Google (NASDAQ:GOOG) (NASDAQ:GOOGL) has acquired another start-up this past week. The company is called Gecko, and while it's not going to move the needle in terms of immediate revenue, nor will there be any significant back-end restructuring charges, the acquisition of top-tier talent is a welcomed addition to Google.
Google excels at web design, application design and development of revenue models that scale very effectively. However, Google hasn't excelled at consumer electronics - the company's acquisition of Motorola did not result in a sweeping overhaul that could make the product relevant again, and eventually the business division was spun off to Lenovo, excluding patents.
These types of failures are perfectly avoidable, but it requires a homogeneous standard to product design that's at least at the level of Microsoft and Apple.
Gecko's team has a proven track record of designing consumer-friendly products, like the HP Slim Line, Logitech joystick and sci-fi television screens. The Gecko acquisition may help Google in its endeavors to create consumer electronics.
The relatively high amount of capital used to buy out companies costs more than hiring random people off the street, but on the other hand it may bring much needed creativity into the design side of Google's product development. Design isn't an exact science, but those who seem to be better at it are pretty valuable to an organization that tends to value technical skills (programming, math, science and engineering).
Poor design execution is another factor that's holding back Google Glass. It borders on faddish, plus people have mentioned that those wearing Google Glass look creepy. This eventually resulted in Google developing a partnership with Luxottica to make the Glass much more aesthetically pleasing, plus it helps to push the product through a standard distribution channel. Both Google and Luxottica are winners, but it also echoes the broad sentiment that Google's engineering team knows how to handle the technical specifications of product design, but when it comes to creating fashion statements, Google falls short.
Web properties outside of Google also are experimenting with consumer electronics. For example, Facebook (NASDAQ:FB) acquired Oculus for $2 billion, and it's not clear as to whether there's enough depth in the product design department at Facebook to take the device from niche to a broader market. Again, all of this requires an extreme amount of planning across design, marketing, manufacturing, distribution, etc.
Unlike the web, physical products cost a lot when they fail. The acceptance rate for new device categories isn't that high. Amazon barely broke-even on the Kindle, and that's with the retail distribution of the largest e-commerce website on planet earth backing it.
The broader trend of web properties becoming more like consumer electronics companies is real, but it's not clear as to whether it's the best use of financial resources, or if they will always succeed at broadening their products/services.
At this rate Google will grow into a larger technology conglomerate, and perhaps Samsung could be a comparable example (not Samsung Electronics, I'm referring to the whole entire Samsung empire).
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