Unpacked for Friday, Sept 30th, 2016

Goodbye Moto! – by Carolina Milanesi

Earlier this week, several publications reported Lenovo had conducted a new round of layoffs at Motorola. According to Droid-life, over 50% of Motorola’s existing US staff have now lost their jobs. Other sources reported the numbers are as high as 700 out of the existing 1200 employees would be asked to leave.

Motorola quickly tried to limit the damage by stating the current layoffs account for less than 2% of Lenovo’s overall workforce of around 55,000 employees. This only emphasizes how Motorola was swallowed, chewed up and spit out. While key people left Motorola soon after the acquisition, there was still talent within the company. People who understood the mobile business and helped to deliver products such as the Moto X, Moto G, and Moto E.

While the Moto X, Moto G, and Moto E were not able to save Motorola from being acquired, I believe they could have done some good to Lenovo if marketed properly and widely. At the time of the acquisition, the Motorola brand still mattered in the US and China. However, an unclear positioning against the Lenovo brand made it difficult to capitalize on that value.

More recently, it became obvious Motorola was only an independent company on paper and all the decisions on products and go to market were decided in China. Moto Mods are a good example of something I very much doubt came out of Chicago. While there is nothing wrong with the Moto Z (it is actually a great phone), Mods very much feel like tech for the sake of tech mainly because of how consumers have felt for years about modularity and price.

I struggle to see how Moto as a brand will be able to make any inroads from now on, especially in the US, where consumers still have a strong sentimental attachment to what used to be the mobile phone market leader. The smartphone market is not the PC market and, more importantly, the consumer market is not the enterprise market. Clearly, Lenovo followed the ThinkPad strategy but the results will be quite different in my view. Moto’s bat wings will remain on some products but consumers will know that what they buy is Lenovo.

Spotify reported to be acquiring SoundCloud – Jan Dawson

This week, reports emerged Spotify was preparing to acquire SoundCloud. This feels like the rare example of a media merger that makes perfect sense for both parties. Spotify would get some exclusivity, which has been challenging to achieve otherwise, by incorporating the many additional tracks which exist only on SoundCloud. That means mixtapes, podcasts, bootleg recordings, and much more which aren’t available anywhere else. Spotify could use a boost ahead of its IPO and, though the acquisition won’t solve all its problems, it should help increase investor interest, not least because it becomes a unique proposition in an increasingly vanilla world of streaming music.

For SoundCloud on the other hand, being part of Spotify solves a problem it tried to resolve with its recent foray into subscription services, which by all accounts hasn’t gone all that well. SoundCould would get a big backer, be paired with the largest paid streaming music service in the world, and wouldn’t have to raise more funding on its own.

All this, though, highlights the challenges of competing in the streaming music market. As I’ve written before, the basic value proposition is so simple it’s tough to differentiate. SoundCloud is a rare exception because it’s approached the market very differently by attracting grassroots musicians as they come up through the ranks but then inevitably, ceding them to the big labels and major streaming services.

Apple tried to mimic some of that value proposition with the Connect feature in Apple Music but it’s been hampered by being part of a somewhat exclusive walled garden within an app rather than on the open web. Apple had the potential to create the soup-to-nuts music service for everyone from bedroom guitarists to rock stars when it created Apple Music but has definitely done better at the high end. SoundCloud potentially gives Spotify an interesting new way to approach the same problem, by integrating the place where many artists already make their start.

Qualcomm in Talks to Acquire NXP – Ben Bajarin

Reports came out yesterday that Qualcomm was apparently in talks to buy NXP. This not long after NXP had finalized acquiring Freescale, making them a top five semiconductor company. Qualcomm remains the undisputed #2 semiconductor company in revenue, behind Intel, but I’ve believed for some time they need to go on a buying spree to play catch. I just didn’t think they would be interested in such a large deal which, at 30 billion, would be nearly 30% of Qualcomm’s market cap. That being said, NXP would fill some gaps in Qualcomm’s overall offering as they look to provide complete solutions, top to bottom, to build any number of technologies in the future.

I’ve written extensively about the consolidation of the semiconductor industry. This consolidation is inevitable as more companies look for one-stop shops to buy all or most of the components they need to go to market with a product. By including NXP’s portfolio, this gives Qualcomm the opportunity to have a larger share of the bill of materials across many different categories — smartphones, IoT, connected cars, smart home, wearable technology, smart cities, and more. The scale opportunity, along with the possibility of capturing a larger share of the BOM, is the big upside to this deal if it happens.

While a large dollar value, it seems the street is positive on the deal as both Qualcomm and NXP shares rose yesterday. NXP does fill a lot of gaps where Qualcomm is behind. This deal would undoubtedly strengthen Qualcomm’s overall portfolio.

Google Upgrades Their Cloud Offerings – By Bob O’Donnell

One of the few areas where Google is noticeably behind their competitors is in the area of cloud offerings for business. The company has been seen as a much smaller player than Amazon, Microsoft, or IBM for quite some time, but they made some announcements this week to step up their offerings.

Notably, the company switched to the imitative but obvious name Google Cloud for its key hosted offerings. In addition, it consolidated its Google Work for Business and renamed Google Apps for Work to G Suite. The net result is that, along with new management in the form of Diane Greene (former CEO of VMware), the company now has a unified set of offerings under a single umbrella name.

Along with the rebranding, Google announced a number of enhancements to G Suite. Many of the new capabilities leverage machine learning and AI-type efforts to create new features. For example, for people who don’t understand how to do formulas in their Sheets spreadsheet app, Google is starting to incorporate more natural language processing that can convert text requests into formulas.

Google also announced Team Drives, a new app optimized for storing and sharing files across a team of workers. The bottom line is Google, like Apple, is making a renewed pitch into the enterprise because growth in the consumer market has stalled or even started declining. It remains to be seen how successful the company can be for business applications and services but clearly, there are focused efforts to try and create new opportunities.

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Carolina Milanesi

Carolina is a Principal Analyst at Creative Strategies, Inc, a market intelligence and strategy consulting firm based in Silicon Valley and recognized as one of the premier sources of quantitative and qualitative research and insights in tech. At Creative Strategies, Carolina focuses on consumer tech across the board. From hardware to services, she analyzes today to help predict and shape tomorrow. In her prior role as Chief of Research at Kantar Worldpanel ComTech, she drove thought leadership research by marrying her deep understanding of global market dynamics with the wealth of data coming from ComTech’s longitudinal studies on smartphones and tablets. Prior to her ComTech role, Carolina spent 14 years at Gartner, most recently as their Consumer Devices Research VP and Agenda Manager. In this role, she led the forecast and market share teams on smartphones, tablets, and PCs. She spent most of her time advising clients from VC firms, to technology providers, to traditional enterprise clients. Carolina is often quoted as an industry expert and commentator in publications such as The Financial Times, Bloomberg, The New York Times and The Wall Street Journal. She regularly appears on BBC, Bloomberg TV, Fox, NBC News and other networks. Her Twitter account was recently listed in the “101 accounts to follow to make Twitter more interesting” by Wired Italy.

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