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How Much Will Google Glass Cost? The Price of Production Offers Some Clues


Glass is one of the hottest Google's gadgets on the market, but its production cost is less than one-seventh of its current retail price. That is likely to change.

Matter of Strategy

The price tag in a store does not necessarily have to reflect production costs; companies the size of Amazon, Google, or Microsoft (NASDAQ:MSFT) can afford to sell devices at prices that are lower than production costs to quickly grow the installed base, and then the companies make money on exploiting the whole ecosystem.

Smartphone makers usually go for a 60% to 70% margin in their top-tier devices. The Samsung Galaxy 4's price tag includes an estimated 62% margin, and the Apple iPhone 5 is sold with a 68% margin.

Google is known to operate on fairly thin margins, and the price of its recent blockbuster release, the Chromecast, at $35, suggests that Google tends to stick to reasonable price points. (The $1,299 Pixel is the exception to the rule).

But even if Google decides to reap a smartphone-class reward on each Glass sold, the device should still cost no more than $599, and it'll likely be much less than that; $299 (for a 30% margin) or $399 (a 47% margin) might be the sweet spots for the company.

No matter the price, however, analysts are skeptical about the financial impact of the project in the near term.

"I don't know if it will even move the needle," Ivan Feinseth, chief investment officer at Tigress Financial Partners LLC, tells Minyanville.

That makes sense: According to IHS iSuppli's most optimistic scenario, there'll be just 2 million pairs of smart glasses sold in 2015. Even if we consider that 100% of the market will be dominated by Google and the company opts for a relatively high 60% margin, 2 million sales would bring Google roughly around $600 million in gross profit. For a company that recognizes $29.7 billion in gross profit and $10.7 billion net income per year, a mere $600 million is not going to cause any serious impact.

"It's more of a kind of buzz-related item than actually a business needle-moving item," said Feinseth.

Want to Get "Glass" Now? You Can Get Pretty Close!

While the forthcoming sales of Glass might not mean much to Google's bottom line, it will mean a lot to the companies that are already producing Glass-like devices, including GoPro rugged cameras that start from $199.99.

Several other manufacturers also have products similar to Google Glass readily available or coming soon.

While the most advanced smart glasses from Vuzix M100 (CVE:VZX) are still not in stores, you can opt in for a Wrap 1200 video eyewear for a mere $499.99.

The other option is a pair of Moverio BT-100 wearable glasses from Seiko Epson (TYO:6724), priced at $699.99, and running an Android-based OS.

How about smart devices in active wear? Check out Recon Jet, priced at $599 and due to hit the market in February 2014. Or you might choose a less advanced "live HUD" right now, for just $299. It stealthily integrates into Recon Ready alpine goggles.

If you're ok with having smart glasses without a screen, check out Epiphany Eyewear glasses, equipped with a high-quality camera and onboard storage, starting with $299 for an 8 GB model and arriving in late summer 2013, according to the company.

Indie products, such as GlassUp or PairAsight are options, too.

Whatever alternative you choose, keep in mind that competitors will have a hard time fighting Google Glass for market attention when the company switches on its marketing machine and begins promoting Glass, despite its cost or availability -- and even despite its flaws.

Also read:

Living in a Post-Google Glass World: What the 'Explorer' Reviews Have Taught Us So Far

Despite New Porn Ban, These Four Google Glass Apps Will Strain Moral Fibers

With Glass, Google Steals 'Control Freak' Label From Apple
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