Google Cuts Nexus One Upgrade Price, But Sales Slow
Google appears to be getting its arms around some of the launch complaints regarding the Nexus One. The company and its carrier partner T-Mobile have changed the Nexus One pricing policy for existing T-Mobile subscribers who wish to upgrade from their current phone to the new Android-powered handset.
The Nexus One, manufactured by Taiwanese phone maker HTC, carries a $529 price for an unlocked phone or $179 for new subscribers who agreed to a two-year contract. Google (NASDAQ: GOOG) and T-Mobile also initially provided a third offering, a $379 price for users who trade in their old phone for the new one.
This last price had met with some complaints for being too steep. In response, the two companies today said they would cut $100 off the upgrade price. Additionally, anyone who purchased an upgrade for $379 will be notified that their credit card will be refunded $100.
The change seems to be playing well among some bloggers, and so far has provoked less of a backlash than the way Apple handled a similar price reduction when it launched the iPhone in 2007. One month after introducing the phone at a $599 price point, Apple (NASDAQ: AAPL) cut the price by $200 -- prompting an uproar among those who had already paid the earlier price. Apple's compensation was to offer a $200 coupon at the Apple Store.
However, T-Mobile users must meet some conditions before they can qualify for the refund. First, they must qualify for a "full grade" upgrade, which means they can have four months or fewer remaining on their contract. Second, the cut is only for individual and non-business users: If your phone is through work, or part of a family plan, you are out of luck.
3G problem solved?
Meanwhile, another source of concern for Nexus One owners could be going by the wayside. Reports of the phone's spotty 3G performance have prompted sleuthy customers working together on the Google support boards to narrow down the problem.
In the discussion thread on poor 3G coverage, people began to notice a pattern emerging: all the problems were with phones that had a particular firmware revision. Users reporting lackluster 3G connectivity all had the baseband firmware version number 32.19.00.16U_4.02.02.41, while users with versions 32.19.00.16U_4.02.02.14 and 21.19.00.16U_4.02.02.14 had no such problems.
Google and HTC, the hardware vendor that makes the Nexus One, have not acknowledged this pattern, though Google has said that it is looking into user complaints about connectivity issues. Calls to Google were not returned by press time.
Despite the interest around its introduction, the Nexus One is off to a slow start compared to other smartphone launches. Mobile market research firm Flurry found that just 20,000 Nexus One phones were sold in the first week, despite a steady stream of leaks in the media that created "unprecedented buzz."
"This same hype helped create the expectation of a revolutionary Android handset and its potential to be an iPhone killer," Peter Farago, Flurry's vice president of marketing, wrote in the post.
According to Flurry, the Nexus One's 20,000 units came up short against the Apple iPhone, which it said landed 1.6 million new users after its first week. It also came in behind another Android phone, the Motorola Droid, which had 250,000 new users the week after it debuted.
The firm said that possibly due to the heightened promise created by early buzz, the Nexus One "has ultimately fallen short on sales expectations. Without the 'wow factor' now expected with each new challenger to the iPhone, especially the first smartphone with Google's own branding, demand generation has been modest."
The distribution model also might not be doing Google many favors: The Nexus One is not sold in stores, and instead, is available only online direct by Google. Plus, it's coming on the heels of many other Android phones, particularly the popular Motorola Droid, which sold 250,000 units in its first week. Droid launched with a $100 million ad campaign before Christmas and with a big push by Verizon, Flurry noted, while all the Nexus One had was an event at the Googleplex and little help from T-Mobile -- and it was launched after the Christmas buying season.
Finally, there is the threat of cannibalization with the Droid that could be hurting the Nexus One, Flurry said.