CES Suspense: Does Google Have Low-Cost Web Device Up Sleeve?

Google may be close to rolling out a bargain-priced device for accessing and managing Web content, according to published reports that say the search giant may use this week’s Consumer Electronics Show to unveil the initiative.

The Los Angeles Times reported that Google has had discussions with Wal-Mart about possibly marketing the device, which many are speculating could be a stripped-down “box” designed mainly for connecting to the Internet rather than a full-fledged personal computer.

Keeping Them Guessing

The report said the box would retail for a “couple hundred dollars,” with the low cost tied in part to the fact that the device would not be run on the Windows operating system but instead on Google’s own software.

The rumor is likely the first of many to be spun out of Las Vegas this week as technology giants convene for the annual electronics show. Google executives are slated to speak to the convention on Friday, leaving several days for speculation before any formal plans are unveiled. The week will be used by scores of vendors to launch products or tease future developments, but few could carry the significance of such an announcement by Google.

Google did not respond to a request for comment on the rumors and the Google Blog, which the company has used to release several new products in recent months, was silent on the topic and had not been updated since before the weekend.

Speculation ranged from a low-cost PC-like device that would run on a Google-created operating system — which would be a direct competitive thrust toward Microsoft, which still controls the vast majority of the PC operating system market — to a much less functional device that would only connect to the Internet and download content for playback.

Some are likely to greet such a move with skepticism and even concern, as Google has quickly morphed into the upstart wunderkind with world-beating technology to a powerful force of its own, one that some are beginning to view with trepidation.

Google has made it known that it has ambitious goals, most notably to make it easier for all of the world’s information to be available and accessible on the Web.

Getting In or Getting Out?

Such an initiative may be unlikely to rattle the PC industry, since the business is one that many computer makers are eager to exit, with few new entrants due to thin profit margins and a decrease in brand differentiation. IBM sold off its PC business to Lenovo in 2005, a move that analysts expect others to emulate as cost pressure from overseas manufacturers continues to squeeze margins.

In fact, some say the real motivation for such a move by Google would be to create a new opportunity for selling Web advertising.

WebProNews.com editor David A. Utter noted that Google’s recent foray into advertising based on the number of impressions received — rather than its traditional pay-per-click model — may be a hint as to where the boxes fit in its strategy.

Such devices could be “the central point for collecting content like music, video, and other items from the Internet, then allow it to be rendered on TV screens or computers connected to the Google Box.”

From there, Google could generate ads to be shown when content is replayed. Such a scenario would explain Google’s desire to make and sell such a device and help it keep the price low, by essentially subsidizing the hardware and software costs due to future ad revenue expectations.

Cube, Box or Pod?

Analysis firm Bear Stearns issued a report to clients in mid-December that noted the possible development of such devices, which they termed “Google Cubes.” That in turn may stem from earlier Web chatter and reports about a Google device that would be used to move content from the Internet to home-based playback devices such as the television.

Search Engine Watch editor Danny Sullivan said the fact that Google is speaking at a consumer electronics show alone is fodder for speculation and rumor.

“Speculation that Google is planning its own operating system or browser has been going on for ages,” Sullivan said.

In fact, he noted that Google CEO Eric Schmidt talked about the data equivalent of an iPod — a single device to connect, wirelessly or with wires to all of the world’s digital information and entertainment.

Meanwhile, Google, fresh off its recent US$1 billion investment in and partnership with America Online, appears poised to see its stock soar even higher in 2006. Just two weeks after a research firm predicted Google shares would move well into the $500 range this year, Piper Jaffray today raised its one-year target to $600 per share, the highest such estimate on Wall Street to date. Google’s stock was up $12, or about 2.8 percent, in midday training today to $426.90 per share.

In a research note, Piper Jaffray analyst Safa Rashtchy said Google had quickly attained “iconic” status as a company that “like Microsoft and eBay before it, has defined a new and vital industry.”