Ruski

iPhone Lockup and Apple's True Colors

And if Microsoft would do the same to your PC with the next Windows version, you would be fine? - "As we need to control the PC from viruses and other malware, no other software than that developed by Microsoft can be allowed to run on this PC". And don't say it is a different thing, because it isn't. And if you still claim that it is different (with that FCC crap etc.), why is Nokia (Symbian and S60), Motorola (Windows Mobile), HTC (WM), Sony-Ericsson (Symbian and UIQ), etc. able to produce multimedia handsets with open software platforms?
Apple is such a great company and a great brand that almost whatever they do (wrong), they will still always have hundreds and thousands of "totally blinded" defenders to back them up. That is impressive.

iPhone Lockup and Apple's True Colors

Great comment Andrew. It is amazing how little criticism this walled garden approach by Apple has raised. At least so far. Interesting to see how successful the European launch now in Q4 will be. Nokia is likely to become much more aggressive with at least its N95 and N81 offerings, both in terms of ads and pricing.

Motorola: It's Time For Change

VAU !!
This was one of the best comments I have ever read on Seeking Alpha. Good work Eric!!

I have attended and listened in on most of Motorola's CMDs over the past 10+ years and I would totally agree with Eric that besides the normal "empty words of bs", this time they actually revealed (to people that understand the biz) that they are totally lost in what to do to get back to a position in handsets to actually challenge the Nr1 Nokia. It is not going to happen, at least not in the near future meaning 2-3 quarters. I am not sure if Motorola even will be able to defend their Nr2 position against Samsung, and even Sony Ericsson could become a tough name to stay ahead of.

Sure, it seems they talk about doing the right stuff now, but it also seems they are now doing some of the things Nokia has done for years already (like focus on working capital, turns, multiple sourcing, cash conversion, broad portfolio etc.) and copy-pasting that will simply not be enough.

Looks like Nokia has a lot of positive momentum ahead as Motorola is down on their knees. Even the likelihood of finally witnessing a turnaround for Nokia in the US market during 2008 seems much more likely now.

Qualcomm Loses Again

I am once again astonished that this seems to come as some sort of "a big surprise" to so many investors in the US. From an European perspective this has been evident for many years and the question has, in my mind, only been - how long can Qualcomm continue doing things the way they have until they have everybody in the industry food chain against them?
And now it seems we are finally getting to that point. And it sure has taken much longer than I personally thought. Glad I didn't short it too early.

Going forward, with
1) Current trends of CDMA IS-95 networks gradually but surely being phased out
2) Qualcomm's so called critical patents in the growing WCDMA world being questioned
3) Nokia's new (and old) 3G WCDMA chipset partners building scale (and more and more of the other top 5 handset vendors turning to the same names for chips ...)
4) and finally, Qualcomm's overall royalty schemes being critized and questioned (as relics from ancient history ...)

... I can not conclude anything else than that the stock is likely to be very volatile and potentially a very dangerous long position. In the bigger picture their business model seems to be running on fumes.

Nokia's Restructuring: Nobody Loves A Value-Chain Hog

Hello David,
A few comments to you story

Two of your arguments seem very shortsighted => "Nobody Loves a Value-Chain Hog" and "Nokia cannot realize its vision of service leadership without running afoul of its major customers - the operators."

- Walled garden services on the mobile side of the Internet are not going to cut it. Why? Because it is simply the same Internet (as on the fixed side) and it will not take long for consumers to understand that. And they will go for the best available services they are used to - and are those provided by the operators? NO way. And Japan and South Korea are likely to be the countries being the exceptions to the rule.

Is Google or Microsoft a "value-chain hog" on operators offering broadband access? No. And neither will Nokia be as Internet access to services and software expands to the mobile space.

The fixed line Internet with its small dynamic companies building "community based" free or almost-free services like Flickr, YouTube, Google, Skype etc. at a pace the operators can only dream about, shows that there is no way the mobile "broadband access" business could be different. Mobile operators will be pushed also on the mobile side to become bit pipe providers. It is only a question of how long it will take - 1 year, 3 years ...?

In this kind of a business environment Nokia can and should be there to offer navigation services, music downloads, e-mail solutions, games, etc. Like any other company should do if they have the know-how, the technology, the brand, the distribution and the opportunity to bundle services and software through links, pre-installations, try-and-buys, etc. on the hundreds of millions of handsets they sell every year.

And sure here and now, it may seem like Nokia is set to challenge some of their important operator clients that sell Nokia handsets. Therefore, here and now, it is a balancing act. But long term, I think we all know what the role of the operator will be. And Nokia needs to prepare for that.

reg,
Lauri

Apple Reinvents Consumer Electronics

Oh, this inspiring iPhone hype.

Calling a technical tactic of recording deferred revenue over 24 months as "Reinventing Consumer Electronics" is however a bit much, I think.

And when it comes to "offering new software features and applications at no additional charge" - to me that sounds more like "the first iPhone will initially be far from complete in terms of its software features, but we promise to patch it up as we go along".

So far, much of ... or actually most of, technical development on portable smartphone devices has been on hardware features => faster mobile data rates from EV-DO or WCDMA/HSDPA, more (and cheaper) memory, better cameras, more efficient processors, better batteries, better and bigger displays, etc.

These features cannot be fixed with software patches and therefore any device sold today is easily obsolete in 12 months or so, at least for a 'techie'. Even the first iPhone will. And we already know what makes the first iPhone obsolete - the lack of faster mobile data than GSM/EDGE. And that can't be fixed with software patches.

And finally, please remember that iPhone's OS environment is closed, so Apple decides what new software and features will be offered, you can't shop for software or shareware like on Windows Mobile or Symbian.


Ruski

Apple's iPhone and The Future of Nokia

Interesting reading on smartphones and iPhone. I would agree on many parts, but would add the following for consideration

1. “The use of OSX” – is it really such a big thing?
Apple’s market share with the OSX is so marginal in the PC/laptop world, that just running that OS on a mobile device, does not as such make it decisive for its success, I think. And how well the first iPhone is running it, we don’t really know, do we?

Is it a big thing that certain smartphones run a specific OS? – I believe it is important primarily in the enterprise segment and there Windows (Mobile) is naturally the ‘easy OS of choice’ for CIOs.

2. “The use of a new consumer user interface” – what do we really know about its usability?
Admitting that the iPhone ‘looks damn gooood’, as does the demos, I have been amazed that people have so strong views on the usability, the user interface, the feature set, etc. without ever having used the device in real life. Already the simple fact that the wireless data rate is restricted to GSM/EDGE, makes me worried about the browsing experience (when WiFi is not available). I sure hope it lives up to the high hopes and expectations.

3. “Moore’s law” – could not agree more, long live Moore.

“Nokia Strength: Hardware/Silicon integration” – agree, some arguments in support

Price point to become critical for smartphone volumes - It will be interesting to see how low devices based on the other operating systems and different hardware platforms can get in terms of a price point for a “full-feature” smartphone within the next 12-18 months. Besides the question of an efficient OS kernel and applications, also the semi design capability of the devices is naturally critical. And here Nokia has a solid track record of ‘design for low cost’.

Nokia’s latest smartphone, the Nokia 6120 is a good example. As this Symbian S60 device starts shipping now in Q2, it has an estimated price point of only some USD 340 without before operator subsidies and taxes. This is at least half or probably closer to one third of the unsubsidised price for the iPhone. At this price the Nokia 6120 will deliver among other things also full 3G HSDPA data at max data speeds of 3.6 Mbps and does that on dual bands (850 Mhz for US and 2100 Mhz for Europe and most parts of Asia). All other features like ‘Web 2.0 ready”, 2Mpix camera, mediaplayer, e-mail, widsets, etc. is naturally built in and the phone is ‘open’ for the user to install any Symbian S60 3rd Ed software out there.

So the critical question, beyond the first few millions of high-net-worth-indiviu... going for the iPhone just for the ‘glamour’ of it, will really be ‘what do you really need to pay for a good smartphone?’ … in the second half of 2007 and beyond. And that, I believe, will be decisive for ‘who is who’ also for the operating systems. And here things do not look that bad for Symbian and Nokia really.

“Nokia’s weakness: The Symbian OS” – Strength or Weakness?

This is a tricky one, but it seems that the consensus view is that it is a weakness for Nokia to be so committed to Symbian. Sure, Symbian’s sky-high market share will decline as Linux, Windows Mobile and Mac OS get to volumes. And sure, I agree on Symbian being an odd choice for smartphones for the Enterprise segment of users (relative to Windows Mobile, which would be the ‘easy choice’). But I think the critical question is at what price point are the big volumes in ‘consumer multimedia smartphones’ going to kick in? And as I argue above, it looks pretty good for Nokia & Symbian, in particular if it happens sooner rather than later. And as 100m Symbian OS devices have now been shipped to date, it can’t be all bad, can it?

“Design question resolved? “– we’ll see about that

Admitting that the iPhone ‘looks damn gooood’, ‘design’ in a pocketable device is so much more than great looks, and as stated above about people having strong (positive) views of the iPhone without using it, I would definitely conclude here that the ruling is still out on this one.

Conclusion

I believe that the iPhone will be a very important device to really kick start the smartphone biz, in particular in the US. At the same time, I believe Nokia just might become the biggest beneficiary of that momentum, especially if they can finally get their act together in the US during the latter half of 2007 and into 2008.

Also note that Nokia derived exactly one third of its group operating profit from its Multimedia smartphone division in the first quarter of this year and that share will grow as their Enterprise smartphone division turns into black numbers later this year. So it is already critically important for them.
Having used the N95 now for two weeks during a trial, Nokia sure seems to at least get the most advanced technical features in place in time for that emerging momentum.

Kind regards,
Lauri Rosendahl

Five Reasons Why Apple's iPhone is Better Than the Rest

Admitting that the iPhone ‘looks damn gooood’, I have been amazed that people have so strong views on the usability, the user interface, the feature set, etc. of the iPhone ... without ever having seen or used the device in real life. I sure hope it lives up to the high hopes.

Kind regards,
Lauri Rosendahl

How To Invest In WiMAX

Interesting article, good work. Could you ellaborate a bit on your statement

"when classified as IMT and IMT-Advanced, the value of WiMAX spectrum will increase ten-fold."

Those few who have WiMAX spectrum, what have they paid for it (example Sprint) and how is that price relative to what has been pain for cellular (CDMA EV-DO or WCDMA) spectrum?

To me, the biz model & technology uncertainties with WiMAX still seem pretty big, in particular as WCDMA HSDPA will have a lead of at least two years in commercial implementation, that simply getting the IMT "stamp" does not necessarily make WiMAX or the spectrum a 'holy Grail'. And I assume IMT approval should not come as a surprise either.

Nokia the iPod Killer? I Think Not

Great stuff David, good conversation. A couple of arguments, if I may

1. I did not say they want the same thing. They will want convergence features that fit them specifically. I do not believe convergence devices will be "one device fits all" (hardware & software), which, by the way is very much the PC/laptop and Windows Mobile device offering. In particular Microsoft still seems to pack all their software practically into one package and then it is up to the user to decide what he needs to use.

I believe you will see a lot of different combinations of convergence devices, but the core is always the mobile phone. Why? - because it is, without doubt, 'the highest priority personal terminal'. And it provides the beauty of wireless communication (also data). And in my view, Nokia is doing a lot of product differentiation in this respect already (too much in my view) and that will continue.

2. When we talk ‘consumer masses’ it is not about having ‘superior convergence devices’ over a standalone device to be successful. It is about convergence devices being ‘good enough’ for ‘the masses’, i.e. the majority of users. You will always have the “serious hobbyists” with a special device like a high-end camera, high-end music player, etc. Like you still have people with an analogue Hasselblad camera (a beautiful piece of machinery by the way), or people travelling with a separate alarm clock. But the real biz is where the volumes are. And that will be in convergence devices, because of 1) everyone ‘needs’ a mobile phone anyway, 2) ease of use (just one user interface to learn, just one thing to remember to take with you), 3) the cost aspect (cheaper as argued before) and the technical aspects (‘extra’ features of the combination).
David, the ‘next to my ear’ is not an issue, Bluetooth headsets takes care of that (already out also in stereo for hassle-free music enjoyment). And you can definitely talk on the same phone (with a headset) that you are reading/writing e-mail on. And do that at the same time.

And then to your ‘problems’
1. JUICE => as you rightly point out, the mobile phone is the highest priority 'terminal' you do not want to risk being left without 'juice' in. So battery time is definitely an issue, I admit. But it is still easier to have a couple of extra batteries (also externals available), and a charger (one) handy for those occasions than having all those separate devices, all with separate (and different) batteries and different chargers to take care of. And why not have an extra miniature plain mobile phone as ‘a last resort’ (with a parallel SIM card and same telephone number ... I do).

2. Content => DRM is in place, but if you refer to Apple’s proprietary technology approach as the right way to avoid piracy, I disagree. The iPod/iTunes approach is not for proper DRM, it is to protect Apple’s own biz model. I think the (Internet) world is already passed that kind of an approach.

3. Experience => How many user interfaces do you want to learn? Camera – would you like to immediately send those precious memories to friends and relatives? Post them directly on your blog or Flickr? Or send them directly to be printed ... and then sent forward as a postcard to grandma? With a converged device you can, without wires, anywhere, at anytime. And it is not science fiction or even difficult, it works here and now. Video – smart phones already have TV-out connections (most Samsung and newest Nokia N-Series and Motorolas at least) and you can immediately look at photos and videos on any TV you can hook up to. The same way you can naturally also use a nearby TV (in you hotel for instance) for “big screen” Internet browsing, e-mail reading with those attachments, etc. Directly from your mobile phone. What do you need the laptop for really ...? FM radio - on a mobile phone is as free as any FM radio. Don’t get you here. Portable TV – you already have systems out there where you can actually program your set-top-box at home from your smart phone anywhere and then “order” those saved programs to be streamed over a 3G network to your smartphone. And again, if you hook that phone up to a nearby TV, you get to see the stuff on a bigger display. Not HDTV, though. What standalone device can (at what price) do the same? With convergence you can.

David, it is really not about ‘superior experience’ as such (despite Nokia saying so), it is about ‘good enough’ technology on a converged device at an affordable ‘bundled price’ COMBINING in the highly intriguing features you can create (mainly with software) because the fact simple fact that the device can communicate (be it CDMA/GSM/3G/Bluetooth/... WiMAX etc.).
N-Gage => We all make mistakes, and Nokia does a lot. However, Apple’s Newton (was it officially called MessagePad?) also failed miserably, but it was not proof of PDAs being the wrong thing to do. Ask Palm, they got it right ... for a while. Who really gets it right in convergence devices, I don’t know, time will tell. But Nokia sure has an advantage from its current scale benefits, technology knowhow, brand name and distribution capability.

But you need to produce good devices too, and I definitely agree David, that the Nokia N91 you commented on is a clumsy failure. The N95 is already so much better that it sends good vibs. And don’t rule out Sony, David, look at their Sony Ericsson JV and you see that they are getting it right with the Walkman and Cybershot smart phones.


Kind regards,
Lauri

Nokia the iPod Killer? I Think Not

David, you are so right on the feature differences here and now between an iPod and a Nokia phone like the N91.

However, I would claim that within 3 to 4 years from now, separate portable devices that perform "just one" basic simple feature like - a music player, a FM radio, a digital camera, a video camera, an email device, portable TV, portable GPS navigator etc. will become a marginal niche business.

Users will go for more and more integrated devices, "all in one portables" including the 'coktail' of features they need as the convenience of that kind of digital convergence devices will be very evident. AND, most importantly, the cost will be MUCH lower than many separate devices (a combined device can share what all devices typically have in common - processor, memory, display, battery, charger ...).

And add to that, that combining the mobile phone with the other features like a music player gives you added combined features like "over the air" downloading of music, wireless sharing of music with friends, etc.

And this kind of "digital convergence" has already happened => Who has in their pocket these days a travel alarm clock, a pocket calculator, a separate electronic calendar (or paper...), a separate electronic dictionary, ... they don't as their mobile phone takes care of such simple tasks well enough. And the list will get longer.

As technology develops, features will improve and we will move from "nice to have features" on mobile phones to real substitution (or cannibalism). Take a look at the specs of the Nokia N95, feel it in your hand, and tell me you still prefer to have a separate 5Mpix camera, separate Blackberry for e-mail, separate GPS navigator, separate music player, separate ... oh yes, mobile phone.

And Apple can either play along (iPhone ...) or get marginalised. Because this is simply going to happen.


reg,
Lauri

Number Fudging in the Wireless Industry

Dean, this is a great comment. And the list goes on and on when you think about it. Just one example, "Handset sales" - is it volumes just shipped into the retail channels or is it really to end-users.

Just after listening to management at the Motorola CMD, you really get 'inspired' by how companies twist practically everything to their own favour. MOT in 3G WCDMA infrastructure is one good example of a "success story" about to only get better when they now unite in a JV with another loser, Huawei.

Wireless Wars: Spectrum Neutrality, 3G and WiMAX

An interesting aspect. However, I would argue that on the other hand Europe and most of Asia are in fact living proof that technology standardisation on specific open standards (GSM, WCDMA) in specific frequency bands has actually resulted in the best scale economies, lowest IPRs, and the toughest competition among vendors and operators. And as a result, the best possible value proposition for the end-user (price point on terminals, tariffs, great roaming, good interoperability etc.).

To change that approach for “do whatever with that frequency band” and to apply pure market economy Darwinism, is not always the best solution. Not even for as you state “pressuring rapacious patent-holders to price their IPR at non-monopolistic prices”, with QCOM being good proof of that.

Wireless Wars: Spectrum Neutrality, 3G and WiMAX

An interesting aspect. However, I would argue that