Google Plans Phone Software, Android

Google Plans Phone Software, Forms Development Group

Google Inc. will work with Sprint Nextel Corp., T-Mobile USA Inc. and others on a mobile-phone operating system and applications that may change how consumers find stores and download files from the Web.

Google, owner of the world's most popular Internet search engine, started the 34-member Open Handset Alliance to make free software that will help the phones run applications. The software is open to any programmer who wants to develop features for wireless devices.

By offering code anyone can use, Google is seeking to expand beyond Web searches on computers and to break the hold big phone companies have over what applications work on which device. New products may include location-based advertisements for shops and movie theaters, or mobile access to services such as EBay Inc., analysts said.

``This creates the foundation for anything you can imagine,'' said John Jackson, an analyst at the Yankee Group in Boston. ``If it works in practice, and we really don't know that it will yet, it should be a catalyst for innovation.''

Google's operating system, code-named ``Android,'' is based on open-source Linux software, allowing it to work for an array of manufacturers and service providers. Software developers can build applications to run with Mountain View, California-based Google's program, enabling partners to customize phones and services for their subscribers.

Android phones will be available by the second half of next year, Google said.

`Real Internet'

``We recognize that customers are wanting to do more with their phones beyond just voice and text,'' John Garcia, Sprint's senior vice president for product development, said in an interview. ``Customers are telling us they want their phone to be more like the real Internet.''

The accord would boost Google's advertising revenue from mobile phones, which outsold personal computers by more than 4- to-1 last year. For phone companies Sprint and T-Mobile, the accord may bolster sales of online services and give them an edge over larger rival AT&T Inc., the exclusive U.S. carrier for Apple Inc.'s iPhone, and Verizon Wireless.

``Sprint is struggling to add customers,'' said Christopher Larsen, an analyst at Credit Suisse in New York. Since last month, he has forecast that Sprint shares will outperform other communications stocks over the next year. ``Maybe this is the thing that turns the tide.''

Sharing Ads?

Google probably offered wireless operators a large portion of its advertising sales as part of the agreement, Larsen said.

Sprint spokesman Scott Sloat said the company hasn't reached an agreement yet on whether it would share revenue from an Android-based phone. Verizon Wireless hasn't ruled out joining the alliance, spokesman Jeffrey Nelson said today in an e-mail.

Spending on mobile-phone ads may jump to $11.4 billion worldwide by 2011 from $2.17 billion today, according to Informa Plc, a London-based research firm. Google gets 99 percent of its more than $10 billion in annual sales from advertising, mostly by selling text links next to search results on its own pages and partner sites.

Google shares rose $14.40, or 2 percent, to $725.65 at 4 p.m. New York time in Nasdaq Stock Market trading. They have climbed 58 percent this year and passed $700 last week, gaining $100 in less than a month on speculation about the phone project.

Android Acquisition

Google's software platform got its name from Android Inc., a startup firm Google purchased in August 2005. Andy Rubin, Google's director of mobile platforms, headed that company.

To make the alliance work, Google will have to ensure its software stays consistent even as different carriers and manufacturers adapt it for their own products, said Ken Dulaney, an analyst at Gartner Inc. in San Jose, California. The mobile industry isn't easy to control, he said.

``Despite Google's size, mobile has made mere mortals of many,'' he said. If the company succeeds, ``it has an enormous ability to help the industry'' by allowing software makers to create features that work on many different devices, he said.

A new Google social-networking service called OpenSocial will run ``extremely well'' on Android, Chief Executive Officer Eric Schmidt said today.

Apple also is adopting a more open approach for its iPhone. Starting in February, the company will allow outside developers to design programs for the device, which combines features of a mobile phone with an iPod music player. That will give users access to ``hundreds of new applications,'' Apple Chief Executive Officer Steve Jobs said in October.

`Big Losers'

The Google alliance is a blow to Nokia Oyj's Symbian and Microsoft Corp.'s Mobile Windows, two phone operating systems that aren't open to developers, said John Bruggeman, head of marketing at Wind River Systems Inc. His company will fine-tune software written for Android to make sure it works on all phones.

``Open source is significantly more efficient and will strip out a lot of the inefficiencies, so from a cost perspective, Microsoft and Symbian will be big losers,'' Bruggeman said in a telephone interview. ``Linux is the most innovated-on operating system on the planet.''

That innovation also will help the new phones offer more features than what's on the iPhone, he said.

``The iPhone was great in that it awakened the appetite of the users, but that's too large for Apple to keep up,'' Bruggeman said. Android is ``going to enable infinitely more applications than the iPhone will be able to get.''

`A Little Surprising'

Microsoft is working with sellers of Windows Mobile phones to cut prices below $100 in an effort to appeal to more consumers. Google's alliance won't affect Redmond, Washington- based Microsoft's plans, said general manager Scott Horn.

``Given all the hype, this was a little surprising because there's not a whole lot new here,'' Horn said of Google's announcement. ``No one knows what the phone looks like or what the software looks like, so it's hard to say what it means.''

Sprint shares fell 14 cents to $17.01 on the New York Stock Exchange. Deutsche Telekom AG, T-Mobile's parent company, fell 1 cent to 13.89 euros in Frankfurt trading.

Alameda, California-based Wind River shares rose 24 cents to $12.41.

The Google alliance also includes handset makers Motorola Inc., Samsung Electronics Co., High Tech Computer Corp. and LG Electronics Inc.; wireless carriers NTT DoCoMo Inc. and China Mobile Ltd.; chipmakers Intel Corp., Qualcomm Inc. and Texas Instruments Inc.; and online auctioneer EBay.