Why I Hope the Rumors of a Surface All-in-One Come True – by Carolina Milanesi
The Verge this week published an article suggesting Microsoft is prepping to launch three Surface-branded all-in-ones (AiO) as well as an update to the Surface Book.
Launching Surface-branded AiOs now might seem out of place, considering everybody is talking about mobility and, in notebooks, thinner and lighter has been the anthem for years. Yet, when we look at what Surface devices usually deliver in terms of experience and specs, a Surface AIO device would have a role to play in both the enterprise and consumer segments.
In the enterprise market, these new additions would do two things. First, they would address some specific business verticals or locations where all-in-ones seem to be the preferred form factor: business receptions, higher-end kiosk locations, hospitality, etc. Most importantly, however, it will continue to add credibility to Microsoft as a committed hardware and solution supplier for enterprises as it builds a fuller portfolio of products.
It is, however, in the consumer segment where I see more opportunity. As mobility continues to take over, we see users replacing existing desktops with notebooks and, less so for now, two-in-ones. Some add to their current desktops with lighter and smaller notebooks and tablets. With these devices, users often put mobility over performance and screen real estate, making these devices not ideal for more serious gaming and content consumption.
With on-demand TV consumption growing, an AiO would function as an additional screen in the home. More importantly though, the current need for VR headsets to have a powerful PC to control them might also help drive AiOs. For Microsoft, a Surface AiO in the family or living room will also add another entry point for Cortana so she can become the family assistant of choice.
If Microsoft remains serious about hardware, the Surface family can only grow so users who appreciate the attention to detail in both design and specs can start building a portfolio of products that delivers on the Microsoft services and experience side in a similar way users do in the Apple camp. This is usually easier to do when the offering falls in the high-end of the market which is exactly where Surface has been playing thus far.
Kantar: iOS Returns to growth in the US and EU5 – by Carolina Milanesi
On Wednesday. Kantar released their OS market share for 2Q16 and, while the report focused on the return to growth of iOS in the US and EU, I think the interesting dataset is how well the iPhone SE is performing.
We heard during the latest Apple earnings call how they had initially underestimated demand but now production has caught up and they are able to fulfill orders. If you look at the numbers Kantar released, you can see how strong the SE is performing, even in the US:
“The iPhone SE became the third best-selling phone at 5.1%, contributing to the overall growth of iOS during the period.”
More evidence of the iPhone SE success is to be found in Europe — specifically GB where Apple accounted for 37% of sales in 2Q16:
“In Great Britain, the iPhone SE was the top selling device in the quarter at 9.2%, followed by the iPhone 6s at 9.1%.”
Let’s be clear. This is not just for the love of the smaller screen. Yes, many are upgrading from previous models with smaller screens but only some of these did not want to give up that particular feature. Many, however, have been holding on to what they had because they did not want to spend more money on the new models. 49% of US iPhone owners, according to Kantar, still own an iPhone 5s or older. The second source of buyers, and one Apple was eager to highlight during earnings, is represented by brand new iOS buyers.
They are clearly not early adopters. Some of them are upgrading from feature phones but most are switching from Android where larger screens have been available for much longer than on iOS. It would be safe to conclude that, while screen size may play a role in the buying decision, it is more likely the real driver was price.
As the iPhone SE base grows, Kantar should be able to share more data on the split between upgraders and new buyers. Ultimately, both groups are good for Apple as they serve different purposes. The upgrade to the SE guarantees the installed base of users is more future proof when it comes to services such as Apple Pay, while new buyers expand the installed base, keeping it appealing to developers as well as content and service providers.
Intel Purchases AI Chip Vendor – By Bob O’Donnell
The quest for influence and control in the burgeoning fields of artificial intelligence, machine learning and deep learning took another turn this past week as semiconductor giant Intel purchased Nervana Systems. Started by ex-Qualcomm employees, Nervana Systems has been working on a dedicated deep learning accelerator chip, along with software and development tools, to enable the creation of software that will run on their unique architecture.
Intel’s purchase of the company reflects their interest in dramatically speeding up their efforts in deep learning, no doubt in part from the near-term competitive threat from nVidia. Longer term, this looks to be a very strategic purchase for Intel as it gives them access to some key IP and expertise around these AI-driven technologies.
Deep learning, and convolutional neural networks in particular, are expected to have an important and long-term impact on overall computing trends, so most major vendors have made efforts to increase their relevance and capabilities in these areas. It’s particularly valuable for Intel because the company has the scale and manufacturing expertise to leverage this IP for both standalone chips initially and eventually, as a core computing block they could embed into future processors and other chips. This will allow Intel to bring deep learning capabilities to servers in the short term and client devices longer term.
In addition, Intel can manufacture the chips themselves and, if they prove to be popular enough, this could help keep their production lines running closer to capacity, which helps them keep their overall manufacturing costs down.
Of course, it remains to be seen how well Intel can integrate the Nervana Systems’ personnel and technology into their own. In particular, there are questions about whether or not the Nervana Systems IP can (or should) be implemented alongside x86 IP but the promise and potential of the deal makes it look very appealing at first glance.
A number of other startups are also working on deep learning accelerators, so there are also questions from a competitive technology basis about how the Nervana Systems IP will stack up longer term. However, given Intel’s financial strength and their desire to continue driving computing platforms in the data center and for client devices, it’s a safe bet to say Intel will work hard to remain relevant.
Walmart acquires Jet.com – by Jan Dawson
Arguably, the biggest tech news this week was Walmart’s proposed acquisition of startup online retailer Jet.com for $3 billion in cash and around $300 million in stock. This is the first really sizable e-commerce deal since Amazon acquired Zappos in 2009 for what ended up being around $1.2 billion. It goes somewhat against a recent trend of smaller online retailers either going out of business or being sold off at downgraded valuations.
The logic behind the deal is fairly obvious. Walmart, the world’s largest retailer, has nevertheless struggled to grow its e-commerce business at anything more than a fairly anemic rate and badly needs help. Jet.com, meanwhile, has grown rapidly but is likely not yet profitable and needs a financial cushion while it scales its operations. Walmart’s scale, distribution, and, perhaps most importantly, pricing leverage can all help Jet significantly. Amazon is the obvious target here, as the largest pure-play online retailer and the company that’s capturing the vast majority of the overall growth in e-commerce in the US. And yet, it will likely take some time for Walmart and Jet to make any kind of meaningful impact on Amazon.
Amazon’s shadow looms over the entire e-commerce marketplace. In essence, Amazon has cracked the e-commerce model for the US and a number of other markets by building a massive distribution infrastructure and selling Prime subscriptions, which create strong incentives for people to concentrate their online spending on Amazon. Jet and others have tried to innovate in their own ways (Jet’s focus has been on bulk buying) but none of these alternative models really seems to have worked. Scale continues to be enormously important and this is where Walmart might well help Jet quite a bit. I wouldn’t be surprised if the more unique elements of Jet’s business model fade away over time in favor of a purer e-commerce play.
While Jet’s technology and user interface are clearly a large part of what Walmart is paying for, I suspect it will also benefit from having an innovative startup culture somewhat separate from the rest of the company. Walmart would do well to give the Jet team considerable independence and space to keep doing what they’re doing, as this team is more likely than the core online team at Walmart to be truly innovative and drive real change in e-commerce. That could end up being very valuable in its own right.
Should Amazon be worried? Not yet, certainly. But I’m very curious to see if Walmart can marry its massive scale and distribution operations with Jet’s user interface, technology, and innovation without squashing it. If it can, this deal might just pay off.