A droid

There is still a out of talk about Motorola and how it survived by adopting Android. Instead of surviving it rather is a strategy that killed it.

Motorola was an early adopter and it started pushing out Android powered handsets earlier than its competitors. That was because there was no choice. Others had pushed Moto out of the race. Android gives a temporary relief, but now Samsung has enters the smartphone race in full steam. It means the early adopter advantage Moto once had is no more. The competition is once again about cost and product quality. And that its the race Moto once lost.

Yes, I am still horrified and interested to see what kind of quarter Moto has next. Is this the ugly one or will Moto be in the business for 3 months more. And who will buy the handset unit when its gone?

Motorola is toast

Motorola phone division posted their quarterly results. It was positive, but only with the legal settlement fess from RIM. Phone business loss was $109M.

It will be very difficult for Motorola to ever come back. They are completely committed to Google Android operating system. HTC is profitable with Android, as is SonyEricsson right now. Samsung is entering the space. Competition will be fierce and Motorola will be the first victim.

Masscre at US mobile market

There is a massacre happening at the US smart mobile handset market. Investigators are not yet in the scene, but the expected victims are HTC and Motorola. The only suspect at the moment is Samsung family.

In the middle of the year 2010 Samsung family members, mostly cousins belonging to Galaxy branch, entered into every major operator inventory. Of course there were also some SIM-free members hanging around in Amazon and others stores to catch by those few who are interested in free mobiles.

That started the spree never seen before. HTC and Motorola first refused to escape, but things got very hot and they had to flee when the bottom line turned red. Samsung had better displays from its own factories, and HTC got first hits when there were no more displays left for its mobiles. HTC had to change to less perfect ammunition, which caused some frustration and display performance fees.

Soon Motorola started to bleed too. It had just gained the market share for 6-9 months, but now the Samsung family hit too hard with lower prices, large selection of different form-factors and good hardware.

Also Apple was seen wounded in the attack, although it is still unclear how serious the injuries are and how much of the injuries were caused by Apple itself, because it refused to bring different form-factors into the market.

Android will probably be abandoned later, after Samsung loses interest into it and will be seen hanging around with Bada.

To Be Continued...

Android is dead

Google Android OS is growing like a wildfire. The latest growth rate in activations was around 8% per week. Now I have gone mad and say it is dead.

Google has many troubles in different parts of the world. Google has been ousted from China. It is under criminal investigation in Germany. It is all the time pushing limits everywhere, and that is good. We need understanding and discussion on these topics.

Operators

But what about mobile? Android is a mobile OS and it has "nothing to do" with Google Street View cars and Google search. Well, Google is trying to bypass mobile operators, the powerhouses of the mobile economy. And it means troubles. By introducing Google voice, it is going to an unmapped territory operators in the US. Operators for sure do not like it. It is trying to make operators a bit pipe between the handset and Google servers. And US operators are very powerful, too powerful to innovate.

Handset makers

Another bitpipe here are handset makers. Everything that the handset does happens between Google and Google. Nothing between HTC, Samsung, SonyEricsson or anybody else. Well, there are radios, cell towers, backhaul etc, but this does not provide additional value. Everything is just pushing the boxes outside Google. Do you think the world's second largest handset brand, Samsung, wants this? No, it will try to make the additional value itself. Therefore Smasung will turn away from Android leaving already troubled handset makers to compete the Android market. Google does not leave space for differentiation between handset makers. Motorola has already committed to Android till death. The end will be ugly.

Now when you look at the handset market, two dominant players Samsung and Nokia are not supporting  Android in the near future. What is left? Loss-making small manufacturers?

Final words

Of course Google will adapt to market requirements and keep its OS alive. But how? We are living interesting times next 1-2 years.

Apple will face hard times with iPhone4. Why?

Apple has launched a celebrated device which has sold millions in its first few days. That is an excellent achievement from Apple. But hard times are ahead.

Piper Jaffray reported that most of the units(77%) were upgrades to existing customers. It is a good achievement, too, because repeat purchase of same brand shows loyalty to the brand. However, repeated sales does not help Apple to increase its market share.

It was also reported that there are some design flaws regarding the antenna structure and some manufacturing failures related to screen and other components. This happens to every device that is sold in a massive scale. Bloggers strengthen the failed unit message by linking videos and photographs to everyone. Of course, every device should be perfect, but it is a statistical fact that some devices are not manufactures properly. There can be more that 10.000 failed devices and it can still be considered as "normal", because the number of sales is massive. But these things are not the hard times I mean. These are usual flaws for a new consumer electronics device, and can be corrected with redesign, improved quality control and more efficient production process.

The hard times come from the operators. They do not support Apple any more, because they know the costs after the previous models. John Strand from Strand consulting has been ranting this for a long time.  Apple does not bring money to operators, as it sells apps in its own App store. Operators do not have any reason to advertise iPhone beyond the point the device sales brings them. An example is that in the United Kingdom iPhone 4 is available unlocked and every operator is selling it. It is not a competitive advantage to any operator. And losing operator support is the game lost in the mobile space.

Android statistics

Google Android platform is doing well. In six weeks, the number of activations grew from 100.000 to 160.000 per day. What will be the sales at the end of the year?


We can begin the analysis with some statistics where the Android activations last year were between 30.000 and 60.000 per day. We can pretty safely estimate that in the early months of 2010 the number of activations was around 50.000. That was when Android devices were launching in the United States. At spring,Android invasion to other markets begun, and the growth is phenomenal.

The number of Android devices is in exponential growth right now. All the manufacturers that decided to turn their strategy to higher-end mobile devices are now entering the market. However, the two giants in mobile, Nokia and Samsung, are supporting multiple platforms. Nokia does not officially support Android, although Android can be used in its N900 device.

Samsung has always supported many platforms, and it is now Bringing Bada OS to the market. Bada starts with mid-range devices. High end Samsung devices currently use Android. One very probable scenario is that Samsung will later heavily turn only to Bada after the Bada OS and its development environment have been matured. Another reason is that Android requires powerful hardware, and the price of the hardware is currently too high to low-end mobile devices. Samsung is a very strong player in the low end and it will not gift that part of its portfolio to competitors.


Two growth scenarios


The current growth rate of Android activations is roughly 8% per week. This results around 1,3M activations per day at the end of the year 2010. The cumulative number of activations with this model is about 120M units per year in 2010. That is a really huge number.

Another growth scenario is linear growth. Android grew 60.000 units in six weeks. This means 10.000 units per week. This gives cumulative sales of roughly 70.000.000 devices in 2010. Again, this is a huge number.

More modeling

We can continue this game for long, but there are at least two other, very simple calculations to do.

First is flat sales. Google activates 160.000 Androids every day all year round. That would mean exactly 58.240.000 units, or around 58M units per year.

Second try here is flat sales from June until the end of the year, but less units sold before that. It would mean roughly 42M units sold this year.

Finally

The truth is not in these models.  I am expecting the Android device sales will stagnate at some point. The economical conditions are again worsening both in Europe and in the USA and this will most probably have a negative effect on consumer electronics sales. If your phone is working, you do not buy a new one. And if it is not working, you buy a cheap device.

Tomi Ahonen Smartphone Prediction Graphs

There was a request in Communities Dominate Brands blog to see the Tomi's predictions in a different format. Here they are.

Please read the blog first. Tomi says these are simplified and hypothetical predictions for the near future. For example, Samsung will be Bada and Android, but it has been simplified to have only Bada in these predictions.

All numbers and predictions by Tomi Ahonen. His work is just turned into a pie here for your convenience.

Why Apple invented iTunes Store

At first

iPod and iTunes came at the same time. At the time, music player had no network connections, but it had to be connected to a Personal Computer. The iPod needed its content, and instead of just implementing a storage media approach via file manager or similar application, a separate software was melted in.

The content

Before moving your audio files into an iPod, you had to have those files. It is possible to convert Compact Discs (CDs) to files. That was the one way. The other way was, and is, to download the audio files you want from peer to peer (P2P) networks. Music industry does not like the latter, because it is not generating revenue to them. iPod has a hard drive for audio and the capacity at that time was enormous. You just could put your entire CD collection into the device and it is not filled up. The next step is to go to the net and start downloading via P2P.

Music industry did not like it, and Apple had to innovate. They started iTunes store. The store is popular, but revenue and profit from it is tiny when compared to devices Apple sells. There is no really any business reason to maintain it. My claim is that it was the pressure from music industry, rather than the business strategy to support the iPod, that created the iTunes Store., Or, do you know a good reason why Nokia has Ovi Music Store?

What happens to books after iPad?

It seems that the same thing may happen to books after iPad. eBooks are already available, but book pricing in P2P networks is more tempting, right?

Smartphone Market Share Diagrams Q1/2010

Here are smartphone market share per vendor for Q1/2010. Different analysts have a slight difference in their numbers.

Canalyst

IDC

Strategy Analytics

Price of the iPhone

Doing some simple math for finance reveals the true price of the phone ownership. The case is for Apple iPhone 3GS 32GB.

ATT USA

iPhone $199, required unlimited data plan $30/month for 24 months.
Math: $199 + $30 x 24 = $919

Vodafone UK

iPhone Free, requires £75 plan which includes 3000 min voice, unlimited SMS, 1GB of data.
Math: £75 x 24 = £1800

Telecom Italiana Mobile Italy

iPhone €719.

Phone is just now killing PC

Mobile wireless smartphones are just starting to kill Personal Computers, PCs. The box-shaped form-factor with separate display, keyboard and mouse has already been transformed into laptops, nettops, netbooks, iPads etc. Now disappearing of that transformed box called PC is closer than ever.

The alternate reality lies in your pocket, the mobile smartphone. You carry it everywhere, it wakes you up at morning and it is with you all the day. It has been used for the small and short tasks, like a replacement of a wristwatch, alarm clock, and of course as a messaging device.

PC is used for the "real work", like planning, writing, drawing, email etc. PCs are used for tasks that last longer, often hours per session. For those sessions, everyone wants a big screen, a proper keyboard, a comfortable mouse, a trackball, a drawing tablet, headphones and other accessory. It is just impossible to work longer without those things. How can a phone with tiny keyboard and small display replace these?

Well, it can't. But right now the connectivity and processing power of the mobile smartphones is gaining rapidly. Bluetooth has been there for ages for audio and keyboards. TV-OUT and HDMI connectors for displays are newcomers, but are there right now. Processor speeds are now at 1 GHz and GPUs are becoming a standard feature. And almost all the accessories that are used with PCs are available in wireless format. Keyboards, mice, headphones etc. If those accessories are not yet compatible with Bluetooth and phones, they will be very soon.

Most of us will soon have a smartphone carried with us, and at home we will have big screen, keyboard and mouse that will be connected to the phone. Our future PC, the mobile computer. The transformation will take years, no doubt. But knowing the replacement rates of mobile phones and PCs, it won't take too long.

This transformation is starting right now. This year, 2010, is the beginning of the end of the PC as we have known it. Watch out and move accordingly.

Hewlett Palmcard: a Negative Approach

Hewlett Packard acquires Palm, a troubled mobile phone maker for $1.2 Billion. Does this mean something for the fast-growing mobile industry? Not really.

Both companies have been strong in the era of PDAs. You remember, those smartphones without a phone. The market of PDAs peaked in 2005 and after that it has been vanished. Those companies have something in common in the past.

Hewlett Packard has been in the mobile handset business before, but not for too long. HP failed to note the move from PDAs to phones and put a calling capability into its devices only 2007. Since then it has been selling HP iPaq phones without remarkable success. Actually, the sales has been falling fairly fast during recent quarters. Why HP has not been using it strengths to gain sales of its own Windows-powered iPaq phones?

But HP is a huge company. It has vast resources and market presence everywhere, and PALM has a nice new operating system. Sales organizations are in shape, technical support has already been helping customers for ages. There is a huge opportunity to utilize the PALM technology and knowledge on mobile through these strengths. True.

But HP is a huge company. Annual sales is well above $100 Billion. PALM sales are below $1 Billion and falling. How much time HP management has to spent with their new acquisition? Just looking at those sales numbers, the answer is "Not too much really". HP may just use PALM as a source of technology. Pick the tech to its products and forget the PALM phones and brand.

Historically two thirds of the mergers and acquisitions fail. Hope you all the best and lots of luck HP and PALM, because odds are not on your side. Work hard, work really hard to understand where you are heading and what is the direction of the mobile businesses.

Sources:

H.P. and Palm – P.D.A. Powerhouses Unite

Mergers and Acquisitions: Why They Can Fail

 

iPhone sales

Apple iPhone sales in pictures. Please note that these are calendar years.

iPhone sales per quarter

iPhone models sold

Apple does not separate iPhone 3G and iPhone 3GS after iPhone 3GS introduction. The assumed sales of iPhone 3G is 5% after iPhone 3GS introduction. The share of iPhone 3G is a pure guess, if you have data for that please leave a comment.

Why Operators are important in Mobile

Everyone has a mobile phone nowadays. being either "dumb" or "smart", it follows you everywhere. Most of us have several phones and when we change clothes we pick up a different phone with us. That little device and its user interface and user experience are personal and important to us.

The little devices we carry are only a very small, little, tiny piece of the figure. The complete figure is the biggest machine in the world, the telecommunications network. The big machine connects you with virtually every person in the world. Just put in the number or email address and you can communicate with (almost) every person in the world. Really, with everyone. From China to South Africa to United States to practically everywhere.

If we look at the business, the mobile industry is a global giant. Following the Communities Dominate Brands blog by Tomi Ahonen, the total business is above trillion dollars per year. That is $1000 billion, or $1 000 000 000 000, or in scientific format 1E12. The business is bigger than that huge number, and it is growing fast. Do you understand the scale? Good, because I don't understand it completely. It is too big for me.

Let's go forward. Again, I refer to Tomi's blog and see that the phone business is worth around $150 Billion per year. That is a huge business alone. But to reach Trillion dollars, we need $850 billion more. And that $850 billion are the mobile operators. Of course, operators do need cell towers, base stations, antennas, switches, fibers and cables to make their business, but still the traffic is the dominant money-maker in the mobile industry.

Operators get most of their money from traffic as they charge voice, SMS, MMS and data. And that is the business in mobile, the traffic. The money is there. And where is the money, there is the power. This is something that can not be forgotten, it must be understood. Operators are the major players in the mobile industry.

You do not carry an operator in your pocket. The operator does not have a nice user interface and operating system. Only when your call cuts and traffic does not work, you notice the operator and blame it. And when your phone bill arrives, you know it is there. It is the giant lurking around the corner, making the machine work, and making money out of it.

There source behind the power of the operators is government and there are two main reasons for that.

1. The frequency bands are limited and they need to be allocated for different purposes. Governments do that allocation, and they give, hire, sell, auction or using some other principles give permissions to the operators to use the radio frequencies.
2. The governments have always been interested in communications between human beings. In the medieval ages they steamed letters open. Today requirements are different but still existing, like a law that requires the storage of the call data, or the law that makes the "wiretapping" obligatory, or the law that requires registration of the IMEI codes etc.
   

Now, the government power makes the market totally different. It is not the "free market", as explained in the economics textbooks, but it is well regulated and controlled. The government says who can enter the operator market and how much the initial investments for the network costs. Using the the words from business strategy textbooks, the entry barrier for the operator market is high. And it is not only money that buy you in, you also need to be "nice" in the eyes of the government that gives you the license.

The high entry barrier explains the profits and power of the mobile operators. Any phone maker must make their phones compliant with the network and that requires interaction with the operator and meeting them is inevitable. If a phone maker is small, operators do not care too much but probably let you try. And if a phone maker is making high profits, be sure the operators want their share.

Mobile social business future

Facebook, Twitter, Skype and similar services are popular. They report tens or even hundreds of millions of users. The companies running the services are funded by the investors expecting to get their money back some time, when these companies find out how to monetize the huge number of users engaged into their services. But you need to be careful, those services are certainly being watched.


The competition

Every mobile handset company has added social applications into their handset application store, or in most cases, preloaded the applications so those can be used out of the box. Mobile handset company works more or less with the mobile operator. Sometimes the operator says what software the phone has to have. And every company wants services that are popular and make people buy from them. This is very clear.

But who pays to bill here? Running the social service requires resources, ie. computer servers, software and maintenance engineers, managers, marketing staff and so on. This personnel and hardware is paid by the company which gets the money from investors. Running the service costs money. The little application in the phone is relatively simple piece of software that is not too difficult to make, ie. it is cheap. Handset makers may or may not pay for the right to use the name and logo of the social service in their marketing. But for the handset maker and mobile operators, the social services are almost free marketing. They get the money by selling hardware and data plans for the consumers.

And the winner is?

Now the tricky point. Do you think you would like to invest money into these cool and popular social services? What happens when your company finds the gold and gets profitable? There will be competition, of course. Everyone wants his or her share of the gold just found. And who has a pole position in that competition? I would say it is the handset maker and operator who puts operating system and preloaded software into your phone.

Why is that? Because those companies already control the market space. The biggest companies in the business, say Google, Vodafone, Nokia, Telefonica, RIM, just to name a few, have truckloads of money. They have thousands of software engineers that will copy the social service framework in a reasonable time to their benefit. Just look at the mobile devices right now. They have IM clients, Skype clients, Facebook clients etc. But the makers have also their own services in parallel. The own clients are probably not as finished, not so good, not so polished as the most popular services. It is because those social services are not profitable enough right now.

As long as your company is not profitable, you are probably "interesting" or "nice". When your last line in the financial statement turns black, you will be a competitor. Be careful, you have been warned. Competition will be fierce.

Ovi Maps helps me to save cash

To put it simple - I use Ovi Maps to save money.

Ever thought your phone can help you to avoid unexpected expense - the speeding ticket? We either just hate or deeply hate those nasty payments easily got on the road. The cameras and guys delivering those are usually placed after the speed limit is lowered. If I just happen to miss the traffic sign showing the new limit, the phone gently reminds me to watch my speed.

Or on the long and boring road, it is easy to push the pedal little deeper. That makes me an easy target for those guys in the radar and camera equipped cars. Now, at least I know when I have been in the "red" and avoid some "extra charges" applied when arguing too loud with the officers about the current speed limit.

The phone with Ovi Maps pays its price back at one shot. Excellent!




Video shows I am first driving in the "green". Then I go to the "red", phone shows the current speed limit and finally remind me about the speeding. OK, I'll slow down...