July 2011 – Tech.pinions

Tech + Media – The Honeymoon Between GoogleTV and Logitech Ends, but the Marriage Continues

The marriage of tech and media is definitely a rocky one at times, and Web TV is no exception. Despite all promises, like all relationships things are always evolving between tech and media – and sometimes they work, and sometimes they don’t. The latest tech / media couple in trouble appears to be Logitech and Google. With the rocky start to Google TV (the biggest player in Web TV so far), Logitech is also hung up in every way possible. Why? They supply the tech end of Google TV with the Revue Google TV set-top box.

Google TV is a pretty cool product – and quite possibly the future of ALL television – or at least a glimpse of it, providing access to live TV, on-demand programming, recorded shows, pay TV, online video clips and, of course, the web.

Will Web TV replace regular TV any time soon? Probably not. But don’t count Google (or Logitech) out of the running. Someone’s going to nab the real estate on Web TV, and for their part, Logitech is willing to continue the union. In fact, they’re lowering the price to make the hardware accessible to almost anybody.

Losing the market share before one is really created is obviously not an outcome that Logitech will go for. In fact Logitech’s Chairman, Guerrino De Luca, was quoted this week as saying: “There was a significant gap between our price and the value perceived by the consumer.”

Market share is the moral of the story for both the data and the technology side of the equation right now. Any day now Google TV should be accessible by Android, and with 130 million users, that is a big deal. For now, Logitech has chosen to bite the revenue bullet and get more customers. That means a lower price in order to boost the real estate for Google.

It’s hard to imagine Apple or Sony supporting the music industry by lowering the price of hardware to encourage market participation, but if this is an indication of what might work, then Blu-Ray may actually still stand a chance.

Make Competitive Smart Phones or Get Out of the Market

We all know the world is moving from feature phones to smart phones. This is happening in some regions like the US and Europe faster but it is happening at a global level.

The latest data from Strategy Analytics and IDC released today both show overall growth in the global handset market along with declining growth of the feature phone market.

This is significant when we look at the top 5 leaders of global handset sales. They are in this order:

The first thing we need to observe is that one on that list is not like the other. Everyone but Apple makes both feature phones and smart phones. This is why the Nielsen data released yesterday confirms Apple as the number 1 smart phone handset maker.

So if you look at the data over the past few days you will conclude that having a competitive smart phone will be critical to anyone on that list above Apple if they want to stay above Apple. Apple climbed to the top of the smart phone vendor chart quickly and they can climb to the top of the global handset list as well just as quickly.

I agree that feature phones are still important particularly in the developing regions but those who are in that market hopefully realize that priority needs to shift in future thinking and RND around the smart phone market. If they don’t they will become irrelevant.

For more data on the profits captured and lost related to this data check out Asymco’s article on how “Apple Captured two thirds of available mobile phone profits in Q2.”

Lastly I believe it is only a matter of time before HTC makes it onto this list. They released record earnings today as well as 12.1 million handsets shipped in Q2 2011.

Apple and its Non-Acquisitions

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

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

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

Android Is at A Critical Junction

I believe that the next six month’s will be the defining point in the future for Google’s Android platform. Whether this future is bright or gloomy will depend on the next six month’s.

It seems right now like Android is riding the big wave reaping in success left and right. The reality is however that there is truth to the Android success but there are also walls still standing in the way.

The report from Nielsen relased yesterday that I opined on shows the meteoric rise of Android in such a short time to garner 39% of US smart phone OS market share. This is truly remarkable success in such a short time. However the question that we have to investigate is how defendable Android is as a platform or is it vulberable at a fundamental level.

If we conclude that Google plays their cards right and builds the right “moats” around the Android castle then it is strong at a fundamental level. However if we conclude that their “moats” are not that strong or deep then it could be vulnerable at a fundamental level. If the former is true Android remains a viable force in the market. If the later is true Android could encounter market volatility and market share could sweep back and forth.

Google’s Hardware Partners
At this stage of the game Google depends on hardware partners to develop devices that take advantage of their software and services. This is a strength as long as your hardware partners stay commited and loyal to you.

There are challenges however with hardware partners. First off there are other companies competing for their business. In the case of smart phones and tablets, Microsoft is Android’s competition. If HP ever wised up and licensed Web OS then there would be three very good options for hardware partners to build products upon.

Android is still the obvoius choice for OEM’s looking to bring a smart phone or tablet to market. Consumers understand the value proposition and there is a large enough app ecosystem in their market place to appease the market.

The question is six month’s or even one year from now will Android still be the obvious choice? I know many people will quickly say yes but I still have concerns. One major reason is the now over 50 law suits facing Android in some capacity. Right now Android is free for most OEM’s to take and implement. However if some of the key lawsuits go against Google we could see license fees from between 15-30 dollars depending on the OEM.

If this happens Android is no longer free. I wonder if that happens whether manufacturers would re-consider their commitement to Android.

App Store Economics
Now you may argue that no other licensable or free platform has the developer ecosystem that Android does. This of course is true but again continuing to develop and maintain that ecosystem will be key.

App developers want to get paid. And as BlueStacks CEO Rosen Sharma pointed out in his column on “How the App Store Money Flows;” there are still issues facing the economics of the Android market that many developers we talk to do not want to deal with. Believe it or not among the larger app developers and as well as some of the more savvy ones, there is heavy consideration still for Windows Phone and for WebOS.

Google must continue to develop a robust economic system that works for everyone who wants to write software for the Android platform. If developers see no economic growth or ROI of their allocation of precious resources to Android they will go elsewhere.

There is a lot I like about Android and I want to see it continue to develop and flourish. Google however will have to navigate and maneuver the waters of the next 6-12 month’s extremely strategically in order to preserve the moats around their castle. Android @Home for example has a great deal of potential I believe and could add real value to the Android platform and ecosystem if done right. Chrome OS is another strength that can be leveraged and assets can be shared across Chrome OS and Android.

As Tim pointed out this morning Amazon could come in and change the game. There are a lot of un-answered questions around Amazon’s tablet strategy from pricing model, to proprietary app development etc, but so long as Android is the underlying platform i’m assuming Google will benefit still in some way.

Android is still behind in tablets and this is another weakness that needs to be addressed. Tablet sales of Honeycomb devices have been less than lackluster. If the Android Honeycomb activation dashboard is any indicator there are between 1.2 and 1.5 million Honeycomb tablets in consumers hands. Motorola released that the XOOM sold 440,000 units; we are yet to see Samsung’s Galaxy Tab sales, Acer’s Iconia sales and Asus Transformer sales.

What we need is a truly break out Android tablet that can excite the mass market. From what I know is possible with hardware and from what I am seeing from the semiconductor companies I know it is possible, i’m just not sure when or who will deliver it to the market.

We will have to wait and see but I have to say I am extremely excited about the next 12 month’s.

How Amazon Could Own the Android Tablet Market

One of the first marketing classes I had in college discussed the concept of razors and razor blades. Sell the razors cheap and then sell men blades over and over. The profit would be in the blades, not the razors. In our tech world, we have our own version of this. It is called printers and printer cartridges. The printer companies sell their printers at a very low price, perhaps even under cost, knowing full well that they will sell users expensive ink cartridges over and over. The profit is never in the printer. It all comes from the ink cartridges and companies like HP and Epson make billions of dollars a year from their ink business.

With this in mind, if I were Jeff Bezos, CEO of Amazon, I would really go to school on this concept and see if it could be applied to tablets. This model would never work for the PC vendors at this stage of the PC game. Although their PC’s are getting cheaper, they are not tied to an eco-system of software and services in which they could derive additional revenue tied to the PC and earn recurring revenue this way.

But I believe that the tablet is the first PC like device where this could be possible. So, Jeff, if you are listening, here is my suggestion to you. Sell your tablet at a price that is really cheap. Perhaps you sell it for 20-25% below cost. I know this sounds crazy and radical, but you actually have the recurring revenue ecosystem to potentially pull this off. It would take some serious guts to do this but if any one could do it, Amazon could.

In this model, think of the tablet as the razor. And in Amazon’s specific case, their Android Store, UnBox movie service and music service would be part of the “blades” they sell to users over and over again. And add to that the profit they could get through their Kindle bookstore as well as items you might buy from the Amazon store. And then add any Amazon cloud service revenue tied to the device that could also be part of an amortized profit pool over perhaps a two-year accounting period.

With info I have on components from my contacts in Taiwan, I was able to do some back of the envelope calculations to see how this could work. Bill of material costs along with manufacturing costs, shipping and tariffs most likely would put the device cost around $300 depending on its specs. For sake of argument, let’s use this as the baseline. But let’s say Amazon discounts this by $51,00 and sells it for $249.

Now, they do some research and determine that over a two year period, a person who has that tablet would buy or rent 15 movies, stream or download 50 songs, could buy 18 books and might pays $5.00 a month for cloud storage from Amazon. And, they purchase let’s say five items through the tablet’s Amazon store that can be counted against a 2 year amortized profit curve. And lets throw in some advertising in this mix as well. Although the prices of the books, video, music, etc would vary, by my guestimates, they would make back the lost “cost” of that $51.00 within six months and realize a profit of anywhere from 20-35% on the tablet over the last 18 months of the devices accounting period.

Amazon already has the trust of over 200 million users as well as their credit cards. And their “one click” buying model would make it quite easy for an Amazon tablet user to buy often through both the Android store and the Amazon store in general. Of course there are a lot of variables in this model, but you get the idea. The tablet is the razor and all of these apps and services are the blades.

Now imagine how this could affect the other Android vendors making tablets. Amazon would provide a product that if sold under cost with the goal of making up the rest of the cost and profit from apps, services and even advertising, it could give all of the other Android vendors a serious run for their money. And, given their deep eco system, other Android vendors would find it very difficult to compete with them. This could make Amazon, measured by units shipped, the king of Android tablets very quickly. In fact, I would go as far as say that they could “own” the Android tablet market.

For Apple, this would be a competitive threat but they have a pretty big lead and their own rich echo system of apps and services that could continue to keep them a market leader in tablets. And given their history of riding down prices of the iPod once it gets to scale, you can imagine that Apple will also be more aggressive with the iPads pricing over time and, as they are today, use their apps, services and the upcoming iCloud to deliver high margins for a long time.

But as radical as this idea might sound, it could make a lot of sense for Amazon to go to market with their tablet with this business model. As I stated earlier, it would take guts, but the impact on the market for tablets could be significant if they did this right and the consumers bought into their version of the old razor/razor blade school of marketing.

Can a New Approach to Wireless Beat Shannon’s Law?

For the past 60 years, electrical engineers have understood the hard limits that physics imposes on the data capacity of any channel. The law, formulated by Claude Shannon of Bell Telephone Labs, says that the data capacity, in bits per second, is a function of the bandwidth, the signal strength, and the noise in the channel.

Shannon's law formula — Shannon's Law (Wikipedia)

No one has yet found a way to break Shannon’s law, but Rearden Companies, the brainchild of Steve Perlman, who is behind the bandwidth-bending OnLive online games service, claims to have found a way to cheat significantly. A paper by Perlman and Rearden Principal Scientist Antonio Forenza, describes a technology called Distributed-Input-Distributed-Output (DIDO).

Normally, when a wireless channel, such as a connection to a Wi-Fi access point, is shared by two or more users, each user can only get a fraction of the channel’s capacity. But DIDO allows each user to communicate, in theory, up to the full Shannon limit of the channel.

The explanation for just how this works is complicated, but the technology uses array of antennas to create a non-interfering path between an access point and a user. Shannon’s law applies not to a particular piece of bandwidth but to each channel. Traditionally, we have thought of the two as the same, but DIDO spearates the concept and allows the link between the access point and each user to function as an independent channel within the dame physical bandwidth.

Normally, I am deeply skeptical about claims of fundamental scientific breakthroughs. My skepticism is mitigated by what Perlman has already accomplished with OnLive, which moves gaming data across internet connections with an efficiency that no one thought possible. Clearly, this guy knows how to move bits.

Don’t expect to see DIDO deployed anytime in the very near future. It requires significant changes to network design.. including interposing a DIDO data center between an internet source and an access point to encode data as well as sophisticated new antennas. But it does hold real promise to to reduce the growing crunch on our wireless airspace.

Why It Matters that Apple is the Number 1 Smart Phone Manufacturer

Data came out this morning from Nielsen providing insight to the current smart phone operating system market share in the US. There are several observations about this report that I want to make.

First off, although this is a report highlighting the state of smart phone operating system market share it demonstrates that Apple is the leading manufacturer of smart phones. Android has 39% smart phone operating system market share however the key point is that is spread out across multiple device manufactures.

What’s amazing to me is that Apple has accomplished 28% iOS smart phone market share with only one single new product each year. They haven’t needed a dozen or more devices on the market at any given time to garner such a large footprint in the market place. They have only needed one called the iPhone.

Second, I am pleased for HTC collecting 20% of the handset market between their mix of Android and Windows Phone. HTC is being rewarded in the market place for their own innovations with things like Sense and other custom applications. These things were created intentionally to differentiate them from other vendors using the same OS and it is working.

Lastly RIM has dropped to 20%. It seems like just yesterday that most of my market share analysis was pointing out that RIM was leading the pack with OS market share and smart phone handset shipments. How quickly things change in this industry.

One last-last point. I also like how Nielsen choose to visualize this data. Rather than a pie chart they broke it out in what they like to call a “brownie pan.” I actually think looking at data represented this way is more helpful than a pie chart.

Do Students Hate Textbooks More than They Like Sex?

It’s no secret that students hate both buying bloated, overpriced textbooks and lugging those bricks around in their backpacks. But we didn’t know how much.

A new survey sponsored by Kno, Inc.–which, not coincidentally, is in the business of e-textbook software–found that 73% of college students would do something they otherwise wouldn’t consider, including giving up sex, if they never had to shlep another textbook.

You can take that finding with a grain of salt, but there’s little doubt that the movement to e-texts is hitting an inflection point. The Kno study, conducted by Kelton Research, also found, more believably, that 71% of students want their texts to go digital.

A big driver, of course, is the rapid adoption of tablets, particularly the iPad, which make excellent textbook readers. An early attempt by Amazon to promote the jumbo Kindle DX as a textbook reader fizzled, mostly because of the limitations of the monochrome, video-free device. But the iPad is so natural for the job that Kno abandoned plans to come out with its own hardware to focus on iPad software.

The most recent big development in electronic textbooks was the announcement by Amazon that to would be renting texts for as little as 30 days and for up to 80% less than the print edition price. The books will be available on all devices that support the Kindle reader, though I suspect that reading a typical textbook on a phone screen will not be a happy experience.

Amazon has initial partnerships with John Wiley & Sons, Elsevier, and Taylor & Francis. That will limit the selection of text available this fall, though other big players such as McGraw-Hill and Pearson will certainly join if the initial efforts shows legs.

That calculus text pictured above? Single Variable Calculus by James Stewart (Brooks Cole) is one variant of a widely used introductory text that is not available in digital form. A hardcover copy is still going to set a student back more than $100 and create a 2 1/2 lb. lump in a backpack.

The Post PC Era Will Happen in Two Stages

In much of my work providing industry analysis to many companies in the technology industry, I come across the question of what the post PC-era actually means quite often. As the technology industry shifts from one computing platform (the PC) to multiple computing platforms (tablets, smart phones, TV, more) the landscape is changing and continuing to bring new challenges to industry leaders.

I believe the Post-PC era is going to happen in two stages. First there is the stage we are just entering into that can best be understood as the PC plus era. In this phase the PC is still needed as a central platform in the lives of most consumers. Meaning the PC is still a valued and sought after part of the ecosystem. Other devices like smart phones, tablets, smart TVs etc are capable and complimentary computing platforms but none can adequately replace the other.

The traditional PC as we know it is still the central computing device in this phase; however more devices are entering the ecosystem that allow consumers to become less dependent on it. Another key point of the PC Plus stage is that the PC is a general platform for computing and other devices are more specialized.

The next phase will be the phase where truly de-centralized personal computing starts to take shape. In this phase you will be able to do most if not all desired computing tasks comfortably, reliably, and conveniently from any connected smart screen. In this phase the personal computing cloud becomes a key ingredient that is the central glue of the personal computing experience.

I say this phase is de-centralized because our dependence moves from the PC to the cloud thus allowing any device connected to our personal cloud to become our computing platform of choice.

Consumers in this model can choose just one or any number combinations of screens that fit their fancy to accomplish any and all computing tasks. The key difference in this stage from the PC plus stage is that most if not all computing devices can become general purpose devices rather than specific function.

There is of course going to be a great deal of variation in how this plays out in the market place. We will see quite a bit of experimentation by both the manufactures and the consumers of these products as we flesh out the needs of the market.

This personal computing market is large enough that a one size fits all approach will not be the standard. This opens the door for many different innovations and product approaches to support each other and allow for healthy diversity and competition.

De-centralized computing becomes more personal
I’ve often explained that as we get smarter devices, smarter software, and smarter cloud services we will also get more personalized devices, software and cloud services. The translation is smarter = more personal.

This is not to say that there isn’t a level of personalization with these devices already only that it will be more so in the future.

The technology industry has used the term “personal computer” for three decades now, however the term really means “owned by a person.” My personal computer isn’t really all that personal at this point in time. It knows nothing about me and everything personalized about it is because I put in the time and effort to personalize it. A better term would be “customized computers” rather than “personal computers.”

In the future however I believe these devices really do become more personal rather than customized. The roadmap the semiconductor companies are on will pack an incredible amount of compute power into nearly everything imaginable. When that happens smart software and smart cloud services will have the opportunity to transform devices into truly personal computing companions.

Tablet Price Promotions to Boost Demand

Staples is the latest retailer in the tablet market to offer a price promotion on tablets. The company is offering a coupon for $100 off tablet purchases (excluding the HP TouchPad) through July 30.

The coupon is the latest price move by a tablet player to spur demand. Tablet brands have recently been lowering prices to boost demand as the US market enters the high volume back-to-school season. Motorola dropped $100 off its Xoom, from $599 to $499, earlier this month. Acer cut $100 off its Iconia A500, from $499 to $399, this past week in Best Buy circulars. Toshiba launched its Thrive at $429 for the 8GB version. Apple’s iPad starts at $499 and had initially set the bar for what tablet pricing should be. However, brands are having trouble reaching levels similar to the iPad’s success with their devices.

Brands and retailers have been gradually catering to the emerging device category through differentiated floor space, dedicated business units, and specific sales strategies. Staples is the first major retailer to offer a price promotion on tablets. Price cuts tend to be viewed as a last resort. Still, many are aiming for significant adoption, viewing iPad sales as the basis for their expectations. Apple reported sales of 9.2 million units in Q2, up over 180% Y/Y. Other brands are nowhere near experiencing iPad-like success.

These price moves may boost demand in the short term, although I doubt it will be to the level they’re expecting, but long term, it devalues the category and threatens the margin levels that they are hoping to achieve. This is especially risky at the start of a category because it sets the consumer’s expectation of what a product should cost. It also makes it difficult to raise that price expectation in the future. We saw that with mini-notes (or netbooks) and the impact on notebook average sales prices.

To a certain extent, the brands and retailers have their hands tied because Apple is having so much success with their tablet. There is an impression that if you can’t reach that level, then you’re messing it up. The reality is: the brands and retailers competing with Apple are playing from behind, and in their desperation, they might be digging themselves into a deeper hole. One could argue that the brands and retailers are responding to what the market is willing to pay for their tablets. That might be easier to accept if the devices in the market were fully mature and not experiencing glitches; however, it is giving the impression that these products aren’t completely finished.

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Americans Elect’s Online Nomination Is a Recipe for Trouble

Americans Elect, a group that promises a new way of nominating a candidate for President in 2012, lept into prominence in recent days with a ringing endorsement from New York Times columnist Thomas Friedman. I don’t propose to debate the merits of the group’s ideas, but I want to take a look at the practicality of the proposed online nominating process. It’s not going to work.

The information Americans Elect gives on its web site is very sketchy, but the basic idea is that any registered voter can become a “delegate” simply by signing up. It’s not clear how, or if, voter registration is verified. All I had to do when I signed up was give an email address and create a four-digit PIN code. It appeared to me to be trivial to create multiple accounts using different email addresses; I asked Americans Elect about this but have not yet received a reply. [See update below]

There’s a good reason why we generally don’t see online voting for anything more serious than American Idol winners. Running a clean and secure online election is very, very difficult. Under the conditions we generally expect of formal elections, both security and anonymity as close to absolute as we can make them, it may be impossible. Last year, a modest experiment with online voting for U.S. military personnel abroad had to be suspended when it proved hopelessly insecure.

Systems that have been tried for serious online voting generally require the distribution of voting tokens–generally a one-time password of some sort–through a secure offline channel. Often this is done by sending the information via postal mail. Americans Elect doesn’t say whether it plans to use such a system, but it would be complicated and expensive for sort of multi-stage nominating process it plans to use.

There’s a big risk that the Americans Elect nominating process could be turned into a circus. Unless exacting measures are in place to protect the integrity of the voting, the system could very easily be gamed (as has happened with American Idol voting.) It will be interesting to see what state election officials have to say about this process, although, in general, parties are given great latitude in how they nominate candidates, and in the view of election boards, Americans Elect will be a party.

By the way, anyone thinking of clicking the Donate button on the American Elect web site should be careful to read the fine print. Contributions to the organization, like those to any party or candidate, are not tax deductible.

————-

UPDATE: I received the following unsigned reply to my question about measures to prevent multiple registrations:

Nothing, really. This is definitely at least something of a problem, but the way I see it, if we end up with with a meaningful number of delegates, the people with clone accounts will only be gaining minimal advantage to change things.

That said, if we can find a way to prevent this without causing significant usage/convenience problems, I’m all for it.

Sorry, but that drastically underestimates the web’s potential for mischief or malice. If Americans Elect want this process to be taken seriously, they’ll have to do a lot better.

Mac OS X Lion and the Future of Computing

By now, you’ve probably all heard or read about Apple’s new desktop operating system, Mac OS X 10.7 Lion, or just “Lion” for short. While I believe it is a really good operating system today, what I am most interested in is what it means for tomorrow. I’d like to share with you my thoughts on what I believe OSX Lion tells us about our computing future.

Device Modularity

Device modularity is essentially when one device, when docked or connected to another one, becomes something even better or more functional. It’s a world where a phone becomes a tablet; a tablet becomes a notebook and even a phone or tablet becomes a desktop. I’ve touched upon modularity with a few previous blogs covering the Motorola Atrix Lapdock and Multimedia Dock, the BlackBerry PlayBook and even the Motorola Xoom.

One of the inhibitors to good modularity is modality in UI. Or in other words, the smartphone, tablet, desktop, and laptop act like you would expect in the context you want. When you plug the phone into the dock to make it a laptop, it acts like a laptop, not a phone.

Lion has unified many of the UI elements and HCI (Human Computer Interface) between the iPhone, iPad, MacBook and the iMac:

· Gestures: Lion unifies gestures, or begins to, between the four platforms. Familiar gestures from iOS like pinch to zoom, tap to zoom, and swipe to navigate are just a few of the multi-platform gestures that are shared between phone, tablet, laptop, and desktop.

· Launchpad: Does this look familiar? This isn’t an iPad or iPhone; it’s Launchpad in Lion on a Mac Air laptop. Launchpad is a place for apps and folders of apps just like you see on the iPhone and iPad.

· Full screen apps: This isn’t exactly revolutionary if you’ve used Windows 7, but full screen apps does just that; allows apps to be maximized to the whole screen, just like iOS apps look with no windows. Then, a user can even “three finger swipe” between apps, similar to iOS 5.

So by unifying user interface and basic HCI, Lion has removed a major hurdle for the future, modular designs.

Air Gestures

We’ve all seen Microsoft Kinect in action in the living room and some of us have even seen “home-brew” tests using the Kinect SDK for the PC. Imagine more advanced, future computer “vision” on a much closer scale, or “near-field” basis, removing some of the actual physical peripherals. This could use very common and inexpensive cameras, possibly stereoscopic, with interconnects like CSI-3 and a heavy compute engine building a 3D model of the hand.

· “Magic Hand”: Consider removing the mouse and trackpad and replacing with a camera to use your own hand to do the gestures. Maybe even remove the keyboard and replace it with a projected virtual keyboard. The camera, like Kinect, tracks exactly what your hand is doing.

· Consistent Gestures: As described above, by having consistent gestures between all devices, the computer would be very focused on a specific set of near-field air gestures, not different ones by platform, increasing the chance of success.

With Lion unifying gestures today tied with future improvements with compute power and lower power with architectures like Fusion System Architecture, higher speed camera interconnects like CSI-3, a future without the physical mouse and trackpad becomes a distinct reality. Removing the physical keyboard is more of a stretch, but with pico projection a robust investment area, who knows? Also, with the success of keyboards on iOS and Android tablets, users are becoming conditioned to be satisfied with virtual, non-haptic keyboards.

Peer-to-Peer Communication

Peer-to-peer communications occur when one device directly interacts with another without the need for a LAN or WAN. The trend with services and the internet has led to the belief that peer-to-peer was dead. Not so with Lion, as it actually dialed it up a notch.

· Airdrop: Airdrop enables two Lion-based Macs to safely send files directly between each other without the need for an intermediate LAN or WAN. It automatically creates an ad-hoc WiFi-WiFi connection.

I find this very interesting given Apple’s forecast of a “post-PC” world. With very innovative features like HP’s “touch-to-share” and enabling communications like WiFi Direct and BlueTooth 4/5, peer-to-peer comms could be making a comeback. I’d guess that we will be seeing even more of this in CE devices. Who would have thought in this “everything in the cloud” world? J

Conclusion

OSX Lion is a really good operating system for users today and also gives us some indications of interesting things to come in the computing future. I believe that Lion tells us a lot about the future of device modularity, our ability to ditch the mouse, trackpad, and maybe even the keyboard. Lion also guides to a world that increases the likelihood of even more devices talking directly to each other without the cloud middleman. It’s a future I can get excited about. How about you?

Pat Moorhead is Corporate Vice President and Corporate Marketing Fellow and a Member of the Office of Strategy at AMD. His postings are his own opinions and may not represent AMD’s positions, strategies or opinions. Links to third party sites, and references to third party trademarks, are provided for convenience and illustrative purposes only. Unless explicitly stated, AMD is not responsible for the contents of such links, and no third party endorsement of AMD or any of its products is implied.

See Pat’s bio here or past blogs here.

Follow @PatrickMoorhead on Twitter and on Google+.

My 5 Favorite New Features in OSX Lion

After spending some time working with Apple’s new operating system OSX Lion, I’ve landed on my top five favorite new features. Now granted, everyone uses computers differently. So for me and my computing habits these are the ones that lie at the heart of my upgraded experience.

Auto Correct

There are actually a number of very good new features for writing and typing. My personal favorite is a new and improved auto-correction feature that, like iOS, will fix a misspelled word or typo for you as you type.

Once a word is fixed a blue dotted line appears just under the corrected word to let you know it was fixed. This allows you to go back and edit the word if the in line edit was not what you wanted.

I type and write quite a bit and not having to backspace several times every sentence is extremely useful. Now that I have adjusted to the improved auto correction feature, I feel as though I can type more freely and clearly.

One other feature around text that I am coming to appreciate is the built in dictionary and contextual word search. You can highlight any word you see and right click with a mouse or triple tap on the trackpad to bring up a dictionary as well as contextual word search and wikipedia of the word.

Spotlight

I use spotlight for nearly everything. I do not have a very organized desktop nor do I organize my files very well so Spotlight saves me a huge amount of time. Primarily because although I don’t know where my files are most of the time I do remember the files name. I use Spotlight for more than just files but for programs as well.

The biggest edition to Spotlight that I absolutely love is called Quick Look Results. What this does is allow you to mouse over any of the Spotlight results and to the left of the Spotlight results drop down appears a quick view preview of the actual file. This way if you have multiple files similarly named or just want to make sure the result is the exact file you were looking for you can now see a quick preview before opening.

Another edition to Spotlight that i’m finding quite useful is the ability to drag and drop the file anywhere on your computer right from the Finder results.

Mail

I am a big Mail user and I have been for quite some time. I never could get used to Microsoft Entourage and even when they launched Outlook for Mac I still preferred Mail. Threaded messages, smart folders, integration with iCal and more were what had me hooked. So naturally I was quite pleased with many of the upgrades to Mail.

The upgrades to Mail’s search capabilities have to be my favorite new feature. Like my needs to search for files often with Spotlight, I also need to search for emails frequently. I don’t always remember the details of who a specific message is from, I only vaguely remember important things. The last upgrade Apple made to Mail helped be a good bit in this department but the latest upgrade to search has made it even faster and less work to find the email desired.

This is because of an advanced filtering process called search tokens. Search tokens let you filter your search down each step of the way and quickly narrows any and all search results until voila, you find exactly what you are looking for.

I’ve used the threaded messages options in Mail but the newest feature Conversations takes it to a whole new level. This has been fantastic because I tend to have very long conversations through email. By being able to see all the conversations organized and threaded in the same window pane has been a joy to use.

Mission Control

When Apple added Expose to OSX I became an Expose junkie. I keep many applications open frequently and I multi-task jumping between them all just as frequently. Expose drastically improved my work flow efficiency. Mission Control is the next step is multi-tasking efficiency and it certainly lives up to its name. I particularly like how Mission Control organizes all your applications and keep your desktop, dashboard and other workspaces at the top of the screen always accessible.

One of the more enhanced elements of Mission Control that is not possible with Expose is the laying of windows on top of applications. If you have multiple windows open from the same application, Mission Control layers the images on top of each other and allows you to select which you are trying to get to.

Auto Save and Application Resume

Most modern applications have some level of document recovery but Auto Save in OSX Lion makes the process standard. Not having to worry about whether or not a document is saved or work is going to get lost certainly eliminates some of the distraction to work efficiently.

Application resume is another great feature that is built into OSX Lion. This features lets you close an application and upon re-opening you are right where you left off. One of the areas where this is particularly useful is with Safari. I like to leave tabs open with some of my most frequented websites and being able to open Safari and have all my tabs re-open with my favorite websites or the last ones open has been extremely useful.

I’m sure as I use Lion more I will find more features that I love but for now those are my top 5. I’d be curious what those who have Lion think and what your top 5 new features are?

How the App Store Money Flows

Rosen Sharma is a guest contributor to Tech.pinions and the President and CEO of BlueStacks.

A good friend of mine recently remarked, “Apple App Store and Android App Store are completely different business models”. I casually asked, “Really? How come?”

The answer was rather interesting. When you buy something from the Apple Store the bill comes from Apple. If you order something from Android App Store the line item in the bill is from the App Developer and not from Google.

Continue reading How the App Store Money Flows

PlayBook Wins Government Security Certification

Under the right circumstances, a bug really can become a feature.

Research In Motion announced today that its BlackBerry PlayBook tablet has been certified under Federal Information Processing Standard 140-2, meaning it is approved for nonclassified communications by U.s. government agencies and contractors who must comply with the Federal Information Management Standards Act. It is the first tablet to win this certification.

This speedy approval appears to be a direct consequence of what nearly everyone considers the PlayBook’s greatest weakness. The tablet has no email, contacts, calendar, or task program of its own, but instead serves as a sort of dumb display for a paired BlackBerry handset. Potentially sensitive information is never stored on the PlayBook, making it easy for the tablet to piggyback on BlackBerry’s existing FIPS certification.

The approval does give the slow-selling PlayBook a leg up in the government market. Unfortunately for RIM, a tight budgets and the ponderous federal procurement process make an imminent flood of government orders unlikely.

A Librarian Looks at the JSTOR Download Case

A Tweet by Nilay Patel (@reckless) of Verge called my attention to an intelligent post giving a librarian’s perspective on the charges against Demand Progress’ Aaron Swartz. Swartz faces federal felony charges for allegedly using unauthorized access to the MIT network and the JSTOR academic journal archive to download millions of articles.

Nancy Sims, copyright librarian at the University of Minnesota Libraries, dispels what have become some common misconceptions about the case. First, she points out, there are no copyright charges involved. And she notes that all databases such as JSTOR have restrictions on downloads and that the violations alleged in this case are pretty straightforward.

One place where I disagree with Sims is that she, like many others, compares the case to that of Lori Drew, a woman who was prosecuted for computer fraud for bullying a young teen in violation of MySpace terms of service. Drew was convicted, but an appeals court later threw out the case.

A key difference (besides that fact that no individuals suffered direct or indirect harm in the JSTOR case while Drew’s actions may have contributed to the target’s suicide) is that the actions laid out in the indictment show a pattern of willful assault on the MIT network and the JSTOR database. It is by no means a simple case, as Swartz’ defenders have claimed, of “downloading too many articles” or even violating MIT or JSTOR terms of service.

One other point: Sims, along with many others, questions the proportionality of the government charging multiple felonies carrying a theoretical prison term of up to 35 years. Prosecutors customarily throw everything they have into an indictment. I’d be very surprised if this case does not end in a plea bargain with no jail time.

Why Apple Can’t Chase the Low End

In a post here earlier today, Ban Bajarin dismissed the frequent criticism of Apple for failing to serve the low end of the computer market. Ben focused on consumers’ willingness to perceive, and pay for, value in Apple’s relatively expensive products.

But in wondering why otherwise knowledgable people keep hammering Apple on this point, it’s worth considering just how the company’s business model is working. Everyone else in the PC business depends on selling enormous volumes of product at razor-thin margins. This has steadily driven the average selling price of PCs downward, though NPD data show that the average retail ASP in the U.S. has stabilized a bit at around $600. Apple has exactly one product close to that price point, the $599 bottom-of-the-line Mac mini. In a world of $500 to $700 notebooks, the entry point for a Mac is $999 and goes up quickly from there.

And what has the refusal to chase the mass market done to Apple? It absolutely owns the market for computers selling for more than $1,000. As a result, with about 10% of the U.S. market and less worldwide, it is grabbing the lion’s share of industry profits. Apple’s operating margin from all products in the most recent quarter was 32.8% compared to 5.7% for Hewlett-Packard’s Personal Systems Group. HP, with total revenues of $127 billion a year, has a market capitalization of $76 billion. Apple, with just over $100 billion in revenue, is valued by the market at $362 billion.

With numbers like that, it’s just silly to argue that Apple should be chasing the profitless low end of the market (or, for that matter, offering low-cost, lower-margin versions of the iPhone and iPad.) The history of the tech business is full of companies that won large market share by cutting margins to the bone, or sometimes further. Apple is in the sweetest of all possible spots, and it would be lunacy to change the business plan.

Social Media Wars – How Wide Do We Open the Kimono? Google+, Facebook, Etc.

By now, you may have heard the name Michael Lee Johnson. He’s a young web developer who recently tried to promote his presence on Google+ by taking out a Facebook Ad. What’s wrong with that? According to Facebook’s terms of service, only everything. And while I don’t agree with Facebook, simply because of my personal and professional stand on Friction vs. Fiction, they are, of course, simply protecting their market share.

It is very easy to see why they don’t want to do battle with megalith Google over anything more than ad sales. One has to wonder, however, where the users come into play. Although diligently trying to evolve every single day, there’s absolutely NO guarantee that Facebook will not become the MySpace of tomorrow. (Meaning that they become a great neighborhood that nobody lives in or even visits any more – sort of the Three-Mile Island of Social Networks.)

This isn’t the only example of what I might call “random” censorship either. Meetup.com is notorious for ripping down local Meetup Groups that don’t fit their user terms (which change at will if you’re of a certain political slant). The bottom line is that social networks are NOT democracies. They are autocracies, and your participation is permitted and censored, at will, by the owner of the club. Simply building walls and creating friction will not protect them.

So where does this leave Google+ ??? Growing. By leaps and bounds in my estimation. Why? Because it addresses all of the issues Facebook created – over exposure, brand and personal comingling, general insanity and finally, the issue of demographic. (And right now, it’s a hotbed for techies.)

As I addressed in my recent Social Media eBook, the problem with ANY network is that you can only reach THAT network’s users. So while you can break demographics out further, you can only operate within the umbrella of users actually ON Facebook, for example. Who are THEY? Mostly, on Facebook at least, they’re people with free time. Yes, I have a ton of “friends” on my Facebook Page, and I value them! But I think Google+ and it’s Circles concept will provide a segregation which will eliminate having multiple Pages, Profiles, Groups, etc., etc. that ALL have to be updated.

Another service worth watching which addresses this, on the opposite side of the spectrum (the personal side), is Proust.com. Proust is a social network designed to connect MORE intimately than Facebook (as if that were possible), by connecting close family members and allowing them to commemorate events and share life stories. With the boom in genealogy that’s been created by the digital revolution, this is an idea that just might take off.

Final thoughts: We have seen some extreme reverberations to the social media age (which is a subset in itself of the digital age). Facebook overtaking MySpace (almost to annihilation) is only one example. There will be a backlash to the autocracy though, you can guarantee it. Because the internet may be a place of freedom – but social networks are NOT. A good example of this backlash is hacker group Anonymous. Even THEY are starting a social network (called “the Revolution”). Their platform? No censorship. This might seem to lean toward the shadow side of things we might all like to avoid … but in reality, is it the Michael Lee Johnson’s of the world and a simple Google+ banner ad that we protect? A question well worth consideration, at least.

What is the future of the PC Industry?

As I perused the recent PC shipment numbers from last quarter and saw that they were rather anemic and with relatively slow growth forecast in the future, it became even more evident to me that we are at a major inflection point in our journey with personal computers. We started this journey in the 1950’s with mainframes and then went on to minicomputers. But with both of these technologies, only a limited amount of people had access to them.

But when the PC came on the scene, it democratized the computing experience and made it possible for millions of users to experience the virtues of a computer. At each point in history, as we moved from mainframes-to-mini’s-to PC’s, we have had a major inflection point in which one technology faded from the forefront and the one’s following it took center stage. But even as we moved from one computing design to another, the older technology matured and took a different place in our digital world. Mainframes are now the super computers and backbones of huge enterprises. Minis have transitioned to powerful workstations and clustered servers in a sense. And the PC’s, which cut the cords to mainframes and mini’s to define their existence have become the workhorses within a family’s home, managing their digital movies, photos, finances, etc. At this stage PC’s have matured and settled into a comfortable place where its reason for existence is more and more focused on handling the heavy digital lifting we need from time to time.

Now, even if the PC market is slowing down and is not as robust as in the past, we are still going to sell 350-400 million PC’s every year for some time. They have a place and will continue to be important digital tools in business and the home. However, we are at the next major inflection point and PC’s are about to take a back seat to the newcomers that will define the next major growth phase of computing.

I believe that this inflection point can be described as going from personal computing to personalized computing and will be defined by tablets and smartphones that take all types of shapes, form factors and designs that make the computing experience more personalized and customizable. This inflection point is just as dramatic as when the PC came on the scene and cut the chord between the mainframes and mini’s and brought personal computing local. Another way to think of this is that we are moving into a phase in which people want a PC on their desktop and in their pocket.

But, it goes even deeper if you look at the PC, tablets and smartphones as just another screen in our digital lives. In the future we will have a lot of screens in our lives as well. A screen in our cars with a 3G chip in it so that our cars can be connected to the cloud at all times. Or screens in our refrigerator that is tied to application specific functions related to the kitchen and food. Or a screen built into the mirrors in our bathroom that is tied to the Internet and can deliver custom information on demand as we get ready to head out for the day.

Here is a chart from one of our presentation decks that shows what this might look like. Out in the periphery are a whole host of screens. Next is a layer of services that serve as gateways to things like apps and various services that are then tied to the cloud.

This new inflection point is being led by tablets and smartphones but is bound to carry over to a whole host of others screens people might choose to meet more personalized needs over time.

On the surface, the PC industry and PC companies who have a history as hardware vendors should see this as a new opportunity to extend their PC design and manufacturing prowess to this new extended personalized computing opportunity. But that is not the case. Except for Apple who has made this transition quite smoothly, the rest of the PC vendors are quite challenged when it comes to designing products outside their normal PC expertise. And it is really unclear to me if they ever will be able to extend their experience in PC and laptop expertise to personalized computing.

It gets even more interesting when you realize that hardware is actually only 1/3rd of the equation. In the future of “personalized computing” there is also the apps and services layer and then how all of these work with and react to a cloud based back end. These screens may be smart but they get much smarter when they have apps and are connected to the Internet.

At the moment, most of the Windows PC vendors realize that moving to a tablet/smart phone extension of their business is pretty tough. Indeed, the big guys seem to be putting more energy in the core strength’s, which are enterprise computing and SMB. I don’t think they will give up but I suspect this will be a big struggle for them to create “personalized” computing devices that really add to their bottom line.

This leaves room for potential outsiders to swoop in and become major players if they have the ability to create new “screens” of their own that can be tied to a rich eco system of apps and cloud services. The one that I see on the horizon that fits this description is Amazon. It is widely rumored that they will do a tablet this fall. But it is their back end and services that could make them a major player over night. They have a music store, a video store, an Android apps store and the big kicker-credit cards of over 200 million users. Like Apple, they have spent over a decade building this back end and customer loyalty/commerce engine and would be well positioned to end up being the #2 consumer tablet player almost overnight.

Further Reading: The Amazon Tablet Opportunity Could be Huge

So how will this ultimately impact the traditional PC vendors? My best guess is that they will not be able to compete in the consumer tablet and smartphone market unless they pour billions of dollars into building similar cloud based back ends and services that make their digital screens sing. The only traditional PC vendor who could have a chance at playing in this new personalized computing consumer space is HP if they are willing to make the billions of dollars in investments to build out their own eco system of apps, services and a rich cloud back end that equals Apple and Amazon.

Further Reading:
HP TouchPad Review – 3 Things that Set it Apart
10 Days with the HP Touchpad

Instead, what I believe will happen is that the traditional PC makers could and should make a major push into corporate with tablets and own that space. Yes, Apple is gaining serious ground here, but they don’t have an enterprise sales and service organization that is really needed to support and integrate tablets into an IT department. In the end, I believe they will realize that it will be almost impossible to compete at the consumer level with Apple and Amazon and put more of their energy into enterprise and SMB focused tablets.

The PC market is maturing and mainstream PC vendors are still well positioned to create new and innovative products around PC ‘s and laptops that could still see yearly growth as much as 10% over the next few years. But I am not optimistic about their chances of extending their computing expertise beyond the more traditional PC and laptop form factors and take serious ownership of the digital consumer. That will come from Apple and Amazon and anyone who can build out a complete eco system of hardware, software and services that really meet the needs of the consumers of the future.

Did Android Tablet’s Gain on The iPad or Did The Market Grow?

Yesterday Strategy Analytics released some numbers showing the latest in the overall tablet shipments which included iPad and Android tablets. In that report Strategy Analytics reported”

Apple sold 9.3 million iPads in the second quarter of this year, giving it a commanding 61% share of the market
Android captured [a] 30% share of global tablet shipments in Q2 2011
Motorola, Samsung, Acer and Asus – shipped 4.6 million tablets running on the Android operating system in the three months to the end of June.
Microsoft managed to capture a 4.6% of the tablet market
PlayBook tablet, shipping half a million units in Q2 to give it a 3.3% share.

Now there are several things we need to bear in mind when we look at these numbers. First is that these numbers are only for Q3 2011. So Strategy Analytics is saying that during the third quarter Android tablets sold 30% of the total tablet sales just in this quarter. Strategy Analytics is not saying that Android tablets have 30% of the total tablet market share to date.

Second Apple’s tablet sales are sell through (actual sales to consumers), meaning those are actual numbers of consumers walking around with iPads in their hands. The Android tablet sales are shipped in to retail sales which is not necessarily indicative of how many consumer actually purchased them, only how many retailers purchased into the sales channel.

Now to look at the actual current market share numbers of tablets. According to sales figures to date Apple sold just over 29 million iPads. Sifting through as much public data I could find i’ve come up with total Android sales to date of just over 9 million, again sell into channel not sold through to consumers. If that is correct then Android tablet market share of total sales into channel to date is just over 25%.

I am keeping a close eye on these numbers and the next two quarters will be very telling. Since the most accurate tablet forecasts for 2011 are in the 40-55 million range, the next two quarters look like they could be huge. I believe Apple will easily sell in the double digit million range of iPads in each of the next two quarters. The true sell through numbers of Android will be key and i’ll update my market share figures when we get them.

We must also remember that tablets are a growth category, this year they will have grown nearly 200%. Meaning that the overall size of the tablet pie is growing. In my opinion discussing market share is great but I’m not sure its entirely helpful until a market has reached its peak.

Apple Doesn’t Want To Sell Corollas

On Wednesday Apple announced that they were dropping the Macbook from their PC lineup and making the MacBook Air the new entry level Mac. To most this move made sense and personally I feel that now entry level Mac customers are getting a premium experience at an entry level price. I did however notice some in the analyst and media community who complained that the price was still too high and that Apple was pricing themselves out of the low end of the market.

This is a point that I just don’t understand. Apple has never tried to compete in the low end of the PC space so why would they start now? There is a market for the bottom end of the PC segment with products priced between $399 and $599 but Apple wants nothing to do with it and in my opinion they have no reason to.

Our research with consumers in the PC buying process indicate that a healthy percentage are looking for the value + quality segment and have a target price point of $799 to $999. These consumers are associating price with value and quality and the result is that they are willing to pay more. Although some specs of the MacBook Air go above $999 for the 11″ and 13″ consumer studies are continuing to show a high consideration for Macs. This is obviously why Apple continues to see Mac sales draw nearly half of purchasers being new to the Mac platform.

Apple is clearly in the value + quality segment of the market and they are perfectly happy there, as we see from their latest earnings. Those who claim Apple’s Mac products still need to get cheaper don’t realize that Apple doesn’t want to sell Corollas they have no intention to compete with those on the bottom of the market.

Three Numbers from Apple’s Earnings That Should Scare Competitors

By now you have probably heard that Apple had the best quarter of their existence in the previous earnings period. Ben has given the basic details in his post but I wanted to share with you three other numbers that came from the call with their COO, Tim Cook, after the earnings were released-numbers that should keep Apple’s competitors up at night.

The first is their cash horde. It now sits as $76.2 billion. In my PC Mag column this week I wrote in detail how Apple uses this cash to its advantage and I suggest you read it and see how Apple “invents” products of the future with this cash reserve, making it very hard for competitors to keep up with them. A reader pointed out that if you subtract current liabilities from this cash position, they actually have about $60 billion in free cash to work with. This is still a pretty big reserve to work with.

See: How Apple Uses its Cash Hoard to its Advantage

The second scary number is that Cook said that 86% of the Fortune 500 in the US are testing iPads and looking at deploying them within their enterprise solutions. We already know that SalesForce.com has bought iPads for their entire work force and are seeing major benefits from its use. And Cook also said that it is being tested in many US government organizations as well. If Apple gains a lot of traction with major US enterprises it could make it hard for any other tablet makers to make any serious inroads given Apple’s huge head start with the iPad.

But the third number should really cause the major PC companies with WW reach to be concerned. Tim Cook said that 49% of the Global 500 are testing iPads for use in global enterprise solutions. I am aware of at least two Global 500 companies that are in the final stages of their tests and could buy thousands of iPads for WW deployment by early next year. This kind of interest from Global IT bodes well for Apple and means that their large head start over competitors could serve the very well in this WW market for enterprise-based tablets.

Although the main audience that is driving iPad sales is clearly coming from consumer’s, this interest in iPads within corporate America and WW IT could possibly increase demand more for iPads by a third of what it already is today from consumers. While the big tablet vendors are also eyeing IT markets for their tablets, they better get a serious offering into their IT customers hands soon or they risk the possibility that Apple could “iPod” them in this market the same way Apple innovated around the iPod and pretty much wiped out any competitive threats along the way.

If I was an Apple competitor, I would be amazed at the monster earning numbers. But the three numbers I listed above should have me shaking in my boots.

Demand Progress’ Aaron Swartz and the Rush to Judgment

When people talk about the internet encouraging a rush to judgment, they are usually referring to tendency to assume the guilt of anyone charged with a crime, say a Casey Anthony or Dominique Strauss-Kahn, before all the facts are known, let alone a before a jury has rendered a verdict. But sometimes it works the other way.

On July 19, a federal grand jury indicted Aaron Swartz, a founder of Reddit and the political activist site Demand Progress on a list of charges related to the download of nearly 5 million articles from the academic journal archive JSTOR. Swartz and Demand Progress were smart. Even before the news of the indictment had spread, the site carried a blog post with the headline “Federal Government Indicts Former Demand Progress Executive Director For Downloading Too Many Journal Articles.”

The post allowed Swartz to set the tone for the commentary that followed. It quoted Demand Progress Executive Director David Segal as saying the indictment is “like trying to put someone in jail for allegedly checking too many books out of the library.” Numerous posters rushed to Swartz’ defense on Twitter many quoting the Demand Progress headline or picking up on the “checking out too many books” theme. A post by Oliver Day (@zeroday), “There are apparently no more documents in JSTOR, aaron schwartz stole them *all*,” was widely retweeted.

The problem with all this is that the grand jury indictment paints a very different picture of Swartz’ activities, making it sound more like he backed up a truck to the library loading dock (of course, the physical book analogy fails because, as zeroday’s Tweet suggests, any number of people can download a JSTOR document with depriving others of access.) The indictment describes a running war as JSTOR and MIT worked to cut off Swartz’ downloads and acuses him of physically breaking into a MIT wiring closet to gain access after MIT administrators had barred his computer from the network.

The indictment makes no reference to the status of relations between JSTOR and Swartz though in general, a felony prosecution is at the discretion of the prosecutor, not a victim. And the indictment itself makes it clear that MIT, including the MIT Campus Police, participated actively in the investigation. (Someone who wants to try the things described in the indictment might do well to target a network less intensely and competently monitored and logged than MIT’s.)

I have no opinion as the Swartz’ guilt or innocence. But the charges of wire fraud and theft are serious ones and cannot be dismissed as “downloading too many articles.” As for what might be the motivations for the downloads, I am sympathetic with those who argue that JSTOR represents an obsolete and repressive system of extremely expensive controlled access to scientific journals (and also an invaluable resource to researchers.) But the future of paid, print journals is a complex subject that must be addressed by means other than vigilantism. Some informed debate on that subject would be helpful.

NOTE: The original version of this post misspelled Swartz’ name as Schwartz.

Why Apple’s Earnings Reports Matter

Today Apple released their earnings report for the third quarter of 2011. As was expected there was much anticipation regarding the earnings, not only from Wall St but also from media outlets. Apple did not disappoint having their best non-holiday quarter ever as well as selling more iPads and iPhones than any other quarter. Outside of continually delivering reports that shock people there is a more significant point about Apple and their earnings progress that i’d like to highlight.

Namely that Apple’s earnings are one of the biggest indicators that not only show the healthy life of the technology economy but they should also give other companies hope. That hope is that if a company truly delivers value to the market place it will be rewarded. They should find hope that consumers aren’t just after the cheapest thing on the market but that consumers truly desire products that add value to their lives and they are willing to pay for it.

It’s not a race to the bottom its a race to provide value. Apple’s earnings continually re-enforce this point.

Below are the key points from the earnings.

Apple® today announced financial results for its fiscal 2011 third quarter ended June 25, 2011. The Company posted record quarterly revenue of $28.57 billion and record quarterly net profit of $7.31 billion, or $7.79 per diluted share. These results compare to revenue of $15.70 billion and net quarterly profit of $3.25 billion, or $3.51 per diluted share, in the year-ago quarter. Gross margin was 41.7 percent compared to 39.1 percent in the year-ago quarter. International sales accounted for 62 percent of the quarter’s revenue.

– The Company sold 20.34 million iPhones in the quarter, representing 142 percent unit growth over the year-ago quarter.
– Apple sold 9.25 million iPads during the quarter, a 183 percent unit increase over the year-ago quarter.
– The Company sold 3.95 million Macs during the quarter, a 14 percent unit increase over the year-ago quarter.
– Apple sold 7.54 million iPods, a 20 percent unit decline from the year-ago quarter.

Overall:
– Apple reported quarterly revenue of $28.57 billion, and profit of $7.31 billion, representing year-over-year growth of 82% and 125%, respectively
– We’ve now sold 222 million iOS devices to date
– International sales made up 62% of the quarter’s revenue, compared with 59% in FYQ2
– Gross margin was 41.7%, above our guidance for the quarter
– Apple closed the quarter with $76.2 billion in cash, compared with $65.8 billion at the end of the previous quarter
Mac:
– 3.95 million Macs were sold, a record for the June quarter
– Mac sales grew 14% year-over-year, four times the global PC market growth, according to IDC
– The Mac has outgrown the PC market for 21 straight quarters – more than five years
– International Mac sales continue to be strong, growing 57% year-over-year in Asia Pacific
– Peter Oppenheimer shared that Lion, the new version of OS X, will be available tomorrow
iPhone:
– Apple sold an all-time record of 20.3 million iPhones during the quarter, compared with 8.4 million in the year-ago quarter, 2X IDC’s growth estimate for the smartphone market
– iPhone is being deployed or piloted by more than 95% of Fortune 500 companies, and by 57% of the Global 500
– iPhone is now available in 105 countries through 228 carriers, and year-over-year sales quadrupled in Asia Pacific
iPad:
– Apple sold 9.2 million iPads in the quarter, up from 3.3 million in the year-ago quarter
– Supply improved and we’re still selling every iPad we can make – iPad is now available in 64 countries
– iPad is now being deployed or piloted in 86% of Fortune 500 companies and 47% of the Global 500
– There are more than 100,000 apps designed for iPad in the App Store
Music:
– Apple sold 7.54 million iPods, with iPod touch continuing to make-up over half of the iPods sold
– iPod maintained over 70% marketshare in the US, according to NPD, and is the top-selling MP3 player in most countries for which we have data
– iTunes Store revenue was up 36% year-over-year, reaching $1.4 billion
– We have paid over $2.5 billion out to developers, as the 425,000+ apps in the App Store have been downloaded more than 15 billion times
Retail:
– Apple plans to open 30 new stores this quarter, for a total of 40 new stores this fiscal year
– Mac sales in our retail stores totaled 768,000, up 13% from the year ago quarter, and 50% were to people new to the Mac
– Apple’s retail stores brought in $3.5 billion in the quarter, up from $2.6 billion in the year ago quarter

Chromebooks: What Netbooks Should Have Been All Along

When netbooks were first launched in late 2008, they were billed as clamshell devices meant to access the internet. About a decade earlier, these devices were also referred to as internet appliances. These netbooks were much less expensive than notebooks at the time, partly because of their limited functionality and partly because of their sleek size (eliminating components such as optical drives). The concept of these devices quickly devolved as consumers focused on price. Brands seized the growing demand opportunity and slapped together miniature notebooks using what they had at the time: notebook components.

What the industry was left with was inexpensive small notebooks, not internet access devices, but “net” books. Many research firms, including DisplaySearch, took to calling netbooks “mini-notes” because they were recognized as miniature notebooks. Research firms took a lot of heat from PC brands, component makers, and others who were worried that if these inexpensive mini-notes were thought of as notebooks, they would lead to lower average selling prices of notebooks. That is what ended up happening. Now the mini-note category is shrinking as brands move away from the modest margins of mini-notes to tablet PCs, while the need and opportunity for devices specialized for internet access remains.

Enter the Chromebook, a clamshell device whose main objective is to access the internet, with some versions coming in at mini-note prices; a case in point is the Acer AC700-1099, selling for $349. Some have said that Chromebooks will be doomed from the start because of the impression that they need a mobile broadband connection to be of any use. I’d say that’s a marketing error that needs to be corrected: Chromebooks can use WiFi to connect to the internet and can be useful anywhere there is a hot spot. The goal is convenience, not productivity. For consumers looking for an instant-on device with a long battery life and sleek design, just for connecting to the web for email and accessing digital media, Chromebooks will be of interest.

Chromebooks have recently started selling, so it’s too early to judge the market’s reaction. However, informal indications seem to point to some traction. As of this writing, the Acer Chromebook was ranked sixth on Amazon.com’s bestsellers list for laptops, and the more expensive Samsung Series 5 in silver with WiFi and 3G versions in white were also in the top 20.

Click here to read more analysis from Richard on the DisplaySearch blog.