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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.
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.
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 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.
Android phone with Yahoo search
No, it’s not a typo. AT&T pulled Google search out of the new Motorola Backflip apparently due to contractual agreements between the carrier and the search engine as reported by MocoNews. I just think it’s funny that the reason Google got into the mobile world by developing Android is to take advantage of mobile search. Yahoo, who also wants a piece of the pie seems to have a better and cheaper mobile search strategy that does not involve a new mobile OS.
Of course, one can always change the preferred search engine on the phone once you bought it. But it defaults to Yahoo in this case. Android’s biggest advantage is user customization. This is like the antitrust fights agains Microsoft for embedding Internet Explorer with the OS “abusing” its leadership to force people to use I.E. Like people won’t download other browsers! It is really a hassle to download Mozilla, Chrome, or Safari, right? Who wants to do 3 clicks? Not to mention the fact that I.E. updates require more than 3 clicks and it gets updated more often that most geek’s underwear… But let’s not go there.
The trend of Androids with Yahoo, iPhones with Bing, Symbians with Google, Blackberries with Lycos (not sure if it still exists) and all permutations and combinations of those is what’s interesting. The most useful feature of smartphones (besides the phone) is search. How many times have you been in a restaurant and wanted to go watch a movie? Who calls the theater anymore? But now the Search engine, the OS and the smartphone itself are independent entities. By that I mean that you can go to your favorite website and buy a phone, pick your OS, your service provider and your search engine. Cool!
It is also entirely possible that carriers and device manufacturers are so pissed at Google due to the Nexus One release that they are cutting them out of the loop. Perhaps. But if the trend goes on, for whatever reason mobile search will be up for grabs. And, my fellow reader (singular) our mobile search is worth money, lots of money!
So when are we going to get service subsidies (i.e. lower data plan costs) from the search engines? Picture this: You go to your preferred service provider’s website and choose your plan, phone, OS, and accessories. On the next screen you pick your search engine which includes an extra incentive. Yahoo may offer $5/month rebate, Google $50 for accessories, Bing something else. Now, that’s driving choices.
Google: If you want to be back in the Android (what a funny incident) subidize people’s data plans and stop making your own phone. Well, not really, just subsidize my data plan.
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.
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