Author: Tim Bajarin

Tim Bajarin is the President of Creative Strategies, Inc. He is recognized as one of the leading industry consultants, analysts and futurists covering the field of personal computers and consumer technology. Mr. Bajarin has been with Creative Strategies since 1981 and has served as a consultant to most of the leading hardware and software vendors in the industry including IBM, Apple, Xerox, Compaq, Dell, AT&T, Microsoft, Polaroid, Lotus, Epson, Toshiba and numerous others.

The New iPad: Setting the Stage for Innovation

This morning Apple introduced a new iPad and with it has raised the bar for anyone creating a competitive tablet. The iPad, with its new Retina display that delivers 2048 X 1536 resolution, is clearly the highest definition tablet on the market. More importantly, as Apple pointed out, the work to create this type of HD quality experience on a tablet took many years of effort and tight integration with their new chip, which will make it very hard for competitors to match anytime soon.

Apple has punched up the power of the new iPad with a custom version of their ARM processor called the A5x, which is a quadcore chip designed specifically to boost any image or video displayed on their new Retina screen. One only has to view the new iPad against an older iPad 1 or 2 to see the major differences between the products. And it is even more pronounced when you view it next to an Amazon Kindle Fire or any of the other tablets on the market with standard definition displays.

With the new iPad display, there is no pixilation whatsoever on pictures and video and text in books is sharper then ones in any real book outside of those designed with high res text and images. And saturation of images and video are 44% greater then on the older model iPads.

Apple also adds a new 5-megapixel camera that takes video in HD, has a much larger sensor then in past iPads and has a 5-element lens with backside illumination and an IR filter that gives amazing color and white balance. And a new dictation feature is now added to the keyboard making it easy to dictate words into a document quite accurately and easily.

As expected, the new iPad also has an LTE option. It includes radios that cover EVDO (Verizon) HSPA GSM, HSPA+, DC-HSPA and LTE, which make’s it a world capable communications tool out of the box. And it will have the same battery life as iPads in the past. 10 hours for continuous use without LTE radio and 9 hours with.

Prices are the same as on the older models, although Apple will now offer a 16-gig version of the iPad 2 for $399, a new price point for iPads and one that will make it available to a broader audience. And the design is about the same so it will work with most cases and peripherals without any changes.

They are also introducing new apps from iPhoto to an updated iLife and an updated version of iMovie that allows for much finer creation tools to new ways to edit and distribute your movies via iCloud. And while all apps work with the new Retina display well, software developers can enhance their apps for even greater resolution to make them optimized for this new display. Software is clearly the key differentiator. The iPhoto demonstration alone will wow consumers and highlights the power of touch computing.

All of this new technology integrated into the new iPad will have a major impact on the market for tablets. From now on, this iPad will be the standard all other tablets will be compared to. And with it should come an even greater opportunity for Apple to pad their lead in tablets.

Of course, we expect that other tablet vendors will try and match Apple with higher resolution displays later this year. But if what Apple says is correct, their integration of both this custom display optimized for this new processor could make it hard for the competition to directly catch up anytime soon.

I view Apple’s new iPad as a major advancement in tablet design and one that will have a major impact on the market for tablets. In business, the need for higher resolution tablets has always been strong, especially in vertical markets like medical, engineering, and even ones where handling a lot of data for viewing is important. At the very least, the new iPad should have even greater interest in the enterprise where Apple is already making major inroads. And consumers who watch movies and view their pictures on tablets will really be drawn to this HD experience, as the quality of their content will be the best on a new iPad.

Although there will always be a market for lower cost tablets, with the new iPad Apple has introduced a new measurement to the decision process for users at any level. And this will cause some challenges for buyers this holiday season as I doubt that any competitor can even come close to having something competitive by then.

That should give Apple a significant edge going into this holiday, as the iPad will clearly be the best tablet available bar none.

One more thing:

Apple also introduced a new version of Apple TV. While many had hoped that Apple would introduce an actual TV, that was not in the cards. What Apple did release is a new version of Apple TV with a new UI and more importantly, support for 1080P HD content. This is a big advance and one that current Apple TV users have been asking for. The price stays the same at $99 and the new software includes the Genius function and a completely new UI making it much easier to find content and display it. This should also be a hot product going into the holidays as more and more people are opting for products like Apple TV and the Roku box to handle their on demand TV experiences and movie viewing and the new Apple TV should be a big hit for Apple.

Related Columns:

The New iPad: Leaving the Competition Behind
The New iPad Display and the End of Paper

 

Why the TV Industry is Vulnerable To Apple

In 1992, while I was overseeing the largest multimedia computing show in NYC for a large publishing group, I was asked to meet with Sr. Executives of one of the major TV networks. In my opening comments at this show, I had mentioned that I thought that one of the major benefits of things like delivering expanded media content on a CD Disc would be to eventually launch an era of content on demand. And one of the examples I gave was that I could see someday when people would be able to call up a TV show on demand and view it at will.

Now, remember that this was before the Internet and few were even thinking about new forms of media distribution. In fact, everything we were discussing at the show was very PC centric. But one of my jobs is to look at technology and visualize its impact over a period of time and try and figure out how it could eventually impact consumers.

It turned out that since this event was in NYC, a lot of TV executives attended this show and consequently I was invited to meet with some execs at one of the major networks to explain my thinking about content on demand. As I spoke to these executives, it became clear to me that while they were interested in the future, they did not want to embrace anything that would disrupt their current business model. The idea of giving customers more of what they wanted through an “on-demand” format was taboo and if it did not increase the quarterly bottom line, they wanted no part of it.

However, to their credit, they saw that what I shared was worth thinking about and they soon created an executive position that was called something like VP of Digital Content. It was so long ago I can’t remember that exact title of the job description but this person was chartered to find out about the digital world and recommend how this company could or should deal with its potential impact on their business. So for the next three months I got quite an introduction to the TV business and its business models and more importantly, how risk averse they were and how much they feared change.

Looking back over the last 20 years, and thinking about that assignment in 1992 and how different the world of TV is today, I am actually amazed at how much progress the television industry has made. But to get where they are today in which each of the networks use the Internet to deliver some of their top shows, they had to understand that the Internet is just a medium for delivering their content. And that consumer’s will continue to want these shows on demand, anytime and anywhere they happen to be.

But to be clear, while they are starting to embrace the Internet as a vehicle for distribution, they are doing so reluctantly. If they had their way, they would keep total control of this distribution for themselves and drive their viewers only to their dedicated sites for viewing their shows. But the Internet has forced them to open up a bit and little by little they are doling out their top shows to dedicated partners who they trust to help them keep some semblance of control so that they can maximize their earning potential and if possible try to keep their customers within their network family as much as they can.

However, in this world of digital content, they are now realizing that while they ruled the roost in the world of broadcast television, they are just another channel among thousands of channels that consumers can choose from for viewing video content. But what they don’t seem to get is that in this world of digital, they will need new distribution partners and that they will not have as much control over them as in the past. And I also don’t think they really understand the idea that people want to have access to that content anytime, anywhere and on any device they own.

Enter Apple

Now enter Apple, who if the rumors are to believed, has been calling on the executives of all the networks and trying to cut deals with them for Apple’s new TV initiatives. And I am hearing that they are resisting Apple’s partnership offers as Apple wants to pay them next to nothing to carry this content and they fear that Apple will do to them what they did to the music industry in which Apple pays a minimal fee to the artists compared to what the artist might have gotten with their labels in the past.

Now, I don’t know what type of deal Apple is offering the networks, if any at all. But I do know one thing. Apple could become one of the most powerful video network distribution companies in the future and to not embrace what Apple is doing could be very painful for them. The reason is simple economics. While we don’t know exactly what Apple is doing in this area of video distribution yet, we have their history to look at for some clues. For example, when they initially introduced the iPod and the iTunes store, they opened the door for music artists to have millions of potential customers. But over a ten year period, Apple made it possible for that music to be played on iPods, iPhones, and iPads and to date, have sold over 350 million iOS devices in which music artists can sell to just through Apples own music distribution vehicle. Add a base of 40 million Mac users and in total there are over 140 million Apple devices tied to the iTunes distribution medium.

Now enter Apple TV. While many people think of this idea of being a physical TV, they miss the real point of what I believe Apple is doing. At the core, I believe they are moving towards becoming a powerful distribution network for video. And while I do think they will have a cool TV someday in their product mix, the reality is that every iOS device and every Mac will become an “Apple TV.” That means that for these networks, and any other of their video channel partners, Apple will deliver to them well over 140 million potential customers immediately once their TV distribution network gets turned on. And given Apple’s history you can expect that the Apple TV experience, whatever form it takes, will be elegant, easy to use and perhaps even revolutionary in the way people use their services across devices.

The mistake the networks could make is to not see Apple as this massive vehicle for distributing their content and instead see them as having to be their partner for making money and relying on Apple for high margin revenue. That is the business model of the past. The new business model that I believe will emerge is to find ways to get eyeballs to view the content and then get creative in the way they make money on that property. Of course, they could tie some advertising to it, but they could also offer games tied to the content, sell merchandise tied to the content, and give special prizes tied to the content, etc. Instead of resisting Apple, or perhaps Google or Amazon who I believe will create similar video distribution networks, they need to embrace them as vehicles to get their content in front of these eyeballs and find creative ways to keep their customers coming back and mining new ways to get revenue from their digital customers.

Apple is going to become one of the most powerful video distribution networks by nature of their existing customer base and one that is added to continually. They have sold 50 million iPads so far and will sell at least another 50 million this year, turning every one of them into an “Apple TV.” I know the networks would like to keep control of their distribution, but in the world of digital, those days are gone. The sooner the networks understand this and see things like Apple’s new distribution vehicle as a critical way to get their content to the masses quickly, the sooner they can adapt to and fine tune a new business models to take advantage of this new era of on demand, anytime, anywhere and on any device video content world.

Why Google Must Commit To Hardware

With the Nexus One and their recent purchase of Motorola, Google has more then signaled that they will soon be in the hardware business in a big way. And the recent rumors that they are building a 120,000 square foot consumer experience testing center on their campus suggest that they will test their own hardware along with partners products in order to create and deliver devices that are truly optimized for their Android and Chrome software.

This move is of course controversial since it means that they will be in direct competition with their customers and partners who back Android and Chrome. However, I don’t think Google has any choice but to go in this direction if they have any hope of gaining ground on Apple and try to stave off an imminent threat from Microsoft via their Windows 8 cross-device Metro strategy.

One of the facts that is becoming very clear to the industry at large is that Apple’s lead in hardware, software and services is a mammoth one. They are selling over 5 million Macs per quarter. The iPhone continues to be a hot product and while Android has gained much ground in units shipped against the iPhone, Apple is taking as much as 74% of all the profit in this space. And the iPad holds well over 80% of the tablet market share and this will be the case through this year too. And many of my research colleagues predict that even in 2015, Apple will have at least 60% of the tablet market.

But the key to Apple’s success is no secret. They are where they are because they own the hardware, software and services and combined they give Apple a significant advantage over their competitors. And while that too is no secret, what is not understood well by the outside world is that they architect their devices around their services. The best example of this is with the iPod. While the hardware itself is the profit center for Apple, it was the music service that was the critical component that made the iPod take off. From a hardware perspective, they architected it around the music service, which means they designed the iPod software, user interface and hardware dials so that they were optimized to deliver a great portable music experience.

The same goes for the iPhone and the iPad. It is the services that drive the final UI and hardware designs and since Apple controls the entire eco-system, they can be assured that they deliver to their customers a unified and easy to use experience with their products.

Now consider the plight of the middleware software vendors like Google and Microsoft. What they bring to the party is a critical component of any final product via the OS. But both companies architect from the inside out, or only at the software level and then hand this off to their vendor partners who must now design their hardware around the software and hope the design can be optimized for the OS they have been handed. And from Google and Microsoft’s standpoint, they can only influence and hope so much that their hardware vendors will get it right.

Historically speaking, Microsoft has done the best job of creating strict technical guidelines that hardware vendors can follow, but Google’s approach to Android design is pretty much a moving target. Vendors have told me of all kinds of problems they have had getting strict hardware guidelines from Google for building Android devices.

Microsoft’s model worked for PC’s. But I don’t think this model will continue to work with this new world of mobile devices. What seems to be happening now is that in both the Windows and Android camps, controlling how the hardware vendors use these operating systems is much more difficult as hardware vendors strive to try and differentiate themselves in the market place. In many cases that mean’s hardware and software UI tweaks that go beyond what these companies give them in the way of an OS which then potentially delivers various forms of fragmentation.

At some point, not controlling the entire hardware, software and services delivers diminishing returns to both of them and sooner or later they will find that the old PC model of creating an OS and giving it to vendors to propagate will not work. In fact, I am seeing that understanding starting to become clear to both Google and Microsoft as they stare up at Apple running away with all of the profits. Apple’s model works. Using the old PC model will not work in this new world of mobile devices.

This is why we are seeing so much hardware activity at Google and I expect to see similar branded hardware strategies evolve at Microsoft very soon. While they can hope that their partners can utilize their software to create great hardware and services, at some point they have to realize that putting their trust in their vendor partners to deliver their vision is a crapshoot.

Indeed, they may only have a real chance to catch Apple if they take control of the hardware, software and services and the sooner they realize this, the sooner they can control their individual destiny’s.

The New Microsoft and Apple OS Wars–Game On

After years of lagging behind Apple in terms of innovating around their user interfaces on both their smartphones and Windows, Microsoft finally took a big step towards competing with Apple head on last year with the introduction of their new Metro UI. Introduced first on Windows Phone 7, this new Touch UI, which uses a tiling metaphor to deliver a more graphical way of dealing with data, is also coming to Windows 8 this fall and in essence, will finally unify the way people interact with Windows based software across smartphones, tablets, laptops and desktops in the future. And while touch is critical to smartphone navigation, Windows 8 is also built around a touch UI that, especially on tablets, will be key to navigation and input on all Windows based devices soon.

Of course, this move is basically copying what Apple has been doing for over five years with their iOS strategy in which they use the same OS, UI and touch architecture on iPods, iPhone and iPads. And while direct screen touch is not built into OS X, Apple has gone to great pains to create a touchpad experience that very much emulates these same touch movements on all MacBooks and with an external touch pad for iMacs. And with the recent introduction of OS X Mountain Lion, they now add much of the great features only available on iOS devices to the Mac as well.

What’s interesting about these developments is that in some ways, history is repeating itself. In 1984, Apple brought to market the Mac and introduced the world to graphical user interfaces and the mouse. It took Microsoft a couple of years and some real false starts until they finally got their own GUI right on Windows 95 and continued to ride this new OS and GUI into further PC domination. And during this period Apple had major changes in management and inconsistent strategies that played perfectly into Microsoft’s hands and Microsoft grew exponentially without any real competition.

But when Steve Jobs came back to Apple in 1997 and began crafting a strategy in which Apple would begin to drive the market beyond the PC and launch the post PC era, Apple soon emerged as the real powerhouse in the world of technology. Starting with the iPod and then with the iPhone, Apple saw their fortunes change from an also ran to the lead horse that is mining most of the industry profit today and is now the most valuable company on the planet. Now Microsoft and other competitors are playing catch up again.

From Microsoft and their partners point of view, they are really hoping that history literally repeats itself. Just as Windows was used to bypass Apple in the past, they are “praying” that Windows 8, with its ability to deliver a similar OS and touch UI experience across multiple devices can revive their fortunes and make them relevant again.

Related Column: Dear Industry History Will Not Repeat Itself

But this is a very tall order this time around. Apple’s lead with iOS and OS X, along with their stellar offering of products that use these operating systems is very large. And while Microsoft’s OS seems to be a solid offering, unlike Apple who owns the hardware, software and services aspect of their eco-system, Microsoft has to hope that their software developers, hardware partners and potential service providers can gel and execute in a way that allows them to actually gain ground on Apple. And, they can’t afford to have any missteps. While Windows on Intel X86 chips seems solid, their move to put Windows on ARM is only in its early stages and its success on this new processor platforms, which includes the need to have software written specifically for these chips, is not assured.

Also keep in mind that, while Microsoft and partners are scrambling to play catch up, they have no idea what else Apple has up their sleeves in the way of new hardware, software enhancements and services. If Apple continues to innovate and stay at least two years ahead of the competition, Microsoft and friends may always be playing catch up for the foreseeable future. And this time around, Microsoft will also have to compete with Google and the Android crowd and Google’s Chrome OS that is destined for the desktop. And with HTML 5 emerging as the future of software development and Web Apps becoming the means of delivering applications, Microsoft this time around has their hands full keeping up with a market that is moving much faster then it did in the past.

But now that the Windows crowd finally has an OS, UI and a strategy that is actually designed to compete with Apple, Microsoft and their partners can now look towards what they hope is a promising future and like in the past, are telling Apple that the game is back on.

Why Amazon Will Create Brick and Mortar Retail Stores

Over the years, in my various discussions with Steve Jobs about Apple and their products, there was one theme that always came out when we discussed any of his product designs; they had to be easy to use. In fact, he was the consummate customer of Apple products. If he deemed them not “easy-to-use” then it was back to the drawing boards until they were.

But while this was at the heart of his designs, he also knew that easy to use was actually a relative term and that in the end, there are a lot of variables around the technology people use that determined if they were easy for “them” to use or not. So when Apple was creating the Apple stores, they made sure that they did not just create a place where people can come and buy an Apple product. Indeed, an Apple store, with its extremely knowledgeable sales staff and their genius bars are just as critical to the success of Apple’s stores.

What Jobs and team fundamentally understood is that for those who use technology every day in the office, their ability to use a Mac and Apple’s products are intuitive enough for them to learn and use out of the box. But for the millions of people who do not use technology as part of their work or school, even easy to use products can be intimidating and some will need hand holding from time to time. Apple also understood that as people begin to integrate them into their daily lifestyles and use them as the center of their digital universe, the variables of how to make the technology work for them would only increase. With that in mind, Jobs and team knew that they needed to not only create a product but also had to provide the software and services, in an integrated way, if they were going to grow the company and become extremely profitable.

This formula is not new. In fact, if you look at the history of mainframes, mini-computers and even PCs, they all followed a similar evolutionary path. First comes the hardware, then the industry backs a major OS for these systems, which then makes it possible for the software world to create the programs that make the hardware indispensable. But over time, the profit is taken out of the hardware and the real money shifts to software and services. This is especially being played out now with the PC crowd. The profits are gone in hardware and only the software guys (i.e. Microsoft) are making any money in the PC game. That is why HP has spent billions on EDS and their service business because all of the real profits for the hardware guys have shifted here.

Related Column: Dear Industry Why History Won’t Repeat Itself

Apple is insulated from some of these issues since they control the hardware, software, and services. But while most people think of their services as iTunes and their related apps and cloud services, they miss the fact that their Apple stores are also part of their services offering. A good way to think of this is that the Apple store is their EDS. They are there to interact with the customer, to help them integrate Apple’s various products into their life or work-styles and if there is a problem, solve it for them on the spot. (Sounds a lot like EDS and the big service providers does it not?)

This is why Microsoft has suddenly entered the retail business. While selling their products is part of their retail offering, these stores are their “EDS” that meets the needs of their consumer’s customers. Like Apple, these stores are there to help them “integrate” Microsoft products into digital work and lifestyles and if problems arise in doing this, be the place to come to help them deal with it. While the Microsoft stores need to break even, they are not necessarily profit centers. Instead, think of them as consumer service centers that keep the customers happy and making sure they keep buying products that use Microsoft’s software from all of their partners.

Google opening a store in Ireland is a nod in this same direction. And now we have rumors that Amazon is looking at opening their first store in Seattle. At first, you might think that an Amazon store will be going after a Costco given their breadth of products. But Amazon is smarter than this. They have gone to school on Apple and like Microsoft, understand that a retail storefront is actually a vehicle for servicing their customers who buy their dedicated technology products. At the center will be their Kindle line of course, and the store will be there to answer questions and help people get the most out of their Kindle eBooks and tablets. But it would not surprise me if this signals they might also do an Amazon branded smart phone and over time consider other Amazon branded products that these stores can sell and support.

None of these moves to copy Apple with storefronts should be too surprising given Apple’s success in this area. But while Apple Stores do sell Apple products and are used to drive people into the stores to show off their wares, keep in mind that the role it plays in providing service and support is equally important to its success equation. And for Microsoft, Google and Amazon, and any other vendors who move towards vertically integrated products, if they really want to keep their customers happy and coming back for their branded products, they better be ready to provide the service and support that goes along with helping them integrate these products into their digital lifestyle. If not, that loyalty will shift to Apple, who has defined the consumer version of EDS and is well positioned to continue to take customers away from the competition.

Why Tablets are Important to eCommerce

I recently noticed something about my tablet usage that really intrigued me. Since using the iPad, it has become a constant companion to me and along with my iPhone and Droid, I carry it with me all of the time. Although my smartphones are quite important to me, I have always had a bit of a difficult time reading their small screens and as I get older, I have to admit that the size of the screens I use in my life are becoming an important part of my user profile. And while I would often buy apps on the smart phones for use on them, I very seldom used them for any real eCommerce purchases. For that I mostly deferred to my laptop.

But over the last six months, I began noticing that my preferred screen for buying things started shifting over to the iPad. This particular fact came into even sharper focus for me recently when I read a piece in Wired that pointed out that Amazon’s tablet might actually serve as a powerful vehicle for their overall large store.

In this same article, they recounted a Wired interview with Steve Jobs in 1997 where they asked him what opportunities he saw with the Web. Here is what he said:

Wired: What other opportunities are out there?
Steve Jobs: Who do you think will be the main beneficiary of the web? Who wins the most?
Wired: People who have something –
Jobs: To sell!
Wired: To share.
Jobs: To sell!
Wired: You mean publishing?
Jobs: It’s more than publishing. It’s commerce. People are going to stop going to a lot of stores. And they’re going to buy stuff over the Web!

As you can see, even back then, Jobs saw that there would be a major shift in user buying habits and that the Web would become a serious vehicle for eCommerce. And over the last 13 years that has happened in a big way. eBay, Craigslist, Amazon, iTunes, etc have all driven eCommerce into the mainstream and they are now just a normal part of the way most of us buy things, especially things that we cannot find at our local mall. Of course, the irony of this quote from Jobs is that while iTunes has driven his eCommerce vision, he also created stores that have become one of the most successful retail chains in the world.

Now, if you look closely at peoples shopping habits these days, much of how they search for a product through search engines and review sites like PC Mag’s product reviews, and then buy them over the Web, should give you an understand that the Web has literally become the most powerful medium for commerce next to the grocery store. Sure, people will always go to the mall, but the mall and local stores will always have a limited supply of goods. But through the Web, you can buy just about anything. Although people will still use desktops and laptops for eCommerce, if my experience with the iPad is any guide, then the tablet, with its bigger screen then a smart phone and its full access to all Web eCommerce in this highly mobile for factor, could actually drive even more eCommerce purchases in the future. Another way to look at this is that the tablet is Amazon’s Brick and Mortar and a tablet is to Amazon what a physical store is to Wal-Mart.

If you think about Amazon’s business, it started with selling books online and then quickly became a place where consumers can buy just about anything and shop competitively from one single location. It just so happens however that this location is not physical; it resides fully within your browser. Amazon’s location is virtual.

To contrast, a company like Wal-Mart is evolving into the digital age with a strategy that includes their brick and mortar stores. To some degree Barnes and Noble is doing something similar but only in the realm of books. Amazon however has no intentions of creating a physical location where you walk in to experience their service. I believe however that Amazon is very interested in giving you a virtual physical storefront and it started with the Kindle.

Any retailer will tell you how important the overall retail experience is to their success. Some companies do retail poorly and others do retail extremely well. The Kindle for Amazon started completely around discovering, purchasing and reading books. The Kindle is the retail storefront to Amazon’s digital book library.

I believe that the evolution of the Kindle will follow Amazon’s business evolution. It started with books then included everything else. Which is why this next device that will most likely be a fully featured tablet will also come with Amazon’s complete shopping experience built in. This includes not just digital storefronts like books, music and movies but physical items as well. Since Amazon is one of, if not the largest digital storefront, it benefits them to get devices on the market where they control the entire shopping experience.

This is one of the reasons Amazon re-jiggered their iOS app strategy to stay away from Apple’s transaction model and fees. I don’t believe this move was just about avoiding management fees but that Amazon wanted to control the user experience with their storefront instead of Apple.

Reflecting on that point briefly, it becomes clear that Apple’s app store commerce model works for those for whom billing and storefronts are a problem but it does not work for those companies who have spent millions of dollars perfecting their own e-commerce experience. This leads me to believe that if the entire eCommerce experience is baked into the tablet experience then Apple’s new big purchase might be an eCommerce “etailer” that offers a broad range of products that Apple can integrate into the complete user experience of the iPad.

Amazon also has an interesting strategy with their Prime service that could be strategically integrated as well within their tablet offering. Perhaps Amazon gives better deals or promotions to those who own the tablet and are Prime customers thus incentivizing more purchasing from their store directly on the tablet.

This is why I believe a tablet is actually strategic for Amazon. Of course they can and will make sure their services are available on every device imaginable. However if they bring a device to market that is a full blown tablet and also includes the most elegant and seamless experience to research, discover and purchase from, then that device becomes the retail storefront to everything Amazon sells – and more.

Made in China: Why Boycotting Apple Would be Wrong

If you have been reading the articles from the New York Times about the working conditions at some of the factories that Apple and other big tech companies use to make their products, you can’t help but get upset and concerned when you learn about the abuses mentioned in the report. Apple has publicly shared how they are trying to combat these abuses and has even gone as far as joining a third-party monitoring group to get independent help to deal with these problems. Clearly, Apple has to put even more pressure on all of their suppliers to improve these conditions and rally all of the other tech companies who use these same suppliers to help with this cause.

The New York Times articles pointed out correctly that the human toll due to these abuses is a serious issue. But there is another side to this story that is not getting enough press and it is equally important to this discussion. I have traveled to China for 25 years and worked on many sourcing projects and have had to deal with Asian manufacturing issues for some time. One of the first things I learned about manufacturing in China is that the majority of factory workers come from very poor areas in central or eastern China. They covet these manufacturing jobs to get them out of their abject poverty.

In 1996 I visited an extremely rural area of China and saw first hand how they lived and the poverty they faced. I was shown a cement home that could not have been more than 10’ X 12’ and was told that two families as well as an aging grandmother lived in this place. And that their only earnings came from their field work if they could get it. I was also told that the parents in these areas pushed their teenage children to try to get the new manufacturing jobs that were just starting to emerge back then. Millions of families in China still live in this type of poverty and these manufacturing jobs are actually a life saver for them as these kids send some of the money they earn back home to help support the family.

There is an even darker side to this. The parents in these regions don’t have a lot of options and in some cases they actually sell their kids into prostitution as ways to support the family. So they see these manufacturing jobs as a better way for their kids to better themselves and still help the family. Although they only make $17.00 per day, this is at least 10 times what they could make a day in the fields if the work is even available.

And there have been reports of underage kids in these factories. But I know for a fact that the poverty is so bad in some areas that it is the parents who push these kids to lie about their age to get them into these jobs. A very sad fact is that the age of the kids sold into prostitution average 13-15. While hiring kids at this age for factory work is still wrong, you can see how when parents get desperate they could push their underage kids to the factories instead of some of the seedy alternatives available to them.

With this in mind, the call for boycotting Apple products would be just plain wrong. Apple selling less products would translate into the loss of jobs for these workers and force them back into levels of poverty and working conditions that would be even more difficult than the one’s they have in the factories.

“This American Life” quoted New York Times columnist Nicholas Kristof, a noted human rights crusader, as defending the Chinese labor system as a positive step in the evolution of the country’s economy. “I think it’s useful to be reminded about how grim the conditions are,” Kristof says in the show. “But again, I just think that if you try to think how you can fight poverty most effectively, and what has fought it within China, then I think sweatshops are a key part of that answer.”

I have actually visited some of the high-tech manufacturing factories in three regions of China and the term “sweatshop” actually does not apply to them. Because of the precision work and need to keep things very clean when making these products, these places are well-lit, air-conditioned and efficiently designed. That said, the work is tedious, and the long shifts can become exhausting. And any reported abuses must be dealt with aggressively.

But the call to boycott Apple would be irresponsible on our part. Apple’s success has created ten’s of thousands of jobs for these workers and these factory jobs are a lifeline to them and their families. Yes, these types of manufacturing jobs have gone offshore and as Steve Jobs told President Obama last year, they are not coming back.

In fact, Thomas Friedman wrote a great piece on the fact that for most American companies their customers have become world customers now and the need to manufacture and sell to them has become a global business issue.

While we might not like that Apple has created so many jobs in China, the reality is that, as the NYT’s articles pointed out, the type of manufacturing needed to make things like the iPhone and the iPad are not available in the US anymore.

The answer to dealing with these abuses is not to boycott Apple products. That would directly impact the lives of thousands of workers in a very negative way. Rather, it will be for Apple to step up their efforts and get as much help as possible from the Chinese government and other tech companies to put pressure on all of their suppliers to deal with these abuses and adhere to the rules demanded by their customers for good wages and good working conditions. They also need to find other creative ways to make the working conditions better for those who work in these factories. Let’s hope that Apple and others can make this happen soon. But boycotting Apple would be the wrong way to solve this problem.

Are Netbooks Poised for a Comeback?

The answer to this is no, and yes. Let me explain.

In 2007, Netbooks took the market by storm. These small low-cost laptops hit the market at the beginning of the recession and were instant hits. Although first versions with Linux were panned once a low-end of Windows was made available they really took off. By 2010, we were selling about 30 million a year.

But in 2011, demand for Netbooks took a major hit. Many attributed this to the intro of Apple’s iPad and other tablets but in truth, the real reason for the decline is that once the vendors realized there was serious demand for low powered, low-cost laptops, they went full-bore in creating full-sized laptops in this price range. Last I checked you could get a 15.6 inch AMD Dual Core E-300 accelerated processor based laptop for around $329. Although Netbook customers liked their small sizes and low weight, they valued even more laptops that had extra power and full keyboards.

But if you try hard, you can actually trace Ultrabooks back to Netbooks. Indeed, at the WSJ D conference a few years back, when Netbooks were all the rage, the late Steve Jobs told Walt Mossberg that nobody really wants a Netbook. While he did not downplay demand for a smallish type laptop, he felt that people wanted a small laptop with a full keyboard and the same power as their mainstream laptops. Three months later, he and Apple introduced their first MacBook Air and of course, this successful product is the reason all the vendors are creating Ultrabooks now.

But Ultrabooks have one big problem. On average, they will be mostly in the $699-$999 price range and well outside of the realm of what we call value PC pricing. That range is from $299-$599. But to say there is still demand for an ultra-thin and low-cost laptop in this value price range would be an understatement.

What you can expect to happen is, in a way, the rebirth of the Netbook in the form of value priced ultra-thin PCs. These will not meet any of Intel’s Ultrabooks specs, but instead, will have low-end mobile processors, perhaps the home version of Windows 7 and a low-density hard drive. But they could be relatively thin and really cool, just with lower end chips and low-cost screens. In many ways, these will speak to the same audience who wanted a Netbook, namely those who desired a really low-cost laptop for basic computer usage.

This low-end category could get an interesting boost later in the year in the way of Windows on ARM. Arm chips are already low-cost, but with long battery life and some pretty good processing power. You can believe they will shoot for use in ultras-lims as well.

So while Netbooks as we know them are mostly dead, expect to see them return in the form of ultra-slims, ultra-thins, or some type of name the vendors will give them that targets this low-end value segment of the market. While I don’t believe it will have a heavy impact on the more full featured laptops in the value end today since these will sport much better processors, higher quality screens, etc. these low end thin laptops will hit the nerve of a part of this value market and could actually become big hits on their own.

Apple Just Re-Invented Books

This morning’s announcement from Apple about creating tools for interactive textbooks is actually a landmark announcement for four major reasons.

The first is how these tools can impact education. Ben wrote a good piece on this so I won’t elaborate on this too much here, other than to say that these tools will completely re-define how textbooks can be created and distributed. It is ideal for higher Ed textbooks but Apple and their major publishing partners are even doing high school level interactive books that should push iPads into education circles even faster.

Related Columns: Why the iPad is an Investment in your Child’s Future

The second thing iBook Author does is lay the groundwork for non-education publishers to create interactive eBooks as well. But, as Phil Schiller pointed out at the iBook 2 announcement event in NYC today, this tool can be used to create any book of any kind, not just interactive books. This free authoring tool is a major step towards making Apple not only a publisher in their own right but a distributor as well as delivering the hardware platform optimized for enhanced eBooks in general.

While the first push with these tools will be to educational authors, it won’t be long until mainstream authors start using these tools and use the iBookstore as their preferred distribution medium. And since these tools are so easy to use, authors who only write text-based content will begin playing with the integration of color drawings, illustrations and other media to enhance their story lines, which will only work properly on an iPad.

The third thing these tools do is give Apple a serious competitive advantage over other tablet vendors. The iPad is already the leading tablet, but by developing these rich authoring tools for creating interactive and enhanced eBooks for the iPad, it makes the iPad even more interesting to consumers and eBook readers from all angles. To date, Apple has sold about 70+ million iPads and we expect them to sell at least that many in 2012. This means that they are rapidly increasing their user base, which in turn becomes more attractive as an eBook publishing and distribution platform for all types of authors. This move really distances them from any other tablets on the market

But the 4th thing these tools could do is quite interesting. It has the potential of doing to the publishing industry what Apple did to the music industry. Although Apple did not invent the MP3 player, they re-invented it and then created the iTunes store, which with the iPod, became the # 1 vehicle for digital music distribution. Today, Apple owns 75-80% of the MP3 player market even though many others have tried to duplicate their success. But they created the iPod, the tools and the distribution medium for digital music that helped Apple own that market. Yes, music is now available on smartphones, but it took Apple’s competitors almost a decade to replicate their success and even then, it had to come on a completely different digital device.

Now Apple has a chance to re-invent eBooks by delivering a complete eco system of hardware, software development tools for creating next generation interactive eBooks, a publishing and distribution medium and a powerful hardware device for delivering this optimized content. On the surface this looks like a major move to get Apple more entrenched into the education market. But I see it as Apple’s first move to disrupt the entire publishing industry. If Apple’s does this properly, they could become the largest publisher and distributor of eBooks and in many ways, change the economics and overall distribution of eBooks in the future.

One more thing. If Apple was concerned about Amazon’s Kindle Fire and even Amazon’s role as a publisher and distributor of eBooks, they aren’t anymore. In fact, this is Apple’s response to the Kindle Fire and Amazon’s overall position as an eBook distributor. The key reason is that with these tools, Apple will completely raise the expectations of what should be in an eBook in the future by pushing the idea that all eBooks should have some type of rich interactive format that delivers an enhanced reading experience.

Of course, the Android or even Windows 8 tablet crowd could respond in kind, but at the very least, Apple has a two-year head start on them and given the competitors track record in trying to catch Apple that lead in this area could even be longer.

I also think that this probably signals that a lower cost iPad is on the way. For Apple to really get iPads into education and leverage this new interactive eBook development platform, they will need to have some models with lower prices. Given the tight budgets of schools and families who could really use something like this to help their kids education, iPads will need to be much more affordable if Apple is going to “own” this segment of the tablet market.

The Simple Reason for Apple’s Success

Back in 1984, one of the major PC companies, who was spectacularly successful with their business PCs, decided that they could be just as successful if they created PCs for consumers. But they wanted them to be different from their business PCs since they knew a consumer model would have to be priced much less than their business models.

So they created a consumer PC that, for all intent and purposes was a “wounded” version of their business models, with a lousy keyboard, very weak processor and the cheapest monitor they could dig up. To say that it was a failure would be an understatement. To make things worse, the only OS they had at the time was MS/DOS so that meant they were giving consumers an OS that was hard to use and difficult to learn from scratch. But they reasoned that since so many business users had their PC with DOS at work, they would gladly buy a similar model for their home and since they knew DOS from the office, it only made sense that they could use it on their home PC.

Interestingly, when it failed, they were dumbfounded. They were certain that they had a winner on their hands and some of the top management kept pushing to re-design it and take a new model back to the consumers the following year. But to their credit, some of the people in the group questioned its potential and turned to outside experts to give a 3rd party opinion on the potential of a PC for consumers at that time.

I was lucky to be one of the few outside persons asked to weigh in on this subject so I went back to their HQ on the east coast two times to give my thoughts on the subject. In my presentation and documentation I gave them, I pointed out the major difference between business and consumer users were that business users had serious motivation to go through the hassle of learning a text-based OS, while the mainstream consumer did not. At the time, PCs pretty much only had software for business use. I argued that for PCs to take off, there would have to be a major reason for consumers to buy them, and emphasized areas like using PCs for educational purposes as well as possibly entertainment as well. I also told them they needed to be cheap.

I drew them a picture of the traditional marketing pyramid and showed that at the top we would find the truly early adopters, which at this time were quite IT driven. I then told them the second layer would possibly come from the worker bees whose IT leaders would push them to learn DOS and harness the PC to make their work more productive. But I told them the third layer would come from what today we call prosumers and, even at that time, I felt it would take at least 3-5 years to get these folks excited about PCs and get the PCs to a price point that they could afford.

And at the bottom layer of the pyramid, which is always the largest audience, I said they would find the mainstream consumer, but pointed out that I felt it would take at least 10 years before this crowd would finally buy into the PC vision.

I never found out how much my outside work on this project impacted their decisions but I do know that a week after I made this presentation, their consumer PC was killed off for good.

But there was another key point that I emphasized in this document. I said that the OS had to be easy to use and the PCs had to be simple enough so that consumers did not need a degree in engineering to run them. And if you know the history of the PC business, you know that consumer interest in PCs for the home did not kick in until Windows 95 hit the market, exactly 10 years after this company killed their consumer PC.

Ironically, even though our PCs have gotten spiffy new user interfaces and are clearly easier to use, to the point that PCs have penetrated pretty much every home in the US in some way or another, the fact remains that they are actually more complicated to use. Consumers not only have to deal with the plethora of desktops and laptops to choose from, they now also have to deal with Internet connections to the home, wireless connectivity, security, identity theft, multiple passwords, personal data in numerous non-connected files, and most recently, this new thing called the cloud.

But in the end, consumers want things simple and some handholding when things go awry. I am convinced that this is really at the heart of Apple’s success. They have one phone–the iPhone. They have one tablet–the iPad. They have two laptops but except for sizes and optical drives in the Pro models, they are actually all the same. And they have one major desktop–the iMac. Even in the iPod line, they have streamlined it to the iPod Touch and the Nano. If a person needs help, they have their Genius Bars and 24-hour hotlines in which the people on the other end actually now how fix your problem.

By comparison, there are now over 80 Android phones to choose from as well as at least 5 versions of an Android OS to deal with. And in the PC space, if something goes wrong, people don’t know who to go to for help. While some of the mainstream PC vendors do have 24 hour hotlines, my experience with them has been only marginally successful. And I have even stumped Best Buys geek squad a few times over the last year with problems with Windows laptops.

While we can point to Apple’s powerful OS, industrial designs and ecosystems of products and services as key to their success, I actually think, that at its heart, the real reason for their amazing success is Jobs’ own mantra to his team, which is to keep things as simple and intuitive as possible. And he was smart enough to know that even with that, given the nature of technology and the fact that things get more powerful and complex over time, provide a place for people to get help that is easy to access and stock it with people who can help when a problem arises.

As I walked the floor of CES recently, I saw over a dozen phones at one vendor, nine new PCs from another vendor and five tablets from another vendor, all with different versions of Android on them. While choice is great, I really think that keeping things simple and easy to understand–and buy–is even more important than choice. While Apple has powerful products in many categories, the real reason for Apple’s success that they just keep things simple.

Catching up with Apple – This Years CES Theme

CES hasn’t even started, but after sitting through various pre-show press conferences and meetings, one thing is clear: Apple is casting a very long shadow on this show. And many of the products I have seen have been various implementations of something Apple has already brought to market.

This is especially true in two categories.

First is the iPad. Pretty much every tablet vendor here hopes they can develop a tablet that is at least competitive with Apple. Some are going for cheap and basic as differentiators, while others are trying to bring out models with a unique design, tied to Android, and still be cheaper than Apple.

The recent success of Amazon’s Kindle Fire has given them another target to go after, but even this is colored by Apple’s iPad and its strong success in the market. And when talking to all of these “clone” vendors, they don’t even pretend they are doing something new or unique. Rather, many point out that they hope to tag along on Apple’s success and tap into new users Apple may not get because of their higher prices. But make no mistake; all of these are iPad wannabees.

The second product they are all chasing is Apple’s MacBook Air. If you look at Intel’s Ultrabook program, you can see that this is a blatant attempt by the Windows crowd to ride Apple’s successful coattails in design and give their audience something that Apple has had on the market for their customers for five years. Now that is not necessarily a bad thing…it just amazes me that it has taken the WinTel world that long to even catch up with Apple.

But when talking to these vendors who are hopefully bullish about any of their offerings in either of these categories, I sense something else. While they know what Apple already has, the fact that they don’t know what Apple will have in the future really weighs heavily on them. Or in other words, they keep waiting for another shoe to drop.

While they rush to market versions 1 or 2 of their tablets, they know that Apple has the iPad 3 and iPad 4 just around the corner. And while they feel Apple’s prices for the iPads are too costly for most people today, they all fear that Apple could drop prices and seriously impact their chances for success. In fact, to many it is a foregone conclusion that Apple could drop as much as $100 out of their base entry model as soon as this year. And given Apple’s history of maximizing their supply chain as well as pre-purchasing components in huge quantities so as to get the best prices on parts, that is a real possibility.

The other thing I picked up is that many of the Ultrabook vendors are working on what are called hybrids. These are laptops where the screen pops off and turns into a tablet. The first generation of these “hybrids” sported Windows on the laptop and Android on the tablet and the two did not mix well. But the Windows world is counting on Microsoft’s Windows 8 to be the magic bullet that lets Windows 8 with its Metro UI work on the laptop and the tablet and provide a unified experience. And some of the models I have seen are quite innovative.

But, this depends on Windows 8, which means that none of these can get to market until at least mid Oct. And some of the vendors have a sinking feeling that Apple is working on a hybrid as well and that they could beat them to market. And what’s worse for them is that if Apple does theirs as elegant and innovatively as they normally do, some vendors I spoke with feel that they would be immediately behind even though on paper they seem to be way ahead of Apple with their hybrids.

You can even see copied elements of Apple TV in the new Google TV being shown. In fact, all of the smart TV vendors know full well that Jobs told his biographer that he “nailed” smart TV, so these vendors also know that no matter what they offer now, once Apple finally releases a TV solution, they will have to go back to their labs and make big changes just to stay competitive.

One of Apple’s core strategies is to keep ahead of the competition by at least two years. And their competitors have finally realized this truth.

That is why no matter how happy they are about their new offerings at CES this year, they are looking over their shoulders because they know with 100% certainty that Apple could do something significant at any time and send them all back to the drawing board to play catch up.

Why Amazon is Not the New Apple

Over the last few months I have heard and read many comments about the idea that Amazon is the new Apple. In fact, in a very good piece in Forbes, E.D. Cain asks if Amazon is the new Apple directly. He makes some good points to suggest that Amazon is very much following in Apple’s footsteps and even has created some innovations of their own with their price check mobile app and their Kindle book purchasing process.

But I believe the answer to this question is no, Amazon is not the new Apple. The reasons for this are many. Now, don’t get me wrong. I have great respect for Amazon and Jeff Bezos. However, Jeff Bezos’s is not the second coming of Steve Jobs and he would be the first one to tell you that. Amazon’s business is very different from Apple’s and though they have some similar goals, such as creating an ecosystem of products and services for their customers, their approaches differ greatly.

Perhaps the most glaring difference is Apple’s total approach to the market. Most importantly, all of their hardware, software and services originate inside Apple. They write the OS so they can customize hardware to be maximized around their proprietary OS platform. Amazon, as well as all of the other vendors competing with Apple, must rely on Google or Microsoft for their code and are always at a disadvantage to Apple in this area.

Also, Apple has all of their design in-house led by recently Knighted Sir Jonathon Ives. Most of the vendors have to rely on ODMs for their products and this too is a disadvantage when it comes to industrial design and its integration with their software offerings.

While Amazon is the world’s greatest retailer, Apple’s stores are re-writing the rules of technology retailing around the world. You buy from Amazon if you know exactly what you want since you can’t touch or feel the products online. But the reason that Apple is driving millions of people into their stores around the world is that Apple knows full well that the majority of potential users are not tech literate and need help buying exactly what they need.

But one thing that really distinguishes Apple from Amazon and their competitors, is that Apple is a leader and all of the others are followers . This started when Apple introduced the Mac itself and decided to use the 3.5 inch floppy in the Mac and made their competitors kill the 5.5 inch floppies back in 1985-1986. Apple was the first to put a CD Rom drive in Macs in 1989 and ushered in the era of multimedia computing. By 1992, all PCs had CD Roms inside. In 1999 Apple added color to PC cases and created the all-in-one PC. Now all PCs have color and all-in-ones rule the desktop market. Even more recently, Apple created the first real “ultrabook” with the MacBook Air and now everyone is chasing them again.

Apple’s genius is also in re-inventing products, which continues to reinforce their leadership position. They did not invent the MP3 player. They did however re-invent it. They did not invent the Smartphone. They re-invented it. They did not invent the tablet. They re-invented it. And in each of these product categories, they force their competitors to play catch up.

What’s more is that Apple casts a long shadow in this area. A more current example is the hybrid computing. In my 2012 predictions, I stated that we should see many hybrids (laptops with screens that come off and double as tablets) this year. But, many of the vendors I talk to who have hybrids in the works have told me that their biggest fear is that Apple will do a hybrid and do it so well that it will force them back to the drawing boards and put them behind, even though they thought they would be ahead. Now, nobody even knows if Apple is doing a hybrid but just the threat of Apple doing one strikes fear in their competitors.

But in the end, the fact that Apple continues to play a major leadership role in the industry is the real reason Amazon and other companies, who might like to think that they could become the next Apple, are still only followers. It is unclear to me if Apple will ever give up that role given their complete control of their ecosystem and the rich talent they have inside the company. But until another company can create this same dynamic, I suspect that there will not be another company that can lay claim to being the next Apple.

Why Microsoft should buy RIM

Three years ago, in my annual prediction list, I said that Microsoft would buy RIM. However, I also stated that this was a very wild prediction that I doubted would happen.

Last week, All Things D wrote a piece that said Microsoft and Nokia had discussed jointly buying RIM but that the talks did not go anywhere.

But if you think about it, Microsoft owning RIM, especially their customer base, makes a great deal of sense. At the moment, Microsoft’s Windows Phone is basically designed for the consumer market and has little traction in corporate offices. In fact, Apple’s iPhone is eating Windows and RIM’s lunch in smartphone enterprise deployments. And while Google and their partners who have Android smart phones are taking aim at the enterprise, their acceptance in this market has been weak up to now.

But RIM’s assets still carry significant value in the enterprise. From their secure servers to their BBM messaging service, RIM still has serious technology that draws great interest from the corporate set. But, RIM is at a major junction in their history. If they are to have any chance of growing their business, they must move their customer base from its existing Blackberry OS to one that is much more powerful and will meet the needs of their business users as smartphones get smarter. To that end, they bought QNX and are planning to migrate to this smartphone OS by sometime in 2012. But here is the rub for them. Besides being very late to the market and having only a minor ecosystem of apps and services to work with now, the investment needed to get software developers to write apps for QNX will be very steep. And given the fact that developers are already backing iOS, Android and Windows Phone 7, it will be a tough sell as well.

In the mean time, Apple’s iOS and Android’s ecosystem that targets the enterprise is rising fast. And even though most of the apps written for Microsoft’s Windows Phone are consumer based, Microsoft too has their eyes on the corporate market.

In my viewpoint, the chance that RIM can be successful with their strategy, given their lateness in providing a powerful smartphone OS for their business users and what it would take to get software developers to back it is marginal at best. And although their market value has taken a big hit over the last three quarters, I doubt that it will recover given the difficult position they are in considering the current competitive smartphone climate.

Consequently, this is a perfect time for Microsoft to make a serious attempt at buying RIM and use this to jumpstart their enterprise smartphone business. Interestingly, the idea of Microsoft using RIM to counter Apple’s iPhone move into the business market was at the heart of my wild prediction 3 years ago.

While RIM has been trying to move QNX into their business smartphones and getting software developers to support it with minimal success to date, Microsoft could instead move very quickly to marry their Windows Phone 7 architecture to replace RIM’s QNX. Then they tell their current Windows Phone 7 software developers that it is now time to begin writing powerful business apps for this smartphone platform. I say quickly but I realize this would take some serious software engineering to make this happen. However, Microsoft’s smartphone OS is very stable and already has strong developer support and a move like this could make Microsoft a serious player in enterprise smartphones almost overnight.

So, will this happen? Probably not. RIM’s management seems determined to try to save the company with QNX and hoping to get developers to support them. Good luck to them but in my view, that ship has passed.

But it sure would be interesting if Microsoft did buy RIM and tap into their loyal customer base and over time move all of them to Widows Phone 7. In fact, it may be their only hope of gaining any ground on Apple in the enterprise and keeping Android at-bay in business as well. And while it would be risky, the upside of owning RIM’s customer base and transitioning them WW to Windows Phone could be huge. I am sure that is what Microsoft and Nokia were thinking about when they discussed this idea recently.

But given RIM’s managements current position, it seems likely that this will never happen, even though it would be best thing for both of them.

The iPhone May Foreshadow The Future of Personal Computing

In 1989, I wrote a piece in one of my internationally syndicated columns about a mobile computing concept that was very modular in nature. Back then, portable computers were pretty bulky and heavy and having to lug them with me around the world was a pain. That led me to think about what future portable computing might look like and I took a stab at this idea of a modular approach to personal computing.

In hindsight this was ridiculously wishful thinking on my part more than anything else since the technology at that time was not there then to make those current portable computers smaller and lighter let alone modular.

At the heart this vision was the idea of having a lot of screens available in my work and home lifestyle. I envisioned these screens as being “displays” that my modular computer would connect or plug into in a lot of places and locations. The most far out thing I wrote about was the idea of the back seat of every plane having a screen and the bottom side of the tray would be a keyboard. In my model, there would be someplace for my “modular brick” as I called it to connect to this screen and keyboard and instantly become my personal computer.

The key to this idea was that the brick would have my CPU, OS, my own customized UI and all of my files and data. That meant that I would always have my own personal computer with me everywhere I would go and I would just plug it into an available screen and keyboard. Of course, that meant a large infrastructure of screens, keyboards and standardized I/O ports would need to be available everywhere. In the end, this vision was too early for its time, and even today would be hard to pull off given the state of the current technology.

Interestingly, we already have modular computing of sorts today. It comes in the form of our laptops where we have our own OS, customized UI and all of our personal files and can be plugged into a screen and keyboard as part of our computing model. Indeed, when I get to my office I connect my 13 inch MacBook Air to a 27-inch screen and use a wireless mouse and wireless keyboard. In this case, my MacBook Air is kind of brick–in this model–in that it just sits there providing the CPU power, OS, UI and access to my files.

But what if we could have that same kind of modular functionality in a “brick” that fits in your pocket? A very small device that houses a powerful CPU, OS/custom UI and data files and can be docked with a multitude of screens that are accessible around the office, school, home, shopping malls, etc. As far out as this seems, I believe that this is exactly the vision Apple has for the future of the iPhone.

If you have used an iPhone in an audio docking system you may have already thought of this idea. I was recently in a rented home in Hawaii where the entire home’s audio system was hooked up to an iPod and iPad audio/out dock. And if you have ever used Apple’s Air Play, you kind of have a glimpse of how the iPhone and the iPad can use wireless technology to share images and video.

One of the key technologies Apple has created that would help facilitate part of this concept is their 28 pin connector. While it has 28 pins, only about half of them are actually used for dock syncing, audio/video out, etc. In essence they have future proofed this connector so it could be used for a lot of other high intensity driven functions in the future.

One interesting example of this would be for an iPhone or iPad to be able to someday drive very high-resolution video monitors. Today it can only power basic VGA monitors. I recently saw technology from Corning’s Fiber division that has created a fiber cable that can be twisted, knotted, and even stepped on with no loss of high-speed transmissions. And these cables can carry data at speeds well over 50 GBPS. If this can be commercialized with the proper I/O connection points in place, it would have major ramifications for computing at all levels. But it could really enable something the like iPhone to become a modular device driving full PC functionality via various docking systems tied to all kinds of available screens, even very high resolution ones. This of course is a futuristic view but the technology is there to make this happen in the very near future.

The other roadblock to making this modular concept work today is the CPU itself. Although we are making great strides in low voltage processors that still deliver great performance, we will need very high speed mobile processors with extended graphics functions to make this modular vision work. However, if you look at NVIDIA’s current Tegra 3 chip with its 5th core, you can see that they are actually heading in this direction. And of course, we expect that Apple is working on their own mobile ARM chips that map this direction too.

I suspect that within 2-4 years we will have mobile chips that could drive this modular approach with smartphones forward.

Another interesting example of this modular connection to a screen would be in a car. All the car would have to have is a basic screen and, in Apple’s case, a dock with the 28 pin connector tied directly to it. That would mean that all you need to do is dock you iPod into this car’s iDock and that screen on the dash is now your full personal computer with added functionality tied to things like hands free navigation maps, traffic info, etc. And it would have all of your apps and files if you should ever need them via this screen.

Or perhaps the screen in the refrigerator is a dumb screen and would get all of its intelligence from the iPhone. Or for that matter, the work area on your desk at home would contain only a large screen and keyboard and you just dock your iPhone to this and you instantly have a full fledged PC.

Of course, things like the iCloud will make it much easier to keep your personal UI and data available across a lot of “smart” screens, but this modular approach could be interesting for the consumer in that the iPhone could bridge that gap between local protected content and the cloud in a much more mobile fashion. And since the smartphone is always with you, you would have the equivalent of a full PC at your disposal all of the time.

Could other smart phones become modular as well? Sure, but Apple has a jump on them with their future proofed connector and this group would need to settle on new high speed I/O s and connectors that would need to be adopted in all of their smartphones to make their modular eco system work. But Apple would appear to have quite an edge on any competitors who would want to do something similar given their advanced thinking on their own I/O’s and the fact that this connector is now on all of their devices.

As far fetched as this might sound, the concept of a smartphone as a modular computer has a lot of legs. And I know of quite a few people in various industries who are thinking this concept out now. But I believe that Apple has had this idea in their sights for some time and they too are thinking about how the iPhone could serve as the heart of a future modular computing model. And given what they have already done with the iPhone and their connector eco system, they could clearly be the first to flush it out and capitalize on this idea well before their competitors can.

Why webOS Deserves Another Chance

My colleague at Tech.pinions, Steve Wildstrom, wrote a great piece last Friday that chronicles Palm’s past and suggested that webOS is at the end of the road. While he may be right, a part of me wants to think that at least Web OS could live on even if Palm as we knew it has lost most of its key staff and any talent left have been absorbed into HP.

webOS got its first chance for life inside Palm, and its second chance when HP bought Palm and made a commitment to use it as an alternative mobile OS to Android.

The key reason for HP’s decision to buy Palm, and use webOS, is that after years of being tied to Windows and then looking at the prospect of being caught up in a similar relationship with Google and Android for their mobile devices, they made the calculated decision to back webOS. And in buying it, it was supposed to assure them that at the mobile device level, they could finally control their own destiny and not be forced to back Android and all of the things Google demands associated with Google product attachments in order to use it.

Not long after Palm started development of webOS, our firm, Creative Strategies, was asked to look at this new mobile OS and work with them on mobile use cases. As a result of this project, we got to see webOS up close and through this exercise, we began to understand that this was, at the time, the best mobile OS available. Since we did that project, Android and iOS have emerged as major operating systems for mobile devices, but from our work with webOS, we still consider it better than Android and in some ways equal to iOS.

One of the things we discovered early on is that webOS is built on WebKit and as a result, software developers can use standard Web development tools to create apps. We saw this as a real advantage since it meant that Web developers as well as professional software designers could write apps and we expected a robust eco system of apps to evolve quickly.

However, HP was slow in getting an actual tablet to market with webOS and given the competitive landscape, it was pretty much DOA when it did finally ship. And as you perhaps know, Their webOS tablet was killed after only a week on the market.

Last Friday, HP’s CEO, Meg Whitman apparently said in some media interviews that HP would bring out a webOS tablet in 2013. However, I went back to HP to clarify that statement and while my sources did not refute what she said, they hinted that what they most likely will do is look for new form factors to use for supporting Web OS and that a tablet may be one of them, although that is not in stone at the moment.

For now, webOS will move into an Open Source environment and although HP will have a dedicated team of developers contributing to the further development of Web OS, now many other developers can also add to and enhance webOS as well. That means that webOS should get even better than it is today. Given that perspective, I would like to suggest that webOS could and should have a third chance at life in the mobile market.

One key reason is that webOS is really an excellent mobile OS that is built on a strong foundation and is easy to develop for. Another reason is that to date, there have been no legal or patent claims against it and as far as I can tell, it is legally the cleanest mobile OS available. And third, smartphone and tablet vendors are still interested in a third OS or more specifically an OS in which there are no strings attached.

This last item is important. Samsung recently decided to back a third OS called Tizen (formerly known as Moblin, ) as they wanted an OS that they could control on their own. But they chose Tizen because webOS was not available and at the time, Tizen was the best option available that they could choose. Many in the industry thought Samsung would actually bid for webOS after HP said the were going to drop this OS, but its price tag back the was probably over $1 billion. But now, with it going to Open Source, it would not surprise me if some of the tablet vendors, especially those on the fence when it comes to backing Windows 8 for Tablets, decide to use webOS at least for their consumer products even if they have Android products in the works. The main reason they might consider this is that with webOS they would have control of their own destiny and not be forced to adhere to and be driven by Google and Microsoft on future products.

I don’t know if webOS will gain traction, but given the fact that it is a great mobile OS that is very easy to develop for, and one that would give vendors more control of their mobile futures, it would be a shame if it does not see the light of day in some other new mobile products and form factors in the near future.

Why Apple Will be #1 in 2012

A couple of weeks ago, market research firm Canalys made a significant prediction that by the end of 2012, Apple would be the number 1 PC vendor in the world. To get to this number, they recognized the iPad as a personal computer and pointed out that if you include iPad’s, Apple would be the #1 PC vendor as well as #1 mobile computer vendor in the market by the end of next year.

Although this prediction came from a respectable research firm, this same line of thinking was given even greater weight last week when HP’s CEO, Meg Whitman, told French reporters, when asked about the Canalys report, that she too believed that Apple is on track to replace HP as the #1 PC vendor in the world, although she hoped that HP would retake this position in 2013.

For the last 10 years, Apple has been all of the OEM’s worst nightmare. They became #1 in portable music players, and then became the #1 handset maker. And with the iPad they emerged as the #1 tablet maker. Now these OEM’s have to put up with the reality that Apple is on track to become the #1 PC vendor as well. And there is something else that Apple does that really irks them too. The fact that while they are having to live with margins of about 5-8% on almost all of their products sold, Apple is making margins well above 25% on everything they sell.

There is some controversy in the market research world about this idea of adding iPads into the overall mix of computers sold since most PC market researchers put tablets in their own category and do not count them as a PC. But that is very old line thinking and if Meg Whitman is counting them as part of the way HP judges PC market share, then the researchers who count PCs in general will need to adjust their thinking on this also.

But Whitman’s comment that they can overtake Apple in 2013 is an interesting one. For one thing, I suspect she is hoping that by that year, their ultrabook will be a big hit and help bring their market share back up in laptops. Also, I am sure she is counting on their Windows 8 tablet to be a big seller in 2013 and that they can create a branded Windows 8 tablet that businesses and consumers want. I believe this is a good goal, but one that may not be realistic.

Keep in mind, Apple’s mantra is to stay two years ahead of their competition at all times. What this means is that they are not standing still. Although we don’t know what is in the iPad 3, I have no doubt that it too will help extend their lead in tablets well into 2013. By 2013, when the first generation of Windows 8 tablets are just hitting stride, Apple will introduce the iPad 4 (or 3S) and could have significantly lower prices by then.

We are hearing that Microsoft’s fee for Windows 8 tablet version could be as high as $68. If that is true, right off the top the BOM costs of Windows 8 tablets will most likely force prices higher than Apple’s low-end iPad is today. And if Apple starts lowering their prices in 2013 as I suspect they will, Windows 8 tablets would be at premium pricing.

Also, while Microsoft and Intel and their partners are excited about ultrabooks, their current pricing is too high for consumers. The good news is that by the end of 2012, we could see some really solid ultrabooks as low as $599 (without SSDs). But the bad news is they don’t know what Apple has up their sleeves with their MacBook Air line for Q4 2012. While Apple will never try to beat the competition at pricing, they still could lower their Air prices significantly and market it to consumers as getting more bang-for-the-buck by then.

And even if Android tablets start gaining market share in consumer markets in the future, most of them are coming from non-PC vendors. The major PC vendors are winding down their Android tablet programs and all the big guys will be backing Windows 8 by the end of 2012. They must hope that Windows 8 tablet is a hit for this to give them any market share boost over Apple.

That means that all of the PC vendors will most likely lose ground to Apple next year, and knowing Apple, once they get to the top of the PC market share mountain, they just may have enough new products in their upcoming arsenal to keep them there for some time. If this happens, the big PC companies may have to get used to playing second banana to Apple in this new role of #1 PC vendor, something that they would never have dreamed would happen.

Tech Trends and Disruptors to watch in 2012

You may not know it yet, but when we end 2012, we will look back on it and realize that it was the most disruptive year we will have had in personal computing in over a decade. In the next 12 months, the market for personal computers of all shapes and sizes will have changed dramatically and I believe we will see at least one of the top 10 PC vendors leave the PC consumer business completely.

So what will be the major disruptive forces that could re-shape the PC business starting in 2012? There are four technologies and trends in the works that I believe will force the computer industry in a new direction.

The first will be Intel and their partners huge push to make ultrabooks 40% of their laptop mix by the end of 2012. Although I don’t believe they will achieve that goal, especially if ultrabooks are priced above $899, the fact is that ultrabooks are the future of notebooks. Instead of thin and light laptops driving the market for laptops as they are now, ultrabooks, which are thinner and lighter with SSDs and longer battery life, will eventually be what all laptops will look like within 5 years. The heavier and more powerful laptops that exist now won’t go away completely as there are power users who will still need that kind of processing power. But ultrabooks will be the laptops of the future and 2012 will be the first year of its major push to change the portable computing landscape.

There is an interesting twist with ultraportables that could be even more important starting next year. This will be the introduction of ultraportables with detachable screens that turn into tablets. In the past, this hybrid as it is called, ran Windows when in laptop mode and Android when in tablet mode. But this approach was dead in the water from the start. But with Windows 8 tablets ready to hit the market next fall, you will see ultraportables with detachable screens that will run Windows 8 with the Metro UI on the laptop and Windows 8 tablet version with the Metro UI in tablet mode. This would bring a level of OS consistency across both device modes and I think that this concept is a sleeper. In fact, if done right, this alone could reshape the traditional PC market in the near term.

The second major disruptor will be the acceptance of tablets in enterprise in greater numbers in 2012. Although IT directors will still be buying laptops, there is a real push by some to add tablets to their overall business use cases. At the moment, Apple has a huge lead here with 475 of the Fortune 500 either buying iPads for deployment or pilot programs and some, like American Airlines, United Airlines and SAP have each bought 10,000+ iPads for use in their IT programs already. As for Android in IT, that boat has sailed. Google screwed up their version releases of Android and not one IT director I have talked to is willing to trust Google with their Android roadmap always being a moving target. And don’t get me started on Android’s security risks. Recent reports that 37% of all Android Apps have some sort of bogus code or malaware has pushed Android out of most IT discussions.

Instead, the option to the iPad that is really on their radar is Windows 8 for tablets, especially the version done for Intel processors. What they want is the ability to run Windows apps as is on a tablet even though they may actually write their own custom programs for Windows 8 and its Metro UI as well. But this is sort of comfort blanket to them and this Windows 8 tablet has many, especially hard-core Windows shops, waiting to see how good Windows 8 will be when it debuts in Oct of 2012 before making a final decision on what device/platform they will integrate into their IT programs over the next 5 years.

The third disruptor will be the proliferation of tablets at the “low” end of the pricing spectrum, which will give birth to the “good enough” category of tablets. There is no question that the iPad will pretty much represent the higher end or “most” desired tablet, but for many, $499 is still too steep a price for them to buy into a product category that they want to participate in. Even with this competition, Creative Strategies has still forecasted that Apple will sell north of 70 million iPads in 2012. But the Kindle at $199 and the Nook Tablet at $249 has opened up the tablet market to millions of new users who will jump on the tablet bandwagon in 2012. This will be the most explosive year for tablets yet and by the end of 2012 we estimate that well over 120 million people WW will be using a tablet of some kind for personal and business use.

The fourth disruptor that will impact the 2012 computing and mobile market is related to processors. By the end of 2012, Intel should have its latest version of Atom that will have it greatest level of processing power and low voltage efficiencies built-in. That means that for the first time, Intel can aggressively compete with the ARM processors for smartphones and in some tablets where low voltages is important. Although Intel is very late to the mobile processing party, you can’t count Intel out, as they are known as a very powerful competitor. And, being this late, they could be very aggressive in pricing to buy into this market in a big way.

The other thing related to processors is the fact that Windows 8 for ARM should debut in 2012. That means that, at least in principle, the ARM guys can start going after the ultraportable market as well. On paper this is good news for the consumer as it could help rapidly bring prices for ultrabooks down. However, Windows programs cannot run on ARM processors as is and apps will need a lot of re-written code as well as UI enhancements to work on this new device platform. But the ARM camp is pretty excited about being able to move their chips upstream and supporting Windows 8 and this dynamic alone will shake up the market in 2012.

As for a top 10 PC vendor pulling out of the consumer PC business, I think that this is inevitable. All of the PC vendors are working on 5% or lower margins for their PC’s sold and given their costs of advertising, overhead and channel support, it is really hard for any of them that do not have a major enterprise business to help bolster profits through software and services, to compete. That is why I believe that at least one of the top 10 PC vendors pull out of the consumer market by the end of 2012.

Yes, 2012 will be a most interesting year in computing. And with these disruptions in the works, it is poised to perhaps become most explosive year we have seen in some time when it comes to altering the direction of the PC market.

Four Industries Apple Could Still Impact with iOS, iCloud and SIRI

Over the last 10 years, Apple Inc has done a rather amazing job of disrupting quite a few industries. By my account, it has dramatically impacted the PC, Tablet, CE, Telecom, Music and TV industries in a big way, and I believe that they are on the cusp of disrupting at least four more major industries in the next 3-5 years.

The first industry I believe they will shake up is the TV industry. Just about every major PC and CE Company is trying to bring out Interactive TV or ITV as it is called and be the first to “own” this market. To date, Google, Microsoft, Samsung, Sony and even Apple have tried desperately to create the next big thing in TV’s and, perhaps more importantly, find a way to integrate the Internet and Internet video channels into their new vision for the TV.

In Walter Isaacson’s biography of Steve Jobs, Steve tells him that he has “cracked the code” for ITV and of course, everyone is wondering what this means. But the most logical answer is that his team will apply Siri’s voice comprehension technology to the TV user interface and then tie it their iCloud service and marry all of your content together for viewing on multiple screens with the TV being the one focused on entertainment. Whether it will be delivered in an Apple TV like box outside the TV or an actual TV itself is still a big question, but Apple’s attempt at creating a new approach to TV interfaces as well as linking it to unified personal content, if done right, could be revolutionary.

Imagine being able to just tell the TV, find Big Bang Theory and it goes right to all available versions on broadcast, cable, the DVR or online. Or ask it about a football player you just saw make a touchdown and on the bottom of the screen it shows you his stats. Or if you want to find out about Yosemite just ask Siri and it will find all related video and Web content available and give you exact answers to your query on the TV. But perhaps its greatest feat will most likely be to decipher instantly the plethora of Web-based video content that is online and neatly show on-screen what is available on that topic. For example, lets say you want to see something about how to roast a turkey. Siri could search its database and find out all of the best shows on TV, DVR or the Web and then post them on your screen for you to pick. And I mean any database, including anything you have bookmarked about roasting turkeys on any of your Mac’s or IOS devices that is now in the cloud and can be added to the list of available shows to watch on that topic.

As I wrote in an earlier column Siri is a voice technology that is actually a front end to multiple search engines. And more importantly, it will change the game when it comes to man-machine interfaces.
While Siri applied to the iPhone is a good start for Apple, I am convinced that they will apply Siri to all of their products in the future and on the TV it could have a dramatic effect on the way people interact with their televisions in the future. And since Apple can tie it to their iTunes and iCloud services as well, it will make it very difficult for competitors to catch up with them anytime soon.

This will be the most disruptive thing in the television industry to happen since the introduction of color and will eventually bury the remote and put the entire TV industry on a course to use voice as the new “remote.” And it will find ways to marry broadcast, cable, DVR and Internet content into manageable channels that brings all of it together in the cloud and displays it on voice demand on the TV screens throughout the home. And it looks like Apple will be the one to take the TV industry into this new century.

The second industry Apple is poised to disrupt is the auto industry. I have been searching for a new car and one of the major criteria in my search has been the ability to integrate my phone and its content into the navigation and sound system in the car. I want a Bluetooth connection as a speakerphone, but I also want it to use the content in my phone as an alternative to play music and podcasts and I want it done wirelessly.

In my search I was pleasantly surprised to see how far Microsoft’s Sync for Autos has come. And for the time being, this will be a big step for me since it also has voice prompts and commands. And to some degree their voice UI is pretty sophisticated. But it is no Siri.

Now, imagine if Apple began working with the auto companies directly and in extreme circumstances perhaps was able to get a 7-inch iPad with IOS into these cars. (This would be the equivalent of Apple doing a full Apple TV) In this case, it could have a 3G chip inside and be able to get a direct connection to the Internet. And of course, it would have Siri’s smart voice UI and voice comprehension technology. While most of its greatest features, such as searching for the closest bank or cleaners or pizza place would be restricted to parking mode, many other voice driven features could be part of the UI and service. It could get and respond to email via voice, and do text via voice, and more importantly, it would be tied to Apples iTunes and iCloud services. That means you would always have access to your content no matter what it is and could call it up on your cars display on demand.

But another way to do this would be to make the iPhone or iPad the host and the cars navigation screen the video terminal that just displays what is on these devices. If you have used an iPad with Airplay today you already understand the potential. Using Apple TV, I literally mirror the content on my iPad on my big screen TV. And if I use my iPhone 4S, I already have the Siri voice UI at least for my content. Now imagine having that type of voice UI and content connection in your car. Sure there would be restrictions while driving, but having that on the car’s screen running IOS and Siri could make the car’s information system even more relevant. Again, Apple could be the big disruptor that brings the auto industry into an information driven century in which information and personalized media becomes a key part of the auto traveling experience and force every one to follow in one-way or another.

The third industry Apple could turn upside down is the watch industry. For centuries, watches have been, for a lack of a better term, dumb watches. Only in the last 30 years have they gotten smarter with the introduction of things like calculator watches and more recently, chronograph and satellite watches tied to the atomic clock. But Apple has stumbled on something interesting with the Nano. Many people have started to use it as a watch. And a whole side industry has popped up that is creating watchbands for iPod Nano’s. I don’t believe Apple ever dreamed of the Nano as a watch but it has become a happy new application for their smallest iPod.

Interestingly, Microsoft took a crack at this idea a few years back with a product called the SPOT Watch. Its data link, which delivered news blurbs, weather and sports bulletins, was tied to an FM radio link. And Microsoft even partnered with Sunto and Swatch to create these watches to try to bring them to a high-end and low-end watch buyer. But unfortunately the SPOT watch never really took off. In 2008, Microsoft killed the product.

But, Apple could do some very interesting things with the Nano with just some simple tweaking. What if they put a Bluetooth radio inside and allowed it to become a mirrored display to my iPhone? I normally carry my iPhone in my pocket so when an alert comes up I have to pull it out to see it. But what if that alert showed up on my Nano Watch? Or what if they add a Siri Interface and tie the Nano display to the iPhone? I could just ask my watch to show me the last message or email I received through iMessage and it pops up on the Nano screen? And with voice feedback, Apple could perhaps tie it to the iPhones GPS and when walking, tell a person to turn right here or head north, to get to that coffee shop you just asked Siri about. Of course, they could put a WIFI radio on it as well and let it get a direct link to data when connected. But it would make more sense for it to use a Bluetooth connection and tie the Nano to the iPhones 3G radio so that it would be connected all the time. But as long as it is mirroring my iPhone, especially when it comes to receiving news, weather, sports and messages, the Nano could become one of those hot items that iPhone buyers would flock to and become another halo product that could drive people to buy iPhones.

And the fourth industry Apple could potentially impact is the appliance industry. In 1997, I did a speech at the Agenda conference where I envisioned a refrigerator of the future that would have a screen on it and it would be tied to the Internet. I suggested that it would have a bar code reader on it and that as I put items in the fridge, it would automatically put them in inventory. And as I took them out, and they did not return to the fridge, it would automatically put them on a shopping list on the screen. I even suggested that if I called up a recipe from the Internet, it would be smart enough to see what the ingredients were and pop them onto the shopping list and if programmed properly, it could even dial Safeway.com and all of it could be on my doorstep when I came home from work.

Of course, today we do have a couple of refrigerators with screens on them connected to the Internet, but that is all they are-Internet terminals.
If Apple applied their IOS operating system and married it to the iCloud, they could turn pretty much any screen integrated into things like a refrigerator, oven, or even cabinets into smart screens and make them application specific. They could all have access to the Internet and IOS apps, which could be tailored for their integrated locations. For example, what if I had an IOS screen embedded into the mirror in my bathroom. As I am preparing for work, it could be programmed to fetch weather reports, updated news items and info related to my commute. It could read out my daily appointment schedules and search my iCloud account for anything I want, including playing back music, podcasts or YouTube video as I prepare for the day.

You get the idea. I have no doubt that we will have many screens in our home and digital lifestyles and if Apple can make them all smart and unify them behind IOS, its Apps and iCloud eco-system, all of them could have quite an impact on the appliance industry of the future. And believe me, the appliance industry is interested. Besides embedding a screen on a refrigerator, they have also added internet connections to ovens, microwaves, lighting and air conditioning and heating systems to try to make them smart devices connected to an Internet eco system. But today, most of them are acting like terminals. For them to reach their potential, they need to have an OS that is tied to a broader eco system that could deliver even greater functionality through connectivity and IOS, Apple’s App’s and the iCloud could play in important role in helping this industry deliver smart homes and smart appliances.

But keep in mind, all of this could happen because Apple has created a fundamental unified platform that is tied to an OS, Apps and cloud eco system that is consistent across screens and can be made to be “application” specific depending on where that screen might be. So it is not too far a stretch to see how this platform, when applied to a TV, automobile, watch or appliances could benefit from something like this that would give it digital intelligence and make it smart.

I suppose if we think hard enough we could probably come up with some other industries Apple could impact with this platform. But I believe that the TV, auto, watch and appliance industries could be next on Apple’s “disruption” agenda.

Analysis: How Amazon’s Kindle Fire Will Impact The Tablet Market

I have been using the Kindle Fire for a while now and I am quite impressed with this new entry into the tablet space. Although one of Amazon’s major goals was to make this a great eBook reader, the fact that it runs on Android and can run Android apps, has a Web browser, and developers can write apps specifically for the Fire inevitably makes it a solid entry in the tablet market.

Some of my research colleagues had originally placed the Kindle Fire in the eReader category, but this does the Kindle Fire a grave injustice. This is a tablet in the full sense of the word and it will especially be competitive with Android tablets. Also, it is very clear that this is positioned only for a consumer audience. Unlike Apple’s iPad, this product would not translate well into a business markets as it stands today. A side note to this is that since it does have an LED screen, reading a page in direct sunlight is as difficult as it is on an iPad now.

I will not be doing a full review in the technical sense of the Kindle Fire as many of the gadget blogs will do that better than I could. However, before I discuss its impact on the market, I do want to point out a few things I like with the Kindle Fire and at least one thing I think would make it better in future versions.

When you pick up a Kindle Fire, the first thing you will notice is how brilliant the screens color and resolution is. It appears that Amazon spared no expense with this component. And its touch sensitivity is as good as I have seen on any of the higher end tablets on the market today. I have been using the iPad from day one and I have a personal preference for a tablet with a larger screen, but I was surprised to find how much I enjoyed reading books and perusing Web pages on this 7 inch form factor. Also, apps like Pulse worked the same as on my iPad, only in a smaller window.

But this also underscores a key issue that consumers need to think about when buying a Kindle Fire. This is really optimized for content consumption and NO content creation. When Apple introduced the iPad, they emphasized its use in content consumption. But within six months on the market, users began to find ways to optimize it for productivity and in some cases, real content creation. In fact, I often use the Zagg Bluetooth keyboard with my iPad and use it as a laptop replacement on many short trips I take. I would never consider doing something similar with the Kindle Fire.

While the Kindle Fire can run localized apps, especially downloaded games, its 6.5 gigs of actual available flash memory means you are highly limited on what can be downloaded for use when disconnected. However, when connected to a WIFI network, the Kindle Fire really shines. You can watch streamed video, stream music in real-time and gain access to apps with Web content.

One small gripe I have is where they locate the on/off switch. It is on the bottom of the device and is awkward to turn on and off in this position. On the next model I hope they put it on the side where it would be easier to access.

The Kindle Fire is the best of the 7-inch tablets bar none. The Android tablet vendors should be very concerned. At $199 Amazon is most likely taking a loss on each product but making it up when people buy books and other products in the Amazon ecosystem.

These devices tied-to-distinct eco-systems underscores another truism that I believe will drive market demand for tablets and other types of digital devices in the future. In fact, I’m not sure that there is an actual tablet market. Rather, the actual revolution-taking place in our tech industry is that the real market drivers going forward will be for broad ecosystems of apps and services that are optimized for various devices, one of which is a tablet, that can be plugged into this ecosystem and are designed to work especially well with these devices.

If you have used multiple Apple devices, such as the iPod, iPhone and iPad, this should have become obvious already. While you may be attracted to Apple’s cool looking products, they are really front ends to a rich ecosystem of apps and services that are designed to work extremely well with these dedicated Apple devices.

The iPod, iPhone and iPad are important vehicles designed to work perfectly with Apple’s ecosystem. And now, Amazon’s Kindle Fire is their first real hardware play that follows in Apple’s footsteps. Using this logic, I believe that Amazon will someday create other devices optimized to fully tap into their ecosystem such as a 10 inch tablet, perhaps a Netbook or UltraBook or even a smart phone. Keep in mind, this is not that big a stretch in thinking. If Amazon is smart, they find ways to drive more people to their ecosystem with optimized devices and expand their growth and fortunes in the same way Apple is doing with their device and ecosystem strategy.

Interestingly, although it uses Android, this is not an Android ecosystem they are tapping into. This is an Amazon walled garden that just happens to be on top of Android. And from this point on, it is their hardware, their software, apps and services they will build on. I once thought that Amazon did not want to be in the hardware business and really wanted to just get more vendors backing their ecosystem. But just like Apple, I believe they now realize that the idea of letting others take advantage of their ecosystem would be foolish. Instead, I believe they will build up their hardware prowess and use this as a key way to lock or tie their customers to a total hardware, software and solutions strategy going forward. And, I firmly believe that in the very near future, people will be buying into ecosystems of hardware, software and services, not devices, especially ones that are not optimized to work well with specific rich ecosystems.

So how will the Amazon Kindle Fire affect the market for Tablets?

As I stated earlier, it will have a major impact on Android tablet vendors. At the very least they will be forced to try and get their devices into Amazon’s price range. However, Amazon’s ecosystem is a key part of the Fire’s draw and in that sense, it leaves most of the Android competitors out in the cold. Yes, these competitors can tap into the Android world of apps, but they are still fighting Google on version provisioning as well having to work with an app store that is not curated. Also, most of the Android tablets coming to market are all the same, while Amazon differentiates through their eco system.

As for Windows 8 tablets, our current view is that these will be targeted more towards business customers. But unless Microsoft develops a rich ecosystem of their own for the Windows 8 world, Amazon and Apple will always have an edge.

As for competing with Apple, the Kindle Fire is not a threat at all to Apple’s iPad in business. To date, this is still the market leader and it won’t get any serious competition, especially from the Windows 8 camp, until at least Oct of 2012.

But at the consumer level, the Kindle Fire is clearly going to be a competitor to the iPad in the sense that it is going after a consumer audience. And at $199.00 it gives the consumers a serious option in tablets for use for content consumption.
I also believe that it could force Apple to bring the price of the iPad down faster than they had planned.

But there are three key things to consider when comparing the Kindle Fire against the iPad. I see Apple’s iPad as representing the top end of the market for tablets and one that is becoming a cross functioning device. That means it is good for content creation and great for content consumption. And with its 9.6 inch screen and over 140K apps written just for the iPad, even with its pricing today, it is and will continue to be a market leader in tablets. And I believe they will still sell 15+ Million per quarter at least through 2012.

And while the Kindle Fire is aimed at the same consumer audience, Amazon will need to enhance their eco system consistently if they plan to really compete with the iPad in the future. Also, its 7-inch screen and form factor may be a drawback to some who really do want a larger screen in their tablet. But that said, the Kindle Fire will be a huge hit for Amazon and I would not be surprised to see them sell close to 4 million during the holiday quarter.

The second thing to consider is that there is a very large audience who are OK with what I call “good enough” tablets. While many consumers may still be lusting after and iPad, its current price remains a drawback for some. And while the Kindle Fire is smaller than the iPad and has less in the way of apps and even services, it will be good enough to many and serve as their first real entry into the world of tablets.

The third thing to remember is that the tablet market is in its infancy and I believe could eventually be bigger than the PC market. Key reason is the ultimate portability of the tablet and as we get more ubiquitous connections, this will be an ideal form factor for millions of people who want a device with a larger screen then their smartphone with them when they leave the house or hit the road.

Just as the iPad became the major disruptor in mobile computing, I expect the Kindle Fire to set the tone for low-cost tablet devices and be the leader in this price category for quite a while thanks to the Kindle Fire’s high quality design that is tied directly to an Amazon Eco system of software, apps and services.

Thailand Floods and Their Impact For PC Shipments

The monsoon rains and floods of Thailand has affected close to 1000 factories across central Thailand and is having a major impact on the hard drive industry. I spoke with my contacts in Taipei last night that told me that the fall out from this, both in human terms as well as business terms would be huge.

At the human level, over 50 thousand jobs are affected in the short-term. But a more urgent problem has arisen. There is now an outbreak of malaria that has struck the area and is causing serious health concerns. And that has now become the government’s priority. Western Digital and Toshiba are the hardest hit and Seagate and Hitachi have been shut down by supply constraints. Seagate could use this to gain ground on Western as their facility was on high ground and will not have to make any capital equipment investments like the others whose equipment were wiped out by the flooding. But they are still impacted by supply constraints.

At the business level, Thailand supplies over 60% of worldwide hard disk drives and 50% of assembly capacity. Even drives assembled somewhere else depend on Thai produced parts.

My sources in Taipei say that this will have a dramatic impact on most PC vendors ability to deliver the amount of PCs they have forecasted in Q1. They believe the shortages of disk drives will mean that it will decrease by at least 30% the amount of PCs that could be shipped in Q1. And because the situation in Thailand is so fluid, they can’t predict how much better things could be in Q2 of 2012 either.

And while PCs are being impacted by this shortage of HDD, so are things like Digital A/V equipment, Digital Imaging systems, and DVR’s as well as in-car navigation systems that are all moving to hard drives to handle their maps and new Internet apps.

What this means for consumers is that if you are looking at buying a PC, do it now. We could see price increases start hitting as early as Dec. All of the PCs and laptops on the shelves now have been priced at the current rate for HDD, while PCs that will ship starting in Dec could see price increases already hitting them by mid month.

And if my sources in Taipei are correct, the component price for HDD’s factored into laptops and desktops could be as much as 20% more by Q1 and some have told me it could be as much as 30-50% given the extreme shortages.

If there were a silver lining to this problem it would be that it could push more of the OEM’s to adopt SSDs for some laptops and all Ultrabooks, and with greater demand for SSDs, SSD prices could start coming down.

Marrying Android and Windows

Earlier this year I discovered an interesting company by the name of Bluestacks who said they had a virtual engine that would allow a person to run Android apps on a Windows PC. When I say I discovered them, this is an understatement. They moved into the office next to mine so it was pretty easy to find them.

But I had actually heard about them from some of my OEM clients who were quite excited about what they had been shown by Bluestacks. So I met with them and became quite interested in their technology.

It turns out that Bluestacks is one of those gems that early stage investors love and so far they have been backed by Andreeson Horowitz, Redpoint, Ignition Partners, Radar and Helion (Jeff Bezo’s VC fund) with strategic investments coming from AMD, Citrix and two others who are not public yet.

The CEO and founder, Rosen Sharma, who is a veteran of many tech startups, realized that many people who have an Android phone or tablet, would really like to have those same apps on their PC. So he set about creating a technology that would virtualize Android on Windows so that people could take their apps from their Android device and send it via a piece of software downloaded on to their device called Cloud Connect directly to the Bluestacks player on a Windows PC.

So, when a user goes through this simple procedure, your Android Apps just show up in the Bluestacks Player on Windows and like magic, they just run on Windows as is and in full screen with no performance degradation. That means software written for Android such as Pulse, Flipboard, or any apps written just for Android will now run on your Windows PC and be tied to the data layer of your Android version as well.

Although Bluestacks has a “Get More Apps” section built into the player itself, most of the ones there now are just to show you what can be done. In the real world, people will just download their Android apps from the Android Marketplace or Amazon’s Android store and then use Cloud Connect to transfer them to their Windows PC.

The program is in Alpha now, but it is pretty solid even in this state. They have a lot of new features and enhancements planned that would give their program even more functionality, but to be honest, just having my Android apps on my PC is already a good reason to try it out. And all this is free. I do believe that they will offer some premium services and apps eventually that would have a cost tied to it, but from what I can tell, most of what they offer will be free to the user when it comes to running almost all of a person’s Android apps on their Windows PC.

Check it out at www.bluestacks.com

Why HP Has Chosen to Make A Windows 8 Tablet

When it comes to being a PC vendor these days, life is tough. For 30 years they have had a cozy business and only had to worry about designing two major form factors. Desktops and laptops were their bread and butter and they mainly needed to focus on enterprise, SMB and consumer markets.

But over the last two years, with the introduction of tablets and smartphones, their world has been turned upside down. Their enterprise customers are bringing iPhones and Android phones to their IT managers and asking them to support them. And now, iPads, and to some minor degree, Android tablets, are entering IT through the back door as well.

Now, these major PC players have to seriously consider significant plays in tablets and smartphones if they want to keep their IT customers happy. But, even their consumer users want tablets and smartphones from these vendors since they are well-known brands and in most cases, are known for their services and support.

But until recently, if the OEM’s wanted an OS for these products, they pretty much had only one option at their disposal. Android came along at a time when, for most PC vendors, it looked like it was a godsend. But after two years of trying to deal with Google and their scattered approach to designing and releasing so many versions of Android at irregular intervals and favoring marquis partners for major releases, some of the really big PC vendors are de-emphasizing or backing away from Android and are now seriously considering Windows 8 on tablets instead.

I was recently in a meeting with two PC vendors who were wrangling with the issue of backing Android or Windows 8 in tablets and while they still viewed Android as a viable product for potential consumer customers, they have pretty much concluded that if they want a tablet to be accepted by their business customers, they need to back Windows 8 on tablets and especially the ones supporting based on Intel silicon.

The key issue for business is backward compatibility. Although developers will have to adapt their apps to run the Metro UI for tablets, they won’t have to re-write much of the applications code as they would for use with ARM processors. And for users, they can be pretty much be assured that they can run Windows apps even without the Metro touch UI if needed by using the pen input as the mouse on most of these Win 8 tablets that will be out next year.

As for Android support in tablets for business, the interest from the big vendors is waning. There are a lot of reasons for this, but in the chart below, Michael DeGusta created this chart to show the Android and iPhone update history. As you can see, Android’s scattered releases alone have caused nightmares for tablet and smart phone vendors and this type of release schedule within enterprise is just not acceptable.

Of course, HP was the only company to buck the Android trend completely. They bought webOS and, to their credit, had hoped that they could build an ecosystem around webOS so that they had total control of this OS and their ecosystem themselves. Interestingly, they started out backing Android but wisely dropped it as they foresaw serious problems with this OS on many levels. The key one was that they were very concerned that Google did not have a good grasp on how to create a mobile OS that would meet the need of their core customers. So, they bought webOS with the thought that they could use this to create a more robust and secure OS for business and consumers.

Of course, as you know, things have not gone well with webOS and at the moment, it is not clear what HP will do with this great mobile OS. But it is pretty clear that they still do not see Android as an OS they wish to support.

HP actually has a long history of Windows tablet support and has sold it to many vertical market customers over the years. At CES 2009, HP publicly backed Microsoft’s Windows Tablets in Microsoft’s keynote. But with their turning their back on Android and webOS not living up to their own expectations, they pretty much were forced to turn back to Microsoft and will indeed, make Windows 8 on tablets their preferred tablet OS.

For enterprise, this is a no brainer. But they do have some latitude to back even ARM based tablets for consumers with Windows on ARM as well.

So, with HP keeping the PC division and tablets becoming a very important part of the business segment, HP, Dell and Lenovo along with the traditional PC vendors are all going to back Windows 8 on tablets in a big way. Unless Google changes their way of dealing with these vendors, I suspect that they will all eventually ratchet down support for Android tablets and instead put all of their weight behind Windows 8 on tablets, at least when it comes to tablets in the enterprise.

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Dan Lyon’s Newsweek discussion with Steve Jobs’ Biographer Walter Isaacson

One of the best tech writers I know is Dan Lyons also known for his Fake Steve Jobs column that over the years that comically portrayed Steve Jobs blogging about his views of life and tech. Earlier this week, he posted a piece on the Daily Beast of his talk with Isaacson about the book and more importantly, Isaacson’s personal views about Steve Jobs. It is such a good piece and one that gives even greater insight to Steve Jobs than comes from the book itself, that I wanted to bring it to our reader’s attention.

I give you the first few paragraphs of the article and then a link for the full article that I highly recommend you read as it really captures a perspective about Jobs that is important for us in the tech world to understand.

Dan Lyons with Walter Isaacson on his impressions of Steve Jobs
Walter Isaacson’s new biography of Steve Jobs is the smash-hit book of the year, but Isaacson is dismayed that so many journalists writing about the book (myself included) have latched onto the anecdotes about Jobs behaving like a monster to the people around him, without setting those anecdotes against the larger picture of everything that Jobs accomplished in his life.

“You have to judge people by the outcome,” says Isaacson, the former editor of Time magazine who has written bestselling biographies of Benjamin Franklin and Albert Einstein and who is also president and CEO of the Aspen Institute, a nonprofit focused on education issues.

“In the end, Steve Jobs had four loving children who were all intensely loyal to him and a wife who was his best friend for 20 years. At work he ends up with a loyal professional team of A players at Apple who swear by him and stay there, as opposed to other companies that are always losing good talent. In the end he was an inspiring person. He inspired loyalty and real love. So you judge him by that.”

Also worth noting, Isaacson says, is that when it came to tough talk, Jobs could take as well as give. Jobs respected and even rewarded people who would argue with him. “In the early days at Apple they used to give an award to whoever stood up to Steve the best,” Isaacson says. “Those people often ended up getting promoted.”

For the balance of the article you can read it here.

Why Google and Microsoft Hate Siri

As I watched Andy Rubin’s interview at the WSJ D Asia conference I became highly intrigued by the comments he made about Apple’s Siri. Rubin told Walt Mossberg “ I don’t believe your phone should be an assistant…Your phone is a tool for communicating,” he said, “You shouldn’t be communicating with the phone; you should be communicating with somebody on the other side of the phone.” (

Here is a link to the interview if you haven’t seen it.

And then Microsoft’s Andy Lees, when questioned about Siri said it “isn’t super useful.” At the same time, he noted that Windows Phone 7 has a degree of voice interactivity in the way it connects to Bing, and thus harnesses “the full power of the internet, rather than a certain subset.”

What are these two guys smoking? They both seem to miss the fact that Apple has just introduced voice as a major user interface and that its use of voice coupled with AI on a consumer product like the iPhone is going to change the way consumers think about man-machine interfaces in the future. I wrote about its impact on future UI’s last week and believe that it is just the start of something big.

I have two theories about their response. One is based on jealously and one that is future driven, based on what Siri really will become very soon and its ultimate threat to their businesses. The first has to do with the fact that both companies have had major voice UI technology in the works in their labs for a long time. In the case of Microsoft I was first shown some of their voice research back in 1992. In Google’s case people in the know have told me that they have had a similar project in development for over 7 years. And in both cases they are way–way behind Apple–especially in Siri’s AI capabilities and speech comprehension technology.

Interestingly, for even Apple it has taken a long time to get their voice technology working correctly. In fact, in the early 1990’s, I spent some time with Kaifu Li when he was at Apple working on a speech and voice recognition technology called Plain Talk. At the time, he was considered one of the major minds on this subject and when, after a short stint at Silicon Graphics, he joined Microsoft, one of his key projects was working on speech technology for them. Of course, if you know about Kaifu Li, you know that he left Microsoft to go to Google and was the subject of a major lawsuit between Microsoft and Google because Microsoft thought he would disclose to Google too much of what Microsoft was doing when he joined Google.

Microsoft and Google, especially since they had the mind of Kaifu Li working on various projects while he was at these companies, cannot be too pleased that Apple was the one to actually harness voice and speech comprehension ahead of them since both have been working on similar technologies for quite some time. You can bet that if they were the one’s announcing a breakthrough voice technology they would be touting it as loud as possible. Instead they are downplaying it and to be honest, making real fools of themselves and their companies in the process.

But the real reason these two companies hate Siri is because of what it will become in the very near future. In case you haven’t noticed it yet, Siri’s voice technology is actually a front to some major databases, such as Yelp, Wolfram Alpha and Siri’s own very broad database. But what it is really doing is serving as the entry point for searching these databases. So, I can ask Siri to find me the closest pizza joint and it quickly links me to Yelp, then to Google maps. On the surface this might look good for Google and Yelp since it ties them to these third-party sites that get the advertising revenue from this search. But what if Apple owned their own restaurant recommendation service and mapping system? They could divert all of these ad revenues to themselves. Here is an obvious prediction then if that is the case. How long do you think it is before Apple buys Yelp or Open Table and MapQuest or a similar available mapping service?

How about searching for autos? Ask Siri where the closest BMW dealers are. It comes back and shows you the three or four BMW dealers within a 25 mile radius on a Google Map. But what if it could also tie you to Edmund’s database and instantly give you ratings of their cars, and dealers running specials? Or perhaps you are looking for an apartment in Hoboken? Ask Siri about available apartments in Hoboken and someday it could perhaps link you to Apartment Finder and while they might not need to own this database, Apartment finder would be Siri’s preferred first site to “search” for apartments and Apple would get a share in ad revenue from these searches.

Indeed, it is pretty clear to me that Apple has just scratched the surface of the role Siri will play for them in driving future revenue. At the moment, we are enamored with its ability to enhance the man-machine interface. But that is just the start. Siri is actually on track to become the first point of entrance to “search” engines of all types tied to major databases throughout the world. And it will become the gatekeeper to all types of searches and in the end control what search engine it goes to for its answers.

For this to work for Apple, they need to start acquiring or at least developing tighter revenue related partnerships with existing databases for all types of products and services. And then make Google or Bing the search engine of last resort for Siri to use if can’t find it in its own or its partner’s databases at Apple’s disposal. Oh yeah, and tie all of these searches to their own ad engine and drive as much of Siri’s “search” to one’s they have a revenue share deal with or own.

Yes, Siri is an important product for enhancing our user interface with the iPhone. But Siri is in its infancy. When it grows up, it will be the front end to all types of searches conducted on iPhones, iPads, Mac’s and even Apple TV. And, if I were Google or Microsoft, perhaps I too would be playing down the impact of Siri since they know full well that it is not just a threat to their product platforms, but to their core businesses of search as well. In fact, they should be quaking in their boots since Apple is taking aim at their cash cow search businesses with their technology and could very well impact their fortunes dramatically in the future.

For Apple’s investors, the call for them to start paying dividends on their cash hoard is too short-sighted. Instead, they should be encouraging Apple to start buying up as many databases and services they can and begin the process of entrenching Siri’s role as the first line of offense when searching for a product and service and get the search ad revenue from this for themselves. I believe that if they do this, they could probably add another $3-$5 billion in quarterly revenue to their already healthy business model within three years, as search becomes another profit center for Apple.

So, don’t think of Siri as just a voice UI. Rather, think of it as the gatekeeper to natural language searching of diverse databases and search engines that Apple will link to an ad model that I believe will eventually make Apple the third major search company in the world someday.

Highlights of KPCB’s Mary Meeker Presentation at Web 2.0 Summit

One of the smartest people covering our industry is Mary Meeker, formerly of Morgan Stanley and currently with VC giant Kleiner Perkins. This week she gave a major presentation at the Web 2.0 summit and as usual, here material is stellar and significant.

Image Credit: Matthew Ingram
Here is the link to the presentation itself and in this post I want to highlight a couple of her observations.

In slide 6 Mary points out that the top Internet properties by global monthly unique visitors are, Google with 1.1 billion, Microsoft with 850 million, Facebook, with 775 million and Yahoo with about 700 million. Interestingly by her account, Apple only gets about 300 million unique global users and China’s Baidu, the largest search engine in China, records just about 210 million per month.

From these charts you can see that the real power brokers are Google and Microsoft and along with Facebook and Yahoo they have the most influence through the Internet around the world. With this type of power, comes significant responsibility. These are huge numbers and you can see why the battle between Microsoft and Google is so fierce. Ultimately, these eyeballs translate into billions of dollars in quarterly earnings and keeping this type of momentum with consumers is critical for all of these companies growth. One really interesting note to this is what if Baidu buys Yahoo. Jack Ma, CEO of Baidu has stated he wants to buy Yahoo and merge it with Baidu. If that happened, could a Chinese company become the biggest Internet player influencing the Internet World? This is one to watch.

In slide 7, she points out that China added more Internet users than exist in the USA.

Another interesting data point is in slide 8 where she shows how many hours are spent on social networking sites per month in certain countries. Israel leads the pack with 11.1 hours, followed by Argentina with 10.8 hours, Turkey 10.3 hours and Chile at 10.2 hours. And the USA is last on her list at 6.8 hours per month.

On slide 13, she shows that smart phones have surpassed feature phone shipments in W. Europe. But in slide 14 she puts this into perspective by pointing out that there are 5.6 billion mobile phone subscribers WW and that only 835 million have smartphones. The upside in smart phone growth will be spectacular. In fact, in our research projections we believe that by the end of 2102, 65% of US cell phone users will have smartphones and by 2015, 65% of WW users will have smartphones.

In slide 17 she gives the numbers to show that at the moment the smartphone and tablet market is a two-horse race. To date, cumulatively, Apple has shipped 129 million iPhones while Google has shipped 152 million Android Phones. At the moment, Apple has shipped 29 million tablets to Androids 16m WW. Although with Apple’s numbers released yesterday on iPad sales for this last quarter, they are closer to a 39 million installed base now and we believe it will top 50 million installed base by the end of Q4 2011.

A most important slide is #20. This outlines the sharp growth in mobile advertising and highlights the fact that quarterly smartphone mobile ad impressions have grown from 37 billion impressions in Q 4 2010 to Q3 1011, which had 250 billion mobile ad impressions.

Mary ends her slides with these comments;

On the economy

“Often darkest before dawn. At least we know what the problems are. Now we need the resolve to fix them. Across-the board sacrifice in needed.

On the tech industry

Wow! Unprecedented times! If you can keep your head when all about you are losing theirs. * Rudyard Kipling- “if”

These are just some highlights of a deck of 66 slides and a rather thorough presentation. But if you follow the tech market, it is worth spending time perusing this presentation as it has a lot of good information to think about.