Google's Nexus 5: What to Expect

NEW YORK ( TheStreet) -- In the last couple of weeks, the first customers of Google's ( GOOG) iconic Nexus 4 -- made by LG ( LGL) -- have taken delivery of this long-anticipated smartphone. According to Google's web site, the wait if you order one now is five weeks.

So what does this mean, now that the Nexus 4 has just hit the market?

Time to speculate about the Nexus 5, of course!

But first: A little bit of history and background:

HTC made the first Nexus, then Samsung made the next Nexus devices and now LG is making the Nexus 4. They were typically released in the October-January timeframe, once a year.

Let's make one stipulation, just off the bat: In my opinion, the Nexus 4 made by LG is essentially unchanged from its predecessor, the Galaxy Nexus made by Samsung. Yes, I know it's got a better camera, and the battery isn't removable -- but essentially, it really did not move the hardware ball forward materially.

The one area that will eventually prove useful was the change in CPU (the main computer processor) -- from one made by Texas Instruments ( TI) to a more powerful one made by Qualcomm ( QCOM). Over time, the headroom provided by this new faster CPU will likely provide some benefit -- once the software has caught up.

As it stands, however, the improvement in CPU performance is a little bit like buying the Porsche Carrera S instead of the regular base Carrera. No normal person can tell the difference in performance, because the base model is already plenty fast enough.

So here is conclusion number 1: If you already have the Galaxy Nexus, which became available a year ago, there is in my opinion no reason to upgrade to the Nexus 4. One year passed, and essentially all the progress was in terms of the Android operating system (going from 4.0 to 4.1 and now 4.2) and in Google's ever-improving, all-encompassing, and generally superior cloud services. Not the hardware.

In other words, we have mostly hit a bit of a smartphone hardware wall. The hardware doesn't really need to become more capable. What is needed with the hardware is to make it less expensive to manufacture. One way to cut this kind of cost is to simplify the hardware. That's different than increasing its capabilities.

Issue #1: Timing

When will we see a Nexus 5? As previously stated, and similar to the iPhone, we have come to expect a new Nexus once a year. I don't think this will stay the same going forward.

Unlike public schools, actual technology capabilities do not fit the seasonal weather patterns or the 1841 farming calendar. Breakthroughs and advancements happen on whatever schedules "just happen." That could be two months or two years, depending on many of the overlapping hardware and software advancements.

Either way, the smartphone has now become a really, really big business. It's an epic clash of the titans. If you have a card you can play to advance your position in the battle, you have to play it -- not hold it back for an annual ritualistic cycle, appeasing the sun God.

For this reason, I think we should expect a Nexus 5 to arrive a lot earlier than October-November 2013. My money is on May 15.

Issue #2: Hardware

How will the Nexus 5 hardware differ over the Nexus 4? First, let's mention what will NOT change: The size and shape of the device, as well as the screen resolution. Therefore, to the untrained eye it will look just about the same.

One barely visible hardware difference would be to make the construction cheaper. This would entail getting rid of the glass backside and to revert to the cheap but durable plastic of the predecessor device, the Galaxy Nexus.

Inside the Nexus 5, the key words are simplification and cost reduction. Much of this is a de-facto pass-through from Qualcomm. The CPU and radio (cellular data modem) will see further integration, getting one step closer to allowing the OEM (LG, Samsung, HTC, whomever) to produce as few versions of the device as possible, to cover all countries in the world. On the issue of LTE, that will be the subject of a separate article.

In this cost reduction exercise, one can surmise that the "old" computer companies -- and I don't mean Dell ( DELL) or HP ( HPQ), but rather Acer, Asus and Lenovo -- would be interested parties. This is their wheelhouse.

Perhaps 2013 will be the year when Acer, Asus, Lenovo -- and perhaps the Chinese, such as Huawei and ZTE -- finally make it to the Tier 1 ranks in the US smartphone market, thanks to Google and Nexus.

Will the Nexus 5 have a removable battery or not? The Nexus 4 got a nonremovable one, for the first time in a Nexus, and the general market trend in the last few years has been to nonremovable batteries. I'm not sure Google cares. They are likely considering both alternatives.

What about a bigger battery, and a (BlackBerry-style) keyboard? Those will be the subject of a separate article.

Issue #3: Software

The only software issues we need to consider here are:

A. Backwards compatibility

B. Google's eyeglasses

C. Miracast, i.e., Google's version of AirPlay

A. Backwards compatibility:

Will the next version of Android, presumably called Key Lime Pie and launched in conjunction with the Nexus 5 on May 15, be compatible with the Nexus 4? With the Galaxy Nexus too? One would think at a bare minimum the Nexus 4.

B. Google's eyeglasses:

Will there be some "secret sauce" in the Nexus 5 that will make it compatible with the Google eyeglasses? Will any of this be backwards compatible with previous Nexus devices? This is totally unknown.

C. Miracast

One of Google's two main black eyes vis-a-vis Apple ( AAPL) is its inability to match one of Apple's signature features: AirPlay. More about the details of these things in a subsequent article, but basically this is an area where Google needs to focus. Expect LG and others to show steps in this direction, with Google's blessing, already at CES. How will the Nexus 5 go beyond the Nexus 4 in this area?

Finally, the BIG question: Motorola

To date, Google's Nexus program has been tiny in relation to Android as a whole. It's also been one where Google has been praying to the "God of fairness," promising that its own internal hardware department magically isn't going to get some sort of leg up, compared to HTC, Samsung, LG or others. Google has been more Catholic than the Pope in its dealings with its (mostly Asian) OEM partners.

Well, this highly defensive and conservative Nexus equilibrium must change. It's the equivalent to Roosevelt and Truman not choosing to build or deploy the atom bomb. Google is fighting the smartphone war with one arm -- and one leg -- tied behind its back. And when you're fighting against Apple and Microsoft ( MSFT), that's something you can't afford.

So what could this mean?

One possible scenario could be that the Nexus program continues seemingly unchanged, but that Motorola's new devices launched in 2013 will be de-facto Nexus devices but simply be called something else. This way, Google gets around the political conflict using tried-and-true semantics: "It's not a tax; it's a fee."

Bottom line: The Nexus 5 is mostly about cost reduction and simplification. The price will be driven down, perhaps eventually approaching $199 unsubsidized. Furthermore, a "second" de-facto Nexus line could be launched from the Motorola division, but would be called something else so as to avoid a peculiar form of "channel conflict."

We will know more on May 15.

At the time of publication the author had a position in AAPL, GOOG and QCOM.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.