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Sluggish Nexus Sales Drag down Google’s Revenues In Q1, 2015; Play Store Revenues Up Over 23%

April 23, 2015 - Written By Kishalaya Kundu

Google on Thursday, posted their Q1, 2015 earnings and announced that their revenues stood at $17.3 billion, an increase of 12% year on year and that their net income stood at $3.6 billion, an increase of over 3% from Q1, 2014. Google also hired over 9,000 employees during the first three months of 2015, and ended the quarter with cash reserves of $65 billion, up from $59 billion from Q1, last year. For Wall Street, these results indicate yet another strong quarter for the Mountain View, CA-based tech giant, but the figures do hide some quirks that technophiles were quick to latch on to. Search revenues were expectedly strong, but it was the “other revenues” category that drew the attention of the tech media.

Talking about the results, Google CFO Patrick Pichette shed some light on what the “other revenues” category encapsulates and its importance in the Google scheme of things. “Other revenues” consist of revenues generated from the Play Store, and contribute minimally to the company’s bottom line. Still, that revenue stream had seen growth to the tune of 23% year on year to $1.8 billion, which far outstripped growth from search. However, that was still down 2 percent quarter on quarter. What really dragged Google down was their hardware revenues. Their Nexus line of products, often praised for their modest pricing and ease of use, struggled to move off the shelves and that impacted revenues. Even though revenues from the Play Store increased significantly, it was “offset by decline in Nexus, and the currency fluctuations”, according to Mr. Pichette.

Analysts believe, that Google’s sluggish Nexus sales is probably along expected lines. A number of things went against the devices, including, but not limited to Google’s pricing strategy. The current generation Nexus flagship, the Nexus 6, is priced at $649, whereas the previous generation Nexus 5 could be had for only $349. This almost doubling of the price in the course of a year hasn’t apparently gone down well with the consumers. On top of that, the fact, that it is an overly large, unwieldy device with a giant 6 inch screen, probably hasn’t helped it move either. As for the tablets, the cheapest current generation Nexus 9 ships for $399 whereas the Nexus 7 (2013) came for $229. All that made the Nexus devices a hard sell, impacting Google’s “other income” revenues.