It’s clear from Mobile World Congress that tablets are the pivotal product in the mobile space. All the financial analysts have estimated iPad growth will beat that of the iPhone. You can tell that everyone is frightened of an Apple market sweep by the fact that tablets are being rushed out for display with neither pricing nor availability noted. Part of this is the fact that the tablet players are still looking at carrier deals and don’t want to spoil any negotiations. But another issue is that Apple competitors are just not ready. Android Honeycomb is the first tablet-sensitive version, WebOS is just emerging from its new HP parent, and nobody is sure what form factor makes sense or how important the enterprise is versus the consumer.
Smartphones and tablets might become the next battleground between traditional players and the emerging China competitors. ZTE is going to ramp smartphone production and is promising models under a hundred bucks. I’ve also heard that both ZTE and Huawei are looking hard at the tablet space, both focusing on an Android model. The story is that there won’t be a big push by either until late this year, but you never know.
The entry of either of these players could throw a big wrench into the market because both might be inclined to offer a very cheap WiFi-only model that would decouple tablets from carriers on a larger scale. That could confound the strategies of the current giants, though some (like Apple) already have a pure WiFi capability. The reason for vendors liking the carrier strategy is the subsidy, which gets the price down and increases acceptance. If somebody does that without the subsidy, all bets are off.
HP finally made an announcement of WebOS-based products derived from the Palm DNA, but the announcement was hardly earth-shaking. A small Pre-like cellphone/smartphone and a 9-inch tablet were announced, but no pricing or release dates or carrier deals were firm. Thus, the whole thing looks like a place-holder, initiated about six months after the time for place-holding was past.
HP needs to make something of WebOS and the Palm deal, and it needs (more than Microsoft) to be successful in the appliance business. HP didn’t offer anything that would be truly compelling.
The nine-inch tablet is HP’s biggest gamble and hope. It takes on the iPad more directly than most other tablets, which focus on the 7-inch form factor, but corporations tell me they like the smaller tablet, and HP has a much tighter relationship with the enterprise than with the hip consumer.
The website positioning is clearly targeting the consumer too, so HP is doubling down and chasing Apple in its core market with a comparable product. There are some interesting features: wireless keyboard and wireless integration with the HP phones, but whether they’ll sustain the product in a market that will be really hot by the time HP even gets a product in the field is another matter.
“Half a loaf is better than none” is an old saw, but it sure seems to describe the newest mobile development—the Microsoft/Nokia pact. The pact is being hailed and panned depending on perspectives, but maybe it deserves it because it’s not the whole solution for either party. Both companies probably know that and are gambling that this step will win them enough time to think of the right answer. But that may be behind both companies now, and maybe forever. Half a loaf may be no loaf at all.
For Nokia, the deal gives them a mobile platform that has a partner in the most critical smartphone market—the U.S. It offers Nokia developer cred, so to speak, and it acknowledges in a backhand way that Nokia needs a marketing partnership to be cool (its homeland climate notwithstanding). For Microsoft, the deal offers the promise of a much faster ramp on Phone 7 through a conduit with the largest provider, and a much-needed boost to 7’s credibility in an ever-more-competitive mobile OS space. It sounds like a win-win, so why am I so down on it? Continued »
Alcatel-Lucent announced its earnings yesterday and the results were a sharp contrast with Cisco’s, sending Alcatel-Lucent’s stock up more than twice the percentage that Cisco’s fell. The most impressive fact was that revenues increased in all geographies and product sectors.
If you couple this with Alcatel-Lucent’s lightRadio announcement, too late to impact the latest numbers, you wonder whether the company may not be finally getting it together. Another implication is that if nobody is effectively linking service opportunities vertically through the network, then the guy with products in every part of the network has an edge. For Cisco, that may be another reason to get serious about service-layer strategy.
Cisco’s numbers were a big disappointment to investors, and they focused on two issues that are key for Cisco (and the market) at this point:
- Cisco’s gross margins were off, and that’s likely due to discounting forced on Cisco by the competition.
- Cisco suffered in the critical switching space, the place where most enterprise investments and the key data center investments would be likely made. Even service providers today are more likely to buy switches or switch/router gateways than pure routers. Thus, it seems likely that either the market is unexpectedly soft or that Cisco is losing share here.
I think it’s the latter. The problem Cisco has is the classic incumbent market leader problem. It can’t accept organic sector growth; it can’t hope to gain market share, and so it has to look for adjacent opportunities. The problem is that these are proving harder to grow quickly than Cisco had hoped, and in the meantime, the lack of focus on core business sectors has created a greater risk of market share loss. There are plenty of drivers for that outcome, too. Continued »
Cost matters. Nowhere is that more true than in telecom, and in mobile broadband in particular. Operators are trying to manage what’s clearly a decisive shift of their own revenue/profit potential from wireline to mobile, and to manage the cost of creating and sustaining customers with ARPU. One of the key elements in this shift is the feedback loop created by ubiquitous mobile broadband, a rich inventory of new appliances like smartphones and tablets, and human behavior. With different tools, we do things differently, and planners are discovering that in mobile broadband, one difference is the way cell planning has to take place. Alcatel-Lucent announced a revolution in cell technology with lightRadio, a completely new way of looking at mobile radio networks that’s tuned to the real-world changes in broadband consumption that tablets now drive.
The basic notion of lightRadio is to make cellular antennas more “populist”; something you can stick on a wall or a light post or a traffic signal or even a billboard. The ability to deploy the antennas to ad hoc sites is created in no small part by their superior economics, but also by their significantly smaller size. The combination means that it’s possible to stick a dozen cells in a small downtown area where it might have been difficult to put five in the past. That means more than double the potential RAN bandwidth available to customers, and at significantly less than double the cost.
The question in my mind now is how much further Alcatel-Lucent might take its mobile revolution theme. Managing RAN cost-effectiveness is critical for the mobile broadband space, but all cost management strategies eventually fail, and all vendors that rely on them become commodities, or worse. For Alcatel-Lucent, the question is whether it can link the disparate elements of its Application Enablement story to the lightRadio picture, and thus capture the mobility/behavior symbiosis for its customers. If it’s going to do that, it will need to move quickly. Monetization strategies at the service layer will be reaching a critical transition point from planning to execution in the second half of this year, and there’s little time to wire the RFIs and RFPs in your favor.
There are some new indications that the momentum of the web is shifting more decisively toward content, but not in the simplistic “content is king” sense. What’s happening is a combination of fairly complicated and interrelated shifts, and these are gradually changing the way the online business model works. How that will impact the online market players is yet to be seen.
One obvious shift is the increased interest of portal players in having their own content, something that we can fairly say is extended into the TV space by the recently approved Comcast/NBCU deal. Ads have to live in something that consumers want in order to be pulled into view, and so all ad sponsorship (and pretty much all of the online world) has to have that magnetic content.
It used to be that you could act as a portal by simply aggregating everyone else’s content, a move that played to early desire by practically every business and content producer to have a web presence. AOL’s decision to buy the Huffington Post (a growing liberal media site) reflects the reality that most content sites are now looking at monetization on their own. That means that portal/aggregator sites have less to work with—unless they start becoming producers. Continued »
One of the issues that now faces the networking market is the fate of Nokia, the once-giant smartphone and networking company that has seemed to stumble in every market race for the last couple of years. There have been all manner of analyses of why this has happened, but they’ve all (in my opinion at least) missed the most critical point because they’ve focused on symptoms of the decline and not causes. The cause of Nokia’s problem is its culture.
Tech companies in general, and companies that tend to sell to large conservative buyers in particular, become accustomed to serving a market that’s supply-driven. The buyer sets the goals based on formal (and protracted) planning processes, and the seller fills orders. There’s a nice horizon out there, clearly visible, and everyone can see the path to it. The Bell System rules; build it and they will come.
But not any more. Continued »
Cisco has again indicated that what it calls “ambient video” (meaning user-generated content) is going to put enormous demands on the network of the future. But like the political process, Cisco is light on realistic solutions to the problem.
Sure, you can argue that to fix traffic congestion you buy routers (a logical strategy for a router vendor to propose) but the real problem again isn’t what it appears to be on the surface. We need to know how to pay for the routers, and ambient video has the smallest monetization potential of all types of video because nobody is prepared to spend much to advertise in that kind of material.
Our research says that only about 0.04% of all the video uploaded by consumers has any potential for ad monetization, and even with that, there’s the question of how the ad money ever flows to the network operator to pay for those routers.
Absent a solution, the only near-term measure operators can adopt is to put price pressure on the gear to improve ROI even when the “R” part isn’t growing.
The shape of the networking industry has long been determined by forces on the outside, and two powerful players there are undergoing management transitions. Apple is losing (at least temporarily, though we hear management expects Jobs’ departure to be permanent) its charismatic CEO, and Google is switching its politically connected “professional” CEO in favor of Google founder Larry Page. How much these changes will impact the industry and the companies involved will surely be the focus of much discussion, but we’ve got to weigh in with our own views since both Apple and Google are truly seminal forces.
Apple has, more than any other company, transformed the relationship between users and networks—by transforming the instruments that connect the two. Anyone who has worked with, or inside, Apple knows how much Jobs has shaped the company and how much his vision of the future has dominated Apple’s planning. But his style has made it difficult for Apple to do any succession planning despite the state of Jobs’ health, and many inside Apple have suggested to me that charisma and determination have more often slipped into intransigence in recent years. Apple’s vendetta against Adobe’s Flash, for example, have put the company into a position of supporting HTML5 when it’s clear that HTML5 is more a benefit to the browser-based Google model of the future than to the Apple app-based model. In fact, the iPad/Phone incumbency is rendered meaningless if all portable apps are nothing more than URLs into an HTML5 world.
In the case of Google, things are a lot more complicated. Eric Schmidt isn’t a charismatic figure, and he’s generally seen by people in the Valley as a bit of a stuffed shirt, a businessman and not a real tech guy. Brought in to add some “maturity” to a management team that investors tended not to trust, Schmidt championed a number of things outside the normal range of an online search giant—most conspicuously stuff like cloud computing and enterprise services. He’s seen as having let social networking languish, losing the space to Facebook. Some say he didn’t back Google Wave properly (others say he promoted it too much). In any case, Schmidt is now being replaced by Larry Page, one of the “infant” founders, and there’s a lot of talk that this is going to prevent Google from “going Yahoo.”
It won’t, because Schmidt isn’t the problem. Google is now a public company, a company that has to make money for its shareholders either through stock appreciation or through dividends. I’ve said for years that there’s a fundamental problem with an ad-revenue model—the total value of all advertising can grow only at the pace of GDP, and gaining market share to show strong growth invites (as Google has already seen) regulatory scrutiny. Google really needs to transform itself, and it’s not clear that Page is the guy to do that.