February 2011
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Month February 2011

Smartphone users still prefer branded phones

The smartphone market has grown threefold in the span of three years. However, as noted previously, the share of units running a licensed OS has not grown dramatically. The following chart shows the vendors’ shares with the same brown/green dichotomy between licensed and unlicensed OS’s.

Comparing Share of Growth: Integrated smartphone vendors held their own in Q4

The smartphone market grew to about 100 million units last quarter. That’s nearly double what it was a year earlier and triple what it was three years earlier, the year the iPhone made its debut.

Few markets grow this quickly, especially as this tripling happened during one of the worst recessions for a century. 100 million units a quarter is not a small number. The rate at which smartphones are growing makes clear the trajectory of where all phones are going.

As I’ve shown in profitability charts, vendors have been benefiting to differing degrees. The overall smartphone market with individual vendors is shown below:

Nokia employs as many people to develop its smartphone software as Apple does to develop all its products

In a recent post I pointed out that Apple’s R&D was about 2.2% of sales in the last quarter. Bernstein took a look at the R&D for Nokia and presented a chart showing the difference between the mobile industry players in terms of total expenditure on R&D.

I took inspiration from that to plot the Devices R&D for both Nokia and Apple over the entire 2010 period. I also compared that with sales and computed the ratio between R&D and sales.

The result is shown in the chart on the left.

Bottom line: Nokia spent 10.2% of phone sales in 2010 on phone R&D while Apple spent 2.5%.

Bernstein goes on to argue that at least for Devices,

Nokia spent $3.9bn in R&D in 2010, almost 3x the average of its peers, 31% of the industry’s R&D total spending, for an output that we can qualify as visibly disappointing.

To relate the $3.9 billion for Devices into head count, they estimate that Symbian projects employ 6,200 people; MeeGo and Qt 1,800; Services 1,800; and S40 1,800. Hardware headcount is assumed to be 4,700 and 900 more for fundamental research.

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

I want to once again 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.

Calling the end of innovation in mobile computers

People are lining up to call the market for mobile phones. Analysts and amateurs alike are connecting points on charts and predicting with confidence the future of mobile platforms. Consensus is forming that there is no future but a quiescent state. By the acclamation of pundits, the survivors are declared to be iOS and Android. They are also predictably arranged in a way similar to OS X and Windows. End of story.

Except for one thing.

The remarkable stability of pricing

Prices provide accurate, independent signals about where, when, and how to create and deploy value-creating innovations. The mechanism of free markets signals what should be rewarded and what shouldn’t. When comparing competitors, prices are the best indicators of differentiable positioning.

However, prices are sometimes anomalous and subject to transient market conditions. It’s therefore important to observe pricing over a long time frame.

This chart shows the average selling prices for all phones sold by the eight publicly traded phone vendors (covering approximately 70% of the market) since mid-2007.

There is remarkable stability in the pricing of the competitors. One could argue that only Motorola and LG saw significant swings in price. (Apple’s instability in 2007 was due to the revenue sharing deal for the 2G iPhone on AT&T).

Motorola pared down its portfolio (and its market share) and as a result has seen a doubling in ASP. LG had a rapid rise and rapid fall as its feature phone business boomed and busted.

But otherwise, pricing trends are subtle: down from Nokia and Samsung. Slight decrease for RIM and HTC and stable for Apple. In a future post I’ll dive into the relationship between pricing power and share.

The Asymco way

When I started Asymco.com I did not have a plan. I did not have a policy or vision statement. I wrote what I found interesting. I knew nothing of blogging or of web publishing as a business. Over the following nine months I learned a few things. I also learned a bit about how web publishing (and publishing in general) works.

My observations were brought into clear focus by this brief overview of the core values of web publishing summed up by this leaked document form AOL: “The AOL Way“.

  • AOL tells its editors to decide what topics to cover based on four considerations: traffic potential, revenue potential, edit quality and turn-around time.
  • AOL asks its editors to decide whether to produce content based on “the profitability consideration.”
  • The documents reveal that AOL is, when the story calls for it, willing to boost traffic by 5 to 10% with search ads and other “paid media.”
  • AOL site leaders are expected to have eight ideas for packages that could generate at least $1 million in revenue on hand at all times.
  • In-house AOL staffers are expected to write five to 10 stories per day.
  • AOL knows its sites are too dependent on traffic from AOL.com, and it wants its editors to fix the problem by posting more frequently, with more emphasis on getting pageviews.

This codification of values has inspired me to put in writing my own priorities for Asymco:

  • Learn by writing. Teach by listening.
  • Improve. Move the intellectual ball forward.
  • Illuminate topics which are bereft of analysis.
  • Be notable. “The proliferation consideration.” How likely is the idea to being widely re-published?
  • Review. Encourage participation by reading all comments and reply to as many as possible. Police comments with zero tolerance.
  • Repair. Declare and correct errors.
  • Select. Publish only when the contribution is unique. Avoid redundancy, clutter and noise. Don’t waste reader time.

Many have asked: What about the business model? I’m afraid there isn’t one. I’m still naive enough to think that if I build a great product then everything else will take care of itself.

Making it up in volume: How profit and volumes traded-off in the fourth quarter

Today’s charts show the amount of profit captured by the top eight public mobile phone companies in two different ways.

The first, as a bar chart:

Google as Android "Vendor"

In a recent tally of mobile OS market share estimates from Canalys, the market was organized by OS vendors. The number of devices sold by operating system vendor includes as many OS’s as each vendor may supply.

For example, Microsoft licensed two different OS’s during the period: Windows Mobile 6.5 and Windows Phone 7. Nokia also offered multiple versions of Symbian, which have varying degrees of inter-operability.

Google’s offerings include (as per footnote) OMS and Tapas platforms in addition to Android.

Fragmentation is not a new subject as OS licensing models have been ripe with it for as long as they existed.

What I want to draw attention to is the concept of Google as “vendor.”

The iPhone share: 17.25% of smartphones, 4.2% all phones

The mobile phone market is growing rapidly. It grew 18% in the last quarter. The smartphone market grew even faster, about 75%.

To grow share in this market means growing even faster than the market. What we can see from the following charts is how the iPhone as a product grew in share since it was launched 3.5 years ago: