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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.
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.
Apple or Microsoft, which is cheaper?
It is all over the news that Apple (AAPL) surpassed Microsoft (MSFT) market capitalization last week becoming the largest tech company from that metric perspective. The question is which one is more expensive?
Assume you have $500 to invest and you are trying to decide which one is a better bet. Let’s see. On June 10th, Microsoft opened near $25 and Apple near $250. So you could buy 20 MSFT or 2 AAPL. So what are you really buying with your hard earned bucks? Based on the prior 12 months and latest financial statements these are the numbers (rounded):
AAPL: revenue $51B, Net Income $10.7B, Cash and Short term investments $23B, and a market cap of $227B (908 M outstanding shares).
MSFT: revenue $59B, Net Income $17.2B, Cash and ST investments $39B with a market cap of $218B (8720 M outstanding shares).
So if you buy 2 shares of Apple your $500 buy you $112 in revenue, $23.50 in NI, and $50.70 in cash. Microsoft’s 20 shares are $135.3 in revenue, $39.4 in NI, and $89.4 in cash. In other words, picking one metric, let’s say cash, Microsoft is trading at 5.6 times cash, Apple at 9.8 times cash. That is 1.76 times more expensive!
Now, let me throw Google (GOOG) into the mix, just for kicks: Google was trading at around $480 with a market cap of $115B (240M shares). Revenues of $25B, Net Income of $7.1B, Cash $26B. You can buy 1.04 GOOG, meaning $108 in revenue, $30.8 NI, and an impressive $113 in cash (4.44 times cash).
So you tell me which one is more expensive? I know, I know, this is based on past results and does not factor in growth potential, investor’s sentiment, cult followers, and other factors. But for the same reason it clearly paints a picture of which company is more favored by investors and which one is less.
Consider one last point: Microsoft hit an all time high of $58.37 on December 31, 1999, Google $724.80 on December 14, 2007, and Apple hit $272.40 on April 26, 2010. Investor’s favoritism has been shifting over time. What’s next for all these three? If I knew, I wouldn’t be blogging about it but it is definitely interesting behavior of 3 of the most traded stocks.
Quoting Scott Adams, the creator of Dilbert, “I remind you to ignore me”. By no means this is an endorsment to invest in any of these companies. You, my fellow reader (singular) make your own judgment.
Enjoy.
Android 2.2 Brings Mobility to the Mobile World
Today Google launched Android 2.2 which, in this humble blogger’s opinion is a leap frog from anything else out there. Besides the obvious smarter smartphone capabilities like the photo gallery, customizable home screen, better exchange support, etc. , it turns your phone into a real mobility powerhouse. Hotspot and enhanced bluetooth make your phone a gateway to mobility for all other stuff you may want to carry. I know what you’re thinking, PalmPre had that already. But Android is mainstream, supported by multiple vendors, and the 2nd best selling mobile OS (after RIM’s blackberry, not iPhone).
The hotspot feature that essentially turns your phone into a Starbucks without the coffee – WiFi hotspot using 3G as back-haul. 3G may not have enough capacity, but remember 4G is coming to a city near you. The point is, my phone becomes my only truly connected device via the wireless wide area network, with a single data plan that allows any other device that I might carry to connect to the Internet through it, without extra payments. As lame as the unconnected iPad is, it is the cheapest out there (before the gPad comes out). My Android2.2 smartphone will make it connected and I do not have to pay extra data. With my laptop I can browse the web, download a book, send email, you name it, even if I don’t have a broadband adapter. My phone is the broadband adapter.
Enhanced bluetooth means that I can now have an ergonomically perfect set of devices to manage my mobile life. I can carry my phone in my pocket or briefcase and use my headset or car kit to dial, answer an make all phone calls. I can even play music through my car’s fancy audio without plugging it in. You can envision new devices that use these capabilities to get connected. A camera, for example can upload to Picassa or YouTube directly without having to connect directly. In-car GPS or portable can also connect and get faster first fixes, maps from your phone or PC, etc.
Again, this is hardly new, but the combination of all this features in Android 2.2 brings true mobility to the mainstream, and will definitely put a dent to iPhone’s reign, that is until Apple decides to add these features too. The question that remains open is how will wireless service providers embrace a single data plan? Today they all charge for “tethered mode” which is really what we all use in substitution of a broadband card; we don’t buy a card, but we still have to pay for the extra data plan. If carriers do away with this extra charge, they will create an explosion of data traffic that they are most likely not ready for. Sprint in the US has created a plan that allows all this for a fixed rate. Sprint also has the only 4G phone available today and with its partnership with Clearwire they have a shot to regain market share even if it’s only to geeks like us. Soon others will follow, though.
Soon 4G, better back-haul from your wireless service provider, and an Android 2.2 (or equivalent feature set) can make every device a connected device. The ubiquitously connected world is getting a push.
Enjoy.
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