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Category Nostalgia

The Allegory of Treo

The following is a work of fiction.

The combination seemed unthinkable just a few years ago. Nokia envisioned itself as a substantial rival to Redmond, threatening to head off its computing dominance as the power of desktop computing shifted to pocket-size devices. But a series of miscues substantially weakened the company, leaving it little choice but to team up with the world’s largest software maker.

Flummoxed, again

The last time I took a snapshot of the iPad death watch it was March 9th, 2010. Almost a year ago. The now-classic quotes are reproduced here.  Last May I wrote:

Apple keeps a tight lid on new products so that competitors don’t get a head-start on copying, but in the case of the iPad, advance knowledge would not have had any impact. Competitors look at the iPad and see nothing.  They’ll only react once the market explodes and they start to feel belated pain.

I thought that would be that. As the success of the product would become self-evident, predictions of imminent demise would trail off. The pain of share loss would prompt a wave of challenger copycats. Imitation would be the the best form of flattery.

But no.

Critics were not silenced. One year, 15 million units, and $9.2 billion later I went back to the source of the quotes and found the following (published quotes dated after March 9th 2010). (Cited from aaplinvestors.net with some editing for brevity and relevance):

In memoriam: Microsoft's previous strategic mobile partners

Microsoft’s new “strategic partnership” with Nokia is not its first. For a decade the software company has courted and consummated relationships with a variety of companies in mobile and telecom. Here are the ones I can remember:

  • LG. In February 2009 Microsoft Corp. signed a multiyear agreement for Windows Mobile to be included on devices from LG Electronics Inc. LG would use Windows Mobile as its “primary platform” for smartphones and produce about 50 models running the software.

What happened?

The (iPod)Touch(i)Pad

The world’s largest PC company just launched a “media tablet[1]“. Conflating the iPod Touch and iPad brands into “TouchPad” HP joins RIM in announcing an integrated OS/device product to compete as a platform vs. iOS and Android (and to some degree even against Windows).

There are others waiting in the wings. Presumably, Microsoft is hard at work to release a tablet-compatible Windows sometime near the middle of this decade. MeeGo is also going through its gestation period targeting Atom-based tablets. John Gruber notes the excitement around tablet platforms in his article about this post-PC renaissance in computing alternatives. I also noted that the end of the PC era was marked by the end of WinTel at CES.

Steve Jobs on Apple's priorities

To me, Apple exists in the spirit of the people that work there, and the sort of philosophies and purpose by which they go about their business. So if Apple just becomes a place where computers are a commodity item and where the romance is gone, and where people forget that computers are the most incredible invention that man has ever invented, then I’ll feel I have lost Apple. But if I’m a million miles away and all those people still feel those things and they’re still working to make the next great personal computer, then I will feel that my genes are still in there.

Jobs Talks About His Rise and Fall – Print – Newsweek

In the language of innovation theory that Clayton Christensen created, companies are characterized by three attributes

  1. Resources
  2. Processes
  3. Values (or Priorities)

Resources come and go, typically arriving every morning and leaving every evening.

Processes take a lot of hard work to change but they can be changed.

Values and priorities are almost immutable. They are what Jobs refers to as the “genes”.

The fact that Steve Jobs said these words about Apple in 1985 after his first departure gives one hope that in 2011 (after his return and departure and return and departure again) the genes are still in there.

Unforeseeable growth: Analyst failure on iPad as indicator of disruptive change

Professional analysts’ first year iPad unit forecasts (sourced from TMO Finance Board)

  • Brian Marshall, Broadpoint AmTech   7.0
  • David Bailey, Goldman Sachs           6.2
  • Kathryn Huberty, Morgan Stanley     6.0
  • Shaw Wu, Kauffman Bros.              5.0
  • Mike Abramsky, RBC Capital Markets   5.0
  • Gene Munster, Piper Jaffray           3.5
  • Ben Reitzes, Barclays Capital           2.9
  • Keith Bachman, BMO Capital         2.5

Nokia's UK managing director resigns

Nokia’s Uk managing director Mark Loughran reckons that the Nokia N97 will prove superior to the iPhone due to its significantly better camera sensor, lower tariffs and its radical change in styling and especially form factor from the company’s ex-flagship the Nokia N96.

Loughran said: “The new iPhone is an evolution rather than a revolution and for people trying to decide whether to get a Nokia N97 or an iPhone, it comes down to a decision on performance and value for money.”

Loughran added: “the new iPhone seems to have the same design and colour, upgrading froma sub-standard two-megapixel camera to a still low 3.2 megapixel camera, and is probably a disappointment.”

Nokia General Manager Believes N97 Will Beat The iPhone

Good times…

Gartner Predicts Mobile OS Market Share

Lots of people apparently think it’s a big deal that Gartner is predicting Android will surpass iOS for second place. But why is that necessarily a good thing, given that they’re predicting Symbian will remain in first place? Who thinks Symbian is actually doing well? Nokia’s board sure doesn’t.

via Daring Fireball Linked List: Gartner Predicts Mobile OS Market Share.

I also noted with amusement that by 2014 “other” is slated to sell 85 million units or nearly 10% share, up from 6.1% in 2009. These “others” will be selling more than twice what Apple is expected to sell this year. Is “other” WebOS, Bada, MeeGo, LiMO? If so they’re in for a healthy future.

But dwelling on details like these is missing the point. To see how improbable this prediction is, let’s go back to 2006 and ask what Gartner was forecasting would happen now.

First thing to note is that in 2006 Gartner was busy tracking PDA sales. You might wonder why this is relevant. The reason is because a significant proportion of RIM’s Blackberries counted as wireless PDAs and were therefore considered to compete with Palm’s Treos, HP’s iPaq and Dell’s famous Axim. Nokia was in the running with its Communicators. Here is how Gartner characterized the equivalent market in early 2006:

So I’ll just come out and say it: In 2006 Gartner did not have a clue what a smartphone was. By their admission:

Gartner defines a PDA as a data-centric handheld computer weighing less than one pound that is primarily designed for use with both hands. These devices use an open market operating system supported by third-party applications that can be added into the device by end users. They offer instant on/off capability and synchronization of files with a PC. A PDA may offer WAN support for voice, but these are data-first, voice-second devices.

In other words, in 2006 Gartner was splitting phones with operating systems into two separate markets: data-oriented wireless PDAs and voice-oriented smartphones. The split was mostly based on the judgement of the analyst on whether a device was “voice” or “data” oriented. I suppose they used the primary input method as a proxy: numeric keypads meant the device was one-handed and therefore voice-oriented. If the device had a full keyboard and/or a stylus-actuated touch screen then it was a two-handed data-oriented device. But even this proxy was not quite enough, sometimes devices were classified whimsically.

To make it more complicated, they bundled non-cellular but Wi-Fi enabled PDAs with wireless PDAs. This made some sense from a corporate IT point of view (their primary customer base) as these data-oriented devices would be used either on a LAN or a WAN (Wide Area Networks: what Gartner anachronistically called cellular networks.)

The presence or absence of a cellular radio did not enter into their view of these devices. So if you asked Gartner in 2006 to forecast smartphones (as we know them now) in 2010, I suppose you’d get what they forecast for “data-centric” devices.

So assuming that today’s smartphones are mostly “data-centric” we would have to look back on their view of that market and not the voice market which was seen as an entirely different thing. Their answer should have had something to do with the market leaders and participants in 2006. As the table above shows Gartner showed that RIM, Palm and HP led in 2005 with Nokia and T-Mobile[1] pulling up the rear.

However, from a platform point of view, at the beginning of 2006

Microsoft Windows CE was the No. 1 PDA operating system (OS) in 2005 as 7.05 million PDAs were loaded with the OS, up 33 percent from 2004 shipments of 5.28 million units. Palm OS PDA shipments declined 34 percent to 2.96 million units in 2005.

In late 2006, Gartner made further predictions for the year:

In 2006, Gartner expects the PDA market to increase by 6.3 percent to 16 million units. The market will continue to be driven by broader availability of cellular-enabled PDAs from wireless carriers. Gartner estimates that 53 percent of all PDAs shipped in the first half of 2006 featured integrated cellular capability, up from 46 percent during the same period in 2005. “The share of PDAs purchased by enterprises will continue to increase; it accounted for 49 percent of all PDA shipments in the second quarter of 2006 and Gartner expects that the enterprise market will account for 52 percent of all PDA shipments in 2006,” said Todd Kort.

At this time I have not yet dug up a Gartner “Wireless PDA OS” four year forecast from the year 2006 but I suspect it would not show devices running Google’s Android operating system or any running something called iOS.

I also seem to remember that they were suggesting that Windows would be the leading mobile platform. Although it was trailing in 2006, Gartner was quite bullish on the disruptive challenger from Redmond.

[1] T-mobile is in the list because it was common practice in 2006 for operators to market Pocket PC Phone Edition devices made by HTC under their own name. Orange, Vodafone and Verizon also had own-brand HTC Windows touch-based devices. Now what does that strategy remind me of?

Apple sales by product line

The following chart shows the value of sales per quarter (in $million) since the beginning of 2005. What’s interesting to note is that more than half of sales is contributed by products which did not exist three years ago (iPhone and iPad). Music and iPod did not exist 10 years ago.  It’s entirely appropriate that Apple removed “Computer” from its name, though they still sell mostly computers of a different kind.

Remembering netbooks

“That market is falling off a cliff,” said Ashok Kumar, an analyst with Rodman & Remshaw, of the netbook sector. “It cannibalized notebooks and simultaneously all it has done is accelerate a price decline.”

Saripella agreed. Sales of netbooks, he said, the brightest light of the PC market during the recession of 2009, tumbled 30% in the second quarter. “The market for netbooks is cratering.”

The PC industry is at the beginning of the end.