It's something the best of magicians do seamlessly: distract you with one hand so that you don't even notice the other hand is doing anything at all.
The distraction was the noise associated with Google (Nasdaq:GOOG) Android's launch (well, launch 2.0 to be fair) a couple of weeks ago. While all eyes and ears were focused on whether Android was ready for prime time, Google quietly bought a VOIP phone company - a move that has the potential to reshape the telecom business. (Learn more about the telecom industry in Dial Up Choice Telecom Stocks).

IN PICTURES: 7 Tools Of The Trade

Back to the Beginning
Android (Google's operating system for smartphones) isn't exactly new, but let's face it, we've heard more about it in the last two weeks than we have over the whole year.

Why? It was only available on a handful of phones prior to October. Beginning in November of 2009 though - and largely kicked off with the launch of Verizon's (NYSE:VZ) Motorola-made "Droid" phone - it's just the first of up to 20 phones slated for unveiling by the end of the year - with another potential 30 or so expected in 2010.

In other words, Android is prolific - prolific enough to be a legitimate threat to Apple's (Nasdaq:AAPL) iPhone. Of course, with 17.1% of the world's market share, and in a smartphone market that's supposed to sell 412 million units in 2014, it's not like Apple's got a ton to worry about, right?

Well, not until Google bought Gizmo5 a few days ago. Now, Apple, AT&T (NYSE:T), VOIP leader Vonage (NYSE:VG), and anyone else with a telecom interest should be worried - Gizmo5 has the potential to let Google act as a carrier, circumventing the need for an actual connection service.

Translation: Why pay a monthly cell phone bill to AT&T when Google can basically do the same for free?

Taking Google Voice to the Next Level
For those of you who have at least tinkered with Google Voice (Google's web-based tool to manage and simplify the telecom service provided by your current carrier), you'll know it's nice, but not a game-changer. The platform's inability to actually connect (initiate and terminate) inbound and outbound calls meant all you were doing was using your regular phone service with a Google interface.

With the addition of Gizmo5's technology, Google gets that missing piece of the pie - the ability to make or take calls to and from real phones as opposed to just virtual phones.

Yes, that's right - Google could be your next VOIP-based telecom carrier, rather than just offering services that use your current provider. It could work with land lines as well as cell phones. And get this: Gizmo5 operating on smartphone in a free Wi-Fi hot spot could entirely dispense with the need for an actual mobile service like Verizon Wireless or AT&T.

There's no need for a knee-jerk reaction, as the logistics in becoming a telecom provider are plentiful and tricky. Another snag is that the whole world isn't covered with free (or even paid) Wi-Fi - at least not yet.

Winners and Losers
Google's move was brilliant when you think about it; it inspired dozens of cell phone manufacturers like Samsung, Sony-Ericsson, Motorola (NYSE:MOT), LG, Dell (Nasdaq:DELL) and HTC to embrace the idea of open source software. In fact, about 50 potential Android-based phones are lined up. Verizon and T-Mobile were also simultaneously convinced to offer an Android-friendly service.

Now, in the proverbial eleventh hour, Verizon and T-Mobile are hawking the very phones that could soon host the VOIP application they'll be competing with.

For the time being, a cellular service is still required to get any use out of an Android phone. But if Gizmo5 does everything it appears it will be able to do, perhaps a cheaper - maybe even free - "data-only" service to operate a VOIP connection on an Android phone will make traditional carriers obsolete.

All of a sudden, Android looks a lot more desirable. That's good for some mobile phone manufacturers, and eventually/potentially bad for most cell phone service providers. And, considering Android will be able to do something big that the iPhone can't do, it may also take a bite out of Apple.

No matter what, it should be fun to watch the industry scramble as it attempts to prevent Google from getting a foothold. Judging by Google's smart maneuvering so far, I'm not putting my money on its competitors.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  2. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  3. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  4. Economics

    Is Wall Street Living in Denial?

    Will remaining calm and staying long present significant risks to your investment health?
  5. Stock Analysis

    When Will Dick's Sporting Goods Bounce Back? (DKS)

    Is DKS a bargain here?
  6. Investing News

    How AT&T Evolved into a Mobile Phone Giant

    A third of Americans use an AT&T mobile phone. How did it evolve from a state-sponsored monopoly, though antitrust and a technological revolution?
  7. Stock Analysis

    Home Depot: Can its Shares Continue Climbing?

    Home Depot has outperformed the market by a wide margin in the last 12 months. Is this sustainable?
  8. Stock Analysis

    Yelp: Can it Regain its Losses in 2016? (YELP)

    Yelp investors have had reason to be happy recently. Will the good spirits last?
  9. Stock Analysis

    Is Walmart's Rally Sustainable? (WMT)

    Walmart is enjoying a short-term rally. Is it sustainable? Is Amazon still a better bet?
  10. Stock Analysis

    GoPro's Stock: Can it Fall Much Further? (GPRO)

    As a company that primarily sells discretionary products, GoPro and its potential falls right in line with consumer trends. Is that good or bad?
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center