This new “mobile computing” use case that smartphones try to serve is not going to be satisfied with solutions that are built from modular components.
The reason is simple: as the solutions are not good enough (because it’s early days), they need to be improved. If they are to be improved, competitive pressure will compel those who try to do so as rapidly as possible. The fastest climb up the trajectory of performance will get the bulk of the benefits. Modular implementations are simply not fast enough in cycle time of iteration in comparison to the integrated approaches.
This is why Apple will grow faster than Google, Nokia and Windows Mobile.
How does this relate to the ecosystem?
Many have been commenting that Google’s (or Nokia’s or Microsoft’s) ecosystems are more “open” or “flexible” with respect to Apple’s. And that in the long run that is the right architecture. That may be, however implementing loose ecosystems coupled loosely to modular devices and operating systems and services as a whole will not be competitive. They will be too late, too slow and too hard to use. They will be awkward to position and the benefits will be impossible to explain to end users. They will be sold through a distribution channel that is too long and with poor information feedback. Too many “vested” interests will dilute the product’s reason for being. The pricing of the integrated player will cause poor economies for the modular cohort. I could go on but it suffices to say that the modular approach will fail to be competitive.
Footnote: the arguments for the imminent explosion of Android are all based on a forecast from Ken Dulaney at Gartner. It was also Ken who in 2004 forecast that Windows Mobile will dominate business devices and that RIM would never gain share leadership. Here is why he is wrong now as he was wrong then:
Ken and his peer group are implicitly and explicitly owned by the customers he tries to serve. What I mean is that Ken is hired by those who have the money but not the competence to think by themselves. His clients are the incumbent device vendors who are signaling to him that they will increasingly license Android (as they signaled that they will license WinMo before). He adds up all the signals he gets and multiples by random numbers to get a forecast. It’s a supply-side forecast assuming “Porter’s five forces” is still at work. In that sense, he is selling back to his clients what they’ve already told him. He is hired to validate their assumptions and that’s what he delivers. Rinse, repeat.
Motorola shipped 13.6 million handsets in the quarter, compared with 25.4 million in the same quarter the year before.
Android will not save them. Not least of all because HTC makes better Android devices.
“In fact, as a percentage of revenue, Apple has actually been decreasing its ad spending every year for the past eight, from nearly 5% in 2001 to 1.37% today. That’s about half the 3.6% Research in Motion’s spends advertising BlackBerries.”
Comparing US sales of iPhones vs. Nokia’s NA device business.
AT&T iPhones activated in Q3: 3.2 million
Nokia phones sold in North America Q3: 3.1 million
(obviously, Nokia’s figures include Canada and Apple might have sold a few more phones in the US than AT&T activated so Apple outsold Nokia by a significant margin in units in the US.)
For reference, some selected current market caps:
- Microsoft (MSFT) – $236.76B
- Apple (AAPL) – $183.40B
- Google (GOOG) – $173.97B
- IBM (IBM) – $159.93B
- Cisco (CSCO) – $138.60B
- Hewlett-Packard (HPQ) – $114.26B
- Intel (INTC) – $109.85B
- Disney (DIS) – $54.31B
- Nokia (NOK) – $48.24B
- Research In Motion (RIMM) – $37.43B
- Amazon (AMZN) – $40.34B
- Dell (DELL) – $29.63B
- Sony (SNE) – $29.10B
- Yahoo! (YHOO) – $24.78B
- Motorola (MOT) – $18.82B
- Adobe (ADBE) – $18.23B
- Palm (PALM) – $2.51B
- RealNetworks (RNWK) – $564.74M
The top 10 world-wide:
- Exxon Mobil Corporation 352.31B
- PetroChina Company Limited (ADR) 240.47B
- Microsoft Corporation 237.58B
- Petroleo Brasileiro SA (ADR) 220.19B
- BHP Billiton Limited (ADR) 204.30B
- HSBC Holdings plc (ADR) 199.98B
- China Mobile Ltd. (ADR) 199.09B
- Royal Dutch Shell plc (ADR) 195.76B
- Wal-Mart Stores, Inc. 195.27B
- Apple Inc. 183.57B
Steve Ballmer is not worried, Apple is just a rounding error.
Apple wiped the floor with Nokia. Twice the net profit and almost on par with gross profit. Nokia spent a whole billion dollars a quarter in R&D. The R&D take is 10.2% of sales.
I’m trying explain the complete lack of interest in Nokia among the US blogging/early adopter audience. If you are an enthusiast, why do you not care about the market leader. The automotive analogy is not quite perfect, but there are brands that are just invisible to the community even though they are quite popular and significant.
The French have a pretty crap reputation and it’s not entirely undeserved, however what’s worse than being talked about badly is not being talked about.
Apple’s Q4 2009 conference call revealed that iPod touch sales were up 100% year over year. For the full fiscal year, iPhone grew 78%.
When asked more pointedly, “So when you go from exclusive to multiple, you don’t change the charge to the carrier?” Cook answered, “Correct.”
Apple has more pricing power than the Don.