Subba’s Serendipitous moments

April 16, 2010

Android and Nexus One shows momentum

Filed under: Business,Competition,Innovation,Strategy — Subbaraman Iyer @ 11:29 am
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Contrary to perceptions that the Nexus One is a failed product, Google actually announced in its Q1 2010 earnings report that Nexus One is meeting expectations, if not exceeding them.

Google mentioned that “driving the business (the Nexus One)  to be a profitable business from the get go. and is happy with device uptake and impact it has had raising the bar showing what a Smartphone can do.”

Report from Mark Huber SVP of Engineering on Android:

Huber: We believe in open platforms.. Our efforts in mobile are a great example of this at work. Schmidt said Google is taking mobile first approach. Your Smartphone knows where you are, so this location launched near-me-now. Turns your location into the search query. New stars in search feature, you click star next to result to save it. Makes it easier to find later (from mobile device). Android and Chrome gaining lots of momentum.

Android powering 34 devices from 12 OEMs. Over 60,000 Android devices sold/activated a day. Our mantra with Android is “open”. The platform and Market. 38,000 Apps, up 70% quarter over quarter.

Now with such an apps surge, it is no surprise that Apple wants to make it difficult for developers to be in both camps – the Android camp and the iPhone camp. It is trying to rewrite history.

April 14, 2010

Is Apple rewriting history?

Filed under: Business,Competition,Model,Perspective,Strategy — Subbaraman Iyer @ 12:27 pm
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Recent moves by Apple clearly indicate that Apple seems intent on rewriting history. Time will tell whether this is a brilliant move or a move that is just more than a misstep!

First, the attempted lock in of developers into its walled garden. The garden may be beautiful, but it is walled; not open. So far Apple has defied the odds of making its  walled gardens innovative and “developer friendly”. Now it is offering a mixed bag.

The iPhone and iPad is becoming a closed system which Apple only can control. Its current rift with Adobe is well known. The fight with Adobe is not about Flash but Apple’s fundamental approach to developers . Apple is insisting that all apps be developed using Apple’s proprietary tools with its SDK and discouraging porting of apps developed on other platforms based on its most recent license agreement. It clearly is an affront to all developers alike. It is clearly a move to limit developers from building apps for other platforms (read: Android)

Second, as a sop to developers, than as a new line of business, Apple offered the iAds an advertising platform for developers and offered to share advertising revenues. Advertisers can place ads in apps and when clicked direct users to a web site without leaving the app. Apple would serve up the ads and offered to give developers 60% of the advertising revenue to developers.

Just another way to keep the developers of more than 180,000 apps happy and help them make some money in the process!

As much as the media portrays this as yet another battle between Apple and Google, I do not see this way! The entire market for mobile advertising is less than U.S. $ 500 million accounting for just 2% of the total U.S. online advertising market. The revenue stream for Apple is insignificant. It is clearly a battle for keeping the developers firmly in the Apple fold and trying to deprive Google to build the developer community for the Android platform.

So make no mistake: It is not Apple taking on Google for advertising dollars, it is about developers!

Will the walled garden work or will open systems succeed or will both co-exist? Time will tell!

October 21, 2009

The Apple juggernaut rolls on

Filed under: Business,Competition,Leadership,Strategy — Subbaraman Iyer @ 1:23 pm
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Apple’s juggernaut continues unabated going by the latest results. Thanks to the iPhone’s game changing play that’s elaborated here. A blow out quarter.

Record shipments:Apple sold 7.4 million iPhones this quarter (ending Sept 2009)which is a 7% growth from last year. It sold 3.05 million Macs in this quarter up 17% a year ago. Both of these are milestones in Apple’s history. Sales of iPod touch were up 100% year over year. iTunes store is now in 23 countries and has become the world’s largest retailer.

Cash: Apple has $34 billion in cash this quarter compared to $31 billion last quarter. There’s a hint that there could be a share buyback soon. No debt. And to put this in context, this cash hoard is greater than that of Microsoft and more than the market cap of Dell.

Profit: A quarterly profit of $1.67 billion on revenues of $9.87 billion. It is the most profitable quarter ever in Apple’s history.

Future outlook: The future outlook seems still better with iPhone making an entry in on of the largest markets in the world — China, followed by Korea and a few other additional countries.

New accounting rules: Apple can recognize revenues from its subscription devices immediately rather than spreading it over a 2 year period.

Competition: Apple’s competition is actually languishing. Nokia the largest mobile device vendor reported a $834 million loss — the first in a decade due to falling mobile sales. Its smart phone sales saw a huge decline in market share as well. Sony Ericsson also suffered losses.

I am wondering whether Nokia or Sony Ericsson will make a bid to acquire Palm.

September 30, 2009

BlackBerry’s opportunity is now.

I was taken aback when I saw the RIM’s stock suddenly drop 17% last week. By all accounts, it had a strong Q2 results: Q2 revenue was up 37% y-o-y and 2% q-o-q to $3.53 billion on shipment of 8.3 million units. Net income was $475.6 million or $0.83 per share versus $495.5 million, or $0.86 per share last year and $643.0 million, or $1.12 per share in the prior quarter. Gross margin improved to 44.1% from 43.6% last quarter due to reductions in raw material costs and shifts in the product mix. The company ended the quarter with $2.5 billion in cash, up by $78.5 million over last quarter.

It gave a conservative forecast for the quarter ahead. I think the analysts were expecting bigger revenue growth. And this explains why the stock got beaten.

Looking beyond the immediate quarters, RIM faces several strategic challenges and threats — iPhone getting entrenched within the corporate enterprise which was RIM’s sweet spot, imminent price wars with Apple and Palm and the emerging Android phones likely to hit the market anytime.

Unlike Apple, RIM hasn’t made much strides with the App Store. Apple’s success is highlighted here. RIM’s App Store was launched only in April and has seen about 20 million downloads compared to Apple’s 2 billion downloads. It needs some serious work here and may be a cutting edge application. It also needs to pay serious attention to building an application eco system for business applications.

I think their deal with Verizon will be watched with interest as Verizon already has deals with Palm and Motorola’s Android. RIM is apparently coming up with several new models, but the competition is hotting up.

I think the next 2 quarters would be key for RIM to regain the momentum it seems to have lost. The opportunity is now.

Nokia’s decline — indicative of a bigger upheaval?

Just as Apple announced stellar results, Nokia the leading player is showing signs of decline. It has the company of another marquee player in Sony Ericcson. I already described the impact that Apple and RIM are having on other players here. The latest market data just reinforces the view.

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The Western Europe market in Nokia’s backyard and hence the trends here are important. The reason for the significant drop is Nokia doesn’t have the zing of the iPhone or the Blackberry and doesn’t have a great smartphone yet.

Now while the overall market has declined by 6% the smartphone sales were up 25% and about 1.7 millions were shipped. Of the 1.7 million, Apple sold 1.4 million and RIM sold 1.3. phones.

Now to add to Nokia’s troubles, it doesn’t have a significant presence in the U.S. though it has a strong presence in Asia , especially in the large markets like China and India. But with iPhone’s imminent launch in China and RIM’s increased efforts, Nokia has some tough challenges ahead.

The mobile device market is clearly headed for a major upheaval. With Andriod based phones to hit the market (18 models) and several service providers launching their own App Store, we will see interesting things happen.

Disclosure: I am a Nokia user and have admired their management style. One of my early blog posts was about Nokia’s amazing success in India here.

Apple’s App Store reinvents the mobile phone

Here are the impressive statistics on the Apple’s App Store based on Apple’s recent announcement:

Number of applications available: 85,000

Number of countries from where App Store is accessible : 77

Number of participants on the App Store : 125,000

Number of downloads : 2 billion.

“App Store has reinvented what you can do with a mobile handheld device, and our users are clearly loving it.” says Steve Jobs.

I talked about the game changing nature of the iPhone and the App Store here.

What is incredible is the rate of growth. From just 500 applications in July 2008, it surged to 15,000 apps downloaded half a million times in 6 months. 3 months later it had its billionth download and 35,000 apps. A further 5 months later both the downloads and the apps have doubled.

Well, I wonder what would be the growth trajectory of the App Store once iPhone is launched in China?

Now that every cell phone vendor has his own App Store the mobile operator is just left to be a dumb pipe.

September 10, 2009

Steve Jobs with a new liver and astounding numbers.

Steve is back with a new liver. He’s back and his unexpected presence at the Apple event got him a long standing ovation. He mentioned that he now had the liver of a person in their mid-20s who died in a car crash. He talked about the significance of organ donation. He ended by telling everyone to think about organ donation, as it saved his life.

That’s wonderful Steve. But would you create a charity organization for organ failures, do something to encourage more organ donation and set an example. When can we see Steve the philanthropist?

That way Steve you would have put your wealth, creativity, charisma and presence to a great cause.

Steve went on to mention Apple’s great successes:

iPhone:

30 million iPhone have now been sold worldwide in a little over 2 years.

There are now over 75,000 apps in the App Store

There have now been some 1.8 billion App Store downloads

The 3.1 update for iPhone and iPod touch will launch today.

iTunes:

     iTunes is now the #1 music retailer in the world

     8.5 billion songs have been downloaded from iTunes

  There are now 100 M accounts on iTunes, making it one of the largest stores on the web

     iTunes 9 is launching today, with a revamped look and feel

     An easier way to organize apps on the iPhone and iPod touch

     iTunes LPs (this is the “Cocktail” feature)

iPod:

     Apple has sold over 220 million iPods to date

     It’s one of the most successful products in history

     In the U.S., the iPod has 73.8% market share

     The next biggest MP3 player is “other” with 18%

     “Microsoft pulling in the rear with just about 1%”

     There have been over 20 million iPod touches sold.

     So combined that’s 50 million iPhones and iPod touches.

     21,178 games and entertainment titles in the App Store now

     Compare that to 3,680 on the Nintendo DS and 607 on the Sony PSP

Amazing mind blowing results and again Steve at this best !

August 11, 2009

Mobile phones serve as catalysts for social media.

The mobile data services market is on an unprecedented roll. For the first time, wireless data revenue in the U.S. passed $10 billion in Q1 2009. Wireless data revenue in the U.S. itself maybe $42 billion by 2009 as per the respected analyst — Chetan Sharma who has provided details in his market update. The U.S. is now is the largest mobile data market, ahead of Japan and China. Verizon’s data revenues are close to $4 billion, just shy of NTT DoCoMo’s. The top four U.S. carriers figure among the top 10 global operators by way of mobile data service revenues.

I was curious to find out what could have led to the phenomenal surge. While there could be a few factors, in my view the single largest contributor has been the growth of social media. Let me explain:

As more and more people sign on to social networking platforms like Facebook, there is a compelling desire to share and be part of the communication. This naturally implies that more people are signing up for the mobile data plans which are far more profitable for operators. The key catalyst that contributes both to the social media and to the operator’s profit pool happens to be the ubiquitous mobile phone.

A simple, easy to use browser and a good camera on the phone is all that is needed. When the smart phone was invented, I bet no one saw this as a potential application. The iPhone showed what is possible and soon a variety of devices has made access to social media quite easy.

Now, mobile operators for a long time have tried to offer a variety of applications, but barring a few none took off. This only goes to show that managing a network and managing a application portfolio calls for different competencies. And suddenly when one was least expecting, there’s a big surge in mobile data services.

INQ Mobile — owned by Hutchinson Whampoa has launched a Facebook phone. In Hong Kong, where the INQ1 launched back in March, nearly 50 percent of its owners regularly use data services on a level that is four times higher than the typical 3G user base. Facebook usage is also 3-4 times higher than the average on other 3G devices on the 3 Hong Kong network, the company said. Soon we may have a Twitter phone as well.

So, we are back to where it all started: Carriers have become dumb pipes and the innovation is happening around the ends of the pipes — at the device level and at the application level.

So, like I normally say about innovation, the unintended effects of an innovation caused by seemingly disparate tributaries often causes a flood in an area that we least expected to happen.

August 4, 2009

Google and Apple are now confirmed rivals

If there was any doubt about the relationship between Google and Apple, the abrupt resignation of Eric Schmidt — Google CEO from the Apple Board should lay it to rest.

I wonder whether the FCC’s investigation of Apple yanking out Google Voice has something to do it. I wrote about their possible rivalry here, but before I could even conceive of possible actions, the resignation was announced. Coming to think of it, Google and Apple are bracing to compete with each other. Google’s Android which will soon be adopted by many device vendors will be in direct competition with Apple’s iPhone. And the Chrome OS will be competing with the Mac OSX.

But is this new? These moves have been going on for the past few years and while the conflict of interest wasn’t that sharp the yanking of Google Voice seems to have brought all that into the open.

I admire both companies. Both Steve and Eric are respected Valley veterans. They have been role models for me. Nonetheless I have to say they always had antithetical approaches to shaping the future of the consumer experience. Some day there was bound to be a conflict.

Apple believes in creating cool products, but being a walled garden. It has fans, not customers. Even though the iPhone is supposed to be open, every application must be approved by Apple. I had talked about the walled garden approach here and it seems to have worked very well for Apple.

Google has adherents. It believed in openness and its whole purpose (even for its Chrome OS) was to reduce the significance of devices in favor of applications that will reside in the cloud. And once the cloud becomes the organizing system, the devices — be it the phones or the laptops do not matter.

Google crowdsourced its innovation. Apple built an innovation value chain in-house. Both models were successful. Yet I think at the core there is a deep philosophical conflict which manifests as a fight between the open and proprietary approaches.  I wrote about it in the mobile phone industry here and hence am not surprised that a rivalry has come about.

The Google Voice episode is just the beginning. The FCC enquiry may reveal more.

And if the Google-Microsoft war and the Apple-Microsoft war, wasn’t interesting enough, we will see a third war — the Google-Apple war.

August 2, 2009

Who is Google’s rival — Is it AT&T or Apple?

By now everyone is aware of how Apple managed to yank out Google Voice applications from the App Store. iPhone users will not have access to this application. This has caused an uproar in the blog world with some reputed bloggers mincing no words. The mainstream media has been quiet, proving once again that the blogging community is increasingly taking the lead in breaking news.

Unfortunately everyone who is involved — Google, Apple and AT&T have maintained a conspicuous silence.

Google Voice is clearly a major disruption. Through Google Voice, people can have one number for all of their phones, free long distance calling, and free text messaging. Two of these would obviously cut into AT&T’s bottom line, since users would no longer have to pay AT&T’s exorbitant service charges for messaging and cellular long distance.

It also is apparently easier to use than the dialer application from Apple itself.

So, in this case has AT&T been firing from Apple’s shoulder? I would believe so but for the fact that the Google Voice software works on Blackberry and so are other VoIP applications. I am not sure though whether the VoIP applications are allowed to run on AT&T’s networks though I am sure many other devices will be able to run Google Voice applications once Android phones are released in the market, which should be soon.

So, I am not entirely sure that it is AT&T which is exerting the influence to reject the Google Voice application from Apple’s Appstore.

Can it be Apple then? The only plausible claim that Apple can make is that it is a duplication of functionality as far as the dialer is concerned and that it could leave the customers “confused”. Clearly the AppStore is owned by Apple, and what it allows on the Appstore is their prerogative, but yet such a poor defence dents into Apple’s credibility. It cannot use a near monopoly position to thwart fair competition.

So, who is it that wants to block Google Voice? For those who do not know Google’s CEO — Eric Schmidt sits on the Apple board.

I think the players owe an explanation. Does it not become a fit case for the regulator (in this case the FCC) to investigate?

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