6 Mobility Predictions

March 11, 2012 by · 1 Comment
Filed under: Business, Finances, Technology 

The world of technology, particularly mobility has been one of the most dynamic in the past 2 decades.  Well, it is my contention that it is about to change again, very fast and very drastically.  What was shown in the Consumer Electronic Show (CES) back in January in Las Vegas and the Mobile World Congress in Barcelona at the end of last month is trully game changing.  If you are an investor looking for advice, I suggest you ignore what you’re about to read here.  It is always fun to venture into the predictive “sciences” and look back a couple of months later to see what really happened but by no means I know what I’m talking about.  My time horizon is 12 – 24 months.  So read away and derride if you must.

Prediction #1:  Research in Motion will not be a stand alone company. The makers of the once annoyingly ubiquitous Blackberry have been losing ground since Apple launched the iPhone back in 2007.  Jobs’ creation revolutionized what we now call the smartphone and by most accounts it is the gadget of the decade.  In the meantime RIM tried to position itself as the preferred smartphone by professionals and the only one trusted by IT.  They were and by far.  In June 2008, RIM hit a high of $148 a share.  These days trading at a meager $13.6 indicates a stock in clear trouble.  They are still profitable and at a market cap of roughly $7B someone that needs good hardware can take them out.  Who can that be?  Read along …

Prediction #2:  Nokia will not be a stand alone company.  This story is even sadder.  The ones kings of the cellphone market could not and did not adapt to the smartphone revolution.  The Finnish company once enjoyed a 40%+ market share around the world.  They revolutionized how cellphones were used and they were the first ones to penetrate emerging markets like India or China.  Nokia back in 2008 saw its share price hit the  mid $30’s.  Now it squanders at $5 and even with their market leadership of roughly 24% share in 2011 (down from 28% in 2010) it struggles to stay profitable.  As I posted previously here, Microsoft has partnered with them and has made them their preferred partner for Window Phone 8.  In this blogger’s humble opinion it will take a lot more than $1B of Ballmer’s money to bring Nokia back to life.

Prediction #3:  Android will come of age.  Are you kidding me;  it is the number one selling OS in the smartphone category?  Sure, but it is still immature.  It is very fragmented, some apps don’t run well across devices, each OEM has its own GUI flavor, enterprises don’t like it, IT can’t manage it, and there are tons of stories of malware and malicious apps that have hit it.  Even if OEMs like Samsung, LG, HTC, or Motorola fix that, corporations don’t want to deal with different tools for different devices.  Google will have to get their act together and embrace them.  Their move to acquire Motorola Mobility, that I mentioned here is a testament of their true interest in the space.  What will they do with Motorola’s hardware capabilities still remains to be seen.  But, my loyal reader (singular) you have to agree that nobody spends $12B, even Google, if they don’t have a solid strategy.  Android will be one of the 3 contenders in the smartphone/tablet battle.  Why 3? read along …

Prediction #4:  Samsung will be the next dominant player in consumer products.  This one is a classic vertical integration play.   Samsung owns ICs, displays, manufacturing, etc. they are extremely agile in their development and manufacture products that are state of the art.  If it wasn’t enough, unlike Apple, they believe consumers should have choices, in fact want choices.  For example, Samsung is the only company with a  mobility lineup of 4.3″, 5.2″, 7″, 8.9″, and 10.2″ Android devices and some Windows devices too.    Samsung had about 17% market share in 2011, are extremely profitable, and are among the price leaders in tablets and smartphones.  But that’s not it; they have impressed in recent trade shows with their integration of computers, TVs, smaprthones, tablets, music systems, etc.  A single experience across “all-screens-and-speakers” has always been the dream of the likes of Apple, Sony, Microsoft, and others.  Samsung seems to be the only one executing to it.

Prediction #5:  Microsoft will be a true force in mobility.  I know I’m starting to go out on a limb here.  They have a dismal 6% market share, about 1/2 of RIM’s.  But our friends in Redmond are pouring (to paraphrase Dr. Carl Sagan) billions upon billions of dollars in the quest. I know I’ve said the opposite before (that’s why you should ignore me) but I think this time is real.  Google’s acquisition of Motorola Mobility also opens the door for Samsung, LG, HTC, and other OEMs to rekindle their romance with Windows if for nothing else, as a hedge against Android’s marriage.  Windows phone 7 was actually pretty good, 7.5 even better.  They were “just” missing OEM adoption and apps.  But in classic Microsoft fashion Windows 8 promises to be the third time is a charm deal. Reports of the beta version of Windows 8 (on a PC) are extremely positive which will revitalize them for the mobile space.  Microsoft is the trusted adviser for corporations across the world and IT will gladly go back to them if users accept it.  The trick will be in the hardware and the ecosystem of apps.  Again, in this blogger’s humble opinion, a combination of what I’ve mentioned in points 1-3 above may be Microsoft’s ticket to mobility.

Prediction #6:  Apple will not continue its reign.  I know this may be out there  and  I’m not saying Apple will go down but at the very least they will slow down their growth.  The main reason of their success may be the cause of their change in fortune.  According g to Cook’s iPad3 launch, Apple sold a mind blowing 172 million devices.  Of those 172 million, even more mind blowing is that around 100 million were iPhones.  Think about that: 1 product (actually 2, black and white) sold in 200 countries!  Essentially Apple believes that 1 product with no changes is ideal for everyone in the world!  My loyal reader I ask you: how sustainable is that, especially when you see their competitors following the opposite approach?  iPad3 was a disappointment not because it is not a great product, it is. It became a “speeds and feeds” game; same old device, but better this and faster that.  It is a reminder of the WinTel era in which you had to have the fastest computer with the most memory and the fastest disk.  Apple themselves made Mobility to be not like that.  The market that Apple changed with music, movies apps, and multipurpose devices is about the experience.  Sure, a better this and a faster that may drive a better experience, but I believe we’re reaching diminishing returns particularly to rush and get one.   iTunes and iCloud bring the continuous experience across iOS device, but it stops there.  On top of that Apple TV was a failure.  There is life outside of our mobile devices.  But then again, with $100 B in cash, they might reinvent something else one more time.

So there you have it. 6 predictions in an 18-24 month horizon.  If you disagree, let me know, if you agree pleas do that too.  And remember to ignore me because unlike the song I will not get closer if you do.

Enjoy.

 

 

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Bezos is On Fire

December 3, 2011 by · 2 Comments
Filed under: Business, Technology 

Well, the race is on.  Finally a product that can challenge the iPad’s # 1 spot: The Kindle Fire.  But is it really?  Analyst predict the Kindle Fire to be the #2 selling tablet in the market.  But it is not a tablet – said Bezos – it is a portal to the cloud.  The main difference between the iPad and the Kindle Fire is the business model.  Yes, my loyal reader (singular) let me explain:

Apple’s business is simple.  Make a kick ass product for $x and sell it for $x+y.  They make money by making cheap things (yes, I said cheap things referring to Apple) and selling them for more.  iTunes is only a way to keep you from buying something else.  Amazon’s business model is making a good product (sorry Jeff, the iPad has you beat) for $x and selling it for $x or even a little less.  They will make money selling you content, you know, books, apps, movies, music, etc. I know what you’re thinking: “so does Apple, have you heard of iTunes?”  hmmm, let’s see.

Apple reported Fiscal 2011 revenue of roughly $108B and a net income of $26B.  This was made of $21B in Mac sales, $7B in iPod sales, a mind boggling $47B in iPhones, $20B in Ipads, $2.3B in peripherals, and a meager (for Apple standards) $6B in iTunes.  On the other hand, Amazon who reported its third quarter a week later has sold $30B in the first 9 months, almost $12 of them in what they call “media”.  In percentage, 6% of Apple’s revenue is iTunes, whereas 40% of Amazon’s is media.  Although the numbers are not directly comparable and Amazon doesn’t distinguish digital from physical media (CDs, DVDs, Books), it is clear that Amazon’s business is heavily weighted in media, whereas Apple’s is mainly hardware, at least for now.

Another way to look at it is that Amazon’s “store front” is the Kindle in all its forms, more comparable to Apple’s stores that to the iPad itself.  Charging $200 for the Kindle Fire is like charging cover to enter an Apple store (kind of what Costco does).  So it is logical to expect that Amazon will not make money on the store front alone since it is really designed to attract customers to by its media products.

Now this is just the beginning of a new Tech rivalry, kind of when Android launched caused Apple to unfriend Google.  iCloud is a direct competitor to Amazon’s media store and Kindle Fire is kind of a competitor to the iPad.  The movie gets more intriguing with all the rumors of Amazon launching free smartphones, again as portals and Apple doubling down on iCloud in iOS5 and beyond.  How will it unfold? don’t miss 2012 – 2015, where 2 of the most revered tech companies go at it cloud to cloud.

But, my dear reader, if you accidentally stumbled upon this blog for investment advice, be forewarned that you’re not getting it.  Apple (AAPL) has$82B in cash and is trading at 14 times earnings. Amazon (AMZN) has $6.5B in cash and trades at around 103 times earnings.  You tell me where would you rather put your money?  Of course, don’t forget one of tech’s fave companies: Google (GOOG) with $42B in cash trading @ roughly 21 times earnings who is about to close the acquisition of Motorola Mobility (MMI) with one of the most impressive IP portfolios in the industry and the capability to develop state of the art hardware and kind of the “inventors” of the cloud.  In other words I’ll wait it out.   I would sell a share and a half of Apple to buy an iPad and a share of Amazon to buy a Kindle Fire and use my free Google account to access both.

The media battle, in this blogger’s humble opinion will be won outside the cloud; on a desk negotiating with media companies that are old fashion and do not understand or particularly care about technology. Better content will win and getting the right terms for the producers is what will be the key.  All 3 have done it and have done it well.  It might just come down to who executes best …

Enjoy.

 

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Googorola, a New Age in Mobility

August 20, 2011 by · 2 Comments
Filed under: Business, Technology 

GoogorolaWell, it certainly has been an interesting couple of weeks in the mobility  industry.  Lawsuits galore, HP punting on the Tab (and most likely the whole Palm acquisition), Google buying Motorola Mobility (Googorola?), rumors of iPhone5 getting louder, and other rumors that Microsoft is finally going to compete in the space.  And silently, well not so silently one by one the companies that started it all are being gobbled up.  New, 21st century brands, some that can’t look at hardware if it was staring them in the eyes are taking center stage.

When there are winners, there have to be losers, even in a rapidly expanding market such as this.  Nokia, the once titan of the category, that robbed market share from the inventors of cellular telephony (Motorola), although still #1 are now falling like a rock.  Palm, who arguably  added the “smart” aspect of smart phones by creating the PIM (personal information manager) elements now ubiquitous, recently bought by HP are now defunct and their legacy, sadly, may follow.  Research in Motion, RIM, makers of the ubiquitous executive gadget of Christmas Past are down to a meager 3% and declining.  While Google and Apple, who dominate the mobile Operating System market share see no end in sight.

Google’s acquisition of Motorola Mobility (MMI) brings to the table the largest patent dowry available:  17000 granted patents plus more than 7000 in process, including some unimaginable radio and communication intellectual property.  This not only gives Google the ability to counter the myriad of lawsuits that make analysts weary of the future of Android, but can actually put them in the driver seat if they weren’t there already.  Unfortunately there are always downsides to every upside.  In this case its in the form of a Taiwanese and 2 Korean companies.  Yes, you guessed it: HTC, Samsung, and LG.  These 3 plus Motorola Mobility are the main adopters of Android and responsible for Google’s rise to the top OS in this category.  Together they represent roughly 25% of the market or about the size of Apple’s iOS.

The question is, my loyal reader (singular), will they pick up their marbles and go home (with a layover in Redmond, Wa)? or will they trust Google to keep MMI running independently?  Yeah right!  Just like other things in life, some win, and some lose.  The ones that win by just waiting it out, Microsoft have a  real chance to become the third horse in the race.  Mainly because they will be the only remaining independent.  But with $53B burning their balance sheet, how long can they afford to stay that way?

Enjoy.

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Netbooks get a Chrome Finish

May 13, 2011 by · Leave a Comment
Filed under: Business, Technology 

When you Google “Netbook” you get thousands if not millions of hits.  The most optimistic ones predict the demise of the category.  Others make fun of the rapid growth and crash landing of it.  The remaining ones credit the iPad for talking over that space.  Google, in a traditional Googlesque move jumps in to redefine the category. hmmm.

Let’s recap.  Originally netbooks were small, light and only browser based.  They were the productization of Intel’s shinny new Atom processor, touted as a low power x86 that would allow powerful enough computers in these form factors with unmatched battery life.  They ran some kind of Linux (Ubuntu mostly), had a 7″ screen little memory, no hard drive to speak of, and a WiFi connection.  They would set you back $300 – $400.  Few bought them.  Microsoft, in a desperate territorial move, launched “Windows Starter Edition” at a significantly reduced licensing cost for OEMs.  The Windows netbooks were born.  Few bought them.  Then, OEMs in a smart move added up to 250GB of hard drive larger screens, more memory and a better keyboard.  Now they were selling them.  Unfortunately people bought them instead of laptops.  Wait … they were laptops … only cheaper.  Congratulations!  Microsoft and Intel had found a way to make less money with essentially the same product from essentially the same customers.  Not good.

Then the iPad was born.  Most techies entertaining to buy a low octane netbook either to substitute their aging laptop or as a lighter traveling device opted for Job’s money printing overgrown iPod Touch instead.  Why not?  a lot sexier, lighter, cooler, and just a little more money (there, among other things, relies the brilliance of Mr. Jobs).  So netbooks went into life support.  All OEMs are now jumping into the confused Tablet marketplace.  Apple, at the top, just laughs it out.

Where has Google been?  Well, Chrome is not new.  You may recognizer it from the fastest growing browser in the PC world.  Even as an OS it has been talked about for years.  But the world decided to focus more on Android since it is selling millions of smartphones and is sexier than a boring light OS.

But now  Google would launch the ChromeBook, a netbook with a twist.

Starting at a mere $379 with a $20 – $28 monthly fee on a 3 year contract for a WiFi cloud service. hmmm  again.  In this blogger’s humble opinion, my loyal reader (singular), what the … ?  Unless those cloud services are a real cloud or send you to the clouds using legal ways, I predict a disaster only rivaled by the NEXT computer.   I’m not ready to dump my iPad, at least for one of these.  And I don’t have a bag big enough for a fourth device.

The question is?  Is it a business model problem or a product problem?  Will you get one if you could get it for free and only pay the monthly fee?  Or better yet, what if Google can subsidize it 100% even the monthly fees to make money on advertisement alone?

And there, my fellow reader, among other things, rely the geniuses of Page and Brin.

Enjoy.

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Exhume the Xoom Soon

February 26, 2011 by · Leave a Comment
Filed under: Business, Technology 

After much anticipation the Xoom is out.  Motorola Mobility’s Android based tablet that won best in show at CES.  But is it really out, you know, like the iPad, with no strings attached?  No, my fellow reader (singular).  It seems to have launched in a way that is difficult to understand.   It is arguably the most anticipated device this year and it managed to beat Apple’s iPad2 by a couple of weeks.  And what do they do?  Force users to get a contract with Verizon!  What the …?

I rushed to Costco to get mine (well not really, I went there after lunch).  They had those fake cardboard packages typical of warehouse clubs and I picked one up, went to the register and paid $780 big ones plus tax and ran to the little cage where they store these things. I was told I had to go to the Verizon counter to activate it.  “OK” I said, even though I’m convinced that WiFi is the only way these devices really make sense. So I don’t need a contract. I just don’t want to wait until the WiFi only comes out.  The guy there tells me he will open a contract for me that I could cancel after a month.  The activation had a rebate and I’ll have to pay $20 bucks for the first month of service.  Irritating, but OK, OK, I really want the device. So they proceeded to open a contract and they ask for my SSN.  “What, for 20 bucks? No way!”  to what the guy responded: “Yes, otherwise we can’t sell it to you.”  Weird.  So I said I wanted it without the contract. and he said “no can do”.  “I’d like my money back, please.”  Costco, without hesitation proceeded to a full refund.

Now what kind of a ridiculous go to market strategy is that?  When your main competitor is not only $300 cheaper than you, and one year ahead of you but has a brand so powerful that can sell millions of phones that don’t work if you grip them the wrong way!  What in you mind will possess you to tie your product to a carrier?  Subsidies? I’m sorry, $800 cannot have a subsidy.  Unless Verizon is paying for the 4G-LTE upgrade which will be not only useless but painful.  We all know how that’s going to go:  Erase everything, make sure you back it up, ship and wait a couple of weeks for your devoice to come back.  And, oh, by the way, the 4G-LTE contract that works in 3 cities in the world is $50 more a month. You know what?  Keep your upgrade and your device!  I’ll keep my money.

Jobs and every employee in Apple must be laughing so loud that you can hear them across the US.  Let’s hope Motorola Mobility will back pedal quickly and get it off contract.   Otherwise I anticipate dismal volumes for the 2 weeks Xoom is ahead of iPad2.  Such a shame for such a good looking piece of technology.  The good news is that everybody else that will have an Android Tablet in the next few months will know not to do that.  I guess I’ll have to wait until someone makes one that has no ties.

Or please, exhume the Xoom soon from Verizon’s death grip.

Enjoy.

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