Google's decision to postpone the launch of two new Android phones in China this week points to the wider implications of the search giant's potential exit from the market.
A decision to leave China could deliver a blow to Android, which has just recently gained notable momentum, and could bring opportunity to Google's struggling rival Microsoft.
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Google had planned to help launch two Android phones from Motorola and Samsung on Wednesday with China Unicom, said Jill Hazelbaker, a Google spokeswoman. She would not say why the launch is now delayed.
After Google publicly revealed a cyberattack on its systems that originated in China, the company followed up with a shocking announcement last week: It would stop censoring search results in China and thus face banishment from the country for failing to comply with local laws. The decision to delay the Android phone launches is likely related to any ongoing talks that Google may be having with China's regulators.
Motorola did not confirm the delayed launch nor answer questions about plans for the future launch of the phone in China. In a statement it said it is committed to offering Android phones in China.
Since Android is open source, any phone maker can develop and sell an Android phone in any market. However, most of the leading Android phones on the market ship with popular Google applications such as Maps, YouTube, Google Search by Voice, and Google Talk. If Google is unable to continue to operate in China, those applications would most likely not be available on Android phones there.
Some of the Google apps are particularly important to users because they synch content with online services, said Chris Hazelton, an analyst with the 451 Group. For instance, Android applications like e-mail and contacts lists synch with Gmail. Most other smartphone platforms like Windows Mobile, BlackBerry and Palm similarly synch such data so that users see the same content from a computer or the phone.
The lack of such applications and capabilities would make Android phones less attractive to end-users. "When it stands up to other devices, particularly other Android devices that have Google services, these phones will be lacking," Hazelton said.
"It may hamstring the devices a bit," said Mike Morgan, an analyst with ABI Research.
A device maker could create its own applications to provide the services that Google may be unable to offer in China or partner with other existing providers of such services. For instance, a phone could run Android and feature Baidu search, Morgan said. China Mobile, in fact, has already built its own version of Android, called the Ophone, that includes some apps that the operator created rather than those built by Google.
Or, phone makers could simply choose another operating system. "China is a huge market for Motorola," said Hazelton. "Now if the direction Motorola wants to go in, and that's with Android, runs counter to this huge market, this will likely push Motorola toward Windows Mobile."
Phone makers like Motorola, HTC and LG have bet big on Android. Motorola has said that the vast majority of its phones in 2010 will be based on Android. LG just last week said that more than half of its smartphones this year will run Android. HTC made the first Android phone on the market and also made the recently introduced Nexus One, the first phone to be sold exclusively by Google.
Each phone maker could decide differently. "It's hard to say," Morgan said. "Do I want to pay licensing fees for Windows Mobile or use the free OS plus development. It's a tough call. The answer probably changes by handset vendor."
Windows Mobile has struggled in recent years, losing momentum and market share. But it is working on a new version of the software, Windows Mobile 7, that could be introduced as soon as next month. While many of the larger handset makers like Motorola were likely to adopt the new Windows Mobile platform anyway, they could be inclined to back it more aggressively due to Google's changes in China.
Nokia is another vendor that could benefit from Google's China decisions. "It's always great for Nokia to hear that one of their key competitors is having trouble getting into China. It's good news for Windows Mobile too if that's the way handset vendors decide to go," Morgan said.