The world of investment banking tech research analysts is a competitive one, so the saavy types make a strong effort to step beyond the traditional quarterly report publication grind. A great example of this came from Genuity Capital Markets, whose Wireless Analyst spent some time in California at the Open Mobile Summit. Here’s a snapshot of his findings:
Open Mobile Summit – An industry conflicted that will remain volatile
Last week, we attended the Open Mobile Summit in San Francisco. The conference had a stellar list of speakers from every facet of the mobile ecosystem, including the four major U.S. mobile operators, hardware and software vendors and Internet heavyweights like Google (GOOG). Presenters included the Chief Internet Evangelist from Google, the CTO’s from AT&T Wireless (T), T-Mobile and Adobe (ADBE), and SVPs from Qualcomm (QCOM), Ericsson (ERIC), Intel (INTC) and Palm (PALM), among many others. Given the buzz surrounding Google’s Android operating system, the conference in many ways was an Android event. The conference was focused on the idea of “openness” and its impact on the wireless industry.
“Openness” is easy to over-conceptualize, but in the end, it is a simple thing. It is an environment where a user is able to run any application on the device of their choosing without restriction from the handset manufacturer or from the owner and operator of the network. However, the reality is far from the concept. Every part of the wireless food-chain is formulating its own view of what “openness” is.
Overall, the conference made it clear to us that the mobile industry is confused and conflicted, as every player is trying to understand their position in the changing landscape and, more importantly, how they can profit from it. For investors, our basic conclusion is the wireless space is becoming more volatile as the industry is evolving at an ever increasing pace. Given that the industry is searching for a direction, stocks in the space will trade on incremental data points.
In some ways, we felt that Google is applying the same “Guerilla” techniques to the wireless space that it is applying to the traditional PC space. The Internet giant is trying to commoditize the traditional components of the wireless business (mobile OS, handsets and network operators) to ultimately break down barriers for users to access the Internet (and their search engine). For Apple (AAPL), the debate is somewhat meaningless (in the near term at least), as it offers the best seamless consumer experience. Last time we looked, users did not care if the architecture is open or closed - they just want it to work.
Our key takeaways from the conference are:
1. Battle lines being drawn: Android versus the iPhone, Google versus Apple.
2. BlackBerry – Verizon (VZ) remains committed, while Research in Motion (RIMM) moves to improve UI and browser.
3. Android is a force that is here to stay.
4. Carriers are conflicted, however, are warily opening their systems.
5. Is Google making the OS ultimately irrelevant?
6. Are application stores temporary as everything moves to the browser.
7. Carriers not giving up on operator application stores.
8. Application developers are confused and not making money - Conflicted about the Apple App Store; want to work with BlackBerry and are hoping Android is the saviour.
9. New market opportunities like M2M are getting a lot of attention.
10. Silicon Valley’s impact on wireless is growing.
For RIM (RIMM-Q: $58.72, BUY, Target - $105.00), the show highlighted that the competitive intensity of the industry is increasing. RIM needs to accelerate improvements to its user interface, web browser and overall application stack (we are hearing mid-2010). However, the show did also highlight to us the strength of its relationship with Verizon and that its push architecture and dominant footprint in the enterprise are not easily replicated. The show was extremely positive for Bridgewater Systems (OTC:BDWRF) (BWC-T: C$9.28, BUY, Target - C$13.00) and Sierra Wireless (SWIR-Q: $9.29, BUY, Target - $12.00). Carriers need help managing and pricing new services (Bridgewater) and are looking to embedded wireless applications like e-readers and M2M to drive additional revenues and incremental margins.