Unpacked: The Week’s News

Microsoft Sells off Feature Phone Biz – Carolina Milanesi
Two years after the acquisition of Nokia, Microsoft has sold its feature phone business to FIH, a subsidiary of Taiwanese hardware manufacturer Foxconn, for $350 million. In a separate deal, Microsoft also sold its brand rights on feature phones and certain related design rights to HMD, a newly formed company based in Finland. Concurrently, HMD closed a deal with Nokia Technologies where it was granted an exclusive global license deal to create Nokia-branded mobile phones and tablets for the next 10 years.

Microsoft acquired the feature phone business as part of the deal with Nokia to acquire their smartphone business. The two came as a package. Trying to make the most out of it, Microsoft attempted to have some apps and services run over those phones – Skype being the prime example. Smartphones prices have been declining over the past two years as have feature phone prices. At the moment, you can buy a feature phone for $10 and a smartphone for less than $20. At those prices, the experience a user could have on Skype or Office is certainly questionable due to processor power, screen size, network support and so on. So, featurephones turned out not to make a good impression for Microsoft services.

Featurephones could have also played a “hook” role for Microsoft. The look and feel of Nokia’s feature phones was very similar to Windows — so much so that consumers would have had no learning curve when they were ready to migrate to a Lumia device. Unfortunately, this never played out for Microsoft as, when the opportunity for Lumia closed, so did the opportunity for feature phones.

HMD now has the opportunity to create that path from feature phones to Android smartphones that Microsoft could not with feature phones and Lumia. This is thanks to the agreement HMD closed with FIH who will be manufacturing devices for them.

The Nokia brand remains very popular in markets such as India, Indonesia and the Philippines. What remains to be seen is what differentiation on both design and price HMD can bring under the Nokia brand to have it compete with the myriad of brands the Chinese ecosystem empowers.

What about Lumia? It is clear to me from the release Lumia is also a thing of the past for Microsoft. This does not mean we will not see a Surface phone but I think it is clear Microsoft has no desire to pursue the smartphone market to become the third ecosystem.

Microsoft is better off focusing on capturing consumers through apps and services such as Office, Cortana, and Skype. This approach, along with devices from wearables to AR/VR, could still deliver Microsoft what it needs and wants: consumers.

Android Apps Come to Chrome – Jan Dawson
On day two of Google’s I/O event, Google announced Android apps will soon be able to run on Chrome OS. This announcement builds on earlier ones where only certain apps were able to run this way. Ben, Carolina, and I were in a pre-briefing with the Chrome OS team on Wednesday where this was discussed in more detail and it’s interesting how it works. Without going into all the technical details and to simplify slightly, essentially a form of Android is running in the background, generating outputs which are sent to the Chrome UI and receiving inputs from the Chrome UI sent back to the Android layer. This means, for all intents and purposes, Android apps can run essentially unchanged on Chrome OS, at least at a basic level.

Of course, the vast majority of these apps are designed to run on touch-based interfaces without mice and keyboards, so many app developers will want to do some additional work to optimize their apps for the ways users interact with Chrome OS. But this is, to some extent, an optional step for developers, many of whom will now be able to target a new set of devices.

The biggest boon for this approach is enterprise apps, which had hitherto made it to Android but not to Chrome OS, will now be available there, too. Google is hoping this will help to break down additional barriers in driving enterprise adoption of Chrome OS, especially among knowledge workers heavily dependent on these more specialized apps. The downside to all this is many apps will find their way onto Chrome OS but not receive the needed optimization and poor experiences will result.

By Bob O’Donnell
One of the more intriguing announcements from this year’s Google I/O revolved around bringing Android apps to ChromeOS-based devices, such as Chromebooks. Specifically, Google announced they were bringing the Google Play store and its apps and content to recent Chrome devices in an update to ChromeOS that’s expected to be available in the fall. This is an important update for Chrome because it allows devices to run applications even when not connected to the internet and, of course, dramatically expand the range of applications available. Because Android apps are designed for smartphone or tablets, they won’t necessarily work well in full-screen mode (think phone apps blown up to run on a tablet), but most Chrome users will love the additional options.

The move comes at an interesting time for Google as IDC has reported Chromebooks actually outsold Macs last quarter. While some have talked about how this update will make Chromebooks a real competitor to Windows-based notebooks, I don’t believe most potential buyers will see it that way because the apps aren’t optimized for keyboards, touchpads, mice and other unique characteristics of clamshell computing factors. Existing Chrome users and buyers will definitely appreciate the additional capability and flexibility, but most Chromebook buyers are only looking for simple, low-cost computers. For Android developers, there’s the potential of even more users but the true impact will depend on how much work is required to optimize their apps for Chrome devices. Google has said all Android apps should work (except those that require a phone number—which Google will not allow to be downloaded onto Chrome devices), but making the experience high quality could prove to be more effort than it’s worth.

Google Looking to Bring Daydreams to the Mainstream – Ben Bajarin
Google announced a VR initiative called Daydream this week at their developer conference. The initiative itself is designed to create a base level hardware and software spec to enable a “good enough” VR experience. Their vision utilizes the smartphone in the same way Samsung Gear VR does. Android OEMs will be able to make their devices Daydream-compliant which will require a certain level of processors and sensors.

Google also announced they intend to make a first party Daydream headset which will shake things up in their partner ecosystem. However, I expect a number of Android OEMs to jump into the VR headset game with their own Daydream headsets and likely bundle them with their smartphones to help boost sales and take share.

The big hook here is the VR content which will spring up from the Google Play store. This move is a shot right at Facebook and Oculus, where Facebook wants the Oculus VR ecosystem to be the center of the VR world. My bet is on Google, who also has the advantage of YouTube and the growing VR/360 video content which is gaining steam and will likely continue to as this Daydream initiative grows.

Ultimately, the biggest ecosystem with VR/VR optimized content will be the one consumers gravitate to. From the current crop, my bet is on Google to develop this ecosystem. But as we know, all the relevant players are not in the market yet.

Apple and the Future of Retail – Tim Bajarin
15 years ago, on May 19th 2001, Apple opened their first retail store at Tyson’s Corner near Washington DC. In my original comments to the media, I said I was “cautiously optimistic” of Apple’s chances to make these stores work.

Since then, Apple’s leadership, led by Apple SVP Angela Ahrendts, has taken a hard look at Apple’s current retail success and decided it was time to reinvent it. That reinvention is being manifested in the new San Francisco Union Square Apple store that opens on Sat May 21 at 10:00 AM PT.

The new store’s design is welcoming and open. I got to see it at a small media event Thursday and, during Ahrendts remarks, she pointed out the design of this store is based on what she calls a “Town Square” where people can come, meet, and congregate. This store has new features to set it apart from current stores and looks to be a roadmap for all of their featured stores over time.

First is what Apple calls The Avenue, which is where the tables and products are laid out for people to test. In this area, there will be areas dedicated to helping people with photo issues, music discovery, video projects etc., manned by experts all of the time.

Second is an area called The Boardroom that actually looks like a boardroom and where Apple specialists can help small business customers.

Third is called the Genius Grove. She said the term bar, as used in Genius Bar, denotes a noisy place and this grove, populated with trees, seating and a more serene area, will now be where Apple’s customer service geniuses work.

Fourth is what is called The Forum, an area that seats up to 100 and has a giant screen that can be used for presentations. Starting this weekend, they will offer special presentations from pros in photography, video and other areas of interest to their customers and, over time, include special presentations from some of their popular developers who will show how best to use their product.

The fifth area is called “Plaza” and is an open patio area behind the store that can seat 100, has free wifi, a beautiful fountain, and makes the overall area more city-centered by design.

This store design represents a new chapter in Apple’s retail strategy and will serve as a design for many other store upgrades over the next few years.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

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