News – Tech.pinions

AT&T Without T-Mobile: Whither Wireless?

We now know what the U.S. wireless landscape will not look like in a couple of years. The filing of U.S. v. AT&T effectively ends AT&T’s dream, tacitly shared by Verizon Wireless, of a wireless duopoly with a troubled Sprint maybe hanging on.

Of course, AT&T made the obligatory noises about fighting on to win approval of its acquisition of T-Mobile USA, but this deal is as good as dead. It is possible for an acquisition to go through over government objections–Oracle-PeopleSoft is an example, but it is very rare. The deal has to be kept on ice for months or years while the legal battles are fought out. The Justice Dept. complaint makes it clear that it would be very difficult to modify the deal in a way that made it acceptable to the government. And even if it were to prevail over the Justice Dept., AT&T would still have to win approval, on the basis of different laws and criteria, from a very skeptical Federal Communications Commission.

That leaves us with the status quo: Two national mega-carriers in Verizon and AT&T, two much smaller national carriers in T-Mobile and Sprint, and an assortment of much, much smaller regional wireless companies.

T-Mobile and Sprint, however, have exactly the same problems that threatened their viability before the AT&T deal was announced. T-Mobile has been a feisty competitor, a fact that helped persuade Justice to move to block the merger. But T-Mo’s coverage is spotty in many parts of the country, it’s 3G service is incompatible with anyone else’s (that why an unlocked iPhone can only get EDGE service on the T-Mo network), and it lacks any clear path to 4G.

Sprint has big problems of its own. After six years, it still hasn’t fully digested the purchase of Nextel and faces challenges in migrating the remaining Nextel iDEN customers to CDMA/EV-DO technology. Sprint’s 4G strategy is also murky. It owns a majority interest in Clearwire, which owns a big swath of national 4G spectrum, but which made a bad technology bet on WiMax. Sprint currently provides 4G service over the Clearwire network and is expected announce its strategy at an event in early October. The government move against AT&T probably makes it more likely that Sprint will buy the rest of Clearwire and accelerate its migration of 4G technology from WiMax to the LTE standard used by Verizon and AT&T (and most other carriers in the industrialized world.)

Would a combination of Sprint and T-Mobile be better equipped to challenge Verizon and AT&T than two relatively weak competitors? Superficially, this makes sense, but there are tremendous difficulties in the way of such a deal happening, or succeeding if it were to happen. Sprint has relatively little cash, a lot of debt, and is deeply entangled in Clearwire.

Sprint would probably have to raise the financing to buy T-Mobile outright. Because it is a subsidiary of Deutsche Telekom, there is no possibility of a merger of equals. In theory, a merged company could be operated as a partnership between Sprint Nextel and DT (as Verizon Wireless is a partnership between Verizon Communications and Vodafone) but T-Mo’s German parent has shown no interest in doubling down in the U.S. market.

A T-mo-Sprint combination would also be a technological nightmare. Sprint operates a CDMA network with EV-DO 3G data, all at 1900 MHz and Clearwire 4G at 2500 MHz. T-Mo provides GSM and EDGE service at 1900 Mhz and 3G UMTS at 1700 and 2100 MHz. There’s no compatibility anywhere and no existing devices that will run properly on both networks. Given its painful technology integration experience with Nextel, Sprint may be particularly reluctant to wade into another swamp.

So it looks like the status quo will be with us for a while. Let’s hope that the Justice Dept.’s belief that this competitive landscape will be better for consumers than a T-Mobile-AT&T merger turns out to be correct.

Here’s a Ridiculous Idea-Split Apple in Two

I saw a story earlier today that said that some on Wall Street have suggested that Apple should split their business in two- A Mac business and the more profitable iOS business.

I normally don’t criticize my brethren on Wall Street but I have to say that this is a very dumb idea and shows that some of them still don’t get Apple. Apple is growing because they have created a growth engine around their total ecosystem of hardware, software and services. And the devices, whether it is the Mac, iPod, iPhone or iPad, are elegant screens that are designed to tap into the rich set of apps and services and soon to be cloud synchronization that ties them all together.

Now, I kind of get their original thought, which is that the iOS business should stand on its own and the Mac business should not be allowed to impact the higher growth to their total bottom line. I am sure some are thinking about HP’s move to sell or spin out their PC business as their example. But this misses the beauty of Apple’s ecosystem and integrated device strategy. Yes, the PC market as we know it is not growing much anymore, but PC’s are not going away. Indeed, they will still be the workhorses in business, education and even in the home where they will be needed to do what I call heavy lifting tasks such as managing your music and video collection, handling personal finances and using it for long form documents and email, etc.

And in the Mac’s case, there is a huge audience for its rich OS, especially in graphics and marketing departments, Hollywood and for certain engineering tasks. More importantly, I believe that Apple still has some mind blowing products in both desktop and laptops in their bag of tricks-products that will drive even more users to the Mac platform. And if that is not enough, keep in mind that the Mac taps into all of Apple’s compete ecosystems of software and services. Once people really understand how iCloud works with the Macs and iOS based devices, they will see the folly of the suggestion of splitting Apple in two.

This is also why I believe they will not merge the Mac OS And iOS together anytime soon. Apple is very proud of the Mac OS and will continue to make it more powerful for those who need it. At the same time, iOS will become more powerful as well, but for use in the more consumer oriented devices in their line. iCloud will be the way they are all tied together in the end.

So Wall Street, get this idea out of your head. Apple won’t split the company in two and never will. They really do know what they are doing and how their entire line of hardware, software and services will work together under a single Apple company.

They have made a lot of money for their stockholders and will continue to do so with this integrated approach to making all of their products easy to use and work together as part of Apple, Inc.

What Does the TouchPad Fire Sale Tell Us? Not Much.

Way too much is being made of the success of Hewlett-Packard’s fire sale of TouchPad tablet, essentially the liquidation of a lot of distressed inventory.For example, this The Next Web article speculates on what TouchPad sales might mean for Amazon’s still completely notional tablet.

First, let’s put the TouchPad “frenzy” in some perspective. HP, directly and through channel partners, probably moved somewhere between 300,000 and 500,000 units. By past TouchPad standards that was fabulous. But Apple is likely selling close to a million iPads a week, at full price, every week.

Second, it’s pretty easy to get people to buy a product with a $300 bill of materials (iSuppli’s estimate for the TouchPad) for $99, even a dying product. Folks just can’t resist a deep-discount bargain. The problem is there’s no business model that will sustain it for much more than a weekend. Only wireless phone operators, with lucrative two-year contracts, can afford to offer that much subsidy. Amazon might be able to subsidize a tablet, but by nowhere near that much unless it was very, very selective about who got one.

There are lots of retail liquidators around who know how to move distressed goods of much more dubious value than a TouchPad. All you need is a channel and a low enough price. We shouldn’t read a lot of meaning into this.

What If Apple Puts A-Series Processors in MacBooks?

Apple Insider posted a bit of news around the rumor that someday Apple may use its own A-Series chips in products like the MacBook Air and MacBook Pro. When Apple made the move to design their own ARM processor by acquiring P.A Semi and Intrinsity it became clear that using their own processors in all their products made perfect sense.

Apple wants to control all the critical elements of the value chain. For smart phones and tablets it’s clear that Apple wants to control the semiconductor in those products so it can highly optimize iOS for a proprietary SOC. The interesting question is if they want to do the same for OSX in the future.

Apple has no control over the architecture decisions that Intel makes, nor do they control the timeline of those decisions. One could see how future MacBook products could benefit if Apple specifically designed A-Series chips to run OSX. The optimizations they could make for efficiently running OSX could make the OS that much better and that much harder to compete with.

In this scenario Apple unlike Intel doesn’t need to try and make a processor that can run any and all software and operating systems. In fact they don’t even really need to follow Moore’s law in their designs like Intel and AMD. All Apple needs to do is design the most effective piece of silicon to run OSX.

You may think they could never do something like this because of all the software for OSX now running on Intel silicon. That is true but if you remember they made the move from the G5 to Intel and it was fairly smooth. Their developer toolkits and their virtualization software Rosetta could be key pieces in making a smooth transition to their own silicon.

The real question in all of this however is where would that leave Intel if Apple ever stopped using them as a supplier?

My Advice to HP: Give All the TouchPad’s Away

Shock and Bewilderment swept the industry as well as the tech journalism and blogger community yesterday. HP announced that they are not just looking to spin off their PC business but that they are also discontinuing all webOS hardware which included the HP TouchPad.

It was fascinating to watch the twitter stream of people commenting when the news hit about the HP spinnoff. Shortly after the initial shock of the news the big question got raised: What does this mean for webOS?

During the aftenoon we came to find out that although HP is discontinuing all webOS hardware operations, they are still commited to the software. If this is true, then I contend that they should give away all the TouchPads left at retail for free. They should at least HEAVILY discount them. Maybe let Best Buy do a special promotion where if you spend more than $200 dollars you get a TouchPad for free. Perhaps run a promo where if you buy HP products like specific printers, notebooks or desktop you get a TouchPad for free.

The reason is because if HP is commited to still supporting webOS it will only live on now by way of license. However no one will want to license it if there is no software ecosystem or apps surrounding webOS. There will be no software ecosystem or apps developed if there are no devices on the market for developers to write apps for.

This is why HP should just give them all away – all 400,000 sitting in a store house. They are already writing off this hardware so why not get it into the market any way possible.

Consumers are simply not going to buy them now because with this news will also come a lack of consumer trust in HP and the TouchPad. However people will accept one that is free just to try it and if they don’t like it they can give it to a friend or loved one. This move would also create a positive image for HP in light of the hit they are most likely taking.

The bottom line is doing this would create a market for webOS software developers to create apps for. My sense tells me consumers would actually be quite impressed with the TouchPad once they got it in their home and maybe would even spread the word about how great webOS is to their friends.

The bottom line is HP needs to move that hardware. Consumers won’t buy them or invest in webOS because it is risky and unknown. Give them all away. There is no downside to the consumer and I would argue only upside for all parties involved.

So to HP’s management-Give them away and make it easier for whoever buys it or licneses it to have a built in installed base of users to build on. I know this sounds bold and risky but that is exactly what you need right now.

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Why iPhone Competitors Should Release Less Products

The Next Web asks an interesting question in this article titled “As Apple’s smartphone sales boom, should its rivals release fewer handsets?”

As I pointed out in my article “Why it matters that Apple is the number 1 smart phone maker,” Apple only needs one product each year to dominate the smart phone market. They are the only company that takes this approach. Every other smart phone manufacturer releases a plethora of handsets each year, many of them based on Android.

Arguably this massive amount of handset choice is one of the leading reasons Android has such a large market share. The interesting question TNW brings up is whether or not Apple’s strategy of one handset each year is a better strategy for each manufacturer.

For Apple they focus all their research, design, engineering, hardware, software, and services teams on just one product. The result is the single best selling handset year after year.

There are rumors that Apple may fragment the iPhone line and offer different priced options but for that we will have to wait and see. Even if Apple did that it would still be the iPhone brand.

The challenge Android has, which TNW brings up, is the Android brand – more specifically the Droid brand. This brand did wonders for Android in the very beginning as Motorola and Verizon spent millions of dollars marketing the Droid brand. Now however it is unclear to the end consumer what devices are “Droids” and which ones aren’t.

On top of the Droid brand we have manufacturers launching products with random names all the time. The Bionic, Sensation, Revoluion, Captivate, Status, Thrill, Photon, Triumph, and XPRT to name a few of the most recent. You have to be a gadget freak or gadget blogger to know what the difference between all those devices I just listed are and those are only half of the Android devices released since January of this year.

Putting yourself in the consumers shoes and trying to research and make a decision on which Android phone to buy could be daunting. I pointed out in a column I wrote for SlashGear earlier in the year that too much choice can be paralyzing for many consumers.

This is why the iPhone strategy has been so brilliant. It simplifies the decision making progress but is also arguably the best handset on the market as evidenced by huge sales. Apple’s less complicated product strategy and laser focus on making THE best handset is paying off.

The biggest benefit I can see for iPhone competitors to release less handsets each year would be that those competitors could pour more resources into fewer designs. The result I would assume would be better smart phones.

Personally I would love to see what a company like HTC, Motorola or Samsung could do if they poured all of their resources into one single device to try and take on the iPhone.

The problem is I don’t think they will do it.

Apple and its Non-Acquisitions

Over at Technologizer, Harry McCracken has an excellent rundown on the long history of rumored acquisitions by Apple that never came to pass. Some of these hypothetical deals made at least superficial sense, most didn’t.

Here’s one test to apply to any talk of an Apple deal: Margin dilution. When financial analysts talk of dilution, they are referring to how the costs of an acquisition will reduce the equity of existing shareholders. Apple’s enormous market cap means that is rarely going to be a huge problem, but a company like Apple is going to be very wary of any acquisition that would seriously erode its very healthy profit margins.

That’s one overwhelming reason why Apple would be very unlikely to give more than about 10 second’s’ consideration to the rumored purchase of Barnes & Noble. On the roughest sort of pro forma calculation, an Apple-Barnes & Noble merger would have reduced Apple’s profit margin in the most recent fiscal year from 23.5% to 21.9%. At most companies, a point and a half of margin is something to kill for. Since B&N offers no technology that Apple wants (strategic investments can be viewed through a different lens than purely financial ones) and would saddle Apple with a great deal of real estate that it has no use for, the deal makes no sense on any level.

A Sure Sign of Real Trouble at RIM

The senior Research In Motion executive who chose to vent his (or her) frustration in a open letter to Boy Genius Report may not have chosen the most graceful way to make those views known. But the writer may well have exhausted other means of communications. Certainly, RIM’s response suggests strongly that the increasingly troubled company’s leadership still isn’t hearing what it needs to hear.

The fact is that the open letter was an accurate analysis of the challenges facing RIM and was full of generally very good advice. The response is dismissive and described RIM’s current situation as a time when it is “necessary for the company to streamline its operations in order to allow it to grow its business profitably while pursuing newer strategic opportunities” after “a period of hyper growth.”

Streamlining and, above all, focus is exactly what the letter writer argued for. Mike Lazaridis and Jim Balsillie should give it another read with more open minds.