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Googorola, a New Age in Mobility
Well, it certainly has been an interesting couple of weeks in the mobility industry. Lawsuits galore, HP punting on the Tab (and most likely the whole Palm acquisition), Google buying Motorola Mobility (Googorola?), rumors of iPhone5 getting louder, and other rumors that Microsoft is finally going to compete in the space. And silently, well not so silently one by one the companies that started it all are being gobbled up. New, 21st century brands, some that can’t look at hardware if it was staring them in the eyes are taking center stage.
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.
Netbooks get a Chrome Finish
When you Google “Netbook” you get thousands if not millions of hits. The most optimistic ones predict the demise of the category. Others make fun of the rapid growth and crash landing of it. The remaining ones credit the iPad for talking over that space. Google, in a traditional Googlesque move jumps in to redefine the category. hmmm.
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.
Losers can get married too
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.
Garmin Needs Rerouting
Imagine you are a leader in your market and you have been dealing with your competition day in and day out, extremely successfully by having arguably the best product in your category. Then, all of the sudden, a disruption occurs that makes your product obsolete. If you still hold Garmin shares (NASDAQ:GRMN), well, I’m sorry. They are not coming back up, ’cause that’s exactly what happened to Personal Navigation Devices (PND), where Garmin was a dominant player. Smartphones with integrated GPS made them obsolete.
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.
RIM Passes the Torch
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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