Google Takes the Wrapper Off of Android Lollipop

Apps & Software

Photograph by Getty Images, Photo Illustration by Businessweek.com

Later today, a 10-foot-tall statue of a lollipop will join sculptures of an ice cream sandwich, a chocolate doughnut, and other confections on the grass in front of Building 44 on campus in Mountain View, Calif. This is how the news will come of the latest major update to Android, which runs on 85 percent of the world's smartphones: not with a hyped press conference or long lines outside gadget stores, but with the installation of an oversize lawn ornament.

Lollipop is the 13th major release of Android. But it's the first to be fully developed under Sundar Pichai, the Google senior vice president and confidant of Chief Executive Officer Larry Page who took over the OS operation last year. Along with Lollipop, Pichai is introducing three Google-designed devices, including the supersize Nexus 6 smartphone, manufactured by Motorola with a fairly gigantic 6-inch screen. (The iPhone 6 Plus display is 5.5 inches.) Pichai hopes the phone will be the first of a series of new Lollipop-powered computers in living rooms, cars, and just about everywhere else. 'We aren't only trying to ship two [products],' he says, obliquely referring to rival well-received pair of new iPhones. 'We are trying to enable thousands of [products] at the same time.'

Lollipop has arrived during an unusually important moment in Google's attempt to control the next generation of computing devices. , Google's largest partner, warned on Oct. 6 that it expects to miss its quarterly sales targets because of price cuts for its phones. In Europe, regulators are examining whether Google violates antitrust law by forcing manufacturers that use Android to preinstall its apps. Meanwhile, Apple has gotten rave reviews for iOS 8 as well as for its hot-selling iPhone 6 and 6 Plus. On Oct. 16, Apple will again convene the media to ooh and aah over new iPads. With the new version of Android, Google 'has to overcome concerns that there is not parity between Android's ecosystem and iOS,' says James McQuivey, an analyst at .

Lollipop is Google's answer to the ominous rumblings in Android land. It's a svelte OS, capable of running on 512 megabytes of memory, which means that even the cheap phones spreading through China and India can pack in Google's latest features. (Older versions of Android were considerably more memory-intensive.) Lollipop's look, called 'material design,' uses moving icons and shifting font sizes in an effort to more clearly organize information onscreen. It also attempts for the first time to unify a user's various Android devices, including a new set-top box that plays Web video on a TV.

Motorola's Nexus 6 smartphone has a sleek, curved aluminum back and a crisp organic light-emitting diode screen that the company says can run for hours after charging for just 15 minutes. The phone will go on sale (subsidized) at all major U.S. carriers by the end of the year, when an unlocked version will sell online, full price, for $649. Pichai studiously avoids using the word 'phablet' but says the Nexus 6 screen was a function of consumer demand. Similar-size phones now make up 25 percent of Android devices, up from 1 percent three years ago, according to researcher Strategy Analytics. They are particularly popular in Asia. It's unclear, however, whether customers who now have a supersize option from Apple will still flock to an Android version.

Wisely, Google is continuing to push beyond smartphones. With the Taiwan-based electronics manufacturer , it's also releasing the Nexus Player, a $99 TV set-top box that offers many of the same features as Apple TV and Fire TV. The Player also integrates the functions of Google's Chromecast, which means users can stream content from their phones or tablets to their HDTV. The company's new tablet, the Nexus 9, was developed with and will sell online for $349. It has a $129 keyboard accessory that doubles as a portable battery. Asked whether Google is imitating keyboard-equipped Surface tablet, Pichai says, 'We have definitely been watching all kinds of stuff.' He adds that the goal of the Nexus program isn't to anoint one must-have smartphone or tablet, but to set a benchmark and get the industry to build a critical mass of devices. 'We want all kinds of devices for all kinds of people,' he says. 'Nexus represents the state of the art, with us guiding the ecosystem toward where we want it to go.'

That ecosystem has stumbled a bit of late, and not just at Samsung. Android partner has struggled to grab even a sliver of the smartphone and tablet market in the U.S., and HTC's slide has been brutal, with its stock down 55 percent since the beginning of last year. One side effect of Google's partnership with a diverse group of companies is that it creates furious competition that dilutes each partner's profits. 'It's a lot like the old Microsoft world, where the companies that made the most money were not the ones that made PCs. They were the companies that owned the platform: Microsoft and ,' says Carl Howe, an independent technology analyst most recently with 451 Research. 'A similar situation has developed in the Android marketplace. The hardware makers have been demoted to commodities.' Android's closest partners are losing share to cheap phones that run free, open-source versions-without most of Google's apps-from companies like China's Xiaomi. Pichai says Android companies are 'exposed to all the forces of a very competitive marketplace' and he expects Samsung to bounce back quickly.

There's also the very real possibility of an antitrust investigation into Android by the European Union. Bloomberg News reported last month that EU regulators are edging toward a formal inquiry unless Google provides an 'adequate' response to the complaints about forcing Android phone makers to install apps such as Google Drive and YouTube. Pichai says manufacturers are free to install any competing software and critics cannot call Android both too fragmented and too monopolistic. 'If we are telling phone manufacturers what to do, why would we see such a diverse set of experiences out there in the world?' he asks.

Lollipop will launch for various Android devices gradually over the next few months, and Google says the Nexus devices will be in stores by November. Pichai largely punts on the question of the next battleground, an Android product that can compete with the Apple Watch next year. 'Knowing Apple, I expect them to build a great product,' he says, flashing his Sony SmartWatch 3-which runs Android but isn't quite on par with the specs for Apple's timepiece. 'I think we will be right there along with them.'