Published in Mobiles

Nexus 9 aims for Apple-like margins

by on27 October 2014

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U-Turn for Nexus' tablet business model

Google wants to abandon its successful business model of making affordable Nexus models and wants to copy Apple’s obscene margins.

In 2012 it has managed to sell millions of Nexus 7 2012 powered by Tegra processor and these tablets were the best of the sub $200 market.

Google took a risk and has increased the price of Nexus 7 2013 to $219. It used a full HD screen and made it thinner but it still didn’t sell as well as the first generation Nexus. Clearing thinking that the price hike might have distorted its sales, Google has replied by doubling the price.

Less than two weeks ago Google quietly announced Nexus 9 its 8.9 inch 4:3 tablet that will start from $399. It is the best-designed Nexus of all time, it has a fancy aluminum frame and it looks classy but it cost twice the price of Nexus 2012.

We asked around what was the reason for such a radical turn in Google's Nexus strategy and it turns that you can blame the profit margins for that. Apple doesn’t rely on a huge market share in tablets but it takes most of profits. Apple iPad has a bill for materials is about $210 while the cheapest iPad sells for $499. This number doesn’t include money spent in research and development but it is still a good indication of rather fat margins.

Google thinks it wants a piece of that and the fact that Google Nexus 6 phone sells for $649, almost double from last year's $349 priced Nexus 5 also proves that Google is after profit margins and not the volume.

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Mountain-view based search giant is lucky that Apple messed up by releasing a version of the iPad mini that failed to raise anyone's eyebrows. This gave Google a fighting chance. Even the Nvidia Shield Tablet, which is an 8 inch Tegra K1 32-bit version is better than the Nexus 9 as it comes with microSD and costs $100 less. The Shield tablet for $399 has 32GB storage and LTE and Google Nexus 9 LTE has 32GB and at Best Buy sells for $599.99. That is a huge difference for this square pants tablet that looks a bit nicer.

We will have to wait to see if the new Nexus strategy pays off for Google, but in the tablet and phone world it might be a better alternative that might get Google's flagship operating system a few months later.

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Last modified on 27 October 2014
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