March 2013 – Tech.pinions

Apple’s Cloud Conundrum

Apple is really bad at the cloud. And while that is not hurting the company much today, it is going to become a growing problem as users rely on a growing number of devices and come to expect that all of their data will be available on all of their devices all of the time.

Apple’s cloudy difficulties are becoming apparent through growing unhappiness among developers about the many flaws of Apple’s iCloud synchronization service. Ars Technica has a good survey of developer’s complaints about the challenges iCloud poses for developers. This long Tumblr post by Rich Siegel of Bare Bones Software is a deeper dive into some moderately technical detail.

These developer issues matter to both Apple and to its customers because iCloud is not being integrated into third-party apps, and some that have integrated it are abandoning it. This leaves users with limited and often complicated solutions for access to their data. Like most tech writers, I’m an extreme case, working regularly on a large assortment of devices working in different ecosystems. I rely on a variety of tools to sync my data, an approach that can be a configuration nightmare. But even someone living entirely within the Mac-iOS ecosystem cannot count on iCloud to provide anything near a complete solution. Just try to move PDF document from a Mac to an iPad.

The fact is that both Microsoft and Google are far ahead of Apple in cloud services. Microsoft has built on its years of experience with SharePoint and Exchange, plus such commercially unsuccessful but technically important projects as Groove and Live Mesh, to build SkyDrive and its associated services. Google has always lived in the cloud and has put its expertise behind Google Drive. Smaller vendors, such as DropBox and SugarSync, also offer solutions far superior to Apple’s. But all of these companies have taken years to get where they are in large part because this stuff is really, really hard. None of them offers a complete multiplatform, multidevice, multi-application solution, but they are getting there.[pullquote]The fact is that both Microsoft and Google are far ahead of Apple in cloud services. And this stuff is really, really hard.[/pullquote]

Cloud information management solutions are only going to get more important as users choose among multiple devices to pick the one best suited to the need at hand. For many, these devices will be heterogeneous, perhaps an Android phone, and iPad tablet, and a Windows PC. The winners will be service providers who make a full range of services available to all devices on all platforms. Microsoft and Google come close, working hard to look beyond Windows and Android, respectively. Apple provides only grudging iCloud support to non-Apple devices, another self-imposed handicap.

Apple has the advantage of starting in this new multidevice world with the best-integrated solutions. But it is serious danger of blowing that lead unless it can drastically improve its cloud offerings.

And one more thing: The cloud imposes new security challenges for service providers. This is a problem no one has solved yet, but Apple has failed particularly miserably. Check out this Verge article for a good rundown on iCloud security failings.

The New Era of “Good Enough” Computing

A few weeks back I was one of the first to write about Windows Blue and in this column I discussed how Windows Blue could be used on tablets in the 7” to 10” range as well as in clamshell’s up to 11.6 inches.

We are now hearing that this particular version of Windows Blue will be priced aggressively to OEMs and could go to them for about $30 compared to the $75-$125 OEMs pay for Windows 8 on mainstream PCs.

But to use this low cost version of Windows Blue, we understand there are some important caveats that go with it. For this pricing, it can only be used on Intel’s Atom or AMD’s low-voltage processors. These chips were designed especially for use in tablets and as I pointed out in the article I mentioned above, this would give Microsoft a real opportunity to get Windows 8 tablets into the market that could go head-to-head with Apple’s iPad Mini and most mid level 7”-8” Android tablets as well.

Netbook 2.0?

As for clamshells, they too need to use these processors from Intel and AMD to get this pricing for Windows 8 (Blue). What’s interesting about these clamshells is that we understand that they will be fully touched based laptops with very aggressive pricing. In some ways, these clamshells with these lower end processors could be looked at as Netbook 2.0, but for all intent and purposes, these will be full Windows 8 touch laptops only with processors that are not as powerful as the ones using Intel’s core i3, i5 or i7 chips or similar ones from AMD. They will also be thin and light and could easily be categorized as Ultrabooks as well.

Windows 8 Blue is one way to get Windows 8 into more products and make it the defacto Windows OS standard across all types of devices, especially the 7” to 8” tablet segment that we predict will be as much as 65% of all tablets sold by 2014. We also hear that Windows Blue RT version will also take aim at 7”-8” tablets, which means that the ARM camp will have a play in this market as well. However, its use in an x86 clamshell could have a dramatic impact on the laptop market and have unintended consequences for OEMs and chip companies as well.

The ramifications could come from a major trend in which tablets are becoming the primary digital tool for most users. The smaller tablets are used more for consumption but the 10” versions can handle both consumption and productivity in many cases. This translates into the fact that tablets are now handling about 80% of the tasks people use to do on a laptop or PC. That means that traditional laptops or PCs now only handle only 20% of the needs of these users, which are mostly used now for media management, handling personal finances, writing long documents or long emails.

New Price Segments

When we ask consumers that have tablets about their future laptop or PC purchases we are told that for many, if the laptop is only used for 20% of their digital needs, then they will either keep what they have longer or if they do buy a new laptop or PC, it will be a relatively cheap one. Consumers, who are not interested in Macs, tell us that the top amount they want to spend on these products is $599. This suggests two key things for the PC industry that could be quite disruptive. The first is that there would be a bifurcation of the laptop and PC market into distinct sectors. One focused on the consumer where all PC products have to be under $599. The other is what we call the premium market for laptops and PCs which are willing to pay $999-$1499 for their computing tools because of more advanced computing needs. This premium segment is mostly tied to enterprise and the upper end of the SMB market. In fact, the price for PC products in this upper premium price range has proven to be quite resilient.

The second key thing means that the mid level priced laptops and PCs could end up in a no mans’ land. PC products in the $699-$899 could take a pretty big hit while demand for products $599 and under could skyrocket. We believe that this trend would usher in an era we call “Good Enough” computing; a term we became intimately acquainted with during the first Netbook phase. To some degree, the robust sales of Chromebooks already suggest this era has already started. But it would pick up if users could get full touch-based clamshells that look like Ultrabooks and are priced well under $599. We are actually hearing that when these come out in time for back to school they will be priced from $499-$549 and the target price would be to get them around $399 by early next year.

At Creative Strategies we are in the early stages of analyzing the potential impact of these Windows Blue low-cost clamshells but our early take is that they could be huge hits and have a serious impact on demand for laptops or PCs in the mid range, which has been a very important segment for the OEMs and CPU companies in the past. If this happens, the OEMs would need to bulk up on their premium products since these have solid margins and actually bring them significant profit. It also means they need to be creative and innovative in products under $599 and find ways to squeeze profit out of these types of laptops as well.

This does not mean that OEMs will stop offering value notebooks that are bulkier and in some cases use processors more powerful then Atom or low-volt chip from AMD. However, if their Netbook 2.0 like clamshells are thin, light and touch enabled, it could even cause demand for these low end bulkier laptops to dry up too. It will be very important to watch the development of this market over the next 6 months. If our assessment is correct, we could see a rather significant bifurcation of the PC market this fall, something that could have a real impact on all the players in the PC world.

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

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.

Tablet Trifurcation

Yesterday, Tech.pinions columnist, Patrick Moorhead, discussed the implications of the growing popularity of the 7 inch tablet form factor.

Schism

I think that Patrick’s analysis of the schism between Apple’s iOS tablets and Android tablets was spot on. While Apple encouraged their developers to create apps that were optimized for the larger 10 inch tablet form factor, Android eschewed optimization and encouraged a one-size-fits-all approach. The resulting “stretched” Android phone apps worked poorly on the larger tablet form factor. However, “stretched” phone apps seem to work well, or at least adequately, on the slightly smaller 7 inch screens.

This divide in approach between iOS and Android tablets has at least two major implications. First, Apple’s iOS tablets will most likely continue to dominate the 10 inch tablet form factor. In fact, Android has all but ceded the 10 inch form factor to Apple.

Second, because both Apple’s 10 inch iPad and their 7.9 inch iPad Mini run optimized tablet apps, the iPad will most likely become the “go to” tablet for high end users. This means that professionals, businesses, government entities and educators will gravitate towards the iPad. And as the virtuous cycle of developer/app/consumer continues the spiral upwards, the high-end iOS applications will make iOS optimized tablets even more appealing to high-end consumers and even less approachable to Apple’s competitors.

Trifurcation

It seems to me that the tablet market is trifurcating. Apple’s iOS is taking the larger 10 inch form factor and the up-scale markets. Google’s Android may command market share in the mid-level markets. And forked or non-Google Android tablets will take the low end of the market. All can survive, but only Apple has proven that it can profitably thrive in such a setting.

What are the Implications of Increased 7” Tablet Popularity?

Last month, DisplaySearch published an analysis, entitled, “Smaller Tablet PCs to Take Over in 2013?” The report essentially laid out the volume decrease of 9.7-10” displays and the increase of 7.X” displays in January of 2013. While this isn’t the freshest of data, it’s still valid and certainly makes sense, given the popularity of the iPad mini, Kindle Fe HD, Nexus 7 and the long tail of “white tablets.” If we are indeed in a volume shift from larger displays to smaller display tablets, there are two key implications which I think are very important as they impact the entire tech ecosystem.

Let me start by taking a brief look back at tablets a mere 9 months ago as it’s important to know where we came from to appreciate where we are going.

Until the Nexus 7 tablet was launched, Android tablets were literally dead in the water and the “tablet market” was really the “iPad market”. This makes sense even today as 10” Android tablets lack the app ecosystem that Apple provides. Why would a consumer pay $399-499 for a tablet that has maybe 5,000 optimized tablet apps? They didn’t and still won’t. Google attempted to compensate by “stretching” phone apps to 10” displays, but the experience is still lacking. Stretched phone apps still look and operate horribly on a 10” tablet. 7” Android tablets like the Nexus 7 were different in that they can effectively leverage Android’s large phone app ecosystem. The rest is history as volumes rise for 7″ tablets.

Let me dive into the implications.

The first implication of 7” tablet popularity is the creation of a new ecosystem. Let me focus on hardware. The iPad hardware ecosystem is large, but not diversified, particularly in hardware, as it is essentially Apple, Foxconn, and Apple’s chosen IHVs. On the OEM side, I believe companies with subsidized business models will be the most likely OEM winners in 7” tablets. These are companies like Amazon, Google, and Microsoft. They can accept lower hardware margins as they drive their corporate profits from e-tailing, advertising, operating systems and application software. Other winners will be OEMs with strong consumer brands or huge marketing budgets like Apple and Samsung. Less clear are the 7” opportunities for PC giants HP, Dell, Asus, Lenovo and Acer. With a new crop of OEMs come new ODMs like Quanta, Pegatron, and the long tail of “white tablet” manufacturers. With new OEMs and ODMs come the component manufacturers.

To get the full appreciation of just how many different component suppliers are involved, you just need to go over to iFixit’s iPad 4 teardown and see the myriad of companies involved. The challenge before was that if you weren’t in the 9.7″ iPad, you were out of luck, because Apple rarely second sources components and they owned the tablet market. On the SOC side, now Nvidia, Qualcomm, Intel, Mediatek, Hi-Silicon (Huawei), and even relative unknowns like Rockchip (in the HP Slate 7) will have opportunities. Needless to say, all this new competition will lead to lower prices and hopefully more innovation. I say “hopefully” because with the lower prices, it’s not a foregone conclusion there’s money left over to invest in a lot of innovation.

The final implication of the increased popularity of 7” tablets has nothing to do with tablets at all, but with personal computers.

10” tablets, more than 7” tablets, had the ability to augment or replace certain PC usage models. Like many, I used the iPad for years as my primary (% time spent) productivity device when paired with a ZAGG/Logitech Bluetooth keyboard. My personal iPad usage model was probably ahead of the curve, but a 9.7” iPad worked well for email, calendar, research via the web or news apps, reviewing presentations and documents, and even writing reports and research. I would never never finalize a document on the iPad as I would do this on a notebook, but the initial research and text entry worked well.

Usage models are different on a 7” tablet versus a 10″ tablet. 7″ tablets are more appropriate as content consumption devices, driven primarily by the screen size and input methods. If you have ever had to type out a lengthy email on a 7” tablet, you know what I mean. Typing on a tablet entails some very uncomfortable typing where half the display is covered by the on-screen keyboard. 7” tablets are great, however, for reading and deleting emails, watching videos, reading e-books, and browsing simple web sites.

With all of this considered, I believe this means that those with the 7” tablets have a greater need for a modern notebook more than those with a 10” tablet. This is not to say that I expect the market for MacBooks and PC notebooks to explode immediately with amazing growth, but I do believe it will lead to increased notebook sales. When you consider the aging installed base of low battery life, thick and chunky Windows XP and Vista-based notebooks, my thesis gets stronger.

Net-net, the popularity of 7” tablets make notebooks look more attractive and I believe will give a boost to MacBooks and Windows notebooks.

Summary

Until the Nexus 7 and Kindle Fire HD arrived, the “tablet” market was really the “iPad” market. While not providing the best experience, 7″ Android tablets provide a good enough consumer experience at a very low entry price. The iPad mini launch validated the 7-8″” tablet market and, based on DisplaySearch figures, the mass of volume appears to be headed to the 7” form factor. This shift brings with it two key implications.

Android will becomes a player in the tablet market and with it, brings much more competition across OEMs, ODMs and even component suppliers. This increased competition will drive lower prices and hopefully more innovation. There is a case to be made that only those with subsidized business models or a stellar brand will survive, but we will have to wait and see on that. Finally, I think notebooks will get a boost from the popularity of 7” tablets driven by the usage model differentiation between the two devices, which is absolutely the most ironic implication.

Who thought a display size change was boring?

The FCC: After Four Frustrating Years, Tough Work Ahead

Julius Genachowski was one of President Obama’s original tech warriors, so hopes were high when he became chairman of the Federal Communications Commission in 2009. He leaves the post some modest accomplishments, some bigger disappointments, and a general sense of stasis that has replaced the excitement of 2008.

This situation is not Genachowski’s fault and there is not much chance that his successor, no matter who it is, will be able to speed process. Inertia is a powerful force in Washington, and few institutions are harder to get moving than the FCC. Why else would the commission still be arguing over rules prohibiting cross-ownership of newspapers and television stations–and issue likely to come to a boil again if Rupert Murdoch goes ahead with a bid for The Los Angeles Times–even as both sets of institutions fade into irrelevance?

The commission has two huge problems. First, the FCC’s actions are governed by a terrible and hopelessly obsolete law, the Telecommunications Act of 1996. Any time the commission seeks to stretch its authority, say, by trying to regulate network neutrality, it can count of being sued and probably slapped down by the courts.

Second, major industry constituencies—big telecommunications companies and wireless carriers, broadcasters, cable companies—see much to lose and little to gain from change, and then opposition of any one constituency can cause things to drag on interminably.

A good example is freeing unused or underused television broadcast spectrum for wireless data use. The fight stems from the transition to digital TV mandated in the mid 1990s and completed in 2007. TV stations ended up with more spectrum than they had good use for. The result was a plan for “incentive auctions,” in which stations would receive part of the proceeds from the sale of spectrum (which they didn’t pay for in the first place). The FCC plan was complex, and Congress, at the behest of broadcasters, made it even more baroque in 2011 legislation authorizing the sales. Broadcasters continue to throw up roadblocks and it now appears that the auction process, originally expected to start next year, is unlikely to get going until 2015. The TV fight is also holding up a plan to make some of the unused TV spectrum, the so-called TV whitespaces, available for unlicensed wireless data. Not surprisingly, the broadcasters oppose that plan too.

Unfortunately, there’s not a lot an FCC chairman can do to speed the agency’s glacial pace. Federal law creates endless possibilities for delay. Any time the commission tries to push its boundaries, it will be sued and objectors have generally found a friendly ear at the conservative D.C. Circuit Court of Appeals, which hears all challenges to FCC actions.[pullquote]Unfortunately, there’s not a lot an FCC chairman can do to speed the agency’s glacial pace. Federal law creates endless possibilities for delay.[/pullquote]

This is troubling, because the FCC has some major items on its agenda. The most urgent is finding ways to find more spectrum for wireless data. It has become clear that the traditional approach of transferring spectrum from incumbents to new users has limited potential to increase bandwidth, at least in any reasonable amount of time. What’s needed is sharing of spectrum—especially between government agencies and private users–and new technologies to use the spectrum we have more efficiently. Steps to do both, sometimes simultaneously–as in the sharing of of the 3.5 gigahertz band between military radars and small-cell wireless data–are underway, but it is going to be a long slog. Incumbent holders of spectrum don’t give it up easily, even for sharing, while establisher service providers will maneuver to prevent competitors from gaining any perceived advantage. Look for a long slog.

Another major issue is mundane, even boring, but very important. The nearly 150-year-old public switched telephone network has nearly reached the end of its useful life; internet technology is a far more efficient way to move voice traffic than traditional circuit switching. The prospect of this happening has been looming for some years, but AT&T has forced the issue with a formal petition to transition its land-line services to an IP network. A lot of money is at stake–there is a huge investment tied up in the existing network. The FCC has to make sure that the transition balances the interests of customers and shareholders of the carriers–this mostly affects AT&T and Verizon Communications–and guarantees a reliable and affordable landline network for the future. (Much as techies disparage it, the landline network is still tremendously important and, of course, the same IP network that will carry voice calls forms the backbone of the internet.

That’s a big agenda for change coming up against a system strongly biased to inertia, complicated by a Congress whose passion for meddling is exceeded only by its lack of understanding of the issues.

When Calculators Had Gears

Photo of Friden D10 — “Naked” Friden D10 (Photo: Jake Wildstrom)

My son, a mathematician at the University of Louisville, has a new hobby: restoring mechanical calculators. These machines were obsolete long before he was born, but a visit this past weekend brought back a wave of nostalgia. I was a student just before the advent of electronic desktop calculators (the ubiquitous personal calculators came along a few years later) and I spent a substantial part of my life doing statistical analysis on a mechanical calculator and a spreadsheet, which in those days was a ledger-sized sheet of ruled paper.

Mechanical calculators were conceptually simple and mechanically extremely complex. They were basically glorified adding machines which did multiplication as repeated addition and division as repeated subtraction. On the early manual machines, to multiply, say 135 by 25, would enter a number to be multiplied from the keyboard or by rotating pinwheels. You would then turn the crank 5 times, move the carriage one place to the right, and turn the crank twice. The answer would appear in the accumulator register. Division was a bit more complicated, but was basically the same process in reverse and could be carried out to as many decimal places as you had digits in the register. Later models replaced the crank with an electric motor and moved the carriage automatically. The last generation of Friden mechanical calculators had a square root function built in, an enormous benefit in stat work, which requires computing lots of square roots.

Disassembled Odhner 227 (Photo: Stephen Wildstrom) — Pinwheels, setting rings, and shaft of an Odhner 227

These calculators made a marvelous noise–motors whirring, gears meshing, bells ringing. The stat labs at the University of Michigan where I would were big rooms filled with dozens of machines, all going at once, making a glorious racket. The space at the Rackham graduate school included a plugboard-programmed IBM accounting machine (ancient even then), a counter-sorter, and a printer, and when everything was running at once, it sounded more like a stamping plant than a lab.

Mechanical calculators were painfully slow by electronic standards and needed lots of maintenance (those levers in the photo of the Friden, top, represent the complex mechanical logic of the machine.) It was generally a blessing when they were replace by electronic calculators and, ultimately, by software such as Mathematica, Maple, Matlab, and Sage.

But those wonderful old machines created a intimacy between analyst and data that doesn’t exist anymore. So I am happy that some in the younger generation are willing to do the work of restoring these beauties.

(Jake recently acquired a Curta, the Ferrari of crank-operated calculators. It looks a bit like an slightly oversized peppermill, if Swiss watchmakers made peppermills. Plus, there’s the amazing story of its inventor, Curt Herzstark, who designed the machine while a prisoner in the Buchenwald concentration camp. And the Curta is proudly marked “Made in Liechtenstein,” possibly the only industrial export of that postage stamp-sized coiuntry (which, of course, issued a postage stamp to honor the device.)

The Best Innovations are Still Ahead

I enjoy technology industry history. After the dot come bubble burst, I had a conversation with the then-CEO of National Semiconductor, Brian Halla. He’s also a tech history connoisseur and he explained to me what is called the Boom Bust Build-out Theory. The theory, in short, details how every major industry during the industrial revolution until now went through an initial boom, followed by a bust, followed by a market build-out.

The “boom” period is a period of euphoria where entrepreneurs, investors and early adopters rally around the new product or industry; followed by a relatively short “bust” where tough economic realities are faced; followed by an extraordinary “build-out.”

During the boom, an industry first gains traction and investment money floods the market. The result is that the supply outpaces the demand of the current market state. This is because the early interest is driven by early adopters, which is not a large market. The over-flooding of capital, combined with an immature market, leads to the bust. The bust, however, causes a drop in price of essential market components, which leads to innovation.

In an example with the railroad industry, the “bust” led to such cost declines in essential components that it made it possible for enterprising entrepreneurs to create the frozen car, thus spurring the meat packing industry. The two-year railroad bust, however, was followed by a global build-out that lasted a century. That build-out occurred all around the world and forever changed transportation and commerce.

A similar cycle of boom and bust in the automobile industry led to the creation of the V8 engine, power steering, electric indicators and safety glass.

Looking over the history of the personal computing industry, we can spot many similarities with mega industries of the past. The technology industry was not immune to the boom, bust, build-out cycle and if the signs are true, we are right at the beginning of the build-out stage.

Much of the innovation we are seeing today around smart phones, tablets and new PC form factors is the beginning of this build-out. Just look around at the innovative PCs, desktops, smart phones and tablets, all coming to market with things that seemed impossible just a few short years ago, and all at mass market prices.

The devices we use are going to get smarter, thinner, faster and more. The internet in five years will look and feel nothing like it does today. The build-out that we are at the very beginning of will drive new businesses, new markets, new technologies, and new opportunities.

One of the more interesting elements to what I am point out here is the hardware renaissance happening in the tech industry. Hardware startups are popping up everywhere these days making things from wearable health monitors, automotive intelligence, smart home solutions, computerized toys, and more. The industry bust led to such a drop in critical components that it made feasible for entrepreneurs to very easily and inexpensively start creating hardware solutions to solve every day problems.

Where we are today is both an opportunity and a threat for non-nimble industry incumbents. New innovative startups can come out of no where and disrupt legacy business or established companies can enter new markets effectively.

When a companies growth slows, or begins to slow due to market saturation of a specific category the two key ways to drive new growth is to enter new markets, or create new markets. The cycle that we are in allows innovative companies opportunities like we have never seen before technologically.

Take the iPad for example. For Apple this was a new market creation strategy. They packaged a product together in ways that have never or could never have been done before at mass market prices and completely created a new category in which to compete.

When I look at the cycle the technology industry is in today, it gives me great confidence that our best and most innovative years are ahead of us. Who will dominate these years ahead will be the continual storyline. But without doubt some of our most exciting innovations are still to come.

The Challenge for Smartphone Makers in 2013

I believe we are in new territory for smartphone manufacturers. Although its true that there are still many people on the planet who do not yet have a smartphone, the reality is that the most mature markets are reaching the saturation point where most consumers–who want and value smartphones–have one. Which means that the battle for the bulk of mature market consumers are now for up-graders and no longer intenders. This changes things quite a bit.

This would explain the concerns over smartphone growth slowing in 2013. For several years the smartphone market was growing at over 50% a year. This year the growth is estimated to be around 30%. I think a better way to look at the growth is to look at the rate specific smartphone price ranges will grow. I think parts of the market may grow more than 30% this year. However, I am not convinced it will be the flagship top-tier devices that grow at faster paces this year but the more second tier devices. Of course this would seem logical given the growth in emerging market but I think this will even be the case in markets like the US and Europe.

If true this brings up an important observation about devices like the Galaxy S4, the next iPhone, and any other flagship device. And that observation leads me to the title of this column.

Good Enough

I think we are getting extremely close to a good enough sentiment by mass market consumers toward their current devices. The quality of most flagship phones and even many tier two phones has been continually raising to the point where they are lasting longer and meeting the simple needs for the mass market.

We have been living in a good enough paradigm in the PC industry for years now and consumers are consistently holding onto PCs longer because they meet their needs and they do not feel an urgency to upgrade their notebooks. I think the smartphone market may be in a similar situation.

The Burning Question

At an absolute fundamental level the biggest challenge smartphone makers face in 2013 is convincing consumers they need to upgrade their smartphones this year. The biggest part of the consumer market is not the early adopters but the early and late majority. These groups think very different about technology and what percentage of this market will routinely upgrade every year or even every two years is a big question mark.

When we talk with consumers and gather our market insights into this specific question, we continually get a sense that consumers are happy with even their later generation devices and don’t necessarily feel the need to rush out and upgrade their devices even if they are eligible. It appears that a growing majority believes their current devices are good enough. It doesn’t mean they won’t upgrade, just that there is no sense of urgency.

This brings up interesting implications for companies like Samsung and Apple. Both companies have garnered a large install base for their devices over the past few years. There will certainly be a significant number of customers who will be eligible in 2013 for upgrades but will they be compelled to upgrade at all? This, I think, is an interesting question.

With regards to the S4 I have my doubts. Samsung will no doubt sell a ton of these devices but will it sell better than the S3? I’m not convinced, and I am not convinced for one primary reason. The S4 runs the dangerous risk of over serving the market needs with the key innovations and features they added.

Horace Dediu tweeted out something I thought was very interesting last week.

Market over-service is a far more dangerous mistake than under-serving it.

Overserving the market means adding features and functions the mass market does not have a perceived need for or is not ready for. Often times when an offering is complex, it is hard to understand. This goes back to the point of what is good enough in today’s market and what is overkill. These are questions to wrestle with.

The S4 has some cool features. Once people get their hands on them we will see if they are just cool or actually useful. Cool and useful are often two very different things. What Samsung doesn’t need with the S4 is consumers hearing the pitch and wondering “why do I need that?” What if the S3 is good enough?

The S4’s biggest challenge will be to address the question in the minds of consumers as to “why should I upgrade?”

Of course Apple will face this question as well. We have seen Samsung’s flagship device and we are yet to see Apple’s. I think this is an interesting year for Apple. I’m not sure Apple has ever found themselves in a position in the past decade with such a strong competitor as Samsung, who is willing to spend more money than them on marketing to convince the world to buy into the Samsung brand.

This is perhaps the first year where I think Apple needs to do more with the next iPhone than the traditional strategy. For the primary reason that the iPhone 5 in its current form is good enough for the masses. If the next iteration of the iPhone does not offer either some entirely new innovation or feature not found on the iPhone 5 that provides an answer to the upgrade question, then I fear consumers who are in the market and eligible for the upgrade may just end up buying the iPhone 5 at a discounted price. Even if that happens it still means healthy sales for Apple but it begs the question about the necessity of a new flagship device it isn’t going to make a compelling upgrade case.

The question will be what features are worth a $100 premium in the good enough market that we find ourselves in. There are fascinating dynamics at play in the market right now from my viewpoint. I do believe that every smartphone maker is now entering uncharted waters due to the saturation and maturity of the smartphone market. It will be exciting to see how these new waters are navigated. I’m glad I have a seat to watch the show.

Google Keep: Bleeding from Self-inflicted Wounds

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.

Android’s Penetration Vs. Apple’s Skimming Marketing Strategies

Technology pundits and press, alike, seem obsessed with market share. But obtaining large market share is just one of many successful business strategies. Android follows a penetration pricing strategy. Apple uses a skimming strategy. Neither is inherently superior to the other. Like any strategy, each has advantages and disadvantages and their ultimate success often depends upon both circumstances and execution.

Penetration Pricing

Penetration pricing occurs when a company launches a low-priced product with the goal of securing market share. For example, a sponge manufacturer might use a penetration pricing strategy to lure customers from current competitors and to discourage new competitors from entering the industry. If the sponge’s price is low enough, consumers will flock to the new product. Competitors who can’t produce and promote sponges for such a small profit will avoid the market, freeing the sponge company to maximize brand recognition and goodwill. ~ Stan Mack, Demand Media

Price Skimming

A price skimming strategy focuses on maximizing profits by charging a high price for early adopters of a new product, then gradually lowering the price to attract thriftier consumers. For example, a cell phone company might launch a new product with an initial high price, capitalizing on some people’s willingness to pay a premium for cutting-edge technology. When sales to that group slow or competitors emerge, the company progressively lowers its price, skimming each layer of the market until the low price wins over even frugal buyers. ~ Stan Mack, Demand Media

Apple has added a twist to the skimming strategy. Rather than introducing their products at a high price and then lowering their prices later, Apple stakes out a price and then maintains and defends that price by significantly increasing the value of their products in future iterations.

For example, over the past six years, the average sales price of the iPhone has remained remarkably stable with the subsidized price remaining at ~$200 and the unsubsidized price hovering around $650.

Advantages and Disadvantages Of Price Skimming

Price skimming offers four major advantages…. It can offer insight into what consumers are willing to pay. It can create an aura of prestige around your product. If the initial price is too high, you can lower it easily. Finally, late adopters might be pleased to get your prestigious product at a bargain price, which creates goodwill for your company. A major disadvantage, however, is that large profits attract competitors, so this price strategy only works well for businesses that have a significant competitive advantage, such as proprietary technology.

The argument against Apple’s price skimming strategy is that the competition has caught up with the iPhone and Apple is no longer able to compete unless they lower their prices. But do the facts support this argument?

First, the iPhone has received 8 (EDIT: make that 9, as of March 21, 2013) straight J.D. Power and Associates awards for customer satisfaction and Apple reported that four times as many iPhone users switched from an Android phone than to an Android phone in the fourth quarter of 2012. Clearly Apple’s cachet is not on the wane, at least not in the minds of phone buying consumers.

Second, in 2012, Apple garnered 69% of all mobile phone profits. Further, they did it with only 8% of the total market share. That means that the remaining 92% of the market provided only 31% of the sector’s total profits. That’s price skimming at its finest.

Conclusion

The current meme is that Apple MUST abandon their skimming strategy and pursue a price penetration strategy instead. However, the facts simply do not support this contention. Apple could, of course, “buy” more market share simply by lowering their prices, but this has two major disadvantages. First, the market share that they would be buying is worth far less than the market share that they already own. Second, a lower price would lead to lower profits as well. It is obvious – or rather it SHOULD be obvious – that this could be counter-productive.

There’s nothing wrong with market share and I’m quite certain that Apple would be more than happy to expand their market share – but not at any price. For example, Apple has some 70% market share in iPods and around 50% market share in iPads. Yet they are doing this while still maintaining their price skimming strategy.

Price skimming is neither the only strategy nor is it the only superior strategy. It is just one of many marketing strategies. However, Apple is executing the strategy of price skimming brilliantly…even if Wall Street and the pundits stubbornly refuse to acknowledge it.

Apple: Time To Come Out Swinging

The dominant picture of Apple in the media today is of a company on the ropes: out of ideas, falling behind the competition, stock price battered, doomed. It’s reached the point where the CEO of BlackBerry, of all people, is criticizing the iPhone as stale.

The reality is a company enjoying record sales and earnings, dominant in its most important markets, with products continuing to be the envy of customers and competitors alike.

How did a company that spent so many years successfully managing and polishing its image reach this point? And how does it change a growing perceptions of failure in the face of actual success? These questions matter because over time, perceptions have a way of infiltrating reality, making the negativity surrounding Apple a long-term threat to the company.

Apple has succeeded by figuring out what consumers want before they knew they wanted it and by making superior products. But a little bit of magic has surrounded Apple products for the past 15 years or so and that helped make iPods and MacBooks and iPhones objects of desire. Today, every major Apple product is the top seller in its category, often by a wide margin. But without the perception of magic, that becomes harder to sustain.

This is where Apple misses Steve Jobs. Today’s Apple is run by a highly competent crew of executives. But Jobs was the magician and no one can replace him. A Tim Cook keynote can be interesting and informative, but it will never be the sort of cosmic event that Jobs presided over two or three times a year. This loss is irreplaceable.

But something else has changed. For the first time in many years, and certainly for the first time since the incredible iPhone run began in 2007, Apple has a competitor that truly matters. When Apple entered the phone market in 2007, it gained about 100% of the mindshare before shipping a product. Once the iPhone was a reality, and especially after the iPhone 3G and the App Store debuted a year later, Apple brushed away the incumbent smartphone makers without them putting up much of a fight.

Samsung is different. The company is nowhere close to Apple’s seamless integration from components to software and the dog’s breakfast that was the Galaxy S 4 launch shows it still has a ways to go in its presentation skills. But it is making first-rate products that are more and more Samsung and less and less Android, and backing them with a lot of money behind an effective marketing campaign. If Samsung ever learns how to overcome Google’s tablet cluelessness, it could be a formidable competitor to the iPad too.[pullquote]If Samsung ever learns how to overcome Google’s tablet cluelessness, it could be a formidable competitor to the iPad too.[/pullquote]

With Samsung on the prowl and Apple, fairly or unfairly, getting beaten up daily by both the tech and financial media, the company can no longer afford its long-time strategy of floating serenely about the noise of the tech and financial worlds. Apple never responded to rumors or much of anything else. Routine inquires to PR staff received polite no comments or, often as not, no response at all. Apple was the honey badger of tech companies. That strategy has served it well for more than a decade, but it clearly is not working very well anymore.

One thing Apple should strongly consider is giving the world some sense of its direction. Rampant speculation about Apple products while Cupertino sat in stony silence used to work in Apple’s favor, but now its being interpreted as having a lack of anything to say. Critics will say Jobs would never have considered even giving hints about products in development, but Jobs was against many things–including Apple making a phone–until he found a good reason to be for them. “What would Steve do?” is not a good guide for Apple today. The company should let the world know that it is still on top of its game.

Apple also needs to throw a bone the the financial markets. With a cash hoard is more than $150 billion and growing, Apple is beginning to look a bit like a bond fund with a consumer electronics company attached. It successfully fought off an effort by investor David Einhorn to give a good chunk of the money back to shareholders, but it has given no indication of what it plans to do, but there’s a good argument to be made that all that cash sitting around is doing investors no good whatever. It could, as Brian S. Hall suggested here the other day, set up an endowment for future product development. More realistically, it could pay a much larger dividend or use the cash to buy back its own stock. It could find something worth acquiring (maybe it’s saving up to buy Samsung, but it needs about another $100 billion.) But one way or another, it owes investors some explanation of its intentions if it hopes to win their confidence back.

There are some signs that Apple understands it is in a new environment. It has come up with a new section of its web site, going after the competition saying: “There’s iPhone. And then there’s everything else.” Marking chief Phil Schiller took on Samsung in an interview on the eve of the Galaxy S 4 launch (though he diluted its impact with an incorrect claim that the phone used a year-old version of Android.) Such steps are a good start, but Apple will have to do more. It’s a difference, and much more competitive world out there.

Is It a Watch or Something Else?

I was asked to come onto the CNBC Closing Bell segment to discuss the smartwatch hype and rumors. I’m on with my friend and analyst colleague Roger Kay, so that is why he took a friendly jab at me. I’ve been all over the world with Roger and have some detailed stories to tell about him during our travels to Amsterdam *evil grin*.

My main point is that this whole smart watch hype is being thought about all wrong. Time keeping is not the core value proposition. We have brought this up a number of times here at Tech.pinions so to our regular readers that will not be a surprise.

If you have a few minutes and want to see the dialogue, here it is. Would love to hear what everyone thinks.

Are the New Crop of Enterprise Tablets a Threat to Apple?

Over the last three years, Apple has reshaped many industries, including the smartphone, tablet, PC and even SOC industry. One area of Apple success that was in Microsoft’s own backyard was enterprise tablets, where, according to Apple, 94 percent of the Fortune 500 is either testing or deploying iPads. For a product that has only existed for a few years and the slow pace of enterprise change, this is no small feat. While no competing enterprise tablets emerged over the last three years to challenge the iPad, technologies developed over the last few years by Intel could very well change the competitive dynamics.

Enterprise iPads were deployed for very similar reasons that consumers bought truckloads of iPads for themselves. IPads were thin, light, sexy, easy to use with 10 hours of battery life. Through the use of EAS and an MDM, iPads were “secure enough” for enterprise email. As time rolled on, Apple added even more security features and companies like Oracle, SAP, and Salesforce.com started to develop enterprise front-ends to their products and services. This enabled iPads to be more than email machines, but devices where workers could quickly get access to HR and financial system data.

Because iPads aren’t Windows PCs, enterprises needed to spend a lot of time and money making iPads “enterprise-compliant”. By this, I mean IT had to buy products and services and create parallel processes to secure, provision, deploy, manage, service and support iPads. They did this because of the benefits iPads brought and the lack of a Windows alternative. At that point, the Windows alternative was thick, hot, and expensive with no more than 5 hours battery life.

Intel Atom Z2760, aka Clover Trail, could change this enterprise dynamic. If you look at many of the vectors where Windows tablets had an issue, many of them are solved with Clover Trail. With the Atom Z2760, HP, Dell, and Lenovo have just recently started shipping created tablets that are thinner, lighter, as sexy with better battery life than today’s iPad.

Here are a few snippets on the new tablets that only became available for pilot and deployment:

Dell Latitude 10: Dell’s tablet is made from shock-resistant magnesium alloy yet weighs in at nearly the same weight as the iPad. The battery is user-replaceable, too, providing up to 20 hours of battery life and enabling the user to focus on the client, not searching for a plug. The desktop dock enables users to come in from the road and dock the tablet to their giant display via HDMI, GigE LAN, and 4 USB ports for a full-size keyboard, full-size mouse and even external storage or a printer.
HP ElitePad 900: Made with an aluminum design, the ElitePad is thinner, lighter, more durable and serviceable than the iPad. HP even provides enterprises with a fixture to remove and repair the display, PCB and battery. We all know what happens to an iPad 4 when the display breaks. Also, HP’s “jacket” system provides every imaginable port a user and enterprise would want, including an extra battery that doubles battery life to 20 hours. Other jackets are available, including rugged designed and one with a keyboard.
Lenovo ThinkPad Tablet 2: Almost a full 100g lighter than the iPad, the ThinkPad is made of plastic design and comes standard with ports that typically only come standard with a PC, like USB, HDMI and SD. Lenovo also provides an optional desktop dock and keyboard.

Windows 7 is still the enterprise desktop standard and Windows 8, with its issues, is actually viewed by the enterprise as a simpler choice. You see, while enterprise isn’t enamored with Windows 8, it’s a lot easier to secure, provision, deploy, manage, service and support a Windows 8 tablet than it is an iPad. This is because it is a PC and can use the same tools and process they do on their 100s of thousands of PCs. These new tablets can also run legacy desktop apps, too, which means as productivity devices, they can access more of the company’s systems and data without any changes to the older apps. Finally, the tablets are compatible with the 100s of thousands of USB peripherals, the ones important to enterprises like corporate standard receipt printers, laser printers, full-sized keyboards and mice.

Net-net, these new Windows tablets offer support or the tools enterprise IT already know and have paid for and eliminated the downsides of the previous 22 years of Windows tablets. The large enterprise CIOs I have talked to really like this combination, too. Because these new tablets only now became available for pilots and deployments, it will take a while for them to start driving mass volume, so the iPad impact will be minimal at first.

Just as it took Samsung and Google years to get their act together in smartphones and consumer tablets, HP, Dell and Lenovo are now ready to lean into enterprise tablets and have the potential to start chewing aggressively into enterprise iPads. Apple finally has real tablet competition in the enterprise and will need to amp up their game to maintain their position.

If you would like to learn more about this, I have published a detailed white paper here.

An Overview of How Google Glass Works… A Curse or a Blessing?

I loved Tim Bajaran’s piece on G-Glass – Mine simply expands on some basic facts, adding value for all of us who aren’t following the very Iron-Man creation of this latest Google Project. We’re losing Google Reader, but gaining hardware. Does anyone else see Apple’s “product” model being adopted here?

Yes, Alice, we’ve definitely fallen into the looking glass. Google’s most recent project, Google Glass, will delve far into the realm of science fiction, bringing Tony Stark, Iron Man-esque technology to the masses. The Google Glass project delivers a wearable computer system in the form of glasses, offering hands free messaging, photography, and video recording. Straight out of 007, this offers the ability to share everything you see, live, in real time: directions, reminders, the web – all seen through the lens, right in front of your face.

The glasses have a display in the top right corner of the frame, making endless information available at all times, and will reportedly connect with either your Android or iPhone implementing WiFi, 3g, and 4g coverage. These revolutionary specs won’t just be a piece of spectacular hardware; Google is negotiating with Warby Parker, a company which specializes in the sales of trendy glasses, in an attempt to bring infinite data while still looking fashionable.

The best part of Google’s Project Glass is that Google is currently allowing civilians, not developers, the opportunity to influence product development. Google declared, “We’re looking for bold, creative individuals who want to join us and be a part of shaping the future of Glass.” Applications are being accepted through the use of Google+ and Twitter, through the hashtag #ifihadglass.

While this idea of unlimited data being available even more easily than at your fingertips is revolutionary, it raises more than a few questions regarding privacy. The ability to record everything right in front of you, in real time, is a daunting thought, covering everything from being photographed at a cafe, to making videos in airports. Beyond the questionable “Glass etiquette” that will certainly develop over time, the prospect that Google and the government will be able to access users’ data is shattering.

If the Glass Project brings information right in front of your face, allowing you to communicate, to access the internet, contacts, etc., and share what you are seeing live, what will stop others from accessing your private information? Although a few decades late, Orwell’s 1984 has definitely caught up with us.

The issues that may arise from the mass production of Google Glass are met with equally impressive, revolutionary concepts around social networking and sharing. Glass would be the apex of social sharing, allowing people to be in constant contact, literally letting individuals step into other’s shoes, to view the world from a different point of view. You could be standing in New York’s Time Square and share and trade that experience with someone around the world, exploring the streets of Venice or Sydney, Australia. Such universal sharing would truly redefine the human experience.

At its best, this would also effect topics as broad as human rights and poverty – but the cost remains to be seen. Only time will tell if the Google Glass Project will be the vessel connecting mankind, Pandora’s box, or something in the middle.

Did Steve Jobs Actually Intend For Apple to Live Forever?

Steve leaves behind a company that only he could have built, and his spirit will forever be the foundation of Apple.
– Apple Inc statement upon news of the death of Steve Jobs

What if more than Steve Jobs’ spirit lives forever? What if Apple lives forever? Is this even possible?

I say yes.

As the blogosphere pronounces ‘Apple is Doomed’ at every turn, I can’t help but thinking that we have it wrong. Apple will have its ups and downs, no doubt. It’s just that the more I follow Apple, the more I study Steve Jobs, the more I suspect that while he could not live forever Jobs absolutely believed his creation, Apple, could. Literally.

These are my clues:

Apple University

As the LA Times noted shortly after his death, “Apple University” was a serious focus of the seriously focused Jobs. Think what you will of him personally, but Jobs believed in the rightness of his vision. Apple University was created to inculcate his innumerable qualities in those who would come to run Apple years and decades into the future.

To survive its late founder, Apple and Steve Jobs planned a training program in which company executives will be taught to think like him, in ‘a forum to impart that DNA to future generations.’ Key to this effort is Joel Podolny, former Yale Business School dean.

According to a former Apple executive, speaking anonymously: “No other company has a university charged with probing so deeply into the roots of what makes the company so successful.” Training at Apple University reportedly focuses on what enables a company to create sustained innovation.

If there is one key to serious longevity, it is that: sustained innovation.

Apple Endowment

Jobs was audacious. To enable Apple to live forever, he needed money. Lots of money. Apple has that. Forget about stock buybacks, or Wall Street howls for dividends. Ignore the idea that Jobs and Apple are hoarding cash for acquisitions – keeping their “powder dry” as it were. The nearly hundred fifty billion Apple has amassed has a higher purpose: an Apple endowment.

I believe that Jobs, had he lived longer, would have worked diligently with two groups he no doubt found tiring, Wall Street and Washington, to change the laws so that a substantial portion of Apple’s already substantial cash reserves could be used for an endowment.

Growing up in the area, Jobs no doubt knew of the founding of nearby Stanford University. Via Wikipedia:

With his wife Jane, Stanford founded Leland Stanford Junior University as a memorial for their only child, Leland Stanford, Jr., who died as a teenager of typhoid fever. The Stanfords donated approximately US$40 million (over US$1 billion in 2010 dollars) to develop the university, which held its opening exercises October 1, 1891.

One billion is nice. One hundred billion is better. Harvard’s endowment, for example, the richest of all, is approximately $30 billion. What if Jobs – and he would have made Tim Cook aware of this, I suspect – wanted to have, say, $60 billion of Apple’s money set aside as an endowment?

At $60 billion, if the investment manager of the “Apple Endowment” earned 6.5% a year returns on average, that would deliver approximately $4 billion every year, forever. Apple currently spends about $4 billion a year on R&D. Imagine: Apple research and development funded in perpetuity. Think what the company could achieve ten years from now, a hundred, a thousand. If the future Apple made only enough to pay for its operating expenses, it could still churn out amazing products for your great great great grandchildren.

Business Model Purity

Beyond the money, of course, the more I study Apple the more I admire Jobs’ vision to ensure the durability – the permanence – of Apple. There is a purity to Apple’s business model that is, ironically, so rare in Silicon Valley. Google and Facebook encourage our use of their services, for free, then sell our data to others. Who is the customer? HP, for example, lives off exorbitant printer ink costs. Believe it or not, that is not a sustainable business.

Apple, by contrast, builds great products and prices them accordingly. No tricks, no inducements. Buy them or not. You always know what you are buying, and for how much, and what you are getting for the money. A hundred years from now, for example, I suspect there will be a littany of new business models, some great, some doomed to fail, some beyond our comprehension. Apple’s, however, I am sure will still thrive long after we are all gone.

Saying No

What does HP do anymore? Who are they? What about Cisco? Are they out of the consumer market or back in? Why is there a Google+ and a Google X Phone and a Google Car? There is creation, and then there is creation that moves you forward, sustains you. Jobs was famous for keeping Apple not focused on building great products, but on great products that mattered.

Yes, some of the stuff we never see would no doubt be cool. Yes, some of the top talent — the A players — are more likely to stay at Apple if they have a skunkworks to play in, like Google’s X Labs. Ultimately, however, such activities diminish focus, which alters who you are. No point in living forever if it’s not really you.

Jobs’ words on focus from 1997 still ring true today – and probably will for decades, at least:

People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully. I’m actually as proud of the things we haven’t done as the things I have done. Innovation is saying no to 1,000 things.

Control

If you follow Apple and/or Steve Jobs, you doubtless know the importance of control: control of core technologies, control of your product development, control of your distribution, control of your brand. So much of Jobs’ control efforts flew directly in the face of accepted wisdom and practice in Silicon Valley: open, sharing, licensing. Jobs would have none of it. He wanted Apple fully in control of its technologies – and its future.

Retail

Apple is (now) lauded for Apple Stores. You may already know they bring in more money per square foot than any other retail chain on the planet. They also ensure that Apple can offer its products directly to customers. Apple, rare in its industry, is not dependent on others for marketing and sales. But I wonder now if there’s an ever greater, longer-lasting benefit to its stores.

Retail is changing, profoundly. Online, mobile, the sharing economy, 3D printing, same-day shipping. With its many stores, Apple are learning, in real-time, not only what their millions of customers think about their latest products, but by being on the front-lines of buying and selling, Apple is learning the future of retail: the integration of real-time, social, online, digital and physical. Not even Amazon possesses this alchemy. Apple Stores should enable Apple to meet the demands of a changing world long into the future.

Here’s To The Crazy Ones

I think of this story from Business Week shortly after Jobs’ passing:

On the day Jobs died, employees numbly walked outside to watch an American flag lowered to half-mast—and then returned to work. Partners who were in town to meet with the company were astonished to learn that appointments would take place as scheduled. “That’s what Steve would have wanted,” an Apple manager explained.

Yes, that’s the way Jobs would have wanted it. He also would want Apple to continue building amazing, magical, revolutionary products in the year 2525. It could happen. It’s crazy, I know, but it’s those crazy ideas that change the world.

A Killer App for Google Glass

There has been a lot of talk and excitement about Google Glass. This product has caught the imagination of the Technorati and has even garnered feedback from the mainstream media by way of reports that Google Glass would be barred in some restaurants and bars. Clearly this product and product concept is fascinating and who knows if it will catch on or even be successful beyond early adopters who love gadgets.

It is true that there could be some solid use cases that develop in vertical markets for something like Google Glass, possibly for use in medical, transportation, public safety, etc. However, at $1500 it is hardly a consumer device. The fact that it could take pictures, record video, deliver speech to text, and put you into hangouts or even get directions is interesting but it would have to do a lot more than that for consumers to even pop for it at this early stage.

I realize that this is the price of entry for these early versions of Google Glass and that over time they could get into more consumer friendly pricing. In fact, most major technology products start out quite expensive and then eventually come down in price over time. Part of getting the price down comes from the early adopters helping to pay for the early R&D costs of developing the product and with greater demand the vendors, in this case Google, will get better price breaks on components as well as help pay down initial equipment and manufacturing costs.

While I don’t think it can get down into consumer prices anytime soon, I do think there could be a consumer friendly app tied to these glasses that could have appeal for some vertical users as well as a group of consumers that could actually drive high demand for these glasses even if the glasses are a bit pricey.

By nature of my work, I am what you might call a reluctant world traveler. Over 35 years I have traveled close to 4 million miles and visited 55 different countries because of my work in the tech field. I was born in the US and my first language is English. I took Spanish in high school and on the side have tried to learn French very unsuccessfully. Ironically, my dad was Filipino and my mother was German and both spoke their respective languages fluently. But I grew up in a time when making sure your kids spoke English well was a priority and they did not see the need to teach us Filipino or German.

So, like any person that goes to another country where they speak a different language, getting around these cities and understanding the various directional signs and printed text is next to impossible to comprehend for people who don’t speak the native language. I have been to Europe so often that I have come to recognize key words and signs in the various languages spoken there, plus they use a Roman alphabet. However, when I am in Japan, China, or any other Asian country where they use pictographical images in their writing, I haven’t a clue what they mean or are trying to tell me. That is not completely true. I have learned to read the local signs for “the toilet” in just about every country I go to.

There is an amazing app on the iPhone that I use today to try and decipher words, sentences and even signs in German, French, Spanish or Italian when I am the country’s where these languages are spoken. It uses the iPhone’s camera and when in the Word Len’s app, it literally translates the local language into English in real time. But because of the size of the iPhones screen it only delivers a small portion of a sign or documents message and you have to hold the iPhone pretty steady over the words in order to get the true gist of the message.

Now imagine if I was wearing Google Glass and it is tied to my iPhone or Android phone and a special mobile app version of Google Translate. In theory, I could pick up the local paper in Paris and start reading it as the glasses scans the words and it instantly translates them into English for me. Or I may be walking down a street and see a sign on the wall of a building and I just look at that sign and it is translated on the spot. Or I go to the underground subway in Japan and look at the signs that give various directions and I get those signs translated for me as I scan them with my Google Glasses. Imagine how much it could help any world traveler get the most out of a trip abroad.

Perhaps the biggest adopters of this type of application though could be diplomats, politicians and anyone dealing with International relations, including the military. One of my assignments in the past was at the EU offices in Geneva, Switzerland and during my time there I was dealing with documents from dozens of countries that all had to be painstakingly translated for us to even work with them. Imagine if I had had Google Glass back then and could just take one of those documents and read it in real time. It would have changed my work-flow dramatically. However, I know a lot of world and business travelers who would gladly pay the price for a tool that can do this type of job for them also.

The big question is whether Google is even working on an app like this? It is hard for me to believe that they do not have this in the labs since marrying Google Glass and Google Translate makes for a perfect marriage. From what I know of the technology, it is also more than possible to deliver this type of application since the mobile processors are getting more powerful and so is the translation software.

I see Google Glass as a great product, but using it for real time translation would make it revolutionary. And the technology is here now that could make this a reality quite soon. If so, I will be one of the first to buy it with this specific app in mind.

Andy Rubin And The Curious Failure Of The Nexus Tablet

On Wednesday, Andy Rubin suddenly stepped down as the head of Android. The reason for this move is obscure. The most telling statement I’ve read on this, so far, comes from Ina Fried, at AllThingsD:

It was certainly a sudden move. Rubin had been confirmed to speak at our D11 conference in May; you don’t do that when you’re easing your way out. In the time between giving wide-ranging comments on Google’s plans two weeks ago and dropping out of a speaking slot at SXSW this past weekend, something changed.

The Trouble With Tablets

I do not know what suddenly changed, but one contributing factor in the change may have been Andy Rubin’s inability to translate Google’s success with handsets into an equivalent success with tablets. This must be particularly painful to Google since studies have conclusively shown that it is tablets, not phones, that best support Google’s advertising business model.

This past summer, I predicted that the introduction of the Google Nexus tablet would eviscerate the market for all other Android tablets. After all, the Nexus tablet was made by Google itself, was sold at cost, and would be competing on the basis of the sale of content, app and advertising revenue that was not available to the likes of Samsung and other Android manufacturers.

So far, my prediction has not come to pass, as Samsung has made modest gains in tablet sales over the past six months. But my failure to accurately foresee the future may have been more due to a failure on the part of the Google Nexus tablets, than it was of my analysis.

Low Tablet Sales

Google does not reveal their Nexus tablet sales numbers which is revealing in and of itself. However, Google cannot hide entirely behind a cloak of secrecy.

Source: The Yankee Group

The Yankee Group recently surveyed consumers, asking them which brand of tablet they intended to buy. The iPad dominated the discussion but the Google Nexus tablets garnered only 1% interest from the survey participants. ONE PERCENT.

How is that even possible? Remember, this is a tablet that is being given away for COST. And it is being given away for cost by the largest, most successful advertising company in the world. One percent interest in future sales is not just bad, it’s dreadful.

And it must be all the more galling to Google that Amazon – which is using a forked version of Android and an almost identical business model – has 7% interest. To put it in colloquial terms, “that just ain’t right.”

Low Tablet Usage

Source: Chitika

And if the unreported sales numbers weren’t bad enough, the usage numbers – 1.7% for all Google Nexus Tablets combined – are equally depressing. That’s just barely better than the rapidly failing Barnes & Noble Nook. It’s less than a quarter of the usage enjoyed by all Amazon tablets. And it’s barely 2% of the usage garnered by Apple’s iPads.

Remember, Google makes no income from the sale of their tablets. If Google tablets are not used, then they are useless to Google.

Conclusion

I doubt that tablet sales were THE factor that made Google suddenly change the head of their Android program. I think that the merger with Chrome was far more significant. However, I also have no doubt that Android’s lack of progress in tablets was A factor in the change…and a significant one at that.

Will Android Tablets Pass iPad in 2013?

The technical answer is yes. Android AOSP (Android open source project) meaning Android code that can be freely taken and used will be installed on more tablets than iPads in 2013. But the story isn’t that simple or clean cut. Data requires perspective and that is what I hope to provide around IDC’s latest press release and chart predicting that Android will be on more tablets than iOS in 2013 and beyond.

Here is the original IDC chart.

Now at first glance we look at that chart and mistakingly assume that the red part, which signifies Android, means a flavor of Android with universal value to both Google and developers. If I was a developer, I would look at that chart and think that Android tablets must be where I should focus my resources because it is clearly the OS market share leader starting in 2013 and beyond. However, if I thought that I would be wrong.

To clearly understand the Android picture we need to better understand the flavors of the OS and in particular which ones have the Google Play store and which ones do not. Because what really matters if we are interested in a clear industry picture of OS platform share is the distribution mechanisms for applications on each platform. If iOS represents a certain amount of market share then I can be confident that Apple’s app store is on that percentage of devices and install base.

The problem when we talk about Android market share in both smartphones and tablets, is that we are not talking about market share in which a universal app store medium exists. This is because Android can be taken and forked, to the chagrin of Google, and used for the sole agenda of others thus not benefiting Google or the Play Store developers. This is the problem we have when we look at the Android growth in tablets. The greatest percentage of it is coming from Amazon with their Kindle fire, and the Chinese market. The Kindle Fire runs a forked version of Android and developers must use Amazon’s SDK and proprietary app store. 90% of Chinese Android devices sold do not come with the Goolge Play store installed but rather have ties to dozens of local app store from local service providers. Therefore to get an accurate picture of the Android market, it is more helpful to break out market share by devices which have the Play store and the ones that do not. If we did, then IDC’s, chart would look more like this.

Chart Caveat: Two things about this chart. First I’m making a point not a series of forecasts. I will let my friends at IDC and other firms do the forecasting. Second, the size of the tablet market in 2017 could likely be over 600 million.

This is a more helpful way to look at the data and understand the market share. If I am a developer and I look at this data, then I may be more inclined to say that I should focus on Amazon’s platform vs. Google’s version of Android when it comes to tablets. More importantly I would understand that iOS and Apple’s App store still offers me the greatest total addressable market. China is the wild wild west as I point out and only local devs have a shot there at figuring out their app store mess.

Since Android is not actually a platform, but an enabling technology that allows companies to create platforms, it’s helpful to look at the data in a way that shows the picture as it is. Stating generically “Android market share” does not give an accurate picture to the market which needs the data to make educated decisions.

My goal here is not to be overly negative on Android, but simply to paint a more accurate industry picture.

Startup Highlight: Automatic

Yesterday a company named Automatic launched a very interesting product. They launched a smart driving assistant. Its a product that further emphasizes the point many of us at Tech.pinions make around the smartphone becoming the hub of our digital lives. Automatic has a simple premise. It’s hardware accessory, which is loaded with BlueTooth, connects to your smartphone, and connects easily to a car’s OBD-II Data Link Connector. This is the port that mechanics use to get diagnostics from your cars CPU when you bring it to the shop. By connecting to this port, Automatics hardware can relay information to your smartphone and give you valuable insights into your car and even your driving habits.

The application tracks each of your trips and will give you extremely useful information regarding each trip including things like, actual gas mileage, how much gas in dollar amount you used for each trip or as a whole, how much time you spent in the car, and more. What I found interesting about this, while I got the demo of the product, was how much information the solution provided which we would never know otherwise. This information can be used to understand driving habits better and even be used to create better habits for safer driving and even saving money on gas.

The application knows when you do things like brake too hard, or speed up then brake hard, or drive over 80 mph, etc., all things known to lead to harder wear on a car and decrease gas efficiency. The solution can also detect a crash and instantly connect to your phone and call for emergency assistance if needed.

My favorite feature, however, was the ability to get diagnostics and data about issues related to warnings or check engine light notifications you get from your cars dashboard. Many times the check engine light comes on for something simple like the need for an oil change, or gas cap malfunction, or any number of non-serious issues. Right now the check engine light on my car is one because its recommending I get an oil change. With the Automatic solution you can see exactly what the diagnosis is related to the light and even turn it off.

The entire solution costs about as much as an average fill up at the gas station these days, $69.99. From the time I had to experience the app and get the demo, that price sounds like a bargain. And its a one time fee with no service charge.

Ultimately, Automatic has a lot of potential for the automotive and insurance industries. Imagine mechanics being able to provide better service or target relevant customers. Insurance companies can use this solution to incentivize better cost savings and get better driver analytics.

Automatic’s solution highlights the many ways that our smart devices like our phones and tablets are becoming the hubs of our digital lives. Smart sensors like the Nike Fuelband and Jawbone UP, give us data and analytics related to our bodies and to a degree our health. These solutions give us the data so we can use it to our benefit and make us smarter about our bodies. Devices like Nest make our homes smarter and let us manage them through our smart devices. Now Automatic has jumped in and made our car smarter. These types of solutions are just the beginning of the hardware renaissance I see coming from Silicon Valley. Automatic is also following the software developer trend I see regularly of iOS first. Their Android app is slated for the fall.

I love the trend of hardware with a side of software.

Dell’s Thinking Outside the Tablet

What is a tablet? Sorry to get philosophical but I think this is an interesting question–especially of late. I sensed from the first early glimpses I got of Windows 8 that we would see hardware that would cause us to question whether it was a tablet or a notebook. I’m still not sure the hybrid or convertible devices on the market today have yet nailed a mass market success and I remain pessimistic that they ever will. Pure slate tablets are the hot ticket and I believe will continue to be for the foreseeable future. However, there is one category of Windows 8 devices that has had my interest peaked for a while. That is portable, large screen, touch based, all-in-one PCs.

Today Dell is releasing the XPS 18. An all-in-one computer. Typically when I refer to this category, I call it an all-in-one desktop computer. However, with the XPS 18, I can not use that term because this all-in-one is not confined to a desk but is rather a highly portable 5 lb computer with a tablet twist. The XPS 18 is not positioned as a tablet nor should it be, but still, many of the key value propositions of tablets are applicable. I guess perhaps with the exception of putting it in a bag and leaving the house for work, school, or Starbucks–or are they?

I first saw these larger screen portable all-in-ones late last year. The reinvention, or I should say redefining, of the desktop category was a trend I had been tracking for a while. Larger, portable, touch computing solutions were not something readily available for the mass market until now. I first saw a touch based table top PC when Microsoft first showed me their Surface Table. That product was too pricey but I felt had a great deal of potential. In my opinion, the XPS 18 is the first to deliver on this new vision of a larger screen touch computing solution.

What makes this product interesting to me is the communal nature of the device. I have been writing for a while now about my conviction for touch based computing products and how there will be some that are personal (meaning intimately tied to a single person) and there will be ones that are communal (meaning freely shared within a community). The communal nature of a computer has always been the case of a desktop PC. These devices, as they matured, were largely used in consumers homes as a shared device. That is what makes this new class of touch based portable all-in-ones so interesting to me.

Dell is positioning this correctly in my opinion because they are focusing it on family use cases. Families can gather around this and use the 10 pt multi-touch functions to play games, or draw together, etc. Yet on top of the many new uses cases that will emerge from this category, consumers still have the bare bones powerful PC they still need for every day computing tasks. But its large screen portability is what I think is interesting. By having an 18-inch portable display that is connected to the web, and runs Windows applications, it opens up some new possibilities. Using it as a portable TV or media hub for example. Or in the kitchen for recipes, or out in the garage for how-to videos and instructions, or even for backseat passengers in the car since it gets 5 hour battery life.

I know several of the use cases I pointed out can also be used for tablets like the iPad, however, what makes the XPS 18 interesting is that it can also be used a full desktop class PC. There is a role for both in my opinion. I firmly believe that the XPS 18 will challenge many peoples pre-conceptions of not just what an all-in-one computer is but also what a tablet is and means to them. At $899 it is actually a reasonable price for a device that may blur the lines for many use cases consumers are looking for.

My friends from Dell came to our offices last week and gave me the walkthrough of the product and let me have some time with it. They set it up with the Bluetooth Keyboard and mouse and I never touched them. I just picked it up, put it on my lap, and started playing with it. I plan on doing a full review / analysis of the XPS 18 but what I will say for now was that I was impressed and intrigued by this form factor. I applaud Dell’s thinking with this product as well as with many other nicely designed computers they have released of late.

Mostly individuals use computers, but there is a place for a family computing device. I believe companies that approach computing from a family standpoint will generate interest in the products they make even if they are simply stand alone solutions. I expect many more solutions like this to come but for now, the Dell XPS 18 may be the best family computer/(tablet?) I have seen to date.

Google and Amazon: Doing It All Wrong

By the conventional standards of business, it would be hard to find two companies with a greater tendency to do things wrong than Google and Amazon. Yet both are regarded as outstanding success story. What is going on here, and what does it tell us about how corporations ought to be run.

Each company violates a fundamental rule of business. In the case of Google, it’s a failure to diversify its sources of revenue and profits while at the same time displaying a woeful lack of discipline in how it enters new businesses. For Amazon it’s a persistent, almost stubborn refusal to maximize profits.

A glimpse at Google’s income statement reveals just how narrow the company’s success is. Google took in $50.2 billion in the year ended Dec. 31. Of that revenue, $31 billion came from advertising on Google Web sites and another $12.5 billion from ads on Google Network affiliate sites. This means that Google’s original revenue-producing activities, AdWords and AdSense, accounted for 87% of its gross. Motorola brought in another $4.1 billion Everything else–the Google Play Android store, sales of Google Nexus branded Android devices, paid Google Apps, whatever else the company does to produce revenue–generated a mere $2.4 billion. Considering that Motorola suffered a heft net loss from continuing operations, it’s safe to say that search-based advertising was responsible for well over 100% of Google’s revenues.

The unprofitability of everything Google has tried does not seem to discourage the company. Under CEO Larry Page, Google has purged a number of its least successful products. But it continues to add efforts that have little hope of generating profit in the near-term, or perhaps ever. It is spending a good bit of money developing self-driving cars, though the technology seems years away from commercialization. It’s from from clear that many people away from such hotbeds of geekdom as the Googleplex or the MIT campus will ever be willing to wear, let along pay for, Google Glasses (above.) Who but a Google engineer is going to put down $1,299 for a Chromebook Pixel, a laptop that cannot run any programs other than a Chrome browser? And why is it messing around with same-day-delivery retail, a business that seems far outside its core competency–and a logistical and business challenge that no one has cracked?[pullquote]Classical economic theory says corporations try to maximize profits. Amazon and Google prove there are exceptions.[/pullquote]

Of course, the ad business is so profitable that Google doesn’t have to worry in the near term. It’s net margin was 21%, down from recent years but still very healthy. And investors seem happy. It’s stock is trading just a bit below its 52-week high of 844 and the price is 26 times 12-month trailing earnings, a sign that investors believe growth will be healthy into the future.

So while Google’s attention deficit approach to new projects may defy business school wisdom, it isn’t hurting the company. And it is certainly benefiting consumers. We get goodies like Google Maps and Gmail for free, while Google funds the sort of research–self-driving cars–that once was the province of the government and that could have a big payoff for society, if not for Google.

If Google’s problem is a flurry of innovation that has produced little revenue and no profit, Amazon is a tale of profitless growth. Classical economic theory says the purpose of a corporation is to maximize profits, and while the research of scholars like A.A. Berle and and Herbert Simon long ago dismissed taking that notion too literally, profit motivation is still supposed to have something to do with business decisions.

Not, it would seem, at Amazon. The company’s revenues in the fourth quarter of 2012 grew 21%, and that was the worst performance in three and a half years. But profits are another story. In its best year, 2010, it netted just over 4% of sales while it actually recorded a loss last year. Amazon has relentlessly pursued growth with little regard to profitability. It has disrupted one market after another by undercutting the prices and business models of competitors.

And its investors love it. Like Google, it is trading near a 52-week high. Its trailing EPS can’t be calculated because of the loss, but Amazon is trading at a staggering 76 times expected 2013 earnings.

And customers love it too. Unless you are in a retail business that Amazon has demolished, you are most likely the beneficiary of Amazon’s predatory nature. Amazon has not only saved me money, it has saved me countless hours I would have wasted shopping. (Once you get Amazon Prime, the tendency to order stuff online rather than pick it up at the store become overwhelming. It’s a rare day we don’t get at least one Amazon package.) And while Amazon’s impact on retailing has been the most obvious, Amazon Web Services has drastically lowered the cost of starting any sort of online business.

So let’s hear it for Amazon and Google and their impossible business models. Eventually, Google will to find a moneymaking business to supplement search ads, whose growth is slowing. And Amazon investors’ patience with tiny or nonexistent profits won’t last forever. But for the rest of us, let’s enjoy it while we can.

HP ENVY X2: One Step Closer to the Hybrid Future

As a technology analyst, I spend a lot time analyzing and keeping the pulse on the latest in inflection points, the ones that matter. Modularity is one of those factors and will be an important thing to keep an eye on for the next 5-10 years. In present day, modularity is important with the smartphone to the TV and the tablet to the keyboard, the latter the subject of this analysis.

The entire PC market is in a bit of a funk driven by the macro-economic environment, but primarily driven by consumer’s fascination with smartphones and tablets. Many consumers voted in 2012 to buy a new tablet, upgrade their phone rather than upgrade their PC. Hybrids and convertibles over time will change this and I believe 2014 is the year where consumers will view PCs as perceptually cool again. The process will start this year, but end in 2013.

Tablet hybrids first came officially on the scene with the Asus Transformer, an Android-based tablet that fit into a keyboard. I have spent a lot of time with hybrids from the Transformer to the Samsung ATIV to the Surface RT and now after having spent a month with a new device, I will share my experiences with HP’s ENVY X2 latest consumer hybrid. The X2 is very different from the predecessors I tested before it.

Design
The first thing that’s different about the X2 is its striking, all-brushed aluminum design. During my month with the X2, I visited three different countries and spent a lot of time in airports and trade shows floors where I took the X2. Many people would ask me what is was and comment on the design. In tablet mode, it is extremely thin and feels like an iPad but an 11.6″ one. In laptop mode, some people thought it was a MacBook Air until I popped off the tablet. When I pulled off the tablet, every single person said “wow”. The power and volume buttons are flush with the system and designed to be used without the user re-orienting the device which is a nice attention to detail.

Weight and Dimensions
The X2 weighs in at 3.11 lbs, which is a bit heavy for an 11.6″ notebook, but aluminum isn’t plastic, which is lighter. This is a design trade-off that consumers will usually always accept as long as it is near that 3 lb. mark. As a tablet, I didn’t feel like I was straining, either. My guess is that it is heavier than the MacBook Air because it needed counter-weight in the keyboard to keep the unit from tipping over, as all the major components are in the keyboard.

Keyboard and Trackpad
The hybrid comes with a full-sized keyboard with full-sized trackpad that is responsive to the full Windows 8 gesture set. Most hybrids cheap-out on the trackpad and I think the use of Synaptics is to be commended. I wrote everything including research papers on the keyboard which has function keys, delete keys and arrow keys and never felt cramped.

Multimedia
Thankfully, the product managers didn’t cheap out on the multimedia features. The X2’s rear camera is 8MP which is much appreciated at volleyball and basketball games. Yes, I am one of those annoying parents taking video with a tablet. My rationale is that it is better than on my phone which will suck the batteries dry. If you don’t understand this then you probably haven’t spent three, 10 hour days of club-level volleyball with your kids. The camera also has a very bright flash, unique in its class. The front facing camera supports 1080P video, much appreciated on Skype. In the follow on products, I would like to see some work done on the camera subsystem to take pictures as fast and as high quality as a phone. This is primarily of the Intel Hive-acquired ISP.

At 11.6″, the display was large for a tablet and perfect for a highly mobile laptop. The 1366×768 resolution is perfectly fine for notebook mode and even watching movies. I love higher-res displays like Retina, but there are certain use cases a user must have them so they don’t see pixels or need the fidelity for photos. This isn’t one of them as an 11.6″ display tablet isn’t the one you will use in bed and read a book on. That’s better territory for the Nexus 7 or ipad mini. The closer the display is to the eyes, the higher the res should be so you don’t see pixels unless you must see original view of pictures.

Expandability
Compared to just a tablet, the X2 offers the full sized keyboard and trackpad that converts it into a small notebook. The tablet holds one microSD card slot for photo or data transfer. The keyboard dock has a much-appreciated full HDMI connector and a full-sized SD card slot for inexpensive mass storage. I really appreciate the full HDMI slot as I cannot tell you how many of the iPad HDMI adapters I have lost. The dock also has two USB 2.0 slots and mini-connector for speaker and mic. After my long business trips, I appreciated coming home and connecting the X2 to my 32″ display extending my experience even further.

Durability
I dropped the X2 (unintentionally) twice on concrete floors and I can say the unit fared a lot better than I expected. Using many devices, I have broken many devices and I have broken three iPads. After my unexpected drop-test, the unit suffered only scrapes but no cracked display.

Software and Hardware
The HP hybrid runs all Metro-based apps as well as Windows desktop style apps. This is great and I really appreciated using Outlook with Google Sync plug-ins, fully-synced Google Drive, Google Chrome and Evernote. While I consider myself a sophisticated user and know the limits of the system, I can see how a general consumer could easily overload the system. While the dual core, four thread Intel Z2760 (aka Clover Trail) is good in its class, it’s not the processor you can do everything a Core i Processor is designed to do. On occasion, I had too many Google Chrome windows open and the system came to a crawl. I also found myself running out of storage space due to my own fault of putting my Google drive and Outlook .OST on the C drive. I didn’t feel comfortable putting it on the SD cards because I have sensitive and confidential information there. I am very much looking forward to Intel’s next generation Bay Trail in this form factor.

As with full Windows 8 and X86 processor, I can connect just about every hardware peripheral I have and it just works. I connected all my mice, cameras, printers and they just worked.

Battery Life
The X2’s battery life was the biggest shocker. In tablet mode, I got around nine hours with the tablet and with the keyboard, I got around 14 hours. I didn’t do official benchmarking, but I did test while on many transcontinental trips where I was writing research papers.

Price
Price is a challenge to place a verdict on because the X2 is just so versatile. Launch pricing was set at $849 for the 64GB-WiFi edition but right now, the unit is selling for $599 on sale, which is an absolute steal. At $849 one must compare it to the MacBook Air which starts at $999 and apply value to touch, convertible design, and battery life and deduct for Core i5 performance. At $599, the X2 with keyboard is a no-brainer as compared to the 64GB iPad 4 at $599.

Conclusion
The HP ENVY X2 shows that hybrid designs are evolving to a point where in late 2013, early 2014, consumers will need to find some other justification to pay $499 for a tablet-only design that doesn’t elegantly dock in a very integrated fashion. By elegant and integrated, I’m not talking just about adding a Bluetooth keyboard, but deeper integration like that of the X2 and beyond. By 2014, no premium-priced (499+) tablets will sell well that cannot do this and OEMs and ODMs will need to address this and invest in better modular capabilities. And as Apple scorned video on the iPod and 7″ tablets, I am sure they have a few prototypes of a few “fridge-toasters” in test which would make for a very interesting 2014.

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.

Anyone But Google

Carriers are understandably unhappy with today’s mobile platform duopoly. Apple and Google generate demand for data services, and carriers can’t live without them (as T-Mobile USA admitted about Apple late last year). However, Apple extracts enormous subsidies, mandates high minimum orders, has complete control over the customer experience, and maintains its own direct billing relationship with the subscriber. In some ways, Google is worse, as it competes directly with carriers. Google bids on spectrum, owns fiber in the U.S., runs a broadband network (currently limited to a single U.S. city), and has this annoying habit of offering services for free that carriers like to charge for. Carriers have long been searching for alternative operating systems that give them more control over the user experience. MeeGo, Maemo, and LiMo have all been promoted by various carriers in the past, and the latest carrier OS hopes center around Tizen, Mozilla’s Firefox, Jolla’s Sailfish, and Canonical’s Ubuntu.
Mozilla and the Tizen Association recently held press conferences that included realistic commitments from hardware vendors and carriers – 17 carriers backing Firefox, if I read the press release correctly. It certainly looks like Tizen and Firefox phones will actually reach the market, but once they do, why will consumers buy them?

“Open” Is Not a Reason a Consumer Buys Anything

None of these devices are all that innovative, none have apps or service ecosystems that are remotely competitive with Apple or Google today, and the vendors kept talking about how “open” they are as if that’s a feature that matters to anyone. Openness does resonate with carriers looking for alternatives to Google and Apple, and I understand why OEMs are building these phones – because carriers say that they’ll sell them. However, the opportunity costs for doing, say, Firefox, instead of trying to deliver a better Android product, are extremely high. And I have yet to see a compelling reason why consumers will give up the Android or iOS ecosystems and buy one of these phones.

Tizen and Jolla basically ignore the question – their presentations have focused on carriers and distributors. Canonical’s execs told me that consumers and enterprises want a system that can span phones to desktops. Do they? And even if they do, since when has Ubuntu been successful on the desktop? Mozilla came closest to describing an actual consumer value proposition, claiming that Firefox smartphones will offer a better user experience than the lowest priced Android 2.3 phones. I’m skeptical. The Firefox mobile user interface is certainly simple enough, resembling a first generation iPhone with a single centered home button and a grid of icons for apps. However, even if consumers prefer a UI without home pages and widgets, Android still has a richer selection of localized apps than Firefox. Google’s services are also a draw, although those are often omitted on low cost Chinese phones. Of course, the whole question of how well Firefox compares to a $100 Android phone in China may be moot: many of the operators signed on to sell Firefox phones are targeting prepaid markets in Europe, where the entry point is slightly higher.

Where Do Google, Microsoft, BlackBerry, and Samsung Fit In?

Google’s launch of the Chromebook Pixel proves that there’s a big faction at the company that views web standards, not native apps, as the future of computing. If Mozilla does have success with Firefox, I would expect to see a ChromeOS phone. Actually, I expect to see a ChromeOS phone regardless.

The focus on Firefox and Tizen seems to indicate that carriers have given up somewhat on Microsoft. Windows Phone has not been terribly successful so far, and Microsoft does not offer operators full control over the services that are eroding their margins. Still, in terms of leverage against Google and Apple, Microsoft is certainly a better bet than any of the alternatives. Microsoft has a real OS in the market today and hardware from Nokia, HTC, ZTE, and Samsung at multiple price points. Microsoft also has the resources and the strategic imperative to keep pouring money into Windows phones and tablets no matter how well (or poorly) they do. Microsoft is a computing software company. Computing is going mobile. Microsoft needs to become a mobile computing company.

Carriers are supporting BlackBerry, at least for now, by helping the company launch the Z10 in over 100 markets. However, few expect it to grow into a real counterweight to Google or Apple, and if the Z10 does not perform well after its initial launch, carrier support will disappear entirely.

Samsung is the largest and most profitable Android vendor, and yet it is also one of the biggest backers of Tizen. Clearly this means [insert hysterical argument here]. The truth is simple: Samsung has always hedged its OS bets. Samsung’s smartphone strategy has always been to bet on every horse (e.g., Symbian, Palm, LiMo, and Windows Phone), and enter its own horse in the race as well (Bada and now TouchWiz). However, when it saw success with Android, it doubled down in that area. For most of Samsung’s competitors, investing in alternate OSs comes with high opportunity costs – allocating time, talent, and management attention to an unproven OS means falling farther behind Samsung in Android. Samsung can afford to follow blind OS alleys just to see if they lead anywhere.

Still, most of Samsung’s device profits come from Android, and Google’s native apps and services add tremendous value to Samsung’s hardware. It would be foolish for Samsung to make any big changes in strategy unless Google forces its hand. Samsung is not foolish. Then again, Google is not entirely predictable – with Motorola, the Nexus program, and the Play Store, Google competes directly with its licensees and carrier partners. Hence the need for Samsung to have a Plan B. Samsung certainly could move away from Android, or create its own Android flavor (the approach taken by Amazon, Barnes & Noble, and many Chinese vendors). However, Samsung mostly wants to use the threat of alternatives to negotiate better mobile ad revenue share with Google, and to keep Google’s Motorola division in check.