The last three months have been very unkind to Google's (GOOG) stock price, lopping almost $100 off. With the company in so many markets and facing so much strong competition, it is not terribly surprising. Google is forced to innovate in so many different areas that when it fails to meet this impossibly high standard, it looks weak. Google's conference I/O running recently provides a new line of products to compete in the ever evolving tech industry. However, I don't expect any of the products to give Google the boost it needs to gain back the 10% it's lost in 2012 so far. Not to mention Google is $100 above its 52 week low, so things could bottom out further if the developments really don't work out. That won't happen. Google is safe where it is, but I don't see a huge probability of massive growth coming.
One of the largest, and most expected, announcements was the Nexus 7, a low-priced 7 inch tablet computer. The Nexus 7 is expected to be a strong competitor due to both its low price and abundance of features. Unlike Amazon.com's (AMZN) Kindle Fire, the Nexus 7 is not stripped down and features the full Android app store. Google is also looking to rush the tablet to the market, with a source indicating it will be on sale by the end of June.
In terms of software, the Nexus 7 looks to be a flagship tablet, much like Google's Nexus phone was. It will feature the new Android Jelly Bean operating system upgrade. Additionally, the tablet appears to be an attempt to unify the fragmented and somewhat nonexistent market for Android tablets. Up to this point, these tablets have not brought much competition, and by offering a much stronger tablet than other Android hardware manufacturers, Google is stepping up competition. If the hardware manufacturers such as Samsung or HTC do not create better tablets than the Nexus 7, they will cease to be relevant in the tablet market. By forcing this competition, Google is hoping to expand the Android operating system across tablet computers in much the same way that it is on smartphones.
Another welcomed development is the new Google Now search. Essentially, Google Now is a major addition to its mobile search feature and it will increase the inputs allowed in search, tailoring the results more specifically to include your location, calendar, contacts, and search history. There are many applications mentioned for this new search. One such application is that Google Now could tell users when their transportation will be coming, be that public transit or flight information, just based on their location and calendar. With mobile poised to overtake desktop computing, the strong increase in search features will put Google even further ahead of its search competition, most notably Microsoft's (MSFT) Bing search engine.
The negative development of this conference is the Nexus Q, a bowling ball shaped device that allows Android users to share social and digital media from their smartphones and tablets to their Google TV. Unlike Apple's (AAPL) Apple TV which incorporates this functionality, Google will charge $300 for its Nexus Q. I have many doubts about this project and expect it to be a niche market at best. First, the price is prohibitive when compared to similar devices like the Apple TV which retails for $99 or Roku LT which retails for $49. The second major problem is the size and shape. It looks very similar to a bowling ball and thus cannot easily be stored. Any user who owns this will almost necessarily have to have it on display.
Overall, the products seem okay (save the Nexus Q) right? I'm not so sure about it. The competition here is terribly strong and though Google can be a miracle worker with products, I don't see a lot of potential here.
Regarding search competition, Google is facing direct heat from Microsoft's Bing search engine. Bing is actually in the process of integrating many startups into its search engine, all of which compete with Google in some form. This united front is helping to create a more social search engine to compete with the integration of Google+ into search results. Specifically, Bing now encompasses Yelp, Facebook (FB), and has made its image search similar to popular social startup Pinterest. This no doubt has the potential to convert some users and will be good for Bing's mobile search, but the introduction of Google Now for mobile really limits this effectiveness. Google needs Google Now to make waves or it risks losing some serious market share. This comes at the same time that Microsoft seems on the warpath, with new products streaming out. It's up 15% in the same amount of time that Google is down its 10% (since January) and does not seem to be the lost elder gentlemen in the tech industry some once regarded it to be.
On the tablet front, the Google Nexus 7 is entering Amazon's space. The dominant Kindle Fire has succeeded due to its low price and connection with Amazon's core ecommerce store, but lacks many features. There have been many rumors surrounding a Kindle Fire 2, but the most common is that Amazon will be releasing an updated Kindle Fire 2 at the end of July. Clearly Amazon is concerned about the Nexus 7. As both these tech companies are giants, both can sustain losses or low margins on the hardware to drive sales and purchases of other goods. Amazon has the advantage of its massive ecommerce business, but Google has more features and apps through its Google Play store. I expect this competition to really heat up in the coming months.
The final area of competition will not likely be much of a competition at all. Google clearly loses hands down with its Nexus Q device. Both the Apple TV and the Xbox 360 beat it on price. That the Nexus Q is an addition to the Google TV also hurts it. Instead of having one device that can integrate all other devices such as the Xbox 360 or the Apple TV do, Google is betting on consumers purchasing two devices for the same experience. Unless it has other releases up its sleeve, I don't quite understand why it would create the Nexus Q.
I would say that Google is trying to gain traction where there is not much to be had. It is strong enough to not lose too much - and boosting a near $33 EPS won't hurt either. Investors will stick with Google and its price will stick somewhere around the $600 range, but none of these products are going to be the ones that take Google to the next level.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.