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Google’s penetration of Android is as important as Android’s penetration of the handset market

Posted in Device Platforms by Manas Ganguly on February 19, 2013

Continued from an earlier post on Android being Google’s best strategic move ever. This Post examines how and why Android undermines the strategic intent of Google in the mobile space.

The best anti-thesis to “Android is selling in huge numbers” is possibly “Android has huge problems in fragmentation” arguement. On a superfical level what this translates to is the consistently lower engagement and monetization of the platform – a far cry from the Apple iOS. Android is the quintessential open source which also means that the Android army stretches from the Samsungs to the Shenzhen sweat shops – the smallest white label OEMs who are fragmenting the low end markets all ends. Samsung’s dominance of Android platform is not the best solution for Google as it struggles with its own line of Motorola Android phones.

Android today is at the same place where Wintel was a decade or two back with an armmy of clones of cheap PC makers churning out tens of millions of cheap commodity PCs. What Android and its eco-system ( Qualcomm, EMP, Mediatek, Allwinner, Spreadtrum) have enabled is a flood of cheap commodity smartphones and tablets. A vast range of other devices ( netbooks, in-car PCs and DVD players, set-top-boxes and lots else besides) following on behind. Often the fragmentation of the Android means a $45 smartphone with no access to Android Play market – but only a way to latch on to the internet. Google thus starts missing out on mapping this strata of smartphone buyers. (Agreed the search would still come through Google).

Compare this with Apple, a $650+ device – bought by a completely different set of consumers to whole experience, exploration and ads make more sense.Thus,it is quite possible that iPhones generate more advertising revenue for Google than all Android phones combined. In that respect 20% iPhones sold globally are more valuable than 70% of the Androids sold.

Beyond the search and advertising revenues that Google makes from Android, there are those bits of signalling data- that the low cost Androids miss out – those valuable bits of information that map the user holistically. A data mine that can be leveraged for data with relevance to the user. The real structural benefit to Google from Android comes from the understanding it gives of actual users, and the threat comes from devices that do not provide this data – even though theoretically, it can still leverage Google search. A significant portion of the $45 handsets skimp on Google apps just as they skimp on IMEI numbers. These devices are like dark matter: a lot of it around – but nothing really adding up to the worth.

Benedict Evans does a very accurate description of the Android platform- Very powerful but spiralling semi-randomly with no clarity on where it would land. Even when there is the threat of Amazon or Samsung forking the platform, there is also the threat that an increasing number of Android devices might have no more connection to Google than does an iPhone.

To put that another way, Google’s penetration of Android is as important as Android’s penetration of the handset market.

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.

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