Google vs Apple: the gadget showdown

Google's Nexus One smartphone is its first foray into hardware. Can the internet search giant challenge Apple's iPhone or the BlackBerry? Nick Clark reports

For the world's gadget lovers, it looks like being a very happy new year, with the two most innovative technology companies of the past decade set to launch eagerly awaited devices within weeks of each other.

Today marks the unveiling of the first of the pair, with Google due to reveal its first high-end mobile phone, dubbed the Nexus One, at its Mountain View headquarters in California. This launch is set to completely overshadow the Consumer Electronics Show, due to kick off in Las Vegas later this week.

Then, in two weeks' time, Apple is expected to reveal its tablet computer. First, though, Apple will face questions over whether Nexus One threatens its iPhone, which has so far set the standard in the smartphone industry. The battle between the pair is well-timed for a UK audience, with Vodafone this month due to become the third operator to get the rights to sell the iPhone. One industry insider described Google's device as "a welcome rival to the iPhone [that] will keep Apple on its toes".

Speculation that Google was developing its own mobile phone re-emerged in December, when the company handed devices to its employees to test. Rumours have reached fever pitch, with talk yesterday that it has signed a deal to include the music streaming service Spotify on the device, while others expect a more radical announcement. One blogger even suggested Google could launch a tablet computer to rival Apple. One upgrade that is almost certain is another upgrade of its operating system Android. So far, the development of the Android software has been the extent of Google's public ambitions in mobile.

The launch of a branded Google device marks a huge turnaround. At Android's unveiling in 2007, the chairman and chief executive, Eric Schmidt, said the company was "more ambitious than any single 'Google Phone' that the press has been speculating about ... Our vision is that the powerful platform we're unveiling will power thousands of different mobile phones". The idea was to get Android into as many different devices as possible. But, as Julien Theys, analyst at Screen Digest, said: "The main reason for the launch of Nexus One is probably that Google doesn't feel that the mobile market is developing fast enough."

Android was originally a California technology start-up that made software for mobiles. Google bought the company in 2005 and used it as the base for its push into the sector.

The software was built to rival Nokia's Symbian and Windows Mobile's operating systems, and it joined with companies from hardware developers to network operators to create the Open Handset Alliance. Mr Schmidt said two years ago: "This partnership will help unleash the potential of mobile technology for billions of users around the world."

It was built as an open platform, for any operator to use and to allow developers to create applications that could call on any part of a phone's functions from calling and texting to photographing. Beyond the basic needs of a mobile phone, Android is designed to run the internet and other applications more quickly. If the expected system upgrade is announced it will be the fourth in a year, as it sought to make the host devices more powerful and iron out early glitches.

Geoff Blaber, director of platforms and devices at CCS Insight, said: "On the whole, consumers don't buy a phone for its software, but they do buy it for what it does, whether that's email or social networking. It's no longer just about the hardware – whether it has a camera or not – we have moved on, and the operating system is an enabler."

The first device built on Android was T-Mobile's G1, which was released in 2008. Since then, numerous handsets have emerged, including Orange's HTC Hero and Motorola's Droid, which came out at the end of last year. "Android is getting some very significant traction, with increasing support from manufacturers and operators. The idea behind Android was to get Google's services into a huge number of products at multiple prices," Mr Blaber said. "This Nexus One shows they are frustrated with mobile and are looking to accelerate their expansion in the area, and could look to disrupt the established model of mobile distribution." One operator said: "Their move into hardware is hugely sensitive, but it won't affect our agreement." Analysts don't believe that operators will be overly upset with Google launching its own phone. It is expected to be essentially just another Android-based device, if slightly more advanced.

Indeed, many believe the move is little more than a marketing tool. Gartner published research in October suggesting that while Android was on less than 2 per cent of all smartphones, the figure would rise to 14 per cent in two years. It said the system would overtake Apple, ranking second in 2012 behind Symbian.

Google is expected to sell the Nexus One online, and leaked prices suggest the unsubsidised handset will cost $530 – described as "pretty much cost price" by one analyst – in the US. Other leaked documents showed that T-Mobile may have landed a deal to subsidise the sale of the phones.

"This is likely to be how it envisioned a phone," one mobile industry expert said. "Rather than hand the software over to an operator and a handset marker, Google will take more control."

Industry experts believe the release could be yet another boon to high-end phones. "The smartphone market keeps reinventing itself," one said. "The Google phone accelerates that, and it shows the company wants to get in on the action."

Nick Jones, an analyst at Gartner, said: "Apple has been top of the pile for a long time, and while I don't expect a catastrophic fall, I do expect the gap between Apple and its competitors to shrink a lot by the end of the year." He added that while launching a handset to match the iPhone was achievable, a competing applications store and iTunes music system would be tough. Google's application store, Marketplace, has also grown to almost 20,000 applications, but that still comes nowhere near to matching Apple.

Mr Theys of Screen Digest said: "I don't believe the iPhone will be the main victim, as it is really in a class of its own. The biggest victim especially in North America will be BlackBerry and Microsoft's Windows Mobile."

"Windows has a dreadful year ahead. Its 6.5 operating system just doesn't match up. BlackBerry has been relatively immune and while it has a faithful following, the operating system is beginning to show its age," he added.

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