Google’s Nexus 7 is No Threat for the iPad

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Pacific Crest analyst Evan Wilson has estimated that Google (NASDAQ:GOOG) will sell 9.6 million Nexus 7 tablets next year. While Wilson had earlier forecast 14.6 million sales for 2013, he reduced this figure because the device has not sold as quickly as expected. The analyst also cut his forecast for this year’s sales to 4 million units from 5 million.

What Prompted the Analyst to Cut His Sales Estimates?

“We have not seen Q4 Nexus 7 sell-through take off as quickly as we previously expected,” Wilson wrote in a research note to clients. “While Google was able to design and ship a well-received device, we believe that competition from Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) continues to absorb most of the demand for tablets in the fourth quarter. While Google has made progress, its unit volumes are still small.”

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Wilson estimated that the fourth-quarter sell-in of the Nexus 7 was approximately one-tenth that of Apple’s iPad and 30 percent that of the Amazon Kindle Fire.

What Does the Drop Mean for Google?

While the news appears to be negative on the face of it, it’s not all that bad for business. Despite trimming the two sales estimates, Wilson slightly raised his earnings per share prediction for the company because Google loses money on the Nexus 7 hardware. “We are bullish on Google, but still have not seen the device that makes us bullish on its Nexus hardware,” Wilson wrote. “We are lowering our Nexus revenue estimates, but raising our EPS estimates as margins should improve from less hardware in the mix.”

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