What do the Android operating system and a can of half-price tuna at the supermarket have in common?
Both, it seems, are loss-leaders, examples of big-picture thinking to gain a long-term profit from a short term loss. Just as the cheap tuna brings customers into a store to buy the overpriced items, Android seems to represent resources devoted by search giant Google without immediate profit in order to keep people using their site as a tour guide of the Internet and downloading apps and other digital multimedia content from Google Play.
'Big Loss for the Whole Year'
In papers related to the lawsuit alleging that Android infringes Oracle's copyrights, the company provided figures that were read in court by U.S. District Judge William Alsup. According to Reuters, there was no net gain from Android in all four quarters of 2010, quoting Alsup as saying, "That adds up to a big loss for the whole year." The jury was not present at the time. Reuters said Android revenues for 2010 were about $97.7 million.
Showing a loss would make it more difficult for Oracle to say that Google stole Java copyrights for Android to profit from it. If the jury sides with Oracle, the next phase will be assessing damages. Oracle also claims patent infringement by Google. Those allegations will be heard separately.
Open to question is whether the open-source Android platform, which debuted on Oct. 22, 2008, powering the HTC Dream, has since turned a profit. Google gives away the system to a range of handset and tablet manufacturers, including Samsung, Motorola Mobility (which Google is in the process of acquiring), HTC and LG.
Android is now the most popular operating system in both the U.S. and global markets, and Samsung is its biggest hardware partner with devices on all major carriers.
Wireless analyst Gerry Purdy of MobileTrax told us the figures as read by the judge may represent incomplete accounting, since the profit may show up in other areas of the company's business.
'Sound Business Practice'
"The process is the same as the razor-blade phenomenon: You give something away cheap or free to sell something bigger," said Purdy. "It seems to me they know that mobile is important enough. It's a sound business practice to give away an operating system in exchange for getting more search business."
Based on this business model, Purdy said, it's highly unlikely Google will ever charge manufacturers for using the system as Microsoft does with its Windows Phone partners.
"Eventually there is going to be more mobile searching than desktop because people are carrying their mobile phones with them all day long. When you click on an ad, Google gets paid for every click," he said.
The second-most popular operating system, Apple's iOS, is only available on Apple devices.