Google Phone Systems Seen Complementing, Not Competing vs iPhone

Google Inc.'s (GOOG) Android cellphone initiative doesn't appear to be quite the rival to Apple Inc.'s (AAPL) trend-setting iPhone as some first speculated.

Rather, as more details emerge about Google's Android system, it is becoming clearer that Google and Apple are targeting different segments of the cellphone market. The one similarity, though, is that both companies - outsiders to the cellphone industry - are trying to disrupt the wireless market.

"We believe Google is working with, not against, Apple in the mobile world," said Piper Jaffray & Co. analyst Gene Munster.

Apple, through its iPhone, has sought to weaken the powerful hold operators usually have on how handsets are made and sold. Meanwhile, Google's Android operating system is free, thus bucking a longstanding trend of charging handset manufacturers a fee to license the software.

The ambitions of the two companies are unlikely to conflict, for now, because they are addressing different kinds of customers.

The feature-packed iPhone, and its $400 price tag, continues to appeal mainly to a higher-end customer in both the U.S. and in Europe, where it went on sale last week. Meanwhile, even at their most sophisticated, Android-based phones are still comparable to lower-end varieties operators often give away for free as a kind of loss leader.

Additional details about the Android system came out this week, when Google released a developer kit, which serves as a kind of blueprint for the kinds of phones and features that its Android operating system would support.

According to the kit, Android-based phones aren't yet capable of adding Bluetooth or Wi-Fi wireless connections, something that is all-but standard on higher-end cellphones.

It shouldn't be surprising that Google and Apple have similar ambitions because the two tech giants have been partners more than competitors and share a key executive, Eric Schmidt, chief executive of Google and a board member at Apple.

An Apple representative had no comment about any work the two companies may doing together, other than to say "Google continues to be an important partner of ours."