Google's Nexus One Phone Hits Snags, Angers Partners

It's barely been a week since Google (GOOG)launched its own phone and the search giant's big push into the mobile market has sent ripples throughout the industry. But the immediate outcome of the much-hyped push into what Google sees as a key area of growth, though, can hardly be what the company was hoping for.While investors remain disappointed, some early customers, developers and Google partners already seem enraged. The brightest prospect so far -- that Google might be able to take on Research in Motion(RIMM) in the business market -- seems like a distraction from the company's strategy of extending its search ad dominance to the mobile market.

Google are off about 5% to $596 on Monday since the search giant announced the launch of its Nexus One mobile phone.

But as Google wades into the mobile market, the company is also getting a crash course in the complexities that come with the new line of business. Many early customers are already outraged by Google's customer service policy, which restricts complaints to email submissions and sets aside a 48-hour window for response.

Some Google partners, meanwhile, may have been massively burned by the surprise launch. Sanjay Jha, the CEO of Motorola (MOT) – the handset maker which designed a prior Droid phone based on Google's operating system and made it a centerpiece of its turnaround strategy – showed up late for the Nexus One launch. He then delivered a terse boilerplate statement, and then took off early.

Shares of Motorola are off about 3.5% since the launch of the Nexus One. And Jha's seething response is seen as understandable by some observers, who feel that Motorola has been "left out in the cold" by Google's launch of a competing product.

Others have noted that Google may even have an edge in its competition with its partners. The Nexus One runs on a newer operating system than that of other vendors but the mismatch is also likely to confuse the developers Google is trying to attract to its platform.

Microsoft (MSFT) – which seems to have made exploiting Google's overreaches a cornerstone of its corporate strategy as of late – is already saying that partners can't trust the search giant and that it is angling to benefit from the fallout.

For all that headache, some early customer responses indicate that the Nexus One is hardly revolutionary and unlikely to wow the same way that Apple's (AAPL) iPhone did. "This product has fret written all over it," wrote Michael Wolff at "It thrills nobody, it offends no one."

With so many disgruntled or unimpressed customers, a dethroning of the iPhone doesn't seem to be in the cards anytime soon for Google. But as talk of Google including a physical keyboard in new versions of the phone circulates – it chances hat the Nexus One could instead make inroads into BlackBerry turf seems like a more realistic scenario.

Indeed, some users have noted that Google's existing suite of online tool, such as email and calendars, port over nicely to the Nexus One and this could give the company a leg up when it comes to courting customers for business applications. Shares of Research in Motion are off 4% since Google's move, indicating that investors see the increased competition as a real threat.

For Google, though, making big inroads into the business markets -- while falling flat with consumers -- would be a consolation prize at best. Yes, the company has been circling the enterprise market through offerings like Google Apps, hosted versions of word-processing and spreadsheet software. Like most other businesses, Google eventually has grand designs for upending the business application software market over the long-haul, too.

But extending its online advertising dominance to the emerging mobile arena -- which Google has endlessly talked up as part of the coming era of "cloud computing" -- is the immediate priority and the company just shelled out $750 million for startup AdMob to that end.

Becoming a bigger player in the business phone market, which is very unlikely to feature ads, would be nice. But staying ahead of Microsoft buy allowing advertisers to buy ads across search, display and mobile platforms more easily is critical.

And rankling early customers and partners -- as Microsoft is happy to point out -- only makes that road more difficult.
Read Full Story