The measure of a creative and powerful marketing organization is often best taken when the chips are down. For Hughes Telematics that measure might have been taken two years ago when Chrysler and Hughes agreed to part company with Chrysler in the throes of a Chapter 11 filing.

 

The loss of Chrysler meant that Mercedes-Benz (Mbrace) might be left as Hughes’s lone OEM customer in North America. The loss of Chrysler also looked like the final straw that might bring down Hughes’ once-grand vision of a cross-OEM hybrid telematics system integrating cellular and satellite connectivity. That vision included a hardware module, call centers, service partners and an integrated three-screen solution enabling Web and smartphone access to vehicle information along with remote control.

 

Today, all of those pieces – except the satellite connectivity – are still in play, but Hughes has repositioned itself to address a wider scope of potential verticals (including healthcare and insurance) while still addressing automotive OEM and aftermarket opportunities.  Hughes is approaching the market with a less grandiose and more flexible offering – in-Drive.  

 

in-Drive to the Rescue

 

In-Drive allows Hughes to pursue fleet, insurance or aftermarket vehicle tracking and recovery solutions as a white label provider of software systems capable of supporting wired or wireless modules or even smartphone-based solutions.  The introduction of in-Drive, heralded at the 2010 CES show and even more advanced at the 2011 show in January, showed Hughes bouncing back with a new vision.  

 

Paramount to that new vision is an emphasis on the insurance side of telematics.  Thanks to intellectual property acquired from NetworkCar, Hughes has the most flexible and extendable platform available in the insurance telematics market.  Also thanks, in part, to that technology positioning, the company is engaged with unidentified insurers to bring a next-gen telematics solution to the market.  (Hughes declines to identify any potential partners or the nature of any systems that may be in development.)

 

The importance of the insurance telematics angle ought not to be underestimated by car makers.  Progressive’s launch of its Snapshot usage-based insurance product (http://bit.ly/fu1JCa - Usage-Based Insurance Brings New Competitors to Telematics Market) has the potential to fundamentally change the relationship between insurance companies and their customers.

 

Progressive’s Snapshot product tracks vehicle miles driven, amount of time driven and time of day and calculates speed, though it does not correlate speed to posted speed limits.  The online reporting tool shows these figures along with a calculation of the number of “hard braking” incidents. 

 

The Snapshot reporting tool also displays a graph characterizing the driving behavior as to whether the driver is maximizing MPG correlated to the time of day of that driving activity.  In this way Progressive is opening the door to a new relationship with the customer.  To Hughes’ credit, the company described its own solutions around eco-routing and eco-driving three or more years ago.

 

Hughes Enabling Next-Gen UBI Solutions

 

Hughes’ insurance offering, like Snapshot, might be an OBDII plug in, or it can be implemented in a variety of ways including wireless connectivity.  Hughes is not wed to a particular platform and is capable of deploying its solution on any platform.  More important is the back-end analytical tools Hughes brings to the proposition allowing for everything from traditional safety and security to vehicle diagnostics, emissions, concierge services or family monitoring.

 

The system/service bundles offered by Hughes via in-Drive (http://bit.ly/hOgPcV) include:

 

Automotive Data Services

Telematics

Family Co-Pilot

 

Hughes’ newfound flexibility means the company is free to pursue opportunities in the fleet market as well as in the consumer market.  In fact, thanks to its wireless patents, Hughes could launch its own OnStar-like aftermarket telematics mirror with CAN connectivity for capturing vehicle data if it so chose.  In other words, Hughes could out-OnStar OnStar.

 

Working through insurance partners, Hughes is in position to help its partners redefine that customer relationship.  An insurance telematics device is perfectly capable of providing vehicle tracking and recovery – like LoJack – roadside assistance, navigation and POI assistance, or any of a variety of concierge and vehicle diagnostics capabilities.

 

The vehicle diagnostics capabilities offered by Hughes include vehicle emissions monitoring for inspection purposes as well as the checking of error codes.  In the event of a breakdown, a Hughes-based insurance telematics solution could provide names of nearby approved service or repair providers.

 

The same kind of functionality is true for emergency circumstances.  A Hughes module, provided by an insurance company and equipped with appropriate sensors and CAN connectivity, could alert emergency responders – again, in an OnStar-like fashion.

 

To paint an even rosier picture of Hughes’ renaissance, prospects are good for the signing of a second OEM telematics relationship later in 2011.  Between its improving OEM outlook and robust aftermarket prospects, Hughes is tracing an improving trajectory.

 

Implications:

 

Hughes Telematics’ emergence in the insurance market changes the prospects for this application segment.  Until now, insurance telematics solutions did not stray far from the basic collection and analysis of driving time and time of day – with some exceptions (http://bit.ly/9XRntG - #Allianz Changing the #PAYD #Insurance Game - blog).  The range of solutions available from Hughes for collecting and analyzing vehicle information opens the automotive market to new opportunities for insurers.

 

The fleet industry is already looking at behavior modification-type solutions tied to vehicle tracking.  (http://bit.ly/e94Opj - Behavior Modification Comes to Fleet Telematics from the Cloud)  Progressive has already taken the step of integrating ecological driving elements in its UBI solution.  A wide range of possibilities are available to auto insurers, but there are obstacles.

 

Devices, like Progressive’s, that connect with the vehicle CAN bus via the OBDII port are problematic.  Some cars are known to respond unpredictably to such plug ins and gleaning the necessary data can be a challenge.  The value proposition difference between such a device and one that is not connected to the vehicle is significant.  

 

It is still early days for UBI-based underwriting.  But Hughes participation in this market has the potential to change the market significantly.

 

Progressive Update:

 

This analyst is currently participating in a trial of Progressive’s Snapshot UBI service.  Progressive said it could not provide an OBDII Snapshot plug in for my 2009 BMW 5 Series, but it could provide one for my 2004 Toyota Sienna.  The initial reporting appears below:

 

 

 

 

 

Next week American Honda Motors will introduce its 2011 Odyssey at the Los Angeles Auto Show. The car comes equipped with what the company calls FM Traffic. This seemingly innocuous announcement marks a shift in the industry with wide ranging implications for both automotive radio and on-board traffic information.

Auto makers are confronting major decisions regarding content delivery to the car and the configuration of the center stack. The battle lines for content delivery divide over the question of embedding a telecommunications module or connecting the driver’s smartphone. Smartphone connectivity shifts the data plan burden onto the driver, while embedding allows wider latitude for vehicle data collection by the OEM.

The radio is the beating heart of the center stack and here a struggle is unfolding between and among traditional AM/FM technology, HD Radio, satellite radio and Internet radio. The battlelines are drawn over content delivery, personalization, localization, monetization and flexibility. Honda’s FM Traffic is based on RDS-TMC, a free (to the consumer) traffic data service delivered over the FM sideband. RDS-TMC represents the state of the art in North America for delivering accurate and timely information on traffic conditions. The Honda solution is unique in that it is supplied by the Broadcast Traffic Consortium (BTC), a nationwide group of broadcasters allied with Navteq.

The industry will have to wait until next week to see how Honda has implemented incident and flow messages, but it is likely that Honda and its supplier, Alpine, have added value to the traffic reporting proposition (http://automobiles.honda.com/traffic/). Alpine will also be bringing the BTC RDS-TMC solution to its aftermarket products. Honda is only the second North American OEM to deploy RDS-TMC from BTC, following Mercedes-Benz. More are expected.

The dominant RDS-TMC supplier in North America is Clear Channel, which is partnered with Inrix. The Clear Channel solution is offered by BMW, Volvo, Mazda and a few other OEMs. Honda’s decision is significant given that the company also offers Sirius XM’s NavTraffic service, which requires a monthly subscription. But Honda’s choice reflects several hard truths for the industry:

Truth #1 – The value of traffic data is declining. Once valued at $1/user/month, traffic data has declined in value to 25 cents/user/month or less at the supplier level. For the consumer, traffic information is perceived as free – especially since so much of it is readily available over radio and television broadcast sources as well as from Depts. of Transportation via the Internet. RDS-TMC traffic information is also free (to the consumer) and, therefore, fits this model and mindset.

Truth #2 – RDS-TMC traffic data is better than good enough. Anyone who has used RDS-TMC-equipped navigation systems in a heavy traffic corridor can attest to its accuracy and reliability. Satellite radio traffic information, by comparison, is not competitive – based on this analyst’s experiences. (Some European RDS-TMC data, Germany in particular, is the exception to this.)

Truth #3 – Traffic information services continue to evolve and improve and service providers must evolve along with them. While HD Radio deployment of TPEG traffic data services will be the next step, it will be followed quickly by solutions based on smartphone integration and, ultimately, embedded traffic data platforms that provide for Internet connectivity. All of this is bad news for Sirius XM. The company is already wrestling two alligators – a transition of existing Sirius users to XM service by 2016 (see http://bit.ly/bIWHJ6) and the introduction of Satellite Radio 2.0 in Q4 2011 (see http://bit.ly/bqiU7F).

While managing these two processes, the company is also justifying its existence on a quarterly basis before its investors as a public company.   Traffic data services are key to Sirius XM because they represent the most successful telematics service the company has been able to deliver. Unfortunately, because of the capacity limitations (traffic data for all cities must be delivered down a single connection leading to data being left out due to capacity limitations or delayed due to the carousel-like data transmission) and one-way nature of the satellite pipe, Sirius XM traffic is poor.  

In fact, Sirius XM traffic, based as it is on Navteq’s Traffic.com, has given Navteq’s data service a bad reputation – through no fault of Navteq’s. (This is not to be confused with the city-by-city audio traffic broadcasts provided by Metro Traffic.) Honda’s selection of BTC RDS-TMC is a shot in the arm for Navteq’s traffic team which is looking to bounce back from its reliance on Sirius XM.  The subscriber volume for satellite traffic has been poor as a result of the poor data. Some OEMs do not even offer satellite traffic for their satellite radio systems. This points to a wider problem for satellite radio. The company has yet to find a successful model for branching out beyond talk and music.  

Both Sirius TV (Chrysler) and TravelLink (Ford) are seen in the industry as failed services due to low subscriber volumes. Of course, the business models were also flawed. Sirius TV only offered three channels of rearseat entertainment, a fatal limitation, and most of the TravelLink services – for parking or inexpensive gas – are available on smartphone apps.  Now Sirius XM is setting the stage for Satellite Radio 2.0. In a report to LibertyMedia shareholders last month, CEO Mel Karmazin tipped his hand a bit by referencing the possibility of transmitting local movie times and/or red-light camera info to drivers via satellite radio. He also mentioned enhanced time-shifting technology, presumably from storing or buffering some satellite content.  Other reports regarding Satellite Radio 2.0 suggest more sophisticated search functions for finding particular artists or songs that may be playing at any given time across the voluminous satellite radio dial. Some industry sources say SR 2.0 is expected to have 25% more capacity. It’s not clear whether any of these SR 2.0 possibilities are true, possible or even compelling to future subscribers. 

But Karmazin has a compelling story for investors. He told them last month that OEM penetration of satellite radio as a percentage of new cars was 60% and that the number of satellite radio factory-enabled vehicles in operation in North America was approximately 30M and on a path to hit 80M by 2015. For this reason, the company is continuing to promote certified preowned vehicle programs for satellite radio re-activation – which is seen as a key to future growth.  Karmazin further notes that Sirius XM has some of the lowest subscriber churn in the media landscape (1.8%), has one of the largest subscriber bases (19.5M, second only to Comcast), and now captures 15% of overall radio revenue ($2.8B) vs. $15B for terrestrial radio, and ~$1B for Internet radio/music services. He also notes that satellite radio’s subscriber revenue is $2.8B vs. ~$300M for Internet radio which translates to per subscriber revenue (annual 2009 est.) of $136 vs. $1.25/user for Internet radio and $10-$20/listener for terrestrial radio. 

Conclusions  It’s worth noting that Karmazin made no reference to either HD Radio or to Sirius XM’s stated transition to XM by 2016. While the present looks promising for Sirius XM in the form of rising vehicle sales and the launch of new certified pre-owned vehicle programs, the long-term outlook is less rosy.  The wider deployment of competing and free traffic services should put the last nail in the coffin of Sirius XM’s telematics ambitions. Embedded telematics services and smartphone connectivity, combined with FM- and HD Radio-based solutions, will obviate the need for any Sirius XM data services.  A new front end to Sirius XM’s audio content will provide a short-term lift in allowing for easier access to specific types of music. And premium sports and personality content remain a demand wild card and, combined with nationwide reception, preserve the satellite value proposition.   But car makers are still not likely to integrate satellite radio into the core of their center stack platforms, meaning satellite radio will remain an add-on, particularly given ongoing system upgrades. In a matter of years, cars will be shifting to Internet connected solutions allowing for personalization and location awareness, two propositions with which satellite radio cannot compete. Additional insights: http://bit.ly/dniNxa - Navigation Heuristic Evaluation: Telmap5 – Schreiner – Automotive Consumer Insights http://bit.ly/95NCoW - Automotive DMB Digital Radio: Marketing Strategies an Increasing Priority – Blight – Automotive Multimedia and Communications Service http://bit.ly/dtRE5C - Automotive Telematics Services: Shifts in Pricing and Monetization Expected – Canali – Automotive Multimedia and Communications Service http://bit.ly/bwdwcW - Connected Vehicle and Vehicle Device Connectivity System Database by Feature, Region, and Price 2010 – Canali – Automotive Multimedia and Communications Service http://bit.ly/d0aLhq - Connected Vehicle Telematics: Car Maker Profiles – Canali – Aumotive Multimedia and Communications Service http://bit.ly/deumcd -# Traffic Data Quality Will Determine #Telematics Winners - Lanctot - blog - Strategy Analytics

Microsoft intends to clear the air at Convergence in Detroit this week with the launch of Windows Embedded Automotive 7.0, the merged automotive operating system that takes the place of MS Auto and Windows Automotive – in all their versions. An earlier version of the OS, Windows Embedded Automotive, will be featured in the information hub in Nissan’s Leaf electric vehicle, according to Microsoft, and will be joined in the spotlight by Silverlight for Windows Embedded, Microsoft’s alternative to Flash. Also highlighted at Convergence by Microsoft will be Fiat’s plans to bring the Fiat 500 to the U.S. along with its Blue&Me 2.0 (not it's official name) interface with support for the iPod. Ford and Kia will likely be making announcements related to their Microsoft implementations and Microsoft noted its participation in 12 different device platforms over the next 12 months from a number of different car makers reflecting the company’s continuing commitment to the automotive business. The announcements and enhanced presence at Convergence concludes multiple reorganizations at Microsoft which saw the departures of senior executives on the automotive team and a consolidation of all embedded activities under a Server and Tools group. Existing OEM and Tier One partners with Microsoft solutions include Ford, Fiat, Chrysler, Kia, Mercedes, Honda, Nissan, Alpine, Mitsubishi, and Clarion. Microsoft will use Convergence to demonstrate various Silverlight development tools for handling prototyping and to accelerate testing within the development and approval process while allowing OEMs to create executable specifications for suppliers. Tools will also be shown for a thread priority-based tuning system that allows for handling and logging errors during development. Microsoft will also highlight advances in its Tellme embedded speech product, currently being deployed by Kia in the Uvo. The new recognizer can handle eight languages with speaker independence while providing for the tuning of recognition for individual users. Also new for the embedded Tellme is an SMS reply function capable of performing fuzzy logic matches to a set of predetermined responses. Separate from the Convergence activities, Microsoft is pursuing automotive opportunities for its Bing search engine as well as for Tellme as a server-based voice recognizer. Both the Ford and Fiat Microsoft solutions provide for application downloads and updates, though Microsoft has not created its own automotive app store model. The Nissan Leaf information hub is the most significant of the announcements at Convergence. The hub will handle navigation, charging, radio and HVAC functionality in the car. The hub implementation suggests the potential for a wider Microsoft engagement with both Nissan and Clarion. As Nissan moves closer to realizing its connected vehicle vision outside of Japan, the company can be expected to move beyond its current reliance on VxWorks. Conclusion: Microsoft remains a credible alternative to QNX and the various versions of Linux distributions in the automotive industry. The MeeGo operating system created from the merged elements of Nokia’s Maemo and Intel’s Moblin platforms and adopted by the Genivi Alliance is not expected to be available in even a beta version until April 2011. Some Genivi members say an automotive version of the OS may be out before the end of the year. Google and its Android operating system continue to flirt with the automotive industry – playing hard to get. Google is interested in the automotive industry for the emerging search-related opportunities and for the potential to sell traffic and cloud-based location-aware applications, but the company still refuses to certify or support Android for embedded use. In spite of Android’s orphaned status in automotive, Continental and Parrot continue to carry the flag, secure in the knowledge that Android can still claim the largest and fastest growing developer community – key to unlocking app store opportunities. Microsoft’s step by step, implementation by implementation, customer-focused approach has left some customers and potential customers scratching their heads about the company’s long-term commitment to automotive. The headquarters reorganizations continue to raise questions, and yet Microsoft forges on, enhancing and refining its solutions and adding to its portfolio. Just the past year has seen Silverlight and Bing added to the mix along with Tellme. After years of wavering it appears that Microsoft has finally taken its vows and accepted its automotive market responsibilities. By now, the company has learned that the automotive contest is not always won by the swiftest, but by the supplier with the most staying power – and it looks like MS is in for the long haul. Further insight: Smartphone Market Evolution and the Automotive Opportunity Implications – Mark Fitzgerald – Automotive Multimedia and Communications Service - http://tinyurl.com/34hldb5 Automotive Connectivity: Beyond Bluetooth Solutions – Mark Fitzgerald – Automotive Multimedia and Communications Service - http://tinyurl.com/2gx88eo

Mid-week thunderstorms in Detroit appeared to be Mother Nature’s comment on momentous industry events, but it was Harman International that stole OnStar’s thunder with its announced acquisition of Aha Mobile. While OnStar celebrated its 15^th anniversary by announcing plans to offer voice-enabled access to text messages and Facebook, Harman’s Aha Mobile acquisition introduces the prospect of the first cloud-based telematics solution. The timing of the two announcements was extraordinary in juxtaposing two very different visions of the future of telematics. It showed OnStar still struggling to create a solution capable of stimulating organic consumer demand, while Harman is showing the way toward a platform capable of responding to and moving with changing consumer requirements. The Harman announcement also defined a third path – different than both the dominant OnStar embedded and Ford Sync connected solutions. It is a path likely to rapidly attract adherents and converts – especially given Harman’s command of the high-end infotainment market. The greatest challenge facing the telematics industry is the inability to get consumers to pay for additional subscription services. This shortcoming is manifest in the free months and years of service that are offered to prospective telematics subscribers and the corresponding retention rates of, at most, 50%. The free service is a lie, of course, since the system cost is already baked into the price of the vehicle. But the proposition is described to the customer as a giveaway, which has multiple negative connotations. As a giveaway, the telematics service is immediately perceived as either not having any value OR as something the customer will not normally request and be willing to pay for. This is a very shaky foundation for any industry. In fact, giving away anything is usually the first step toward that product or service being discontinued – with the possible exception of navigation. A good example of this phenomenon is satellite radio vs. Internet radio. Satellite radio continues to be subsidized by the service provider with a free subscription period for the consumer. The high cost of the service and hardware is masked by the supplier’s subsidies, but the cost remains and it is because of this cost that satellite radio is increasingly a consumer-selectable option or is no longer offered on a growing proportion of cars. In contrast, the millions of users of Internet radio services have demonstrated that they will go out of their way and pay handsomely for the privilege of accessing this service. Car makers and carriers could not kill consumer demand for Internet radio even if they wanted to. The fact that satellite radio is subsidized and offered “free” to the consumer is a long-term predictor of failure. The automotive telematics industry faces this same prospect every day. Rare is the Mercedes, BMW, GM or Toyota customer that crosses the dealer threshold requesting telematics services. In fact, dealers are hesitant to mention these services because of the occasional customer that might want the system removed from the car! (Don’t believe everything you read about OnStar’s claimed influence over GM vehicle purchases. Those messages are coming from OnStar, not GM.) It is in this context that OnStar announced the prospective capability for drivers using the Gen 9 system to receive audio Facebook updates and to receive and send text messages. The group also announced what it described as a platform offering the “potential for open development.” The focus on Facebook showed OnStar reaching out for an application that will offer users daily relevance – something missing from run of the mill safety and security applications. But this laser focus on a single application misses the greater goal of enabling GM customers to safely access any application they may desire. OnStar scores big points for identifying the most popular application within its target demographic, but what it misses is the ethos of that customer base which is freedom and personalization. This is where Harman scores with its Aha Mobile acquisition. While OnStar is testing and recruiting university students to cook up creative application concepts, Aha Mobile has already created a cloud-based location aware platform purpose-built for automotive environments, that is voice-enabled, traffic-data enhanced and ready for integration into automotive solutions. More important, the Aha Mobile strategy is to rapidly deploy application programming interfaces to enable the latest applications regardless of what they may be. In other words, it isn’t all about Facebook. Aha Mobile’s success is built on a portfolio of content and applications delivered in a manner suitable and responsive to the user. There are other Aha Mobile-like platforms, such as Aloqa, representing the latest wave of cloud-based aggregation solutions. But Harman’s acquisition, coming on the heels of 18 months worth of divestitures of divisions, facilities and personnel, reflects its importance in the context of a telematics market seeking that elusive objective: organic consumer demand. It will be interesting to see which Harman client is able to push to the front of the line to deploy the Aha Mobile solution: BMW, Mercedes, Chrysler, Toyota, PSA, Volkswagen, Audi or Hyundai. Might OnStar be interested in deploying Aha Mobile? What about Ford? With the acquisition of this tiny start-up Harman may breathe life into a telematics industry in desperate need of a marketing lift. Additional insights: http://bit.ly/bUoJKc - Consumer Implications for Smartphone-Vehicle Connectivity - Chris Schreiner - Automotive Consumer Insights http://bit.ly/c0OLhT - Consumer Interest High for Connected Safety and Security Services - Chris Schreiner - Automotive Consumer Insights http://bit.ly/aLtrF7 - Google, Nokia and New Entrant Positioning in Automotive Infotainment - Lanctot - Automotive Multimedia & Communications http://bit.ly/d0aLhq - Connected Vehicle Telematics: Car Maker Profiles - John Canali - Automotive Multimedia & Communications Service

The cardiac kids at Sirius XM are at it again. After surviving years of multi-million dollar losses, a high-wire, company-saving merger with XM, and the downturn in auto sales, the company reported a strong first quarter in May. With auto sales recovering at the beginning of the year, Sirius was able to report revenue and subscriber increases and later revised its estimate of subscriber additions for the year to approximately 750,000. But now the ultimate test, the switch to XM, is on. The subscriber increase, which pushed the total close to 19M, reflected a net gain of 171,441 vs. a decline of 404,422 in the year-ago period. The numbers looked good, but they obscured the challenges arising from an increasingly competitive radio-listening landscape, the increasing inclination of car makers to make satellite radio an option rather than standard equipment and the impending termination of the Sirius half of the combined Sirius XM satellite network. All of these negatives were either swept from the table by the positive earnings report or were not mentioned at all on the earnings conference call. (In the interest of full disclosure allow me to acknowledge that I am a subscriber to both XM and Sirius services and enjoy the content, as do the members of my family. Each member of my family has his or her favorite stations and it is nice to know that those stations are available anywhere in the U.S.) Strategy Analytics consumer surveys in the U.S. show satellite radio lagging well behind traditional AM/FM as a must have in the car. While AM/FM is described as a must have by 88% of respondents, satellite radio is regarded as a must have by only 14%. Internet radio lags even further behind at 5% - but that is changing. Interestingly, U.K. survey respondents show a higher level of interest in digital radio (DAB or DMB), with 22% describing it as a must have in the car. The lack of enthusiasm for satellite radio reflected in the survey results is just one of several negative indicators. Another such indicator is the fact that the aftermarket for satellite radio products is almost non-existent. Just as car makers have been inclined to make satellite radio optional, makers of aftermarket head units have also tended to introduce systems that are “satellite ready” vs. offering one or the other system built in. And the market for portable devices enabled for satellite radio has been limited thus far. Sirius XM is line extending into the iPhone app marketplace, but here, again, the company will run up against music services and Internet radio. The music services leverage more liberal licensing models for storing and managing music and Internet radio will benefit from the increasing proliferation of programming guides such as Stitcher or RadioTime to access interesting and relevant local content including podcasts. Of course, these services also benefit greatly from having a two-way link. Millions of consumers are turning to music services and Internet radio. Car and handset makers are developing ways to integrate these music services (ie. Slacker, Pandora) and Internet radio (ie. IHeartRadio) into their platforms – while carriers are scrambling to introduce tiered data programs to shield themselves from the burgeoning traffic. While satellite radio is increasingly optional either from the factory or in the aftermarket, HD Radio is increasingly standard equipment on cars. But the real killer for Sirius is unfolding in recent meetings with OEMs. Sirius has told its clients, which include BMW, Mercedes, Chrysler, Ford, Kia, Land Rover, Jaguar and many others, that they must switch to XM by 2016. For the car makers that helped make Sirius XM what it is today, there are no special subsidies, no silver bullet hardware fix or retrofit. There is simply a notification that they must switch from Sirius to XM by 2016. The bottom line, of course, is that the two satellite systems – one based on a satellite in geosynchronous orbit and one on satellites in geostationary orbits and using similar frequencies – require different receivers and antennas. In spite of a legal requirement in the merger agreement that the companies find a solution for interoperability, nothing beyond a combination of the two incompatible receivers and antennas was ever introduced in the market. The quiet announcement of the switch to XM, though long anticipated, is surprising for a number of reasons: 1. The companies must have known this day would come when they originally merged, yet it was never acknowledged until recently that one of the satellite networks would have to be sacrificed. 2. Given the fact that subscriber growth has reached a plateau it is clear that Sirius XM can ill afford to lose half its subscribers. And winning new subscribers in the current competitive environment will be a challenge especially as auto sales – the source of the majority of new subscribers – continue to move sideways, failing to provide the engine satellite radio so desperately needs. 3. Car makers – including several premium marks - are incensed that Sirius is making this unilateral change with little or nothing in the way of guidelines or even a public information campaign strategy. Sirius has made no public statement yet and company representatives have failed to respond to repeated requests for comment. 4. There is also some irony in the fact that Sirius spent many years denegrating XM's solution but in the end has chosen to consolidate on the XM platform. Long term, the good news is that the company selected to preserve XM, the more robust of the two solutions. XM was first to market with data solutions for weather (XM Weather in August 2003), traffic (XM NavTraffic on 2005 Acura RL and XM NavWeather on the Acura TL. Sirius made up some ground with the launch of Travel Link by Ford, but XM’s platform, including its terrestrial repeater network, is better suited to providing a wider range of content and services to drivers. If Sirius can keep car makers on board with a vision of low-cost, nationwide content delivery – and the higher ARPU implied therein – it may emerge profitably and competitively vis-à-vis smartphone and digital radio-based solutions. But the company is changing gears just as these new solutions are gaining momentum and at a time when car makers have little patience for another high-wire act. Further Insight: CES 2010: The Arrival of Converged Automotive Multimedia Products - John Canali -  http://bit.ly/9gq4yo Automotive Bluetooth: Profile Strategy Key to Infotainment Success - Mark Fitzgerald - http://bit.ly/9qEXbU Internet Radio: Ready for Prime Time - Mark Fitzgerald - http://bit.ly/ZBXzd Internet Radio to Vie with Music Services for Automotive Dominance - Lanctot - blog - http://bit.ly/9xm6qR WorldDMB Car Manufacturers Workshop - Munich - July 7 - Arrange meeting with Strategy Analytics - http://bit.ly/aUcqgm

It’s difficult to comprehend the schizophrenia of the automotive industry unless you’ve been living with it for longer than you can remember. One minute OEMs are embracing suppliers, the next they are beating them into the earth, forcing down their margins. The latest manifestation of this schizophrenia (some may call it give and take) is the contest over infotainment operating system dominance. Which automotive OS is best? Which is gaining? Which is losing? Does anyone care? The questions are all serious ones and they reflect the struggles at tier one suppliers to determine which operating systems to support. The issue was highlighted, yet again, at the annual Fachkongress Elektronik in Ludwigsburg last week. At the event, Audi voiced its support for QNX, Microsoft restated its devotion to the automotive industry as part of its wider embedded software initiative, and BMW announced its first Genivi implementation for a MY2013 vehicle program. But might these commitments shrivel in time as so many others before them have? What’s new in the current debate is the increased assertiveness of OEMs. OEMs are no longer content to take whatever a tier one supplier may deliver. In addition, there is a perception that the operating system represents a potential point of cost reduction. OEMs are taking charge in a variety of ways including specifying the operating system in the RFQ, creating a coalition for sharing and re-using code as in the case of Genivi, or getting into the system integration business itself as in the case of Audi’s e.solutions venture with Elektrobit. This new assertiveness on the part of OEMs has placed tier one suppliers in a bind. For many of these organizations, software and, by extension, the operating system, has represented the special sauce that the tier one brings to the RFQ proposition. From a tier one supplier’s perspective, the OEMs are seeking to strain that special sauce, which translates roughly as added value or cost, draining it of its value and ultimately diminishing the justification for an expensive solution. OEMs are hiring software engineers and programmers the way they used to hire line workers and tier one suppliers are feeling the pressure. The usual schizophrenia enters the picture when tier one’s try to make sense of what OEMs say they want. OEMs say they want open source software – as in the case of the Genivi Alliance built around Linux – yet they say, generally, that Android (also based on Linux) is too open. They say they prefer closed software systems – as in the case of Microsoft or QNX – but not too closed. It is a clever supplier, indeed, that can make sense of these conflicting messages. But with five-year development cycles in mind, hard decisions must be made. The fundamental criteria for evaluating operating systems break down to: Developer support Cost Flexibility Security Stability Cross Platform Functionality Long-Term Viability Independence All of the available operating system platforms have their merits and are competitive on each of these criteria with some notable exceptions. But it is worth considering the relative merits of each of the most popular platforms. Android is considered by many OEMs and suppliers to be “too open” – by which is meant vulnerable to attack. Android is supported most notably by Continental and Parrot and, indirectly, by a rapidly growing developer community and a growing range of hot selling handsets, Android is an OS to be reckoned with regardless of the qualms regarding its openness. And the widening use of an abstraction layer of code in automotive systems has rendered moot most security concerns. Our sources at Strategy Analytics say RFQs requiring Android have already been awarded. There is a broader battle surrounding Android in that the technology is being extended to a wide range of consumer electronics categories including televisions, netbooks and tablet PCs. Google’s promotion of Android into other domains places the Linux-based OS in direct confrontation with Microsoft and Apple which also have designs on the consumer electronics OS market. The fact that Android is being leveraged to facilitate connectivity to the wider device eco-system makes it an attractive choice for auto makers. Even GM/OnStar is considering Android for its next generation platform. Nevertheless, industry resistance persists. When it comes to automotive operating systems, though, Strategy Analytics recommends a dispassionate consideration of the relevant criteria and all signals suggest Android is a legitimate contender for future automotive platforms. Genivi is a Linux-based, industry-coalition driven OS intended to reduce development costs for OEMs by re-using and sharing software code. Genivi inspires both respect and anger in the industry. But, again, Strategy Analytics recommends a dispassionate evaluation. Genivi inspires respect because it has been promulgated by Intel and BMW, which have attracted a broad coalition of OEMs, tier ones and second and third tier suppliers. It inspires anger because coalition members of lesser status feel their influence is diminished. Most industry participants feel they must “participate” in the Genivi coalition so as not to miss out on any business opportunities with the leaders of the coalition: Intel, BMW and GM. At the same time, skepticism abounds regarding the length of time required for Genivi to impact the industry, the motives of the founders, and the internal decision-making processes of the organization. The impact of Genivi can probably best be compared to the influence of Autosar or JasPar. These initiatives unfolded over many years with the true nature of their impact only recently becoming clear. A typical benchmark to put Genivi into perspective, is the 10 years it took for Nokia’s “terminal mode” technology to reach the market as a commercial standard. As for the motives of the Genivi founders, it is simply to share and re-use code with the intention of reducing the cost of development. Leading Genivi participants expend a great deal of energy emphasizing the limited amount of software code that will be impacted by this sharing, but second- and third-tier players in the organization remain suspicious. BMW’s announcement at the Ludwigsburg event of te first vehicle implementation of Genivi for model year 2013 was momentous for the organization and the industry. But industry sources say the entry nav version of the platform in question – BMW’s NBT, for Next Big Thing – is being built around an nVidia processor. NVidia is not a participant in Genivi. Even in its first implementation, Genivi is raising questions about the solidarity of its coalition. (The premium NBT package will be QNX-based on an Intel platform.) Linux, in all its forms, appears to be the most popular operating system in the industry. Linux benefits from not having the support of any large organization with an industry shaping agenda. As an open source platform it is perfectly malleable and well-suited to a rapidly changing marketplace and technology eco-system. Linux is open and yet not perceived as representing a security risk and it is showing up in a growing range of systems and devices both within and outside the automotive industry. As in the case of Android, developer support is strong, and some tier ones previously working in older platforms, have begun shifting to Linux, as the safe choice. Robert Bosch and Clarion/Hitachi are just two of many suppliers that have turned to Linux even as they weigh other options. Visteon has been showing Ubuntu implementations during and since the Consumer Electronics Show in January. Microsoft, meanwhile, has one of the hottest hands at the OS table. The company routinely points to its two-million unit success with Ford Sync and its one-million unit (and counting) achievement with Fiat’s Blue&Me, with similar expectations for the soon-to-be-launched Kia Uvo platform. But Microsoft still struggles with a legacy of suspicion in the automotive industry. Car makers and OEMs frequently express their concern that the automotive industry is an afterthought for Microsoft. Microsoft has fostered this thought process by shuffling executives into and out of the automotive group. At the Ludwigsburg event the newest head of the Embedded Software group, Kevin Dallas, had his debut making a forceful statement for the Microsoft platform. In spite of any concerns about Microsoft's devotion, suppliers Alpine and Mitsubishi in Japan and Continental and Magneti Marelli in Europe have profitably embraced the platform. Microsoft can rightfully claim perhaps the widest developer support in the software industry. The company’s Bing search initiative is making impressive gains and its developer tools are widely supported. Microsoft even has its own alternative to Flash, called Silverlight, which is expected to see automotive implementations in the near future. Where Microsoft is weak, at least at the moment, is in the mobile market. Where Android has been able to counter Apple’s growing influence in mobile phone operating systems, Microsoft is struggling. Microsoft’s influence on the automotive market would no doubt be greater at this time if the company could point to a stronger position in the handset market. For now, Microsoft will be content to support individual OEM customers. Building on its success at Ford and Fiat and anticipated gains at Kia, it is likely that Microsoft will have a new OEM partner to announce within the next year. Chrysler and Mercedes are the most obvious but not the only candidates for a future announcement. QNX is in the strongest position it has ever been in in the automotive OS market. Harman’s design wins over the past five years have created a monumental backlog of premium infotainment implementations that will keep the company busy for the foreseeable future. At the Ludwigsburg event, QNX gained the endorsement of Audi as a critical element in its strategic plans. The company can also lay claim to the support of Panasonic and Denso, reflecting strong relationships with Chrysler and Toyota. QNX is perceived by many in the industry as being vulnerable for its lack of developer support and its lack of influence beyond the automotive market. But these perceptions may be subject to revision following the company’s acquisition by RIM. RIM creates instant credibility for QNX in the mobile market and QNX for RIM in the automotive market. In its current form, QNX is challenged by the need to keep pace with new drivers for mobile devices arriving on the market on a weekly basis. Microsoft and Android have the luxury of actually providing the drivers to many of these devices. QNX will gain from its RIM relationship, but the challenge will be to expand the capabilities of its operating system without increasing its system requirements. It is clear, though, that QNX has already gained a significant boost from its separation from Harman, making it easier for competing tier ones to adopt the platform. Conclusion The ongoing automotive operating system debate is complex and not easily resolved. Even aging platforms such as Micro-Itron or VxWorks (Nissan, PSA, Volkswagen) continue to persist and most vehicle infotainment systems and devices use multiple operating systems. In fact, the typical car might have a dozen or more operating systems processing information. The automotive business is not a zero sum game. Even at the Ludwigsburg event last week, new OS players Mentor Graphics and OpenSynergy were on hand taking in the latest industry developments even as they are laying the groundwork to make their own impact. Strategy Analytics can only recommend that industry executives make their OS decisions dispassionately and avoid prejudice and suspicion. There is plenty of business to go around and a win by one OS is not a defeat for another. Additional insight: Global OE Automotive Multimedia and Communications Systems Forecast 2009-2017 - Joanne Blight - http://tinyurl.com/24n9nz5 Global Automotive OE Audio/Visual (A/V) Systems Forecast 2009-2017 - Joanne Blight - http://tinyurl.com/2g897ax

Audiovox Corporation reported a profitable fourth quarter and fiscal year today suggesting a significant turnaround fueled by the resurgent automotive industry generally and recovering satellite radio and rearseat entertainment categories specifically. The report was terrific news for Audiovox, which held its earnings call this morning, but the good news seemed somewhat empty in view of a lack of innovative new solutions or even a stated vision of vehicle connectivity from the normally creative electronics supplier.The company built upon the good earnings news by announcing that it foresees developing a $100M OE portfolio for fiscal 2011 thanks to the addition of Qualcomm’s in-vehicle Flo-TV business and the acquisition of RSE supplier Invision and remote start/vehicle security player Omega. Invision’s existing RSE deals with GM and Toyota represented a solid shot in the arm to Audiovox’s own aftermarket business. The electronics segment of Audiovox’s business saw a revenue decline in fiscal 2010 due to reductions in inventory and the exit from several product lines including flat panel televisions and portable navigation devices. Combining the Invision RSE line with its own aftermarket RSE business, Audiovox now boasts relationships with GM, Ford, Chrysler, Nissan, Hyundai, Porsche, Kia, BMW, Toyota, Subaru and Mazda. With expectations of 11M cars being sold in calendar 2010 in the U.S., Audiovox expects the current boost in its fortunes to continue. The electronics segment’s sales were $375M for fiscal 2010, down 16.6% vs. the year-ago period due mainly to the decline in automobile sales and the recessionary economic environment. The company pointed to the positive impact from new programs with Sirius XM, Sony (PS3 integration with RSE system) and Flo-TV and noted that the acquisition of Invision has been instrumental in positioning the company to build on its existing OE relationships. Many of Audiovox’s existing relationships derive from the support of its own expeditor network, one of the largest and most effective installer networks in the industry. In its earnings call, Audiovox said mobile sales were up over the fiscal 2009 fourth quarter due primarily to increases in satellite radio, security and multi-media products, and the addition of new sales from Invision, Omega and Flo-TV. As a percentage of net sales, Electronics represented 71.4 percent of sales for the fiscal 2010 fourth quarter as compared to 62.3 percent for the comparable period in fiscal 2009 - demonstrating the increased importance of mobile electronics sales.

Audiovox is uniquely positioned for a range of significant automotive business opportunities including remote vehicle connectivity and security and video distribution within the car. The company does offer a range of head unit products that provide for multiple connectivity options and continues to offer non-desktop computing platforms suitable to automotive applications. The onset of connectivity and social networking present a range of potentially profitable opportunities awaiting a solution from Audiovox..

 

If there was anything missing from the earnings call it was a statement of strategy vis a vis social networking applications and Audiovox’s plans to capitalize on the trend. The partnership with Qualcomm for Flo-TV represents one avenue for Audiovox to connect with the rapidly growing smartphone market. The company introduced the Jensen Anyware Ultra-Mobile PC last fall, but there was no mention of the product on today’s earnings call, nor was their mention of Audiovox’s range of head unit offerings under multiple brands. Perhaps the next earnings call will bring news of more creative mobile initiatives and a vision of future vehicle connectivity.

The battle to dominate automotive connectivity has finally been taken on by Research in Motion (RIM) with the announced acquisition of Harman International's QNX Software Systems, a real-time operating system supplier focused on the automotive market. RIM had appeared to be sitting on the sidelines in recent months as fellow handset maker, Nokia, announced its terminal mode strategy and Apple grabbed multiple headlines for innovative in-vehicle connections from marketing partners. The acquisition of QNX gives RIM instant credibility as a leading automotive connectivity player and promises a spirited battle for automotive market share. The acquisition was announced this morning. The announcement says the two companies have reached an agreement for RIM to acquire QNX. The deal is subject to regulatory approval and is anticipated to close within 35-45 days. This strategic move is expected to further strengthen QNX's penetration in the automotive market and foster innovation for markets served by all parties. The move solves marketing challenges for both organizations. QNX's software is used in instrument clusters, head units and automotive Bluetooth solutions. The company had found tremendous success as part of Harman, which in recent years has come to dominate the luxury and near luxury segments of the automotive market. QNX is best known for its high-end infotainment software solutions used by Mercedes-Benz, Porsche, BMW, PSA, Hyundai and Chrysler, among other OEMs. As part of Harman, though, QNX's ability to break out into larger volume market segments was somewhat limited, and Microsoft had been winning most of the highest profile (and higher volume) automotive connectivity platforms including Fiat's Blue&Me, Ford's Sync and Kia's Uvo. At the same time, Apple was increasingly emerging as the automotive connectivity device supplier of choice for consumers and, by extension, OEMs as both the iPod and iPhone helped establish the iTunes App Store model as a compelling content, application and service delivery platform for the automotive market. It is true that some OEMs, such as Mercedes with its mbrace smartphone app, made allowances for Blackberry connectivity along with Apple's iPhone. But a growing number of OEMs, such as BMW, have been going out of their way to provide proprietary Apple connectors to enable the use of in-vehicle interfaces to access smartphone content. With few exceptions, Blackberry has been receiving no such support from OEMs and its devices remain enterprise-focused and ill-suited to automotive infotainment uses. While QNX's partnership with Alcatel-Lucent promises to target the complete spectrum of in-vehicle connectivity, a partnership with RIM opens up wider market opportunities for both QNX and RIM. The timing of the deal is ideal given that several OEMs participating in volume segments of the market have yet to launch branded, high-profile connectivity solutions. There is still time for a RIM-QNX collaboration capable of helping RIM vault into contention with both Nokia and Apple for automotive connectivity leadership. RIM also brings its unique global managed network added value to the proposition promising enhanced capabilities for in-vehicle applications that other handset suppliers are unable to match. It also presents a potential challenge to telematics service providers such as WirelessCar, Airbiquity and Telecommunications Systems. The importance of the in-vehicle connection has become increasingly important as consumers seek to use their smartphones in a growing variety of settings ranging from the home to the office and the car. QNX's existing position in the automotive market will instantly bring credibility to RIM's initiatives. It also introduces an entirely new value paradigm combining the virtues of device connectivity with the advantages of the managed network. The move is also a positive for Harman as it frees up the company to work with a wider range of software providers. Harman cannot afford to ignore the Genivi Alliance operating system, favored by its largest customer BMW. But Harman may also find it expedient to bid on Android- or Microsoft-based projects. Harman gains greater flexibility by decoupling itself from QNX. Of course, in reality the two companies will be virtually joined at the hip for the foreseeable future with a wide range of programs already underway and in the pipeline expected to extend for more than five years into the future. RIM, though, is likely the bigget winner. The company has been confronted with pressure to extend its operating system software to other industries such as netbooks, consumer electronics devices and, yes, automotive applications. The acquisition of QNX is an excellent door opener to these potential avenues of growth. QNX is in a similarly advantageous position to profit from wider market opportunities. Of course, while the move gives RIM a strong hand in contending for automotive connectivity opportunities it is likely that the merged company will continue to collaborate with Apple. QNX has a long history of supporting Apple in the automotive market including the most recent announcement of enhanced support for Apple iPods in the QNX Aviage Multimedia Suite.

It is very strange indeed to find Toyota at the focal point of a vehicle recall imbroglio after years of immaculate quality ratings and at the peak of its global market share. But the strangeness of the timing is even more severe than that, because it was Toyota’s Prius that was used by QNX and Alcatel-Lucent to promote their “ng connect” LTE Car initiative late last year. The Toyota Prius became the mascot for the ng connect program, popping up in Detroit, Los Angeles, New York, Washington, D.C., and Las Vegas, in fact anywhere cars or automotive technology were on display. The purpose of the ng connect tour was to spread the word about the onset of 4G LTE technology and what it will mean for connected cars. Of course, the tour was also a showcase for QNX’s vision of both on-board and connected applications. Chief among the roster of on-board applications was a so-called Virtual Mechanic. The virtual mechanic is intended to provide live in-vehicle status reports on a wide range of vehicle systems including brakes, transmission, fuel, etc. with text and graphics. QNX is already the enabling software behind OnStar which, like Ford’s Vehicle Health Report feature, provide drivers with emailed status reports. The difference with virtual mechanic is that the information is live and delivered inside the vehicle. For QNX, the virtual mechanic was merely a concept shown in the context of a wide range of other concepts including in-vehicle displays of remote traffic cameras, access to Internet radio (Pandora), and a host of other location-aware and entertainment oriented applications. But the plot thickens with the emergence of Toyota’s recall nightmare because QNX is a supplier to both GM and Toyota. The virtual mechanic concept appears to belong to QNX, but the possibility for GM or Toyota to adapt the technology for their own marketing and customer relations purposes changes the prospects for this technology considerably. The question now is which manufacturer, Toyota or GM, will be first to enable a virtual mechanic-type application in the car. Or could some other QNX customer leap to the front of the queue: BMW, Peugeot, Mercedes Benz, Chrysler, Hyundai? Any one of these companies can look at Toyota’s difficult situation and realize they could be the next car company with software-laden cars producing unexplained, and seemingly unfixable, failures. A challenge for both Toyota and GM in implementing QNX's virtual mechanic will be the limited number of cars both companies sell with full-screen navigation sufficient to graphically display on-board systems. But LCD attach rates are improving for all OEMs in all segments and this application is yet another justification for large display fitment. Suffice it to say that the virtual mechanic is a concept that has arrived just in time to offer a way forward for a damaged auto maker and possibly for the entire industry. Whether QNX’s customers view this prospect from the same perspective remains to be seen. A final note: In this analyst’s opinion, the virtual mechanic will also make a great customer demonstration for car dealers. Source:  Strategy Analytics

Harman announced a return to profitability for its fiscal second quarter in an earnings call earlier this week. In that call, the company detailed its marketing plan which could be taken as a blueprint for the entire industry – particularly the company’s inroads into larger volume mid-segment vehicle categories.

Harman is pursuing emerging market opportunities in China, Brazil and India with local development and manufacturing presence – including a $1B revenue target for China by 2015. The emerging market initiative is reflected also in a targeted shift of engineering/R&D balance from 99% high capital and cost (HCC) markets to 60% HCC, and manufacturing/assembly from 81% HCC to 50% HCC by 2012.

The company expects to maintain its luxury segment leadership while leveraging its previously announced “scalable system” strategy, which has already contributed to a Toyota European design win for MY2011. The scalable system is part of an initiative targeting what Harman sees as a $5B high-growth, mid-segment market opportunity reflecting the company’s desire to capture a broader portfolio of business.

In that regard, Harman wants to pioneer energy-saving GreenEdge technologies for hybrid and electric cars in partnership with Intel and Texas Instruments developing solutions to reduce power consumption by 75% including high efficiency speakers, one of the few objectives the company has yet to realize in the marketplace. Similarly, the company is working with Lotus Engineering on Active Noise Management solutions for hybrid, electric and conventional vehicles to address impending legislation regarding pedestrian safety. Noise management will also apply to in-cabin noise cancellation and reduced weight and CO2 emissions. And Harman is also targeting advanced driver assist systems, an entirely new segment for the company.

In its earnings call the company mentioned winning $2B of additional business, expanding its contract portfolio to $10B, a figure the company claims is the largest in the industry. Included in its current and recently executed order book are:

->     Infinity branded audio systems for next-generation Chrysler SRT series high-performance vehicles;

->     Launch of Mark Levinson premium surround sound for MY10 Lexus GX 460;

->     Launch of JBL premium sound for MY11 Toyota Sienna in U.S.;

->     Launch of Harman Kardon Logic 7 HD system with Range Rover for MY10 mid-model year introduction;

->     Launch of Ferrari 458 Italia equipped with Harman audio and infotainment;

->     Exclusive Haman Kardon sound lounges at BMW brand centers in Munich and Berlin;

->     Press launch of Harman/Lotus Engineering HALOsonic sound synthesis technologies;

->     Selected by BMW for next gen, high-end “Professional infotainment system for all new platforms including BMW, Mini and Rolls Royce;

->     Selected by Daimler for next gen Comand infotainment system for new Mercedes S-Class and C-Class models;

->     Selected by Toyota to provide Harman next gen scalable infotainment for vehicles sold in Europe beginning MY11;

->     Selected by Toyota to provide premium JBL branded audio for 4Runner and Land Cruiser in the U.S., Europe and Middle East and the MY11 Siena in U.S.

All of this contributes to what Harman estimates as 45% global branded automotive audio market share, with Bose at a distant 25%. Harman’s branded audio solutions are used in more than 200 car platforms from 12 OEMs shipping more than 2M audio systems annually. Sources indicate that this 500,000 units/quarter pace is actually approaching 1M units/quarter – a pace that will no doubt be stimulated by the recent Toyota wins and future higher volume segment wins.

The pace of launches has eased somewhat for Harman, which may help explain the return to profitability as profits cusually come later in the program cycle. The company hit a peak of six program launches in FY08, followed by five in FY09. The programs for those years included Mercedes, PSA, Porsche, Audi, BMW, SSangYong, Chrysler and Hyundai. Going forward, Harman says it will have four launches in FY10 (including Audi, Mercedes and BMW (2)), three in FY11 (Toyota, Mercedes and Chrysler) and one in FY12 (BMW), before ramping up again in FY13 with four: Harley-Davidson, Mercedes and BMW (2).

The company further notes the evolution of its infotainment architecture:

1997: SH1/16MB – Tuner/CD/Navi – Turn-by-Turn

2002: SH3/32MB – MMI2000 – VxWorks – Tuner/CD/DVD – Phone/SDS – MOST25 – 2D/2.5D Map

2008: SH4/512MB/1024 – MoCCA Framework – QNX CAR Platform – Tuner/CD/DVD – Phone/SDS – MOST50 – 3D Map – Internet Connectivity

2012: Intel Atomm/1GB – MoCCA & DSI 2.0 – QNX CAR – Tuner/CD/DVD/Blu-Ray – Phone/SMS/Email – MOST150 – NDS Navi – Enhanced 3D Map – Internet.

Worth noting in the architectural evolution is the growing role of both QNX (CAR Platform) and Intel (Atomm) as well as the onset of Internet connectivity - pioneered by BMW - Blu-Ray, MOST and enhanced navigation features, many of which will revolve around 3D and augmented reality implementations.

Overall, Harman appears to have emerged victorious from its cost cutting regimen with fewer European facilities but with a profitable organization in place pursuing business building initiatives throughout Europe, Asia and the U.S. The most significant business transformation of all, though, will be the Toyota wins. Not even Toyota's recent marketing stumbles can tarnish this achievement and how its will transform Harman's operations and growth profile.