Analyst: Google's mobile business could land $2 to $4 per smart phone

Oppenheimer analyst Sandeep Aggarwal is putting some big revenue figures behind Google's mobile applications plans.

Aggarwal used the search giant's mobile strategy to up his price target to $850. Google will announce its mobile software strategy dubbed Android shortly. Here's a look at the winning numbers:

• $2.1 billion to $4.8 billion a year: Revenue Aggarwal expects Google to generate with its mobile applications in the second or third year of operation.
• $10 billion or more a year: Revenue Google will generate in its fourth or fifth year of operation "once Google is able to trigger mobile monetization," says Aggarwal.
• $2 to $4 annually per smart phone in the installed base. Aggarwal reckons that Google can generate revenue from every cell phone that features its software. To back up this estimate Aggarwal uses Google's per PC revenue. "On worldwide basis Google generated $1 annually per installed base of PC in '02 ($6 in US) and is expected to generate $19 in '07 ($37 in US) due to higher penetration of Internet and more users & usage of Google search/other services," says Aggarwal in a research note.

Aggarwal's note is among the first in what will be a bevy of bullish predictions about Google's mobile business. Aggarwal did note a few risk factors just in case Google's Android isn't a home run.

These challenges include:

• Google's bargaining power with wireless carriers (a huge issue);
• Adoption of data usage on mobile phones;
• Mobile content;
• And bandwidth constraints.

But that's chump change compared to the big picture. A few key excerpts from Aggarwal:

"We believe that as Google focus more on mobile platform with its mobile products and applications and/or a mobile hardware and/or Spectrum auction, it would trigger monetization of mobile advertising opportunities for Google very similar to how Google has monetized PC platform. Google has increased its annual ad revenue per PC in the installed base in US by 6x in four years from $5.65 annually in 2003 to $36.60 in 2007 and on worldwide basis by 8x in from $2.49 annually in 2003 to $19.03 in 2007."

And.

"The mobile installed base is 3bn phones, which is 3x of PCs. What is more important is % of smart phones i.e. mobile phones that can access Internet is between 35% to 40% and growing very fast. A typical smart phone's computing power and storage capacity are very similar to a typical desktop 3 or 4 years back."

In a nutshell, all Google has to do is monetize its existing portfolio, outlined below.

Will Google outline any of these projections today? Not a chance given its "no guidance" edict. But that fact just leaves the door open for more estimates.