Google Second Gen Tablet Coming Soon

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Reportedly, Internet search giant Google Inc. (GOOG) is likely to release its second-generation Nexus 7 tablet at the end of this month.

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.

Powered by the newest version of Android, the second-generation tablet will come with a better screen resolution and have a thinner design. Google decided to install Qualcomm's (QCOM) chip, replacing Nvidia Corp's Tegra 3. Tablets with fast processors offer improved performance and therefore enjoy steady demand.

Google is yet to disclose the price of its latest tablet but we expect 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 e-commerce market. Therefore, both these companies gain from 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 shipped 19.5 million tablets in the first quarter of 2013. In the process, Apple captured 39.6% of market share, followed by Samsung’s Galaxy line of tablets with 17.9% share, ASUS with 5.5%, and Amazon’s Kindle Fire with 3.7% share.

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

In the first quarter of fiscal 2013, Google reported solid earnings of $10.07 per share, exceeding the Zacks Consensus Estimate by $1.24. Google’s gross revenue (including total traffic acquisition costs [TAC]) came in at $13.97 billion, representing a year-over-year increase of 31.2%. However, revenues excluding TAC came in at $11.0 billion, 12.7% lower than our estimated $12.6 billion.

Google has a Zacks Rank #3 (Hold).

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