Google unveiled the first suite of hardware products it designed and made itself last month. Now its parent company is giving investors a first sign that this isn’t just a passing fad.
Alphabet Inc. reported a new inventory line in its latest quarterly filing with the Securities and Exchange Commission on Thursday. The holding company disclosed inventory of $559 million on its balance sheet at the end of September, reflecting the growing pile of hardware the company is trying to sell, such as its new Pixel phone that competes with Apple Inc.’s iPhone.
The new numbers cover assets for all of Alphabet, so they include inventory of gadgets from the Nest unit, which sells internet-connected devices like thermostats. Alphabet reported Thursday that its inventory was $491 million at the end of 2015, likely reflecting Nest hardware. An Alphabet spokeswoman declined to comment on the filing.
Previously, inventory was included in a catchall “other assets” line item in the company’s financial reports. Google has sold hardware for several years, including its Nexus smartphones, but they were negligible efforts and hardware partners were responsible for most of the design and manufacturing, and assumed a lot of the inventory risk.
“Part of being the seller of record means that inventory, that supply chain risk — you know, hundreds of millions of dollars on the line on any given day — that’s on Google now,” Jason Bremner, a former Qualcomm executive who works on Google’s new hardware supply chain, said in a recent interview. “Typically, that risk was on our OEM partners.”
The software giant is now selling a quartet of new home-grown consumer devices: its Pixel phone, a virtual-reality headset, a wireless router system and a voice-activated speaker called Google Home.
Some analysts have expressed concern that Google’s new hardware efforts will dampen the company’s margins, particularly after considerable marketing spending.
“While Google has priced many of the new devices competitively with others that exist today, we view go-to-market as a clear hurdle to wide acceptance, which will require investments in brand, marketing and distribution to overcome,” UBS analyst Eric Sheridan wrote in a note to investors last month.
While Alphabet is revealing some financial details of its hardware program, it’s still keeping most under wraps. The company doesn’t break out gadget sales, for instance.