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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RIM Passes the Torch

September 17, 2010 by · Leave a Comment
Filed under: Business, Finances, Technology 

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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Two Recent Deaths in the Smartphone world. Long Live the Emperor.

July 23, 2010 by · 2 Comments
Filed under: Business, Technology 

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.

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iPad, gPad, or MaxiPad?

May 12, 2010 by · 2 Comments
Filed under: Business, Technology 

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.

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Palm got a hand

April 28, 2010 by · Leave a Comment
Filed under: Business, Technology 

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.

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