Stock Highlight: What Android One Could Mean to Google (NASDAQ GOOG)

Google announced the launch of its Android One platform on Monday, September 15, targeting the low-end smartphone segment in emerging markets. While newly launched phones are currently available in India, the company plans to roll them out to other developing countries such as Indonesia, the Philippines, Bangladesh, Nepal, Pakistan and Sri Lanka in the coming months.

The wide launch strategy signals that the competition in the smartphone industry in emerging countries is heating up, albeit at a lower price point. In this note, we explore this offering and Google’s strategy behind the launch. Google launched the Android One program to offer smartphones at affordable prices to price-conscious users in emerging markets.

Unlike developed countries, where smartphone penetration is above 50%, penetration is below 25% in many developing countries. While the adoption of smartphones in developed countries fueled the first wave of global growth, strong demand in emerging markets will drive the next phase. Sales of sub-$200 smartphones are expected to see significant growth in emerging markets.

Google Inc (NASDAQ GOOG) News: Android One

According to IDC, global smartphone shipments are on the rise and set to surpass the 1.2 billion unit mark this year. In Q2 2014, smartphone sales edged past the 300 million mark with substantial growth in the sub-$200 smartphone category. Additionally, smartphone shipments are forecast to grow to nearly 4 billion by 2018.

By launching a line of smartphones that cost around $100, Google has opened the smartphone market to a new segment of lower-income customers who want to own a smartphone with the latest software and apps. According to World Bank, the per capita income in countries targeted by Google is between $1,046 and $4,125.

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Google Inc Financial News (NASDAQ GOOG)

This launch presents an excellent opportunity for Google to capture market share and strengthen Android’s ecosystem of devices in these developing countries. To capitalize on this opportunity, Google will sell three smartphone manufactured by Micromax, Spice and Karbonn. While the Android One devices are a step up from entry-level phones, these smartphones leverage the use of lower-cost components. Furthermore, each phone has a front (5MP) and rear-facing camera (2MP), dual SIM card slots, a replaceable battery, 1GB of RAM and a 1.3GHz quad-core MediaTek processor.

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