How Google May Yet Again Go After Apple
Updated from 11:10 a.m. to include additional comments in the sixth paragraph.
SAN FRANCISCO ( TheStreet) -- Google
Google is reported to be launching its own set-top box, known as Android TV, entering an increasingly crowded field and one that it's already in, which makes the move all the more curious. Google currently sells Chromecast, a $35 dongle that is plugged into a HDMI output on a television, giving consumers access to software like Netflix
Google's move comes at a time when smart TVs -- televisions that connect to the Internet -- are just starting to take off. Smart TV shipments represented approximately 39% of TV units shipped globally last year, up from roughly 25% in 2012, according to noted venture capitalist Mary Meeker, of venture capital firm Kleiner Perkins Caufield & Byers .
Google's senior vice president of Androids, Apps and Chrome, Sundar Pichai, made public comments about Chromecast during a keynote speech at South by Southwest, noting the company has sold "millions" of Chromecast devices without giving a specific number.
Last quarter, Google generated non-GAAP earnings of $6.27 a share on $12.19 billion in revenue, excluding traffic acquisition costs. Google site revenue of $10.47 billion rose 21% from last year's first quarter and accounted for 68% of Google's revenue.
One hedge fund analyst agrees that the set-top box business isn't a "needle mover" for Google, but winning the over-the-top (OTT) video service is important down the line. "Longer-term, winning in OTT video will be material and of great importance," the analyst said, who declined to be named because they were not authorized to speak. "Amazon and Netflix need to win, it would be really nice for Google or Apple if they win, but it's not in their valuation now, like it is for the others."
Apple has sold more than 20 million Apple TV units since inception, and the device generated more than $1 billion in revenue for Apple in fiscal 2013, according to CEO Timothy D. Cook.
Google couldn't be reached for comment for this story.
By having its own streaming media device, Google addresses the fact that not everything can be stored in the cloud and that some local storage is needed, unlike Chromecast, where everything is stored in the cloud. Android TV may also offer a completely different user interface than Chromecast, looking very similar to Fire TV, allowing users to scroll through movies, apps, games and TV shows.