New Products Point to Increasingly Diverse Opportunities for Alphabet Inc

By Markets

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) has just upped the ante in the battle of consumer tech ecosystems.

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The company released details for multiple hardware products this week, including its Pixel smartphones, Daydream View virtual reality headset, a 4K-compatible Chromecast Ultra, and Google Home smart assistant, among others. Together, these offerings create an attractive portfolio of products that can compete with the best that major rivals have to offer.

In this segment, Motley Fool analyst David Kretzmann joins CCTV America to break down the new products and their potential impact on the competitive landscape.

A full transcript follows the video.

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This segment was recorded on Oct. 4, 2016.

Michelle Makori:All right. Let's get more on the future of Google with David Kretzmann from the Motley Fool. David, thanks for joining us.

David Kretzmann:Thanks for having me.

Makori:David, Google wants us to start looking at it as a hardware company. Today, it announced a variety of new made-by-Google products. Let's start with that new Pixel phone. Who should be most threatened by this? Apple?

Kretzmann:I don't think Apple's actually going to lose much sleep over the Pixel phone. I would actually be more worried if I'm Samsung with the Note and Galaxy line, especially after some of their phones were exploding a month ago. I think entrenched Android users with Samsung will be more likely to adopt the Pixel phone rather than Apple users switching over to the Pixel. So we'll see, but I would be more worried if I'm Samsung than if I'm Apple.

Makori:Google has sold another line of phones before, since 2010, called the Nexus, but those devices haven't gained any traction. Why is this phone so different?

Kretzmann:This one is different, because Google is really taking more of the process with hardware and software rather than just the software, which is more the route they took with the Nexus line. This is also a higher end phone going for $650 or more, so a higher end phone, Google has more control and input over the hardware and software, which theoretically should be a product in Google's eyes that consumers will flock to more than the Nexus.

Makori:David, you mentioned Samsung. With Google's push into its own hardware, does this now alienate the manufacturers that use its Android operating system like Samsung?

Kretzmann:It'll be interesting to see. I see this as a more serious push by Google into the hardware space, so if I'm Samsung, I would see this as a threat. I don't know if it will really impact the relationship as far as Android goes, because Android is the world's most widely adopted mobile operating system. That's a very powerful platform, so I don't know, but if I'm Samsung, like I said, I would be worried that more of their customers would be going to Google's new phone.

Makori:David, we just saw some footage over there of the new virtual reality platform and headset that Google announced, Daydream View, made from fabric, more flexible. It goes on sale in November, and they're aiming for it to make it onto Christmas shopping lists. What's your reaction to this?

Kretzmann:It still remains to be seen if virtual reality will hit the mainstream this year. I have my doubts that this will really be a mass market product. I think you'll see some early adopters continue to gravitate toward these virtual reality solutions. We also have the Oculus from Facebook, so there are more and more solutions out here. I think this is a nice step for Google, but I remain to be convinced that this is what will really push virtual reality into the mainstream.

Makori:You know, David, speaking of mainstream, Google's certainly upping the ante in the digital assistance space with its new home device going against Amazon's Alexa and Apple's Siri. When do you see the whole voice-activated home assistant device space really catching on?

Kretzmann:Artificial intelligence is certainly here to stay. Obviously, you have Apple with Siri. You have Alexa with Amazon and the Echo device. Google really made a big push into the smart home today with Google Home, really trying to connect devices through voice and have all those devices be interconnected so you can talk to your Google Chromecast, your Google Home, your Google tablets, your smartphone of course, so really communicating across all these devices. I think people really will see artificial intelligence become more ingrained in their daily lives, and that's really what it comes down to for Apple, Google, and Amazon. It's a competition among ecosystems, and I think artificial intelligence is one avenue to strengthen those ecosystems. As people get more used to utilizing artificial intelligence in their daily lives, that makes ecosystems for all three of those companies all the more powerful.

Makori:Yeah. Absolutely. Let's take this another direction quickly, David. Lots of ground to cover. Google and parent company Alphabet have also been building and operating self-driving vehicles, and Google's saying today that its end goal is not to make autonomous cars but to create autonomous drivers to pilot them. What's your take on that?

Kretzmann:You're seeing a lot of companies go that route, whether it's Uber or Lyft, and you also have Ford and GM and the established automakers going that direction. I think Google is opting more for building the software of the operating system for self-driving cars. As you mentioned, the company is not trying to get into the business of auto manufacturing itself, but a million lives are lost globally on roads at the hand of car accidents, so there's a huge opportunity here to improve the well-being of people's lives around the world who lose their lives or get seriously injured in car accidents. Google really looks to focus on high-impact avenues, whether it's self-driving cars or smartphones or things in medicine. Whatever it might be, the company really looks to tackle these key issues, and I think self-driving cars, it's an important issue. I don't think they'll be readily adopted any time soon, in the next couple years, but we'll see. More and more companies pour resources into that technology.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. David Kretzmann owns shares of and Facebook. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares),, Apple, Facebook, and Ford. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool recommends General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.