Google's Nexus 5: What to Expect

NEW YORK (TheStreet) -- In the last couple of weeks, the first customers of Google's (GOOG) iconicNexus 4 -- made by LG (LGL) -- have taken delivery of this long-anticipatedsmartphone. According to Google's web site, the wait if you order onenow 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 theOctober-January timeframe, once a year.

Let's make one stipulation, just off the bat: In my opinion, theNexus 4 made by LG is essentially unchanged from its predecessor, theGalaxy Nexus made by Samsung. Yes, I know it's got a better camera,and the battery isn't removable -- but essentially, it really did notmove 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 headroomprovided 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 littlebit like buying the Porsche Carrera S instead of the regular baseCarrera. 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 toupgrade to the Nexus 4. One year passed, and essentially all theprogress was in terms of the Android operating system (going from 4.0to 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 hardwarewall. The hardware doesn't really need to become more capable. Whatis needed with the hardware is to make it less expensive tomanufacture. One way to cut this kind of cost is to simplify thehardware. That's different than increasing its capabilities.

Issue #1: Timing

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

Unlike public schools, actual technology capabilities do not fit theseasonal weather patterns or the 1841 farming calendar. Breakthroughsand advancements happen on whatever schedules "just happen." Thatcould be two months or two years, depending on many of the overlappinghardware and software advancements.

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

For this reason, I think we should expect a Nexus 5 to arrive a lotearlier 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'smention what will NOT change: The size and shape of the device, aswell as the screen resolution. Therefore, to the untrained eye itwill look just about the same.

One barely visible hardware difference would be to make theconstruction cheaper. This would entail getting rid of the glassbackside and to revert to the cheap but durable plastic of thepredecessor device, the Galaxy Nexus.

Inside the Nexus 5, the key words are simplification and costreduction. 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, tocover all countries in the world. On the issue of LTE, that will bethe 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 theirwheelhouse.

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

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

What about a bigger battery, and a (BlackBerry-style) keyboard? Thosewill 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 andlaunched in conjunction with the Nexus 5 on May 15, be compatible withthe Nexus 4? With the Galaxy Nexus too? One would think at a bareminimum the Nexus 4.

B. Google's eyeglasses:

Will there be some "secret sauce" in the Nexus 5 that will make itcompatible with the Google eyeglasses? Will any of this be backwardscompatible 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 inabilityto match one of Apple's signature features: AirPlay. More about thedetails of these things in a subsequent article, but basically this isan area where Google needs to focus. Expect LG and others to showsteps in this direction, with Google's blessing, already at CES. Howwill 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 Androidas a whole. It's also been one where Google has been praying to the"God of fairness," promising that its own internal hardware departmentmagically 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 inits dealings with its (mostly Asian) OEM partners.

Well, this highly defensive and conservative Nexus equilibrium mustchange. It's the equivalent to Roosevelt and Truman not choosing tobuild or deploy the atom bomb. Google is fighting the smartphone warwith one arm -- and one leg -- tied behind its back. And when you'refighting against Apple and Microsoft ( MSFT), that's something you can'tafford.

So what could this mean?

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

Bottom line: The Nexus 5 is mostly about cost reduction andsimplification. The price will be driven down, perhaps eventuallyapproaching $199 unsubsidized. Furthermore, a "second" de-facto Nexusline could be launched from the Motorola division, but would be calledsomething 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.

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