Apple and Imperfection

Apple-Think Different

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

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

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

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

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

 

A Quick Take On The Surface Pro

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

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

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

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

Does this strategy make sense to anyone outside of Redmond?

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

Spectrum: Where It Came From, Where It Goes

Dark Side of the Moon album cover

In the the beginning, wireless spectrum in the U.S. was free. In  1983, the Federal Communications Commission created the first analog cellular networks by assigning two chunks of airwaves in the 800 MHz band. One chunk was reserved for the incumbent local wireline carrier, or Baby Bell as they were then known. This ancient history is important because the leg up that was given to the companies that gradually coalesced into Verizon Wireless and AT&T formed the basis for these carriers’ domination of the U.S. market. The story of spectrum over the past three decades is mostly a tale of the rich getting richer, all the while bemoaning their poverty.

Over time, the government assigned more and more spectrum to wireless voice and (eventually) data. New competitors did arise. Sprint, until then primarily a wireline long-distance operator, created its network out of the 1994 auction of 1900 MHz “personal communications services” spectrum. Wireless phone pioneer Craig McCaw built the Nextel network out of bits and pieces of “special mobile radio” licenses intended for dispatch services. T-Mobile and its predecessors assembled a bunch of smaller carriers using the GSM standard, which was then widely used everywhere but the U.S.

But through auctions and acquisitions, the biggest carriers managed to get even bigger. The last major wireless spectrum auction was the 2007 sale of television bandwidth that had been freed by completion of the transition to digital TV broadcasting. To the surprise of just about no one, the overwhelming winners in the sales  were Verizon and AT&T, which have been using the spectrum in the 700 MHz band to build out their fourth-generation LTE networks.

The problem we now face is that after 30 years of freeing bandwidth for mobile data use, we’ve pretty much run out of spectrum that can be reassigned without a major fight. The only sale on the horizon is an additional 100 MHz of TV bandwidth. But among many other complexities, availability of this spectrum will require some stations to give up their licenses (in exchange for a share of the proceeds from the auction) and others to move to new frequencies to create usable blocks of contiguous spectrum. The convoluted process mandated by Congress means that the sales won;t begin until 2014 (at the earliest) and are likely to yield a good bit less than 100 MHz in many parts of the country.The problem we now face is that after 30 years of freeing bandwidth for mobile data use, we’ve pretty much run out of spectrum that can be reassigned without a major fight.

In the absence of new allocations coming down the pike, Verizon and AT&T have been bulking up on spectrum through mergers and acquisitions. AT&T failed to convince Justice Dept. anti-trusters that its need for spectrum justified its proposed 2011 acquisition of T-Mobile. It announced on Jan. 22 that it intends to acquire the remainder of regional carrier Alltel, the bulk of which was bought by Verizon in 2008. Verizon is buying the spectrum of a consortium of cable companies, which once had dreams of building their own wireless networks.

The incumbent wireless carriers insist that the system is header for crisis without additional bandwidth and the the best, and perhaps only, way to get it is by selling them the rights to spectrum currently held by others. In a post on a the AT&T public policy blog, Joan Marsh, vice-president, federal regulatory, responded to a recommendation that sharing spectrum with federal agencies might be a good way to increase capacity, saying:

The Report [of the President’s Council of Advisors on Science & Technology] found that the new norm for spectrum use should be sharing, not exclusive licensing.  While we agree that sharing paradigms should be explored as another option for spectrum management, sharing technologies have been long promised but remain largely unproven.  The over-eager pursuit of unlicensed sharing models cannot turn a blind eye on the model proven to deliver investment, innovation, and jobs–exclusive licensing.  Industry and government alike must continue with the hard work of clearing and licensing under-utilized government spectrum where feasible.

John Marinho, vice-president of technology and cyber security for CTIA-The Wireless Association, which speaks for the wireless incumbents, wrote:

Trust me, the carriers are deploying and using every single technology and “trick” they can to try to solve the looming spectrum crisis in the near-term, but nothing will solve the problem like more spectrum. Claude Shannon proved that there are practical limits to how much bandwidth capacity is available from a limited amount of spectrum. One has to look no further than the father of information theory to realize that the solution is more spectrum.

I’ll have more to say about Shannon’s laws and its implications for wireless networks in future installments, but the truth is that there are lots of techniques for expanding the capacity of wireless networks that have yet to be deployed in any serious way. Martin Cooper, who built the first cellphone for Motorola before there was a network to use it on, says: “I can tell you that the way not to create more spectrum is to redistribute it. And that is what the government is proposing to do now, take it away from some people and give it to others. That’s not going to do it.”

The next articles in this series will explore some better ways.

 

AMD SurRoundhouse Concept: Future Cure for the CE Industry Woes?

For a run of at least 30 years, the “classic” consumer electronics industry successfully transitioned from one technologyWP_20130110_037 to another.  TVs are a good example.  TVs went from big color tubes to rear projection to flat panels and HD projection to HD panels.  We can’t forget laser disc to Beta to VHS to DVD either.  Consumers ate it up, too, and were pleased to roll the old iron out of the living room into another room and roll the new gear in.

Then things changed with 3D TVs, which were an unmitigated disaster for the industry.  I call it a disaster because for the most part, consumers were not willing to pay more for 3D and in some cases flat out didn’t want it.  HDTV margins collapsed and are still in a funk for many CE markets.  4K TV and Smart TV is NOT the solution either as research I have seen indicates general consumers won’t pay a premium.  There are a few things going on here.  First, already-installed generic 1080P flat panels at 10” will be a very good solution for many years to come.  No one quite knows how long the installed base of displays will last, but it could be 10 years.

Smart TV’s, while valued more than 3D by consumers, isn’t valued at a lot either.  Consumers are getting conditioned, too, to know you can add “smarts” for as low as $50 with the external add-on of a Roku, Apple TV, or DVD player.  So what is the answer to revitalize the “classic” CE industry?  You really need to understand the problem, and the problem is lack of immersiveness and too many constraints.

Certainly,  3D HDTV was more immersive than HDTV, but not enough so for us to spend hundreds more to replace our current 1080P TVs.  Also, 3DTV had too many constraints, or what I like to call “if-thens”. Everyone in the room had to wear 3D glasses to enjoy the content and without it, the content is a blur.  3D glasses aren’t cheap, either, as active glasses were $50-$100 a pair.  Then there is the hassle of charging and making sure every one of them is ready for the big movie. Then there is the nausea some people feel when watching 3D videos.  There are 2.6M results from a Google search result from “3D” and “nausea.”  Passive 3D like LG showed at this and last year’s CES will significantly lower the glasses cost and a few manufacturers showed prototypes of glasses-less 3D TVs, but are many years off and are not very high quality.  3D may not the answer, but what is?

Consumers are looking for immersiveness without constraints which is affordable.  One example of this is a concept AMD showed off at CES.  AMD showed off its “SurRoundhouse” proof of concept which is quite expensive and complex now, but takes the industry in the correct, general direction.  The SurRound house is a “theater” room with 10, 55” HDTVs looking like windows in a house, 32 speakers, and four subwoofers.  The ten LG 1080P HDTVs displayed more than 600 Mp per second at 10,800 x 1,920 resolution, which is 3X the resolution of 4K (UltraHD), albeit spread around the room.  Driving the video and audio was one PC with an AMD FX 8150 8-core Black Edition processor with three FirePro 8000 graphics cards with Digital Multipoint Audio which was amplified by eight AV receivers.

AMD plays what looks like a hostage rescue scene from a video game and shifts audio from stereo to 32 speakers to show the value of high quality, multi-channel, positional audio. Each shift of the audio takes your eye to different windows of the house and as helicopters are flying, crashing, and as multiple machine gun melees erupt, you really feel like you are in a different and very real place.  The content was entirely custom and to it takes work to get games and movies to take advantage of a setup like this.   This is a different class of entertainment, one that could actually motivate to invest, maybe over-invest in new CE gear.

Here is a smartphone video I took of AMD’s SurRoundhouse.  Of course you don’t get the same experience as as the real thing, but you can get somewhat of a sense of the experience below.  Make sure you select 1080P and full screen:

AMD could have improved the experience even more by improving the quality of the graphics in the scenes.  They looked more cartoony than life-like.  AMD says that the goal of the demonstration was to show the experiential difference in the audio, but I’d still like to see max graphics to turn it into a reality show.

So how is a $35,000, 10 display, 8 receiver, 36 speaker setup requiring custom content “without constraints” and “affordable”?  It’s not right now, but if you look ahead to new technologies, the cost curve, and need for CE and entertainment businesses to create radically different experiences, it could very well become affordable and relatively simple.  Let me explain.

First challenge is content.  The entertainment industry has shown that it will make changes if it sees potential extinction or at least a major depression in business.  The film industry started shooting in 4K well before 1080P had mass adoption so the big question would be “if” they see the opportunity to shoot in multi-“frame” and multi-“angle” dimensions to be surround or at least convex.  The next challenge is cabling, but possibly already has a video solution with multi-channel, 60Ghz wireless display technology.  Lower frequency wireless speakers are already available, but the challenge would be to solve amplification at the current frequencies.  The great thing about wireless audio is that you wouldn’t need eight receivers to send the right audio to the right speaker.  Theoretically, you would only need one with a bunch of broadcast antennas.

Then there are the displays…. The current monitor sweet spot this year will be at around 30,” priced around $300.  I can imagine in 5 years that that $300 display becomes 40-50” for a full room display build out around $3,000.  This seems reasonable when you think that LG sells their 89” 4K TV today for $22,000.   Yes, 4K displays will lower in price, but how many years before it gets down to $3,000?

AMD’s SurRoundhouse gives the industry a potential scenario for the entertainment or theater room of the future.  While it doesn’t pass the tests for mass industry adoption today in media rooms, it could, and is certainly more interesting than the same boring, flat experience.  Neither 4K or SmartTV is the solution to the woes of the traditional CE market and I hope they are looking at AMD’s glimpse of the future.

Why RIM Is Not Dead Yet

2013-01-18T161117Z_1_CBRE90H18YX00_RTROPTP_2_US-RIM-SHARESI wanted to share some of my thoughts regarding RIM prior to them having their press event next week. I know there are many who have the opinion that RIM has been circling the drain for some time now and have counted out any rebound chances the company has. While I agree that the hills they face are steep, I am not ready to write their obituary yet. These are my reasons why.

The Sheer Size of the Mobile Market

When I give our platforms and ecosystems presentations to industry executives, investors, and at other public forums, the most common question I get when I talk about other platforms than the current dominant ones, is how many platforms can the market sustain. This is an extremely valid question, but it is one that I believe is asked with a backward looking view and not a forward looking view.

If we are using the PC industry as our example, then this question makes the most sense. There was one dominant platform—Microsoft—who owned the vast majority of platform share. If we look at the size of the market as well as where it was during along both the consumer adoption path and market maturity cycle, then we can explain quite a bit about why Microsoft was dominant, but also why at a certain point in time the door was open to other players. But the most relevant point on this topic was that during Microsoft’s dominance the market was both maturing, using Windows and more relevantly the Internet as the standard, but also not that large on a global scale. The market for PCs is in the hundreds of millions (and potentially shrinking) where the market for smartphones is in the billions. With such a large market it is easy to believe that a number of platform players can and will thrive as they carve out specific segments of the market to focus on.

As we are constantly observing, the one size fits all model simply doesn’t stand up in such a large consumer market and personal preference will only become more personal and specific to the end consumer the further down the adoption and maturity process that both smartphones and tablets go.

You Never Forget Your First Love

Our mobile market intelligence data continually points out positive sentiment toward RIM and the BlackBerry devices in particular. For many mobile professionals today, and even more millennials than you would think, they cut their proverbial smartphone teeth on BlackBerry devices. I can’t tell you how many times during our smartphone interview sessions with consumers we hear the words “I sure loved my BlackBerry.” Granted much of this sentiment was founded in the love of the BB keyboard that so many used for heavy text input. I believe we are past the point of the physical keyboard being desirable for the bigger sections of the market and we are yet to see what RIM intends to do with their hardware in this area. That being said, the level of positive sentiment toward BlackBerry devices is one that I do not believe can be discounted as I have a feeling that at the very least it will lead these consumers who share this sentiment to strongly consider BlackBerry’s new devices.

A Focused Opportunity

The opportunity staring RIM in the face is not the general mass market consumer, rather it is the mobile professional. A number of my colleagues in the field of industry analysis disagree with me and think RIM should go after the low end but I disagree. I feel RIM’s potential is the higher end. Many millions of global industry professionals switched to the iPhone from RIMs devices but also many millions still use them today.

Whenever I talk with folks still using RIM devices today, they acknowledge the fact that they are not the most cutting edge devices, but also point out that they are embedded into their workflow. Something that by itself is a key understanding. Just like how many professionals and corporate workplaces have come to standardize, depend, and are extremely comfortable with Windows and Office in their productive workflow. So are many of these same professionals committed and comfortable to RIM. These devices have helped them be successful and many have not changed yet for that very reason. Even though the iPhone and iOS is penetrating the workforce in rapid numbers I still think there is an opportunity for a second platform player focusing on the mobile professional. Android has not caught on largely due to security and Windows Phone is practically non-existent from current CIO surveys I have seen.

If RIM can bring to market a more modern and competitive solution targeting these individuals, I believe they can have a successful business by focusing on value to the high end on the front of hardware, software and services. Keep in mind this market may not be massive like the mass consumer market but I do believe it is lucrative.

Competitive Hardware and Software

This is the big IF. As I stated above targeting the mobile professional is the key but this hardware has to also be appealing from a consumer standpoint because these mobile professionals are also consumers at heart. So the saying goes “if you want to compete in enterprise, you have to compete for the consumers.” Its the BYOD effect in full swing.

RIM must bring competitive hardware to market. This was the root of Palm’s downfall in my opinion. webOS was an extremely competitive platform from an OS standpoint but the hardware was years behind. If RIM makes this mistake they will certainly go the unfortunate way of Palm.

Secondly the software experience must also be competitive and I don’t just mean a plethora of apps. I am becoming increasingly convinced that a solid list of quality applications is more important than a massive quantity of applications. I find every single app store shopping experience today much too cluttered and difficult to make decisions on which app to install or buy. See my thoughts on the paradox of choice for a more clear idea of what happens when we are faced with too many choices.

I’d rather have a much more curated app experience around the core things I do or applications I care about. By focusing on the mobile professional, this becomes a bit easier. Even Apple has begun to do this and smart platforms will take notice. Apple has many app essentials or app starter kits broken out by genre. This can be games, photography, productivity, social networking, etc., but when you look at these genre specific hubs you don’t see hundreds of apps you see dozens. These are highly curated and that is the point.

I am not downplaying the value of long tail applications, but what I am pointing out is that most consumers at best use 10-12 key applications regularly. They may download way more than that but regular use is much lower. This is why I believe that other platforms can come in with a segmented play and get the couple thousand or so most popular apps but then also begin to curate quality genre specific ones to the market segment they are focused on.

Of course for RIM, or any new platform entrant, there is a chicken and the egg scenario. To attract those key applications and keep attracting quality top tier applications, you need to acquire a critical mass. There is no if you build it they will come motto here. There is only if you sell tens of millions they will come motto. This is where the channel comes in and we will certainly see how serious the network operators are about wanting more platform choice.

I look forward to RIM’s event next week and to see whether it will alter my opinion on their future.

Smartphones Become the New Hub of Our Digital Lifestyles

Screen Shot 2013-01-21 at 7.14.36 AMIn the winter of 2000, Steve Jobs took the stage at MacWorld and laid out what we now consider a very forward thinking idea. He said that the “Mac would become the center of our digital lifestyle.” We did not know it at the time, but he and his Apple team were secretly working on the iPod and a music store that used the Mac to side load downloaded music to the iPod. Jobs literally made the Mac a hub connected to a “spoke” or cable that was then connected to the iPod.

For most of the last decade, the idea of the Mac working as a hub that side loaded content to products like the iPod, iPhone and the iPad played itself out well and made it very easy for consumers to buy digital content and download it on these devices. Over the last few years, Apple has refined this vision and starting making the iCloud more of the hub and wirelessly connecting their online stores to download content directly to their iDevices via the cloud.

While making the cloud the hub in this scenario is still the best way to think about this idea, it became pretty clear to me while at CES last week that in many ways, smartphones are really emerging as the hub of our digital lifestyles. Yes, smartphones are still connected to the cloud in terms of accessing data and transmitting information and even digital commands, but it seems to me that the smartphone in many ways is becoming the one device that is sitting at the command and control center of our lives and is working more like a hub in its own way.

A good example of this is the role my smartphone plays in my connected car. My smartphone uses Bluetooth to connect to my car’s digital display, which has channels for music, data and of course voice. When a call comes in to me, the phone serves as the hub that connects to my cars screen and tells me who is calling and even allows me to use the cars screen to answer the call. My smartphone also is the hub that sends music to the cars audio. At CES, GM showed its Malibu Eco connected to a smartphone that actually started up the car remotely.

In smart homes, the smartphone in many ways serves as the remote control. We can now turn on and off the lights in our home even if we are thousands of miles from where we live. Thanks to the Nest Thermostat, we can use our smartphone or connected tablet or PC, to adjust our thermostat to a higher temp so the house is warmer when we get home. If a burglar trips a motion sensor, a person could be instantly alerted of the break in and immediately call the police. Comcast even has a system that puts cameras in homes and ties it to their network, which lets users see what is going on in the house on their smartphones while sitting at a restaurant or in the office.

Interestingly, CES could have been called the “sensor” show for the hundreds of devices shown that had sensors embedded in products that tied them to the Internet and apps downloaded to a smartphone to remotely control these senor based devices. This was especially evident in the special health exhibit on the CES show floor where 74 companies had various sensor-based health monitoring products tied to smartphones.

One health product that really interested me as a diabetic was iHealth’s wireless blood glucose meter called the Smart Glocometer. It lets diabetics determine their blood sugars and then sends that data to a smartphone app for reading and storing so that they can monitor their daily progress. This product is before the FDA for approval but could be on the market soon.

A small start up named AliveCor has created an iPhone case that, when grasped, records an electrocardiogram on the iPhone screen via its app. And the folks from Nike, Jawbone, Omron and FitBit, to name just a few, were in this smart health area showing off their various health monitoring devices which all have sensors for recording things like steps, sleep patterns, calories burned, etc.

When Jobs introduced the Mac as the hub of a digital lifestyle, I doubt that at the time he envisioned the cloud becoming the big hub in the sky or the role a smartphone could play in becoming a “hub” in our pocket. However, it is clear that Apple has played a major role in defining the concept of a digital hub and allowing other major players to learn from their original vision and expand on it exponentially.

Over the next two or three years, I believe we will see thousands of sensor-based products tied to apps on our smartphone that will make it even clearer that the real hub of our digital lifestyle may actually be our smartphone. It is the one device we have with us at all time and given its increasing power and capabilities, it could emerge as the command and control center of our digital activities and become even more indispensible than it is today.

Would I Buy A Phablet?

img_img01One of the more unique smartphone designs in the market are ones that sport a 5.3″ to 6.1″ screen and are called Phablets by some in the industry. We call them tweeners as they are a cross between a large smartphone and a small tablet but in a single package. Samsung popularized this form factor with its 5.3″ Galaxy Note that was released last winter and they sold about 10 million in 2012. Some analysts believe that Samsung is on track to sell around 20 million Galaxy Note 2’s in 2013. Up to now, the market for these Phablet’s has mainly been in Korea and other parts of Asia and while available in the US, the market for it over here is quite small compared to its demand in Asia. 

At CES, Huawei upped the ante in phablets with the introduction of their Ascend Phablet that sports a 6.1 inch screen, the largest screen used in products in this category. It seems that Huawei is trotting this out to see what the market response will be to it and once they determine if a smartphone this large might fit in the market. Depending on the market response, they could either back it big time or adjust the screen size downward if the sweet spot for Phablets is with screens more in the 5.3″ to 5.7′ range. Like Samsung, Huawei believes there is a market for Phablets and seems committed to building smartphones in this larger size going forward. 

To date, most smartphones have screens under 5 inches and we don’t see that changing anytime soon. Smartphones with smaller screen sizes will have the lions share of the market for many years to come. What is interesting to me is that when I actually held Huawei’s 6.1 inch smartphone in my hand at the Huawei booth at CES, I could actually see myself using it, but not as Huawei might expect. To me this was a small tablet that just happened to have a cell phone radio in it. I would never hold this up to my ear as a phone and if I had one, I would only use it with a Bluetooth headset (this is how I primarily use the iPhone now, paired with a BT headset).   

Since getting the iPad Mini, with its 7.9″ screen, it has become my go to tablet. While I still use my original iPad, it is with a Bluetooth keyboard and I use it more as a mini-laptop in this configuration. What I have learned though is that the iPad mini, or a smaller tablet, is ideal for content consumption but not as ideal for content creation or productivity. While I do appreciate the 7.9″ screen in my iPad Mini, I was just as comfortable with Huawei’s 6.1 Ascend if I used it mainly as a small tablet. 

Markets Driving Phablet Demand

There are two market dynamics emerging that could actually make these phablets important products in various markets. The first one is emerging markets. We in the west would be fooling ourselves if we think that masses of people in emerging markets could afford both a smartphone and a tablet. Even with grey market tablets going for cheap prices, the issue of carrying two devices with them all of the time is just not reasonable. Apparently, Samsung saw this trend early on and has taken aim at the emerging market with their phablets, hoping that the desire for a single device that serves as a smartphone and tablet resonates with them. Indeed, the reason for a forecast of 20 million Galaxy’s Note II’s in 2013 is that most of them will start finding their way into emerging markets and filling a real need, especially if Samsung gets the prices of this product into price ranges acceptable to this market. In these markets, one is better than two.

The second market developing has broader implications for us in the west. If you sit back and try and visualize our digital future, it is pretty easy to see that most of us will have many screens in our digital lifestyles. We will have a screen in our smartphone, tablets, PC’s, TV’s, Car, appliances, etc. If they are all connected to our digital stuff in the cloud, then the screen that is closest to us at our time of need is the one we will most likely use.

In most cases, the closest screen is our smartphones. However, when desiring to access our digital “stuff” or the Web, many of us who have tablets often to go to our tablets for one major reason, it has a bigger screen and is easier to use especially when surfing the Web or reading docs and email and getting other forms of content.

However, this implies that we now carry with us two devices at the very least, a smarpthone and a tablet. What if we could get both in a single device that is highly portable? It that were the case, perhaps a smartphone even with a 5.3-inch screen would be too small; but one with perhaps a very pocketable one at 6.1″ might be just right. I was easily able to put the Ascend 6.1 in my back pocket as I do now with any spare smartphone I happen to be testing at any given time.

One Size Doesn’t Fit All

One other thing we are learning from our research is that one size does not fit all. Based on individuals needs, they may actually need a larger screen on their smartphone because they would be easier to read due to age, eyesight problems, individual choice, etc. As a small tablet, this larger screen size also works well for the same reasons, along with its ultraportablity. We believe it will start to be pretty clear to all device makers that one size does not fit all and that they may need a range of screen sizes in the smartphone and tablets to meet new user demands in the next 12-18 months.

If both of these market trends play out as I suggest here, and the concept of a two-in-one device catches on in emerging markets and demands increase in mature markets, all smartphone vendors may have to seriously consider doing phablets of their own. As strange as this may seem to us western thinkers, there is a real possibility that a market for phablets could actually emerge and become quite important in multiple markets around the world. Yet if we take a step back and look at the vast array of sizes and forms of our current automobile market, then we understand the role personal preference and they need to have a lineup of products to cover a wide range of uses. So in fact vast variance in smartphones and tablets actually makes sense due to mature market characteristics.

CES 2013: Plenty of Innovation – You Just Needed to Know Where to Look

CES-SignI didn’t expect much in the way of OS, phone, or tablet announcements at CES this year, if only because all the key platform drivers stayed home. Apple never attends trade shows, preferring to host its own events. Amazon follows Apple’s lead. Google takes over Mobile World Congress each year, but does not attend CES. Microsoft used to have a keynote and a large booth at CES, but chose to quit the show after last year – which was a mistake. Many device vendors also skipped the show, and some who were there – I’m looking at you, Samsung and LG – held big press conferences without actually announcing much. RIM is staging its big comeback try in New York on January 30. Nintendo is making a big bet on digital entertainment with the Wii U, but it focuses on E3, not CES.

App-Driven Devices

Nonetheless, CES 2013 was a huge show, and not just in terms of sheer size. The biggest trend I identified at the show was easiest to see at the evening press mega-events, Digital Experience (Pepcom), and Showstoppers. Pepcom usually gets the bigger name vendors, but this time, smaller vendors were showing the most unique products, and Showstoppers was actually the better venue because of it. I counted dozens of innovative devices which depend on app and device infrastructure built by Apple and, in some cases, Google. Several gadgets that seemed silly in pre-CES press releases (ex: a connected fork) were revealed to be worthy concepts when I got to see them live. Some examples:

  • The HAPIfork measures how quickly you eat and vibrates if the intervals are too frequent. The companion app collects the data as part of a medical weight loss program. (No, this isn’t for everyone. But it isn’t ridiculous, either.)
  • The Lark Life is a wearable vibrating alarm clock whose app acts as a sleep coach. There were at least a half dozen variants on this concept on display from various vendors.
  • Parrot’s Flower Power gardening sensor works with an app that not only tells you when to water your plant, but what you ought to be planting in that soil instead.
  • Evado Filip’s ViVoPlay is a combination watch, three-way GPS tracker, and limited phone designed to prevent children from getting lost in public places. The companion app enables you to find your child and call them to reassure them – and tell them to stay put or how to find their way back.
  • The DoorBot is a zero-setup WiFi-enabled smart doorbell which sends video of your front door to your phone or tablet when someone rings the bell.

There were literally dozens more (especially in the personal fitness category). Some have been crowdfunded through Kickstarter or Christie Street – which counts as a microtrend of its own. All of them were designed for iOS, with some offering Android apps or promising them down the road. Apple has long had a lead in apps, but as these app-driven devices become more popular it could push more people to iOS over Android. It will almost certainly make it more difficult for Microsoft and RIM to establish Windows Phone and BlackBerry 10 as strong alternatives.

Other observations:

  • TV vendors are still looking for a way to get consumers to shop on something other than price. 4KTV is the new 3DTV – incredibly cool technology with no content (or clear consumer demand).
  • The connected car is a full-fledged category now.
  • Samsung is the industry’s rock star. People started lining up for Samsung’s 2 PM press conference at 7 AM, and even people with VIP passes ended up being turned away at the door for lack of space.
  • The Americans may have stayed home, but Chinese vendors were everywhere at CES. Huawei, ZTE, and TCL (Alcatel) all showed off new high end phones, Lenovo launched a clever tablet/notebook and an innovative – if silly – $1,700 27” Windows 8 coffee table/tablet. On the other end of the pricing and utility spectrum, we saw literally hundreds of cheap unbranded Android tablets from Chinese vendors on the show floor.
  • The OS vendors all skipped CES, but the silicon platform vendors were out in force. Qualcomm delivered an awkward and entertaining keynote, Intel and NVIDIA held press conferences, and Marvell had a huge booth. NVIDIA’s press conference ground to a halt a few times, but NVIDIA did a good job positioning the Tegra 4 as providing better pictures (not just faster performance), and its Project Shield is an ambitious new gaming hardware platform.
  • Dish gets no respect. Its press conference had real news and the most swag of any vendor at the show, but the room wasn’t full. The new Hopper integrates Sling technology for placeshifting, can transfer content to an iPad for offline viewing, and still records all of prime time TV for 8 days with automatic commercial skipping. As if that weren’t enough, during the show Dish also made moves towards launching a wireless network (or, failing that, at least make Sprint’s executives miserable).

Winners/Losers

If there was a winner and a loser at CES, Apple won without showing up thanks to companies large and small building apps, accessories, and app-driven devices for iOS. Microsoft lost because it didn’t show up. Microsoft needed to be at CES this year to show off Surface, pitch developers on Windows 8/RT/Phone, and do damage control on Windows 8/RT’s UI quirks and slow PC sales.

This article is adapted from a full CES Wrap-up report for Current Analysis clients which also contains analysis of specific device launches and recommendations.

Putting Together The Pieces of the Personal Computing Puzzle

images-34As I read other’s thoughts on personal computing, I am sometimes struck by the fact that we tend to view the world the way it was rather than the way it is. Not only are we not good at seeing the future of personal computing, we’re not even very good at seeing its present.

With that in mind, I thought I’d take a look at some of the new pieces of the personal computing puzzle – smartphones, tablets, hybrids and phablets – in order to speculate on how those pieces might be fitting together in new and changing configurations.

Zero Computers

Hard as it may be for us to believe, most of the world – residents of third world countries, children, seniors and those who simply have no interest in computing – still don’t own even a single computing device. (Believe it or not, my thirty-something next-door neighbors do not own a computer.) But this is all rapidly changing.

The smartphone is allowing millions upon millions of former non-users to put the power of the computer in their pocket. The smartphone is small, relatively inexpensive and more powerful than the computers that were used to land men on the moon. Further, the introduction of the touch user interface has made computing more accessible to the young, the old, the computer illiterate and the computer phobic.

“In the fourth quarter of 2012, mobile PC shipments decreased 11 percent while desktop PC shipments declined 6 percent year-on-year,” said Isabelle Durand, principal research analyst at Gartner.

We are inundated with stories of how computer sales are declining. But those are desktop and laptop sales. Sales of personal computing devices – phones and tablets – are booming.

Takeaway #1: Personal computing is growing and growing rapidly.

One Computer

Yesterday, if you only had one computer, that computer was likely to be a desktop. Or possibly a laptop.

Today, if you only have one computer, that computer is likely to be a smartphone. The power of the internet, email, texting, phoning, etc. – all in your pocket, all for a relatively reasonable price. People from the remotest portions of the globe are using smartphones to conduct business and enhance their personal lives.

Tomorrow, if you only have one computer, that computer may be a tablet. A tablet with a dumb phone (data free, no monthly payment) is a powerful combination. The tablet is less portable than the phone but its added battery life and screen size makes it a formidable stand-alone computer.

Takeaway #2: The first computer that most people will own is likely going to be a phone or a tablet, not a laptop or desktop.

Two Computers

In the past, many of us used to own both a desktop and a laptop computer. As laptops came down in price and increased in power and portability, most moved away from desktops and toward laptops as their one and only computing device.

Today, the laptop and smartphone combination is extremely popular – the laptop for our heavy duty computing and the smartphone for computing on the go.

In the future, the two-computer combination of choice will be the smartphone and the tablet. Both the phone and the tablet have the same touch operating system so the learning curve is almost nonexistent and data transfer is a breeze.

Hard as this may be for geeks like us to fathom, the tablet is all the high-end computer that most people need. Spreadsheets like Excel and heavy-duty word processing programs like Word might be de ri·gueur in the Enterprise, but they are anathema to the average computer user. Asking most computer users to buy a laptop or desktop is like asking a gardener to buy a backhoe in order to do their gardening. A backhoe is indispensable for professional construction workers – but most of us aren’t professional construction workers and most of us aren’t professional accountants, programmers or page layout designers either. We don’t need professional computers to do the work we most often do. We just need what works.

As an aside, I am intrigued by the idea of a computer watch and tablet combination. The watch would serve the purpose of making and taking calls, texts, short emails, etc, notifying us of incoming and upcoming events, allowing us to see small snippets of text, graphics and videos, allow us to use voice input when voice input is appropriate and allow us to rapidly reference programs that rely on geofencing and geolocation.

No one is even proposing such a device at this time. I only mention it because I can easily see how such a watch would take care of our low end, on-the-go, computing needs while our tablets would handle the rest of our computing tasks. Whatever the computer watch turns out to be, if anything, I’m sure that it will be as different from what I envision as the long-expected iPod phone differed from the iPhone that Apple finally provided us.

Takeaway #3: The phone and the tablet may be all the computing power that many will ever need.

Three Or More Computers

For those of us capable of purchasing three or more computing devices, the most obvious solution is some combination of smartphone, tablet and laptop or desktop.

If you had told me in 2005 that people would be buying three or more computing devices, each costing $500 and up, I would have argued against it. First, it would be cost prohibitive. Second, it would be counter-intuitive. People want convenience, not complexity. Why buy several devices when one will do?

Yet today we’re moving more and more toward a multi-screen world and – I would argue – more and more away from multi-purpose hybrids. We’re moving toward several computing tools that do specific things well rather than a single tool that tries to do everything well. How can this be?

As to cost, well, we pay for what we value. Smartphones and tablets do some tasks much, much better than laptops and desktops do. It’s not a question of paying for three computing devices. It’s a question of paying for three tools that excel at performing three very differing tasks.

A gardener buys both a shovel and a trowel because they perform very different tasks. He doesn’t regret the fact that he is buying two shovels — one large and one small. He focuses on what he is trying to accomplish, not on how he can use a shovel as a trowel or a trowel as a shovel.

As for convenience, well, it’s perfectly reasonable to think that we should have one computer perform all of our computing tasks. It’s perfectly reasonable – and perfectly inaccurate.

Notebooks and laptops, like shovels and trowels, do very different things. Trying to get one computer to perform both purposes provides us with a compromise, not an acceptable solution. Swiss Army knives are very useful on a camping trip. But when we’re not camping, we use spoons, forks, knives, corkscrews, etc., not a Swiss army knife. Similarly, a hybrid is useful if we’re in a situation where we’re forced to use only one device. Only most of us are never in that situation anymore.

“Tablets have dramatically changed the device landscape for PCs, not so much by ‘cannibalizing’ PC sales, but by causing PC users to shift consumption to tablets rather than replacing older PCs,” said Mikako Kitagawa, principal analyst at Gartner. “Whereas as once we imagined a world in which individual users would have both a PC and a tablet as personal devices, we increasingly suspect that most individuals will shift consumption activity to a personal tablet, and perform creative and administrative tasks on a shared PC. There will be some individuals who retain both, but we believe they will be exception and not the norm. Therefore, we hypothesize that buyers will not replace secondary PCs in the household, instead allowing them to age out and shifting consumption to a tablet.”

This is a fascinating observation. Today, most view laptops and desktops as the one and only possible computing solution. There are even vicious fights on the internet in which commentators passionately deny that tablets are even personal computers at all.

But what about tomorrow? Tomorrow we’ll live in a world where tablets are our 1-on-1 devices and laptops and desktops are shared because of their cost and limited uses.

Takeaway #4: Our computing devices are diverging, not converging. We’re not looking for one tool to do it all, we’re looking to use the tool that best fits the task at hand.

Conclusion

None of this may seem controversial to you…or ALL of this may seem controversial to you. To me, the things I’ve stated are so obvious as to border on the trite. Yet I recognize that many – and probably most – do not share my views. Today we have many new personal computing pieces. How these pieces fit together will determine the future of computing. It’ll be fun to see what this puzzle looks like when it’s finally put together.

Spectrum: The Shortage Is a Crisis, but Not Serious

Dark Side of the Moon album cover

The late economist Herb Stein used to say that “if something cannot go on forever, it will stop.”

A profound economic truth lies behind that seeming flip statement. The world is forever on the verge of running out of vital commodities–oil, food, water, and many more–but somehow we never do. In the worst case, as a commodity grows scarce, its price rises and demand shrinks. The real world, however, human ingenuity triumphs over shortages. We find alternatives to whatever we are running out of, or, better, we find ways to use what we have much more efficiently. So it is with the spectrum we need to move ever-growing volumes of wireless data to our proliferating mobile devices.

In the short run, available spectrum is more or less fixed, creating an atmosphere of shortage. The established carriers, especially Verizon Wireless and AT&T, warn of “exponential”* growth in demand and use claims of shortage both to lobby for new allocations of spectrum for wireless data use and to justify data caps and higher rates. Critics argue that while dedicating more spectrum to wireless data is desirable, much can be accomplished through greater efficiency in the use of what we have.

In this an subsequent articles in this series on spectrum, I will examine the claims and look at possible solutions. Perhaps the biggest issue is just what is happening with demand for spectrum. The truth appears to be that it is still growing very quickly, but at a decelerating rate. Cisco’s Visual Networking Index, which has often been criticized for exaggerating the growth rate, indicates this clearly. It shows the growth rate for mobile data slowing from 133% in 2011 to an estimated 78% in 2014. A growth rate of nearly 80% is still staggeringly fast, but the effect of this deceleration is enormous. At a 133% compound annual growth rate, consumption would increase 240-fold over a decade; at 78%, just 60-fold. The difference: More than 100 exabytes of data per month.Stein’s Law: “If something cannot go on forever, it will stop.”

But even if we discount the more breathless and self-serving estimates of growth in wireless data use, it is clear that the amount of spectrum allocated to wireless data will be, at some point in the not too distant future will be inadequate to meet demand, based on today’s technologies. It is also clear that to meet this demand, we must both find additional spectrum and find ways to use it more efficiently. Fortunately, both are eminently doable.

The actions that can be taken to improve the availability of spectrum for data include:

  • Auctioning spectrum currently used for other purposes. This is the course favored by the incumbent carriers and, to a considerable extent, by Congress and the Federal Communications Commission. The big problem is that it is extremely difficult to get anyone–public or private–who currently holds spectrum to part with it. Legislation passed last year provides for the auction of 100 MHz of unused or under-used television spectrum for  data, with the current broadcast licensees sharing in the proceeds. The rules for these “incentive auctions” are extremely complex. No spectrum will actually be sold until next year at the earliest, and it seems unlikely that the amount freed will ever come up to 100 MHz. Prying spectrum from the vast hoard held by government agencies, particularly the Defense Dept., is even more difficult.
  • Speeding buildout of unused spectrum. Even while complaining of spectrum shortages, the incumbent carriers still have a lot of spectrum in the bank. Neither Verizon nor AT&T has completed the build-out of LTE networks on the 700 MHz-band spectrum they bought in 2007, a Verizon has just acquired considerable additional spectrum in a deal with Comcast and other cable companies. The biggest chunk of barely used spectrum is nationwide coverage at 2.5 GHz held by Clearwire, whose financial woes have allowed only a small portion of the network to be built out. Both Sprint and Dish Networks are bidding for control of Clearwire with the fate of this spectrum in the balance.
  • Spectrum sharing. A lot of spectrum is assigned to entities, usually government agencies, that sue it only sparingly. For example, Defense Dept. operates a scattering of military radars in the 3.5 GHz band. The FCC is currently implementing a plan that will allow commercial use of this spectrum by devices and base stations specially designed to operate only where and when they will not interfere with the radar.
  • White spaces. This is a Wi-Fi-like spectrum-sharing variant that operates on unused portions of the television band. Unfortunately, white space is most available in rural areas and scarce in crowded cities where it is really needed. It is most likely to have its main impact as an alternative to wired broadband service in rural areas.
  • Small cells. The basic principle  of cellular communication is that limiting the range of base stations to fairly small areas allows spectrum to be reused, as long as the cells are far enough apart to avoid interference. Cell sizes, which depend on transmit power and the height of the antenna, range from a radius of 30 kilometers in the country to 1 km or less in dense cities. But reuse of spectrum can be increased greatly by using very small cells in the densest areas.
  • Wi-Fi offload. Unlike other wireless technologies, Wi-Fi operates on spectrum that is free for anyone to use, and Wi-Fi access points serve areas with a radium of 100 m or less. The load on crowded cellular data networks can be reduced greatly if as much traffic as possible is shifted to Wi-Fi, and new technologies are enhancing the ability of this offload to be handled automatically and seamlessly.
  • Smart antennas. While small cells reduce the radius of coverage, smart antennas can reduce the angle of the sector covered. Current cellular antennas typically cover a 120° sector. Smart antenna technology can allow base stations to beam their transmissions to the devices to which they are connected, again allowing for greater resuse of spectrum.

Most or all of these technologies are going to be needed in combination to deal with the growing demand for wireless data,  but the fact is that the spectrum “crisis” is a challenge we can meet with a combination of sound policy and good technology. I’ll be looking at each of these options in more detail in coming articles in this series.

*–Truth in mathematics time. The essential characteristic of exponential growth is that it increases at an ever increasing rate. (For those of you who remember your calculus, all derivatives are positive.) This never happens in the real world, at least not for long, because growth is always constrained by something. As noted below, there is, in fact, evidence that the growth in demand for wireless data is already decelerating.

Leaving the iPhone- How Android Stacks Up

About a month ago, I made the decision to stop using my iPhone 4s with the possible outcome of leaving the iPhone for an Android or motorola-razriWindows phone for an extended period of time.  I don’t want to use the term “never”, because that’s limiting.  As promised, I wanted to share with you my experiences with Android so that you may get a deeper insight into how other users may feel and respond to their next phone purchase and experience.  I want to reinforce that this is, at best, a qualitative research study of one individual; me. I possibly represent a market segment of U.S. mid 40-something males that is technically savvy and enthusiastic about technology.  I will talk about the pros, cons, and things that just didn’t matter one way or the other when comparing my iPhone 4s to Android phones.

I used three Android phones, bouncing back and forth between them to experience  Android.  The three phones were: Samsung Nexus, Motorola Razr HD i, and the HTC One X+ which were provided to me to use.  Let’s start out with the Android phone plusses.

Android Phone Plusses

Instant access to info and controls via Widgets: With Android Widgets I can look at my most often accessed information without even opening up an app.  My most often used app widgets were Mail, Calendar, sports scores, weather, social media updates, and TripIt.  The neat part is that you can actually manipulate the data in the app and there more often than not, don’t need to open the app. This is a big time saver.  My Android control widgets were display settings and hotspot, so instead of three clicks, it takes one.

Free hotspot: This one is very straight-forward.  On AT&T and my iPhone, I needed to pay extra for a Wi-Fi hotspot and with my Android phones I did not.

Easier content sharing: Sharing content like photos to multiple social media sites is very easy.  With my iPhone I need to open the app then I can pull in content like a photo or video with the exceptions of Facebook and Twitter.  With my Android phones I can share a photo or web link to Instagram, Dropbox, Evernote, Sugarsync, Foursquare, Google+, Google Drive, Flickr, HootSuite, Messenger, Picasa, Skitch, SkyDrive, Skype, WordPress, and HTC_One_X_Plusmany more.

Google Voice: As I said in my earlier post, I drive a lot and need speech to text for notes and texts that works really well.  Google Voice just works where Siri does not work well for me.

Flawless sync with Google Services: Google Services like Mail, Calendar, Tasks and maps work flawlessly. They don’t work well or aren’t as feature rich with my iPhone.  Contacts are a great example as my iPhone contacts would not sync with my Google contacts without the need of another app.  We don’t need to talk about Google maps.

Cool tools: I really like some of the very cool tools that come with the phones.  Motorola Smart Actions makes suggestions to automate task like personalizing context aware situations like while sleeping, at home and at work.  HTC has a power saver toggle that really did save power and a very detailed “usage” tab that showed me exactly how much data each app used and would send me warnings based on my pre-set conditions.

Multitasking control: Android lets the user control everything about multitasking, more like a PC or Mac.  This came in real handy when uploading photos in the background to cloud storage or social media sites.  It also works great to have a fully refreshed phone with the latest data from Pulse, Podcasts, and Evernote.  To not kill power, many of the apps give you a choice to only upload during WiFi connection or when plugged in.  Sugarsync is smart enough to stop uploading photos when the battery gets to 25%. My iPhone just doesn’t do this.

Chrome browser: This isn’t the WebKit browser in iOS, it’s the real thing, and I can sync my PCs bookmarks, passwords, and tabs from other Chrome browsers.  Yes, I could do this with Safari, but I preferred Chrome for my PC and Mac browser.

Google Now: I am very impressed with Google Now, primarily the search based cards. It is very helpful to be on a trip out of town and Google Now displays when my plane leaves, the gate, the weather there, hotel details without entering any data.  It’s indexing my emails which a bit creepy, but adds value so I let it do it.

Now let’s move onto the areas that didn’t make a difference one way or another.

Android Phone Neutrals

Same “Page 1” apps: Unlike Android of yesterday, Jelly Bean offer the most popular and trendy apps, they aren’t “ugly” anymore and have very similar feature sets. One exception, Evernote, is still very ugly compared to iOS, but that’s about it.  All my other “page 1” apps look and run just fine.

Feel and flow: I’ve used every version of Android since inception and none ever “felt” as good as iOS… until Jelly Bean.  Project Butter made a very big experiential difference.

Battery life: I didn’t feel and more or less battery life with any of the phones, except the Motorola Razr HD i, which seemed to last longer.  There are a 100 review web sites that can give you exact figures, so I will stop there.

Android Phone Minuses

Camera: However many people told me about the great Android cameras, they all felt short to my iPhone, except in some flash circumstances, where images were white-washed.  All my Android cameras took photos quicker, had more settings, but the pictures never looked as good as the iPhone 4s.

Mail: This is a tough one, one that I waffle on, because I spent the last few years on an iPhone.  I prefer iOS email to Android for reasons that are hard to explain.  Android mail doesn’t look or feel right to me and it’s too hard to find a new folder.  This may have something to do with the fact I have four email accounts, but that’s the way I operate.  The only exceptions are swipes, which you can customize in Android to do what you want, like delete.

Courtesy links: This isn’t the official name in iOS, but I dearly miss the “courtesy links”.  These are the links to addresses, phone numbers in mail, calendar, and web pages that allow you to do something.  Adding a name embedded in an email is torture in Android and pure bliss in iOS.

Copy-Paste: This, like mail, I am a bit torn.  Copying and pasting, a very basic function, and is more challenging for me on Android.  I don’t know if it’s because I spent most of my time on the iPhone the last few years but I get frustrated with Android.

Group text: Unlike the iPhone that presents group texts in order and in-context, Android presented texts to me in an out of order, jumbled way.  We’re 4 years into Android and I don’t understand how this can be.  Android can do better than this.

Next Stop, Windows Phone 8

I really did like the Android phones and none of the minuses turned me off enough to run immediately back to my iPhone.  After using Android phones for the last few weeks, I can see very much why so many people gravitate to it.  It’s more than low price; many of the experiences I found much more enjoyable than my iPhone.  Android felt so more empowering, too, as I am in control of the phone, not the manufacturer.  As my iPhone 4s is sitting in my drawer collecting dust for a while, I’ll be taking the Nokia Lumia 920 and Windows Phone 8 for a deeper spin.  I’ll keep you posted.

For Now, Marketing is More Important Than Innovation

It seems as though the past year I’ve heard a lot of people with early adopter tendencies, especially the media, complain about the lack of innovation coming from the tech industry. It again up again at CES this year. Quite frequently I heard from people that there was nothing ground breaking or truly innovative at the show. Now we can define innovation in many different ways where even simple improvements can be innovative. But I think it is important to point out that true limit pushing, ground breaking innovation is cyclical not annual. We are coming off the re-invention of two primary technologies categories, the smartphone and the tablet. Furthermore we are in the midst of now re-defining what a personal computer is, does, and looks like. Of course I believe innovation is still around the corner but I think there are some important market truths that need to be pointed out.

Innovate Then Communicate

Innovations fail if they can not be marketed. Sometimes I think the importance of effective marketing is taken for granted. I think many industry observers simply assume that when something innovative is released that everyone will magically understand it at a glance. The truth is, even the simplest innovations need effective marketing if they are to be embraced by the mass market.

This is the cycle we currently find ourselves in. This is why it actually becomes much easier to discern the winners and losers by judging not just the product but also the marketing. Great products have the potential to fail to be considered by the mass market with poor marketing while at the same time bad products do not get embraced by the mass market even with great marketing. Great products require great marketing.

There is also the danger of over innovating during a market’s maturity process. When this happens a company tries to add too many bells and whistles and runs the risk of it being too much for the market to handle. Thus their market doesn’t grasp the value of all the new features, or perhaps it just isn’t ready.

Marketing Matters in Mature Markets

Perhaps the most fundamental point for the reason we are in the marketing driven cycle we are currently in is due to the market largely being a mature one. Mature markets function very different than when they are maturing. As a market is maturing it is receptive to more limit pushing innovations. As the market reaches maturity it is more receptive to the marketing of that mature product in order to drive its growth from the early adopters and into the mass market.

Early adopters are important segments for every company to understand because the things they value today will be the things the mass market of tomorrow values in the future. Early adopters rely heavily on new, cutting edge, and innovative features. They appreciate the wow factor, the things that no one else has and they can be the first to embrace. However the mass market is often more down to earth and doesn’t necessarily understand why the flashy, shiny new gadget adds value to their life and is truly useful. Luckily for companies the mass market is significantly larger than the early adopter market. The billions need marketing to help them understand why they need something, the millions need to be wowed by something. Moving from early adopters to the mass market is the fundamental key to a product’s success and that is where marketing comes in.

We also have to understand that the demand to innovate by companies also catches up with technological limits. Many of the things in labs that I have seen that I think can lead to the next round in innovation for smartphones and tablets, like flexible displays, new semiconductor process technology, battery science, etc., are still years away for being ready for mass commercialization. This is why we should simply expect more evolutionary hardware than revolutionary.

This happens all around us, especially in post mature markets. Look at the automobile industry for example. We don’t see revolutionary hardware on an annual basis. If fact we rarely see it at all.

The Myth of iPhone Fatique

I’m in no way saying innovation isn’t important. Just that it is cyclical and we need to understand where we are in the innovation cycle. Maturing product segments require time for original innovations to be adopted by the mass market. To make this point, I’d like to address something I think is interesting. From many early adopters I know, it seems as though they frequently complain that iOS feels dated. For the early adopter this is the challenge. They adopt technologies extremely early and then have to wait for the rest of the market to catch up. As per iPhone fatigue, for many (hundreds of millions of people) they will be experiencing the iPhone and iOS for the first time throughout the next few years. For them there is no such thing as iPhone fatigue. This is the point that many early adopters miss.

Believe it or not, marketing is more important than innovation in the cycle we are currently in. Value needs to be communicated to the mass market. People need to be shown the usefulness of a product or feature and fully grasp the why not the what. Too many companies market the what not the why. Anyone analyzing any company in today’s market needs to heavily evaluate said companies marketing plan as much as the product itself.

Innovation at its best solves problems. Great marketing communicates the value the innovation is bringing to solving a problem people either knew or didn’t know they had. In my opinion there is only one tech company who currently does this well.

Introducing the Chinese Grey Market Android Tablets

Buckle up because this is going to get interesting. What I am going to elaborate on is perhaps one of the most disturbing and potentially disruptive things that I picked up on at CES. As many of our readers know, I have been studying and compiling data for my Creative Strategies reports around the Chinese consumer technology market. I shared some high level thoughts around the market for Android smartphones in this column where I layout how Android in China is the wild wild west. Yet that market looks fairly organized compared to what is happening with low-end Android tablets in China.

What are Grey Market Tablets

You might be wondering what I mean when I say the grey market tablets. This means several things. First they are made up largely by white box tablets coming to market by a no name brand. A company or shelter company was started to simply take entry level ODM tablets and bring them to market. These devices come with stripped down versions of Android (AOSP). Meaning its basically stock with just a few simple apps pre-loaded and stripped of Google services because they are irrelevant in China. These devices don’t come with any services, including Google’s or from any other like Tencent, 360, Baidu, etc. Consumers who buy these tablets need to go download a local app store (or several) and customize them with the local services they choose. Lastly, the grey market also means how they are sold. Let me explain this last part.

When Tim and I were in Shenzen a few years ago by random accident we happened upon one of the more interesting things I have ever seen. We entered a building that looked like an indoor mall and what we saw was four levels of flea market style booths and tables all selling cell phones and smartphones. The place was bustling with people shopping for phones. As soon as we walked in I knew what we stumbled upon and tried to take my phone out and take a picture. To no surprise the second I tried a nearby guard said I couldn’t take any pictures.

What happens in these technology flea markets is buyers come in loaded with boxes of smartphones and tablets inventory and sell them for extremely low cost (often negotiated rather than fixed). Sometimes hard to find devices make it to they grey market here and go for prices well above retail. This activity is legal but unregulated. When vendors sell out their inventory they close up and come back the next day with more. Given the amount of commerce and the amount of people I observed, I would approximate that many tens of thousands of devices change hands in each of these locations every day and who knows how many of them their are all over China. The grey market sales channel also includes smaller local Chinese shops selling these devices as well. The key thing to understand it that the grey market is parallel to the traditional sales channel but less regulated. This is a simple picture of the grey market in China.

[UPDATE] Engadget’s Chinese Editor Richard Lai shared this link and photo where he was able to get a picture of one of these markets.

How Cheap and How Many?

While I was at CES, I talked to a vendor mass producing several versions of these low cost tablets at volume in China. This particular vendor had the lowest cost 7” Android tablet I could find and it was $47 dollars (292.51 CNY). Nearly every vendor I spoke with was around this range offering Android tablets starting at 7” and going to 10.1” for a range of $47-$60 for 7-inch all the way to $150 for 10-inch. There is unquestionably a massive and rapidly growing market for extremely cheap Android tablets in China. How big this grey market is hard to quantify and I know I am not the only analyst currently trying.

The challenge is that these are being built by many second or third tier manufacturers. Many of these are off the radar but are sourcing older generation materials from many of the usual component manufacturers. Although these second and third tier manufactures don’t have massive capacity, there are many of them popping up all over the place. They are sourcing later generation components like SoCs, memory, and displays, which have dropped in price, have higher yields but are also looking to be moved in volume by the source to clear inventory for newer products. Also, because these are moving in volume through non-traditional parallel channels, it makes it that much more difficult to track.

However, through some trusted sources in the supply chain who have common parts across these devices, I think I can approximate its size potential. Toward the later half of 2012 these tablets sold into China and grey market, super cheap, locally made Android tablets were creeping up on 20 million a quarter. This segment is gaining steam and I believe the market for tablets in China could be as high as 200 million units in 2013 largely driven by the grey market and super cheap Android tablets. I know this seems shockingly high and is much higher than other firms estimates. But it is these super low-cost Android tablets that could bump the number up and lead China to pass the US in tablet sales next year. If this scenario plays out as we believe it means that we could be looking at total worldwide tablet sales of over 400m in 2013. Meaning if we count these low end Android tablets we could sell more tablets than PCs in 2013. Also based on overall triple digit tablet growth in China, which is line with many supply chain forecasts I have seen, this number is plausible. There is of course the question of local manufacturing being able to meet demand but as I said sources are popping up all over the place as this is beginning to smell like a gold rush.

Significant Implications

This of course has significant implications on many levels. First of all legitimate brands are going to be challenged to compete with dozens upon dozens of upstarts looking to trade margins for volume just to make a quick buck. These off brand white box companies do not have sustainable businesses but it sure has the potential to make some people fairly rich overnight. Get in, ride the wave as long as possible, get out.

This growing movement has the potential to thwart the growth opportunity for many legitimate brands trying to build legitimate products and add value around hardware, software, and services specifically for the APAC region. Of course many legitimate brands will still do well in China because the market is so big, particularly in the tier one more developed regions of China. However, those buying these cheap tablets are likely not also buying ones from a major brand. So arguably, these low end devices are stealing customers from the legitimate brands.

Although all of this sounds crazy and like a hot mess (which it is), it is potentially a good thing for the China tablet market. These grey market tablets will help develop the market for tablets at large. As Chinese customers experience these products for the first time and potentially refresh them several times a year, these consumers will become accustomed to their needs, wants, and desires with regards to tablets and then begin to shop for products who are innovating and adding value. This is where the brand comes in, because as value is established in the mind of the consumer, they are willing to pay more for the function and convenience.

Many of us in the developed world are extremely accustomed to many technologies like smartphones, tablets, and PCs. We understand, for the most part, what we want and why we want it. Billions of consumers in China do not and that is the point. This market is extremely immature and undeveloped. There are huge problems to be solved in that region but those buying grey market products do not know that yet. The hope is that over time as they experience the pain points for themselves, that those who are investing in adding value and solving those pain points will begin to reap the rewards.

Why Hardware, and CES, Still Matter

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

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

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

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

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

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

An Homage To The Tablet

Tablet PC shipments are expected to reach more than 240 million units worldwide in 2013, easily exceeding the 207 million notebook PCs that are projected to ship, according to NPD

Amazing.

The only thing greater than the resistance to tablet adoption has been how quickly tablets have overcome that resistance.

SPEED OF ADOPTION

The modern tablet was reinvented in April 2010 with the introduction of the iPad. It’s now two years and 8 months old. No personal computing technology has been adopted faster than the tablet. And that’s saying something. The tablet is being adopted at almost twice the rate that the smartphone was.

TOUCH USER INPUT VS. PIXEL USER INPUT

The key to understanding why the tablet has taken off is touch. Prior to the iPad, tablets used desktop interfaces. The genius of the iPad was that it used the finger – not the mouse or a stylus – as the primary user input.

TABLETS VS. HYBRIDS

Despite the unprecedented success of the tablet, many people think that the tablet is flawed – that the tablet would be perfect if only it were…a notebook.

It is my belief that the tablet and the notebook are inherently separate computing tools because their primary user inputs are incompatible. The tablet and the notebook use two disparate user inputs that cannot be successfully integrated into a single user interface.

This is highly controversial. If I’m right, then hybrids will always be niche products, struggling to serve two masters. But I could be wrong. Times change and technology changes. Perhaps a unified user input is possible. But it’s certainly not available in today’s market place.

PERSONAL AND INTIMATE

That which we touch, we love. The tablet is a personal, intimate device. It’s revolutionizing every aspect of our computing lives, but I think the tablet is going to have a particularly strong impact in education. We’re about to move from a computer for each classroom to a computer for each student. And that’s going to change everything.

Today we can’t imagine leaving our homes without our phones. Tomorrow, we’ll feel the same way about our tablets. I can, in fact, imagine a day where we wear our phones on our wrists, like watches, and our tablets take care of most of our other computing needs. But that’s a discussion for another day.

CONTENT CONSUMPTION VS. CONTENT CREATION VS. PRODUCTIVITY

Many artificial barriers have been constructed in an attempt to understand and/or dismiss the importance of the tablet. For example, arguing whether the tablet is a content consumption or a content creation device is about as helpful as debating how many angels can stand on the head of a pin. It’s a false dichotomy. There is no mythical line of demarcation between content creation and content consumption. The question should be, which tool is right for the job. And when you put the question that way, silly distinctions like content creation and content consumption simply fall away.

Similarly, questions of “productivity” suffer from two flawed ways of thinking. The first is to assume that the term “productivity” should be defined by comparing the tablet to the PC. You don’t compare a tool to a tool, you compare the tool to the job it is being asked to do. A screwdriver makes for a lousy hammer, but it’s pretty useful when you want to use a screw instead of a nail. Similarly, a tablet makes for a lousy notebook computer – but tablets aren’t trying to be notebook computers.

A second flaw is the myopic manner in which we define “productivity”. Most people define productive as “the things I do” and unproductive as “the things that other people do”. Don’t make the mistake of defining the productivity of others using your standards. Tens of millions of people are being productive on their tablets, even if their definition of productivity dramatically differs from your own.

BIG PHONES VS. TABLETS

Even though every flat computing device bigger than a phone is being defined as a tablet, there are very big differences between tablets that run big phone apps and tablets that run apps optimized for larger screens. Anyone who has used an iPad can vouch for this. The difference between an iPad specific app and a double sized iPhone App is night and day.

Further, most everyone is lumping all 7 inch tablets together. The truth is that there is a big difference in screen size between most 7.0 inch tablets and Apple’s 7.9 inch iPad Mini. (I’m sure that Apple would love to say that the iPad Mini was an 8 inch tablet in order to highlight the difference.) Most 7 inch tablets run big phone apps. The iPad Mini runs tablet apps. That’s a big differentiator that’s going unnoticed by pundits but seems to be taken into account by tablet buyers.

WHERE DO WE GO FROM HERE?

We live in a world of multiple screens: phone, tablet, notebook, desktop, TV. We start a task on one screen and finish it on another. We consume content on one screen while simultaneously initiating queries on another screen. The television is the screen in our living room. The phone is the screen that fits in our skinny jeans. The notebook and the desktop are the screen that we use when we have to engage in multiple screen, processor intensive or pixel specific tasks.

The tablet? The tablet is the default screen – the screen that we turn to when we have a choice between it and a phone or a notebook. And that makes the tablet the future of computing.

The ThinkPad X1 Carbon Touch: Windows 8 Is Tough Even on a Great Windows 8 Laptop

ThinkPad X1 Carbon Touch photoI have been using Windows 8 through its several beta and preview versions on equipment designed for earlier editions, and I have been wondering for many months whether my unhappiness with it resulted from shortcomings of the hardware. I’ve now had a chance to spend some time with a first-rate Windows 8-optimized touchscreen laptop and while it works much better than older hardware, the new operating system remains an uncomfortable two-headed beast.

If you want a conventional clamshell laptop with a touchscreen, Lenovo ThinkPad X1 Carbon Touch (from $1,349) strikes me as an ideal workhorse. It features a 14″ 1600×900  display, an Intel i5 or i7 processor, and SSD storage to 256 GB. It weighs 3.4 lb., is .74 in. thick–just a hair thicker than the non-touch version–and provides a solid 5 hours of battery life. The keyboard is outstanding, as you would expect from a ThinkPad, and both the multitouch display and the big trackpad work very well with the full repertoire of Windows 8 gestures (there is also the traditional ThinkPad TrackPoint stick, which remains great for pixel-precise pointing.)

Windows 8 is certainly happier on the X1 Carbon Touch  experience than any older laptop I have tried. Most important is that the swipe-from-the-side gestures so important to effective use of Windows 8 now work flawlessly on both the screen and the trackpad. But that’s not nearly enough to overcome the essential clumsiness.

Windows 8 still feels like two operating systems loosely bolted together. In fact, what the experience of working both in the traditional Windoiws Desktop and what, for lack of a better name, I still call Metro, most felt like was switching between virtual machines under a system such as Parallels or VMware. The two user interfaces share storage and a clipboard—and not much else.

This separation manifests itself in many annoying ways. For example, if you start typing while in the Metro start screen, you initiate a search for applications, including Desktop apps. Indeed, with the disappearance of the Start button, this is the standard way to launch Desktop applications not on your task bar or desktop. You would expect that if you put the cursor outside any desktop window and began typing, you’d get the same search. Instead, nothing at all happens.

Then there is the failure of of Metro and Desktop apps to communicate. The Metro Calendar and People apps and Outlook don’t seem to know anything about each other. So adding an appointment or contact in one has no effect on the other unless you sync through an external service.

The usefulness of the touch display is badly damaged by the wildly inconsistent behavior of applications. For example, pinch and stretch works just as you would expect in the Desktop version of Internet Explorer. But in the Google Chrome browser, the gesture works on the trackpad, but not on the screen.

Adobe Photoshop CS6 would seem to be an application that could benefit greatly from touch, but it just plain doesn’t work. You can use touch to select items from menus or palettes. But when you touch the screen inside a picture, whatever tool you are using simply disappears and moving your finger has no effect at all. The tool cursor reappears as soon as you touch either the TrackPoint or trackpad.

Obviously, this situation will improve if and when third-party software vendors add proper Windows 8 touch support to their products. But it’s not as though Windows 8 sneaked up on them, and their failure to work properly with touch is depressing.

Outlook 2013 context menu screenshotMicrosoft hasn’t done that great a job itself with making its most important applications touch-ready. Office 2013 works better with touch than earlier versions, but that’s not saying much and the effort has a half-hearted feel to it. For example, the “ribbon,” Office’s do-everything menu bar offers a choice between “touch” and “mouse” modes. In the latter, the menu items and icons are bigger and further apart and therefore much easier to hit accurately with your finger. But the same courtesy does not extend to other interface elements. In particular, context (right-click) menus are much too small for comfortable touch use. (In general, context menus are evil with a touch interface.)

Office applications also have a strange proclivity to pop open an onscreen keyboard, for example, in Outlook whenever a search box is selected. This makes sense on a pure tablet or a convertible or hybrid when the physical keyboard is not available. But it makes no sense at all on a laptop where the keyboard is permanently attached, and Windows ought to know better.

I think the conventional touch laptop ought to be a truly useful tool. The undoubtedly will become more common since Intel has decreed that touchscreens will required for the next generation of lightweight notebooks to carry the Ultrabook label. I’ve spent enough time working with a tablet and a keyboard that the idea of reaching to touch the screen no longer feels odd. But the deficiencies of the software keep the hardware far short of its potential. This will change in time, though there is no excuse for Microsoft launching either Windows 8 or Office 2013 half-ready for touch. For now, the fact that you pay a $200 premium for the touch version of the X1 Carbon–other touch models carry a similar premium–is a bet on the come.

Where’s The Windows 8 “Buzz”?

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

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

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

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

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

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

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

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

“Redmond, We Have A Problem”

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

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

While Microsoft Fiddles, Their Monopoly Burns

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

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

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

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

Conclusion

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

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

NVIDIA’s Project SHIELD Connects Disparate Gaming Worlds

Even before CES 2013 officially began, NVIDIA announced a new product that rocked the gaming world.  NVIDIA announced Project SHIELD, an NVIDIA-branded mobile gaming device that connects different world of gaming, across modes, displays and content.

My first visual impression of SHIELD when I saw it was that it looked like a high end portable game controller used with an XBOX with a 5”, fold out display. The user holds it with both hands, pistol-grip style, with access to all the different kinds of buttons you would expect.  While the controller does look very cool, what is most interesting is the gaming flexibility it provides.

Connects Small and Large Display Gaming

Gamers can display their games on two displays, the integrated display and to an HDTV.  The integrated display is 5”, 1,280×720 resolution, and is adjustable for optimal viewing angle.  When not gaming, it folds down to protect itself.  Gamers can also display on the big screen, too, up to a 4K display.  This can be done wirelessly or via an HDMI cable.  Wireless display is accomplished via a dongle that connects into the HDMI port of the HDTV.  Essentially, the gameplay is encoded into a an H.264 video stream and sent to the TV in a similar fashion as Apple  AirPlay.

Connects Android and Windows PC Gaming

One of the biggest differentiators in gaming is that players can play Android and Windows PC games.  Android gaming is very straight-forward.  Just download a game from Google Play and you play it.  If you ever had an Android device like a Nexus 7 or HTC One X+ Android phone and purchased a game there, you can also play that same game on SHIELD.

SHIELD also plays Windows PC games, too, which is very distinct, something no other portable game device can do.  NVIDIA’s desired PC experience is straight-forward, while the technology behind the scenes is complex. In SHIELD-mode, the gamer slides the carousel to “PC” games where they are presented with a list of PC games.  They click the game and they play it, it’s that simple. The user never sees Windows Metro or the start screen or anything that resembles a PC.

Behind the scenes, the game is actually being played on a remote PC in the house and images are being transmitted to SHIELD or the HDTV.  It uses technology similar to that used on remote desktop applications, where the image is encoded into an H.264 video. The games are screened by Nvidia to make sure that they work well on the HDTV so the quality of service is better.  Small text could be a bit of a challenge in some games, but as devs realize they can expand their gameplay to SHIELD, they will accomodate by scaling the text to be used on the 5″ display.

I very much hope that the experience is as smoothe as NVIDIA desires, because if there are a few hiccups, gamers will stop using the Windows PC gaming function, one of SHIELD’s biggest differentiators.

Connects Portable and Console Gaming   

Finally, when you add up the fact that SHIELD can operate on the small screen, big screen, can be used as comfortably in the living room as it is in the car, it really is as, as NVIDIA’s Jen-Hsung says, a “portable console.”  While first designed as a portable gaming device, it really does beg the question on why you would need a gaming console as long as SHIELD works as planned and has access to the best titles.  Many hard core gamers will have both SHIELD and a gaming console, but where money is tight or consumers want just one device, they may choose SHIELD.

NVIDIA’s SHIELD a Success?

SHIELD is undoubtedly a major disruptor, but there are many things we don’t know yet, like price and distribution, to yield a market verdict.  What I can say is that if the experience is as good as presented, there will be very high levels of interest across “gamers” and consumers who really like to play games.  Nvidia plans to ship SHIELD in Q2 of this year and as soon as I get my hands on one, I will let you know about the quality of the experience.

Conflicting Data

As an analyst I continually come across data. Much of it is often conflicting and discerning what is an accurate reflection of the market is not always easy. Such data has come out today that I think is fascinating due to its suggestions either way if true.

Venture Beat published an article referencing an Accenture study which stated that 66% of phone, tablet owners don’t really care if they run iOS, Android, or Windows. Venture Beat quoted Kumu Puri, a managing director at Accenture saying:

“Overall, our survey found there is not widespread loyalty among consumers about operating systems used on their smartphones, tablets and PCs,”

Really, they don’t care at all? I find it extremely hard to believe. That’s like saying the vast majority of consumers don’t care what care they drive, what clothes they wear, what brands they support, etc. If this is true then RIM, Windows Phone, and Tizen all have a viable shot in the market. As should have Palm with the Pre. The bottom line is personal preference matters and software is a part of that preference.

Yet we have Kantar releasing stats today that share AT&T (the original exclusive iPhone carrier with Apple) had half (51.7%) of their iPhone user base upgrading to a newer iPhone.

66% are saying they are not loyal yet 51.7 percent of AT&T’s iPhone subscribers updated to the newer iPhone. Personally I believe there is much more platform loyalty, particularly to iOS than the Accenture survey is showing. My experience from surveys is that you can get consumers to say whatever you want if you ask the question the right way. This is why we don’t do them anymore and instead focus on observational research crossed with real world market patterns.

The Accenture survey sounds like it was targeted at a much more mature and early adopter user base. Market behavior data we have of the early and late majority (a market that is massively larger than the early adopter market) validates our conviction that loyalty is there. Also it shows there is more loyalty to iOS than any other platform.

While I am on the subject I want to point something else interesting out about the Kantar data and it relates to Verizon. According to their data:

“First-time smartphone buyers upgrading to an iPhone led to iOS becoming Verizon’s top selling OS for the first time. Verizon, who has the largest featurephone user base, saw 44% of their featurephone user base upgrade to an iPhone, compared to 38% of AT&T’s featurephone user base.”

iOS is already among AT&T’s top selling smartphone platform, with over 50% staying loyal and they have had it for over five years. Verizon is going on its third year selling the iPhone and it is now their top selling smartphone. Could that with Verizon’s sizably larger feature phone base and the data point that most upgraders from feature phones to smartphones chose the iPhone highlights the headroom still available in the US for the iPhone. I also believe Verizon’s iPhone customers will show similar loyalty patters as AT&T’s. As iPhone subsidies get stronger in other parts of the world my gut is that similar patters will emerge.

All in all real world market habits don’t validate Accenture’s study in my opinion but that’s just my .2c.

Big Thinkers, Disruptive Technologies at CES

This will be my 10th year moderating a Super Session at CES called “Big Thinkers, Disruptive Technologies.” Anyone going to CES can attend any Super Session’s as these are the only major conference sessions open to all attendees. http://cesweb.org/Conference-Program/SuperSessions.aspx

Each year I get to look at a whole host of technologies that are considered disruptive and chose 3 or 4 to present in our super session. That’s the good news. The bad news is that since the session is only an hour, I can only choose 3 or 4 and deciding which one’s to include is one of the most difficult things I have to do each year.

This year I was asked to add a gaming emphasis to our session, although all of the technologies represented on the panel can be deployed across the board in our digital world. Over the last year I got to see a lot of things in the labs that I consider very disruptive, but most cannot be shown publicly at this time. And this session’s emphasis has to be on products that are in the market or close to release impacting our world of tech in the next 12-18 months.

With that in mind, here are the three technologies that we will discuss in our session.

1. The Future of Displays

Jams Clappin, the president of Corning’s Glass Division will be talking about their advancements in next generation displays. Last March, Ben and I went to Corning’s HQ in Corning, NY and got to see first hand some of the things Corning is doing with displays. Below are links to two videos we saw that gave us a glimpse of the future of glass displays.

http://www.youtube.com/watch?v=6Cf7IL_eZ38

http://www.youtube.com/watch?annotation_id=annotation_424843&feature=iv&src_vid=6Cf7IL_eZ38&v=jZkHpNnXLB0

He will be giving us an update on these new glass technologies that can be flexible, rolled out and seen through to deliver a whole new way to view our digital content and interact with and collaborate with friends, family and business colleagues.

2. Augmented Reality

Casper Thykier, the Managing Director of Zappar, will be showing how augmented reality will soon be impacting how we use technology to get access too much more info and content that is already shown on our mobile screens. In my TimeTechland column a few weeks back, I profiled Zappar and shared how they are working with game companies, movie studious and consumer brands to make our mobile devices indispensable in the near future.

The links in this column will give you a good idea of what AR is, but you really need to see these demo’s and similar one’s from Aurusma (http://www.aurasma.com/#/explore) in person to really understand how this technology will be disruptive.

3. Using Android Apps on Windows PCs

Rosen Sharma, the CEO of Bluestacks, will be showing how their technology allows a person take any Android app and run it on Windows PC’s as if it is a Windows app. This is a really cool technology that while on the surface makes Window’s products better but the underlying technology behind what Bluestacks offers suggests a day soon where any app can run on any OS using their core architecture. What they have could finally deliver on the promise of write once, run anywhere and could by quite disruptive for the future development of applications for all digital devices.

4. The Wrap up

After these three presentations and demo’s, Brian Cho, a partner at Andresson Horowitz, who handles their research into investments in gaming and related technologies will share what he sees as being disruptive in this space.
(http://www.crunchbase.com/person/brian-cho)

A former executive at Ubisoft, Brian is well versed in the world of gaming and can share a lot of light on what he technology he sees impacting the future of games, video and digital entertainment.

If you are at CES, please come and join us as I believe this will be a most interesting and provocative session.

Tuesday, January 8, 11:00 AM at LVCC…room N255-N257.

If you’re not attending CES feel free to share what next generation technologies you are excited about that could be coming in the next 10 years.

Google vs. Microsoft: Just Cut It Out


YouTube screen shot

Hostilities between Google and Microsoft are heating up, and users are being caught in the crossfire.

Microsoft, of course, has spent the last couple of years trying to bring the wrath of the federal government down on Google. This campaign failed last week, when the Federal Trade Commission let Google off with a mild admonishment because it did not have a case it thought it could win.

There’s no way to know if this is retaliation, but Google seems determined to make life difficult for Microsoft customers. The latest evidence is Google’s apparent decision to block access to Google Maps from Windows Phone 8 handsets. The issue is shrouded in a bit of confusion. Gizmodo first reported the blockage. Google responded by saying that the problem was that the mobile version of Google Maps is designed to work with Webkit browsers and the Windows Phone 8 browser is based on the non-Webkit Internet Explorer. But this explanation fell apart when Microsoft pointed out that the Windows Phone 8 browser is essentially the same as the Windows 8 version of IE, which works just fine with Google Maps.

App developer Matthias Shapiro seemed to settle the argument with a YouTube video  that shows calls from Windows Phone 8 to Google Maps failing until the browser-agent string is changed to disguise the browser. With the phony browser-agent string, Google Maps worked just fine (in what appears to be a Windows Phone 8 emulator).

Fortunately, Windows Phone 8 users have other mapping options. I supposed Google has the right to deny its Maps service to any device it wants to block, but this just seems dumb and petty.

In other Google annoyances, yesterday I entered a search string in my Chrome browser and when the search page came up, I got an odd popup asking me if I wanted to share my results on Google+. Thinking that no one could conceivably be interested in my search for information on Fermat’s Little Theorem, I closed the window, unfortunately before I thought to capture a screen shot.  I have not yet been able to replicate this behavior, but Google popping up a G+ interstitial every time I do a search could just drive me to Bing.

Should Apple Make a Hybrid or Convertible PC?

In a Tech.pinions piece I wrote a few weeks back, I stated that in our talks with IT directors they have been sharing with us their interested in the hybrids or convertibles that are just starting to get into the marketplace. Products like Lenovo’s Yoga or HP’s Elitebook Convertible are attractive to them for various reasons, but the main one is that instead of having to support a separate tablet and laptop, these converged products give them both in a single package.

An IT capable tablet might cost $600 or $700 and an IT grade laptop might cost upwards of $900- $1300 depending on configurations. These convertibles or hybrids are priced around $900-$1300, which is cheaper than buying a separate laptop and tablet combined. Thus, cost of support and cost of ownership is reduced and with IT budgets being stretched these days, lower priced, yet highly functional devices like these hybrids or convertibles makes a lot of sense to them.

We are also seeing some real interest in hybrids and convertibles with SMB and some consumers as well. The compactness of having a 2-in-1 device seems to be of real interest to them as well. At a personal level, I have used a Bluetooth keyboard with an iPad for over a year and in many cases, this has replaced my laptop. However, I still need my laptop to handle what we call heavy lifting tasks like managing my media, doing large spreadsheets or complex documents.

Looking to the Future

In my 2013 predictions column last week, I suggested that hybrids and convertibles could be a sleeper product next year and could catch on with business users in a big way. However, in this same column I made a bolder prediction that Apple would create something I called the AirPad or iPadAir that possibly would be ultrathin like the current MacBook Air and be more like an actual laptop but the screen would detach and become an iPad. Since I made this prediction I have had a lot of calls and emails from people who today have iPads, but tell me they would love to have an iPad/laptop combo device and they would be first in line to buy it.

There is one big problem with my prediction of an Apple hybrid though. Apple CEO Tim Cook has gone on record saying that Apple does not believe this type of device makes sense. They appear heavily opposed to this idea and seem to stand strong around the idea that a laptop is a laptop and a tablet is a tablet. At the moment, you can’t argue with their logic as they are selling a record numbers of MacBooks and iPads, and they may be right. Hybrids and convertibles from the PC crowd have only been out for a short time. Microsoft’s Surface product being the poster child for hybrids also clouds this issue since it acceptance in the market has been lukewarm at best.

Given the type of work we do at Creative Strategies, we get to see a lot of products behind the scenes before they ever hit the market. Over the last three months, we have seen about a dozen hybrid’s or convertibles that will hit the market in Q1 or Q2 of 2013 and some of them are stunning in their design and functionality. On some of them, the screens stay attached and either slide down over the keyboard to become a tablet, or they twist and fold down to also become a tablet in its own right. In our work, we define these types of products as convertibles.

We have also seen a lot of what we call hybrids, in which the screen completely detaches from the keyboard and becomes a much lighter stand-alone tablet. In both cases, some of these are ultra-thin and extremely well designed and I can’t help but believe that when these products hit the market interest by business users and consumers will be piqued. Hybrids dual functionality as a full laptop as well as a real tablet, along with lower pricing than if you bought the tablet and laptop separately, will resonate with many people.

I have also been hearing that the PC side of the house is very bullish on these two-in-one designs and since most of them fall under Intel’s ultrabook designation, they will be heavily promoted next year as part of an increased campaign to get people to buy Ultrabooks. Because of the innovative designs in hybrids and convertibles, which are really eye catching with most priced under $1000, this duality of design and functionality should get a lot of attention next year.

What if the Market for Hybrids Takes Off?

If our prognostication that hybrids and convertibles are correct, and they really take off, Apple will have to look harder at possibly creating a similar type of product for their customers. Today they just let them go out and buy a third party keyboard and force their users to piece together their own hybrid solutions. We have talked to a lot of people who have done this and just love the fact that in a very small package the iPad becomes a powerful productivity tool as well as one that they can use for consumption of media, pictures, etc.

There is strong precedent as well that a product Apple said they would never do they eventually bring to market anyway. Steve Jobs said Apple would not get into phones. And he also said he believed 7” tablets were worthless. However, market dynamics have a way of changing Apple’s position on products they dismiss as not being viable for them to do.

That is why I believe that if hybrids and convertibles really strike a chord with consumers, Apple will have to respond to this possible threat to them, especially in business markets where these types of products are garnering a lot of interest now. Imagine a MacBook Air like design with an iPad tablet that detaches. Given Jony Ives brilliant design acumen, I could imagine an Apple hybrid that would not only be competitive with the PC crowd, but one that would re-define the market for these types of products in the future.

We are in the very early stages of bringing hybrids and convertibles to business users and consumers, so it is too early in the cycle to predict with any certainty the level of adoption of hybrids. But our early research in this area continues to point to the fact that these types of products could be attractive to a large amount of users, and if they do take off and become a threat to Apple, it would not surprise me if Apple responds in kind and creates a product that could turn this market upside down.

The Opinion Cast Round Table: 2013 Predictions and CES

Steve, Tim, and Ben discuss their tech predictions for 2013 and give some insight into this years CES. We are looking forward to an exciting 2013!

As always, we would love any comments or feedback on our Opinion Cast. We want this podcast to be valuable to our readers so please let us know things you like and what we can do better. Also, if you get a chance please rate it in the iTunes store.

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Qualcomm and the Birth of the Smartphone

Qualcomm pdQ photoQualcomm CEO Paul Jacobs’ appearance on the Charlie Rose Show brought back memories of the earliest days of smartphones. Jacobs told rose that he originally proposed adding a cellular radio to the Apple Newton MessagePad. When Apple demurred, Jacobs headed to Palm, then owned by 3Com, where he negotiated a license for Qualcomm to build a phone based on Palm OS.

The original Qualcomm pdQ wasn’t very good–I later described it as “a Palm glued to a phone.” It had all the functionality of a Palm 3 PDA and a typical CDMA phone of the late 1990s, but virtually no integration between the two sets of features. As I recall, you couldn’t even dial the phone by looking up a contact on the Palm and tapping the number. The only real advantage was that you got to carry one big device instead of two smaller ones. Needless to say, it sold poorly.

The followup pdQ a couple of years later was a more interesting product. By then, Qualcomm had sold its handset business to Kyocera, including the in-development pdQ 2. The revamped pdQ was a much more appealing product. It was much smaller than the original and offered some real integration of PDA functionality. It also borrowed the primitive Web-browsing capability of the Palm VII. Data communication in those days was limited to a theoretical maximum of 14.4 kilobits per second and you often did much worse than that, so the Palm system relied on pre-digested an condensed web snippets.

Interestingly, in the same BusinessWeek column in which I wrote about the Kyocera pdQ, I also dealt with what turned out to be the true ancestor of the modern smartphone. The Handspring VisorPhone was pretty terrible product from the company set up by Palm’s founders to build licensed Palm-compatibles. The VisorPhone, $299 with contract (!), was a GSM phone module that slid into the accessory slot of a Visor PDA and added phone and SMS apps to the standard Palm repertoire. Not many people bought it, but Handspring used the design experience to build the Treo 300, the first trule integrated smartphone, and the Treo 600, the first successful one.

CLARIFICATION: Turns out folks at Qualcomm in addition to Paul Jacobs have fond memories of the pdQ. Engineers who worked on the project point out that there was some significant integration between the phone and the Palm including the ability to place a call from the Palm Address Book, a “find and dial” search for phone numbers across apps, Address Book search from the phone dialpad, and APIs to give third-party Palm developers access to pdQ phone features. These features don’t sound terribly exciting today, but they were breakthroughs in 1999.

4 Technology Trends, 5 Technology Predictions

Prediction is very difficult, especially about the future. ~ Niels Bohr, Danish physicist (1885 – 1962)

Trend #1: Two Seperate And Incompatible Types Of User Interfaces

Personal computing will be divided into two types of user interfaces:

1) Touch; and
2) Pixel-specific (surface-required)

Touch will require the use of only a finger for user input and will work best on the go. Pixel-specific will require the use of a mouse or trackpad which, in turn, will require the use of a flat surface. These two user inputs are inherently incompatible with one another – and that has consequences.

Prediction #1: There Is Little Room For A Category Between The Tablet And The Notebook

I do not think that there is room between the touch-only tablet and the mouse/trackpad-only notebook for the new category of computer that Microsoft is trying to create with Windows 8 tablets. Tablets are becoming more capable. Notebooks are becoming ever thinner and lighter. There is little room for the hybrid. Hybrids will survive as a niche – but they will not thrive as a category.

Many disagree with this opinion, including some who write for Tech.Pinions and everyone who works for Microsoft. That’s the beauty of free speech and free markets. Time – and sales numbers – will tell the tale.

Prediction #2: Tablets Are Going To Be Even Bigger Than We Thought

Tablets are the future and in a much bigger way than even I had imagined.

They are not just becoming an equal to the pixel-input, surface-only devices, they will soon be the default, go-to device of choice. We’ll use our tablets whenever we can, our phones whenever we’re traveling and our surface bound devices only when we absolutely have to.

Pixel input personal computing devices will become like land line phones. They will persevere but with an ever shrinking base and and ever decreasing significance to our lives.

Prediction #3: Apple Will Create A New iPad Mini In The Spring

This is really a sub-set of prediction number two, above.

I believe that tablets are going to be huge in education. Last year, many school districts tested the waters with tablets. This year, many are going to move from trial programs to initiating programs designed to eventually put a tablet in the hands of every single student. This is a profound computing shift which will have a profound effect on education. By 2014 and beyond, the flood gates will have opened and tablets in schools and colleges will be accepted as the new norm.

Apple knows that they currently have an in with the education market. Educational institutions make most of their buying decisions in the Spring. In my opinion, Apple is not going to let the Spring go by without refreshing the iPad Mini.

Trend #2: Two Phone Operating Systems

In the Ninties, there were only two personal computer operating systems that mattered – Windows and whatever Apple was running on the Mac. Windows dominated, but the Mac survived and, in terms of profits, thrived.

Simiarly, there are going to be two operating systems that matter to smartphones. But this will be a duopoly with a difference. Google is not a strong and domineering operating system shepard the way Microsoft was. iOS has 500 million users and is self-sustaining. This time, iOS will be the premium operating system while Android will be the majority operating system.

Prediction #4: iOS will become the premium model, Android will take the rest

iOS will appeal most to businesses, government and education. (The irony of predicting Apple as the preferred operating system for business is not lost on me.) Android will take the rest.

Both operating systems will unhappily co-exist with developers flocking to iOS and cost-concious buyers flocking to Android. The dollars will continue to flow to Apple and the market share will continute to flow to Android and both sides will continue to insist that the other side doomed.

In the meantime, RIM and Nokia will continue to fade and Microsoft’s Windows Phone 8 will stubbornly cling to third place. But a licensed operating system does not fare well as a minority player.

Trend #3: Freemium v. Premium

The chief divide between tablets will not be their size, but their business models. Amazon and Google follow the freemium model. Samsung and Apple follow the premium model. The Freemium’s give away their hardware at or near cost and seek to make money on the sale of content and services. Apple’s premium model seeks to sell their hardware at a profit and encourage those sales through the use of both content and services.

Prediction #5: Samsung Will Be Forced To Create Their Own Ecosystem

In a world where your operating system provider (Google) is undercutting you by selling hardware at cost and taking in all the content and service dollars, there is simply no other choice — Samsung needs to create their own content and services ecosystem. Samsung has been preparing for this moment for quite some time. And we’ll see the fruits of their labor in 2013.

Trend #4: Multiple Screens

I think the biggest trend that is receiving the least attention is that of multiple screens. In 2001, we had one computer screen and it sat on our desktop. In 2006, we had, at best, two computer screens – our desktop and our notebook. In 2013, we have 4 computer screens – our phones, tablets, notebooks/desktops and TVs. And the when and why we use those screens is going to help to shape the future of computing.

I’m going to cop out here and not make any predictions other than to predict that this trend is going to change everything. People are already using two screens – a television and a phone or tablet – to watch TV. And the way we rapidly switch from phone to tablet to notebook and back again is already baffling that way pundits think about categorizing and pigeonholing our computing buying and using habits. Multiple screens deserve not just a simple prediction on our part but ongoing examination and analysis. It is not an emerging trend but an existing trend. It is the consequences that we haven’t yet fully fathomed. Expect to see us talk a lot more about the effects of multiple screen computing in 2013 and beyond.