On October 22, Nokia (NOK) will be hosting a media event in Abu Dhabi, United Arab Emirates, where it is expected to announce new smartphones. Later that day, Apple (AAPL), which last month launched it's the new iPhone 5s, will also hold a media event in San Francisco to announce the new line of iPads, and various other products. Meanwhile, in September, Microsoft (MSFT) announced their new line of surface tablets.
There is a lot at stake here: tens of billions of dollars in market capitalization.
Just five years ago, who would have thought that BlackBerry (BBRY) would be dropping from over $80 to $8.38 - losing 90% of its value. Tuesday's events are pivotal in how the future will play out for those involved.
In this post I will focus on critical points that virtually all other financial bloggers have missed.
On September 3, Microsoft announced that it had purchased Nokia's Devices and Services business, for €3.8 billion. They state:
Building on the partnership with Nokia announced in February 2011 and the increasing success of Nokia's Lumia smartphones, Microsoft aims to accelerate the growth of its share and profit in mobile devices through faster innovation, increased synergies, and unified branding and marketing.
Clearly, any new devices introduced on the 22nd will be Windows mobile. Most notably, a new Lumia 1520 is expected. The phone is reported to have a 6 inch screen, one of the largest in the industry, and will include a high-end camera, which has been a trademark of the series.
Since Microsoft is due to purchase the division, this should be viewed as a Microsoft event. Unfortunately for them, their announcements will probably be overshadowed by Apple's big iPad event.
Microsoft Surface tablets
Early last month Microsoft announced their new line of Surface tablets, The Surface 2 and the Pro 2, with base prices of $449 and $899 respectively. These are also set to go on sale Oct. 22 (although recent news is that some versions with higher memory will be delayed until December). These add to older RT, which has moved down $100 in price.
The Apple event will be a spectacle - as always. I don't want to list all the possible new features that are rumored, but will mention the most important ones for this discussion. The invitation teaser is "We still have a lot to cover."
- It is likely that Apple will announce the availability of the latest version of OSX - Mavericks.
- It is possible that they will announce some new Mac hardware, particularly the fantastic Mac Pro that caught so much attention at the last event.
- Apple TV - the desktop unit may be updated.
- Definitely, the iPad line will be updated with a new iPad 5, and a new iPad Mini. [See Note 1 below for further speculation.]
Item #4 is of most interest here. Let's look at the really important changes that are coming - two items that are at once the most significant and the most certain:
- Touch ID sensor
- Apple A7x processor
These two are important since they are both:
- ground breaking,
- part of an overall plan towards greater security,
- aimed at the enterprise, and beyond.
Actually, the two are tied together in a way that not many people appreciate, and this gives iOS, and Apple, a real advantage that will be hard for others to match. Let's start with the A7 processor.
A7 system on a chip processor
The larger iPad, and perhaps the Mini, will have an A7x processor. If Apple follows the past, then this will be identical to the A7 in the iPhone 5s, except that it will have more graphics cores to handle the larger screen size.
In my earlier post, Apple's 64 Bit A7 - What It Really Means, I went into details of the A7, and some of its implications. Here I will focus even deeper on one aspect - security.
- The A7 is based on the ARMv8 design specifications, intellectual property of ARM Holdings (ARMH) which licenses designs to those who want to build their own processors either for resale [e.g. Qualcomm's (QCOM) Snapdragon series] or for their own use (e.g. Apple A-series).
Here is a small portion of a chart from Anand Tech's superb review of the A7 performance showing the difference between the processor running in 32-bit vs. 64-bit modes.
This is what they say about the extraordinary performance gains (up to 825%) in a few of the tests:
The AES and SHA1 gains are a direct result of the new cryptographic instructions that are a part of ARMv8.
That is to say - one of the greatest gains of the new A7 is in the execution of encryption routines, because of a new, specialized encryption unit. One has to wonder if a motivating factor for this is to meet the demands of Touch ID.
We have been told that when training Touch ID, sample prints are encrypted. No one outside Apple knows just how much data is required, but it could be that the encryption is quite intensive. In particular, the authentication of a fingerprint to open the device must also encrypt the touch data, and do so very rapidly.
Which leads us to another, somewhat esoteric feature of the A7 - the mystery SRAM.
Firm Chipworks loves to dissect new processors to find out how they are constructed. They give the following picture of the A7 internals. Note my arrow to the SRAM feature.
This is an area that they believe consists of 4 MB of static memory. They write:
Scorn was convincingly poured on my tentative theory that it might be used for fingerprint data, although I persist in believing Mr. Ives in his video - if he says it's stored in the A7, then I presume it's stored in the A7.
It is interesting that nothing like this is found on Apple's earlier chips. So, as the authors point out, if this SRAM is not where iOS stores the fingerprint data, it is clear that it is stored somewhere on the A7, which is precisely my point here. Apple refers to it as Secure Enclave. From Apple's site:
Touch ID does not store any images of your fingerprint. It stores only a mathematical representation of your fingerprint. It isn't possible for your actual fingerprint image to be reverse-engineered from this mathematical representation. iPhone 5s also includes a new advanced security architecture called the Secure Enclave within the A7 chip, which was developed to protect passcode and fingerprint data. Fingerprint data is encrypted and protected with a key available only to the Secure Enclave. Fingerprint data is used only by the Secure Enclave to verify that your fingerprint matches the enrolled fingerprint data. The Secure Enclave is walled off from the rest of A7 and as well as the rest of iOS. Therefore, your fingerprint data is never accessed by iOS or other apps, never stored on Apple servers, and never backed up to iCloud or anywhere else. Only Touch ID uses it and it can't be used to match against other fingerprint databases. [Note 2]
To understand this, we have to look at added security features of the ARMv8 designs, what they call TrustZone.
The modern central processing unit (CPU) is composed of one or more cores that do the actual processing work. Each of these is more or less equivalent to one of the earlier CPUs that was monolithic. (The A7 has two CPU cores and 4 GPU cores.) ARM's TrustZone whitepaper states:
Each of the physical processor cores in these designs provides two virtual cores, one considered Non-secure and the other Secure, and a mechanism to robustly context switch between them, known as monitor mode … the Non-secure virtual processor can only access Non-secure system resources, but the Secure virtual processor can see all resources.
This means that Apple's Touch ID method is part of a system-wide structure of security that goes deep into the very computing hardware.
This explains why Apple moved to the 64-bit processor at this time - not for the processing gains only, but for the security gains as well.
iOS implications for the enterprise
Touch ID shows that Apple is taking the security issue extremely seriously, and has implemented what most likely is by far the most secure sign-on system in the industry. We need to remember that a security system is only as secure as individuals are willing to use it. Regular, simple login PINs are ignored by many because it is just a pain to use so frequently. Touch ID obviates the need to constantly sign on, and thus encourages not just the use of the regular PIN but of the more secure full password feature. If you only need it only once or twice per week, why not.
As we all know, security is of prime importance to the enterprise where frequently employees need to have access to important classified data. Touch ID is just one part of a concerted effort to make iOS meet the needs of the enterprise.
Ryan Fass of CITE reports:
iOS 7 could radically improve enterprise mobility and enterprise apps. Apple is offering developers the ability to plug into APIs and iOS features to an extent well beyond what the company has offered in the past. It is also making some major leaps forward in terms of enterprise integration, mobile management, and data security.
Just a few of relevant features are:
- Per app VPN
- Enterprise Single Sign-on
- New app configuration management
- New device management
The traditional PC market is stagnating as tablets take share. While this is driven mostly by consumers, everyone knows that enterprise adoption is not only a source of direct revenue, but devices at work can influence the purchase decisions of employees and their friends.
Last week, Good Technology reported:
While Android is gaining enterprise market share on the device side, iOS dominates as platform of choice for enterprise app deployment, with 98 percent and 95 percent of total app activations in Q2 and Q3 respectively.
Both Touch ID and the new A7 processor are solid moves that enhance Apple's lead and further differentiate it from other systems - both Android and Windows.
In July Microsoft took a $900 million write down on its original Surface tablet line, as sales have been very disappointing. Microsoft has been very slow in coming up with a real, quality answer to the iPhone revolution of 2007. Windows Phone 8 was only released a year ago.
The Surface tablets, in particular, have been slow to catch on. (I checked them out at a local Microsoft Store yesterday, and they are pretty slick.) Yet this is an area in which they very much need to catch up, but where they have a natural advantage since their Pro 2 model runs Windows 8.1 - the PC OS - and is therefore capable of running all regular Windows programs. It is, however, expensive, pretty much equal in price to a good quality Ultrabook such as the MacBook Air. So its acceptance remains to be seen. In the end, the acceptance of the Surface is critical to Microsoft's continued dominance of the software space.
As for the Nokia smartphones, Nokia has a long history of building quality products, and their Lumia series is already highly regarded. I am sure the new offerings will be well received. Currently WP8 market share is small, but growing, and Nokia is largely responsible for that growth. Here, too, Microsoft needs a win in order to stay relevant.
Apple also needs a win. While many consider them to be best in class, that thought is not universal. They need to keep on top of the game or risk losing even more market share. If they should ever hit the point where customers see little difference in Apple products and the competition, they will lose the ability to command premium pricing, and that would be disastrous for them.
In conclusion, the iPads introduced on Tuesday will determine if Apple can maintain its dominance in the mobile end of enterprise computing, as well as keep its consumer base electrified. (Remember, the iPhone 5s launch hit a record 9 million sales.) Microsoft, for its part has a lot riding on the Nokia phone launch, and the initial reception of the two new Surface models.
So Tuesday, will be an interesting, high-stakes day.
I have tried to bring some technical data to those of you used to only the financial news. I hope this has deepened your knowledge of the issues.
Please let me know if I have been able to explain reasonably clearly, and if you have found it helpful. You may leave comments below or contact me via my profile link.
Related Article: Apple devices are more responsive than Android.
1: What else might come up? I see a possible high end iPad "Pro Model" with over 4 Gb RAM to meet the criticisms of some of the A7 detractors. I also see the possibility of an A7xx that not only has more graphics cores, but more CPU cores as well. If the A7 can match quad-core processors with just 2 cores, imagine how it would do with 4.
2: User passwords on Unix based systems (including Linux, Mac OSX, iOS), and I presume on Windows as well, are not stored on the computer system. Rather, an encrypted form is saved. The encryption is of a one way type - it is extremely difficult to go from the encrypted form back to the original. When a user logs into the system, the password he enters is once again encrypted, and this is tested against the stored "copy." It appears that this may be what is done in Touch ID. Therefore, first, it is virtually impossible to recover the encrypted form from the A7 hardware, and even if one did, it would be virtually impossible to decrypt it, and even if someone did this, it would not reveal an actual fingerprint - just AuthenTec's identifying features.