The Devices Formerly Known As Smartphones

|
Includes: HPQ, LNVGY, MSFT, QCOM, SSNLF
by: Bob O'Donnell

Summary

The Barcelona-based Mobile World Congress trade show has served as the location for major smartphone announcements for a long time.

Splashy introductions have been made by Samsung, LG, Lenovo and other usual suspects.

In the future, smartphones, as we known them now, will likely cease to be.

The Barcelona-based Mobile World Congress trade show has served as the location for major smartphone announcements for a long time, so it’s no surprise to see that happening again this year.

Splashy introductions have been made by Samsung (OTC:SSNLF), LG, Lenovo (OTCPK:LNVGY) and other usual suspects. But there is an important twist for 2016. It stems from the transformation of smartphone-sized devices that has been going on for several years now. In essence, the question boils down to this: when is a smartphone no longer (or not primarily) a smart... "phone?"

For many younger people, arguably that’s been the case for quite some time. We know they essentially use their phones as mobile computing devices and very rarely use the traditional smartphone features. In fact, in a survey of over 1,000 US consumers done last fall by TECHnalysis Research, voice calling only represents 5.8% of the 18-24-year-old segment’s total smartphone usage time. Even with older consumers in the 45-54 age group, voice calling and texting together only account for just over ¼ of a typical user’s smartphone time. The rest is spent on more computing-device type activities, such as browsing the web, listening to music, gaming, reading email, social media, etc.

Alongside these consumer trends, we’ve seen tremendous changes in work habits. For example, in that same survey, over half of employed respondents said they used a personal phone for work tasks during a typical week, spending an average of 2.3 hours on those efforts. While a good portion of this is likely for email, there’s no question a large amount of time is spent doing work-related, computing-style tasks on our personal smartphones. Throw in the large number of employer-provided smartphones in active use where - theoretically, at least - most of the time spent is on work tasks, and the total hours of computing done on smartphones becomes enormous. Plus, this is just for the US, where PC penetration is quite high. In many developing regions, smartphones are essentially the only computing device many people own or have access to. As a result, smartphone-based computing on a global basis is now on a staggering scale.

Given this context, thinking of a smartphone as more of a traditional computing device than just a communications tool seems incredibly obvious. But for many traditional applications, there is that one thing - screen size.

Now, as someone who finds reading glasses to be an increasingly necessary accessory, I’ll admit I don’t have the razor sharp eyes of my youth. I also acknowledge that it never ceases to amaze me how much today’s young people can do on the 5-5.5”-sized screens the smartphone industry has coalesced around. Still, there is a limit that most people face when it comes to what they can achieve on these smaller screens, particularly when a fair amount of input is required.

That’s why I’m intrigued by HP’s (NYSE:HPQ) new Elite X3. At first glance, the 6″, Qualcomm (NASDAQ:QCOM) Snapdragon 820-powered device looks to be just another smartphone - a Windows 10 Mobile-based one, at that. But, in conjunction with some of the hardware accessories the company specifically developed to be used alongside it, along with the capabilities of Windows 10 Mobile’s Continuum features, the X3 can morph into a full-on, big-screen computing device.

Now, cynics will argue we’ve seen this before. Anyone remember the Motorola Atrix? Or how about Microsoft’s (NASDAQ:MSFT) own Lumia 950 from last fall? Both notable but ultimately failed efforts to develop a smartphone form factor computer. The difference with the X3, however, is the focus and detailed vision. On the Atrix and Lumia 950, the computing features were add-ons to an existing smartphone. The X3 seems to be positioned and designed primarily as a computer, with the smartphone capabilities essentially built in.

Admittedly, that may sound like semantics and, of course, whether the final execution lives up to the promise remains to be seen. However, a quick glance at some of the details suggests HP has thought things through pretty well. First, the hardware accessories - particularly the clamshell form factor Mobile Extender, with its 12.5” HD screen, three USB Type-C, micro HDMI and audio ports - add a whole new level of connectivity and input options to the phone-based computing experience. You connect the X3 to the Mobile Extender via one of the USB Type-C ports - where you’ll get the added benefit of being able to power and recharge the X3 through the Mobile Extender’s built-in battery - but HP will enable also wireless connections, though that may come after the product launches.

On the software side, because it’s Windows 10 Mobile-based, the full Microsoft Office suite is built-in. As an ARM-based device, however, there is the potential for compatibility problems with existing Windows apps (other than newer universal Windows 10 apps, which can run natively on Windows 10 Mobile ARM devices, but those applications are still very limited in number). To avoid the Windows RT-like incompatibility stigma, HP is working to provide a virtualization-based solution that will allow traditional x86-based apps to run on the X3 - a huge boon for most potential users.

Even with all these efforts, it’s not clear to me a device like the X3 will become most people’s only, or even primary, computing device. Nevertheless, in a world where people are looking for more flexible computing options and are accustomed to working across multiple devices, the X3 concept seems to be well timed.

Mobile World Congress also saw the debut of some smartphone form factor computing devices from Panasonic (OTCPK:PCRFY). The company’s new ToughPad FZ-F1 and FZ-N1 (Windows 10 IOT Mobile Enterprise and Android-based, respectively) are ruggedized, have a 4.7” screen and are Qualcomm Snapdragon 801-equipped handheld computers with integrated barcode scanners. At first glance, they look like ruggedized smartphones with a large protrusion (for the barcode reader) but, interestingly, the company will actually be selling a version that supports WiFi only (and can do voice via VOIP), in addition to an LTE-equipped option. Though clearly not designed to be a general purpose computing device, like the HP X3, these Panasonic FZ devices exemplify how hardware companies are evolving smartphone form factors to meet unique mobile computing needs.

To be sure, the "traditional" smartphone will continue to be the dominant opportunity for these five-inch screen-based devices for some time. But as the category matures and dramatic new technology innovations for them continue to slow, it’s clear we’re entering an era where smartphones, as we know them now, will likely cease to be.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.