I think RIMM and NOK are takeout targets, but most companies with the cash to take them out will be waiting for them to get cheaper before they jump. RIMM has basically destroyed their relationship with their carriers customers. Unless the BB10 is so revolutionary that customers will be lining up to buy them, most carriers will not be jumping up and down to support them nor subsidizing their new products to a great extent. Keep in mind the phone consumers pay $99 for usually cost the carriers $300 or more. That is why there are 3 year contracts so they can at least get their money back. RIMM will have to pay large subsidies to get their product out there for the new product. I have not heard of them bring in a whole new industrial design team and they have never been leaders in new market trends but follower beside their original core technology
They used to make a lot of money on their exchange servers and get a royal off any traffic sent through those servers. The softening of their security and privacy policies in the middle east and the fact that carriers have been adopting alternatives to paying the royalties to RIMM means that business in under attack also. Their bright spots have been their growth in foreign markets. That growth has slowed as those economies slow. Nokia's dominance of the foreign markets have not be able to help make them be profitable because of the lower margins than in westernized markets. Given that backdrop it will be hard for RIMM to do better than NOK.
Microsoft has only a single digit market share in the smartphone market and has shown that they don't cooperate with their partners well. The fact that current Nokia phones will not be upgradable to Windows 8 and the recent new tablet announcement without letting potential partners in on early designs so they could announce a suite of products in indications of that. NOK's only hope now is to offer free upgrades to existing phone user to maintain any sense of brand loyalty.
Keep in mind this is a low margin business as the drop in price and the slower growth in tablets shows. Even applications are a low margin business as consumers are used to free or $1 applications. Most applications can grab consumers attention for 60 days and then it is old news That means you need to recover your development cost and make most of your money in that timeframe. Most consumer have at most 5 applications on their phones that they used on a consistent basis.
We talked about Apple being a cult. It is more of a fashion company than a technology company now. MSFT, RIMM and NOK have just not been culturally able to make the shift.
Even if MSFT is able to gain more share some of the explosive growth in these sectors is over. People are starting to wonder why they really need it and in light of the weak economy if they can afford it. Wanting it and needing it are two different things. A designer handbag cost 10 time more that a generic handbag because of the hype machine that has to be paid for keep people believing they need it as opposed to only wanting it.
I did not see a killer app or device at CTIA this year. The big push to NFC for payment but again how many people need it. Cash works pretty well and the difference between a cash transaction and the NFC transaction is not that much faster. There has to be value to the consumer at the end of the day.
>>>>>>>>>>>>>>>>>>>>>>>>
With $60B in cash, Microsoft is set to blow up its business Don't be fooled. Microsoft's entrance into the tablet market shows nothing less than a willingness to overhaul its business model.
by Marty Wolf
July 1, 2012 7:00 AM PDT
Microsoft's Steve Ballmer introduces the Surface tablet in Los Angeles, Calif.
(Credit: Josh Lowensohn/CNET)
Editors' note: This is a guest column. See Marty Wolf's bio below.
With the recent announcement of Microsoft's new Surface tablet, the decades-old network of partners that Microsoft and Intel built just got a formidable new asset-rich competitor: Microsoft.
Like all successful partner networks, Wintel thrived because all of the players -- the two principals, OEMs, the channel and other stakeholders -- benefited individually from the association while contributing to the growth of the network itself. The Wintel platform is still the dominant desktop and laptop computing architecture.
But with smartphones, tablets and the cloud replacing desktops and laptops with remarkable speed, it's a brand new post-PC world. And in the most stunning development imaginable, Microsoft's Surface announcement confirms that Steve Ballmer and company are willing to do whatever it takes to achieve success -- including blowing up the partner network Microsoft helped create -- and that has been the linchpin of the company's dominance for the past 30 years. And it has the financial staying power to do it.
How much staying power? Almost $60 billion.
Even though margins from its desktop business peaked in 2010, Microsoft still has 90 percent of that market and, as of the most recent quarter reported, assets of $118 billion -- third behind Apple and HP -- including $59.5 billion in cash and cash equivalents.
Naturally, there's been a lot written about Microsoft and Surface lately. One is Charles Cooper's CNET article entitled: As Microsoft retools, Ballmer has chance to rewrite his CEO legacy.
At the core of Cooper's analysis is how Microsoft is going to compete with Apple: sleek new Surface tablets, Windows Phone 8, which will ship in next-generation Windows Phones, and possibly new capabilities such as a complete mobile payment system. As Cooper noted, "Take that, Apple."
Certainly, competing with Apple is one driver of this gutsy make-it-or-break-it move for Microsoft. But in my view, the core of the story is really, "Take that, OEMs and channel partners."
To be fair, there are some who think that Surface is merely an attempt by Microsoft to get its OEMs to step up with better hardware product designs and that it will exit the hardware business as soon as they do. This is a seriously misguided view that partners would do well to ignore.
Microsoft's new world view
What's happening here is Microsoft is looking at this new world through a totally new lens -- and it doesn't like a lot of what it sees. The world is changing fast, yet its existing partners are too slow and add too little value. They've been reduced to speed bumps on what Microsoft perceives as its road to success.
Also in the post-PC era, staying close to the customer is everything. It's the only way to ensure a superior customer experience, which -- as Apple has demonstrated -- is a huge competitive advantage.
Apple achieves this by designing the hardware and the software for seamless integration and exercising strict control over the entire Apple ecosystem -- sales, distribution, services and support and even carrier partners. In contrast, until now Microsoft has pursued a strategy of licensing its software to hardware vendors, maintaining modest control at best over product and the consumer experience.
And here's one more factor driving this new Microsoft strategy. Owning the ecosystem is the best way to protect the monopoly-style rents Microsoft enjoys on the desktop. If delivering a great user experience is the customer benefit of owning the ecosystem, the vendor benefit is customer lock-in. If you want access to Apple's elegant design, interoperability, great apps and content, and intensely loyal customers, then Apple is the only game in town. In return, Apple takes a piece of everything that flows through its hardware.
So starting now, Microsoft will openly compete for customers with its longtime OEM hardware partners, including Lenovo, Acer, Dell and HP. That's terrible news for OEMs immediately. And that is just the start.
Microsoft also will move to displace its distributors and resellers, starting with distributors. What distributors provide today -- multi-vendor time and place, inventory and credit -- are low-value and low-margin services that Microsoft can easily duplicate, so it will. It will take a few more years for Microsoft to supplement resellers' retail storefronts, customer relationships and higher value services offerings, but that will happen too.
I don't know if Microsoft can pull this off. I haven't seen a company succeed at a transition of this magnitude since IBM moved from commodity hardware to enterprise services or GE closed the book on light bulbs in favor of aerospace and other high-tech breakthroughs. It's that big.
But make no mistake about it: as Microsoft focuses its considerable resources on a long-term strategy for winning in the post-PC era, the impact on Microsoft's partners will be seismic and swift. |
