HANDHELD G&K GAME UPDATE
1. Introduction
The Handheld G&K Game was set up to identify and track potential Gorillas and Kings in the emerging handheld field. Handhelds are loosely defined as portable devices that offer computing, web access, as well as wireless data and voice communication. By this definition, both PDAs (personal digital assistants, or handheld computers) and wireless smart phones qualify. Ideally, companies in the Handheld Game derive majority of their revenues from handhelds, but the Game also includes companies with technology that could dominate the handheld market.
I'll provide a periodic update to the Handheld Game. The purpose is to review significant development in the handheld field, to examine the performance of the Game, and to make necessary adjustment to companies included in the Game. Since this is the first update, I welcome your feedback on the format and content.
2. Latest Handheld News
Handheld OS Gorilla Battle
Although Palm has dominated the PDA OS (operating system) with 80% market shares, it's facing a tough battle again Symbian in the smart phone OS market. Backed by major wireless phone manufactures, Symbian's Epoc OS is the leader in this bigger market segment. Since users of browser-enabled smart phones are forecasted to soar from 1.1 million this year to 79.4 million in 2003, while Internet-capable PDA users are expected to increase from 5.2 million to 12 million in the same period (data from yahoo.cnet.com, it's vital for Palm OS to have a strong presence in the smart phone OS area. This is the reason behind Palm's recent alliance with Nokia and Motorola.
In October, Nokia announced it will license the operating system and user interface of Palm Computing Inc. and employ the software in pen-based smart phones that will ship in the U.S. market in 2001. In the wake of the announcement, Palm and rival Symbian said they will work with Nokia to create smart-phone designs that incorporate software from both companies.
This month, Motorola announced a similar license agreement to use Palm OS in Motorola's lineup of wireless Web devices. At the same time, Motorola said it remained committed to Symbian. Some analysts speculated that Motorola might use Symbian's 32-bit operating system rather than Palm's 16-bit version as the base for its wireless Internet products, and then overlay Palm's user-friendly pen-based character recognition interface.
It seems that, even when Palm OS is making progress in the smart phone OS front, the market is forcing Palm and Symbian to cooperate while compete for the handheld OS gorilla position.
Palm PDA Tornado Watch
3Com reported on 12/21/99 that its Second-quarter sales of Palm devices increased 50 percent from last quarter to $260.9 million. The growth rate indicates the Palm PDA may have already entered tornado. The following news shows the rapid expansion of Palm partner list and its value chains:
In the SEC filing for an initial public offering early next year, Palm said Motorola, Nokia and AOL had agreed to purchase up to 4.5 percent of Palm stock.
Sony and Palm will collaborate to develop a "next generation" handheld platform that uses memory storage technology from Sony and the Palm operating system. The new handhelds will have audio-visual capabilities and will focus on providing wireless communications. Sony and Palm will work together on a new version of the Palm operating system that enables Palm-based devices to take advantage of Sony's Memory Stick technology, as well as other unnamed Sony technologies.
OmniSky, a 3Com wireless start-up inks a deal with AT&T to offer wireless Internet service to Palm handheld users. The new service will provide Palm users Web access and email.
To advance its vision of Net devices everywhere, IBM and the online pharmacy PlanetRx announced a deal that allows virtual shopping via Palm handheld devices.
Qualcomm Sells Handset Manufacturing to Kyocera
Qualcomm sold its mobile phone manufacturing division to Japanese handset maker Kyocera Corporation last week. The deal transfers Kyocera from a leading Asia CDMA handset manufacturer to a global player in mobile phone, especially in wireless web-enabled smart phone market. The acquisition gives Kyocera a solid production facility in San Diego, with access to local CDMA engineers and other talent, as well as strong U.S. sales and distribution efforts. At the same time, Qualcomm can finally focus its strength into developing wireless transmissions technology. Qualcomm recently started testing its new HDR (High Data Rate) technology, and it has teamed with Microsoft on a wireless data joint venture. After the deal, Qualcomm will continue to make money by selling CDMA chipsets to several phone manufacturers, while reaping royalty fees from phone and chipmakers that license its technology to make their own products.
Microsoft Plays Catch Up
Mighty Microsoft has been struggled in its attempt to dominate handheld OS. Its latest strategy to leverage its power into the handheld arena is to develop mobile browser for Ericsson's web phone. The new browser, called Mobile Explorer, will be a simplified version of Microsoft Internet Explorer. Designed as a bundle of services, applications and back-end software that will enable cell phone manufacturers and service providers to offer a number of wireless Internet options, Mobile Explorer will be used by Ericsson in upcoming cell phones.
Mobile Explorer is considered a threat the current mobile browser leader Phone.com. The latter's stock price has been under pressure since the news announcement. However, the outcome of this royalty fight is far from determined. Given its track record on Windows CE, Microsoft is not invincible.
3. Handheld G&K Game Review
Handheld G&K Game started on 12/13/1999 with $100,000 initial investment. Four companies were selected for the Game. Their weighting in the game was: 3Com (33%), Nokia (33%), Qualcomm (17%), and Phone.com (17%).
Using today's last trading price, I summarized the performance of the Handheld G&K Game vs S&P500 and Nasdaq as below:
Handheld G&K Game: +10.5% (COMS+2.8%, NOK+9.5%, QCOM+57.8%, PHCM-18.7%)
S&P500: +3.4%
Nasdaq: +10.5%
For the new millenium, I plan to include two new companies into the Game. The first one is Kyocera, which, like Nokia, is a king candidate for the smart phone. My original thought was to have Kyocera replacing Qualcomm, which exited smart phone manufacturing. But the final decision is to keep Qualcomm because its HDR technology may become key for faster web access for the wireless smart phone. The second addition is ARM, which licenses high-performance, power-efficient RISC (reduced instruction set computer) microprocessors used in mobile phone handsets and a variety of handheld devices. Power-efficiency is one of the critical elements for the technology to be adapted in handhelds. Windows CE failed in handheld OS competition simply because it chews up batteries like crazy.
So, the Handheld G&K Game now consists of the following companies, together with the new weighting, and the game they are playing:
3Com (25%): Handheld OS gorilla & PDA royalty.
Nokia (25%): Smart phone royalty & handheld OS gorilla (with its Symbian holdings).
Qualcomm (12.5%): Wireless web transmission gorilla.
Phone.com (12.5%): Wireless web browser royalty.
Kyocera (12.5%): Smart phone royalty.
ARM (12.5%): Handheld microprocessor gorilla.
Since the Game is 100% invested, the adjustment requires selling part of existing holdings. I'll use tomorrow's closing price to determine the transition price. $8 will be deducted from each transition.
That's it. Thanks in advance for sharing your thoughts and supporting the Handheld G&K Game!
Happy New Century!
John Zhang |
