Category: Industry

One of the most popular themes running through the mobile phone industry this year has been the unprecedented growth in Android adoption. I’ve argued that the adoption was initiated on the supply side by vendors and operators, but demand has certainly manifested itself.

Android is almost viral in the way it spreads. With no constraints on intellectual property, pricing, contracts, modification or terms of distribution, the incentives to push product out are phenomenal. It even works, mostly.

One hypothesis of the consequences of this viral adoption is that there will be a “commoditization” of smartphones with rapid price erosion to follow. This in turn might even lead to lower margins for Apple and RIM and most major vendors, including those selling Android itself.

In order to test this hypothesis, we need to look at what has been happening to prices. Continue reading “What has Android done for Apple?”

Andy Rubin, the executive in charge of Google’s mobile software effort, said that international expansion lay behind the latest advance. Speaking in an interview with the Financial Times, he also predicted that a boom in sales in India, Brazil, Indonesia and other emerging countries would contribute to the fast growth rate for the foreseeable future.

Quoting independent research suggesting that Android has also come to account for half of smartphone shipments in China, Mr Rubin said that the open-source nature of the software had made it popular there. However, in the wake of Google’s dispute over censorship with the Chinese government, Android handsets shipped by China Mobile, the dominant supplier, do not carry the company’s search or e-mail services.

via FT.com / Technology – Booming Asia drives Google’s Android.

This was already confirmed by the data published here this morning.

Verizon alone or with the other US operators cannot account for the majority of Android volumes and anecdotal evidence points out that Europe is not contributing much more.

[Goldman Sachs analyst Bill] Shope also expects both iPad and iPhone sales to exceed expectations in 2011; he sees sales of 37.2 million iPads next year, “which could potentially make Apple one of the largest vendors in the global personal computing market,” if you include both tablets and PCs.

via Apple: Goldman Pounds The Table; Sets $430 Target – Eric Savitz – Tech Musings – Forbes.

Apparently, it’s not just the crazy ones who dare to think the iPad is computer.

My forecast for iPad in calendar 2011 was set at about 33 million since last summer. I may raise it if Q4 units top 6 million.

Meanwhile…

He re-launched coverage of the stock for Goldman this morning, setting a Buy rating and $430 price target, while placing the stock on the firms “America’s Conviction List.”

I don’t make stock price forecasts as they are based on a random number called ‘sentiment’. But by forecasting earnings and assuming a range of P/E multiples between 15 and 20 (essentially in-line or below the S&P 500) values Apple’s stock at between $360 and $480 by this time next year.

Goldman’s target of $430 is about in the middle of this range so I don’t see it as requiring much in the way of conviction.

When comparing smartphone platforms it’s tempting to consider the global market as unified and commonly addressable. However, when you look at individual countries some strange patterns of behavior emerge:

• Indonesia, the fourth most populous country in the world (230 million people) loves Nokia’s Communicator. It’s the ultimate mobile status symbol.
• Japan had one of the largest installed bases of Symbian phones. The version running in Japan is not compatible with versions elsewhere. Famous for its Galapagos mobile culture, the iPhone is changing what the Japanese consider the basis of phone performance. Continue reading “Smartphone parochialism: How operator policies prevent or promote platform adoption”

The difficulty in analyzing the smartphone market lies in its extremely rapid growth. With the market growing at 90% (and 400% in some areas like China) the forces of demand and supply are disconnected. It’s impossible to discern whether a purchase decision is made from a choice of comparable alternatives or if it’s made from a choice between buying nothing and some alternative.

Furthermore, another problem lies in distribution inefficiencies. The global phone market is nominally serving 4.6 billion consumers but they are not all participating in the same market.  Devices and the services they are bundled with are not fungible globally.  You cannot buy a phone is one country and easily couple it with service in another. You can’t even transfer one bundle from one owner to another within the same country. Products are available only in some countries or some operators and not in others.

Commentators focusing on mobile OS platform shares assume a zero sum game and a liquid, efficient market. Both assumptions are false. Continue reading “When markets are supply constrained purchase decisions are not based on product performance”