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Two Recent Deaths in the Smartphone world. Long Live the Emperor.
Within the last couple of weeks two surprising deaths happened in the Smartphone world: Kin and Nexus One (direct from Google); both of whom I had blogged about before here and here. Similar to my predictions on tablets, the world has decided to make me look bad.
I can’t say either action is a real surprise, given the success – or lack thereof – of both products, but it begs the question of what the hell is so unique about Apple that makes them so successful? Both products were reasonably good and both came out with some marketing strength and high hopes, albeit none had Jobs sticking his turtleneck out for. In fact one can almost say they are truly cleverphones. Nexus One sold directly by Google lasted a few months but managed to sell more through the carriers than direct. Kin, on the other hand, didn’t even last enough to hear comments about it. Microsoft has decided to protect their channel by pulling it out of the market and allowing HTC, Dell, Samsung, and LG who will release Windows 7 Phone Series (gotta love Microsoft’s marketing) devices this year for the “holidays”.
What I think is really happening is that even strong players like these tend to underestimate the power of the wireless carriers. They own the customer since people buy phones in order to get a service, not the other way around. Smartphone OEMs have learned the game and have succumbed to the carriers’ will, quite successfully I might add. The market has turned into a selection of services where you pick a desirable phone for. In other words, I know I want AT&T, Verizon, Telus, Vodafone, etc. for whatever reason and then I select my phone. Nexus One tried to separate it out unsuccessfully, even given the fact that Google didn’t need to make money on the phone! People still bought the subsidized phone through the carrier in spite of a long term commitment.
Microsoft on the other hand didn’t try to sell direct, but attempted to bypass OEMs, where carriers buy more devices from. So it is easier for them to add a Windows 7 Phone from HTC to the portfolio they already buy from them. Besides, Kin was a succession of project “Pink” in which Microsoft had an agreement with Verizon to supply a device. This contractual agreement forced Microsoft to release Kin with an OS that was not quite Windows 7 Phone. In addition to that Verizon changed data plans and made the Kin less than attractive cost wise. Again, a wireless carrier took control of the market.
One can also blame Palm’s near demise (and HP’s gain) on carriers’ acceptance or choice.
Whatever the reasons are, wireless carriers will continue to dominate and control the market. Granted, both Google and Microsoft have a potentially great future with their mobile OS without their own branded phones as long as they follow the desire of the carriers they sell through.
The only exception so far is Apple. AT&T has gained millions upon millions of customers that wanted one and were willing to compromise their carrier selection for the privilege of carrying an iPhone. When Apple opens up to Verizon we’ll most likely see them run back and abandon AT&T. Apple will churn the base, Verizon will add users, and AT&T will lose them. Very few new iPhone users, but Apple will continue to sell them new ones. Will Jobs be open to have an unsubsidized dual system (AT&T and Verizon) iPhone to sell direct so users can declare him his loyalty? I can see it if AT&T and Verizon decide to create cheaper iPhone plans since they will not subsidize the phone anymore and create a price war. We’ll see.
But for the time being iPhone remains the only device requested by name and the carriers maintain control over everything else. For how long?
Enjoy.
Couch Potato Meets Herman Miller Potato
Google strikes again! Now coming to a TV near you. In a much anticipated and with not too much fanfare, Silicon Valley’s fave (at least my fave) unveils TV plans during Google Developer’s Conference in San Fransisco. There have been several trials, all failed. Bill Gates had predicted the convergence decades ago and with bandwidth becoming more and more available, it had to happen. Not a surprising move but an interesting approach. 2 of the “three screens” converge.
In an unprecedented multi-partner new product category, Google – providing Andriod OS and Chrome browser, Sony – manufacturing the TV, Intel – providing processors, and Logitech keyboard and remote, WebTV is reborn. But this time it is a TV that browses the Web, wait, no, a computer that plays TV, no wait, both. The promise is that: both. Based on the TV you’re watching, you’ll see ads, tweets, references, blogs, etc. that you can click and navigate to. Google’s business model fits right in.
Straight forward, right? Not quite, much better.
The TV experience is passive. You sit down pick a channel (or 17) and watch. The Web is active: click, click, click. TV works on a schedule (slightly disrupted by TiVo and other DVRs) and the Web is always available. TV is to pass time, an entertainment. The Web is to waste, sorry to spend time, searching, learning, and finding amazing content (like this blog); there’s a sense of discovery in every click. TV is a family activity, at the very least to avoid talking. The Web is individual. What Google seems to want to offer is the Web experience for TV content. All shows, all movies, all channels, all sports, all reality shows, all news; all of it ready to be found. In other words, and infinite DVR with Google’s amazing search technology. Pretty cool, and pretty disruptive for cable and satellite operators, especially with the newer generations that waste, I mean spend much more time online that in front of the TV.
To this humble blogger, these disruptions are what make radical changes in the way consumers behave. This will do to TV content what iTunes and Rhapsody did to music, Expedia and Orbitz did to travel agencies, or Amazon did to retail. A totally new way to find and enjoy professionally produced content (I know you’re thinking “unlike this blog”): on your own schedule. No more “I forgot to TiVo the game”. The beauty of these disruptions is that they grow the pie and lengthen the tail. In other words: more is consumed and there is room for new suppliers.
Whether the two sets of habits converge nicely is yet to be seen. But one thing is sure: multi-million dollar TV advertising campaigns will go the way of the LP: a distant memory of other times.
Enjoy.
iPad, gPad, or MaxiPad?
Well, it seems that the world is ponying up for what I call the third device unlike I had posted before. Verizon appears to be working closely with Google on a better Pad. At the same time Google has been posting videos of how Chrome OS will run on a tablet (I like tablet or slate better than pad for obvious reasons). The thing is “with Verizon” not “supporting Verizon”. My fellow reader (singular) this could really challenge the emperor’s Pad.
Let me tell you why I think that’s the case: As lame as the whole category is in this blogger’s humble opinion, an unconnected (i.e. no cellular support) tablet is the lame of the lame. It brings me back to the 90′s when you had to go home or to your office to get internet access. Sure, the 3G iPad is about to debut, but @ $600+ i really think the market will be limited. Now, if our friends in Verizon Wireless agree to pardon the Nexus One debacle and decide to subsidize the gPad, imagine what will that do to the price. Neither Verizon, nor Google have to make money with the hardware, which really does a job to Jobs (sorry, couldn’t help it). Estimates of the iPad cost put it at $250 – $300 US, add a 3G (or maybe a 4G – ooooh – radio), we could be seeing a street price in the $400′s. Still hefty for a useless device, but less than $600+ for the emperor’s Pad (ePad? now I’m pushing it).
But wait, there’s more! Chrome Os is the word on the street, not Android. What that may mean is a real processor capable of Flash (not Flash lite) and real browsing. Yes, my friend, I believe it will be x86 based which means that every website you can go to on Chrome today – which is virtually any website known to mankind and robotkind – is accessible to your gPad. Not even Palm’s (future HP’s MaxiPad) running WebOs can do that! Apps anybody? Yeah, sure, real apps with Java or the like, not fake widgets that look pixelated. Content? Did I mention it is Google?
So there it is. As much as I hate the category, a subsidized x86 based tablet may be the ticket to ride. BTW, Adsense must be having a ball with this post! I’m sure the ads are funny albeit unrelated. Do comment.
Enjoy.
Palm got a hand
Well apparently there is some hope for the nearly dead. One more time I’m wrong and someone did find enough value for Palm, unlike I had predicted before. Although in this blogger’s humble opinion $1.2B seems a little excessive. Sure, HPQ has the cash to spare, but a Webkit browser on top of Linux does not take that much money. Granted Palm has a good device or two, but in this environment it takes more than a good device to unseat the emperor. I guess they’d figure they’d offer a sign-on bonus to Palm employees ($5.70 / share is a bit too distant to the $17+ back in October 2009) since they would really struggle to assemble a team like that on their own.
Sure there’s some intellectual property and some innovation left in the inventor of the category. And it is the fastest growing and one of the most profitable markets in the industry but the world does not need that many mobile Operating Systems (OS) to choose from. I’m sorry. As I’ve pointed out before, to unseat the iPhone it will take more, a lot more than multitasking, a cool form factor, and a clever UI. I’m sure HP will make products people want to buy, but the question in my mind is will HP be able to create the ecosystem that will finally challenge Apple? I quite frankly doubt it. Not because it is impossible, or because HP doesn’t have the skills, it is because it is not in their DNA and Palm does not bring that to the table.
Other bloggers (the real ones) are talking about tablets and netbooks using WebOS. Now that is even crazier. If a stretched out iPhone makes little sense, a bloated Pre (will they call it HP-Pro or the Maxi?) doesn’t make much sense either. A clever-phone OS will make a tablet look like a dumb keyboardless PC (no offense Steve). Besides, with no app store, no cult to follow you, no content delivery, no store chain, no Steve (sorry Mark) things don’t look too promising. Besides, HP is a much more powerful brand than Palm, so it’s not that they’re bringing that to the table.
So, my dear follower (singular). Let’s just regret having covered our short a day too late and wait for their next move. An app delivery company? video distribution? or perhaps music delivery? We’ll see. But one thing is certain: there will be more of these moves (some may be really big). Microsoft, Dell, HTC, RIM, and others will be on the M&A news soon.
Enjoy.
Ma Bell teaches us a lesson
In the shadow of Apple’s kick-butt quarter, AT&T reported results that made the market yawn. “Yeah, yeah, you sold 2.7 million new iPhones in the quarter, added 1.9 million subscribers for a total of 87 million (1 in every 3.5 US residents uses AT&T), reduced churn, and increased ARPU (average revenue per unit) 3.9%, and a 30% increase in data revenue; so what?” is essentially what Wall Street said. I don’t know about you, but a company that still manages these numbers in a market that is essentially 100% penetrated is impressive – sure, a 6%+ dividend helps . But the really impressive, albeit insignificant number to this humble blogger is the “connected devices” increase of 1.1 million to a total of 5.8 million.
AT&T has close to 6 million non-phone devices on the network. Now why is that even relevant, my fellow reader (singular)? Simply because there are a lot more non-phone devices and a lot more things out there that need to be connected than there are phones or people. Yes, they may not be sexy, play music, browse the web, or even wash your car, but they essentially do everything else. Beyond the obvious (Kindles, iPads, etc.) these things are everywhere and in desperate need to be connected.
Take your car, for example. If you have Onstar it’s already connected (not with AT&T) so you know some possible apps. But imagine a world in which you go to Google Maps, plan a route and squirt it into your car’s GPS! Or simply download the movie you want your kids to watch from your home DVR. Your electric meter one day will be connected to so you can monitor your consumption real time (Ok, Ok, i don’t know why would I want to do that either, but you can). Every thing out there can be connected and can benefit from the internet. But where things really start changing is with Enterprise Applications.
Next time you receive a FedEx or UPS package go to the web immediately after you sign for it and voila it says received, in real time because the device where you signed is connected. The copier service personnel can consult schematics and order parts in real time when his/her machines are connected. Or the copier can ping someone when it’s running out of toner; the end of the empty copiers or useless service visits. Making every device a smart device has endless applications that are starting to look affordable. Ma Bell’s humble cellular non-phone numbers are starting to show growth. The ubiquitously connected world is getting started. Make sure you are ready for it.
Enjoy.
Palm Looks for a Helping Hand
In the past couple of days Palm’s stock (NASDAQ: PALM) has soared from around $3.5 to above $6 (from a 52 week high of $18 by the way) amidst rumors of an imminent buyout. The question in my mind is who wants to pay close to a billion dollars for a company that looses $100M a quarter, has no cash, and it is debt ridden? A fraction of that money will get any company in the smartphone game. Most are already there, arguably with a little excess as I pointed out here.
Granted, their products are good, WebOS is a neat idea, but they have lost the clout they once had. It is sad to see a Palm, in a way the inventor of the category suffer this fate. But hey, in this industry you have to listen to Bob Dylan: “You’d better start swimming or you’ll sink like a stone, ’cause the times they are a-changing.”
So what happened to Palm? Execution and focus, lack of them, that is. Back in the late 90′s with an explosive IPO after a spin-off of US Robotics everything looked rosy. But they got greedy instead of focused. But as Michael Douglas said in Wall Street: “Greed is good”. No question but greed has to have a source. And my fellow reader (singular) that has to be your products, not Wall Street itself! It is my theory that Palm, as many other great corporations get too caught up in Wall Street’s metrics, quarters, and their leaders making money off of money alone, that they loose focus on the main thing: Their products. Countless corporations (Google, Apple, Toyota, Ford, etc.) are the opposite: they have focused on creating the best products or services, and Wall Street follows.
Greed is indeed good, but with a focused source.
Enjoy.
Another Googlesque act at the Nexus of the smartphone market
Google is an amazing social experiment. Besides giving bloggers an endless source of topics to write about, it challenges all common sense, business logic, and engineering innovation concepts. In a very Googlesque fashion, Nexus One was announced during 2010 Consumer Electronics Show in Las Vegas. What is more surprising is that it will most likely be a success.
Without having had my hand on it it is tough for me to have an opinion on its performance. But given the engineering track record of Silicon Valley’s favorite they probably nailed it (even if they didn’t you know there will be a Nexus 2). But that is not what will make it a success, nor is that what is surprising about it. Motorola, LG, HTC, Sony Ericsson, and others have or have announced plans for Android powered smartphones. Yet, Google, the author of Android, decides to put out a device that competes with all of them. Moreover, Google does not have to make money from it (even though they will) since it is really a bet on mobile advertisement revenue. So far nobody has found a way to make money on mobile ads, but it is my contention that if somebody can figure it out it will most likely be Google. It is hard to imagine that Google decided to compete with their hardware partners just to make a “few” bucks selling hardware. They most likely did it for the same reason Google does everything else: to disrupt a market.
Imagine a world in which you do not have to pay for cellphone service. Pretty much the way you didn’t have to pay for TV in the past. Advertisers paid for it and consumers take advantage of that money flow. I know, I know, those days are waaaay over and not likely coming back anytime soon (until Google has a say). But in the mobile Internet business the biggest barrier to entry IMHO for mobile search to explode is the hefty $30 – $50 a month data fee from your preferred carrier plus a $100 – $300 “club entry fee” for your favorite smartphone. Sure there are hundreds of millions of smartphones out there and there will be more in the years to come, but the mobile search revenue still dwarfs the “fixed” one. Granted usability, contextual value, and other issues are still important. But Apple and Google will shortly solve those. Cost will remain a barrier. Unless, yes, unless it is free. In other words, paid by advertisers. You and I can pick our favorite smartphone subsidized by a carrier to get your voice revenue and Google pays your data plan as long as you search. Weird? Sure, but then again Google is known for its weird business models.
Enjoy.
Leadership is Execution
Although it may sound a bit cliche, the success of a company (or any enterprise for that matter) depends on its leadership. It not only depends on their ability to inspire action but also in the leaders’ ability to paint a picture that people can relate to. I recently bumped into a post by an ex colleague that clarifies the point very eloquently. He comments that leading visions must be clear, compelling, and credible for followers to act on them. I agree. However execution is a key element for any leader to succeed.
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