July 2013
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Month July 2013

What's an Android user worth?

Excluding Motorola, Google’s gross margins have dropped for six out of the last nine quarters. They peaked at 65.8% in early 2011 but have now dropped to 60.4%. Including the drag from Motorola they are down to 57%.

Screen Shot 2013-07-20 at 7-20-9.52.38 AM

Gross margins include the effect of price, volume and direct costs of sales. Although sales have grown (see graph below), the pricing Google has been able to obtain (CPC) has fallen. The cause is unknown but there is a strong correlation between the growth in their mobile channel. For their part, management cites mobile as having an effect in reducing CPC though they caution that it’s one of many factors.

The PC Calamity

As Intel has improved its products, their demand has decreased. Enormous efforts put into improvements are neither valued nor absorbed. The problem is not with the processors themselves but with the systems within which they are built:

Screen Shot 2013-07-18 at 7-18-11.16.38 AM

PC sales fell again last quarter and the contraction is likely to continue. We received affirmation of this as Intel cut sales and earnings forecasts and the crucial capital spending that creates supply in the longer term.[1]

At the same time, computing device sales have soared.

Screen Shot 2013-07-18 at 7-18-5.07.35 PM

Even excluding Android devices which don’t register with Google’s Play Store (and excluding Windows Phone devices), mobile ARM devices are selling at 2.6 times the rate of Intel-powered devices. Put another way, since the birth of Android nearly as many iOS and Android devices have been sold as PCs.

In terms of install base, a computing category that did not exist six years ago has come to overtake one that has been around for 38 years.

The calamity for Intel has been that they have had no part to play in the new category. Perhaps that is because they had every part to play in the old category.

Notes:

  1. Intel said it was cutting 2013 capital spending to $11 billion. The cut follows a reduction from $13 billion to $12 billion in April. Apple’s budgeted capital spending for fiscal 2013 (ending September) was set at $10 billion.

"Everybody has got a smartphone"

… says UBS analyst John Hodulik, as quoted by the Wall Street Journal.

No they haven’t.

According to the latest comScore survey data, 98 million Americans above the age of 13 don’t use a smartphone as their primary phone. That’s 41% of US mobile phone users.

What’s more, 2.5 million more people first started using smartphones in the three month period ending May vs. the three month period ending in April.

The switching rate to smartphones is shown below:

Screen Shot 2013-07-17 at 7-17-10.32.09 AM

The Critical Path #92: Microsoft's Critical Path

Horace talks about Microsofts reorganization from Divisional to Functional, and the implications on their Windows and Mobile OS roadmaps. In doing so, he and Moisés touch briefly on the subject of last episode, Scott Forstalls ouster from Apple.

via 5by5 | The Critical Path #92: Microsofts Critical Path.

Sponsor: Digg

Digg (yes, that Digg) has released a new RSS Reader for the web, iPhone, and iPad (Android coming soon). The design is sleek and clean, and the apps are speedy and efficient.

Whether you’re a hardcore RSS junky or simply want all your favorite online reading in one place, Digg Reader is for you. It’s free and available today.

Sponsorship by The Syndicate

Sponsor: Netradar, Crowd-sourced mobile quality of service data

Netradar is a free service that provides independent and accurate information about the quality of your mobile Internet connections. It allows you to test your mobile connection (both cellular and WiFi) and share the data into an aggregated map of coverage. This is the best of crowd-sourcing: useful data  aggregated and presented by and for end users around the world.

The information shared can be viewed as maps and through a statistics page.

Netradar is developed by Aalto University, Finland, and is based on years of active research in analysing mobile communication. See this page for some more information about the research behind Netradar.

Netradar supports all major smart phones and tablets including iOS, Android, Windows Phone, Meego and Symbian Belle.

Get Netradar for iOS here.

Understanding Apple's Organizational Structure

Apple has hired a new VP who will report directly to Tim Cook. Paul Deneve is cited as having responsibility for “special projects” and will report directly to Tim Cook.

The previous roles as a manager in luxury brand companies has led to a great deal of speculation about what new projects Apple could be working on that might also fit this new manager’s background and title.

The most commonly cited speculation is around the iWatch or TV product lines (with some surprised that he will not be heading Retail.)

Although reading “luxury product CEO” and concluding “new luxury products” seems logical, a little knowledge about how Apple is organized dispels this notion. And a little knowledge happens to be about all we have, as Apple’s organization is one of its most closely guarded secrets. Even employees at Apple have little idea of how the company is organized. What we do know is summarized into this org chart:

Screen Shot 2013-07-03 at 7-3-3.37.27 PM

The Critical Path #91: Apple's Douglas MacArthur

Horace expands on last episode’s discussion of organizational structure, as well as his recent appearance on Screen Time with Guy English. We begin speculation on the job iWatch would be hired to do, and preview the relaunch of High Density.

via 5by5 | The Critical Path #91: Apple’s Douglas MacArthur.

What's a BlackBerry user worth?

Last week BlackBerry announced that it had 72 million subscriber accounts. The current market capitalization is $5.4 billion and enterprise value (i.e. excluding net cash) is about $2.8 billion.

That implies a net present value of about $40 for each account. This is quite a drop from early 2010 when the value was $866.

The graph of BlackBerry subscriber accounts and EV/account is shown below:

Screen Shot 2013-07-01 at 7-1-10.09.16 AM
I’ve also added a graph showing a derived value of US consumer BlackBerry users (derived from comScore’s survey data).

There are several patterns which intrigue me:

Screen Time #40: The Puck

Horace Dediu and Guy English join Moisés to look at the rallying forces in the arms race for content. Does Apple have too well-entrenched a lead? How will their gaming strategy compete with traditional consoles? How and why would they make a TV set?

via 5by5 | Screen Time #40: The Puck.