GooglePhone Ahoy

The GooglePhone is coming. There has been no official announcement, but in all likelihood it will sail over the event horizon in 2008.

Like the iPhone, the GooglePhone began its life as a mythic beast. Like the iPhone, initial rumors and speculation swirled hot and heavy. Like the iPhone, wild speculation gave way to tantalizing specifics, cited by those “who have been briefed on it,” as the Wall Street Journal (WSJ) recently put it.

If the parallel holds true to form, next up (early 2008?) will be the official announcement. It will be most interesting to see how Google handles that, and what forum, if any, is used. Steve Jobs is a tough act to follow.

The GooglePhone promises to be every bit as big a deal as the iPhone. Maybe even bigger. Say what you will about Google, but in its first 9 years it has done enough things right to earn its $160 billion market cap.

If the WSJ is right and Google has already spent hundreds of millions of dollars on its cellphone project, these guys aren’t fooling around.

Which is why I just about choked on my coffee, when Eli said “GooglePhone” in the first 15 seconds of his recent Cramer moment. Although the comment seemed innocent enough, why mention the GooglePhone? There just might be something up here. The interchange:

Cramer: “I was making a joke. I was trying to get some flavor as to how exciting the flash memory summit might have been?”

Eli: [laughs]. “I think the industry definitely is in a very exciting time. Tremendous torrid pace of product innovation such as the iPhone and, you know, the rumored GooglePhone. It is just all over the place. Everywhere you look, flash is [Cramer interrupts]”

I’m thinking that SanDisk might have a piece of the GooglePhone business through msystems’ connections and its comprehensive product line-up. If not, that’s good news too. Like the iPhone, the GooglePhone promises to consume loads of flash memory.

The Google Way and Net Infrastructure

Google’s a bit different, even organizationally. Decentralized, with self-managing teams, Google lets its engineers run with interesting ideas.

Google has a number of ongoing internet-related infrastructure initiatives. For years, Google has been acquiring dark fiber, fiber-optic cable that is already in place but not in use. Then there are Google’s free WiFi initiatives in Mountain View CA and San Francisco and its Net neutrality Initiative. And then the impressive data centers where Google remains far ahead in the data-center race. Recently Google’s showing interest in the FCC’s 700MHz spectrum auction. And the list goes on

All these initiatives are related in loose kind way. More theme, than grand plan.

Google’s spending billions to build out its capabilities to not only run search engines, but also run a variety of Web services that encompass e-mail, video and music downloads and online commerce. And the next battleground will be Mobile with its potential $11 billion mobile advertising market. Nothing like $11B to focus the mind.

The Google Mobile Platform & the GooglePhone

The GooglePhone is probably best understood in the context of the Google Mobile Platform. Google is in the process of creating a software development platform for mobile devices on which its applications can run. This platform will deliver the mobile Google experience.

Which aspects of the platform are implemented, where, and with whom will depend on opportunities and partners.

Some prongs of the mobile strategy we’ve already seen or are likely to see, in order of difficulty/likely chronology:

– stand-alone mobile applications (gmail, maps, browser)
– bundled mobile applications (gmail + maps + browser)
– GooglePhone (iPhone/Treo competitor)
– mobile platform (Mac OS, Windows Mobile, Palm OS competitor)
– VOIP mobile communicator (GoogleUnPhone)
– wireless broadband

We already have many of the Google mobile applications which Google has been pushing with varying degrees of success.

Google purportedly has been trying to get its search engine, email and a new web browser onto as many different phones and platforms as possible. Part of the challenge is trying to convince phone manufacturers to implement Google’s preferred specs.

Google also has to convince the carriers to cooperate, not an easy task. Verizon reportedly decided not to integrate Google Search into its phones because Google wanted too big a cut of ad revenue. But progress is being made with some companies such as Sprint which is working on a nationwide WiMax network.

I think Google would just as soon avoid hardware, but it might be a necessary evil that Google needs to show off what it can do when the stars are aligned.

For the best Google mobile experience, Google seems to want phones with a camera, WiFi, 3G and GPS. Music is likely in there too, but these days music is software.

There aren’t going to be a lot of devices along these lines that don’t have integrated music. To compete with the iPod/iPhone, though, Google is either going to need to go with iTunes which means a meeting of the minds with Apple, or go another route entirely.

Other than Apple’s iPhone OS X, the mobile OSs out there leave a lot to be desired. Apple’s the only one who seems to have it figured out. There are rumors that Google has been working on its own Linux-based mobile operating system. If Google has come up with a sophisticated and flexible mobile OS, a lot of pieces could fall into place.

There seems to be plenty of evidence that Google has already approached Asian handset designers/manufacturers to handle the final design and fabrication of the GooglePhone. Names commonly mentioned are LG Electronics and HTC.

HTC is Taiwanese and designs and makes phones, some of which run MSFT Windows Mobile. This has led some to speculate that the GooglePhone might run Windows Mobile. That seems highly unlikely. Seems more likely that Google has its mobile OS waiting in the wings. If so, I can imagine Google ultimately using this OS to open a lot of doors.

As far as wireless operators who may offer the the GooglePhone, from the 2 August 2007 WSJ article, “Google Pushes Tailored Phones To Win Lucrative Ad Market”:

“Google has approached several wireless operators in the U.S. and Europe in recent months, including AT&T, T-Mobile USA and Verizon Wireless, a joint venture of Verizon Communications Inc. and Vodafone Group PLC, people familiar with the situation say. T-Mobile USA, a unit of Deutsche Telekom AG, appears to be the furthest along in considering it, these people say.”

WSJ seems to have missed Spain’s Telefonica, which others include on the list.

SanDisk’s Potential Opportunities with the GooglePhone

Potential opportunities for SanDisk with the GooglePhone are embedded flash storage, SIM cards, and bundled memory cards. msystems’ business relationships may have given SanDisk an edge for both embedded NAND storage and SIM cards.

HTC specializes in designing and manufacturing world-class mobile computing and communication solutions and has in-house engineering teams to help with design and product performance issues. This is the same HTC tied to the GooglePhone, and the same HTC which has been designing-in msystems’ embedded NAND solutions into handsets for years.

MegaSIM was one of msystems’ promising products. MegaSIM is a high capacity SIM card with storage up to 1GB. The MegaSIM has been in trials with mobile network operators with a 2008 target rollout. Two of the mobile network operators (MNOs) reportedly seriously considering the MegaSIM are also two of the MNOs talking to Google about the GooglePhone: Orange and Telefonica. Also, the company building some of the handsets for the MegaSIM trials is — HTC.

Its also probably worth noting that a significant number of the rumored carriers tied to the GooglePhone– AT&T, T-Mobile USA, Vodafone Group PLC, and Telefonica are all GSM providers. A single hardware specification (tri or quad-band GSM) could support all of those providers. GSM = SIM cards.

In all likelihood, the GooglePhone will include a memory card slot. The iPhone doesn’t, but that’s Apple, not known for open systems. On the other hand, “open systems” is a Google battle cry.

Who might supply the bulk of the memory cards bundled with GooglePhone? Top candidate is the worlds biggest and baddest memory card supplier, which of course is — SanDisk.

If and when the GooglePhone is finally released, product tear-downs will occur within hours, just like for the iPhone. Then we’ll know just how innocent Eli’s recent “GooglePhone” comment really was.

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8 Responses to GooglePhone Ahoy

  1. Poofypuppy says:

    Thanks again for your thoughts, Savo. Given Samsung’s commitment to supplying Apple’s iPhone, it makes sense that Google would want to team up with SanDisk. If the GooglePhone debuts next year with multiple SanDisk products on board, SNDK will look like a Saturn V rocket headed for the moon. I’ll be more than satisfied if Google’s phone includes only one SNDK product, however. 😉

    Even with GooglePhone, however, Eli needs to make sure that SanDisk remains the leader in cost per bit (ever-smaller production nodes, X4, 3D, etc.). As long as SanDisk maintains IP and cost leadership, other opportunities will arise (with or without Google).

  2. 'shoes says:

    Savo, and Poofy,

    I just watched the Cramer clip (thanks for the link). It is interesting that he mentioned the google phone, and now to try and figure out of it was totally spontaneous or somewhat calculated. Not knowing the man, my initial guess would be that it was spontaneous, and if not indicative that SNDK has a deal locked up, perhaps more likely that it is much on his (Eli’s) mind, as in something being pursued.

    I agree with both of you that it would be a very logical partnership. I am interested in just how Google goes about this (choice of carriers, if exclusive, operating system, features, memory configuration etc) even independent of my SNDK interest. I think Apple is starting ro see some consumer backlash with respect to the i-phone (not 3G, the battery replacement policy, the alleged touch screen deadspots etc) and it is important that an improved follow-up from them and/or someone else comes quickly so that momentum is not lost.

    Personally, I can’t see why a person would make that kind of investment in such a device without expandable memory.

    ‘shoes

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  4. poofypuppy says:

    Hi Savo,

    I saw a Yahoo post regarding the Seagate CEO’s comments about flash memory in its product roadmap (http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_S/threadview?m=te&bn=16839&tid=461096&mid=461096&tof=2&frt=2#461096), and was surprised to learn that Seagate previously owned and sold 40% of SanDisk.

    I’d be interested to read any background on this that you might know about. Equally important, how do Bill Watkins’ comments bode for SanDisk in the future? It seems that SNDK is on the verge of passing Seagate anyways, so do you think Seagate’s plans augur for a friendly or a competitive relationship?

    Regards,
    poofy

  5. savolainen says:

    Hi poofy,

    Seagate is interesting. Will try to comment this week. Am planning on doing some more updates and including thoughts on “Solid State Storage Solutions LLC”, the new SanDisk stealth joint venture mentioned in the SNDK’s latest 10Q. Seagate would seem to be a possibility for one of the two unnamed partners. On balance, though, am inclined to think others are more likely.

    Am not so sure what Seagate has to offer SanDisk. Seagate and MU might be a better fit. Both companies have problems (joke).

    Best,
    Savo

  6. afkkl8_99 says:

    Hi Savo

    Now that Goog made the announcement that the platform (software) is open and for free, it makes a lot of sense that SNDK will join the party with its own brand Gphone. It can be the cheapest on the market as they will have no cost to develope the software, captive NAND supply (with existing embeded, cards, & megasim solutions), packing it into the sansa view with required modifications and sell it in its 200,000 already existing outlets…? Looks like they have all the ingredients in place…

  7. savolainen says:

    Greetings afkkl8_99 and mordecaim,

    Have been out of town visiting family and missed this week’s post. My plan is to post this weekend on Android, the the Google Mobile Platform. I listened to the call yesterday and didn’t hear anything negative for SanDisk. Am looking forward to going back through again carefully.

    Just read the street.com’s article on how the gPhone won’t need much onboard memory. Pretty shallow analysis.

    No mention of Google gears and the challenge of intermittent, dropped or unavailable connections. And what about all those third party applications, where are they going to live?

    Does the street.com think the gPhone, targeting media rich services, is going to skip camera functionality? or music? If a camera is included, where are photos/videos going to be stored? Will the gPhone only work for streamed music? Seems far more likely it will include a business-as-usual MP3 player. If so, where will songs be stored? Are they thinking that the gphone will be a multimedia device but only show low quality streamed video when there is an adequate connection? The list goes on and on. Sheesh.

    Anyway, I think that the Google Android Mobile Platform looks to be every bit as big a NAND demand driver as the iPhone, likely far bigger as Google wants nothing more than to spread the platform as fast and as far as possible. For GOOG, this is all about eye balls. More is better.

    As they said on the call, the future of wireless is all about apps and content.

    Expect that web applications are going to be the wave of the future. Google certainly is going to be pushing theirs including Google’s web-based calendar, e-mail, chat, word processing and spreadsheet software. Android is going to be the platform.

    If the mobile phone is going to be the computing platform of the future, is all work going to stop when no web connection is available?

    Google’s solution is Google Gears, in essence a software database engine which caches data on the mobile device even when working online, so that when a connection isn’t available the web ap is still functional. When a network connection is once again established, offline and online work are synchronized.

    And where is all this caching going to be stored? The obvious solution: NAND. And this is on top of baseline storage for the OS, third party aps etc.

    Best,
    Savo

  8. savolainen says:

    Greetings again afkkl8_99,

    I meant to address your comments last time, but then got distracted by that street.com article, so I’ll try again.

    Don’t think SanDisk will jump right into the phone market. SanDisk needs to be careful not to alienate its embedded and card customers. Probably more money to be made there. If SanDisk does decide to enter the phone market figure it will be at least a couple of years out under different circumstances. Eli did a good job of describing his feelings on the subject in his Stanford talk last year:

    “ Q: Ultimately the MP3 player market will go into the handset business. They will converge at some point. [Eli:absolutely] At that time will you go into the handset business knowing that a lot of your partners are already there?

    Eli: Very good question. First of all I do believe that the handset will become the convergent device for MP3s, for camera, for video, for TV and so on. We are going to enable a lot of that through the storage. We are going to be the TiVo in the handset or the MP3 in the handset.

    Whether we have to be in the handset market itself [pause]. We are a very trusted suppliers to Nokia, to Sony-Ericsson, to Motorola. So it is a question then of do we need to be there? Apple needs to be there because they see that it is going to go in the handsets.

    We don’t need to be there. I will be very happy selling all day long to every one of these MP3 slots in the handsets. I’ll win out on this (?). But eventually, handsets, 5 years from now, will be very different than they are today. They could be totally driven by WiFi networks and not what we see today. In that case we may just be in it without even realizing it.”

    That said, I still think that the Google Android Mobile Platform is perfect for a large screen redesigned WiFi-enabled Sansa View. Such a product could compete head-to-head with the iPod touch. Doubt Android is going to be limited to just phones.

    Google just wants eyeballs. There could be complications behind the scene of which I’m not aware. I hope not. The fit is great for the View. SanDisk needs the Linux OS, a browser, email etc. & applications. Google seems ready to pass all this along to all who are interested. SanDisk would get the goods and be in the game without antagonizing its big name partners/customers. After all the View isn’t a phone.

    Best,
    Savo

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