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.

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.

Let me tell you why I think that’s the case:  As lame as the whole category is in this blogger’s humble opinion, an unconnected (i.e. no cellular support) tablet is the lame of the lame.  It brings me back to the 90′s when you had to go home or to your office to get internet access.  Sure, the 3G iPad is about to debut, but @ $600+ i really think the market will be limited.  Now, if our friends in Verizon Wireless agree to pardon the Nexus One debacle and decide to subsidize the gPad, imagine what will that do to the price.  Neither Verizon, nor Google have to make money with the hardware, which really does a job to Jobs (sorry, couldn’t help it).  Estimates of the iPad cost put it at $250 – $300 US, add a 3G (or maybe a 4G – ooooh – radio), we could be seeing a street price in the $400′s.  Still hefty for a useless device, but less than $600+ for the emperor’s Pad (ePad?  now I’m pushing it).

But wait, there’s more!  Chrome Os is the word on the street, not Android.  What that may mean is a real processor capable of Flash (not Flash lite) and real browsing.  Yes, my friend, I believe it will be x86 based which means that every website you can go to on Chrome today – which is virtually any website known to mankind and robotkind – is accessible to your gPad.  Not even Palm’s (future HP’s MaxiPad) running WebOs can do that!  Apps anybody?  Yeah, sure, real apps with Java or the like, not fake widgets that look pixelated.  Content?  Did I mention it is Google?

So there it is.  As much as I hate the category, a subsidized x86 based tablet may be the ticket to ride.  BTW, Adsense must be having a ball with this post!  I’m sure the ads are funny albeit unrelated. Do comment.

Enjoy.

Sure there’s some intellectual property and some innovation left in the inventor of the category.  And it is the fastest growing and one of the most profitable markets in the industry but the world does not need that many mobile Operating Systems (OS) to choose from.  I’m sorry.  As I’ve pointed out before, to unseat the iPhone it will take more, a lot more than multitasking, a cool form factor, and a clever UI.  I’m sure HP will make products people want to buy, but the question in my mind is will HP be able to create the ecosystem that will finally challenge Apple?  I quite frankly doubt it.  Not because it is impossible, or because HP doesn’t have the skills, it is because it is not in their DNA and Palm does not bring that to the table.

Other bloggers (the real ones) are talking about tablets and netbooks using WebOS.  Now that is even crazier.  If a stretched out iPhone makes little sense, a bloated Pre (will they call it HP-Pro or the Maxi?) doesn’t make much sense either.  A clever-phone OS will make a tablet look like a dumb keyboardless PC (no offense Steve).  Besides, with no app store, no cult to follow you, no content delivery, no store chain, no Steve (sorry Mark) things don’t look too promising.  Besides, HP is a much more powerful brand than Palm, so it’s not that they’re bringing that to the table.

So, my dear follower (singular).  Let’s just regret having covered our short a day too late and wait for their next move.  An app delivery company? video distribution? or perhaps music delivery?  We’ll see.  But one thing is certain: there will be more of these moves (some may be really big).   Microsoft, Dell, HTC, RIM, and others will be on the M&A news soon.

Enjoy.

Granted, their products are good, WebOS is a neat idea, but they have lost the clout they once had.  It is sad to see a Palm, in a way the inventor of the category suffer this fate.  But hey, in this industry you have to listen to Bob Dylan: “You’d better start swimming or you’ll sink like a stone, ’cause the times they are a-changing.”

So what happened to Palm?  Execution and focus, lack of them, that is.  Back in the late 90′s with an explosive IPO after a spin-off of US Robotics everything looked rosy.  But they got greedy instead of focused.  But as Michael Douglas said in Wall Street: “Greed is good”.  No question but greed has to have a source.  And my fellow reader (singular) that has to be your products, not Wall Street itself!  It is my theory that Palm, as many other great corporations get too caught up in Wall Street’s metrics, quarters, and their leaders making money off of money alone, that they loose focus on the main thing:  Their products.  Countless corporations (Google, Apple, Toyota, Ford, etc.) are the opposite: they have focused on creating the best products or services, and Wall Street follows.

Greed is indeed good, but with a focused source.

Enjoy.

Research in Motion, responsible for those of us “thumb-typing” all day long and undoubtedly king of the smart phone market announced quarterly results today. Impressive!! They beat analyst estimates again. Yet, the stock traded at some point after hours almost 10% below yesterday’s close (it has then recovered all but the last 2% or so). Is the Blackberry is running out of juice (I hate puns!) at last?

People buy things because of the things these things do (whaaat?). Applications are what sell devices, not the devices themselves. Sure a sexier iPhone will sell better than an ugly one but first and foremost you have to want to do what the iPhone does before you consider it.

Blackberries mobilized email. An applications that had been relegated to a computer and involved carving out time of your day to actually do it. RIM leveraged their know-how in two-way paging technologies to create email “push” technology that allowed devices on a cellular network to receive email in real time. They had perfected the thumb qwerty keyboard in the RIM- 950 (leapfrog) so they had a great input UI. They added a screen and a great scrolling interface. Lastly (and the most important component) they created the Blackberry Enterprise Server (BES) that made email “push” technology seamlessly integrate to Microsoft’s Outlook and voila, by April 2000, mobile email was born. In other words, they created the perfect combination of device, infrastructure, and services for the application at hand. Over the past 9 years they’ve managed to dominate the smart phone market by essentially bringing mobile email to more and more people from the corner office to around the corner soccer moms and hockey dads. Sure, you see some people running SAP interfaces, Syclo apps, Salesforce.com, and a bunch of other business apps on them, but they are really, really very good for email only and most importantly email is what lures people into buying them. Are there more people that need to mobilize email? Not really and they now have too many options to chose from. That may be the reason why Wall Street did not get excited about another blowout quarter by RIMM. They have to clearly prove a new application base in order to grow significantly.

Similarly Apple had found an amazing way to sell and distribute digital music that made everybody win: consumers, record labels, and mostly, well, Apple. When they introduced the iPhone they leveraged that, added telephony (which was no big deal anymore) and found a great way to mobilize the internet. A real browser with an awesome user interface made it really useful on the go. But forgive my heretic comment, but iPhone, 3G, and 3GS are reminiscent of the PC speeds of the 90′s and the RAZR, KRZR, ROKR sequence: essentially the same thing with an minimal evolutionary advance.

Palm is now trying to combine both email and browsing but, like I pointed out in a prior post, it is just dividing the pie further (if they are lucky) not really growing the pie or creating new pies.

In other words we need a new mobile application that will create new categories of devices and grow the market. Think about it, we started with simple telephony, we added PIM (Personal Information Managers), text messaging, media, pictures, videos, games, email, location (gps), internet browsing, books and magazines, and there may be a couple more. But the list really stops there. It is all about things that are tethered today and need to be mobilized so we can do them any time and anywhere without having to dedicate special time to them. Or things that we keep in one place and we want to take with us everywhere we go.

The app store phenomena with various degrees of success is, in my opinion an attempt to find other things to do with your device as a secondary functions. Good idea, don’t get me wrong, but if wireless carriers, device manufacturers, OS suppliers, etc. all have an app store, few are making money, and more importantly few app developers are making money too it is hardly what you would consider a market changing catalyst the way the Palm Pilot, StarTack (now I’m aging myself here), BlackBerry, or iPhone have been.

There are several possibilities here: Either someone finds something else to mobilize which I find difficult to believe at least on a massive scale (the PC industry has not found a lot of new things to automate on a fixed basis that will later need to be mobilized) or we approach this in a totally different way. The fact of the matter is that your Blackberry, iPhone, MotoSurf, Palm-pre, pro, pra, or pri are a commodity.

The point is that although there may be some innovation coming up to a device near you it is only evolutionary. It may be in the form of a sexier phone with more features. But to really be a catalyst for change the networks need to build out bandwidth and capacity. Network addressable storage has to come to a consumer simplicity, and innovation has to come in the form of services and data delivery. Why? well …. that’s a topic for another discussion.

By the way, make sure you start digitizing your entire life in preparation for it. Remember whatever you own that displaces water it is not portable. If it is stored in binary format it is.

Enjoy.

The industry seems desperate to find an alternative to the iPhone so far with no success. Palm (the inventor of the category in a way) launched last week the “pre” a successor to the “pro” (pretty creative naming) that is supposed to be what we’re all been waiting for. Based on what Palm calls WebOS (do not try to pronounce it in Spanish) which is really a WebKit browser on top of a Linux kernel. It is to me just another “clever phone”, pretty well designed, but just a follow up.

The phone looks promising with a full touch screen, a sliding qwerty keyboard, a well thought out user interface and a great webkit browser. It is really an adequate challenger to the iPhone’s kingdom. The problem is the partner carrier. Sprint has been losing customers since the Nextel acquisition (at the tune of 300K/month at some point!) that did not go well at all. It has the worst coverage in the US and the least amount of international carrier partnerships. It has put all its eggs in the 4G JV with Clearwire and has not invested enough in the mundane 3 or 3.5G. If it wasn’t enough, the Pre is built on the CDMA technology, which is great, but very few carriers in the world support it. One will hope they thought about it and they are cranking an HSPA version as we speak for AT&T and most of the world. Better yet, a dual mode (like the Blackberry Storm) that supports both technologies in the same device. But for the Pre to stand a chance, it needs to find other carriers pronto.

The battle for the smart phone kingdom currently dominated by Research in Motion (aka RIM) the creator of the Blackberry with the most successful lineup in the industry that seems to yet unchallenged (yeah even by the iPhone). The interesting thing is that Windows Mobile (WM), the first mobile OS with (sort of) a real mobile browser after WEP is falling behind, way, way behind. LG, Motorola, Samsung, HTC, and others serve up WM phone of varying success but no where near what RIM has been able to accomplish. When in 2006 there were twice as many WM phones shipped than any other smart phone.

Now, there is still the battle of the App Stores where Apple has an apparently unbeatable lead. Palm has not announced its store yet (as RIM has) but the Pre is iTunes compatible…weird thing. Is it a play for the true alternative to the iPhone or is it something else like someone getting ready to buy Palm? Who knows. But in any case, Nokia failed miserably with its store, RIM’s success is yet to be seen, and Windows’ App store, well …, will be Windows: late and not so impressive.

This battle brings memories of the glorious days of the RAZR, where everybody had one but Moto still sold 100M phones until it fell off a cliff with no true follow up. Will the iPhone follow the same fate? and the Pre, HTC-magic, G2, Moto-Q, STORM, Dare, and all sorts of weird unimaginative names – all probably registered trademarks – being the “me too’s” will also fall into oblivion soon? Check out a great comparison here.

A real mobile internet is what is needed. Check my other post What’s next after the iPhone and tell me what you think.

Enjoy.