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This Quarter Offers a Lot of Challenges for Smart Phone Vendors with Fruit in Their Names!

|Includes: AAPL, BlackBerry Ltd. (BB), GOOG, MSFT, NOK, S, VZ

My series on the battle for mobile computing dominance is now over 21 articles long. It was started less than a month ago, yet so many things have changed since then. Google's strategic initiatives are blooming and it is showing that Google's management is capable of executing at a very high level with a very distant level of foresight. Their investment in broadband services, mobile OSs, and cloud services have virtually guaranteed them a very viable path outside of their current core reliance on search ad revenue. The issues on the plate for interested parties are a) quantifying the monetizaton to be had from such efforts (it is not necessarily bullish for the equity in this particular environment), b) gauging the progress and potential of Google's biggest and most capable competitors in this race (although Google looks to be successful in diversifying, that doesn't necessarily mean it will win the mobile computing wars, and c) as always, get the timing right.

I have went into this in detail in the first four installments of my mobile war seriers:

  1. There Is Another Paradigm Shift Coming in Technology and Media: Apple, Microsoft and Google Know its Winner Takes All
  2. The Mobile Computing and Content Wars: Part 2, the Google Response to the Paradigm Shift
  3. An Introduction to How Apple Apple Will Compete With the Google/Android Onslaught
  4. Don’t Count Microsoft Out of the Ultra-Mobile Computing Wars Just Yet

The second article listed, “Google’s response” had a very interesting graphic in it that many may have missed…

Notice how Google has directly funded all of the technologies that have converged to threaten to topple Apple’s smartphone hegemony? Sprint’s 4G Wimax tech, HTC’s collaborative use of the Android OS and the customization of the interface through HTC Sense! Google is, and has been for the last two years, Apples biggest threat.

Has it worked? Well, I’ll let you be the judge, but before you rush off to judgment, be aware that my Sprint HTC Evo handset just picked up a 4G signal today. I was interested, so I downloaded a speed test app to run it through its paces, as well as testing video conferencing, Flash video streaming off of Amazon, etc. Spring hasn’t announced 4G availability in NYC yet, probably because they are still testing, but I must admit that it is impressively fast. The fasted I have seen on a portable device on a cellular network. Much faster than most DSL, as fast as come cable modems/WiFi, and able to wirelessly hotspot for up to 8 devices (at 4G speeds), or an unlimited amount if rooted. Below are the details of my findings.

Below are the results of the ad hoc tests that I ran in Brooklyn, NY using the Speed Test app from the Android Market.

Date ConnType Visual Signal Strength Lat Lon Download Upload Latency ServerName ExternalIp
8/24/2010 18:53 Wifi(n)/Optimum Cable 4 bars 40.8555 -74.1268 1109079 680335 31 Clifton, NJ
8/24/2010 18:53 Wifi(n)/Optimum Cable 2 bars 40.8555 -74.1268 132663 486902 28 Clifton, NJ
8/24/2010 18:52 Wifi(n)/Optimum Cable 2 bars 40.8555 -74.1268 414773 674119 31 Clifton, NJ
8/24/2010 18:47 Sprint 3G 5 bars 40.8555 -74.1268 144330 41250 218 Clifton, NJ
8/24/2010 18:34 Sprint 4G 3 bars 40.8555 -74.1268 837349 133116 89 Clifton, NJ
8/24/2010 18:33 Sprint 4G 1 bar 40.8555 -74.1268 742814 1501 96 Clifton, NJ
8/24/2010 18:16 Sprint 4G 2 bars 40.8555 -74.1268 792933 134027 119 Clifton, NJ


  • Notice the signal strength in “bars”. These tests were purposefully conducted in areas that had signal encumbrances, ex. Not directly in front of a router or cell tower.
  • The Sprint 4G network in NYC has not even been announced yet, it is in testing. More cell towers are sure to be implemented, materially increasing signal strength
  • The Sprint 4G network in NYC appears to be quite competitive with Cablevisions “wired” broadband service.
  • Standing one room away from my WiFi (n) router on Cablevision’s Optimum Online service at 3 am (low peak load time) yields me 12.17 Mps down and 5.1 Mps up, for the sake of comparison.
  • While this may pale to the direct to modem speeds of Verizon’s FIOS of 25 Mbs and higher, it trounces any and all cell offerings, all DSL offerings and even some cable offerings. This is quite interesting for the Evo 4G and the Samsung Galaxy offshoot with 4G capabilities are actually smart phone hardware that can handle this here, and now. These are essentially the best of breed in hand held computing – the fastest, most advanced, and most flexible devices offered to the public to date.
  • Subscribers should take note of our recent research note on telecomm providers (File Icon The Race for 4G Next Generation Broadband Deployment), click here to subscribe. This will heat up and one provider has a big leg up on the others.
So, What Does This Portend for the Race to Mobile Computing Dominance?

I will be visiting the flasgship Apple store in Manhattan by FAO Schwartz to run some one on one tests against Verizon phones and the iPhone, and will record the event in 720 HD via an Android-based Evo – should be interesting. Take note that Android phones such as the Samsung Epic and the HTC Evo in the chart above are inherently and significantly faster than the iPhone to begin with (see this head to head test for proof, fast forward to the speed comparison – Phone 4 Vs. Samsung Captivate (Galaxy S)). When you add in broadband speeds that are literally multiples of that of the carrier that the iPhone is running (currently AT&T, but all of the networks are now materially slower in many big cities than Sprint’s offerings), you get an extreme difference in performance. Again, more evidence of the onset of margin compression in Apple products as they will either have to compete on features (more R&D and production expense) or price (lower ASP), see How Google is Looking to Cut Apple’s Margin and How the Sell Side of Wall Street Will Enable This Without Sheeple Investor’s Having a Clue.

As I have said many times in the past, many Apple consumers and investors are literally enamored with Apple. The Apple marketing technique should be studied in business schools world wide, for I have never been witness to a C corporation that has inspired such fanaticsm. Despite Apple’s runaway marketing successes, and its applaudable success with its mobile products (iPod, iPod Touch, iPhone, iPad, notebooks, etc. – there have been a laudable amount of success here), the FACTS on the ground still show Empirical Evidence of Android Eating Apple!. We are still fine tuning our valuation models for Google and Apple, for there are a lot of variables that I want to capture on a realistic basis. One is the effect of the iPhone being launched on other platforms. If Apple were to do this before Android took off, they would have waltzed through the CDMA market, since MSFT was on the decline. Now, I am not so sure. They have ample demand and mind share, but they also have very real (if not superior) competion in the form of Android. They will also face further margin compression, for I doubt other carriers will bend over in the fashion that AT&T did after seeing how expensive that endeavor was, and being empowered through Android into say we have capable alternatives, that are currently outgrowing your (as in Apple’s) offerings. Now, I know there are many saying that Apple will walk all over Android if released from AT&T. I say hold on there, Kemosabe! (as I channel Tonto, for anyone old enough to remember the Lone Ranger). AT&T is not necessarily the cause of Apple’s reduction in market share. For one, Apple is matched or bested by Android handsets in terms of ability. The Evo bests it with industry standards-based features that a closed system like iOS won’t offer, see HTC EVO 4G HDMI demo for an example. The Evo also beats the iPhone in a head to head features and functionality battle – see CNET Prizefight: iPhone 4 vs. HTC Evo 4G. I have spend ample time with both and I find the Evo superior, by far, although there are some aspects of the iPhone that I do like better.

Even if we compared the offerings solely offered on the AT&T network, the Android is easily holding its own. AT&T currently does not offer a very high end Android phone like that of those available on Sprint (Evo, Epic, etc.), but its 2nd tier Android offerings are literally taking customers away from the iPhone. Yeah, I know – Apple diehards find this hard to conceive, nonetheless believe. Well, let’s take a look at what the people had to say who bought the Samsung Captivate from AT&T instead of the iPhone. Cnet currently has over one hundred reviews with an aggregate rating of 4 out of 5 stars, or excellent. You can read all 104 comments here. I have taken the liberty of excerpting acouple…

“Fast, powerful, *great* screen, fun and easy to use”by okmft on 2010-07-17 20:35:43.0

Pros: Absolutely beautiful screen
Smooth (Touchwiz) interface
Camera works great and takes clear pictures
Solid build, yet very light and pocketable
Battery life is comparable with other smartphones including iPhone 4 (which I returned and got Captivate)

Cons: GPS had slow signal acquisition at times, even with clear view of sky
Problems syncing with MS Vista (looped into MTP mode when connected to PC)
Can’t see buttons unless screen is active
AT&T duplicates stock Android apps with their own useless apps

Summary: I stood in line and got an iPhone 4, returned it for obvious reasons (as well as a desire to use Google Voice in an integrated manner), and now am the satisfied owner of the Samsung Captivate. Overall, this is a very nice device and I am extremely pleased. Calls …


“Bottom line: amazing.” by JBeau33 on August 23, 2010

Pros: The 4 1/2″ super AMOLED 720p hd screen is awesome

The 1GHz processor feels like a desktop computer at times

Captures pics and video in crystal clear hd

All around great phone… In my opinion, it blows the iphone 4 out of the water

Cons: Having difficulty hooking up to my computer

Other than that, its a cell phone so it ain’t perfect but haven’t had much trouble as of yet


There are 102 more reviews for you to peruse if you are in doubt. I, personally, have no doubt that Apple’s distribution through other carriers will result in a spike in revenues. What I do doubt, and seriously doubt, is Apple’s ability to stem the tide of Android’s growth and market share capture by doing such. Apple is bound to get caught in a feature/usability battle, and that will impact margins. There is no way around it, now that the Android as been let out of the bag. You cannot produce and improve upon this stuff for free!

And What About That Blackberry from Research in Motion?

The Blackberry is now, officially out of the running in my opinion, both in terms of mind share and capability, and it is just a matter of time. The release of their newest hardware, the Blackberry Torch, running their newest software, the Blackberry OS 6, was a non-event. This handset/software combo, although a significant improvement upon what they were currently offering, is already behind the curve in respect to what is being offered by Apple, HTC, Motorola, Samsung, and soon even Sony (the PSP phone running Android?). It is almost guaranteed that Microsoft Phone 7 handsets will hook securely and handily into Microsoft Exchange Server, and then that happens (probably in a month), exactly what is RIMM to do? They will be losing the assault in the consumer and potentially even the enterprise markets. They do not have any other markets to fun to!

Research in Motion’s share price is agreeing with both me and my forensic analysis. See Many More Black Eyes for the Blackberry? A Complete Forensic Analysis of Research in Motion and The BoomBustBlog Multivariate Research in Motion Valuation Model: Ready for Download for more than evidence than a prudent investor needs. Or maybe a pic will do the trick…



The result of a bearish position taken as of my first warning of RIM's obsolescence. 155% ROI short the stock (20:1) and 100%+ gains ATM options. The OTM options were dirt cheap and threw off much higher gains!!! For some reason, options market makers do not see what I see.

The market sees the writing on the wall for RIMM, the question is now how far will it fall given "X" loss in market share and/or "Y" loss in margin, and more importantly… How much of a loss is too much and when will it be adequately valued?

The BoomBustBlog Multivariate Research in Motion Valuation Model (Pro & Institutional subscribers only) is an abbreviated plug and play version of our proprietary RIMM valuation model that allows you to answer those very questions using our proprietary, internal analytics.

The full Research in Motion Forensic Valuation reports are available to subscribers below (click here to subscribe or upgrade your subscription):

Later on today, after I address S&P playing catch up  to, and verifying our (what used to be) contrarian research by cutting Ireland’s rating due to being overbankd (which is exactly what we said while Ireland was being held up as the poster child for austerity success many months ago, see Many Institutions Believe Ireland To Be A Model of Austerity Implementation But the Facts Beg to Differ!), I will release the proprietary mobile OS model to subscribers and allow the public to get a sneak peak on who is trouncing who, and how. This will be the OS centric version (which will capture the potential for tablets as well as smart phones) of the dynamic handset market model (complete with data populated from Gartner, Canalyis, Nielson and other sources) that provides a very rich, in depth view off the trends in handset sales growth, market share growth, and smart phone market penetration (an aspect I never see discussed on the web) for all of the players mentioned above. It is available for download as an Excel model to BoomBustBlog professional and institutional subscribers, here: File Icon Smartphone Market Model – Blog Download Version. Those who wish to subscribe or upgrade their subscription can do so here.

More on the Creatively Destructive Pace of Technology Innovation and the Paradigm Shift known as the Mobile Computing Wars!

  1. There Is Another Paradigm Shift Coming in Technology and Media: Apple, Microsoft and Google Know its Winner Takes All
  2. The Mobile Computing and Content Wars: Part 2, the Google Response to the Paradigm Shift
  3. An Introduction to How Apple Apple Will Compete With the Google/Android Onslaught
  4. Don’t Count Microsoft Out of the Ultra-Mobile Computing Wars Just Yet
  5. This article should drive the point home: An iPhone 4 Recall Will Hurt Apple More By Opening Additional Opportunity for Android Devices Than Increased Expenses
  6. A First in the Mainstream Media: Apple’s Flagship Product Loses In a Comparison Review to HTC’s Google-Powered Phone
  7. After Getting a Glimpse of the New Windows Phone 7 Functionality, RIMM is Looking More Like a Short Play
  8. RIM Smart Phone Market Share, RIP?
  9. Android is gaining preference as the long-term choice of application developers
  10. A Glimpse of the BoomBustBlog Internal Discussion Concerning the Fate of Apple
  11. Math and the Pace of Smart Phone Innovation May Take a Byte Out of Apple’s (Short-lived?) Dominance
  12. Apple on the Margin
  13. RIM Smart Phone Market Share, RIP?
  14. Motorola, the Company That INVENTED the Cellphone is Trying to Uninvent the iPad With Android
  15. Android Now Outselling iOS? Explaining the Game of Chess That Google Plays in the Smart Phone Space
  16. There Goes Those Fancy eBook Aspirations from Apple, Barnes and Noble, and Amazon: 100,000’s of FREE eBooks from the Public Library
  17. How Google is Looking to Cut Apple’s Margin and How the Sell Side of Wall Street Will Enable This Without Sheeple Investor’s Having a Clue
  18. Empirical Evidence of Android Eating Apple!
  19. More of the Android Onslaught: Increasing Handset Revenues and Growth
  20. Many More Black Eyes for the Blackberry? A Complete Forensic Analysis of Research in Motion
  21. The BoomBustBlog Multivariate Research in Motion Valuation Model: Ready for Download

Disclosure: Short RIMM