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Losers can get married too
Have you ever seen a couple walking down the street, holding hands that make you think that only they could have found each other? That’s the impression I get when I see Microsoft and Nokia ink a strategic alliance. Granted, that’s not quite a marriage, but more like dating. Two of largest technology companies that arrived late to the smartphone party and who are struggling to remain relevant in the fastest growing boom in the Tech Industry since … well … ever, decide to join forces to battle Apple, Google, and their ecosystems. A daunting task I might add.
This is the deal: Microsoft has not been able to do anything good in the mobile world even after pouring millions (if not billions) of dollars. And Nokia, once the giant to follow in the cellphone industry did not see the modern smartphones come. Together, well, in this blogger’s humble opinion, is no better. Nokia’s hardware, as good as it is, is just that: hardware. They have never been able to stand out as a software supplier, areas where both Google, and Apple, the 2 leading forces in the smartphone world, excel at.
On the other hand, Microsoft has not been able to cut the cord. Still the number one player, by far, in fixed applications, has just been a disaster in the mobile world. Windows Mobile, arguably one of the first “smartphone” OS’s out there, did not evolve. And Windows Phone 7, a great approach, is a classic case of “too little, too late”. While Balmer, Microsoft’s CEO, brags about the eight thousand apps in WP7′s marketplace it remains at least an order of magnitude below iOS or Android. Carrier’s have dozens of smartphones in their lineup already with access to these apps and users preference, either by cult or anti-cult. NokiaSoft (or MicroNokia) will have to do the equivalent of pushing a herd of elephants up Mount Everest, one by one, without a sherpa, oxygen, and very little food.
In a letter to Nokia’s associates, Stephen Elop, Nokia’s CEO explained the transition his company will make to dump all activities on Symbian OS in order to adopt WP7 as its main smartphone OS. I find interesting he used the analogy of a “burning platform” and how people do desperate things in desperate moments. Kudos for admitting the desperate times and comparing a partnership with Microsoft to “jumping into the icy Atlantic”. Although it may seem a bit too much, it is more like jumping into the icy Atlantic, naked, in the middle of the night, and picking up drowning friends, with luggage, on the way down.
Granted, these are both outstanding companies with a history of innovation and impressive comebacks (remember Netscape?). But to pull this one off will require oodles of money, several miracles, outstanding negotiating with the carriers, and great, great products. They’ve both done it in the past, but will they do it again? But, given where they both are in this multibillion dollar market, do they really have a choice? Maybe not.
So good luck in your marriage, hope you both keep your maiden names. And please do not argue about naming the kids, hire professionals instead. Neither of you have a good track record there …
Enjoy.
The Year of the Tablet
Well, apparently the whole world decided that it was about time for everyone to carry a 3rd device: a Tablet. You may know them by their more colloquial name “iPad”, which, as you know represents only 1 of the 100′s (I do mean hundreds) of such devices that will be in the market by the holiday season 2011. I had written before that I didn’t think there was a need for such a gizmo since people are already carrying too much technology with a laptop and a smartphone. I was obviously wrong and the world does need those devices. In fact I myself have 2 and are waiting for the third one, hopefully very, very soon.
The question is how many will survive in 2012 and how will they all differentiate among each other? There are really 2 camps: Consumer tablets (iPad and Android based), and everyone else. I know, I know, RIM has one (the Playbook), Cisco (Cius), and Avaya (Flare) have one too, and maybe HP’s WebOS will be like these too. But, I’m sorry, they fall in the “everyone else” camp. Let me explain:
iPad and most Android tablets (Dell Streak, Motorola Xoom, Asus Slate, Samsung Galaxy, etc.) are designed primarily for media consumption. In other words to watch videos, read books and blogs, listen to music, etc. The difference between iPad and all Android tablets is the obvious, but the uses are pretty much the same. The “other three” are for communications. All three companies have a great history of selling product to the enterprise and want to capitalize on the Tablet buzz. So they are tailoring them to be best for video communications, email, and those kinds of apps for people that are on the go. BTW, where is Microsoft in all this?
Now, there is also a sub categorization of the consumer devices in iPads, “good” Androids, and 100′s of cheapo devices. During CES, Motorola Mobility (one of the 2 siblings that came out of the mother ship Motorola, Inc.) introduced the Xoom, whose main allure was the introduction of Google’s new version of Android, Honeycomb. Reviews were amazing, Honeycomb looks fabulous. But every non Apple manufacturer in the consumer space will have access to it, so there will be competing head to head, the same way Android Smartphones do today. But there will be 100′s of cheap ones too, based on Android, but not necessarily good. When you take away the complexity of the phone, almost every manufacturer can build one, but few will be worthy of the Android seal of approval. Those are the ones to look for.
By any measure, this is great since it will drive lots of product innovation, lots of choices, in a market with iDevices has been the only true alternative, but it will also drive commoditization. Good for consumers, bad for the companies that will be competing. Particularly great for Google who will see it’s new OS proliferate like the corn subproducts. And more and more users will access the internet using a mobile via either Google’s Android or Apple’s iOS with infinite income potential for both. And the competition between them will only get more fascinating.
How will everyone differentiate remains to be seen, but with the clever ideas on this post there will be room for plenty. One more thought: Will this be totally incremental to the 600M smartphones supposed to be sold in 2012 or will it cannibalize it? Quite frankly who cares? There is plenty of pie for both.
So, my faithful reader (singular) wait for Honeycomb and run for your tablet or go buy an iPad now. You will be glad you did.
Enjoy.
Putting the Entire Map on the Map
This week Google backed satellite operator O3b, which stands for the Other 3 billion, secured $1.2b in funding to launch a satellite based fiber quality broadband service for the un-wired world (not to be confused with the wireless world). O3b estimates that 70% of the world’s population does not have access to the internet, and their satellite service will fill that gap.
Now, that is not new. Motorola tried to offer phone service around the world with the now defunct Iridium venture. What’s different, one might ask? For starters, Google is backing it, which means they are not afraid of risk. Not that Motorola was, but Google has also a business model that can allow them to reach other heights if the forgotten 70% of the world starts searching online.
Second, and the fun part, the satellite constellation will be launched at 8000 km above the Earths surface, or 4 times closer than geostationary satellites (like Iridium was). This means that users will get 4 times less latency (aka delay) one of the limitations that made Iridium usage so annoying. At this distance a signal will take roughly 50 mS to go up to the satellite and back to Earth. Seems acceptable, right?
Third, it is not necessarily meant for mobile applications. This means that you can have a huge battery since you will not be carrying the device with you all the time. Again, like Iridium that needed a 20lb backpack to make a phone call. Although they will probably do offer telephone services it is not its main purpose. Internet access is.
O3b plans to start commercial service by the first half of 2013 after their first 8 satellites. The question, my fellow reader (singular) is: will they survive? Who knows. Like I said, Google backing means a lot, especially since they are so used to non-money making ventures but with a strategy to make them money in the future (Android anyone?). But it is definitely an interesting approach that confirms the “universally available” part of Google’s mission. Will it support it’s “Don’t Do Evil” motto? Let’s wait for the business model.
Enjoy.
Garmin Needs Rerouting
Imagine you are a leader in your market and you have been dealing with your competition day in and day out, extremely successfully by having arguably the best product in your category. Then, all of the sudden, a disruption occurs that makes your product obsolete. If you still hold Garmin shares (NASDAQ:GRMN), well, I’m sorry. They are not coming back up, ’cause that’s exactly what happened to Personal Navigation Devices (PND), where Garmin was a dominant player. Smartphones with integrated GPS made them obsolete.
Now, to their credit, they tried to remain relevant by launching 2 phones, one of them even running Android. But as they reported today in their 3Q results call, they’ll be “winding down” that business. I can’t blame them. Trying to compete with Apple, RIM, Motorola, LG, Samsung, Nokia, and all those multimillion brands that spend millions on each smartphone is tough. The question is what’s left for Garmin to hang their hat on?
At roughly $6B US in market cap and still making $130M in earnings last quarter you’d think there is hope. Focusing on their fitness, aviation, and marine business, which grew last quarter, seems reasonable, but I doubt they can sustain a $6B market cap that way. So, my fellow reader (singular) there might still be room to short, but not a lot. They may be an acquisition target for their technology, but it is a gamble. So exit your position, whatever it is and be glad it didn’t go any worse.
Enjoy.
RIM Passes the Torch
Last year in June I wrote a piece about Research in Motion (Nasdaq:RIMM), maker of the Blackberry. At that point the stock closed @ $76.55. After a 42% drop is it probably time to cover our shorts to avoid a repeat of Palm? After the latest results release, RIM showed progress on earnings, but decrease subscriber adds and more importantly is draining cash. Being acquired seems to be their best option. Not that there are dozens of companies with billions to spare on an ailing smartphone maker. But it only takes one; and there is one who is also struggling to get a piece of the smartphone market: our beloved Microsoft.
Now why would Microsoft pay big bucks (really big bucks) for RIM only to combine a decreasing market share with an almost non-existent one, may I ask? I don’t seem to find the right answer. I struggle with the idea on any synergy that the merger will bring. RIM needs to invest to bring products up to par with Android and iOS based ones. Their Acquisition of Torch Mobile (who brought you the Torch) was an attempt to do that but it seems to fall short: it is not a wow phone. Even if corporate fans buy them, we’ve all seen Androids and iPhones show up in the enterprise and for the most part successful using them for the same applications.
At a first glance, the synergy seems to be there. RIM’s corporate fans and huge installed base of BES – which happens to mobilize Microsoft Exchange for the most part – and Microsoft has been unsuccessful in bringing a decent smartphone to the party with their Windows Mobile, Windows Phone, and other inroads, but understand well how to sell to the average consumer. Add a bunch of cash to mix and it is seemingly a marriage made in heaven. But not so fast, my fellow reader (singular)! RIM’s market cap is in the neighborhood of $25B plus the typical premiums tech deals get may drain all of Microsoft’s cash. Although it seems like a better investment than dividends or buying back stock it will probably not leave enough room to invest what it takes to win in this market.
Both companies need a miracle in the smartphone space. But Microsoft has other legs in the stool, albeit declining too but at a slower pace. And most likely want to conserve some cash to maintain Windows and Office in the spot they have as well as their Bing and Xbox franchises. Whereas RIM doesn’t have pagers anymore and more and more viable alternative devices are popping up in the market and making their way to the enterprise. So while RIM passes the Torch (pun intended), Microsoft passed on the Kin and both are being left behind in the race.
Now, a 42% drop is good to cover our short positions because you don’t want to be that greedy, especially after what happened to Palm (which I predicted the exact opposite). Nobody will blame you for covering in the vicinity of $45. But, if you don’t believe in Microsoft’s acquisition: short, short away till the cows come home or the stock dips another few bucks!
Enjoy.
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