December 2010
Mon Tue Wed Thu Fri Sat Sun
« Nov   Jan »
 12345
6789101112
13141516171819
20212223242526
2728293031  

Month December 2010

What has Android done for Apple?

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.

[Updated] RIM's sales down 15% in the US, up 112% outside the US

First, a round-up of the quarter’s numbers:

  • 14.2 million devices shipped, sell-through: 12.3 million
  • expect to ship 14.5 to 15 million units in the next quarter
  • ASP of approximately $315
  • US, UK and Canada are 56% of sales
  • US represented 34% of the total revenue
  • Last year US represented 57% of revenue
  • BlackBerry Torch launched in over 75 new markets, Torch launched with the $99 pricing from AT&T
  • BlackBerry Curve 3G launched with 118 carriers in 48 countries

[Sponsor] Marketcircle: business applications for Mac, iPhone and iPad

I want to thank Marketcircle for their support and for their great software.

Marketcircle develops business applications small businesses and individuals who use the Mac, iPhone, and iPad. They have two core product lines; Daylite business productivity management software, and Billings, a professional time billing and invoicing application.

I tried both products and consider them a great way to integrate your operations and improve productivity.

Daylite is a CRM solution that integrates Contacts, Calendars, Projects, Opportunities, Tasks and Email on the desktop and includes an iPhone client.

Billings Pro is the best multi-user time tracking and invoicing application for Mac, iPhone and web.

As I’ve mentioned in my stats round-up Mac and iOS users make up a majority of the audience for Asymco. As I also expect many of you are using Macs in a working environment and are either self-employed or work in small firms, Marketcircle’s applications could be a valuable addition to your operations.

Strongly recommended. They offer free trials. Read more here.

[bonus: they’re from Canada and everybody loves Canadians.]

It's time for Apple to look at owning factories again

Toshiba plant to make LCD panels for Apple: report | Reuters.

Apple will invest in a portion of the investment for the factory, the Nikkei said.

This is one of the more interesting news items I’ve seen for a while.

[UPDATE] Toshiba denies rumor Apple will invest in mobile display subsidiary

There was a time when Apple designed and owned factories. From an interview with John Sculley:

That went all the way through to the systems when he built the Macintosh factory. It was supposed to be the first automated factory but what it really was a final assembly and test factory with a  pick-to-pack robotic automation. It is not as novel today as it was 25 years ago, but I can remember when the CEO of General Motors along with  Ross Perot came out just to look at the  Macintosh factory. All we were doing was final assembly and test but it was done so beautifully. It was as well thought through in design as a factory–a lights out factory requiring many people–as the products were.

During the 90s the manufacturing function moved outside Apple’s ownership umbrella. It was more economical, more flexible and more scaleable to outsource manufacturing to Asia. The time has come to rethink this.

Asia drives Android

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.

Analyzing the iPad as a computer: from a whisper to a roar

[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.

Verizon Strikes Out in Smartphones [Updated]

[Updated]

[ITG sent an explanation of their methodology and there is no indication that the data represents inside information.]

ITG Investment Research analyst Matthew Goodman is forecasting monthly sales record for all of Verizon’s devices “based largely on our proprietary daily point-of-sale data from thousands of independent wireless retailers across the US.”

Assuming the data is accurate, we are going to dive into it but I will state up-front that without confirmation, the conclusions below should be taken with a grain of salt. All statements should be read with a preceding “if the data is accurate…”

So, if the data is accurate, here is what I conclude [1]:

Verizon Has three strikes against them:

  1. The iPhone has stolen their growth
  2. They are facing the prospect of a single OS platform supplier
  3. Android is not competitive vs. iOS

Smartphone parochialism: How operator policies prevent or promote platform adoption

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.

The asymmetric competition between Google and Apple app stores

In the latest version of Android, Google shifted from bitmaps to vector rendering for maps.  The shift is probably more a function of available processing power on the device than a strategic shift to position value on the device rather than in the cloud. Vector maps, which are much more efficient in terms of bandwidth and local storage, have been the choice for in-car navigators but Google has always been using bitmap tiles which are fetched from a server and delivered only if the device is using a data connection. The downside for vectors is that they require a bit more local processing power.

I doubt that Google’s move to vectors is part of a shift to more app-centered/edge-of-network strategy.

How is this relevant?

Google has been riding a wave of re-centralization of value toward the center of the network as broadband made the cloud feasible. Keep in mind that Microsoft rode a wave of de-centralization as value moved to the PC and away from the mainframe. As intelligence was pushed to the edge, Microsoft accrued value from enabling the edge as a locus of productivity. This is no small thing.

Then came apps.

When markets are supply constrained purchase decisions are not based on product performance

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.