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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.
The Year of the Tablet
Well, apparently the whole world decided that it was about time for everyone to carry a 3rd device: a Tablet. You may know them by their more colloquial name “iPad”, which, as you know represents only 1 of the 100′s (I do mean hundreds) of such devices that will be in the market by the holiday season 2011. I had written before that I didn’t think there was a need for such a gizmo since people are already carrying too much technology with a laptop and a smartphone. I was obviously wrong and the world does need those devices. In fact I myself have 2 and are waiting for the third one, hopefully very, very soon.
The question is how many will survive in 2012 and how will they all differentiate among each other? There are really 2 camps: Consumer tablets (iPad and Android based), and everyone else. I know, I know, RIM has one (the Playbook), Cisco (Cius), and Avaya (Flare) have one too, and maybe HP’s WebOS will be like these too. But, I’m sorry, they fall in the “everyone else” camp. Let me explain:
iPad and most Android tablets (Dell Streak, Motorola Xoom, Asus Slate, Samsung Galaxy, etc.) are designed primarily for media consumption. In other words to watch videos, read books and blogs, listen to music, etc. The difference between iPad and all Android tablets is the obvious, but the uses are pretty much the same. The “other three” are for communications. All three companies have a great history of selling product to the enterprise and want to capitalize on the Tablet buzz. So they are tailoring them to be best for video communications, email, and those kinds of apps for people that are on the go. BTW, where is Microsoft in all this?
Now, there is also a sub categorization of the consumer devices in iPads, “good” Androids, and 100′s of cheapo devices. During CES, Motorola Mobility (one of the 2 siblings that came out of the mother ship Motorola, Inc.) introduced the Xoom, whose main allure was the introduction of Google’s new version of Android, Honeycomb. Reviews were amazing, Honeycomb looks fabulous. But every non Apple manufacturer in the consumer space will have access to it, so there will be competing head to head, the same way Android Smartphones do today. But there will be 100′s of cheap ones too, based on Android, but not necessarily good. When you take away the complexity of the phone, almost every manufacturer can build one, but few will be worthy of the Android seal of approval. Those are the ones to look for.
By any measure, this is great since it will drive lots of product innovation, lots of choices, in a market with iDevices has been the only true alternative, but it will also drive commoditization. Good for consumers, bad for the companies that will be competing. Particularly great for Google who will see it’s new OS proliferate like the corn subproducts. And more and more users will access the internet using a mobile via either Google’s Android or Apple’s iOS with infinite income potential for both. And the competition between them will only get more fascinating.
How will everyone differentiate remains to be seen, but with the clever ideas on this post there will be room for plenty. One more thought: Will this be totally incremental to the 600M smartphones supposed to be sold in 2012 or will it cannibalize it? Quite frankly who cares? There is plenty of pie for both.
So, my faithful reader (singular) wait for Honeycomb and run for your tablet or go buy an iPad now. You will be glad you did.
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.
iDon’t Flash, say the Steves
To start off with a cliché, it is true that “the enemy of my enemy is my friend.” But to have the Steves ( Balmer -Microsoft’s CEO and Jobs – you know who he is) agree on bashing a competitor is unheard of, at least for this humble blogger. Apple has been criticized not only for not supporting Adobe Flash video player in the iPhone, iPod, and iPad (i’Ve had it with Apple’s naming) but for banning apps that have their roots on it. To make matters worse, Silicon Valley’s more revered deity sent out a letter saying that Flash sucks – battery, that is, as well as making devices crash and causing other problems. Balmer agrees. They both are in favor of the open standard video version called html5 video.
Hey, we’re all for standards, even better if they are open, but is it realistic to essentially ban all Flash designed websites from your mobile iProducts? Microsoft definitelly adds some muscle to the fight, but Shantanu Narayen (Adobe’s CEO) got there first. An estimated 70% of websites with video use Flash. It has a great advantage over html5: it exists today. It has also a huge installed base, works across browsers, and makes it easier for non-geek developers to use. The question is: will the the explosion of browsers (especially mobile) makes an open standard needed even more? Indeed, but it will not happen overnight, even with the Steves’ weight behind it.
Claiming that Flash crashed devices and drains battery is a bit too extreme, unrealistic, and quite frankly arrogant. Not that there’s anything wrong with that. But when you consider that the iPad has a 6000 mAh battery compared to the 1200 mAh battery in the iPhone 3GS sure, I’ll give you 10 hours of video too! Simply put, battery problems are solved with batteries. You want more battery life? put a bigger battery in. Granted, it drives the device’s weight, but so does the display. Palm Pre, RIM, Windows Mobile (and soon Android) devices that support Flash lite are roughly the same weight than the iPhone, and crash just as often. Reality is, Flash provides the programmer control over the video experience and that makes Jobs angry. He wants to control it all! As per Microsoft’s motive? Well, it just sounded like a good idea to blame computer crashes on somebody else’s software for a change.
Flash’s biggest limitation is the lack of mobile platform support. It is a heavy weight platform that so far only works well on “big” desktop OS’s. There is a Flash Lite out there but it is not 100% compatible with all Flash’s features. But that will have to change soon, if Narayen wants to stay on top. But then again, with more powerful processors and graphics coming to a mobile device near you will make this limitation a thing of the past. In any case, it is this bloggers opinion that html5 video will eventually take over video on the internet. The timing is the unknown. But I don’t think one should start to short Adobe (ADBE), at least not because of Flash. Au contraire mon fraire, this makes them a pricey acquisition target for cash rich software companies.
Enjoy.
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