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Nokia’s choices:Death by a thousand cuts or Sell-off

Posted in Mobile Devices and Company Updates by Manas Ganguly on June 25, 2012

Already in the doldrums, Nokia share proce has taken a 27% hit in June 2012 because of the Windows8 announcement

 

Over the last month or so, Nokia’s share tumbles are in excess of 27% from a peak of $3.02 to $2.20 as of today. Even while the Windows7.5 powered Lumis is not in the same breadth as Galaxy SIII or HTC One or iPhone, the Lumia dished out some hope to Nokia in terms of survival in the smartphone space. Now with Windows8 working on a completely different kernel compared to Windows 7.5, Microsoft has essentially killed all the Windows7.5 smartphone sales, as retailers and operators will put off their next Windowss Phone purchase till such time when Windows8 smartphones are launched.

Windows8 will run on Nokia, Samsung, HTC and Huawei. While others may still take things in stride, Nokia which has run a “Windows Only” strategy has the most to lose. Already in its death spiral, Nokia is rapidly running out of time, cash, options and sales. And the overt dependence on Windows has left them high and dry with no options to fall back upon. I am not sure, but Nokia’s dumping of Meego (given its brilliant acceptance) will be haunting Stephen Elop. For all  that Nokia has risked in the last year and half, Microsoft hasnot really given Nokia any great hope in terms of Windows on Nokia being a differentiated offering (vis-à-vis Samsung, HTC and Huawei). A stark contrast in this comparison is Samsung which has stakes across Android, Windows, Bada and Tizen as well. Nokia may have to bleed profits to sell off the Lumias in the channel and markets.

With depleting cash reserves, a smartphone line-up  which is not as invigorating, a junk rating for its credit rating, a double cut (in 6 months) on earnings guidance, Nokia’s H2, 2012 will be the worst double quarter on record. Given the current strength of the Samsungs and Apples around, it is unlikely, that Nokia will recover any lost glory 2013-14. For Nokia, it’s a Hobson’s choice- Death by thousand cuts or a sell off. A sell-off could still make money for Nokia even now.

Will Microsoft’s fragmentation take Nokia down?

Posted in Mobile Devices and Company Updates by Manas Ganguly on June 22, 2012

Even while Windows8 has just been announced, the spectre of platform fragmentation is turning out to be a real bogey for the bealeagured Nokia.

 Nokia shares plunged 18 percent this June after forecasting a wider second-quarter operating loss from handsets and 10,000 job cuts. After wiping out about $100 billion in market value, Espoo, Finland- based Nokia trades at a 38 percent discount to its net assets, the least expensive on record, according to data compiled by Bloomberg dating back to 1995.

Reeling under the impact of business slowdown, loss of market share both in smartphone as well as low and mid range, Nokia had pinned all its hopes on the Windows platform as a differentiator and a saviour. However, if the Windows8 is any indication Microsoft doesnot really accord as faith and importance to Nokia as much as Nokia would have really liked it. The Windows8 will be released with 4 OEMs – Samsung, Nokia, HTC and Huawei. Thats not much comforting for Nokia having to vie with an in-form Samsung .

6 months back, the Lumia 900 was considered the exemplar of Microsoft’s new operating system, Windows Phone. However, the saviour of Nokia smartphones was not quite the messiah it was touted to be.  As a result of poorly planned platform migration, Microsoft Windows8 would not be available to Lumia 900 owners. Eevn while Nokia sold two million Lumia handsets in the first quarter of 2012 but the company’s top device has essentially been rendered out of date within a year.

This can be looked at from two ways – Microsoft’s platform fragmentation and its inability to bridge the Windows7.5 and Windows8 platforms can leave a lot of the early OEMs high and dry. Worse with the hype and hoopla around Windows8, sales of the Windows7.5 devices are effectively going to stall for a while. The OEMs will be under pressure to undercut prices for distress sales. Thats not great for the bottomline of Nokia which has increasingly been loosing faith with the markets. (Moody’s, Fitch and S&P have already cut down Nokia’s credit rating to Junk).

Secondly, while, Elop’s strategy of jumping of the Symbian “burning platform” was good forbearance, its deserting of Meego and “dont even touch it” stance with Android have really not worked for Elop. Possibly a risk diversification would have helped especially with the Meego platform.

So while Windows fragments, Nokia’s primal fear is to stay afloat in an environment which evolves from Windows7.5 to Windows8 on cash reserves which aren’t comforting really. Will Nokia see the end of 2012? 60-40 it wont.

Why Samsung’s Device strategy will not be a sustainable one in the long hop?

Posted in Mobile Devices and Company Updates by Manas Ganguly on June 20, 2012

Samsung has been on the ball with the rise of Smartphones globally. The SIII  pre-ordered 9 million units and Samsung stands pretty much ahead of the competition with Apple some space behind it. However does Samsung have firm ground under its feet as far as Smartphones is concerned? In my view the Smartphone success story for Samsung is very device led and is not very sustainable in the long run. The following are the reasons of my belief

  1.  In fact, Samsung’s superiority in this space stems from its competency across screens – LCD, LED,OLED, AMOLED, Flexible OLED, Super AMOLED.  It essentially leverages its strength in TVs to the mobile screen. True the Galaxy S series phones are possibly the first super phones, but is Samsung missing the consumer and the usage bit? Sample this – Samsung has an astonishing range of devices from 1.4” screens to 11” screens. In Tablets, Samsung has 7”, 7.7”, 8.9” and 10.1” screens for Android and will soon come out with a 11” screen for Windows8. The many screen tablet strategy serves to only confuse the consumer in lieu of greater choice. Most importantly, there is no underlying proposition that  Samsung over-archingly provides across its high end devices except perhaps a large screen migration from one device to other. 
  2. Apple on the other hand has 2 devices each in smartphones and tablets and while it competes on the hardware, it also leverages the app eco-system, the voice recognition technology, the iCloud, iTunes store and a seamless transition (between iPad, iPhone, iTV, iTunes) to build the customer story. That to me is a base which can be used to Apple’s advantage in providing a consistently great experience across all screens and keep building on it. Samsung’s range is made of individually great devices, but no commonality underneath the surface.
  3. Samsung is also on divided stakes on Android, Windows8, Bada OS and Intel powered Tizen. That is good in as far as de-risking perspective. However, Samsung is being dependent on atleast 3 app eco-systems which is a challenge as far as a consistent consumer experience is concerned on Samsung per se.
  4. Samsung would obviously ride on the Android/Windows cloud and the other properties of diverse platforms but there is no singular property which would provide the consistent Samsung experience across the range of devices (Smartphones, Tablets, Laptops, TVs). Compare this with Apple where the iCloud and the iOS form the bedrock of a great consumer experience.
  5. While I personally fancy the 5 inch Galaxy Note for the handwriting feature, what amuses me is that Samsung has not really taken this feature across its other smartphones and tablets.
  6. As the device space becomes increasingly competitive – (remember how HTC One is snapping at Samsung’s edge), the above mentioned factors provide donot quite provide a platform for Samsung for an all encompassing media and mobility experience.
  7. Stickiness and great experience are key to building profitability and that is one area where Samsung shall always lag Apple – in terms of generating profits inspite of a great portfolio of devices.
  8. Even while Sony is itself bleeding from a thousand cuts, it has a few interesting properties around media and entertainment (Sony Entertainment, Sony BMG, Playstation).  Amazon has a firm media selling competency in terms of books, videos, music. Apple is the best itegrator of online and mobility experiences. These are larger customer propositions than just the device. Samsung rides on the device strengths which are at best competitive but not compelling.

Love to hear your views about my belief – that Samsung will never really open up a large lead (assuming it is able to maintain a lead over Apple)

Microsoft Surface means more than just a tablet – its Microsoft’s departure from the OS led business model

Posted in Mobile Devices and Company Updates by Manas Ganguly on June 19, 2012

XBox and now Surface – Microsoft’s device philosophy is changing. ironically, it is possibly Microsoft’s ode to Steve Jobs

Microsoft Surface is remarked departure from Microsoft’s  decades-old business model to sell OS licenses to companies like HP and Dell, and rely on them to make and sell the hardware. Yes,times have changed.The quintessential OS maker has now ventured into devices. More than anything this move is possibly Microsoft’s tribute to Steve Jobs.

 

Apple has proven that the best computers — which rely on tight software integration more than ever before — are made when one company is in charge of designing both the hardware and the software, so they’re built in harmony and just work. Microsoft seems to have figured this out, too, via the Xbox and now this Surface tablet. That’s why the Surface is able to ship with a cool cover with a built-in keyboard. Such integration couldnot have been left to any other ODM. Microsoft has also learned that the best business model in today’s mobile industry — tablets and smartphones — is to the sell the actual hardware to consumers, not just license an operating system. Given today’s economics, the only way to potentially earn a profit of more than $100 per tablet is to sell the actual tablet. There’s no way Microsoft could earn that just selling Windows licenses to HP. Especially as it’s primarily competing with Android, which is sort-of free.

Will this thing be a hit and make Microsoft a lot of money? Enough to compensate for any potential decline in the Windows-for-PC business? Who knows. Would people opt for a Windows Surface in the face of a higely popular iPad. Perhaps some will, especially if they think Office means something to them. But I expect the iPad to continue its dominance of the tablet industry. But it sure looks like a better strategy for Microsoft than only trusting the Samsungs of the world to design great Windows tablets, and only trying to generate mobile revenue from Windows sales.

Sure, Microsoft may now alienate some of its Windows partners by competing with them. But as those partners have gone into the mobile industry, they’ve already strayed from Windows to Android, anyway. Windows8 is already a great option for Android ODMs given the Google-Moto acquisition. Plus, competition or not, as long as Dell wants to make PCs, it’s not like it has any real OS alternatives to Windows.

Microsoft is unquestionably late to this market, though it didn’t intend to be. But the interesting thing is that Microsoft is evolving with the times, both in terms of product design and business model. It may fail, but it’s at least learning to play the right game.

Microsoft, Apple and the Tablet form factor evolution

Posted in Industry updates, Mobile Devices and Company Updates by Manas Ganguly on June 19, 2012

Microsoft was a company of the past with its vice grip on PC shipments and from the new spate of devices that Microsoft is getting around it is the company of the future. Steve Ballmer missed a few steps on the “present” but Microsoft now seems to be making a successful transition from its legacy laden desktop centric past to its “converged” future in time. Its inaction in the present meant that it lost the title of the No.1 selling OS on computing devices to Android.

Between the technology Triumverate, Microsoft was third in smartphones and until yesterday lagging Android and iOS by a few generations both in smartphones and tablets. However, the Surface announcement yesterday finally heralds the arrival of Microsoft in the tablet territory. Analysts are already betting on the future prospect of Microsoft beating Apple to take No.2 spot in smartphones by 2015 and Microsoft beating Android to take No.2 spot in tablets segment.

 

Interestingly here, the device evolution that Microsoft has followed is contrary to the Apple evolution. Both Microsoft and Apple followed their strengths in respective fields – Microsoft in computing and Apple in Mobility. So while Apple’s design was seeded in the iPod Touch which evolved into iPhone which then evolved into iPad (Touch being the cornerstone customer experience), Microsoft’s journey was from the Desktop computer which evolved into laptops and netbooks which then went the ultrabook way and finally manifests itself in the Surface with a keyboard. This is an interesting study of how different form factor and devices have evolved into the converged device category of the future- Tablets.

India’s enterprise software market (2012 thru 2016) – Gartner

Posted in Enterprise Computing by Manas Ganguly on June 11, 2012

Despite challenging economic conditions, the increasing globalization of the Indian economy is leading to a growing need for modern software with the latest features and improved functionality – none so more as with Enterprise in India. With Indian enterprises continuing to embrace IT to improve productivity and drive growth, penetration of ICT infrastructure has been growing rapidly during the past decade. The primary drivers of growth have been domestic demand, the growing maturity of users and incremental enhancements in the technology. A combination of high domestic demand, presence of global vendors and entry of new small vendors with innovative products have made the overall ecosystem apt for robust growth.

 

Gartner expects the enterprise software market in India to grow at 13% in 2012, and revenue will cross $$3.22 billion in 2012. India’s enterprise software market is forecast to maintain its strong performance, with an estimated compound annual growth rate (CAGR) of 13.6 per cent from 2009 to 2016 – the third highest growth rate in the world.

In 2012, India will be the fourth largest enterprise software market in Asia/Pacific. The country is forecast to account for 11 per cent of the region’s total revenue of $29.33 billion USD for Asia/Pacific this year, the equivalent to 1.15 per cent of the total worldwide software of market share of $280 billion USD billion.By 2016, India’s share of the software market in Asia/Pacific is expected to reach 12.1 per cent, representing $5.4 billion in revenue, or 1.5 per cent of total worldwide software market revenue of $361 billion. In comparison to other countries in the Asia/Pacific region, such as China (with 27 per cent share of regional spending in 2011), the software market in India is still relatively small and evolving.

End users in Asia/Pacific are expecting to increase their spending on application and infrastructure software, with China and India being the most optimistic and leading the way for budget increases, followed closely by Malaysia and South Korea. The high intention to increase budgets in India is expected because of the rapidly growing economy, globalization of operations, and ongoing investment in India as a customer service-related outsourcing destination. Optimism regarding spending within Indian organizations reflects confidence in India’s regional economic performance, as well as the need to adopt better technology to effectively compete in a tougher global environment.

Microsoft: Now or never on Tablets

Posted in Mobile Devices and Company Updates by Manas Ganguly on June 8, 2012

Android’s weakness may be Windows’s gain.

Even as ComScore reported four straight months of Android smartphone growth slowdown in 2012 (Jan- April) in US markets, the one device that Android has failed to lord over globally is tablets – it remains Android’s Achilles heal. Amazon was a single quarter flash in the pan and it remains to be seen how Amazon leverages its content comptence to lift up its delivery device- Tablet sales.

Now with Windows8 tablets making their first appearance – it is expected that Windows8 will usher in the new wave of Microsoft devices – tablets and ultrabooks with the keyboard dock and touch functionality.

Morgan Stanley has predicted that after Apple and their iPad, Microsoft will take the number two spot in the tablet market, in the process surpassing Android. 

Morgan Stanley now estimates shipments of 133 million tablets in 2012, up 57% from their original estimates; and 216 million tablets in 2013, up 112%. No surprise there, tablet sales have been growing fast — despite high-profile stumbles by Hewlett-Packard and Dell — thanks to demand for Apple’s iPad. The report expects 25% of (new) users expect to buy Windows 8 tablet. Office will be the key feature, especially for those considering their first tablet purchase. Microsoft would be able to attract tablet builders by bundling its two strongest personal computer brands — Office and Windows.

Microsoft’s hopes are pinned on the success of the tablet – if Microsoft can’t make itself relevant in the tablet market now, the value of its Windows and Office brands will only get weaker over time as Apple and Google push alternatives to Office such as Apple’s iWork and Google Docs on iOS and Android tablets. For Microsoft, it’s now or never.

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The future OS paradigm

Posted in Computing and Operating Systems by Manas Ganguly on June 6, 2012

Zach Epstein, exe. editor of BGR had an interesting set of observation on the OS triumverate and the Android growth story to end in 2012 as Microsoft begins to steal Google & Apple’s thunder. The basis is the IDC report which sees a shift in the OS ranking ladder with Microsoft Windows 8 scoring a few points at the expense of Apple iOS and Android.

While a brief summary of the IDC report is as given below, the facts and the findings are not much changed. Smartphones are expected to grow albeit a slow trot given the increasing base. Feature phones will register declines pulling down the industry numbers.

On the OS dominance, Android will remain status quo although Windows could ride its way past Apple into what could be a second life for Microsoft post PC era. Legacy systems will provide Microsoft the traction in the market. 

 

Reflecting further, what could really influence the tables by 2016 is cross platform play – TV, mobile, car. For some time now Android and iOS focus has been to shift into other platforms which will augment mobile and be driven by mobility. To me Android and iOS may slow down but they will diversify into these platforms which will rub off on the mobile numbers. Developers as well will see this as a unique opportunity for multi platform presence through the cloud. So while the triumverate theory still holds, what is interesting is how OSs will migrate across platforms and the experience factor. Android has a spot of bother on that and Apple is heads and shoulders above others. Ultimately it is the seamless play across different computing and content/consumption platforms which really will sway sway developer communities.Cross platform pressence, migration, experience and abilities will form the future of mobility.

Blackberry- I think that story is done and dusted.

Do Facebook and Blackberry make a good marriage?

Posted in Industry updates by Manas Ganguly on June 4, 2012

RIM has hired JP Morgan and RBC Capital to help search for a partner to license its software. However, Bankers don’t normally help in mere partnership capacities. They become involved when a company has put itself up for sale. And there is no doubt this is exactly what RIM has done. Its announced job cuts last week was a move to make itself more attractive to potential suitors. (Read earlier posts about Blackberry’s fall here –  Part 1, Part II, Part III and Reprise)

Whenever RIM/Blackberry is said to be a target of an acquisition, there is the obligatory mention of  Microsoft, which makes perfect sense; it would relish the opportunity to beat Apple and Google at their own games while strengthening its existing partnership with Nokia. For that matter, there are plenty of reasons why Nokia might enter the mix and make a play of its own for RIM.

However, the focus really is another company which is trying to make its own smartphone- Facebook. Even while trying to assess whether of nor exactly the value of social media is $96 billion, Facebook has announced its interest in smartphones (not a smart idea really!). We have seen examples of another tech lord miserably failing in terms of hardware – Google and yet its Moto acquisition. If that be the direction Facebook is rooting itself to – Facebook needs RIM as much as RIM needs Facebook.

Facebook has to justify a lot of $s on its ability to monetize 900 million users and its ad revenue model.  In RIM, not only will Facebook get a better enterprise presence; it will acquire assets such as RIM’s BB10 software, a growing music service as well as RIM’s Mobile Fusion, a product that supports the collaboration of enterprise mobile devices, even that of competing models such as iPhones and Android devices. These services, as you realize will help Facebook diversify and hedge its risks and further its mobile ambitions.

In Essence, Facebook immediately becomes a hardware and services company while silencing critics who assert that the company does not monetize well and enough and hence the valuation is merely a fad, a bubble.

For RIM, the game is over — end of story! But marry it to Facebook and a whole new dimension could uncover.

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End of road for Sony?

Posted in Mobile Devices and Company Updates by Manas Ganguly on June 4, 2012

Technology companies keep a lot of cash and investments for a reason, to tide them over in bad times, and to fuel turnaround strategies. When the cash starts to run out, however, that’s a clear sign that we’re no longer talking about a turnaround.

A headline that caught my eyes today, was that Sony shares had breached the 1000 yen level in Nikkei. This was the first time after 1984 (28 yrs) that Sony has seen such a valuation. Worse, Sony now has less cash than a quarter’s sales.

Compare that with Microsoft which could get by for three quarters on its cash, if sales fell to zero. Or Cisco, which could live for a year on its cash and short-term investments.

Kazuo Hirai’s turnaround plan for Sony has yet to show any results whatsoever. There is a point in the life of every technology company’s lifecycle where you go from turnaround mode to survival mode. At that point it’s usually too late to do much of anything. The next best option is then to sell the non-core assets of the holdings and draw money to support core operations. 

Read my earlier posts about Sony: The choices for Sony, Of lost opportunities and bygone glories, Profiling Sony’s accumulated losses across categories

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