Differential Privacy. Bane or Boon?

Ben Thompson of Stratechery on Apple’s implementation of Differential Privacy:

The broader challenge for Apple is this: in a fair fight the company would have a hard time matching Google or Facebook’s big data capabilities, which increasingly means a worse user experience, but this isn’t a fair fight: Apple is tying its own arm behind its back. The focus on privacy is admirable, to be sure, but there is absolutely a conflict with Apple’s focus on the user experience, and my question is whether or not Apple is being explicit in their decision-making about balancing the chances of datasets being stolen (or abused) + de-anonymized + compromising information being found + that information being abused, versus taking reasonable privacy steps (i.e. anonymizing data) that are not perfect but make it much easier to enhance the user experience for its hundreds of millions of users.

Quote via Apple 3.0

I don’t disagree with Ben Thompson lightly. He’s one smart dude. But I think he might be missing a trick here. He says that differential privacy guarantees a worse user experience…

…but isn’t privacy a part — and perhaps a very large part — of the user experience?

Apple Stared Down The FBI And The FBI Just Blinked

In the case of FBI v. Apple, a hearing was scheduled for Tuesday, March 22, 2016. Late on Monday afternoon, the government requested a postponement. I predict that this case is over. Here’s why.

1) The FBI saw the San Bernardino shooting as the perfect case for gaining a preferable legal ruling of their use of the All Writs Act.

2) The government picked the case, made it public and then aggressively took their case before both the public and Congress. Considering that the case dealt with a very recent, and very deadly, terroristic attack, I think the FBI was confident that they would win the public relations battle, perhaps win favorable legislation from Congress and most probably obtain a favorable legal precedent from the courts. They were wrong on all counts.

3) A hearing had been scheduled for Tuesday, March 22, 2016. Late Monday afternoon, the FBI went to the Judge and suggested that an outside party had shown them a possible new method for obtaining information from the iPhone without Apple’s assistance. They requested additional time to explore this option. The judge granted their request.

4) The government’s claim that there might be another way to obtain information from the phone was completely contrary to what the FBI had been saying over and over again in their Pleadings. The FBI had, in fact, steadfastly insisted that Apple, and only Apple, could gain access to the contents of the phone. That was the foundation of their case.

5) In addition to granting the government’s request for a delay, Judge Pym put an indefinite stay on her order. In other words, she put her order on hold — possibly forever. At the urging of the government, the Judge scheduled an evidentiary hearing for April 5, 2016.


Here’s my take. Apple can’t say this, but I can.

What’s going to happen is, on April 5, the government is going to give a status report and — surprise, surprise — they’re going to announce that they have miraculously found another way into the iPhone in question and the government won’t be needing Apple’s assistance after all. ((At least not for now.)) The case will, for all intents and purposes, be over.

The FBI went eyeball to eyeball with Apple and the FBI blinked first. The FBI realized that they were about to lose and perhaps lose badly. Rather than risk generating an unfavorable precedent, they will simply declare victory and then get the heck out.

None of this has happened yet. Barring further developments, I’m predicting that it will.

The Rebirth of U.S. Manufacturing

“The age of labor arbitrage is over,” General Electric CEO Jeff Imelt declared at the D11 conference last week.

Signs that he is right are all around us. Today, Lenovo–a Chinese company owned partly by the Chinese government–opened its first U.S. plant in Whittset, NC., (photo) where it will make ThinkPads, commercial desktops, and servers for the North American market. Motorola announced at the same D11 conference that it will manufacture its new Moto X phone in Texas. Apple also plans to return Mac manufacturing to the U.S. at a Texas facility.

What is happening is simple. For the past 25 years or so, multinational manufacturers have chased low labor costs around the world. For a long time, China seemed like the promised land with a seemingly unlimited supply of cheap workers and and business-friendly–that is to say, extremely lax, labor and environmental standards. But a funny thing happened. The supply of qualified labor turned out to be finite after all and rates are rising. And china belatedly realized that its environment, especially the air, could only absorb so much pollution before it began poisoning its people. Growth had to slow.

At the same time, advances in robotic manufacturing mean that the labor content of electronic devices is plunging making labor costs less and less of a factor in deciding where to build. But logistics costs, especially the cost of air or ocean shipping, are going up. That’s an argument to source manufacturing closer to markets. A great deal of high-tech manufacturing will remain in china, in large part because the Chinese have developed and exquisitely well tuned supply chain to keep plants stocked with components while minimizing inventory. But some will move, in many cases, to Mexico or the U.S.

The decline of labor input helps explain why a rebirth of U.S. manufacturing will not produce a surge in U.S. manufacturing employment.  Many of the U.S. manufacturing jobs that have disappeared since the 1970s did move to China, they just vanished. And the production is coming back precisely because not much expensive labor is required. The Lenovo plant. for example, will only employ 115 production workers.

Still, growth in manufacturing is a boon for the economy. The jobs it does produce tend to be better than old factory jobs, though they also require higher skills. And factories produce a lot of secondary employment–everything from construction workers to cooks and waitstaff to transport workers.


A Significant Product Differentiation

Philip Elmer-DeWitt is calling him the man who figures Apple is worth $240 a share. I read his blog post and dove into his theory of ROIC. Something he said stood out to me.

Without significant product differentiation, Apple cannot maintain the ultra high profit margins and ROICs.

I don’t know about David, but I consider iOS a significant differentiation. I believe in Apple the company. It is just becoming harder to believe in Apple the stock.

Bloomberg, the Internet, and Trust

We’ve just begun to see the fallout from Bloombgerg LP that, in the word of CEO Dan Doctoroff, “Bloomberg News reporters had access to limited customer relationship management data through their use of the Bloomberg terminal.” In blunter words, Bloomberg reporters were using their access to terminal log information to spy on customers’ activities. Considering that Bloomberg’s customers are the titans of Wall St. and government and that they are typically paying $20,000 per terminal per year, I expect the consequences to be nasty.

But the issues go well beyond Bloomberg. The internet, and society in general, operates as a network of trust that demands that certain lines never be crossed. Email providers have access, at a minimum, of extensive information on who you are exchanging mail with and often to the contents of the messages as well; you assume, without even thinking about it, that your email host is not selling the information to your competitors. You mobile phone service also has extensive records about both who you have called and where you have been. You assume these records also stay private. Bloomberg crossed that line. There are good technical reasons why the company–or any service provider–needs to collect log data that can reveal a good bit about client activity. And there are good legal and ethical reasons why that information must remain tightly restricted.

Breaches have, of course, occurred in the past. When I worked for BusinessWeek, we had a leak of market-moving information. employees of one of our printers were selling advance copies of an Wall Street column to traders. It turned out that one editorial employee was using the same information to trade on his own; both the printers and the editor went to jail. The electronics age makes this sort of thing both easier to do and harder to stop.

What remains to be seen in the Bloomberg case is just how widespread the practice was, exactly what information reporters had access to, what senior executives knew about it, and how long it went on. The initial damage will be to Bloomberg, but this episode (along with mounting reports of extensive government snooping on citizens) further weakens the delicate fabric of trust that lets the economy and society work.



Tom Wheeler and the FCC: The Challenges Ahead

President Obama announces the nomination of Thomas Wheeler (right)

Thomas Wheeler has been influencing  communications policy in Washington for a long time, but always from the sidelines. He ran what was then the National Cable Television Association and then the Cellular Telephone Industry Association until he was driven out in House Majority Leader Tom De Lay’s purge of Democrats at trade associations. He was a top advisor for Vice President Al Gore and a key member of President Obama’s 2008 transition team. Now he is about to move to center stage as Obama’s pick to head the Federal Communications Commission.

If you want to get a sense of the trouble the FCC has had adjusting to the new era of communications technology, just try to find something on its web site. Its biggest problem is that its most important activities are covered by the 1996 Telecommunications Act, a seriously flawed law when it was written and one that has not aged at all well. Every time the FCC has tried to push the boundaries of the law, whatever party didn’t like the result sued and, most of the time, won. Yet, there is little hope for new legislation from a Congress that cannot seem to do anything (though the Senate is likely to confirm Wheeler, who has bipartisan backing, without too much trouble.)

In this terrible political and legal environment, the FCC faces two enormous challenges over the next few years. One is finding enough wireless capacity to satisfy the rapidly growing demand for wireless data. The low-hanging fruit has all been picked and the painful progress of incentive auctions to free TV spectrum shows how difficult it will be to reassign chunks of airwaves. The FCCwill have to persuade spectrum holders, many of the civilian or military government agencies, to share nicely and will have to promote the technologies needed to make spectrum sharing work.

The FCC must also grapple with the dull, complex, and extremely important issue of how to retire the nation’s public switched telephone network. This network, a relic of the old monopoly Bell System today operated mostly by Verizon Communications and AT&T, is an engineering marvel that has outlived its usefulness. AT&T has gotten the ball rolling by petitioning the FCC to replace traditional PSTN service with internet-based IP telephony. But a business and regulatory structure built up over the past 125 years, with many billions invested, is not so easily disassembled. A huge part of the regulatory structure that governs communications is based on the PSTN, and even as telephony moves to wireless and IP-based communications, we depend on the old networks in many ways. It’s a system that was built with deep government involvement and the government will have to be deeply involved in its retirement.

Wheeler looks like a good choice to lead the FCC during this difficult period. He combines solid technical knowledge of the issues with the political skills that has often been lacking in FCC commissioners. The fact that his nomination has won praise from sources as disparate as top AT&T lobbyist Jim Cicconi and Public Knowledge’s Harold Feld suggests that he at least starts with a reservoir of good will, though it probably won;t survive his first major decision.


Windows vs. Mac In Schools: All the Wrong Reasons

The Maine Department of Education announced earlier this week that it was switching from Apple Macintoshes to Hewlett-Packard Windows PCs as the technology behind the Maine Learning Technology Initiative. Macs had been used exclusively since the program was started by then-Governor and now Senator Angus King in 2002.

I don’t think it makes a lot of difference whether Maine uses Macs or PCs in its schools. My guess is the state will pay a little less up-front and spending a bit more over the life of the machines because Windows software tends to be somewhat more expensive to maintain. But Maine made its decision for the worst possible reason, one that leads me to wonder if they have any idea of why information technology should be in schools in the first place.

Said Gov. Paul LePage (R):

It is important that our students are using technology that they will see and use in the workplace. The laptops use an operating system that is commonly used in the workplace in Maine. These laptops will provide students with the opportunity to enhance their learning and give them experience on the same technology and software they will see in their future careers.*

As the physicist Wolfgang Pauli said, that’s not even wrong. This argument didn’t make sense 15 years ago, when the differences between Windows and   Mac OS was much greater than it is today and Macs’ market share was much lower. It makes even less at a time a user proficient in one OS can master the the with maybe an hour of training.

But it is much worse if Maine thinks the reason to have computers in schools (and, yes, they really should be thinking about tablets, too) is to teach students how to use specific pieces of hardware and software. Students’ computers should be windows into a boundless sea of information. They should be tools in science class. And students should be learning the principles of programming, not so they can all grow up to be software developers but so that they learn something of what makes today;s most important technology tick–and perhaps learn a bit about the importance of the precise, logical thinking that programming demands.

Gov. LePage seem to see PCs as little more than the modern equivalent of the rows of typewriters in classrooms for vocational typing and the purpose of computers in schools as training students to get jobs typing in word or scheduling appointments in Outlook. The four-year contract is a nice win for HP, but it may be a tragedy for Maine students.

*–The HP Probook 4400s will ship with Windows 8, making LePage’s argument even more lame ,since the new OS has been largely shunned (so far) by business and is far more different from the Windows XP and Windows 7 versions used in business than is Mac OS X. But an HP spokesman notes that Maine schools have the option of downgrading to Windows 7.

Startup Highlight: Curious Tackles Informal Learning

The world of online education is buzzing with talks of MOOCs–massive open online courses–that many see as the future of higher education. MOOCs certainly have a place, though I’m not quite sure yet of just what it is. But there is no question that the web has both a massive supply of and demand for more informal educational opportunities. There are thousands of educational video on YouTube, but except for such well known sources as Khan Academy, they can be tough to find and tougher to assess.

Curious.com, a Menlo Park startup launched today, A big problem, wants to get the teachers and the students together and to help would-be web educations make some money in the process. The brainchild of Justin Kitch, who founded Homestead.com and later sold it to Intuit, is starting with about 500 curated lessons covering everything from beer making (photo) to exercise, from art appreciation to HTML coding. For the most part, the lessons stay away from traditional curricular areas, though there is the seemingly inevitable calculus tutorial and favor of more lifestyle and hobby-related content. “Our goal is a better way to deliver online education,” says Kitch. “Curious is a platform and a marketplace for teachers of anything.”

In contrast to many of the instructional videos found on YouTube, a considerable amount of care has gone into the quality of the Curious videos. While the quality of the ones I watched varies, even the worst were pretty good. The player features in-lesson quizzes: The instructor can insert questions into the video timeline. The video pauses and a question pops up on the screen. These can be a help in maintaining engagement or in student self-assessment.

One goal of curious is to provide the informality of YouTube, including the ability to start a course at any time, with something a bit more structures. “We did a lot of research onto how people learn online,” says Kitch. “The research shows you have 90 seconds before you lose someone. The idea is tyo provide a better educational experience than YouTube. YouTube gives a great educational experience, but not instruction.

Some of the lessons are free, but most cost between one and three “Curious coins.” New users start with 20 coins and additional units cost $1. The basic business model is a revenue share between Curious and the instructors.

The big test here is whether customers will part with their money in a world in which courses taught by professors from Stanford, Harvard, and MIT are available free. Succeeding in those formal courses, however, requires a heavy commitment of time over six to ten weeks, which explains why typically more than 90% of the students who enroll fail to complete the course. Curious offers lighter, smaller bites and just might succeed.



Google “Plays” With Android Activation Numbers

“…there are now 1.5 million Android devices being activated every day, Google Chairman Eric Schmidt said Tuesday. That’s led to more than 750 million Android phones currently in use.” ~ Erica Ogg, Gigaom

Google changed their methodology to only count user visits to the Google Play store when determining which versions of Android are in use. So exactly how many of those 1.5 million daily activations and 750 million overall activated units have actually connected to the Google play store?

Google isn’t saying.

Now why do you suppose that is?

Office for Tablets: Delay Could Be Death

Office logo

The usually very well-informed Mary Jo Foley reports at ZDNet that we won’t see major improvement in Microsoft Office for tablets until next year, spring of 2014 for Windows RT and fall for the long-awaited iOS and Android versions. If true, this is big trouble for Microsoft’s cash-cow Office franchise.

The huge threat is that this long wait gives everyone a year to 18 months to continue to learn to live without Office. In tech time, that is more-or-less forever. The longer people go without Office on their tablets and the more that tablets become the dominate computing tools, the less people will want or need the Microsoft software. It will hold on in the enterprise in those roles where Office is indispensable, but that will be a steadily shrinking market.

The bizarre thing is that Microsoft foresaw the future of tablets with the development of the Tablet PC in 2001, but utterly failed to recognize their importance once Apple released the iPad in 2010. The brand-new version of Office relies on Windows’ classic Desktop user interface and its applications are unsuited for use even on Microsoft’s own tablets unless they are effectively configured as laptops with keyboards and a stylus or mouse. Outlook, a key component of the Office suite, is not available at all for RT, the tablet version of Windows (Foley says Outlook RT is fall 0f next year.)

As the latest sales figures suggest, the world is moving decisively to tablets. To the extent that people need Office-like apps, companies more nimble (and less riven by internal politics) than Microsoft will provide them. If Microsoft doesn’t get around to releasing tablet versions of the applications until the fall of 2014, it is likely that very few people by then will care.

Fox, Aereo, and the End of TV

Aereo antenna array (Aereo, Inc.)

News Corp. Chief Operating Officer Chase Carey’s threat to pull the Fox network from the airwaves if Aereo wins its legal battle to retransmit over-the-air TV signals without paying for them is probably nothing more than bluster. But the fact that he could make such a threat with a straight face, and in front of the National Association of Broadcasters, no less, is a clear indication that the end of TV as we have known it is approaching.

The broadcast networks, especially Fox and the old big three of ABC, CBS, and NBC–are still tremendously important players in the TV world. Far more people watch their content than any of the cable-only channels. They still dominate news and live sports (though ESPN and to a lesser extent Fox have made significant inroads in the latter).

But over-the-air is no longer how they reach most of their viewers. And while we still think of broadcast TV as ad-supported, the retransmission consent fees paid by cable carriers–and avoided by Aereo–have become a tremendously important source of revenue to local stations. In a sense, they already are pay TV stations from the point of view of most viewers, and that is why  Carey’s threat is not an empty one.

What would it mean if over-the-air broadcast TV disappeared? For one thing, we could forget about the hideously complex incentive auction now being planned by the FCC to free a bit of the prime spectrum now occupied by TV stations for wireless data use and just turn the whole thing over to wireless.

Some of the more interesting consequences would be for politicians. Members of Congress depend on local stations to keep their names and faces in front of voters, especially as local newspapers fade away. Politicians are also the beneficiary of regulations that require local stations to sell advertising to candidates for federal office at the lowest rates they charge any customer. In fact, if stations stopped broadcasting over the air, the Federal Communications Commission would lose essentially all ability to regulate their content, rates, or much of anything else.

Even the most anti-regulation Republican doesn’t really want that to happen. That’s why Carey’s real audience may have been Congress. If Aereo wins in court, as seems increasingly likely, the broadcasters are likely to turn to Congress for relief. Carey’s statement was likely a shot across the bow in that fight.

But history has shown us that depending on favorable treatment from government to save you from the forces of change can work, but only for a little while. The times they are a-changing for television.

Facebook Home: The Death of Android

Facebook Home Chat-heat (Facebook)As a core operating system, Android is thriving. As a brand–and a user experience–it is dead. Facebook just killed it.

Android’s brand demise has been coming for a long time. Phone makers have been taking advantage of Android’s open architecture to install their own modified versions, such as Samsung’s TouchWiz. The most recent Android launches, the Samsung Galaxy S 4 and the HTC One, have barely mentioned Android. And in announcing Facebook Home, Mark Zuckerberg talked about Android only to say that Facebook was taking advantage of the openness of both Android and the Google Play Store to let anyone with a fairly recent Android phone replace the Android experience with the Facebook Home experience.

I dont know how many people will want Facebook  completely dominating their phone experience. I’m out of  the target demographic by more than a generation, so I’m probably a poor judge. But I’m pretty sure Facebook’s announcement won’t be the last of its sort. Maybe we’ll see a Twitter Home, or a Microsoft Home built around a growing suite of Windows/Skype/Xbox/SkyDrive products.

All of this seems to leave Google in some difficulty. Facebook is a direct competitor to Google’s primary business of delivering customers’ eyeballs to advertisers. Google’s considerable difficulty in monetizing Android just got considerably worse, and things are likely to go downhill from here.

Of course, one thing Google could do, at the risk of being evil, is lock down future releases of Android. That, however, might well be locking the barn door too late. Open source and free (as in speech) versions of Android are out there and Google action might well be viewed as just another fork of Android.

Google never seemed to know just what it wanted to do with Android. Now it may be too late to figure it out.

Want To Sell Used Digital Content? Not So Fast

Just two week after the Supreme Court stop a publisher’s attempt to impose tight limits on the ability of purchasers to resell books, a federal judge in New York has reminded us of the limits on our resale rights when it comes to digital products. In Kirtsaeng v. John  Wiley & Sons, the Supreme Court ruled 6-3 that the “first sale” doctrine applies to goods made outside the U.S. and that a purchaser has the right to resell a book no matter where it was published.

Today’s decision by Judge Richard J. Sullivan of the U.S. District Court in Manhattan appears to end the effort by ReDigi to create a market in used digital music. The judge granted Capitol Records’ motion for summary judgment and while he did not immediately issue an injunction against ReDigi’s operations, that seems likely to follow.

The decision is highly technical and turns on a distinction between what copyright law calls a “phonorecord” and a sound recording. If you own a vinyl or CD recording–a phonorecord– you are free to sell it, but not so with a digital copy.  In essence, the judge said that if Congress wants to create a right to resell digital content, it may do so, but absent such action, forget about it: “[T]he Court cannot of its own accord condone the wholesale application of the first sale defense to the digital sphere, particularly when Congress itself has failed to take that step.”

Uniloc v. Rackspace: A Rare Patent Win in East Texas

Patent shingle (USPTO)

The U.S. District Court for the Eastern District of Texas has a well-earned reputation as a place where non-practicing entities, more colorfully known as patent trolls, use their dubious patents to extort money from companies that actually do things and make stuff. So it was deeply gratifying to see infrastructure-as-a-service provider Rackspace Hosting win a summary dismissal of a patent claim brought by Uniloc USA.

Uniloc claimed a patent of a general method for rounding floating point numbers and argued that the Red Hat Linux used by Rackspace infringed upon it. Red Hat defended Rackspace as part of its program for indemnifying customers against such claims.

The Uniloc patent was silly and clearly should never have been granted; the method claimed is neither novel nor non-obvious–two of the three legs on which all patents rest. But mere silliness often fails to stop patent claims from dragging on for years a tremendous expense to all concerned. So the quick end to this case is something of a miracle, especially in a district where patent holders have a very strong chance of winning.

The case does not address the general issue of software patentability nor does it, as some reports have held, determine that mathematical algorithms are not patentable. But Judge Leonard Davis found (PDF of ruling courtesy of Groklaw.net) that the patent in dispute failed to comply with the rules of patentability of algorithms as laid out by the Supreme Court, mainly in Gottschalk v. Benson and in re Bilski. Judge Davis wrote:

 [A]ccording to the patent itself, the claims’ novelty and improvement over the standard is the rounding of the floating-point number before, rather than after, the arithmetic computation… Claim 1 merely constitutes an improvement on the known method for processing floating-point  numbers…  Claim 1, then, is merely an improvement on a mathematical formula. Even when tied to computing, since floating-point numbers are a computerized numeric format, the conversion of floating-point numbers has applications across fields as diverse as science,  math, communications, security, graphics, and games. Thus, a patent on Claim 1 would cover vast end uses, impeding the onward march of science.

A few more Judge Davises and the patent mess could look a whole lot less messy.




Google Keep: Bleeding from Self-inflicted Wounds

Google keep icon


I don’t know how much Google is saving by killing off Reader, but it is rapidly becoming clear that it wasn’t worth it.

Most people don’t know what an RSS reader is and Reader never became a popular offering  on the scale of, say, Gmail. But it was heavily used by techies, especially tech writers who counted on it to provide  easy access to a broad variety of industry information. I definitely count myself among them. So the decision to kill Reader after years of neglect caused widespread dismay among industry influencers.

The cost of this became clear when, a week after the Reader announcement, Google rolled out Keep, a competitor to Evernote, Microsoft OneNote, and other note-taking and syncing apps. GigaOm’s Om Malik led the charge with a post headlined Sorry Google; you can Keep it to yourself.” His argument: “It might actually be good, or even better than Evernote. But I still won’t use Keep. You know why? Google Reader.” IDG’s Jason Snell chimed in with a tweet: “Can’t wait for Google to cancel Google Keep in four years after it’s decimated Evernote’s market.”

Google, of course, has the right to kill off any service it wants, especially where it provides the service without charge and has no contractual relationship with users. But Google wants to be something new in the world: A company that can be a trusted partner providing services at little or no cost. But gaining trust requires confidence on the part of customers that the services will be there after they have come to depend on them. The termination of Reader did grave damage to that trust. The price was a rocky launch for Keep, even though the product itself generally got good reviews.

Like Malik and Snell, I’m sticking with Evernote, which is offered in both free and premium paid versions. The company is doing well and note-taking and related services are its only business, so I have confidence it’s not going to abandon the market. But Google is going to have to work hard to convince me it can be trusted.



Understanding Android Activations

There are some questions that are worth spending the time to understand. Part of this lure may be due to the elusive nature of how Google reports Android. They make it sound like the game is over, they have already won, they are the new Microsoft. Now there is nothing wrong with that even if it is true. There is no question Android is the current market share leader and there is nothing wrong with that. The problem that I have and the reason I scour for data on the subject is because by not operating within the mantra of full disclosure, I feel as though there is a level of disingenuousness when data is not accurately reported. This forces many to guess and often speculate and in often not so helpful ways. Especially when many in the mass media fail to ask critical questions about the data they are reporting.

There are two articles I highly recommend, especially if getting to the bottom of this puzzle is interesting to you.

Benedict Evans is on the same hunt and wrestles with the same questions as I do related to Android. His post here makes some relevant observations. Horace Deidu of Asymco also is on this quest and posted a great article today looking at the question of “Where are the Android users?”

Horace makes the following point:

My suspicion is that it has something to do with the fact that the US is one of the few (but largest) market where the iPhone is available as a “low end” offering. At a minimum price of $0 (with a contract) many consumers are finding the iPhone attractive relative to a $0 (with a contract) Android phone. This price parity (illusory as it may be) allows iPhone to grow even faster than Android in this particular market.

One wonders what would happen if such price parity were present globally.

As I pointed out last week with regards to the clear application usage and engagement times of Android vs. iOS users, Apple’s growth in the low end is what is interesting. I have a hunch similar to Horace’s that the US could be a sign post of what could happen world wide as Apple extends their aggressive offerings there as well.

Can We Call Windows RT a Flop Yet?


Windows RT was a bold move by Microsoft to make its mark in the world of ARM-powered tablets. But five months after launch, it is looking more and more like an expensive flop.

The German site Heise Online reports (h/t to The Verge) that Samsung has cancelled its plans to roll out the RT-powered ATIV Tab in Germany and elsewhere in Europe, do to weak demand. This is the latest blow in what has been a steady pullback of OEMs from the RT market. In addition to Microsoft’s on Surface RT, there appear to be just three RT tablets available in the U.S.: The Asus VivoTab RT, the Dell XPS 10, and the Lenovo Yoga 11. Hewlett-Packard has announced that it is skipping the RT market and other OEMs seem to have no interest in expanding their product lines.

Tablets running full Windows 8 seem to be doing considerably better, with Microsoft still having difficulty keeping the Suface Pro in stock. The big question is whether these tablets, and the relatively slow sales of traditional Windows 8 PC, give developers enough incentive to create apps specifically for the user interface formerly known as Metro, or whether developers will prefer to try more touch-friendly versions of apps using the traditional Windows UI.

Why the iPad Needs a File System


Over at Monday Note, the always perceptive Jean-Louis Gassée writes about how the lack of a true user-accessible file system is holding back more intensive use of the iPad as a creation tool. Jean-Louis has been on this kick for a while, and I couldn’t agree with him more.

My creative process, and I expect many of your workflows too, consists of creating documents by writing original text combined with bits and pieces from a variety of sources, including web pages, image files, Word documents, PDF files, email messages, tweets, and who knows what else. On a Mac or a Windows PC, this is very easy to do, by openeing multiple windows and cutting and pasting between them. The lack of multiple windows can’t easily be overcome on a tablet; at best, you could manage two small windows on the limited display real estate.

But Apple makes this much harder than it has to be by imposing tight restrictions on communications between iOS apps and by denying users access to any sort of listing of files available on the system. There are lots of ways around this, using third-party apps such as SugarSync and Documents to Go, but like all workarounds, the are clumsy, halfway solutions. I love traveling without a laptop, but even writing a simple blog post on an iPad is a lot more challenging that it ought to be.

I like Gassée’s suggestion of a two-tier user interface for the iPad, with the advanced version exposing features such as the file system while the standard mode keeps them hidden. I don’t think Apple would ever offer this–it violates the canon of iOS simplicity–but it sure would be a big help to some of us.


HTC One, Android Zero

Photo of HTC One (HTV

There was a word missing from HTC’s unveiling of its impressive new HTC One phone. HTC executives talked about the BlinkFeed streaming home screen, the redone Sense user interface, the BoomSound audio system, and the Zoe photo-plus-video app. But there was no mention of the phone’s Android software. Even on the One’s web page, you have to drill down to specs to learn that it runs Android.

This downplaying says a lot about the branding efforts of both HTC and Google. HTC, having come through a very rough patch that saw its market share and profits tumble, is anxious to relaunch itself as a premium smartphone provider. Talking about Android cannot do this; mentioning Android just makes it look like a provider of commodity hardware running commodity software.

So instead, HTC is promoting the One brand as well as the subbrand it has chosen for the proprietary apps and services that it hopes will distinguish itself from the Android pack. HTC isn’t alone. Samsung has established Galaxy as its premium brand and is spending heavily in both development and marketing to establish a unique hardware identity. About the only one promoting Android these days other than Google is Verizon, with its Droid franchise. (Probably not coincidentally, Verizon is the only one of the four major U.S. carriers not offering the HTC One.)

Of course the One does run Android (version 4.1.2, to be precise) and HTC, which doesn’t offer much in software beyond the apps it has developed for the One, needs the Android app ecosystem and the Google Play store to make the phone valuable to users. But HTC’s handling of the announcement makes it clear how much the brand value of Android has eroded even as its market share has grown. For Google, which seems to be struggling to find a way to make money off Android, that cannot be a good thing.


The Enterprise Is Important. Let’s Get It Right.

BlackBerry z10 photo (BlackBerry)

One of the most striking features of much tech writing today is its near total ignorance about corporate software and systems. Except for sites like ComputerWorld and others that specialize in the enterprise, reporting is sparse and when it appears, often wrong.

This tendency has been glaringly revealed in a lot of the writing about the new BlackBerry and the BlackBerry 10 operating system. The heart of the blackBerry business has always been the enterprise and the company’s hopes for revival hinge on its ability to win back customers who have been drifting to other platforms or bring-your-own-device options. But consider this from TechCrunch:

In short, BB10 isn’t built for the way business is done today. When RIM was in its ascendance there weren’t many options for an IT guy. You could install Exchange, sendmail, or Lotus and wait for a crash. BES was a godsend. Now that’s no longer true. 99.9% uptime is the rule, not the exception, and there are hundreds of cloud service providers that can turn a single founder into a mobile powerhouse from the comfort of her phone – her iOS phone.

The writer, the usually solid John Biggs, doesn’t realize that BlackBerry Enterprise Server was never an alternative to Microsoft Exchange or Lotus Notes. It ran (or runs) on top of one of those platforms. BES may have been a godsend, but not for that reason. And major commercial mail platforms such as Exchange or Lotus Domino Mail have provided three nines of uptime for a very long time. and to the extent that I can understand that last sentence, there have been cloud providers for a very long time too, including those that offer hosted BES services.

BlackBerry is making a serious play to regain the corporate market, BlackBerry Enterprise Service 10, released last week, provides two new services: BlackBerry Balance, a software approach that partitions a BlackBerry 10 devices into separate  business and personal halves, and BlackBerry World for Work, a custom corporate app store. It also brings messaging and mobile device management support to Android and iOS devices, as well as BlackBerry 10s.

BlackBerry faces huge challenges and its success in the enterprise is far from assured. But if you want to analyze its chances, it helps to know how this stuff actually works.

Apple and Imperfection

Apple-Think Different

Near the end the dot-com bubble, smart investors finally realized that a major problem with tech stock pricing was that dozens of companies were priced to perfection: Their stock prices were so high relative to the underlying financials that only a perfect performance could justify the share price for any length of time. Very few companies could deliver perfection and the house of cards folded.

Apple these days seems to be the opposite of a bubble dot-com. Despite a depressed stock price–it was trading at a very mediocre 11.6 times trailing earnings before accounting for a sharp after-hours post-earnings plunge. Apple has now given up all the gains of the past year,

And while I am no financial analyst, this is ridiculous. The sharp run-up in the stock that ended abruptly this fall was fully justified by the company’s stellar performance and even at its peak, Apple was still underpriced by most fundamental metrics. Two things have been true about Apple’s performance for some time: Its margins and growth rate were both unsustainable. But in a reasonable world, there was room for both to decline, as they have, and for shares to keep rising, as they most certainly haven’t.

Apple has always been a stock that traded heavily on emotion rather than analysis and now is no different. If pessimists want to drive it lower, they mill, despite a P/E heading for single digits and a price that’s just a bit more than three times the cash on hand.

Disclosure: I do not have any direct position in AAPL stock, though funds I invest in may.


A Quick Take On The Surface Pro

images-38First, let me say that the Microsoft does not get enough credit for the hardware build on the Surface RT. Microsoft had little experience in bringing out a hardware product and they got the hardware right and they did it on the first try. An outstanding job.

Second, since the Surface Pro is not yet available for independent review, I shall assume, for the moment, that the Surface Pro works as intended.

Having said all of that, I still don’t see how the Surface Pro can be a success for Microsoft. It is clearly a notebook, not a tablet. This was true of the Surface RT and it is even truer of the Surface Pro. (Thicker, heavier, lower battery life, etc.) You can’t hope to hit the target, i.e., tablets, when you’re not even aiming at them.

Finally, I used to believe that the Surface Pro would sell a lot of machines but do nothing to advance Microsoft in the tablet wars. Now that the pricing has been revealed, I’m not even sure that Microsoft will sell a lot of machines. Microsoft lists the Surface Pro at $899 but this is disingenuous since it does not include the cost of a Type Cover keyboard ($130) or a Touch Cover Keyboard ($120). This brings the price up to $1,029, which means that you could buy a MacBook Air, instead, and SAVE $30.

Does this strategy make sense to anyone outside of Redmond?

EDIT: Over at TechCrunch, Matt Burns argues that the Surface Pro is priced just right. What’s your take?

Why Hardware, and CES, Still Matter

DEC system board (Wikipedia)An odd notion that hardware no longer matters has lately taken hold in the world of tech commentary. For example, in a well-argued piece explaining his decision not to attend the Consumer Electronics Show, Buzzfeed’s Matt Buchanan  writes:

[S]oftware and services have become the soul of consumer technology. Hardware (seriously doesn’t the word “electronics” in the conference’s dusty title make your eyes instantly droop a bit?) has become increasingly commoditized into blank vessels that do little more than hold Facebook and Twitter and the App Store and Android and iOS. And the best and most interesting vessels, increasingly, are made by the very companies making the software.

It’s true that the relationship between software and hardware is changing, but this is happening in much more complicated and interesting ways. If hardware were a pure commodity, sales of phones, tablets, and PCs would behave the way commodity markets do, with all business flowing to the lowest cost  and no-name Chinese manufactures of good enough handsets, tablets, and PCs dominating even in advanced economies. Instead, the premium producers, especially Apple and Samsung, are winning. (Samsung makes lots of low-end phones, but it is enjoying its greatest success with its top-of-the-line products.)

What is happening is that hardware and software are becoming more and more integrated, to the point where it is difficult to tell where one ends and the other begins. This integration is at the heart of Apple’s success and the need for it is driving Google and Microsoft into the hardware business and may push Samsung to break with Google’s control of Android or to develop an alternative to it.

The integration of hardware and software also makes the meme started by Google’s Eric Schmidt and repeated by many others, that the only companies that really matter to consumers are Apple, Amazon, Google, and Facebook. Of these four, only Apple comes anywhere close to full vertical integration. All of them depend on a sprawling infrastructure of companies, including Intel, Qualcomm, Nvidia, and ARM Holdings, that design the non-commoditized components on which everything else depends. These companies, as it happens, were very well represented at CES.

Tech is a complicated business. But the tech commentariat is hopelessly addicted to simpleminded generalities. The consumers of punditry would be better served if we all stopped to think a bit more.

Where’s The Windows 8 “Buzz”?

With all the news coming out of CES this week, I couldn’t help but be struck by the lack of “buzz” surrounding Microsoft’s Windows 8 tablets. Microsoft and its partners just introduced a slew of new hardware and software products, but the response at CES has been muted, at best. In fact, it seems to me that the start of 2013 has been very negative for the technology giant from Redmond.

— Apple’s falling stock prices have been getting all the attention, but while Apple’s stock ended the year up 30%, Microsoft only had a year long gain of 2%.

— Sales of Windows 8 tablets have been tepid, at best.

According to NPD, overall Windows sales dropped 11% during the holidays.

— And next year isn’t looking any better with Sterne Agee analyst, Shaw Wu, projecting a 2% growth rate for the PC side of the industry.

— Windows 8 tablets have been criticized as being “confusing” both by analysts and some of Microsoft’s manufacturing partners.

— Windows Phone – which was already struggling — has an industry low 37% repurchase rate. (EDIT: This low number may be a reflection of discontinued Windows Phone 7 devices.)

— Microsoft even had to suffer the indignity of having thieves break into one of their offices and only steal Apple products — ‘No Microsoft products were reported stolen

“Redmond, We Have A Problem”

Here’s Microsoft’s real problem: They shot their bolt with Windows 8 and they badly missed the mark. They looked at the wildly successful Apple iPad and decided that it was a flawed product. Instead of creating a tablet, Microsoft created a hybrid with the basic assumption that what the market really wanted was a tablet that could act as a notebook PC. It’s still early, but so far the marketplace is telling Microsoft that they got it wrong.

“Microsoft doesn’t have a credible response” to expensive tablets like the iPad, or cheap tablets like the Kindle Fire, Google Nexus, or iPad Mini, and that’s what’s hurting Windows consumer sales.” ~ Shaw Wu

While Microsoft Fiddles, Their Monopoly Burns

Nero was famed for fiddling while Rome burned. And like Nero, while Microsoft fiddles with hybrids, their business monopoly is burning. Businesses aren’t waiting around for Microsoft to get their mobile act together. They’re moving on and they’re moving away from Windows.

Trip Chowdhry, a managing director at Global Equities Research, has put out a research note estimating that Apple sold between 3 million and 4 million iPhones to businesses over the past quarter.

— In a recent analyst survey, the percentage of CIOs who said they’d conduct “broad” tablet rollouts jumped to 15 percent for this year from just 4 percent last year.

— Companies have also found they can save money by letting staffers use their own personal smartphones and tablets at work. Combine that with the corporate trend of avoiding new PC purchases and it paints a very bleak picture for Microsoft’s personal computing efforts.


“Apple’s iPad…now has a starting price of $329 with the entry-level iPad mini. … Windows 8 hardware priced between $500 and $1,200 is ‘uncompetitive’ compared to lower-priced options from Apple and even Google’s Android. ~ Sterne Agee analyst, Shaw Wu

In the fall of 2012, Microsoft planted the seeds for their future in personal computing. If the early signs are any indication, they may not be pleased with what they reap.