Posts Tagged ‘smartphones’

Mobile phones: where does the money go?

Friday, August 20th, 2010

Dediu’s analysis is a good one: winning the commodity smartphone battle really isn’t a battle worth winning. It’s another example of the delusion that turnover is as important as profit.

One of the oldest mottos at Vulture Central is Show Us The Money. There’s one even better, I think, which is Show Us The Profits. Are there any? If there are, where are they going? At a stroke, this cuts through huge amounts of hype and puts entire industries (and, for good measure, almost anything WiReD magazine has ever endorsed) in a much clearer perspective. So have a gander at the following analysis of the mobile phone business – it’s quite startling.

Asymco is a one-man analyst company operated by Horace Dediu, a former Nokia manager in Helsinki, erudite and informative with a good eye for history. Earlier this week he looked at the profits of the largest seven manufacturers, responsible for 80 per cent of the phones sold, over the past three years. The trend indicated last year is now quite clear, with two North American companies capturing the lion’s share of the profits. In Q2 2007, Nokia pocketed 63 per cent of profits; Apple and RIM just seven per cent between them. Wind forward three years, and Apple and RIM snag 65 per cent of the profits, largely at the expense of Nokia, but helped by the collapse of Sony Ericsson and Motorola, who are a tiny shadow of their former selves.

There’s a conclusion to be drawn for Google and the Android licensees, thinks Asymco. None of the three leaders are likely to abandon their in-house platforms for Android, it’s either inferior (to iOS) or (as with BlackBerry OS, Symbian or Meego) switching simply isn’t worth it. So Android is left to target the very manufacturers who have been squeezed. And that in turn leaves them with some tricky choices to make. Android is becoming a commodity platform, so they need to differentiate themselves from the rest of the Android rabble: we’ve seen Sony Ericsson, HTC and Motorola invest heavily in their own UIs. But because Android is a commodity platform, this investment isn’t worth it. (more…)

Rescuing Nokia? A former exec has a radical plan

Thursday, July 22nd, 2010

A couple of months ago, a book appeared in Finland which has become a minor sensation. In the book, a former senior Nokia executive gives his diagnosis of the company, and prescribes some radical and surprising solutions. Up until now, the book has not been covered at all in the English language. This is the first review of the proposals outlined in Uusi Nokia (New Nokia – the manuscript) and draws on three hours of interviews with its author, Juhani Risku.

It’s very, very timely – and even if you don’t follow Nokia, mobile or telecomms it’s a fascinating exercise in business analysis and organisational studies. Enjoy.

Read more at The Register

Nokia, Apple and Sudden Extinction Events

Friday, July 16th, 2010

Every day brings fresh gloom for Nokia – and the criticisms are now so familiar I won’t elaborate on them. But I was struck by a recent observation likening Nokia’s plight now to Apple’s in the mid-1990s.

It seems absurd, at first – Nokia is still turning a profit in the billions, while Apple’s annual loss was in the billions of dollars. But one thing should focus minds of executives and shareholders for one reason that’s never mentioned – the Sudden Extinction Event.

A recent theory suggests that life on Earth is extinguished and starts over every 27 million years. Coincidentally, 27 million years is how long it takes the Dave TV channel to show every repeat of Top Gear without showing the same repeat twice [*].

Businesses suffer Sudden Extinction events too, and we saw one in the past 12 months right in Nokia’s backyard: the rebirth and crash of Palm. Some businesses are much more vulnerable to Sudden Extinctions than others, and I’ll explain why by using Apple’s pre-Jobs quandary to illustrate it.

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Rescuing Palm

Wednesday, March 3rd, 2010

You know you’re in trouble when your revenue is $1bn less than you’d expected for the year. But a few companies might envy being in Palm’s position. It has an excellent product it can’t sell, and in webOS an asset that wealthy rivals – Nokia, Samsung or Microsoft – would pick up in a snap.
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Google to mobile phone industry: ‘Fuck you very much!’

Friday, January 8th, 2010

"It’s Google’s autistic approach to relationships," one senior phone exec told me this week. "They don’t know what hurt they’re doing, and they don’t care."

It’s nothing personal, guys. Today, some of the biggest tech companies in the world, who thought they were Google’s closest partners, will begin to understand how, say, copyright holders have felt for some time now. For the first time, I suspect, they’ll be enjoying that recurring tingle of amazement and disbelief that (as Chris Castle explained here), Google would even try and pull off such a stunt. It took EMI Publishing six months to realise that Google had claimed digital rights to its songs, for example. But even if the decision to shaft its closest Android partners and biggest customers is an aberration, a one-off, a fling that Google will later regret – then the size of the parties involved means it’s going to have lasting repercussions.

Even before Google started competing with it head on this week, the mobile industry was already wary of the Mountain View Chocolate Factory, and its inclination to hoover up every morsel of service revenue. Now complaining about that may be a bit hypocritical, you might think, if you look at how much of a transaction operators such as Docomo have traditionally retained, and how much they want to keep now. But look at the alternative, Google told the networks and device makers. That Mr Jobs doesn’t leave anything on the table. And besides, we Do No Evil.

 

Read more at The Register.

Rescuing Nokia's Ovi: a plan

Friday, May 29th, 2009

Ovi means door in Finnish

It must be frustrating to sketch out a long-term technology roadmap in great depth, and see it come to fruition… only to goof on your own execution. But to do so repeatedly – as Nokia has – points to something seriously wrong.

Nokia spent more than a decade preparing for Tuesday this week, when it finally launched its own worldwide, all-phones application store. It correctly anticipated a software market for smartphones back in the mid-1990s, when it was choosing the technology to fulfill this vision.

That was just one of the bets that came good. Leafing through old copies of WiReD magazine from the dot.com era, filled with gushing praise for Enron, Global Crossing, and er, Zippies, I was struck by the quality of the foresight in a cover feature about Nokia. (Have a look for yourself.) WAP didn’t work out, but I was struck by particularly Leningrad Cowboy Mato Valtonen’s assessment that “mobile is the Internet with billing built in”.

“The managers responsible for putting together the Ovi Store should be put on Nokia’s naughty step – and left there for the Finnish winter”

And so Nokia has been encouraging users to download applications for users. My ancient 6310i wants me to download applications. Every Nokia since has wanted me to, too. Seven years ago, the first Series 60 phone (the 7650) put the Apps client on the top level menu, next to Contacts and Messaging.

The problem is today, it’s Apple and BlackBerry who have the thriving third party smartphone software markets. For six months, punters have been bombarded with iPhone ads showing what you can do with third-party apps. And yes, it’s like Palm all over again, but they’re very effective. So if Apple’s store is the model, then what on earth is Ovi?
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Apple and the Gentlemen from the Networks (or, why it pays to turn up Really, Really Late)

Friday, March 20th, 2009

the iPhoneThis week Apple threw the kitchen sink at its iPhone/Touch software stack, removing most of the most irritating nuisances at a stroke. It’s a stunning achievement.

So Apple now finds itself where everyone else in the mobile handset business wanted to be 15 years ago. Large companies full of clever people devoted years of planning and expenditure to fail to get here. If the iPhone continues to flourish (see below for the many obstacles en route) – then both rival manufacturers and the networks have to tear up some long established strategies.

For the established handset competition, if Apple takes the lucrative high end, that leaves them scrambling around for gimmicks in a cutthroat market that’s increasingly low margin. For the networks, they’ll need to find devices that people actually want – or pray that Apple drops its carrier exclusivity policy and partners with any network that wants to sell its gear.

So how did someone with no track record in a notoriously difficult business find itself walking away with the laurels? What can explain this paradox?

For Apple, coming late to the phone business has actually been a huge advantage. The success of the iPhone is down not just to great engineering, but profiting from several years of desperate and outright stupid behaviour by the mobile phone networks, who set the terms for the manufacturers. The received wisdom of the industry – that you had to know the wiles of the mobile networks to succeed – turned out to be completely mistaken. And to explain this we find another paradox, which looks like this.

The mobile phone business is actually the most “customer friendly” or “customer responsive” in the world. This might seem a strange thing to say. Have a read of Brendon McLean’s splendid rant from two years ago – Why we hate the modern mobile phone, for a summary of customer unfriendly business. But it’s true.

That’s because the customer isn’t you or me, or the billion and a half other phone users in the world. Phone manufacturers have only 800 customers, of which only around 200 really matter: these are the gentlemen from the networks.

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Farewell then, Symbian

Tuesday, June 24th, 2008

Ten years ago to the day, I attended the surprise foundation of Symbian. I was in Norway and sorry to miss the event today that closed the chapter – and probably the book – on the great adventure.

I find it exquisitely ironic that the philosophy behind the decision to end Symbian’s independent existence as a joint-ownership, for-profit consortium has its roots in the Microsoft antitrust trial. Symbian was created because the leading phone manufacturers desperately wanted to avoid Microsoft’s desktop monopoly being extended to mobile devices. They didn’t want a dependency on high license fees, rigid requirements and poor code.

Well. Philosophy might be a grand way of putting it – it’s more of a fashionable buzzword. This is the idea of “multi-sided markets”, which when you get down to it, is really just a fancy way of describing cross subsidization. The case for a “multi-sided business model” was made in an economic defence of Microsoft’s strategy of bundling Windows Media Player with Windows in the EU antitrust case. So take a bow, economist Richard Schmalensee, Microsoft’s favourite economist. It was Schmalensee who in the US antitrust trial argued that the true price for Microsoft Windows should be around $2,000 per license. The idea that emerged from the EU trials was that WMP created a “platform”, and therefore consumer benefits. The idea here is that Nokia, which now entirely owns Symbian, will cross-subsidize the market by giving away the Symbian OS, er … platform, royalty free.
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Why didn't Nokia become the next Sony?

Wednesday, June 4th, 2008

When, a few years ago, I described Sony and Nokia as the only two companies who could call the shots in consumer electronics, a few eyebrows were raised. Sony, yes. But Nokia?

I anticipated that success in smartphones would be a beachhead into a bunch of other consumer electronics markets. Few noticed that Nokia already made TVs and set-top boxes. It had just launched a games console, too.

In fact, Nokia had began planning for “mobile multimedia convergence” in the mid-1990s, when it began sniffing out a next-generation operating system – it eventually opted for Psion’s Epoc, which became Symbian OS. For years Nokia put its best brains on the task – and sat back and waited. And waited.

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Panic in smartphoneland

Monday, November 5th, 2007

Google is set to give the mobile phone business a body blow today – the second punch in the guts it’s had this year. Apple delivered the first blow, by turning the operators’ subsidy model upside down – as well as making rival manufacturers look like knuckle-dragging Neanderthals. But Google’s arrival may prove to be more dramatic and far reaching for the business.

Google is expected to give away the platform required to create a sophisticated smartphone to OEMs. Its strategy is to extend its digital advertising business into new areas – and the phone is the vehicle.

In a research note for Dresdner Kleinwort published last month, an understated Per Lindberg summed it up:

“Other players, accustomed to riding on operators’ subsidy business model, notably Nokia and RIM, would have to absorb much of the ‘marketing expenses’ themselves. Such a transformation of the competitive landscape could have overwhelmingly effects [sic] on industry-wide profitabilities and market share distributions.

Indeed, and at the Symbian Smartphone show last month, the question of Google’s imminent entry into the market hung over the event.

Symbian came about because of a common resolve by the three largest handset makers – others soon joined – to create a mass market for smartphones. At the time, and it’s almost a decade ago now, the company predicted a market of around 400 million “wireless information devices” per annum by the mid-2000s. While Symbian’s annual run rate is only just reaching about a third of that, it’s arguable whether there’s a smartphone market today at all.

Blackberry claims around 10 million users for its messaging service, but most of the rest of those devices are expensive fashion statements; the “smart” features go unused. Technically, these devices are quite amazing, but like the expensively-built 3G networks they’re all dressed up with nowhere to go. The operators’ massive investments in building up high speed data capacity haven’t found a market.

So, Google is addressing this from both a supply side and a demand side.

The supply side envisages much cheaper devices, subsidised by advertising and location services. The demand side sees users rushing to use Google services such as YouTube, Maps, and its search engine on a mobile.

One of these looks a better bet than the other.