Please, it is time to go

April 24, 2016 by · Leave a Comment
Filed under: Business, Technology 

windows-10-phoneWell, a year ago I wrote this piece begging Mr. Nadella to stop the misery and kill Windows 10 Mobile and for some unknown reason, he didn’t read it.  Ok, I get it.  he is in denial.  But in 1Q16 the Lumia line in Microsoft got an alarming decrease in sales of 73%.  If that doesn’t make you quit, I don’t know what will.    A year ago I thought i was going out on a limb, but it does seem like the market agrees with me.  A rare occasion … let me just enjoy it for a second … OK, that’s enough.

Where were we?  right, the fiasco of Windows Mobile …

Let’s make a little bit of history, shall we?  the Lumia line came to Microsoft as the difficult to understand acquisition that Ballmer made as a parting gift back in 2013.    I wrote about that too at the time. It was a questionable acquisition from the business perspective.  Nokia mobile was losing money and had no sight at becoming profitable.   However, if you have money up the wazoo and are the perceived leader in technology, can you afford not to participate in mobile?  Nokia was the last standing soldier developing mobile phones using Microsoft’s OS.  Rumor has it that they had threatened to go Android in order to recover a position in the market share.  So what’s a rich company to do?  Ballmer had 2 choices:  let Windows Mobile die with Nokia going to Android, or plunk out an insane amount of money for a business that was losing money.  Obviously, he chose the latter, $7.2B for a shrinking business that lost money.  But it became Microsoft’s “right to play” in the mobile world, by far the largest computing platform of this decade.  Mr. Nadella wrote that investment off back in 2015 without a lot of explanation.  I guess the first quarter of this year explained it.

It does seem clear that Microsoft has not been focused at all in Mobile and are now a distant, or even negligible player.  Just to put things in perspective, Microsoft sold a little over 2 million phones in 1Q16 (fiscal 3Q16).  Apple sells that amount in less than a week, and there are more than 2 million Android phones sold every day in the world.   Yes, seriously.

Imagine if you are one of the unlucky people who happened to buy one of the 2.3 million phones?  Who is going to write apps, who is going to be my phone buddy?  So, please, Mr Nadella, the world begs you to kill this walking dead.  My loyal reader (singular), please tell Mr. Nadella to help the industry out and do like RIM and go Android.  The world will be a better place with one less OS to distract developers.

Enjoy.

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Time to Say Goodbye

April 26, 2015 by · Leave a Comment
Filed under: Business, Finances, Technology 

The need to say goodbye is one of the most basic emotions.  It is always hard, never comes intuitively, and we struggle to say the word and stick to it.  There are myriads of songs on the topic.  One of my favorites will have to be Can’t Let You Go by Rainbow.  It is probably the right time for Mr. Nadella to sing goodbye to Microsoft’s mobile operating system.

The industry reported that in 2014 Microsoft had a pathetic 2.7% market share in the Mobile OS, dominated by Google’s Android and Apple’s iOS.  The thing is, Mobile OS’s are successful if developers create apps for them.  Obviously all developers are focused on one of the two mentioned above or perhaps, both.  There is little room for a third.  But that is not really the issue.  Strategically, Microsoft has decided to give away Windows for any device smaller than 9″, or any tablet or phone.  But it collects a $10 royalty or more on most major android devices.  2014 estimates put the royalties at around $3B.  This cash goes directly to the bottom line.  Sure, software has great margins, but not 100%, royalties almost do.

But wait, there is more.  Microsoft has reported hundreds of millions of downloads of Office for iOS and Android.  Office, the defacto corporate suite is Microsoft’s money making machine. It is a mind boggling product. Last fiscal year it was responsible for 40% of Microsoft’s OE and 33% of its revenue.  It operates at an outstanding 56% OE.  So, my loyal reader (singular), who do you want to protect?  An OS franchise that is going the way of the dodo or your money printing machine.  Microsoft will be better served, and it actually is, but the downloads and product of Office 365 for Android and iOS.  And, of course, the insane royalties it is collecting for android devices.  And then focus on cloud and other services.

So, Mr. Nadella, it is time to say “goodbye” to the product that made Microsoft exist and dominate the PC industry, at least the mobile kind. In case you don’t know it, I’m taking the liberty to post the entire lyrics of Rainbow’s song on this piece since it seems that Master Richie Blackmore and Joe Lynn Turner had predicted the demise of Microsoft’s Mobile OS and wrote this song.

“Day after day I’m waking up
To find that you’re slipppin’ away
Night after night
I can’t fight the emptiness inside

There’s nothin’ I can say
Now I know you’re turning me away
It’s only you know disguise but you don’t have to hide
The truth is in your eyes tonight

I don’t wanna live a lie
But I don’t wanna say, “Goodbye”
And I can’t let you go, even though it’s over
I just can’t let you go
I know your love is growing colder

One look in my eyes and you’ll realize
You got my heart in your hands
Won’t you let me know somethin’ more
Where did we go wrong, girl?

I don’t wanna fight
All I wanna do is try and understand, yeah
I’m reaching out for you, babe, what can I do?
I’ve been holding on so long

I don’t wanna live a lie
But I don’t wanna say, “Goodbye”
I can’t let you go, even though it’s over
I just can’t let you go
I know your love is growing colder
And I can’t let you go, even though it’s over

I don’t wanna live a lie
But I don’t wanna say, “Goodbye”
I want you by my side
And I can’t let you go, even though it’s over
I just can’t let you go
I feel your love growing colder

And I can’t let you go, even though it’s over
I just can’t let you go
Feel your love is growing colder

Don’t go
Though I know it’s over
I just can’t let you go.”

Enjoy.

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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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Losers can get married too

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

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.

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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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