Category: Smart Phones

Galaxy Note 7: The Death of a Smartphone

It’s hard to imagine a much worse scenario.

The world’s leading smartphone company debuts a new device that initially is touted as one of the best smartphones ever made. Glowing reviews quickly follow and the company’s prospects for a strong fall and holiday season, and the opportunity for regaining some lost market share, seem nearly assured.

But then a small number of the phones start to overheat and catch fire. The company tries to react quickly and decisively to the concern and issues a recall of several million already shipped devices. It’s a somewhat risky and certainly expensive move, but the company initially receives praise for trying to tackle a challenging problem in a positive way.

Customers are reassured that the problem seems to lie not in the phone itself, but in a battery provided by one of the company’s third-party battery suppliers (ironically, most believe the culprit to be Samsung SDI—a sister company of Samsung Electronics).

And then, the unthinkable. Replacement phones start to show the same problems and the company is forced to stop the production and sale of the device, encourage its telco and retail partners to stop selling it, and tell all its existing customers to stop using it. Just to add insult to injury, the US Consumer Products Safety Commission (CPSC) also sends out notes to consumers encouraging them to stop using the device, while the Federal Aviation Administration (FAA) and major airlines around the world reinforce the message they’ve been saying for the last several weeks on virtually every airplane flight in the world: don’t use, charge or even turn on your Samsung Galaxy Note 7.

It’s probably the most negative publicity a tech product has ever seen. The long-term impact on the Samsung brand is still to be determined, but anyone who’s looked at the situation at all knows it can’t be good. At this point, it appears that the Note 7 will likely end up being removed from the market, costing Samsung billions of dollars, and there’s even been some concern expressed about Samsung’s ability to save/sustain the Note sub-brand.

Part of the issue isn’t just the product itself—although that’s certainly bad enough—but the manner in which the company is now handling it. Reaction has quickly moved from praise for Samsung’s initial quick efforts to address the issue, to disbelief that they could let a second round of faulty products that are this dangerous get out the door.

On top of that, there are many unanswered questions that need to be addressed. From a practical perspective, what is the cause of the problems if it isn’t the battery cell (the charging circuits?) and what other phones might face the same dangerous issues? Why did Samsung rush out the replacement units without actually figuring out what the real cause was? What kind of testing did they do (or not) to be sure the replacements were safe?

Beyond these short-term issues, there are also likely to be some bigger questions that could have a longer-term impact on the tech market. First, what types of procedures are in place to prevent this? What governmental or industry associations, if any, can take responsibility for this (besides Samsung)? Will products need to go through longer/more thorough testing procedures before they’re allowed on the market? Will product reviewers need to start doing safety tests before they can really make pronouncements on the quality/value of a product? How can vendors and their suppliers work to avoid these issues and what mechanisms do they have in place should it happen again to another product?

Some might argue that these questions are an over-reaction to a single product fault from a single vendor. And, to be fair to Samsung, there have certainly been reported cases of other fire and safety-related issues with electronics products from other vendors, including Apple, over the last few years.[pullquote]Our collective dependence on battery-driven devices is only growing, so it may be time to take a harder, more detailed look at safety-related testing and requirements.[/pullquote]

But when people’s lives and health are at stake—as they clearly have been with some of the reported Galaxy Note 7-related problems—it’s not unreasonable to question whether existing policies and procedures are sufficient. Our collective dependence on battery-driven devices is only growing, so it may be time to take a harder, more detailed look at safety-related testing and requirements.

Given the breakneck pace and highly competitive environment for battery-powered devices, there will likely be industry pushback against prolonged or more expensive testing. As the Galaxy Note 7 situation clearly illustrates, however, speed doesn’t always work when it comes to safety.

Finally, the tech industry needs to take a serious look at these issues themselves, and figure out potential methods of self-policing. If they don’t, and we start hearing a lot more stories about other devices exploding, catching on fire or causing bodily harm, you can be assured that some politician or governmental agency will use the collective news to start imposing much more challenging requirements.

As the old saying goes, better safe, than sorry.

Top Tech Predictions for 2016

Another year has come and gone, and in the tech world, it seems not much has changed. 2015 was arguably a relatively modest year when it comes to major innovations, with many of the biggest developments essentially coming as final delivery or extensions to bigger trends that started or were first announced in 2014. Autonomous cars, smart homes, wearables, virtual reality, drones, Windows 10, large-screen smartphones, and the sharing economy all made a bigger initial mark in 2014 and continued to evolve over this past year.

Looking ahead to 2016, I expect we will see changes that, on the surface, also don’t seem to amount to much initially, but will actually prove to be key foundational shifts that drive a very different, and very exciting future. Here are the first five of my predictions of key themes for the new year (the next five will appear in next week’s column.)

Prediction 1: The Death of Software Platforms, The Rise of the MetaOS

Proprietary software platforms like iOS, Windows, and Android have served as the very backbone of the tech industry and the tech economy for quite some time, so it may seem a bit ludicrous to predict their demise. However, I believe the walls supporting these ecosystems are starting to crumble. Device operating systems were built to enable the creation of applications that worked on specific devices, and they did an incredible job—perhaps too good—of doing just that. We now have somewhere between 1.5 and 2 million apps available each for iOS and Android and hundreds of thousands of Windows apps. The problem is, the vast majority of people download less than a hundred and actually use more like 5-10 apps on a regular basis.

More importantly, most consumers now own and regularly use multiple devices with multiple operating systems and what they really want isn’t a bunch of independent apps, but access to the critical services that they access through their devices. Yes, some of those services are delivered through apps, but many of the biggest software and service providers are altering their strategies to ensure that they can deliver a high quality experience regardless of the app, device, OS, or browser being used to access their application or service. Factor in the increasing range of smart home, smart car, and other connected devices we’ll all own and regularly use in the near future—plus the general app fatigue that I think many consumers now feel—and the whole argument around an app-driven world starts to make a lot less sense.

Instead, from Facebook to Microsoft to DropBox and hundreds of other cloud service providers, we’re seeing companies build what I call a MetaOS—a platform-like layer of software and services that remains independent of any underlying device platform to deliver the critical capabilities that people are ultimately looking to access. Bigger companies like Facebook and Microsoft are integrating a wide range of services into these MetaOS platforms—particularly around communications and contextual intelligence agents—that will increasingly take on the tasks and roles that other individual applications used to. Want access to media content or documents or (eventually) commerce and financial services? Even better, want a smart assistant to help coordinate your efforts? Log into one of these MetaOS megaservices and your unique digital identity (another key element of a MetaOS) will give you secure access to these services and much more.

Look for Google, Apple, and Amazon, among others, to start making a bigger effort in this area, and expect to see some of these larger companies make key acquisitions to fill in gaps in their MetaOS efforts over the course of the next year. This isn’t something that’s going to happen overnight, but I think 2016 will be the year we start to see more of these strategies take shape.

Prediction 2: Market Maturation Leads to Increased Specialization

The era of products that appeal to a broad, cross-section of all consumers is coming to an end and it’s being replaced by a new era where we will see more products that are more tightly focused on specific sets of customers. The key product categories have matured, and it’s hard to find broad new product categories that appeal to a wide range of consumers in the same way that PCs, tablets, and smartphones have.

That’s not to say that we won’t be seeing any exciting or interesting new product categories—after all, something has to be next year’s hoverboard—but they won’t have the same kind of wide-ranging impact that the now more “traditional” smart devices have had. As a result, I think we’ll see a wide variety of sub-categories for smart homes, connected cars, wearables, drones, VR headsets, and consumer robotics that will perhaps sell in the tens or hundreds of thousands instead of the tens of millions that other product categories have enjoyed. The Maker Movement and crowd-funding efforts will go a long way towards helping drive these changes, but I also expect that we’ll see the China/Shenzen hardware ecosystem start to adjust and focus more efforts on being able to specialize and even personalize devices. The end result will be a wider range of devices that more specifically meet different consumers’ needs. At the same time, I believe it will also be harder to “find the pulse” of where major hardware developments are headed, because they will be moving in so many different directions. The key will be in developing manufacturing technologies that can enable greater abilities to specialize and that can produce products profitably with lower production runs.

Prediction 3: Apple Reality Check Leads to Major Investment

Apple has had an incredible run at the top of the technology heap for quite some time and, to be clear, I’m not saying that 2016 is the year this will end. What I am saying, however, is that 2016 is the year the company will face some of its biggest challenges, and the year that the “reality distortion field” surrounding the company will start to fade. With two-thirds of its revenues dependent on a single product line (the iPhone) that’s running into the realities of a slowing global smartphone market, the company is going to have to make some big new bets in 2016 in order to retain its market-leading position. I’m not exactly sure what those bets might be (augmented/virtual reality, financial services, automotive, enterprise software, media, or some combination of all of the above), but I’m convinced there are a great deal of very smart people at Apple who are undoubtedly thinking through what’s next for them. Maintaining the status quo in 2016 doesn’t seem like a great option, so this should be the year they seriously tap into that massive cash reserve of theirs and make some major, game-changing acquisitions.

Prediction 4: The Great Hardware Stall Forces Shift to Software and Services

As most companies besides Apple have already learned, it’s very hard to make money on hardware alone, and those problems will only be exacerbated in 2016. With expected declines in tablets and PCs, the flattening of the smartphone market and only modest overall uptake for wearables and other new hardware categories, we’re nearing the end of a several decade-long run of hardware growth. We’ll see pockets of opportunity to be sure—see Prediction 2 above—but companies who have been primarily or even solely dependent on hardware sales are going to have to make some difficult decisions on how they evolve in the era of software and services. As a result, I expect to see more major acquisitions such as the recent Dell/EMC/VMware deal. The challenge, of course, is that many hardware-focused organizations don’t have the in-house skill sets or mindsets to make this transition, so I expect we’ll see very challenging times for some hardware-focused companies in 2016.

Another potential impact from this hardware stall could be an increased desire for hardware companies to become more vertically oriented in order to maximize their opportunity in a shrinking profit pool. This could lead either to acquisitions of key semiconductor vendors and other core component providers by device makers, or vice versa, but either way, hardware-focused companies are going to have to focus on maximizing profitability through reduced costs. After decades of widening the supply chain horizontally, it seems the pendulum is definitely swinging back towards vertical integration.

Prediction 5: Autonomous Car Hype Overshadows Driver Assistance Improvements

The technological advancements in automobiles have been impressive over the last year or two, with the idea of a connected car, and even a partially automated car, quickly moving from science fiction to everyday reality. However, there are still a number of major legislative, social, and technology challenges that need to be overcome before our roadways are filled with self-driving cars. The real advancements that are starting to take place in advanced driver assistance systems (ADAS), such as lane departure warnings, automatic braking, more sophisticated cruise controls, etc., offer some very beneficial safety benefits. But they’re not as sexy as autonomous driving, so much of the press seems to be overlooking them. Even the car vendors seem to be focused more on delivering their vision of autonomous driving than on what we’ll be able to actually purchase and drive over the next five years. In reality, they’re showing the modern-day version of concept cars instead of production cars, but that point is being missed by many. Remember that, unlike the tech industry, the automotive industry regularly builds and displays products it has little or no intention of ever releasing to the world at large.

Improvements in car electronics and intelligence are happening at an impressive pace, and the quality of our in-car experiences is going to change dramatically over the next several years. It’s important to put all the advancements in context, however, and recognize that they’re not all going to occur at the same time. We’re really just now starting to get high-quality connectivity into the latest generation cars, and there are many improvements that we can expect to see in infotainment systems (with or without Apple and Google’s help) over the next few years. As we learned this past year, there are still critical security implications just from those changes, and they won’t all be easily resolved overnight.

Eventually, we will get to truly autonomous cars that regular people can actually buy, but it’s important to understand and appreciate the step-by-step advancements that are being made along the way. These advancements may not be as revolutionary as driverless cars, but they are the news that the automotive industry can realistically deliver on over the next 12 months. Unfortunately, I think the message is going to be lost in the noise of “autonomous automania” this year, leading to thoroughly confused consumers and unrealistic expectations.

Next week I’ll finish off my 2016 predictions with five more on wearables, foldable displays, IOT, connected homes, and VR/AR. In the meantime, have a Happy New Year!

Flat Slab Finale?

The Mobile World Congress (MWC) show in Barcelona has always been somewhat of a paean to the mobile phone and, for the last several years, to smartphones. This is the trade show where the world has witnessed the flattening and expanding of smartphones from the smaller screen, thicker devices of just a few years back into the thin, large-screen devices they are today. With the exception of Apple—who never has a booth here—many other companies have also used the show as a launching point for a fair number of tablets.

In other words, Barcelona has become the place where most of the world’s vendors have introduced a whole lot of flat slabs of smart glass. This year’s show was no exception. Samsung introduced the S6, HTC unveiled the M9, Microsoft released the Lumia 640, Sony introduced the Xperia M4 Aqua, etc.

Many of these new smartphones offered some notable improvements over their predecessors—better cameras, faster processors, tougher glass, slightly slimmer sizes, and all the other things that have come to represent enhancements to today’s smart phones.

But as with CES, I was disappointed to find that virtually no company has done any fundamental rethinking or redesigning of smart phone form factors. It’s a bunch of smart, flat, planes of glass.

The problem is, that’s not really exciting any more. We can’t exactly get bigger screens without getting devices that are too big. In fact, several vendors have pulled back from 6” and larger devices and settled down into the 5-5.5” sweet spot that most vendors and consumers seem to see as a relatively ideal size. We may be able to shave off a few fractions of a millimeter in width, but only at the expense of battery size and, likely, battery life. Bottom line is, it increasingly feels like we’ve come to the end of the line when it comes to the basic design of both smart slab smartphones and smart slab tablets. We’ll continue to see improvements in the internals, of course, but despite vendors’ best efforts, all these devices are increasingly looking the same.[pullquote]It increasingly feels like we’ve come to the end of the line when it comes to the basic design of both smart slab smartphones and smart slab tablets.”[/pullquote]

To be fair, this form factor seems to work for most consumers overall, but they provide absolutely zero tactile feedback. Now that lack of feedback has been perfectly fine on billions of smartphones sold over the last few years, but it feels like the time has come to rethink where smartphone and tablets designs are going.

We have seen an interesting experiment via LG’s Flex smartphone, which features a curved screen, but not really much else. There have also been some demonstrations of interesting haptic technologies, which provide force feedback to users of touch-based devices, such as tablets and smartphones. The latest is the Tactus Phorm iPad Mini case, which uses a fluid-based screen overlay technology that can generate physical keys seemingly out of nowhere and then disappear when they’re no longer required. In addition, I’ve heard rumblings of technologies that can leverage supersonic audio waves to generate a type of haptic force feedback as your hand hovers over a flat display. Nothing, however, has really made any kind of impact just yet.

I made the prediction at the beginning of the year —and have since had the thought verified by a number of long-time industry players—that we are overdue for much more tactile devices and experiences. So far, the market hasn’t moved in that direction, but I’m certainly hoping that by next year’s MWC, we’ll be able to start looking beyond the flat slabs of today to more interesting form factors of tomorrow.

VCs On The Wrong Side In The Smartphone Wars

Think of how much better your life is now you have an iPhone or one of its many virtuous progeny…iPad, Android, apps, mobile-optimized games, content and services. Do you want to go back to before smartphones, before tablets? Unlikely. Yet many VCs do. Hence their self-interested handwringing over the alleged slow death of the mobile web.

Do not be fooled. The web is thriving.

The real issue? VCs fear the easy money days of amassing their fortunes atop publicly financed, freely available platforms is long gone. Now they are faced with the daunting prospect of either building their investments inside the thriving iOS or Android ecosystems, both of which demand their fair share of any booty, or figuring out ways to route around these two clever giants.  

This is very unlikely to happen. 

iPhone, Android, native apps and today’s infinitely scalable private platforms continue to deliver benefit after benefit to users around the world.

A Tax On Venture Capitalists

Chris Dixon of Andreessen Horowitz (A16Z) bemoaned the declining state of the “web” last week, squarely blaming iPhone, App Store and all it has wrought.

What wins mobile, wins the Internet. Right now, apps are winning and the web is losing. Moreover, there are signs that it will only get worse.

Worse for whom? Not me. Likely, not you. Worse, perhaps for a venture capitalist. Just like the original incarnation of the web was worse for music companies and newspapers.

Dixon continues:

Resources are going to app development over web development. As the mobile web UX further deteriorates, the momentum toward apps will only increase.

Resources following users is not a problem. Moreover, Dixon appears to hold a rather limited view of the web. As John Gruber noted last week:

We shouldn’t think of “the web” as only what renders in web browsers. We should think of the web as anything transmitted using HTTP and HTTPS. Apps and websites are peers, not competitors. They’re all just clients to the same services.

The fact is, the “mobile web UX” has not deteriorated. Instead, the web has evolved, as it always has, and new platforms have constructed a thriving business that, for now, better support the needs of the billions of mobile web users. This should be lauded! Indeed, omit the nebulous term ‘app’ and the fact is web services, software and computing functions have never been more robust, more capable, more discrete, more accessible, more affordable. These are all good. I’m surprised any venture capitalist would bemoan this state of affairs.

Let’s not reduce the web to only those parts that VCs can exploit for maximum gain.

More money is presently flowing to Apple’s iOS ecosystem and Google’s Android ecosystem because that’s where the users are. That these two great private companies have their own platforms, their own gateways — and demand payment for access — has actually helped extend the power of the web.

My suspicion, of course, is VCs do not fear a deteriorating web UX, but are instead upset today’s brave new web limits their potential gains. Don’t believe me? More from Dixon’s post:

Google and Apple control what apps are allowed to exist, how apps are built, what apps get promoted, and charge a 30% tax on revenues.

Ponder that. A venture capitalist is decrying a sustainable business as little more than a “tax” on revenues. Again, whose revenues? Apple and Google have each created a marketplace that only a few years ago did not exist. These now serve billions of people. This is a net good, even if it’s not ideal for today’s web VCs.

Shortly after Dixon’s column, venture capitalist Fred Wilson similarly lamented the “mobile downturn”:

It has gotten harder, not easier, to innovate on the Internet with the smartphone emerging as the platform of choice vs the desktop browser.

Wrong! Innovation has never been easier, never been faster, cheaper, more accessible. Time for VCs to accept this new world.

Before the iPhone, before the App Store, the ‘open web’ offered a massive resource VCs happily plundered: the public switched telephone network. The costs of this public infrastructure was borne by carriers, the government and each of us. VCs piggybacked their investments upon this infrastructure, which carried them to unfathomable wealth.

Those days are gone. They will not return, no matter how hard VCs press for a change.

A Boon For Users

If the VCs really want to alter today’s mobile reality, they are welcome to risk their sizable funds toward technologies and services that improve the non-app web or completely disrupt the current state of affairs. After all, despite their assertions, the web has not been shut down or corralled. It’s still there, availing itself to all.

Build something better. That’s my challenge to them.

Do they have it in them? Consider this final lament from Fred Wilson’s post:

So (VC) Brian (Watson) pulled out his iPhone and I pulled out my Android and we took at trip through the top 200 apps on our respective app stores. And there were mighty few venture backed businesses that were started in the past three years on those lists.

This matters not one whit for users.

It just may be, thanks to the iPhone, Android and the new mobile web, the future big money in tech will have to be earned the old fashioned way: brick by brick; through building an actual sustainable profit-generating business, from scratch. Now that would be disruptive. 

Panic Inside Apple and Cheers for Satya

The blogosphere has suddenly discovered the incredible array of products, tools and services Microsoft has long possessed. Better late than never, I suppose. Fact is, their realization of the obvious is in large part due to the accessible dynamism and well-regarded tech cred of Microsoft’s new CEO, Satya Nadella.

Nadella’s hire makes for a great story on many levels. I will get to those in time. The more important story however, is the potential trouble brewing inside Apple.

Yes, Apple is the richest tech company in the world. Its laptops, smartphones and tablets are the established market leaders. But as we learned last week, from still another Apple-Samsung court case, Apple is clearly in the throes of that great ontological concern sure to stricken all those with immense wealth and power: Who am I? 

The very question could prove debilitating.

Since being named CEO, Nadella has rallied the troops, made the necessary overtures to developers, appeased the critics, silenced the doubters and taken rather bold, once unthinkable actions to ensure Microsoft has a prosperous future in mobile, in the cloud, in homes and businesses, on Apple, the web, and the Internet of Things. Not a bad two months.

The talk about Apple? There’s still no large display iPhone and the iPhone 5c is still unwanted.

All Our Yesterdays

Thanks to Apple’s ongoing “holy war” against Google — and the court documents that are now public — we learned last week what we already suspected:

  1. Samsung’s ads attacking Apple users are particularly powerful.
  2. The market for smartphones costing less than $300 is growing like mad — and this greatly concerns Apple.
  3. The market for smartphones with displays larger than the iPhone 5 and 5s is growing like mad — and this greatly concerns Apple.

iphone-4-5-inch-displays-1

We learned something else, however. Something I had not previously considered — there is dissension among the upper ranks of Apple.

Apple is struggling to understand the bounds between margins and market share and how best to maintain the profit stranglehold its iPhone franchise has on the industry.

If Apple doesn’t know, this game just got really interesting.

Guess what? Apple doesn’t know.

The iPhone 5c has made that painfully clear.

With iPhone sales growth rapidly decelerating, SVP Phil Schiller is rightly worried “customers want what we don’t have.”

What Apple doesn’t have of course, is two things: an iPhone under $300 and an iPhone with a larger Lumia 1520-like display — the two areas where most of the smartphone growth is coming from.

Expect a larger display iPhone this year.

The low cost iPhone was supposed to be here already: the iPhone 5c.

Someone at Apple clearly blinked.

Given Phil Schiller’s exhortations for a low cost device, my suspicion is Schiller is now on the opposite side of Jony Ive and possibly even Tim Cook. Given the early growing pains of iCloud, perhaps Eddy Cue also was opposed to a low cost iPhone. They really needed to have decided all that before launching 5c.

Tomorrow and Tomorrow and Tomorrow

The iPhone 5c was meant to be the “low cost” iPhone but has failed at this one job. It’s almost comically overpriced. I’m now convinced internal divisions, corporate concerns over margins, branding and sourcing all forced Apple to blink and price the 5c far higher than it ever should have been.

As I wrote in a previous Insiders post (subscription required):

Apple’s iPhone 5c has been a striking failure, however, selling far fewer devices than Apple expected, likely dampening overall iPhone sales, and, if well-placed rumors are correct, very soon to be no longer of this world.

It all began, of course, with so much promise. The iPhone 5c — aka the “cheap iPhone” — was, we were convinced, going to be the aggressively priced new iPhone, ready to dismantle Android throughout the developing world, possibly beyond. It would (quickly) add tens of millions, ultimately hundreds of millions of new users into the Apple/iOS ecosystem.

Based on the court documents we saw last week, which make clear many inside Apple understood the pressing threat from the low end, such a low priced device was commissioned. Only…Apple doesn’t do low end.

But it must.

But Apple doesn’t do low end.

The end result: a failed product, at least. Given Apple’s strengths, that’s easy to recover from. If there are splits within Apple’s executive ranks, however, that could prove a lasting harm.

The iPhone 5c should not exist unless it’s priced at about $300 or so. The forces within Apple demanding such a device obviously clashed with the forces that demanded margins — and brand equity — trump new users.

I confess I find this fascinating.

I find it even more intriguing now that the giant, bloated, aging Microsoft has been rather stunningly re-energized.

In my earlier Insiders post on the iPhone 5c, I was troubled with the question, ‘why’. Why did the 5c happen and how?

Explain this: A 16gig 5c retails for $549. A 16gig 5s retails for $649. Why?

For that extra $100, the iPhone 5s buyer receives the following additional hardware, services and benefits:

  • A7
  • M7
  • TouchID sensor
  • Lighter weight
  • True Tone flash and larger 8 MP sensor
  • Slo-mo video
  • Enhanced imaging features

I stated then Apple had foolishly devalued its hardware by making a mere $100 price differential between iPhone 5s and iPhone 5c:

The most egregious, most confounding failure of the 5c, and the one I think will haunt Apple, is that the 5c effectively declares to all the world that one or all iPhones are radically overpriced. I am at a loss to understand how Apple allowed this to happen.

Now I know. Internal divisions. The 5c is a fine product, one explicitly designed to bring millions more into the iOS ecosystem. Only, the counter-forces decided another piece of beautiful, functional Apple hardware could not be priced with other ‘mid-tier’ devices.

That’s just not Apple.

Full Of Sound And Fury

The iPhone still accounts for the majority of the Apple’s revenues. The focus then is on building out the iPhone base, maximizing its profit potential, surrounding it with more and more devices, services and accessories to ensure lock-in. This is Tim Cook’s wheelhouse.

You can brand Cook as not being a ‘product guy’ like Steve Jobs, or not a true techie like Satya Nadella, but there is probably no one better suited for growing Apple and the iPhone business.

iphone revenues

With Cook in charge, and given his keen ability to scale manufacturing and optimize profits, expect the iPhone to be the center of the Apple universe for years to come, probably through at least this decade.

Apple wearables will require the iPhone. CarPlay will require the iPhone. New Apple accessories will be optimized for the iPhone. iBeacons will work best with the iPhone. New forms of peer-to-peer and point-to-point sharing, via the iPhone, will be rolled out over the months and years.

This is all very wise.

But I confess the failure of Apple to deliver a low cost iPhone, when so many obviously want one, when its top execs understand the potential for one, does make me question Cook’s ability to guide Apple toward the post-iPhone revolution.

Unfair? Perhaps. Even if I’m right, given I expect iPhones — smartphones, in general — to be our primary mode of computing and connectivity through this decade, Apple likely won’t feel the least bit of pain.

We are, after all, still well into the evolutionary phase of smartphone and tablet computing. This year’s iPhone, this year’s iPad, will be better than last year’s. Next year’s will be better still. And so on and so on. But a revolutionary new product? One that can live outside of the iPhone or iTunes sphere? Do not expect any such breakthrough product or service anytime in the near future from Apple. Apple is on a very direct course, set by Tim Cook, with its mission being to ensure the iPhone continues to print money. A low cost iPhone would have threatened the vision Cook holds for Apple’s future. It’s a vision I believe is almost guaranteed to succeed yet also highly predictable.

At Microsoft meanwhile, everything is in flux.

Which brings me back to Satya Nadella. He has the benefit of knowing his core moneymakers are nearing the end of their life. Tim Cook is not yet aware of such horrors.

When that day does come, I cannot say if he will still be the best person to lead Apple.

The Computer Chronicles

Why are you here? Why are you even reading this?

Me? I know why and am grateful for the odd, stirring, mostly unplanned path that brought me here.

My father spent over 30 years working inside an auto factory, the first 20 “on the line”. When he heard “computers were the future”, he saved up, found one at a garage sale and proudly brought it home. It was a Commodore 64. I loved it from the start.

Confession: I have never cared much for coding, programming or building my own computer. I was however — and still am — acutely interested in what I could do with a computer. In the case of my 64, I was a kid, so mostly gaming. Lucky for me, dad’s garage sale booty included a “floppy drive”, several games and various “educational” programs.  

In short time, I became reasonably expert at H.E.R.O., Fort Apocalypse, and Summer Games. There was a time when I engaged in far more virtual Raid(s) over Moscow than any of today’s most capable generals.

Commodore_64_Box

The Commodore 64 cost far more than my parents could reasonably afford. So from the start they made it plain it was very important, not at all a toy (despite how I used it), and repeated this to me like grace before dinner. Computers, they insisted, are the future. Be a part of that.

That’s why I’m here.

Intel Inside. And Maybe Hopes & Dreams.

Of course my native Detroit was far away from Silicon Valley, the fast beating heart of the computing revolution. It didn’t matter. The 64 carried me here. For all the machines that followed, the used Mac, the shiny new Mac LC, the Toshiba laptops and many more, it was that first 64 which shed a light on my future, a future where people and data and machines and ideas and random musings are all connected.

The Commodore 64 lured me down the rabbit hole that was online bulletin boards, which led me to Prodigy, Dialog, Compuserve and others. From there, I discovered Mosaic, then Netscape. By then I had a career in computer tech, almost without planning it; my parents’ intentions realized.

I can’t stop now. I don’t want to stop. It’s not just there’s more to come. More is coming faster, and it’s even more amazing.

Consider the scary-exciting merger of healthcare and computing. Acknowledge the rapid rise of Facebook and global messaging, from nothing to vital in a few short years. Reflect upon the astounding functionality of the iPhone, the utter pervasiveness of Google, how giant Microsoft is morphing before our eyes. We have new media, mobile payments, crypto currencies and experimental forms of retail. Global connectivity has dethroned the sovereigns of time and distance. Yet, both real time and precise location are now more critical to more of what we do and say (and even think, see and feel) than ever before. I did not see that coming.

I am here as well because the visions, proclamations and inspired work of the early computing pioneers really did come true. Their words, their mad tinkerings quickly spread far beyond Silicon Valley, where the shrouded potential of their creations seeped into our computer-less consciousness, found their way into the local news and duly informed my parents who went straight out and acquired for me everything they were told I would need to become a part of the future.

I am pleased to still be part of this long running serial.

Yes, our industry failed at much. The endemic spread of pornography, the utter devaluation of personal privacy, our rather casual silence at how the latest waves of computing technology are displacing good, smart, hardworking people by the millions, leaving them with little to do but hope self-employment, freelancing and the sharing of labor and tools can somehow enable them to get by. There is much to fix.

Random Access

The arrival of that Commodore 64 led to another serendipitous find. We could afford only one television in those days, no cable, and when home, my father religiously watched the local news and all sports. Big-ticket purchases like the 64, however, demanded he work on Saturdays — time and a half made those 8 extra hours of work equal 12 hours of pay, which mattered dearly. Which led to him being gone one particular Saturday. Which led me to gleefully run through all 9 channels. Which is when I stumbled upon The Computer Chronicles.

“the amazing palmtop computer”

The Computer Chronicles documented, almost from the very beginning, the rise, the spread, the incredible innovation of personal computing. It proved to me — because it was on television — a career in computers was viable, no matter where I lived.

I am more excited, more convinced of the transformative power of computing tech and its ability to achieve net good than ever before. This is one reason why I never play favorites. It’s why I can’t suggest you buy Bitcoin, no matter how hyped it has become, or why I cannot recommend the iPhone 5c, no matter how greatly I admire Apple. It’s why my posts cause numerous CEOs and VCs (and several editors) to immediately block me from their Twitter feeds, and limit my access.

All worth it. This stuff matters to me and I fully appreciate how it impacts you.

bits-commodore-custom2

We are the screen. The screen is the world.

Whatever the reasons you are here, I am glad you are. Now hang on tight.

As Google and Facebook appear to buy up everything that was only yesterday considered cutting edge, as venture capital becomes, somehow, even more of an insider’s game, with not even scraps available to the rest of us, I nonetheless stay positive. I know money, computing power, networking, software, the creeping of technology into all aspects of our life and into every personal and business endeavor, and the random, very human mutations that takes hold inside this swirling glorious mix will continue to create still more and larger revolutions, more big and bigger bangs, more insanely great.

We are rapidly transitioning from the era of personal computing to an era where each person is a computer — with eyewear, wristbands and clothing all capturing who we are, what we do, and how, when and where. Then sending this data floating off, joining up with 7 billion similar nodes.

We are the screen. The screen is the world.

I say this all not because I have a product to sell you or because the larger, more pumped the market, the greater the return on my quickie investments. I say this because it’s true: The computer chronicles have only just started.

Holiday Shoppers Gifting Themselves

Now that we’re fully in the throes and craziness of the holiday shopping season—just seven shopping days left until Christmas!—it seems appropriate to further investigate how the process really works, especially when it comes to electronics purchases. In fact, I’ve always been curious to not only know what items are hot sellers each year, but what drove the purchase decisions. The common perception, of course, is that most holiday shopping outings have an intended gift recipient in mind. But recent research just completed—the first report created by my new firm, TECHnalysis Research—reveals that many of the electronics purchases made in the early part of the holiday season are actually for the buyers themselves.

Specifically, in a survey of 401 US consumers aged 18-74, we found that a full 50% of electronics purchases made on Thanksgiving Day, Black Friday and Cyber Monday—either in retail stores or online—were for me. Well, not actually me, really, but the “me” of the shopper who made the purchase. The chart below summarizes the basic results.

HolidayShopperWhomPurchased

Perhaps not surprisingly, women were a bit more generous than us guys, with only 47% of female’s purchases being for themselves vs. 47% being gift purchases and the remaining 6%—like the total numbers—a “non-gift” purchase for others. Men, on the other hand, listed 52% of holiday electronics purchases as being for themselves, 42% as gifts for others and 6% as “non-gift” purchases for others. Clearly, lots of tech shoppers wait for and specifically target these huge shopping days for their purchases—either that, or the spirit of Uncle Scrooge is perhaps a bit more alive today than many of us would like to admit. But I digress…

The top-selling items among survey respondents were large-sized tablets (those with screen sizes greater than 8”), followed by game consoles, small-screen tablets (under 8” screen sizes), PC accessories and smartphone accessories. The chart below lists the top ten of the 19 categories that were covered. The x-axis represents the % of respondents who made a purchase in that category.

HolidayShopperTopCategories

Of those purchases that were made as gifts, the top category was actually small tablets, which makes sense given their lower prices, followed by larger tablets and game consoles. Interestingly, the top category for both personal purchases and as “non-gift” purchases was PC accessories—which covers things like USB drives, speakers, keyboards, mice, cases, printers and more.

In terms of buyer rationale, 57% of the purchases were considered “net new” devices, and 43% were replacements for existing devices, though the numbers ranged fairly significantly based on the category of device. For example, 75% of small tablets were considered new purchases, whereas only 32% of desktop PCs were additions to the household.

An interesting statistic regarding the new category of smart watches and other wearable devices was that only 45% were considered new and 55% were replacements. To be fair, the sample size for that group was only a modest (and not statistically reliable) 11 purchases. Still, it suggests either that early purchasers of those devices were not happy with their first choice, or that it’s the same people who keep buying many of the different options now available. Only time will tell….

Another interesting statistic from the study relates to the manner (and location) in which the purchase occurred. For online shoppers, which were intentionally just over half of the total respondents, 45% of purchases on Thanksgiving or Black Friday were made on mobile devices—either tablets or smartphones—while that number was 39% for Cyber Monday purchases. Additionally, 11% of all online purchases made on either Thanksgiving or Black Friday were done while the individual was mobile—either while shopping, while travelling, or at another public location, such as a café. If there was ever a question about the impact that mobile devices have had on people’s lives—let alone their shopping—these data points clearly show it.

If you’re interested in learning more, you’re welcome to download a free copy of the top-level results from the study at the TECHnalysis Research sample deliverables page.

Apple’s Free OS Upgrades and iWork Could Leave a Mark on Microsoft

Apple’s announcement Tuesday brought with it many innovations across the span of tablets, notebooks, and workstations. Apple introduced the new iPad Air, updated the iPad mini, redesigned the MacBook Pro, and provided more information on the Mac Pro.  I attended Apple’s event, and one announcement that didn’t get much attention until Microsoft’s blog is that much of Apple’s key tablet and personal computer software is now “free”.  Over the long-term, I believe this could have an impact not only on Microsoft, but its OEM partners, too.  Let me start with what Apple announced.

Yesterday, Apple announced that with the purchase of every new iPhone, iPad, and Mac, OS upgrades, iLife and iWork will now be “free”, or downloadable and usable for no charge.  Think about that for a second…. Free, high-quality operating systems, lifestyle, and productivity software across phone, tablet and notebook and woIMG_8358 (2)rkstation.  Consider for a second that it costs $120 to upgrade from MS Windows 7 or Vista to Windows 8.1 and an MS Office 365 license costs $99 per year or $300 over a three year period. I believe this will make a difference to desktop software in the long-term.

From a tactical point of view, this reduces the Apple premium price for the premium experience. Let’s consider the new 13” MacBook Pro. What was once $1,299 could now appear $879 if you factor in three years of MS Office and one major MS operating system upgrade.  This is a TCO basis that may be more appropriate for businesses than consumers, but does comprehend the potential full costs.  I don’t believe this will immediately be comprehended in consumer’s or businesses value proposition, but I do think overtime, it could. Now let’s look at this strategically.

Microsoft has diversified over the last decade into enterprise software and services, but Office and Windows, including upgrades, are still cash cows.  Enterprises don’t pay list price for OS upgrades or Office, but based on MS’s profit margins, there is still a lot of “room” to work.  And it’s that “room” that Apple intends to pierce based on today’s announcements.  Consider for a minute what the MS world would look like to Microsoft’s customers and partners with the expectation of free OS upgrades and free Office.  Apple is essentially commoditizing OS upgrades and productivity software.  The PC software industry has already has been impacted by the mobile world and I don’t see this stopping anytime soon.  In fact, Apple’s announcement exasperates the issue.  PC software and services like Windows upgrades and Office will continue to look more expensive year after year.

So what does this mean to MS’s partners?

MS OEMs like Dell, HP, and Lenovo now must consider the entire value proposition with PCs with Windows and MS Office.  Consider that OEMs do drive revenue selling Office. Just look at how hard they pressure sell you in on-line configurators.  OEMs recognize that Office is the business standard, but how do you deal with a “free” cloud and client offering from a credible brand like Apple over the long haul?

Free MS Office productivity alternatives to Office have been available for 20 years, but this time, it’s different now.   PC software that costs a lot of money looks odd when compared to low cost mobile and freemium models.  As I said before, over time, I believe buyers will be less likely to pay as much as they do today for PC software, look more closely at the alternatives.  This creates a big challenge for Microsoft.

I believe that OEMs, because of the vanishing software opportunity, just have one less reason to connect themselves to Microsoft and more strongly expand their opportunities with alternatives like Android, Chrome OS, and Linux.  This transition has already started when you look at Dell’s, HP’s and Lenovo’s products, but Apple just gave OEMs another reason to invest more into the alternatives.

Net-net, Apple’s “free” software announcement will hurt Microsoft, starting with consumer, then bleed over to education and small business.  I don’t think this will have much of an impact to medium and large enterprises because Microsoft has money to move around (Exchange, SharePoint, Windows Server, Lync, etc.) but will certainly come up in Microsoft price negotiations.

Do Android Or Windows Phone Have Any Hope Of Defeating iPhone?

No.

Neither Android nor Windows Phone, apart or in concert, have any hope of defeating iPhone. None. For the foreseeable future, iPhone will remain the world’s most popular, most profitable smartphone by a wide margin. The best apps, the first apps, the most popular accessories, the lion’s share of the industry’s profits all will belong to iPhone.

Indeed, I think the gap in profits and mindshare will only widen from this point forward. The iPhone is simply too good, Apple too rich, iPhone hardware too advanced, the iOS ecosystem too robust, integration across devices and platforms too seamless, retail footprint too large, customer satisfaction too high.

Mobile First

iPhone’s dominance is also partly the result of the right strategic bets. Apple has successfully re-positioned itself as a mobile first entity. Android and Windows Phone not only lag behind iPhone from a financial, technical and platform perspective, their masters — Google and Microsoft — still underestimate just how profoundly mobile will remake computing, work, play, commerce, interactions, our lives. Their smartphones suffer accordingly.

Google, which makes nearly all its money from (stationary) web advertising, continues to focus its efforts on getting more users on the web more of the time. Wise, but not enough. As I have previously shown, the person-to-web relationship is no longer central to the connected user. With smartphones, apps and services such as AirDrop and iBeacons, for example, we will witness a radical jump in person-to-person, person-to-group and device-to-device interactions that bypass the web entirely, never once to cross a Google server or gateway.

Likewise, Microsoft is still designed for a world where the “desktop” is at the center of an ever-expanding sphere of computing devices and services. This is fail. As Ben Bajarin has shown, it is smartphones, not PCs that will serve as the hub of our mobile, social and highly connected lives.

Apple’s iPhone is simply too far ahead of the competition everywhere that matters.

But, there remain opportunities — very big ones, in fact.

As I have written in the past, do not be misled by those who insist that Apple can magically go down-market whenever they wish. This is false. Apple’s skill set, cost structure, corporate expertise and branding all prevent this. Thus, Windows Phone and Android vendors can fight it out over the low-price, low-profit market.

There are several additional paths to take. These can all benefit from non-Apple innovation.

Form Factor

Apple now controls the most robust developer platform for personal computing. No one on the planet foresaw this happening, not even Steve Jobs who initially radically underestimated both the disruptive power of the app and the near-limitless potential of the iPhone.

Therein lies the opportunity.

Apple is now beholden to its developer community. The iPad and then the iPad Mini, the iPhone and then the iPhone 5, all have very specific display sizes in large part because these work best for the nearly million apps available. You may pine for an iPhone “Note” but the fact is Apple cannot offer us a wide array of display sizes because this would harm the performance and presentation of existing apps.

Android and Windows Phone should therefore radically expand their efforts and develop devices that embrace all manner of display size and form factors (e.g. these massive Microsoft ‘tablets’). The upcoming “bendable” LG smartphone and the extremely popular large-display Samsung devices reveal the potential of this market.

Similarly, iOS cannot well support physical keyboards. Mobile devices with physical keyboards — including, yes, the Surface — will remain in high demand for years to come.

The Integration of Things

The shockingly rapid transition from iOS 6 to iOS 7 only hints at the potential power of Apple’s platform. With hundreds of millions already on iOS 7, app developers, payments platforms, makers of accessories and hardware companies all know that building for iOS, unlike all other platforms, is a near guarantee that their service or device will function properly and have access to the most lucrative market.

There is another path, however, one which Apple may simply be unable to support: everything else in our lives.

I want my smartphone to serve as my identity, my credit card, my house key, car key, to manage my heating and cooling, monitor my home when I am not there, control my washer and dryer, serve as my television remote, connect with my medical devices (e.g. blood pressure monitor), track my dogs, offer me instant access to the subway and thousands of other activities.

Given the obvious limits on Apple’s marketshare and hardware development, Android and Windows Phone need to position themselves as the go-to platform for the Internet of Things. Apple and its hardware partners cannot be everywhere.

Government Intervention

Smartphones connect us with content, with the web, with one another, and with an ever-expanding array of devices and services. They are the center of our lives. Not the PC, as Microsoft envisioned. Not the web, as Google still believes. The smartphone is the last thing we see at night, the first thing we see in the morning. The odds of some new tech marginalizing smartphones any time over the next decade, say, are extremely remote.

A far more likely pitfall for Apple’s iPhone is government intervention.

No matter your political bent, the long history of government from at least the beginnings of recorded history clearly reveal that wherever there is a great deal of money, government will be there.

Apple has a great deal of money.

Expect new rules on how this money is taxed, how it may be spent, and a bevy of new and potentially inexplicable regulations on what Apple must do to satisfy each nation’s (or region’s) many and varied constituencies. Also expect nations to directly and indirectly limit Apple’s sales in favor of national entities.

How such intervention might impact Apple and iPhone is simply unknowable at this point. I nonetheless expect ongoing and potentially significant government intrusion upon Apple’s business, at least from China and the European Union, possibly even the US.

I suspect that government intrusion, more than the marketplace, more than any new technologies, more even than industry collusion, will impact Apple’s and iPhone’s continued success the most over this next decade.

Motorola’s Confusing “X8 Computing System” Actually Qualcomm and TI Silicon

Two weeks ago, I penned the Forbes column, “Google’s Motorola Confuses Everyone With Its ‘X8 Computing System.‘ “My intention was not to ridicule or embarrass anyone, but to point out just how important it is to be factual and precise during product launches and communications.  Trust me, I have empathy as I have launched hundreds of products in my career.  I showed in the column that there were multiple press interpretations of what Motorola launched with the Moto X which caused a lot of confusion.  Additionally, I believe Motorola was taking credit for work other companies had done, which I do have a bit of an issue with.  While most end consumers don’t care about the technical details, many do, particularly the influencers, and those influencers have an impact on that typical consumer. One ambiguous piece of information when I wrote the first column was determining exactly who made the two special voice and contextual chips.  Thanks to AnandTech’s Brian Klug, we finally know.

Last week, Brian Klug wrote a very positive review of the Moto X.  Through his analysis, he uncovered a few things.

On the contextual processor core, Brian writes,

“This stowage and contextual awareness detection comes through fusion of the accelerometer, gyro, and ambient light sensor data on a TI MSP430 controller which enables most of the active display features from what I can tell. These then are exposed as flat down, flat up, stowed, docked, and the camera activation (flick) gesture. The MSP430 also surfaces its own temperature sensor to the rest of Android, which is nifty (the Moto X has an accelerometer, gyro, pressure sensor, compass, and the MSP430’s temp sensor).

On the natural language processor core, he writes,

“Anyhow I spent some time tracking down what is responsible for the voice activation feature as well, and it turns out there’s a TI C55x family DSP onboard the Moto X, probably one similar to this. It’s easy to see the MSP430 references without much digging, the C55x references are referenced in an aov_adspd (activate on voice, dsp daemon?) application, and then inside the two aonvr1,2 firmware files that are loaded presumably onto the C55x at boot. The C55x runs this lower power (sub 1 mW) voice recognition service and wakes up the AP when it hears it, I believe it also does noise rejection.”

As I have worked closely with AnandTech since its inception, I can say they usually have their facts straight, so I will take this as near-fact.

As further confirmation, AllThingsD’s Arik Hesseldahl confirms the TI connection with his article discussing a recent IHS tear-down report.  Arik reports,

“The main chip inside the phone is a Qualcomm Snapdragon S4, which IHS estimates costs $28. That chip has been combined with two chips from Texas Instruments that handle gestures and listen for spoken commands from the user, which cost between $4 and $5 together.”

OK, so the Motorola branded ‘X8 Computing System’ is comprised of Qualcomm and Texas Instruments silicon. I think this is a very good example of heterogeneous computing, which is a good thing, but the silicon is so very not Motorola.

You may be wondering, “do consumers care about silicon details” or “why shouldn’t Motorola re-brand the silicon they bought and integrated”?

Most consumers could care less about the silicon their phones have, but the precision of the communication does matter to influencers.  As we have seen over the years, communication about new products spreads quickly, particularly over social networks and the web.  The social glitterati many times make up their minds during the product launch they are watching, tweeting and posting away.  The general consumer injests this either directly or by retweets or reposts on social media sites and, based on research I’ve seen at OEMs, pay attention when they’re in the buying state of mind.  While some marketeers call it “buzz” or “intrigue”, you don’t want any ambiguity in your product launches.  This is why Apple is so precise during product launches.

Apple, during their product launches, is very precise with every word is communicated.  They know that ambiguity leads to a pause, and every pause takes away from understanding.  If there is ambiguity on the facts, Apple is quick to follow up afterwards with their specially chosen press corps.  This precision helps focus the social glitterati on the key messages Apple wants reinforced, and not the side-shows debating what Apple really said or meant.

In the end, I believe Motorola’s “less than precise” explanation of their “X8 Computing System,” which is comprised of Qualcomm and TI silicon, played against them.

Time To Reboot Smartphone Benchmarks

Benchmarks are used in every market as one way to show why one company’s widget is better than another company’s widget.  Whether it’s MPG on a car, energy ratings on appliances, or a Wine Spectator rating, it’s a benchmark.  The high-tech industry loves benchmarks, too, and there is an industry full of companies and organizations that do nothing but develop and distribute benchmarks.  With high-tech benchmarks come controversy, because the stakes are high as all things equal, the widget with the highest benchmark scores will typically receive more money.  The recent spat about Intel versus ARM in smartphones illustrates what is wrong with the “system”.   When I mean “system”, I mean the full chain from benchmarks to the reporting of them and to the buyer.  I want to explore this and offer some suggestions to help fix what is broken.

The first thing I want to highlight is that getting benchmarks “right” is important to the buyer.  If a buyer makes a choice based on a benchmark and either the benchmark isn’t representative of a comparative user experience or if the benchmark has been manipulated, the buyer has been misled.  The first case would be like a buyer buying a racing boat based on the number cup holders and the second would be an auto MPG test during 100 mph tail winds.   The smartphone benchmark blow-up has accusations of both and reminds me a bit of a Big Brother episode.

It all started with ABI Research publishing a note in June entitled, “Intel Apps Processor Outperforms NVIDIA, Qualcomm, Samsung”. News outlets like the Register picked up on this and wrote an article entitled, “Surprise! Intel smartphone trounces ARM in power trials.”  Seeking Alpha jumps on the bandwagon, citing the ABI report with an article entitled, “Intel Breaks ARM, Sends Shares Down 20%”.  100′s of article later, if you believed the press,Qualcomm, Samsung, Nvidia, would be driven out of mobility and Intel would pick up all their business.  Even Intel doesn’t believe that even though they have made some pretty remarkable mobile improvements with Atom from where they were three years ago.

As I said before, this isn’t the first benchmark controversy or the last.  BAPCO Sysmark andMobileMark were some of the more controversial in the PC world over the last decade, and even 3D benchmarks have controversy too. Apple isn’t immune either. Servers and systems are chock-full of examples, too.  So why would mobile smartphone benchmarks be any different?

In talking with Intel, they said that no one should ever use one benchmark to measure performance and that if there were questions on how AnTuTu worked on their processors or compiler, they should contact AnTuTu.  I’ve had no luck with that yet.  Smartphone benchmarks are an issue, so what should the industry do?

I have had the pleasure of being part of multiple industry benchmarking efforts over the last 20 years, have seen some success, some failures, and learned a lot.  I think that if consumers, press, analysts, and investors stuck to a few guidelines, we wouldn’t get sideways like this.

The following are my top benchmark learnings for client devices like phones, tablets and PCs:

  1. The best benchmarks reflect real world usage models: It all starts with what the user wants to do with their device.  For smartphones, it should reflect what is done with the content- social media, email, messaging, web, games, music, photos, video, and talking.  As an example, do smartphone benchmarks comprehend photo lag time or battery life?
  2. Never rely on one benchmark: There are no perfect benchmarks and every one of them has a flaw somewhere. In the AnTuTu case, many in the press and analyst community relied on one benchmark which exasperated the issue at hand.
  3. Benchmark shipping devices: Many benchmarks are performed on test systems, not real devices.  Typically, there is benchmark variability between phones in-market and test systems and they go both ways.  Some early ODM phones or reference designs have beta stage firmware and drivers which can be slower or faster than production level designs by OEMs. Many shipping phones have bloat-ware, which can slow down a benchmark. Intel was very clear with me to ignore the latest leaked Bay Trail benchmarks that were on reference designs
  4. Application-based benchmarks are the most reliable: There are three types of benchmarks, synthetic, application-based, and hybrids.  Synthetic benchmarks, like the AnTuTu memory test, are running an algorithm that tests one specific subsystem, not how a smartphone would run an app in the real world.  The benefit of synthetics are that they are easier to run and develop. I prefer application-based benchmarks like the 3D benchmarkers are using where they test a specific game like Crysis, but I am OK with hybrids as long as they reflect the performance of real-world applications.  Application-based benchmarks take a lot of development time and resources.
  5. Look for transparency: Some benchmark companies and groups tell you exactly what they test, how they test, and even offer source-code inspection. If benchmarks don’t offer that, be very wary, and ask yourself, “why don’t they”?
  6. Look for consistency: The best benchmarks are repeatable and can be relied upon time and time again.  Be wary of benchmarks that give you different results after running them multiple times.  You just can’t rely on benchmarks like that.

While no benchmark is perfect and all have issues, I really like FutureMark’s benchmark approach, execution and the ability to herd many of the largest tech companies to arrive at decisions.

Mobile benchmarks are one of the more challenging benchmarks to develop, for many reasons. First off, mobile benchmarks support multiple mobile operating systems, primarily iOS and Android.  Secondly, there are three processor instruction sets to support- ARM, MIPS, and X86.  Thirdly, smartphones are based on somewhat custom subsystems like image signal processors, digital signal processors, and video encoders which are often hard to support.  Finally, it is very difficult to measure power draw of specific components of an SoC or even a complete SOC because it entails connecting tiny measurement probes to specific parts of the phone.

In the end, I’m glad the AnTuTu-Intel-ARM blow-up happened, because it gave the industry a chance to reflect on how well smartphones are being evaluated with benchmarks, their pitfalls, and the impact of the industry quickly jumping to conclusions from one benchmark.  Now it’s time for the smartphone industry to come together plug many of the holes out there.

Apple vs. Android: The Open Factor

Judging by the comments on John Kirk’s post “Android’s Market Share Is Literally a Joke,” we are well into another operating system religious war. As is always the case in religious wars, it’s tough to make sense of the the arguments. As Harry McCracken notes at Time Techland, we can’t agree who is winning because we can’t agree on what “winning” means.

Advocates often argue that victory for Android is inevitable because Google’s platform is more open and open always triumphs over closed. That proposition is debatable at best. But the arguments is muddled by the confusion of several different concepts of openness. I’m going to try to at least clarify the terms of the debate. There are at least three concepts of open clamoring for our attention; I am going to call them open hardware, open software, and open systems.

Open hardware. In the beginning, all personal computers had an open architecture. The first really popular PC, the Apple ][, followed the design of earlier CP/M-based systems and included slots for hardware add-ins. (One of the more successful of these was the Microsoft SoftCard, which let the Apple ][ run CP/M programs.) In 1984, the Mac came along in a sealed box. There’s a widely held, but almost certainly incorrect, view that Apple lost the first OS war to Microsoft because Macs were closed and IBM PCs and later clones from Compaq and many others allowed modification. This may have been a small factor but much more important was the fact that IBM and others marketed to business, and business, not the rest of us, was buying most of the hardware. Besides, by the time that Apple lost decisively to Windows in the mid-1990s, Macs too had gone to an open architecture. Apple even tried the Microsoft approach of licensing Mac OS to third-party hardware makers. It didn’t work.

Today, this argument is almost entirely moot. Lots of people still buy open Windows boxes (more than you probably think), but hardly any of them ever open them up. Laptops and Apple’s iMac and Mac mini are about as closed as the original Mac. And phones and tablets make hardware modification impossible. The hardware openness argument is strictly of historical interest.

Open software. Google makes Android code available, license and royalty free ((Just because Google gives away Android doesn’t necessarily mean that you are free to use it without licenses or royalties. In particular, Microsoft claims patents on a number of aspects of Android and nearly all tier one Android OEMs except Motorola are paying license fees to Microsoft.)), to anyone who wants to use it. Sort of. If you want to use the Android logo and have access to Google services such as Maps and Google Now, to have to agree to play by Google’s rules. As a result, there are two distinct forms of android out there, official Android licensed by Google and used on all the brand-name phones, and Android Open Source Project devices, including the Amazon Kindle Fire and a gazillion no-name Asian phones.

There are fierce sectarian disputes within the “free and open source software” community over just how free and open code must be to qualify, to the point where the Free Software Foundation’s Richard M. Stallman has denounced Ubuntu, a leading Linux distribution, as “spyware.” A lot of code these days mixes open- and closed-source components. Both iOS and Mac OS are based on an open-source BSD kernel, but the higher level of the OS are proprietary. Apple’s Safari and Google’s Chrome browsers are both based on the Apple-developed open-source WebKit. Even Windows contains many open-source components.

Fundamentally, open- and closed-source are two different models of software development. Both have their proponents and arguments in their favor and there is no reason to believe that either is inherently superior to the other, But the bottom line is that except for those swayed by religious arguments, whether a given piece of code is open source or not makes no difference to users.

Open systems. Here we get to a real difference. Apple’s iOS ecosystem is tightly controlled. The iPhone and iPad are both tightly locked down devices. Unless you have “jailbroken” your device, a warranty-voiding software modification, an iPad or iPhone can only load software through Apple’s iTunes App Store. And software sold through the App Store must meet a long list of Apple requirements, ranging from those designed to protect the system from malware to those designed to protect the user from pornography to those intended to protect Apple from some kinds of competition. iOS users implicitly accept a tradeoff: Apple makes a lot of choices for them, and in exchange, they get software that is very unlikely to mess up their device or infect it with malware.

Android is a very different world. Google imposes minimal supervision on apps sold through the Google Play store, and a simple change of one setting on any Android device lets the user install software from any source. Many Android phones let users replace the manufacturer’s firmware, a way to get around the sluggishness of OEMs in distributing Android updates but no way to enhance stability or security.

This sort of openness is extremely important to a relatively small group of enthusiasts who really want to dig deep into their devices and who will accept some inconvenience and risk to gain more freedom. They definitely should by Android products. But I suspect that there aren;t enough of them to explain more than, at most, a couple points of share. The great bulk of Android buyers are choosing on other criteria: screen size, price, or what the guy in the phone store happens to be pushing.

The only aspect of openness that really seems to matter to the bulk of buyers is that Android devices come in a wide variety of sizes and designs. With iPhone, you have the choice of the 4/4S or the 5, while Android comes in a wise variety of sizes and designs. The fact that Android is increasingly synonymous with Samsung reduces the choice somewhat, but Samsung seems determined to offer a product for every market niche.

 

 

 

SKAA: Better Than AirPlay and Bluetooth for Premium Wireless Audio?

Wireless audio speakers and headphones are growing as a consumer category.  Best Buy has 192 different “wireless speakers” on their website, Amazon, 400.  The growth in wireless audio was helped by the growth of the premium music headphone phenomenon, started by Beats Audio.  Of these wireless speakers, the clear majority utilize either Bluetooth or AirPlay to connect the device to the speaker or headphone. The problem is that both of those standards fall short on premium audio quality, openness or ease of use. Skaa, an emerging audio standard with roots in pro wireless could solve most of today’s problems inherent in today’s wireless solutions.   

Let me begin with Bluetooth.  Most wireless audio products on the market today use stereo Bluetooth, A2DP. It’s on all modern smartphones, tablets and on many but not all computers.  Bluetooth’s primary use is very straigh-forward: connecting one phone to one headset or earpiece from Plantronics or Jawbone so drivers can talk and drive.  But as we have all experienced at some point, Bluetooth is an absolute nightmare to pair and maintain a reliable pairing. To add to the pairing nightmare, Bluetooth-based speakers also face a contention problem.  Wireless audio contention occurs when people, in my case family members, have paired to the same wireless speaker, allowing anyone to take control. In my house, we share a wireless Bose Soundlink II system across 4 people.  We have taken it everywhere inside our house, to parties, and when we travel.  If my wife is connected, even if she’s not using it, I have to ask her or my two daughters to turn off Bluetooth on their phones to let me in.  The other issue is distance. I cannot take my phone too far from my speaker or else the audio starts degrading.  The speaker starts hissing and popping.  I personally don’t use the Bose wireless speakers anymore because it is such a hassle. The final challenge for Bluetooth is bit rate.  I interviewed a few audiophiles for this piece and they literally said they do not buy any wireless Bluetooth devices because of its “less than MP3 quality” nature. I wrote a more technical note here, which provides a technical comparison. Let me switch to Apple’s AirPlay.

Another wireless audio alternative is Apple’s AirPlay.  I think AirPlay is an awesome feature to mirror my Mac and iPad displays and share photos with a group of people, but it comes with its own set of major issues for a premium audio experience. First, you need a WiFi network to use it, at least until WiFi direct is enables.  The network requirement eliminates the option of taking AirPlay-based set of wireless speakers to the park, unless you’re a mega-geek and bring a router with you.  Secondly, AirPlay is limited to Apple host devices, the iPhone, iPod, iPad, and the Mac.  I recently switched from an iPhone 4S to an HTC One X and my tablet to a Nexus 7, therefore limiting my AirPlay investment.  Staying inside the premium walled garden of  AirPlay is great if you or the family is all-Apple, but not for the other 75% of smartphone owners out there.

AirPlay also limits my ability to enjoy certain audio usage models.  First, there are no AirPlay headphones.  You can still do wireless headphones on Apple devices via Bluetooth, but AirPlay uses too much power as its basis is WiFi. Secondly, if I want to play a game or watch a movie directly on my iPad, I cannot send the audio to a wireless speaker as it will be out of sync with the video over AirPlay and for any other WiFi-based wireless speaker solution.  This is because AirPlay uses the unreliable home WiFi network with higher latency.  If the home network is 2.4Ghz., it is susceptible to interference from Bluetooth, the neighbor’s WiFI, microwave ovens and cordless phones.

There is a developing standard for wireless audio called Skaa, which eliminates many of the premium audio challenges inherent with Bluetooth and AirPlay.

SKAA comes from the professional and pro-sumer music world. The basis for SKAA is a standard called PAW, or Pro Audio Wireless, and powered the wireless gear for artists like Justin Bieber, Lady Gaga, Keith Urban, Kanye West, Eminem Band, and Justin Timberlake. These bands used PAW in concerts for wireless guitars and speakers because of its high quality with a high bit rate, long range, and because wasn’t susceptible to interference from other 2.4 GHz devices like smartphones and WiFi. SKAA, simply put, is the consumer flavor of PAW, designed for consumer phones, tablets, computers, TVs, and game consoles.

With SKAA, users can connect up to 4 speakers from one device, and because it has long range and multi-point capabilities, consumers could have four speakers in the kitchen, living room, dining room, and bed room all broadcasting the same, synchronized audio. The pairing nightmare goes away as it uses small, mobile-friendly, wireless transmitters that immediately start playing the music after pressing one button the first time you get a speaker.  These small, wireless transmitters are currently available for Apple’s 30-pin devices and USB for all computers, Mac, PC, and even Linux. Apple’s Lightning devices, micro-USB for Android devices, and other wireless transmitters are coming soon. So am I saying that Bluetooth and AirPlay are going away?  Absolutely not as these are two pervasive and flexible standards that will be here for a long, long time.  For audio, particularly premium audio, I do believe that SKAA-based speaker and headphone companies will start adopting the new standard and challenge AirPlay in the premium audio space.

If you want a more technical dive, I have written a short note here.

Are Google Apps On iOS A Trojan Horse Or A Concession to Apple’s Dominance?

Grin And Bear It

Aside from Google Maps and Google Now, many users would sooner tap on Gmail, Google Chrome, and Google Drive than the apps Apple would much rather you use, and the result is completely antithetical to Apple’s insistence of a controlled ecosystem and specific apps within a walled garden.

Google apps are besting the iPhone’s default software, and Apple has to grin and bear it. ~ Mike Schuster, USA Today

Apple has to grin and bear it? Do they? Or is it actually the other way round and Google is the one who has to grin and bear it?

App Revenue

Apple’s iOS ecosystem is crushing Google’s Android in dollars generated from App sales.

“Cumulative app downloads have surpassed 45 billion and app developers have made over $9 billion for their sales through the App Store, including $4.5 billion in the most recent four quarters alone. Canalys estimate the sales from our App Store accounted for 74% of all app sales worldwide in the March quarter.” ~ Apple Earnings Call

According to a new report from app analytics firm App Annie, the iOS App Store has maintained its lead in terms of monetization, earning around 2.6 times more revenue in the last quarter. During the holiday season – when users are receiving, activating and then filling new smartphones and tablets with apps – that lead was even higher, with iOS generating roughly four times more revenue.

app-revenue-q12013

Ad Revenue

Whenever it’s pointed out that Apple developers make far more income than do Google developers, Android advocates quickly point out that Google is an advertising company and that they and their developers make their money through advertising rather than through the sale of Apps. Only here’s the thing…

… 75 cents of every dollar spent on mobile advertising is spent on iOS, not Android.

“…iPhone, iPad, and yes, even iPod touch ad rates are much higher. While Android smartphones draw $.50 CPMs (cost per thousand impressions), iPhones pull in $.65 to $.88 CPMs, iPod Touches do $.74 to $.98, and iPads do between $.82 and $1.16.” ~ Venturebeat

screen-shot-2013-04-18-at-10-26-24-am

As you can see from the chart, below, what’s utterly amazing is that the iPad alone makes almost as much advertising revenue as all of Android put together.

screen-shot-2013-04-18-at-10-31-48-am

Convoluted Logic

I have heard it said that Google’s excellent iOS software is a Trojan Horse that will make it easier for iOS users to switch from iOS to Android. But I fail to see how Google’s efforts to improve their iOS software – and therefore improve the iOS experience – either harms the iOS platform or makes it more likely that iOS users will leave the platform.

Google is not creating iOS Apps out of the goodness of their hearts. They make money when people use their apps and consume their advertising. And right now, the bulk of the app money and the bulk of the mobile advertising revenue is being made on iOS. If Google wants to stay in the game, then they’ve got to deign to play on Apple’s turf. It’s as simple as that.

iPhone 5 Versus Galaxy S4 A War Of Less Versus More

Last week, within the span of 24 hours, the two dominant players in the global smartphone wars released…not new smartphones, but new commercials. Both were very well done. They are also very different. Both ads reveal the core differences between Samsung and Apple, and possibly between Android and iPhone users.

First up, Samsung.

Now, the latest iPhone commercial from Apple.

Corporate Values Revealed

Apple’s latest iPhone ad is sixty seconds of creamy, delicious awesomeness. The commercial spurns crass marketing appeals. Rather, it uplifts us, revealing that life is spread over an infinite number of sparkling moments which may occur at any time, at any place, and all ready to be captured forever, thanks to Apple.

The images are so powerful, so palpably iconic – and so emotionally directed – that words only get in the way. Indeed, there are almost no words spoken or presented until the very end: “Every day, more photos are taken with the iPhone than any other camera.”

Contrast Apple’s focused, less is more approach with Samsung’s newest commercial. It starts loud and bold, the music of Vivaldi framed with brash, confident slogans.  The Samsung ad shows off the device’s camera, the screen, the speakers, bludgeoning the viewer with an audio and visual assault clearly meant to match the power and functionality of the device itself.

The Galaxy S4, the ad suggests, is all about…more. More display. More sound. More features. More of everything.

For Apple, less is more. Emotion trumps function. Not so with Samsung – and by default, Android. More is more, and function – not emotion – matter most. More is better. More is bigger, bolder, louder, crisper, more functional. More is more.

Less Versus More

Which ad is best? Standing on their own, that’s easy: Apple’s ad is great while Samsung’s is only good. Yet on the more important question – how will each new ad help its respective company win the smartphone wars – well, that’s harder to answer. After all, design, innovation, product focus, global supply chain, carrier relationships, retail footprint, content, apps and services are all extremely vital to the two combatants, no matter how good or bad the advertising.

However, on the values level – emotion versus function, less versus more – I suspect this is a war without end.

For Apple, there must always be that deep emotional connection between the user and the product. The product should uplift, possibly ennoble the user. Apple products, as their commercials reveal, strip everything away until the end result is (near) perfection. Less is more.

Score one for Apple.

But this value, while it resonates with many, will not convince everyone. The global smartphone market is big. Really big. It’s already over 1 billion strong and growing. Smartphones are now outselling feature phones. It’s wise to assume that before this decade is out at least 2 billion and potentially 5 billion people will possess a smartphone. That is a staggering number, nearly unparalleled in product history.

Do five billion people on this planet consume wheat? Corn? Meat? The scope of the smartphone market is nearly incalculable.

These devices, then, like cars, like the PC that sat on our desk for years, like food, must serve a purpose – many purposes, in fact. I already use my smartphone to write blog posts, monitor my finances, track my fitness, edit presentations and outline my next book. Soon, I will use it as my car key, house key, credit card, debit card, glucose monitor. What next? I can’t say but I know my next device must offer more.

Score one for Samsung.

The Smartphone Wars Continues

It seems unlikely that any rival or any new technology, Google Glass, for example, is going to unseat Samsung or Apple anytime soon. Expect these two companies to remain the dominant “personal computing” companies through at least this decade. They will battle it out in the marketplace and in the courts. They will fight over suppliers and content licensing. They will seek to win on pixel counts, integration, UI, features, price and innovation.

But I suspect the biggest difference between the two will remain just as it has been revealed in their latest commercials: Apple will remain focused emotional appeal, a less is more approach, and on what the product means to you. Samsung will stay focused on adding new features, increasing old specs, and promoting what their product can do for you.

These are core values, deeply held, and unlikely to change. Which side you choose likely reveals far more about you than simply which platform you prefer, iOS or Android.

Android’s Leaky Bucket

John Paczkowski over at AllThingsD covered a report written by Carl Howe, VP of the Yankee Group. Carl makes a bold statement, indicating iPhone ownership in the US will exceed Android US ownership by 2015.

Carl has developed an analogy using the idea of a leaky bucket. In short, he proposes that if platforms are a thought of as a bucket and their buyers comprise the water that fills it. Therefore how "leaky" a bucket is refers to a consumer intent to buy something else. What Carl's consumer survey research shows is that the Android bucket is leaking faster than the iPhone bucket.

A couple of stats to highlight from the Yankee Group survey.

  • 91 percent of iPhone owners intend to buy another iPhone
  • 6 percent plan to switch to an Android device with their next purchase
  • 76 percent of Android owners intend to buy another Android phone
  • 24 percent of Android phone users plan to switch to another platform
  • of those professed (Android) switchers, 18 percent plan on buying iPhones.

While 76% plan on remaining faithful to Android, 91% plan on remaining faithful to the iPhone. Carl's point is that the Android bucket is leaking faster than the iPhone's.

So ultimately platform loyalty is the key indicator here from a sustainability standpoint. The key to Carl's theory, however, will be the decisions of the lower end and new smartphone buyers, not necessarily purely switchers.

I'd again argue that the anticipated behavior of both the lower end market, who probably bought a cheap or free Android devices as their first smartphone, along with smartphone intenders, favors Carl's theory. How many smartphones on the market will be able to compete with a $99 subsidized iPhone 5? Probably only the Galaxy S3, arguably.

I'm not sold on the idea that everyone in the US who wants an iPhone has one. However, I'm also not convinced that the category is fully mature from a consumer adoption standpoint. What I specifically mean when I say that is, i'm not sure the market has fully experimented with different devices, platforms, software, etc., in order to fully define their needs, wants, and desires. Once this happens we will truly see a much clearer picture of platform share and sustainability.

One thing our research continually shows, as does the Yankee Groups and a host of others, is that once consumers get into the Apple ecosystem, they rarely leave.

Which makes one single point perhaps the most significant. The key for Apple is not necessarily to get consumers to buy all their products at this very moment. Rather, to just get consumers to buy one, which acts as the gateway to their ecosystem.

* Caveat. Surveys are, of course, not always an exact indicator of future behavior. However, I have seen more than a few solid data points that support this data. Also, without knowing specific device plans of Apple or competitors the timing is also hard to predict. What Carl proposes could happen sooner or later. This is why I mentioned the market adoption cycles and experimentation still taking place.

Apple In Perspective

Apple has been taking a real beating on Wall Street and in the press lately. But are we losing our long-term perspective by focusing so intently on quarterly results?

Stock Market

The Stock Market is a predictor of future growth, but it is hardly infallible. Seven months ago the market was predicting spectacular growth for Apple. Today it’s predicting almost no growth at all, worse than Dell and HP. Was the market wrong seven months ago or is it wrong today? Or both?

Growing Markets

Take a broader look at the computing markets. We are transitioning from notebook and desktop computers to mobile phones and tablets. No one is in a better position to benefit from this changeover than Apple. They were first-movers in both phones and tablets and they continue to devour the bulk of those sector’s profits. Apple’s path is not unimpeded, but they still have the inside track.

iPhone & iPad Sales

Last quarter, Apple sold 37.4 million iPhones for 7% growth and 19.5 million iPads for 65% growth.

Remember all that talk about suppliers cutting orders and how it meant that Apple wasn’t selling as many phones and tablets as before? Yeah, not so very much.

China

“iPad experienced very strong year-over-year growth in every operating segment, particularly in Greater China and Japan where sales more than doubled year over year.”

The highlights for the quarter in China were that iPads grew 138% year-on-year, and we set new records for sell-through both for iPhone and iPad during the quarter.” ~ Peter Oppenheimer

Remember all that talk about Apple not doing well in China? Yeah, not so very much.

Business

“…the Good Technology’s data that says that iOS accounted for 77% of all their activations by their corporate customers. Now that would not include BlackBerry, but it would include all the other guys. and so we seem to be doing really well and honestly, I don’t see the recent announcements changing that at all. I’ve seen more and more people developing more and more custom apps for their businesses on iOS to be used on iPad and we’re very, very bullish on it. As a matter of fact, just to quote you some numbers, iPad now is being used in 95% of the Fortune 500 and what’s even more impressive probably is on the global 500 companies, we’re now in 89%.” ~ Peter Oppenheimer

Remember all that talk about Apple’s iPhone and iPad not doing well in business? Yeah, not so very much.

Unique Advantages

Critics dismiss Apple as un-innovative, passé and niche. But Apple retains distinctive differences that give it unique advantages in the the newly emerging mobile markets:

— App Stores in 155 countries

— iTunes in 119 countries

“Today, our iTunes store offer the broadest combination of geographic reach in content depth in the industry, and they surpassed quarterly billings of $4 billion for the first time ever in the March quarter, that’s a $16 billion annual run rate making our digital content stores the largest in the world. The quarter’s iTunes billings translated to record quarterly iTunes revenue of $2.4 billion, up 28% from the year ago March quarter with new quarterly revenue records for music, movies, and apps. ~ Peter Oppenheimer

— 300 million iCloud users

— Highest loyalty and customers satisfaction rates in the business

“A recent study by Kantar measured 95% loyalty rate among iPhone owners, substantially higher than the competition, and iPhone remains top in customer experience. Last month, we were very pleased to receive the number one ranking in smartphone customer satisfaction from J.D. Power and Associates for the ninth consecutive time.” ~ Peter Oppenheimer

“The most recent survey published by ChangeWave indicated a 96% satisfaction rate among iPad customers.” ~ Peter Oppenheimer

— Developers

…(W)ith App Stores in 155 countries that encompass almost 90% of the world’s population, our developers have created more than 850,000 iOS apps, including 350,000 apps made for iPad.”

“Cumulative app downloads have surpassed 45 billion and app developers have made over $9 billion for their sales through the App Store, including $4.5 billion in the most recent four quarters alone. Canalys estimate the sales from our App Store accounted for 74% of all app sales worldwide in the March quarter.”

“…(W)e are now paying very happily our developers more than $1 billion every quarter.” ~ Peter Oppenheimer

Revenues, Profits And Margins

Apple had $43.6 billion in revenue. What other company had comparable revenues?

Apple had $9.5 billion in profits. What other company had comparable profits?

Apple had 37.5% margins which is astonishing for a hardware company and compares quite favorably to the margins of both Google and Microsoft, which are primarily software shops.

Screen-Shot-2013-04-25-at-4-25-10.06.04-AM

Courtesy of Asymco

It seems that Apple compares favorably to every other company in the world other than the Apple of 12 months ago.

iPhone 4

“Now, that said, we see an enormous number of first time smartphone buyers coming to market, particularly, in certain countries around the world. And so what we’ve done with that is and we started last quarter is we’ve made the iPhone 4 even more affordable and which has made it more attractive to first time buyers and we caught up on the – our supply – demand towards the late in the quarter last quarter and we are continuing to do that in other markets. And we believe that the phone or the price point that we are offering is an incredible value for people, that allows them to get into the ecosystem with a really, really, phenomenal product.”

One thing that hasn’t been getting enough attention, or rather hasn’t been getting the right kind of attention, is the continued sales of the iPhone 4. The iPhone 4 is now over two and a half years old but it continues to sell well in developed markets like the United States and Europe and in developing markets like China, India and Brazil. How can this be? Is there any other phone manufacturer who could successfully sell a phone that is two generations and two years out of vogue?

The iPhone 4 is proof that buyers are buying Apple’s ecosystem, not just their hardware. So long as Apple maintains a lead in integrating hardware, software and services, they will maintain an edge in mobile computing.

And as an added bonus, while the iPhone 4 may be bring the iPhone’s average sale price down, the sale of this older technology should be bringing the iPhone’s margins up.

Apple’s Long-Term Outlook

“We are managing the business for the long-term and are willing to trade off short-term profit where we see long-term potential. The iPod is a great example of this. When we launched it in 2001, its margins were significantly below the margins of Apple at that time.

Four years later, the iPod and the iTunes Music Store comprised half of Apple’s revenues and inspired us to build the iPhone. The iPad mini is another great example. We have priced it aggressively and its margins are significantly below the corporate average. However, we believe deeply in the long-term potential of the tablet market and think that we’ve made a great strategic decision. We’ll only make great products and this precludes us from making cheap products that don’t deliver a great experience.”

If you look at Apple’s numbers for this quarter and the next, you might think you see a company in decline. But if you look at Apple’s numbers over the fiscal or annual year, you see anything but decline. Let’s put this in perspective: Would you rather have Apple’s profits or those of Google, Amazon, Microsoft or Samsung? Once you put it that way, the answer as to how Apple is doing becomes clear.

Apple dominates the most dominant tech sectors of our times. And unless I’m gravely mistaken, that’s a good thing. A very good thing.

Can Carriers Handle a Low-End iPhone?

There is a good discussion happening online at the comment that I want to comment on. Horace Dediu has written several good pieces on the job the iPhone is hired to do. In his latest installment he looks at the average revenue per user in numerous countries and distills that data to browser share on iOS and Android.

Screen-Shot-2013-04-23-at-4-23-11.21.37-AM

What the data highlights is the fact that right now the iPhone is the most valuable device for the networks that carry it. Carriers have been in a transition the last few years to move their value from voice to data. The key for carrier services going forward is to capitalize on the consumer consumption of their data services not their voice services. Therefore device which are excellent at consuming data services are highly valued. This, as Horace points out, is the reason the carriers are willing to pay the high price of the iPhone and subsidize it to their customers.

The key question remains to the other devices, like Android, which certainly don't generate the same ARPU as the iPhone (or specifically iOS). We know that Android devices are heavily skewed to the lower end of the market. This market certainly behaves differently and although they browse the web and consume data, the evidence shows the engagement is less than with iOS.

Android devices do not maintain the same ASP line as the iPhone and often drop in price and add promotions quickly, often within 3-6 months. The iPhone stands strong in its price and its value to the operators.

A key question here is that if the low-end of the market does indeed behave differently, and this part of the market is not as valuable to operators, then why should Apple cater to it? Either we believe that this market will always behave this way, or it is the device itself (meaning a lower-end, less capable device) that is causing them to behave this way. I've always found a fascinating question to be whether the low-end market behavior with engagement and data consumption would change if they used iOS.

Read:
The Job the iPhone is Hired to Do Part 1
The Job the iPhone is Hired to Do Part 2

Along these lines, Ben Thompson (@monkbent), on his site Stratechery, offered up more useful points to this discussion topic.

Ben brings out a point regarding the iPhone's role as a premium network device that I think is interesting.

"Take three quick examples: Verizon, NTT DoCoMo, and China Mobile. If the iPhone as “Premium Network Services Salesman” is the only explanatory factor,1 then all three should have been clamoring for the iPhone from Day One. Yet Verizon resisted for years, and NTT DoCoMo and China Mobile have yet to give in. In fact, the iPhone has generally launched on the 2nd or 3rd-place carrier in any given geography."

Read:
Why Do Carriers Subsidize the iPhone

This is true and a valid question. If the iPhone is a premium device driving ARPU and operator value/CapEx recoupment, then why are certain carriers holding out?

The answer, I believe, lies in the iPhones success being both a blessing and a curse. The device in its early days nearly took down AT&T regularly due to the network demands. Many of us remember how awful AT&T was here in the Silicon Valley for many years as a result of the network demands from the iPhone. Many networks, Verizon included, have quality of service demands in which I'm sure their concerns over their own network capacity are or were an issue. Verizon adopted the iPhone when they were ready and prepared (also after the AT&T exclusive was up obviously). I'm sure others will as well when they feel they are prepared.

There is no question that the iPhone drives value so I do not believe the lack of universal carrier support is completely or even largely a business model question. It is, in my opinion, an infrastructure question. The question is can the operator networks handle the iPhone?

In this theory and to my earlier question about the low-end. If Apple went low-cost and grew their market share substantially by catering to the low-end, bringing hundreds of millions of new iOS users onto the networks, I have a strong feeling it would put monumental stress on all current network infrastructure. Bottom line is, I’m not sure the carriers can handle a low-end iPhone.

The Next Evolution In User Interfaces

With the introduction of the iPhone, Apple introduced the touch UI and literally changed the way people interact with their smartphones. When they extended the touch UI to the iPad, it set in motion an industry stampede to create PCs, laptops, tablets, and smartphones with touch based interfaces. In the world of technology, this was a real milestone. For decades the way we navigated through our PCs was through a keyboard, mouse or Trackpad. While Apple was not the first to bring touch to tablets or smartphones, they clearly get credit for commercializing it and making it the defacto standard for next generation user interfaces.

But there were two products released recently that I have tested that I believe gives us an early glimpse at the next evolution of user interfaces. These, perhaps, will be just as ground breaking as the graphical user interface and touch UIs in the market today.

Touch Freedom

The first is a couple of gesture features that are in the new Samsung Galaxy S4 smartphone. The first is called Air View. If you are in the email application on the S4, you can just “hover” your finger over the email you are looking at and the subject line and first 2 or 3 lines of the email pops up. It hovers over the actual email line so you can see what the email is about at a glance and decide if you need to read it or just move onto the next to check it out. The Air View gesture only works on the email app now but the software community will likely get the tools to be able to use it on other apps shortly. This gesture alone is a game changer in that it takes limited information on a small screen and blows it up in context so-to-speak so you can gain more info on the item you are looking at.

The second feature is just as cool. It is called Air Gesture. Have you ever been working in the kitchen with a recipe and gotten your hands dirty yet needed to go to the second page of the recipe to get the rest of the details? Well with Air Gesture, all you do is wave your hand in front of the tablet and it moves to the next page without ever touching the screen. I often take my tablet with me to restaurants when I am alone on the road and catch up on the days news, or even read a magazine or book while chowing down. Often my hands are full with knife and fork and today I actually use my knuckle to touch the screen to open a page or turn it.

To be fair, Microsoft has had gesture based user interfaces on the Xbox for almost two years, but to date it has only been designed for game consoles and has not transferred over to PCs or mobile devices yet. Both of these features on the Galaxy S4 smartphone represent the first major shift to making gestures an integral part of a mobile UI. While these two gestures are only on the S4 today, I’m sure it will eventually find its way to Samsung’s Galaxy tablets perhaps later this year.

The other gesture-based technology introduced recently comes from Leap Motion. This pad like device is used on a PC and sits in front of the monitor and between the keyboard and turns Windows into gesture based UI for supporting software. It can also be used with a laptop via a USB dongle with the device sitting in front of a laptop keyboard. Leap Motion has seeded over 10,000 developers with SDKs to make their apps work with their Leap Motion Controller. After it ships this summer, we should start to see a good amount of leap motion enabled apps later this year. HP has considered this so important that they did a major deal with Leap Motion recently and HP has committed to using it in their products in the future.

Similarly with Kinect, what is appealing about Leap Motion is the way you can interact with a game in 3D. Just use your hands as the controller, or use it to add hand controls to manipulating 3D objects. However, with support from the software community you can imagine eventually being able to just wave your hand and turn Web pages or use your hands to mold pottery on the screen, etc. The key thing here is that the Leap Motion technology is an enabler and once the software community gets behind it, it could become the next major step in making a user interface more friendly and even easier to use then it is today.

The reality is that Apple, Microsoft, Intel and others are all working on gesture based UI technology and believe that gestures represent the next significant evolution in computing interfaces. In fact, Intel has a human factors project around gestures and while not much is known about it, I would not be surprised to see the controller for gesture UIs even part of the SOC in the future.

While many had hoped voice would be the next big thing in user interfaces, there is still a lot of work in this space to be done to bring it into mainstream computing. I have no doubt that voice commands, such as the one HAL used in 2001: A Space Odyssey will eventually be the main way we interact with computers. However, for now, the next evolution will be gesture based. The technology used in Samsung’s Galaxy S4 smartphone and Leap Motion will most likely help define how gestures may soon become a major part of the interface we have on all of our computing devices.