Google Has a New Tablet Competitor

Sources have indicated that Google (NASDAQ:GOOG) is planning on releasing its Nexus 7 tablet in July, and will carry with it a more aggressive price strategy. Reuters reports that the device could start as low as $149.

Powered by Qualcomm’s (NASDAQ:QCOM) Snapdragon processor, the Asustek-built Nexus would be pointed directly at undercutting Amazon’s (NASDAQ:AMZN) Kindle Fire and Apple’s (NASDAQ:AAPL) iPad Mini. Google is estimating that it will be able to move as many as 8 million units in the second half of 2013. The company is keen on getting the Nexus to catch on, as it would expose more consumers to Google’s primary stream of revenue, online advertising. That’s an ambitious leap, as Google sold only 4.6 million Nexus units in the same period of 2012.

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Higher resolution, the Snapdragon processor, and a thinner bezel design will be new features to the Nexus, the sources said. Google’s decision to go with the Snapdragon — power reasons were cited — was a blow to Nvidia (NASDAQ:NVDA), which provided its Tegra 3 processor for the Nexus in the past.

Final pricing has not been announced, and Google may choose to sell the new gadget for $199, the same as the first generation rolled out last June. There is a decent chance that the old model may be discounted, one of the sources said.

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Alternatively, the new tablet could be priced more competitively at $149 and the previous model discontinued entirely, the source added. It all depends on what strategy Google decides to pursue — it could go the route of making a profit off the hardware and raise the price slightly, or sell the units nearly at cost, and rely on the new internet traffic generated by putting the device in more hands, pushing its margins back to Google’s core business.

“This is the ‘zero margin strategy’,” said Fubon Securities analyst Arthur Liao. “Ninety-seven percent of Google’s revenue comes from advertisement, so it needs to sell more mobile devices in order to reach more consumers.”

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