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Google needs to show it can earn profit from its hardware

Surfboards lean against a wall at the Google office in Santa Monica, Calif.

LUCY NICHOLSON/REUTERS

Google Inc. will kick off a busy month in the tech sector when it reports its second-quarter earnings on July 19. But the company behind the world's most popular search engine will be under pressure from investors to show that it is making money off more than just search advertising.

Although primarily a search company – it still makes most of its money off search-related ads – Google has slowly become more of a hardware player.

Late last month, the company unveiled several new devices at its annual developer conference, including a Google-branded tablet and a media-streaming tool called the Nexus Q.

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The latter device, designed primarily to compete with products such as Apple TV, is notable because it is the first piece of hardware designed entirely by Google, rather than in partnership with another firm.

The new Google hardware builds on the foundation the company set when it unveiled the Nexus smartphone in 2010 and the Chromebook laptop a year later.

Having developed a software ecosystem with its search engine, Android mobile operating system, and myriad cloud-based services such as Gmail and Google Docs, the company now hopes to convince its customers to buy laptops, phones and tablets designed specifically for that software.

Indeed, the Chromebook contains virtually no on-board consumer software except for a browser – the idea being that a Chromebook user access all their documents and software over the Internet.

But Google's ambitious strategy to become a one-stop shop for almost all consumer electronics faces a barrage of challenges.

The Android operating system is the subject of dozens of intellectual property lawsuits, primarily filed by Apple. Resulting injunctions have kept several Android-based devices from various markets around the world, threatening the long-term viability of the software.

In addition, Google has yet to show investors significant return on several of its newer projects, including the Google+ social network. Analysts will be watching closely this week for signs Google non-search projects such as Android – popular as they are – have actually generated revenue.

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July is going to be an especially busy month for earnings in the tech sector.

In the next three weeks, a host of major players are expected to report, including Microsoft Corp., Intel Corp., Apple Inc. and Yahoo Inc. On the 26th, Facebook Inc. will issue its first quarterly earnings report as a public company.

Editor's note: An earlier online version of this story and the original newspaper version of this story gave an incorrect date for Google's earnings report. This online version has been corrected.

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