NEW YORK (TheStreet) -- In the battle for consumers' eyesGoogle (GOOGL) - Get Alphabet Inc. Class A Report is reportedly jumping into the fray against rivals Apple (AAPL) - Get Apple Inc. Report and Amazon (AMZN) - Get Amazon.com, Inc. Report.
According to the Wall Street Journal Wednesday, the company is readying a new set-top box that, while carrying another company's brand, will be powered by Google's new Android TV software.
"Users will be able to control the box using Android smartphones or tablets, and potentially other devices," the Journal reported, citing unnamed sources.
Now raise your hand if you believe any of these features are new?
Google cares and focuses only on making its operating system as ubiquitous as possible. To me, that's the only thing that matters in this case. Like Amazon and Apple, Google is looking to extend and leverage its ecosystem while also building upon the popularity of Chromecast.
Google shares recently traded near $581, up 3.5% for the year to date. So before you go jumping in to buy Google stock solely based on this announcement, think about how this new set-top box will stand out from Google's already popular Chromecast.
Or will the device be any different from video game consoles such as Microsoft's (MSFT) - Get Microsoft Corporation Report Xbox and Sony (SNE) - Get Sony Corp. Report Playstation consoles that carry similar features. Smart tvs from the likes of Samsung (SSNLF) can essentially do the same thing.
Why is anyone surprised Google will not manufacture the device but allow another company's name to be on the hardware? It's no different from how Google has operated with Android.
Apple's recent deal with Comcast (CMCSA) - Get Comcast Corporation Class A Report, aimed at reinventing the way consumers watch television, demonstrates the sort of leverage Apple's set-top box (Apple TV) already has.
Apple and Comcast are said to be negotiating a joint streaming-television service. To ensure the success of the service, Apple demanded special access on Comcast's public line to prevent congestion. Google's set-top is a means for Google to keep up and not be left behind.
To that end, it should surprise no one to hear, say, in six to 12 months that Google signed a streaming deal with DirecTV (DTV) to further the stickiness of both Chromecast and the new set-top. But the only way for Google to establish the leverage it needs is to firmly plant its flag in the living room. This is what set-top box is all about.
Google may have realized it has taken Android as far as it can go within the smartphone space. Apple's iPhone 6, which is expected to come in bigger sizes, is certain to narrow the market share gap of Android. While the living room is not a new frontier, it can still be disrupted.
For now, the set-top box should not be seen as anything other an infrastructure building for Google and possibly widening the access to YouTube. Gven that Chromecast already serves the purposes of what the box offers, it's best to curb our enthusiasm until there are clear revenue and profit potential to the device.
At the time of publication, the author was long AAPL.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
TheStreet Ratings team rates GOOGLE INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate GOOGLE INC (GOOGL) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and feeble growth in the company's earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 21.3%. Since the same quarter one year prior, revenues rose by 19.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Although GOOGL's debt-to-equity ratio of 0.07 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 4.17, which clearly demonstrates the ability to cover short-term cash needs.
- Net operating cash flow has increased to $4,391.00 million or 20.86% when compared to the same quarter last year. Despite an increase in cash flow, GOOGLE INC's average is still marginally south of the industry average growth rate of 23.24%.
- GOOGL's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 37.28%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Internet Software & Services industry and the overall market, GOOGLE INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: GOOGL Ratings Report