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Nokia after Nokia: Rise of the phoenix!

Posted in Mobile Devices and Company Updates by Manas Ganguly on November 22, 2013

Nokia’s not finished, Nokia’s device division is going out with a bang, and while most view Nokia as a device-less company once the Microsoft deal closes in Q1 2014, this post delves into the other halves of Nokia and the tricks up its sleeve.

Microsoft paid $7.2bln for the Nokia devices and services portfolio – expected to close by Q1, 2014. However the other “not so significant” parts of Nokia could provide the value up end in the next 2-5years horizon.

While Nokia hasn’t really created any splash around its Lumia range of smartphones, but it is in the process of diversifying portfolio to phablets, tablets and wearables (smartwatch). Wearables alone are expected to number 485million by 2015. However, analysts and industry mavens are betting their monies on Nokia diversifying its portfolio from phones to “any communication” device. This includes amongst others cloud operated devices, sensors and receivers powering the Internet of things.

However it is the alternate portfolio of Nokia that is particularly interesting-

1. Nokia Networks which contributes to 90% of the Nokia (minus devices and services) is a key holder of 4G patents and has been on a comeback trail with associations with Sprint, US Cellular, T Mobile working out post the Nokia takeover of the better half. Nokia Networks also has a good patent portfolio in the 5G space and is expected to be a network driver in this technology.

2. Here Maps – is possibly the unsung Hero in the Nokia portfolio. What started as acquisition of Navteq has ended up in a strong suit of solutions around Mapping- It allows Offline use, Augmented Reality wrappers and a good accuracy (compared to Apple atleast). However, it is Here Map’s telemetry portfolio that is the strongest asset – Here Maps can leverage a robust and long standing relationships with key car makers to push the solutions to driverless cars. Here maps is quite clearly a very strong alternative to Google maps.

3. Finally, Nokia has a good portfolio of patents. Nokia has allowed Samsung to continue licensing its patents for 5 years (2010-15), with a settlement amount to be determined by arbitration in 2015. Nokia will also receive additional compensation beginning in 2014. Given the number of smartphones that Samsung is selling, there is a significant windfall from this settlement that is due to Nokia. Nokia’s venture into 5G technology, self-driving cars, Graphene, and its current core holding of essential 4G patents should ensure royalty fees from many technology companies for years to come.

Bottomline – Nokia after Nokia looks to be a great series of propositions. Now then, do we expect the rise of the phoenix?

Nokia’s Plan.B was Android (Before it got acquired)

Posted in Mobile Devices and Company Updates by Manas Ganguly on September 14, 2013

The cost and benefits of options and opportunities not taken can never be estimated in its entirety. The same could be said for Nokia rumoured move ( Plunge be abetter word) to Android.

Before the 23rd August 2013, Nokia Microsoft deal was announced, Nokia was considering options in Android on Lumia. This isn’t surprising – rather it was in common sense not to load up all its devices on Windows platform. It was a huge risk- which i am not sure has benefitted Nokia. Stephen Elop has himself accepted that this move was not considered in 2010 because of the dominance of Samsung on the Android platform would have meant Nokia being relegated to a lesser-than-what-was-expected status in the Android hierarchy.

Considering that Nokia lost market share from 32% in 20110 to 3% in 2013 – the Android shift as a plan B hardly comes as a surprise- rather it is much too obvious that the maturity of Android as a platform and the hardware competence and scale of Nokia would have made a great combination.Nokia would have saved money, reduced development costs and still play to its hardware design strengths. The Android scale would have also helped Nokia enter mid and low end of the smartphone markets earier, faster with greater acceptability.

Nokia had an option to exit the partnership late next year, but that certainly can’t happen now. It’s interesting to think about how differently things could’ve gone if Nokia had decided to go with Google rather than Microsoft, but it looks like we’ll never know now.

Will Amazon do a Gillette?

Posted in Mobile Devices and Company Updates by Manas Ganguly on September 7, 2013

Guess the latest gate crasher on the Smartphone party? The rumours have been doing rounds for a while now – But Amazon, the king of digital distribution seems set to take on the likes of Apple, Google and Samsung on smartphones. Amazon already has a current portfolio of Kindle Fire tablets and Kindle eBooks – and is reported closing down on 2 smartphones and 1 audio streaming device.

amazon 2

One of the devices that Amazon is working on is a 3D screen smartphone. Details are sketchy – but this could be Amazon’s flagship device – with retina movement sensors and a 3D effect overlay.Also of interest is the rumour that Amazon could release a smartphone for its consumers free of charge without a wireless contract. That could be a very significant departure in pricing strategy in smartphones.

The smartphone game is changing. New smartphone entrants Amazon and Google are beginning to generate revenue primarily through e-commerce sales and online advertising, respectively. As such, they are more willing than their competitors to sacrifice device profit for market share and reach to build on their digital distribution networks.

Its interesting to see how the Apples, Samsungs, Microsoft-Nokia’s of the world react to Amazon’s disrupting pricing. Amazon is doing a Gillete with a easy entry price for the razors and making the consumers pay for catridges.
1. The key for Amazon is to establish a user experience and interface so uniquely engaging that users would stayed hooked to it. Associate that to the Gillette shaving experience and how the user was not able to get rid of the Gillette habit and would spend more and more monies on catridges, foams and others… Yes, Amazon must do the Gillette magic.
2. It has the digital content that can upend a lot of device-only players – such as Samsung.
3. Also key to this equation is the reach and penetration of Digital content in the third world countries – it will require a lot of different other monetization models for Amazon to get threshold volumes in such markets.

Microsoft buys out Nokia! (Finally)

Posted in Mobile Devices and Company Updates by Manas Ganguly on September 3, 2013

There then, didn’t i say it?

steve-ballmer-stephen-slop-03913

In an earlier post dated July 2012, i had quoted Eldar Murtazin on a supposed rumour of Microsoft buying out Nokia. The moment has arrived as Microsoft has announced take over of Nokia’s portfolio of smartphones, patents and services to mount a more formidable challenge to Google and Apple.

The 5.44 billion euros ($7.2 billion) deal announced late Monday marks a major step in Microsoft’s push to transform itself from a software maker focused on making operating systems and applications for desktop and laptop computers into a more versatile and nimble company that delivers services on any kind of Internet-connected gadget. The proposed price consists of 3.79 billion euros ($5 billion) for the Nokia unit that makes mobile phones, including its line of Lumia smartphones that run Windows Phone software. Another 1.65 billion euros ($2.2 billion) will be paid for a 10-year license to use Nokia’s patents, with the option to extend it indefinitely. It will represent the second most expensive acquisition in Microsoft’s 38-year history, ranking behind an $8.5 billion purchase of Internet calling and video conferencing service Skype.The operations that are planned to be transferred to Microsoft generated an estimated 14.9 billion euros, or almost 50 per cent of Nokia’s net sales for the full year 2012.

To me, the marriage has been in the making for long – ever since Stephen Elop joined Nokia as CEO in 2010. Elop has been single handedly instrumental in aligning Nokia to Microsoft – at the cost of cutting out other platforms from Nokia – Meego in particular which was a very promising platform. The fabled act of putting “all eggs in one basket” i.e concentrating all of Nokia’s high end effort on the Microsoft platform bypassing Android as an option. The Lumia series of Nokia smartphones has not exactly set the Nokia Cash registers on fire. Elop also worked out to lean out Nokia moving out 20000 workforce/jobs. Nokia has lost more than 5 billion euros in nine quarters as Elop’s comeback bid hasn’t reversed market-share declines. Through Elop’s tenure, Nokia’s basic phones have been losing users to Chinese rivals and new smartphones have failed to stop shoppers from picking up Samsung and Apple devices. Nokia Smartphone business hasn’t been performing very well. Nokia which sold close to 28 million smartphone handsets not long ago in December 2010, has managed to sell only 7.4 million Lumia handsets in Q2 2013. That said, Nokia’s low end handset business and its Asha platform hasn’t been performing well.Stephen Elop sets out from Nokia and into Microsoft to possibly see the acquisition to a closure by early 2014.

Nokia-handsets-495x303

Microsoft bets on Nokia for its formidable patents and the hardware edge that Nokia brinsg to the table. Microsoft’s attempts at making its own device (Surface & Surface RT) have been less then spectacular given the $900million write off for last year.

My take on the take over – (It hasnt changed over the past 4 years)
Both Nokia and Microsoft really missed the boat in terms of smartphones, and it is extremely difficult to claw your way back from that. The question is whether combining two weak companies will get you a strong new competitor. It’s doubtful.

Is Apple reliving Nokia? (Part II)

Posted in Mobile Devices and Company Updates by Manas Ganguly on May 4, 2013

This is the second part of a two part blog on Apple reliving the mistakes that Nokia made 4-5 years back. Read Part I here.

Both Nokia (2007) and Apple (2012-13) were trying to time and control consumer preferences in terms of the features and the screen. Conversely, that was akin to letting the competition in thrugh the back door. Instead of creating the future by out-innovating on the feature roadmap – Both the companies were possibly trying to amass the cost benefits from standardized feature formats.

Tim Cook’s comment on this issue, “Our competitors have made some significant tradeoffs in many of these areas to ship a larger display. We would not ship a larger display iPhone while these tradeoffs exist. Some customers value large screen size. Others value other factors such as resolution, color quality, white balance, reflectivity, power consumption, compatibility of apps, and portability.”

The strongest parallel is how both companies started fighting the consumer preference for larger displays at the peak of their profitability… and then dug in as margins began eroding rapidly. Sample this: Phablets as a segment are already likely to make up more than 15% of smartphone market in 2013 – And Apple chooses to give this market a miss. At the peak of its prowess, Nokia executives talked about the performance trade-offs of big-screen phones: power consumption troubles plaguing big-screen phones; surveys showing that most consumers prefer smaller models. On and on and on, an endless stream of justifications and carefully constructed defenses, lecturing consumers about what they should want to buy. Do you see the pattern?

Apple already has a well learnt lesson – the iPad Mini which was sacrilegious in terms of Steve Jobs’ definition of a tablet is the one that is holding the fort for Apple against the medium/low cost Androids.

AppleHas Apple hit the peak or is it a seasonal variation?

Secondly, Apple’s smartphone market shares now seem to be on the wane with Androids from Samsung doing the pincer attack – both from the top end and the economy smartphones. As smartphone penetration moves from early adopters to mass-market and laggard consumer segments, the smartphone as a product will be less dependent on technical superiority, and more dependent on reliability and value – and it is Apple’s market to loose. (The gainers will mostly be the ZTE, Huawei and Alcatels of the world). As reported by Juniper, Samsung’s smartphone volumes are 2X that of Apple’s. AllianceBernstein predicts that Apple’s market share in smart phones will fall to about 12% this quarter, compared to 23% in the same quarter of 2012. Further, the firm predicts that Apple’s market share may fall into single digits next quarter. IDC’s Q1 market shares also show Apple slowing down on its growth trajectory (YoY).

Apple needs to look at the next evolution of iPhone – the mid level low cost iPhone. The iPhone 5S is already confirmed to be only an incremental over the iPhone5 – and is not going to incite mass hysteria as iPhones normally have done. A low cost iPhone could also be critical for Apple especially because ABI estimates the low cost smartphone market will more than triple, in devices sold, between now and 2018 whereas the mid-range will grow at only (roughly) 50%.

For the present, Apple and Tim Cook look to be in a denial state – which is further going to bleed Apple. The high margin strategy is a great things for share holders – but then market presence and numbers is quite another thing. For the love of Apple, I hope it doesn’t going the Nokia way.

Addendum: Just read that Apple may finally be looking at iPhone low cost model and saw a couple of photos as well. Will this turn the tide or is the initiative lost already

Addendum 2: A further validation of loss of Apple’s grip in the smartphones segment is Apple’s declining profit share of the global smartphone industry. Between Q1,2012 and Q1, 2013, Apple’s profit shares of the global smartphone industry declined from 74% to 57%.

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Is Apple reliving Nokia? (Part I)

Posted in Mobile Devices and Company Updates by Manas Ganguly on May 3, 2013

This is the first of a two part blog on Apple reliving the mistakes that Nokia made 4-5 years back.

In 2007, Nokia was the biggest thing in the mobile phone market. It held 60% of the global smartphone market and more than 40% of the overall handset market. Its handset operating margins briefly topped 25%, something that was thought to be impossible in the phone business. In the summer of 2007, Nokia released the N95 – a 2.4” screen dual slider phone with a 5MP camera which in 2007 was a package that couldnot be bettered. N95 went on to create a roar in the markets – but imperceptibly Nokia’s slide was beginning. 3 months after Nokia launched N95, Apple launched iPhone and the rest is history.

Nokia N96 versus iPhone

The initial iPhone and even the early Samsung phones played on the large screen format – 3.2” – 3.5” and the likes. Nokia’s response to the first smartphones, was a bettered N95 – the N96 – crammed with more features which failed to tickle the market. Touch was catching on – and Nokia was lethargic in its reaction. In an age when customers were falling head over heals in love with the iPhone, Nokia was lamenting the iPhone on subjects such as 2MP Camera and lack of Bluetooth and loaded up the 2.6″ N96 to fightback (in vain). By the time, Nokia responded with the 5800 XpressMusic, it had fallen behind on its tracks. It repeated the mistake with N97 – a large screen which was woefully resistive – in an era when the iPhone3GS ruled and the Androids were beginning to fly. Nokia was edged out of the market – and had fallen behind. Nokia’s next releases N900, N8 failed to woo customers clamoring for the iPhone.

2013 – Apple’s incredible run through from 2007 onwards is slowly running out of steam and gross margins had peaked in early 2012. Apple played economies of scale on standard screen sizes to keep its BOM (Bill of Materials) cost low – driving operational efficiencies in production. However, they seem to have been reading the market wrong as the era of large screen devices was stepping up considerably against the 4” iPhone. Premium buyers were increasingly flocking to the 4.5” segment smartphones and the 5.5”+ phablet space and Apple’s roadmap to large screens is already a couple fo years behind.

The sense of déjà vu is not wasted – as Apple repeats the same mistakes in 2013 that Nokia made in 2007.

Continues to Part II

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Elop – Whose line is he towing?

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

If the results from Nokia are any indication, Stephen Elop is in a tight spot – and unless the Lumia launches in Q4, 2012 reap a rich harvest, Elop may be under a huge pressure. Nokia has reported a third-quarter net loss of $1.27 billion as revenue plunged 19% and sales of its flagship Windows Phone fell to 2.9 million units. Revenue dropped to $9.45 billion and furthermore, Nokia has given a grim outlook for the rest of the year. While the numbers seem to have reversed as against Q2, 2012, Nokia is now pinning all its hopes on the Lumias – a desperate and a dire situation to be in. Given the dominance of the iPhone5 and the Androids, Nokia’s comeback kid, Lumia may risk a lukewarm response which may not re-kindle the comeback hopes for Nokia.

Nearly 20 months after the announcement of the Windows smartphone polarization, Stephen Elop really hasn’t much to show in terms of smartphone numbers. While Nokia’s reliance on the strategy of third platform option against Apple and Android is definitely true, but Elop just seems to be talking more Microsoft. As a phone maker, Windows has not really turned things around for Nokia. Has it? Instead over the last 2 years, Elop has steadily and unfailing ditched every other promising option – be it Meego, Maemo, Meltemi and now Symbian Belle in favour of Microsoft Windows.

So, Q4 is now the crunch quarter – Nokia will have to our perform with the Lumias – make it a smashing success. Anything less than smashing success will not inspire anyone. Given the Apple iPhone5’s 58 million numbers and the march of Samsung Android’s, it is difficult to imagine customer interest and instore-purchase of Nokia Lumias to be moonbound in the 1st quarter of its launch. What really beats me – is that Nokia has now put Symbian in maintenance mode and all the future roadmap of Symbian is cancelled. Nokia Symbian devices still outsells Windows-powered Lumias, by 3.4 million to 2.9 million, in Q3, 2012. Pulling the (investment and development effort) plug on your cash cow isnt the wisest thing – is it?

The question for Elop remains – Whose line is he towing? Nokia? Or Microsoft? And is Microsoft really planning a take-over

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Microsoft’s biggest strategy shift can leave it in the middle of no-where.

Posted in Mobile Devices and Company Updates by Manas Ganguly on October 10, 2012

About 3 months back, I had been musing about the change that was afoot at Microsoft – The 30 year old OS centric company was for the first time shedding its old feathers to look, feel and compete with the new kid on the block – Google and a resurgent old rival – Apple. Ballmer’s letters to Microsoft share holders clearly signals that Microsoft is moving away from its make the OS & the service, let the partner handle the device model, which is what Ballmer terms as “significant shift, both in what we do and how we sees ourselves”. This is clearly necessitated by Internet and cloud centric business models, which puts the Microsoft traditional server, desktop and OS centric model. Given the momentum that Apple has now in mobile workforce and cloud space and the initial cold shrugs that Microsoft’s high price tablets have seen, Micorosft will take more batter before they get better. Also, the head start that Apple and Android have in the mobility space can be hard to overcome. Microsoft has to play the game changer and it needs its OEMs to support it while it does so. However the device route would mean that it will expend itself trying to integrate things into the user experience and the device. May be Google and Apple are doing this bit – but Microsoft will have to really execl to take the game away from Google and Apple.

The Windows centricity still remains as per Ballmer the intent to “firmly establishing one platform, Windows, across the PC, tablet, phone, server and cloud to drive a thriving ecosystem of developers, unify the cross-device user experience, and increase agility when bringing new advancements to market.” With Windows8, Microsoft is pushing to have unified messaging across all platforms. More than just sharing the same name, the various versions of Windows for different devices will now share a common foundation. It’s a move not dissimilar to what Apple does with OS X and iOS and its an essential part of making it easy for developers to target specific platforms.

Ballmer closes his shareholder letter by noting that “it truly is a new era at Microsoft ” and that the company has “an unprecedented amount of opportunity for both this year and the long term.” However given the number of competitors that it has to contend with, and the umbrage of the OEM makers who see Microsoft’s device designs as a challenge to their own competencies – it will be a complex equation, making the revenue and profits strategy work in a dynamic environment. Already the new game that Microsoft is playing itself is hurting itself as it suffered its worst loss ever in its 26 year old history in April-June quarter 2012.

However, it does make sense for a possible take over a beleaguered Nokia by Microsoft. Doesn’t it?

Has Nokia staged its comeback?

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

Continued from an earlier post

The Nokia Lumia has a lot of small details .From a device perspective, the key is that  lots of these small details add up to a holistic experience that creates aspiration. However, what ultimately sells is a collection of details properly integrated into a whole experience which needs a complete end to end eco-system integration. That could be a concern for Nokia given the Amazon and Apple strategies of putting their eco-systems as points of differentiation as against just the devices.

Being from the Nokia stable, there is little doubt these devices will stand out from the crowd in terms of hardware which will help the extra delta at retail.  A quick look at whats in offer from Nokia –

The Nokia City lens Augmented reality app

  1. Nokia Maps is  refreshed to include an add-on functionality is that of Offline availability. This is not the usual cached units, but a true offline feature which is important for data conservation. To top it, it has free turn by turn voice navigation.
  2. Nokia Maps also gets augmented reality.  The Nokia City Lens is pretty slick in delivering augmented reality in what’s useful and not just a gimmicky manner. In scheme of things of  Nokia’s business as a whole, Maps will be a big revenue driver going forward on top of a differentiator on their devices and City lens can be an important enabler in terms of the AR browser to provide a simple, fluid and intuitive experience to the user . Nokia location platform is now a core part of the WP8 platform
  3. The new Lumia range will support NFC with the only drawback that it connects only to other Windows devices. NFC plays music by placing it on the speakers.
  4. Glove dial is another good to have app which allows the capacitive screen to respond to touch by elements other than the human hands – for instance gloves.
  5. A first in the industry which was supposed to be Apple’s thunder is stolen by Nokia as it premiers the Wireless charging across the board. This is actually a new meaning to the term – Power Nap and the wireless charging keeps the battery topped off. Nokia has partnered the Fatboy recharge pillow such that the phone left on this recharging pad will top up the battery charge. Interestingly enough, even before its launch, Nokia has eco-system partnerships to promote its wireless charging feature through Virgin in its Heathrow Airport lounge, and Coffee Bean on its countertops using the wireless power consortium standard
  6. There is also an awful lot that has been integrated into the camera space
    1. Pure view on the new range of Lumia phones is more than a Megapixel count. SO there’s no point in getting misled by a 8MP count on the camera. The Pure View captures between 5-10x the light of any other camera in a phone and easily surpasses image stabilization of most DSLRs. The Floating lens technology used is used to stabilize the lens for HD video stabilization as well.
    2. Cinemagraph which essentially adds a video experience on a still photo. A hybrid between the still and video – it also allows frames customization.
    3. The Smart Shoot feature allows to get rid of unwanted parts of an image automatically.
    4. Nokia integrates the Photosynth augmented reality app too create a hyperlink navigated real time picture of the world indexed by photographs in the web. Photosynth takes a large collection of photos of a place or object, analyzes them for similarities, and displays them in a reconstructed 3-Dimensional space. Now that once done is a WOW!

The Microsoft Photosynth feature

The Nokia Cinemagraph feature

The Nokia fatboy Recharge pillow

The message through the launch event of Lumia is loud and clear -Nokia ecosystem is growing and Nokia has a direction. Music, Navigation and Imaging are the Nokia mantras – as Nokia delves deep into the consumer psyche of why and how the phones are used. While the absence of a launch date and pricing are huge dampeners, the new direction that the Nokia-Windows partnership is taking is pretty interesting.

The only problem remains is that Apple’ event scheduled for 12th September may  see an immediate launch – and the absence of Nokia for the next 2 months will mean that the iPhone5 will take all the shelf space, operator space and consumer space – leaving Nokia out to fight its way back. But so far – it’s a new direction for Nokia and personally I am glad that Nokia-Windows seems to be putting a spirited comeback. The only silent fellow in this interim is Android which seems to be fast fading and loosing its colors.

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Amazon – Future of digital distribution? (Part I)

Posted in e-commerce, Revenues and Monetization by Manas Ganguly on September 7, 2012

This is the first of two post series on Amazon

Amazon killed it … or very nearly did. Amazon’s device and service announcements in the 6th September event have just gone to show Amazon a few notches above Google, Nokia and Microsoft put together.

Post the launch of Kindle Fire tablets last year and a record sales in the holiday season, Amazon spent a lot of time understanding their customers and how the customers use digital media. In the course they have managed subverting the long held notions of device pricing – and managing the margins without any device contributions. After all, when you make your money through services, device margins are obliterated. That is going to put a awful lot of pressure on the earlier generation of device makers – Samsung, Nokia, HTC and the works. What that means is that Amazon is willing to make the Kindle and the Kindle Fire a loss leader to lure shoppers inside its virtual store. This principle is where disruption @ Amazon begins.

People don’t want gadgets anymore; they want services, and the new ranges of Amazon devices have a clear perspective- to provide a dedicated sales channel for Amazon’s digital storefront with an end-to-end set of services. By taking off the device bit, Amazon signals that it is ecosystems not devices that will drive consumer purchases. As Bezos puts it- “We want to make money when people use our devices, not when they buy our devices.” When business isn’t built on HW margins, the larger ecosystem and services you can do a lot of things competitors can’t – that’s an innovation principle that Apple and Amazon would hold as the key.

Amazon is stepping up ecosystem efforts but is focussing on its own features, services. Third-party apps still seem like an afterthought. Similar is principle to the Apple “Walled Garden”. Given Apple’s iOS app selection & large ecosystem of it’s own, I don’t think iPad is under major threat. But Apple cannot afford to be complacent.

The 6th September event was an act of declaration of war and the whole eco-system and market just got a whole lot more interesting in the course rebuilding the DNA of Amazon. The only other company who is thinking of business in the manner that Jeff Bezos is thinking about it, is Apple! As per Bezos – “We have our own patents, our own hardware, can afford to subsidize, and we’re going after Apple”. That’s setting the perspective.

In short, this is all about Amazon positioning itself as the future in digital distribution

Continued…

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