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Why Google Glass Will Never Propel GOOG Stock

Google's $1,500 futuristic product looks like part actual failure, part planned failure.

By John Divine, InvestorPlace Assistant Editor

http://invstplc.com/1vsLEus

Google Inc (GOOG, GOOGL) is one of Wall Street’s few true dreamers, and for that I’m thankful.

why google glass will never propel goog stock price google inc
Source: Google

And while you could make a pretty compelling case for creative, outside-the-box thinking driving explosive returns — Apple Inc. (AAPL) and its “Think different” campaign comes to mind — it can just as easily be a pain in the rump for investors.

Enter Google Glass, a project that won’t ever impact the GOOG stock price. At least not in a positive way.

Google’s kooky, highly publicized endeavor aimed at bringing a video camera/processor/eyewear hybrid to the masses hasn’t exactly been a hit with the common man since its mainstream launch on May 15. Citing anonymous sources, Reuters reported last week that the futuristic wearable technology won’t re-release in 2014 after all.

OK, Google — $1,500 Is a Bit Pricey, Don’t You Think?

Wearables were supposed to be the coolest, newest form factor, so Google’s in the right league with Google Glass. Unfortunately, it’s in the wrong ballpark.

AAPL stockholders have been eagerly awaiting the company’s highly anticipated Apple iWatch for some time, and the product, which starts at $349, sure ain’t cheap. But it’s dirt cheap compared to the $1,500 cost of Google Glass. Understandably, this is one reason the product hasn’t yet caught on or contributed any meaningful revenue to the top line for GOOG stock.

Astro Teller is the head of the search company’s Google X lab, which researches and develops harebrained ideas with little chance of success. His job title is “Captain of Moonshots,” and he’s overseen the Glass’s development from its inception as a zany idea. But even Teller has admitted that Google Glass was essentially priced for commercial failure, telling CNET that wearables need to get cheaper:

“Every time you drop the price by a factor of 2, you roughly get a 10 times pick up of the number of people who will seriously consider buying it.”

That means if Google had cut the price of Google Glass by 75% — halving it and then halving it again — the Silicon Valley giant could’ve likely sold 100 times more units and logged 25 times the sales it did if it slashed the price tag from $1,500 to $375.

One could argue that cutting the price that dramatically might actually be bad for GOOG stock, since the company could be forced to sell the product at a loss to generate those sales. Unfortunately, a “teardown analysis” of Google Glass by the business intelligence firm IHS blew that theory to bits.

Upon a careful examination of all the parts in Google Glass, IHS determined the parts were worth just $152.47, meaning a 50% price cut — or two — would have been comically easy for Google to afford.

It all starts to make sense when you consider that the company still refers to Google Glass as an “open beta” project, meaning its May 2014 release to the masses was not actually intended for the masses but a sampling of the masses who would  be able to provide further feedback about the project before the real product launch.

Google Glass, at least in its current iteration, was never intended to move the needle for GOOG stock.

Unfortunately, the delayed release of the final, revised Google Glass product tells me that Google Glass will never be ready for prime-time. This is a critical juncture for the product’s success, as GOOG must ensure app developers for the Glass don’t abandon their projects in light of the poor sales. Unfortunately, that’s exactly what’s happening. Twitter Inc (TWTR), for example, recently threw up its arms and quit developing for the platform.

A not-insignificant list of employees focused on Google Glass have also left the company in the last six months, according to Reuters.

The writing is on the wall: Google Glass is a failure and GOOG shareholders shouldn’t expect the product to ever contribute meaningfully to growth. It’s a bummer, because Google has spent a significant amount of time, resources and money on the project, and those assets could’ve been put to better use.

But it’s also not going to ruin the company. It’s OK that Google Glass failed.

After all, they’re called “moonshots” for a reason.

As of this writing John Divine owned shares of GOOG stock, GOOGL stock and AAPL stock. You can follow him on Twitter at @divinebizkid.

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Article printed from InvestorPlace Media, https://investorplace.com/2014/11/why-google-glass-will-never-propel-goog-stock-price/.

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