Mobile Computing Industry
Tim Cook :
We can put all of our products on the table you’re sitting at. Those products together sell $40 billion per year. No other company can make that claim except perhaps an oil company.
We are the most focused company that I know of, or have read of, or have any knowledge of.
We say no to good ideas every day; we say no to great ideas; to keep the number of things we focus on small in number.
Goldman Sachs technology conference, February 2010.
by 2007. The goal was set 6 years and 3 months ago:
On November 3, 2003, Microsoft announced that it intends to sell 100 million Windows Mobile devices by year 2007. This goal has been set by Steve Ballmer. Majority of Windows Mobile devices that are expected to be sold will be smarpthones, not just PDAs (Pocket PC).
Linux.com :: 100 million mobile Windows devices by 2007
Two years after that goal, in 2009, Microsoft sold 15 million units, down from 16.5 million in 2008.
AppleInsider | Gartner: Apple’s iPhone was No. 3 worldwide smartphone in 2009
From the GSMA Mobile World Congress 2009 (one year ago):
Kallasvuo used Apple and its “closed” ecosystem as an example of what could limit innovation in the mobile market in the future. He said Apple’s vertically integrated model, where its hardware and software are tightly controlled by the company, further fragmented the market. And he added that what is truly needed is more openness in developing applications.
Yes, prior to the iPhone innovation was zipping along rapidly, but now it’s stuck because the iPhone is closed. The iPhone is hindering innovation because it’s highly integrated.
Ballmer argued that device openness was important to give customers more choices. And he pointed to the number of choices that Windows Mobile customers have when choosing a device.
We’d all have more choices if we’d all choose Windows Mobile.
Fast-forward one year and Microsoft decides to offer more choice by adding a new operating system (in parallel to its existing OS) and Nokia decides to solve fragmentation by launching a new platform called MeeGo (in parallel to Symbian).
Symbian will lose smartphone battle
By Rob Jones at Gartner Symposium ITxpo, Cannes [07-11-2003]
Microsoft’s standardised handsets will win the day, says GartnerAnalyst Gartner has warned that, without a concerted effort by Symbian and its backers, Microsoft will sweep them aside in the smartphone business.
Redmond’s ability to offer standardised handsets which are easier for businesses to support and use will help the software giant win corporate approval, the market watcher predicted.
The analyst predicted that Microsoft will ship a phone boasting strong integration of a range of packages, such as Exchange and Outlook.
Symbian, he added, needed to resolve a number of issues to be a credible, corporate alternative. Its platform and menus differ slightly on various handsets, which means that they often do not have the same user interface.
So spoke Nick Jones, vice president and research fellow at Gartner in 2003.
The mobile operating system formerly known as “Pocket PC 2000/2002, Pocket PC 2000/2002 Phone Edition, Smartphone 2002, Windows Mobile (2003/5.0) for Pocket PC, Windows Mobile (2003/SE/5.0) for Pocket PC Phone Edition, Windows Mobile (2003/SE/5.0) for Smartphone, Windows Mobile 6[.1/.5] Professional/Classic/Standard” will now be known as Windows Phone Classic.
The last “Classic” nomenclature lasted from Windows Mobile 6 Classic to Windows Mobile 6.1 Classic and denoted the OS for Microsoft’s PDAs. It disappeared after version 6.5.
Windows Phone Classic will co-exist with Windows Phone 7 Series.
Simple.
What are we to make of the new Windows Phone 7 Series?
First, we have to distinguish it as a new platform. Let’s use Microsoft’s new naming conventions and call it “WP7S” as distinct from the current Windows Mobile 6.5 aka “WinMo”.
Steve Ballmer said they will continue to “invest” in WinMo presumably in parallel to the WP7S platform. This is an interesting development since although there might be some interoperability of applications, the new platform will likely have a new set of APIs.
What strikes a follower of the WinMo platform is that the new WP7S is orthogonal in its positioning. Whereas WinMo was for either hard core, ROM burning, .cab-editing geeks, or for corporate suits, the new WP7S is going for the Xbox, Facebook ADHD hipster user. Perhaps Microsoft is also going for the “average” user though that did not come through the presentations.
So these two constituencies (geek vs. socialite) are quite distinct and a product that pleases one won’t please the other. Evidence of this is the fact that many existing users are feeling dejected over the absence of true multi-tasking, the locked memory cards, the lack of compatibility with the old UI and apps, and the overall “dumbing down” of what they thought was a haven of nerdiness in a sea of iPhone hype.
If Microsoft pours more resources into the new WP7S at the expense of the WinMo platform then we can assume they are “firing” their loyal geek users. Frankly, they are a difficult set of customers whose advice tends to steer a product into ever-more complexity and over-service.
This sets up a potential schism repelling the geek set toward Android and the corporate set perhaps sliding toward iPhone.
That would leave Microsoft in a quixotic pursuit of iPhone users without the benefit of an ecosystem.
Delivering precisely what the world needs today:
Three new ambitious platforms starting with zero installed bases and no applications are going up against the following:
It should be noted that Microsoft’s new Windows Phone “7 Series” will compete with Microsoft’s Windows Mobile 6.5 which will continue as a product line.
MeeGo will also compete with Nokia’s existing Symbian OS for developers, replacing Maemo.
Most of these new platforms will not have products shipping for at least 6 months during which time another 50 million (at least) new users will join existing ecosystems.
There are now nine smartphone platforms, but who’s counting? I’ve been hearing predictions of consolidation for years and although platforms have come and gone (PalmOS, SavaJe), the total number continues to increase.
If nothing else, this seems to indicate that the industry is not in any state of maturity or point of “over-service” where commoditization takes place.
As mentioned before, Blackberries should not be thought of as smartphones.
Consumer Reports announced this week the results of a study it commissioned assessing the monthly data usage for customers of Apple’s iPhone and other smartphones. The data reveals:
On average, iPhone users consume 273 MBs of data per month. That compares with 54 MBs for consumer users of Blackberrys and 150 MBs for consumers who use other brands of smart phones, the Validas study found.
The disparity in data usage is particularly evident at low levels, where 80% of BlackBerry and 54% of “other” smartphone users consume less than 50 MB of data per month while only less than 20% of iPhone users maintain such low usage.
As I argued in the past, Blackberries should be considered feature phones. Doing so helps to understand both their limitations and their potential.
This categorization helps put into perspective the phenomenal growth RIM is able to maintain while not being at all competitive with other platforms by any measure of performance that defines the basis of competition in smartphones.
Being a feature phone means the Blackberry just needs to be better than a dumb phone, something it’s more than able to demonstrate to a prospective buyer.
When I heard about Android being positioned against the iPhone, I thought about how that decision must have been justified internally at Google. I wondered how Andy Rubin added up the benefits of his product vs. the risks of losing whatever value Google derived from the iPhone.
On the benefits side, Android’s original business plan called for zero direct revenues with indirect revenues from search. The actual value would be somewhat dubious during the half decade it will take to get a significant installed base. Of course, with the Google-as-retailer model, Android can also be justified as earning some margin from devices, but as we’ve seen, these numbers don’t add up to much.
On the risk side there is the potential loss of the screen real estate on the iPhone (see photo above). Being the default search engine in mobile Safari might be worth hundreds of millions to Google.
Silicon Alley Insider reports a rumor that Apple’s current deal with Google to provide default search functionality for the iPhone is currently worth over $100 million per year to Apple in revenue sharing.
So the iPhone may be a bigger money maker for Google than Android will, at least for a long time.
Which begs the question of whether by picking a fight with Apple, Android is biting the hand that feeds it.
If there is any logic to this Android adventure it might be that Google really feels it needs to have an option on the future mobile computing platform and that Android is worth the risk of losing placement on the iPhone.
I, for one, don’t think this is a risk worth taking.
I calibrate my growth rates on the assumption that Apple will overtake the combined share of the two money-losing handset vendors.
Sony Ericsson and Motorola are the weakest competitors in terms of portfolio and competence with software. Their sales, units and profits shares for 2008/2009 are shown in the graph above (source: Morgan Stanley).
Therefore, my thesis is that Apple could beat these two weakest competitors in 3 more years.
Here is the basic top-down view:
In 2009 174 million smartphones were sold out of a total of 1.13 billion phones (IDC, Strategy Analytics). Using a 10% CAGR on this figure gives 1.65 billion phones in 2013
Apple obtained 2.1% share in 2009 and about 1.5% share in 2008. My forecast share for Apple:
2010: 3%
2011: 4.1%
2012: 5.5%
2013: 7.5%
During the last quarter, Sony Ericsson held 4.5% share and Motorola 3.7% therefore my 2013 target for Apple is a little less than the sum of what these two hold today.
This results in unit sales for Apple of 125 million units for 2013 and a compound annual growth rate of 50% a year.
