Capital Project the Nexus Q, Google\'s New

Capital Project

The Nexus Q, Google's new media streamer, is failing to satisfy investors because it fails to incorporate Google TV, is limited to Google Play, while You Tube has all the necessary features has been let down with the Nexus Q, and it has no Android interface (Smith). The operating system has been buried under Google-owned apps. The device is lacking in features with an overbuilt operating system. With the device costing more to the consumer than competitive products, this will not sell well and could cause the company to develop a bad image. Competitor products include Apple TV, Roku, and other Internet friendly set up boxes.

To make this product more competitive and provide justification needed for the higher price to consumers, it needs to be upgraded to provide features compatible for Google TV, You Tube, and Android compatible features for users to be able to do more with the device. The operating system needs to be adjusted in order to function more smoothly without being overloaded; maybe a stronger operating system or doing away with some of the Google owned apps. In order to make this product more competitive, it would require more research and development to come up with a system that would be more compatible with Google TV, You Tube, Android, and other programs that users use on a daily basis, as well as user friendly features. The new design would need to justify the final price that would be charged to consumers for consumers to be satisfied and want to buy the end product.

The new design, from research and development to customer service, could incorporate an additional $1 million for an initial investment to implement an upgrade for the Nexus Q. This could include redesigning the operating system to be more compatible for more programs, making sure it is not overloaded, and implementing more compatible features with the Google TV, You Tube, and Android, as well as, adjusting the apps so they will not bury system features. Assuming a ten percent annual return on investment with an estimated five-year useful life would yield a 3.791 annual rate of return, or $37,910 annual cash flow (Horngren, Datar and Foster). Considering a 30% annual tax rate, the after tax annual cash flow would come out to be $26,537.

There are risks and uncertainties involved. To effectively upgrade the Nexus Q, there could be unknown costs of design, regulations, or intellectual property claims (Google, Inc. Annual Report). There is the risk of already unhappy consumers that could damage the image of the product, the risk of non-usability, unexpected costs that raise the initial cost, insufficient revenue to offset liabilities and expenses, and regulations that increase the cost to implement. There could be claims against the intellectual property, such as how the product impacts competitors. Getting the proposal accepted by committees could present problems because the product has already been so costly and would increase the cost to consumers causing it to be more difficult to sell. There could be public relation problems because they product has already been put on the market and has failed to satisfy the investors with the features of the existing product. The newly designed product may not sell enough to cover the costs involved to upgrade the existing product.