Google to Launch Second Gen Tablet

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According to Reuters, Internet search giant Google Inc.(GOOG) announced the launch of its second-generation Nexus 7 tablet, which will be powered by Qualcomm Inc.'s(QCOM) Snapdragon processor. Google will start selling its flagship tablet from Jul 2013.

Google, in collaboration with Asustek launched its first tablet Nexus 7 last year. Powered by Android OS, Nexus 7 comes with a 7-inch display and an Nvidia (NVDA) Tegra 3 quad-core chip. Google sold 4.5–4.6 million units of the tablet in 2012.

The second-generation tablet will come with a better screen resolution and have a thinner design. Google decided to install Qualcomm's chip, replacing Nvidia Corp's Tegra 3. Tablets with fast processors offer improved performance and therefore enjoy steady demand. With a new processor for its second generation Nexus tablets, Google hopes to make inroads into the overcrowded tablet market.

Google is yet to disclose the price of its latest tablet but we are expecting it to be affordable. Google, like Amazon is not dependent on hardware sales. Both have a thriving Internet business that could be well supported by proprietary hardware. Recently, Google also launched a same-day delivery service that indicates increased interest in the fast-growing ecommerce market. Therefore, both these companies gain from very low-priced tablets that could create a large installed base for selling other services.

Apple Inc. (AAPL) on the other hand, is primarily a hardware vendor and therefore greatly dependent on device sales. The company is likely to maintain its leadership position with the soon-to-be-launched next-generation tablet, iPad 5. According to IDC, Apple’s shipped 22.9 million tablets in the fourth quarter of 2012. In the process, Apple captured 43.6% of market share, followed by Samsung’s Galaxy line of tablets with 15.1% share, Amazon’s Kindle Fire with 11.5% and others. Google is way behind its competitors, but its Android-based tablets are gaining on iOS-based tablets every day..

Further, IDC is predicting that tablet shipments may reach 350 million by the end of 2017. It is predicting that lower screen size i.e. 7 inch and below may become more popular as consumers prefer smaller devices for daily use.

In the fourth quarter of fiscal 2012, Google’s gross revenue (including TAC) touched a record $14.4 billion, representing sequential and year-over-year increases of 2.3% and 36.2%, respectively. Excluding the $1.5 billion contribution from Motorola, revenues were up 21.9% from the year-ago quarter.

Google has a Zacks Rank #3 (Hold).

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