Google could harvest $3.8 billion in sales from Pixel phone: analyst


Google might be able to haul in nearly $4 billion in sales in 2017 from its new Pixel phone, according to an analysts’ report issued on Monday.

Mountain View-based Google is expected to generate $3.81 billion in sales next year from the Pixel smartphone. That would be 83.4 percent higher than the $2.08 billion estimated for the device in 2016, a research note from Morgan Stanley stated.

The tech giant also is expected to sell 5.5 million units in 2017, up from 3 million in 2016, Morgan Stanley analyst Brian Nowak estimated.

“We believe Pixel is important as Google owner Alphabet works to provide users with a more integrated and consistent Android experience,” Nowak stated in the note on Monday.

One of the major limitations for the Pixel at present is the device is available only for Verizon wireless customers.

“To sell significantly more units than our primary estimates, we believe Alphabet would need to expand the partnerships they have with carriers,” Morgan Stanley said in the note.

Plus, the Pixel phone is well behind the iPhone in terms of sales success.

Cupertino-based Apple during fiscal year 2016 sold 212 million iPhone units, which generated $137 billion in revenue, analysts have estimated.

The Pixel phone should produce a gross margin of 24 percent, Morgan Stanley’s note stated. That’s well below the 40 percent gross margin for the iPhone.

The analysts also indicated that increased sales and a wider installed base for the Pixel phone could benefit Alphabet in numerous ways in its other key businesses.

“We see Pixel’s unique artificial intelligence capabilities, deeper app integration, improved computing power and platform, and new hardware capabilities leading to higher Android user monetization (more spending by using smartphone devices),” Morgan Stanley said.

More Pixel phone sales could also bolster a core Google business, the analysts stated.

“This is important for Alphabet’s long-term search revenue growth given Android phones make up about 84 percent of the global smartphone install base,” Nowak wrote in the Morgan Stanley note.


Photo: Rick Osterloh, Google senior vice president of hardware, introduces the new Google Pixel phone during a product event Oct. 4, 2016, in San Francisco. (Eric Risberg/AP)