Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) recently unveiled a new suite of hardware centered around the company’s Google search and assistant software. Most notable were the Pixel Phone 2 and the Pixelbook, neither of which are completely new, but they stand to help Google make itself a more important part of its users’ lives.
The Pixel 2.0 ups the game
Google is building on the success it had with its first Pixel phone, and the new lineup was unveiled with a similar look and feel. The devices were well-received last year, and the second generation has a few minor changes to keep up with the competition.
The new phones include an improved camera, what Google claims is the fastest fingerprint reader mounted on the back, and an “always-on display” that shows time and notifications. Some other big changes include the ditching of a headphone jack — users will need to opt for USB-C cable or wireless compatible ones from here on out — and the addition of two front-of-phone mounted speakers. The phone is also dust- and water-resistant, not good enough to take scuba diving, but great for bathroom and kitchen accidents.
The Pixel lineup starts at $649, below its bigger competition. Apple ‘s (NASDAQ: AAPL) new iPhone 8 starts at $699, while Samsung ‘s (NASDAQOTH: SSNLF) Galaxy S8 phone starts at $720 for an unlocked version that can be used with any wireless carrier.
Image source: Alphabet.
The Pixelbook — doesn’t Google already have that?
The other Pixel release was the Pixelbook, clearly designed to go after the Microsoft (NASDAQ: MSFT) Surface, Apple Macbook, and other similar offerings. However, Google already has similar laptop/tablet combos it licenses out to Samsung and Acer. So why the need for a “made by Google” Pixel version?
The device is lightweight, thin, and features a sturdy box-like design. The keyboard and screen have a 360-degree swivel feature that allows for multiple configurations, though none of that is all that new. The big change here is that this new two-in-one device will be the first that fully utilizes and integrates with Google Assistant (the “OK Google” command many are familiar with on other Android and Google devices).
Pixelbook will replace the high-end Chromebook and starts at $999. The tablet can also be paired with a Pixelpen for an additional $99, which can be used in tandem with the assistant by circling words, pictures, etc.
Google’s angle with Pixel
The company’s move into the hardware world is really about the software and its potential revenue generation. Google said it designed the Pixel products around its suite of programs, including search, Google assistant, and artificial intelligence (AI). When launched last year, the company said these new devices were built “from the inside out.”
Google’s new lineup of Pixel products. Image source: Alphabet.
That software-centric approach is especially embodied in the assistant, which can now be used across all Google devices to control your home, workplace, and communications with others. The built-in AI is being leveraged to make Pixel more helpful and to make users’ lives easier. With the latest releases, Google now has a piece of hardware for virtually everything.
Hardware sales fall under the “other revenues” line item at Google. That segment was up 42% year-over-year during the last quarter. Much of that was due to cloud services, but device sales were reportedly growing at a healthy pace, too.
That’s only part of the story, though. The bulk of Google’s sales came from advertising and internet traffic-related revenues, which increased 20% year-over-year and were nearly 90% of total sales. By comparison, the “other” segment was only 12% of total revenues.
Devices are nonetheless a key part of the company’s growth strategy. With the rollout of new Pixels and other devices, the hardware segment has a lot of potential. More importantly, though, the inclusion of Google assistant, search, and related software gets users more dependent of Alphabet’s bread-and-butter. All of that could equate to more traffic, more paid clicks, and higher advertising revenue feeding the Alphabet internet business.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool’s board of directors. LinkedIn is owned by Microsoft. Nicholas Rossolillo owns shares of Apple. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy .
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