Google aims to be able to offer hardware at scale, including Pixel and Nest products, within two to three years. Sales from Nest products are increasing, but sales are still quite loss-making.
“In terms of hardware, we now have the end-to-end capabilities of a first-class hardware organization, along with the quality of the software organization we already had,” said Google CEO Sundar Pichai when asked about its long-term hardware strategy.
According to Pichai, long-term hardware planning is needed: “The longer you can do this, the more benefits you will have.” He refers to silicon as an example, and probably refers to the advantages of optimizing software on chips. According to the CEO, it is necessary to scale up in the US and internationally ‘to increase adoption’. This would take two to three years.
Google is active in the hardware field with the Pixel 2 smartphones, Google Wifi, Chromecast and Nest products. In its quarterly results, the company classifies the turnover from this under ‘Other revenues’. The division’s sales increased to $4.35 billion in the quarter, compared to $1 billion last year. It is difficult to determine which part of that comes from which hardware revenue, since it also includes Play Store revenue.
It is clear that Nest is responsible for a turnover of 278 million dollars. Full-year 2017 revenue was $726 million, but there was an operating loss of $621 million. This is apparent from a calculation by Recode, which is possible because Alphabet no longer categorizes the Nest figures under its ‘Other bets’ report, but under the ‘Other revenue’ figures of subsidiary Google. Because of that change, the company is publishing 2017 figures with and without Nest as part of “Other bets.”
Alphabet’s total revenue was 31 billion dollars in the fourth quarter of 2017, with which ‘Other revenue’ at 4.35 billion is still a modest part. Alphabet’s profit was $9 billion. Nest was acquired in 2014 for $3 billion. Last year, Google acquired part of HTC’s mobile division for $1.1 billion.