Well, the race is on.  Finally a product that can challenge the iPad’s # 1 spot: The Kindle Fire.  But is it really?  Analyst predict the Kindle Fire to be the #2 selling tablet in the market.  But it is not a tablet – said Bezos – it is a portal to the cloud.  The main difference between the iPad and the Kindle Fire is the business model.  Yes, my loyal reader (singular) let me explain:

Apple’s business is simple.  Make a kick ass product for $x and sell it for $x+y.  They make money by making cheap things (yes, I said cheap things referring to Apple) and selling them for more.  iTunes is only a way to keep you from buying something else.  Amazon’s business model is making a good product (sorry Jeff, the iPad has you beat) for $x and selling it for $x or even a little less.  They will make money selling you content, you know, books, apps, movies, music, etc. I know what you’re thinking: “so does Apple, have you heard of iTunes?”  hmmm, let’s see.

Apple reported Fiscal 2011 revenue of roughly $108B and a net income of $26B.  This was made of $21B in Mac sales, $7B in iPod sales, a mind boggling $47B in iPhones, $20B in Ipads, $2.3B in peripherals, and a meager (for Apple standards) $6B in iTunes.  On the other hand, Amazon who reported its third quarter a week later has sold $30B in the first 9 months, almost $12 of them in what they call “media”.  In percentage, 6% of Apple’s revenue is iTunes, whereas 40% of Amazon’s is media.  Although the numbers are not directly comparable and Amazon doesn’t distinguish digital from physical media (CDs, DVDs, Books), it is clear that Amazon’s business is heavily weighted in media, whereas Apple’s is mainly hardware, at least for now.

Another way to look at it is that Amazon’s “store front” is the Kindle in all its forms, more comparable to Apple’s stores that to the iPad itself.  Charging $200 for the Kindle Fire is like charging cover to enter an Apple store (kind of what Costco does).  So it is logical to expect that Amazon will not make money on the store front alone since it is really designed to attract customers to by its media products.

Now this is just the beginning of a new Tech rivalry, kind of when Android launched caused Apple to unfriend Google.  iCloud is a direct competitor to Amazon’s media store and Kindle Fire is kind of a competitor to the iPad.  The movie gets more intriguing with all the rumors of Amazon launching free smartphones, again as portals and Apple doubling down on iCloud in iOS5 and beyond.  How will it unfold? don’t miss 2012 – 2015, where 2 of the most revered tech companies go at it cloud to cloud.

But, my dear reader, if you accidentally stumbled upon this blog for investment advice, be forewarned that you’re not getting it.  Apple (AAPL) has$82B in cash and is trading at 14 times earnings. Amazon (AMZN) has $6.5B in cash and trades at around 103 times earnings.  You tell me where would you rather put your money?  Of course, don’t forget one of tech’s fave companies: Google (GOOG) with $42B in cash trading @ roughly 21 times earnings who is about to close the acquisition of Motorola Mobility (MMI) with one of the most impressive IP portfolios in the industry and the capability to develop state of the art hardware and kind of the “inventors” of the cloud.  In other words I’ll wait it out.   I would sell a share and a half of Apple to buy an iPad and a share of Amazon to buy a Kindle Fire and use my free Google account to access both.

The media battle, in this blogger’s humble opinion will be won outside the cloud; on a desk negotiating with media companies that are old fashion and do not understand or particularly care about technology. Better content will win and getting the right terms for the producers is what will be the key.  All 3 have done it and have done it well.  It might just come down to who executes best …

Enjoy.

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.

Let’s recap.  Originally netbooks were small, light and only browser based.  They were the productization of Intel’s shinny new Atom processor, touted as a low power x86 that would allow powerful enough computers in these form factors with unmatched battery life.  They ran some kind of Linux (Ubuntu mostly), had a 7″ screen little memory, no hard drive to speak of, and a WiFi connection.  They would set you back $300 – $400.  Few bought them.  Microsoft, in a desperate territorial move, launched “Windows Starter Edition” at a significantly reduced licensing cost for OEMs.  The Windows netbooks were born.  Few bought them.  Then, OEMs in a smart move added up to 250GB of hard drive larger screens, more memory and a better keyboard.  Now they were selling them.  Unfortunately people bought them instead of laptops.  Wait … they were laptops … only cheaper.  Congratulations!  Microsoft and Intel had found a way to make less money with essentially the same product from essentially the same customers.  Not good.

Then the iPad was born.  Most techies entertaining to buy a low octane netbook either to substitute their aging laptop or as a lighter traveling device opted for Job’s money printing overgrown iPod Touch instead.  Why not?  a lot sexier, lighter, cooler, and just a little more money (there, among other things, relies the brilliance of Mr. Jobs).  So netbooks went into life support.  All OEMs are now jumping into the confused Tablet marketplace.  Apple, at the top, just laughs it out.

Where has Google been?  Well, Chrome is not new.  You may recognizer it from the fastest growing browser in the PC world.  Even as an OS it has been talked about for years.  But the world decided to focus more on Android since it is selling millions of smartphones and is sexier than a boring light OS.

But now  Google would launch the ChromeBook, a netbook with a twist.

Starting at a mere $379 with a $20 – $28 monthly fee on a 3 year contract for a WiFi cloud service. hmmm  again.  In this blogger’s humble opinion, my loyal reader (singular), what the … ?  Unless those cloud services are a real cloud or send you to the clouds using legal ways, I predict a disaster only rivaled by the NEXT computer.   I’m not ready to dump my iPad, at least for one of these.  And I don’t have a bag big enough for a fourth device.

The question is?  Is it a business model problem or a product problem?  Will you get one if you could get it for free and only pay the monthly fee?  Or better yet, what if Google can subsidize it 100% even the monthly fees to make money on advertisement alone?

And there, my fellow reader, among other things, rely the geniuses of Page and Brin.

Enjoy.

I rushed to Costco to get mine (well not really, I went there after lunch).  They had those fake cardboard packages typical of warehouse clubs and I picked one up, went to the register and paid $780 big ones plus tax and ran to the little cage where they store these things. I was told I had to go to the Verizon counter to activate it.  ”OK” I said, even though I’m convinced that WiFi is the only way these devices really make sense. So I don’t need a contract. I just don’t want to wait until the WiFi only comes out.  The guy there tells me he will open a contract for me that I could cancel after a month.  The activation had a rebate and I’ll have to pay $20 bucks for the first month of service.  Irritating, but OK, OK, I really want the device. So they proceeded to open a contract and they ask for my SSN.  ”What, for 20 bucks? No way!”  to what the guy responded: “Yes, otherwise we can’t sell it to you.”  Weird.  So I said I wanted it without the contract. and he said “no can do”.  ”I’d like my money back, please.”  Costco, without hesitation proceeded to a full refund.

Now what kind of a ridiculous go to market strategy is that?  When your main competitor is not only $300 cheaper than you, and one year ahead of you but has a brand so powerful that can sell millions of phones that don’t work if you grip them the wrong way!  What in you mind will possess you to tie your product to a carrier?  Subsidies? I’m sorry, $800 cannot have a subsidy.  Unless Verizon is paying for the 4G-LTE upgrade which will be not only useless but painful.  We all know how that’s going to go:  Erase everything, make sure you back it up, ship and wait a couple of weeks for your devoice to come back.  And, oh, by the way, the 4G-LTE contract that works in 3 cities in the world is $50 more a month. You know what?  Keep your upgrade and your device!  I’ll keep my money.

Jobs and every employee in Apple must be laughing so loud that you can hear them across the US.  Let’s hope Motorola Mobility will back pedal quickly and get it off contract.   Otherwise I anticipate dismal volumes for the 2 weeks Xoom is ahead of iPad2.  Such a shame for such a good looking piece of technology.  The good news is that everybody else that will have an Android Tablet in the next few months will know not to do that.  I guess I’ll have to wait until someone makes one that has no ties.

Or please, exhume the Xoom soon from Verizon’s death grip.

Enjoy.

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.

Now, that is not new.  Motorola tried to offer phone service around the world with the now defunct Iridium venture.  What’s different, one might ask?  For starters, Google is backing it, which means they are not afraid of risk.  Not that Motorola was, but Google has also a business model that can allow them to reach other heights if the forgotten 70% of the world starts searching online.

Second, and the fun part, the satellite constellation will be launched at 8000 km above the Earths surface, or 4 times closer  than geostationary satellites (like Iridium was).  This means that users will get 4 times less latency (aka delay) one of the limitations that made Iridium usage so annoying.   At this distance a signal will take roughly 50 mS to go up to the satellite and back to Earth.  Seems acceptable, right?

Third, it is not necessarily meant for mobile applications.  This means that you can have a huge battery since you will not be carrying the device with you all the time.  Again, like Iridium that needed a 20lb backpack to make a phone call.  Although they will probably do offer telephone services it is not its main purpose.  Internet access is.

O3b plans to start commercial service by the first half of 2013 after their first 8 satellites.  The question, my fellow reader (singular) is:  will they survive?  Who knows.  Like I said, Google backing means a lot, especially since they are so used to non-money making ventures but with a strategy to make them money in the future (Android anyone?).  But it is definitely an interesting approach that confirms the “universally available” part of Google’s mission. Will it support it’s “Don’t Do Evil” motto? Let’s wait for the business model.

Enjoy.

Now, to their credit, they tried to remain relevant by launching 2 phones, one of them even running Android.  But as they reported today in their 3Q results call, they’ll be “winding down” that business.  I can’t blame them.  Trying to compete with Apple, RIM, Motorola, LG, Samsung, Nokia, and all those multimillion brands that spend millions on each smartphone is tough.  The question is what’s left for Garmin to hang their hat on?

At roughly $6B US in market cap and still making $130M in earnings last quarter you’d think there is hope.  Focusing on their fitness, aviation, and marine business, which grew last quarter, seems reasonable, but I doubt they can sustain a $6B market cap that way.  So, my fellow reader (singular) there might still be room to short, but not a lot.  They may be an acquisition target for their technology, but it is a gamble.  So exit your position, whatever it is and be glad it didn’t go any worse.

Enjoy.

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.

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.

In an unprecedented multi-partner new product category, Google – providing Andriod OS and Chrome browser, Sony – manufacturing the TV, Intel – providing processors, and Logitech keyboard and remote, WebTV is reborn.  But this time it is a TV that browses the Web, wait, no, a computer that plays TV, no wait, both.  The promise is that: both.  Based on the TV you’re watching, you’ll see ads, tweets, references, blogs, etc. that you can click and navigate to.  Google’s business model fits right in.

Straight forward, right? Not quite, much better.

The TV experience is passive.  You sit down pick a channel (or 17) and watch.  The Web is active: click, click, click.  TV works on a schedule (slightly disrupted by TiVo and other DVRs) and the Web is always available.  TV is to pass time, an entertainment.  The Web is to waste, sorry to spend time, searching, learning, and finding amazing content (like this blog); there’s a sense of discovery in every click.  TV is a family activity, at the very least to avoid talking.  The Web is individual.  What Google seems to want to offer is the Web experience for TV content.  All shows, all movies, all channels, all sports, all reality shows, all news; all of it ready to be found.  In other words, and infinite DVR with Google’s amazing search technology.  Pretty cool, and pretty disruptive for cable and satellite operators, especially with the newer generations that waste, I mean spend much more time online that in front of the TV.

To this humble blogger, these disruptions are what make radical changes in the way consumers behave. This will do to TV content what  iTunes and Rhapsody did to music, Expedia and Orbitz did to travel agencies, or Amazon did to retail.  A totally new way to find and enjoy professionally  produced content (I know you’re thinking “unlike this blog”): on your own schedule.  No more “I forgot to TiVo the game”.  The beauty of these disruptions is that they grow the pie and lengthen the tail.  In other words: more is consumed and there  is room for new suppliers.

Whether the two sets of habits converge nicely is yet to be seen.  But one thing is sure: multi-million dollar TV advertising campaigns will go the way of the LP: a distant memory of other times.

Enjoy.