Google – Proprietary inclination

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The quest for proprietary software begins.

• Google is planning to “put more thought” into its Nexus line of devices which to me is yet another signal that Google’s is beginning to prepare the market for taking complete control of the Android software.
• At the Recode conference being held this week, Sundar Pirchai, CEO Google discussed plans to add more functionality to its Nexus line of devices to make them more appealing.
• The problems with the Google ecosystem based on Android are that the user experience is hobbled due to the endemic fragmentation of Android about which Google has been able to do very little.
• Nexus devices today ship with the standard version of Android but in the future Google will add more features on top of that to improve the user experience.
• Ensuring that new features perform well and don’t drain the battery invariably means that low level changes to the code will be required.
• Google’s contextual based search service Now on Tap is a great example of that.
• I suspect that the end result of this will be that in order to bring these new features to Nexus, Google will have to use a fully closed, proprietary version of Android.
• Once this is in the wild and assuming that it is much better than the open version, I can see handset makers being rapidly pushed into adopting it.
• I think that Samsung has nothing to lose by adopting a proprietary version of Android as despite its recent protestations, it is soley a hardware company.
• Samsung’s profitability is derived from the scale that it gets from outselling its nearest competitor by 2 to 1 and not from any software innovations that it makes on its devices.
• If it proves to be a superior experience, as I am sure it will be, then as soon as one vendor uses it, they will all have to adopt it and Google’s mission to fix its awful problems with Android will be complete.
• A proprietary version of Android will allow Google to fix the endemic fragmentation that plagues Android and to take back control of software updates.
• RFM estimates that it takes around 4 years for a new version of Android to fully penetrate Google’s ecosystem compared to a matter of months for iOS.
• I think that the real problem with this move will be getting it past the Android developer community but here Oracle is the ace up Google’s sleeve.
• In Marshmallow, Google has been forced to use Oracle standard libraries for the Android Run Time meaning that Google has effectively lost control of the software roadmap for the runtime.
• This is something that Google simply cannot afford and when it presents its proprietary version it can point the finger at Oracle as the reason for having to make this move.
• The signs of this outcome are growing reinforcing my position that this will begin to happen in earnest in 2017.
• Alphabet shares remain around fair value leading me to prefer Microsoft and Samsung for the immediate term and Apple for long-term income based investors.
• I also like Facebook for the long-term but need to see it get past potential difficulties in H2 2016 before I get involved.