There has been much furore and inaccurate juxtaposition in the press of announcements by the GSMA and he SIMalliance over the last few weeks, trying to pitch a SIM card v embedded world, an angle that missed many of the key nuances around the announcements. these announcements were interspersed with rumours that Apple’s next generation of iPhone would not incorporate a USIM module.

With responsibility for looking into and forecasting the growth of the embedded market, these announcements got me interested. We have recently written about the consolidation among module makers in the M2M space, with SIM card players such as Gemalto, looking to move up the value chain into being a complete module player.

While the rumour about Apple’s next-gen iPhone is just that (a rumour), it seems as though the SIMalliance and GSMA are on the same page in their approach to the future of the SIM card, namely that personal devices and automated modules will require different means of distribution and activation, but that USIM cards will still have an important role to play.

We recently discussed in-depth the growing importance of M2M service platforms as a means of activating and managing the more than, Strategy Analytics believes, 4.6+ billion connections (excluding handsets and smartphones)  that will likely be in place by 2020. Many of these connections will be legacy M2M applications like smart meters and cars, but many will also be data devices like personal navigation devices (PNDs), tablets, eBook readers and laptops. what is clear is that the Embedded service platforms that are being built today for M2M applications, will tomorrow be used as the de facto means of activating and managing billions of connections globally, including handsets and smartphones.

It is clear that mobile operators are concerned about the possibility of the SIM card being replaced by a vanilla module/soft SIMs, as with it goes not only customer attachment and identity, as well as the SIM-only business, but also lowers the barriers to customers switching carriers and will force selection on key criteria such as quality of service, incentives and best tariffs/deals.

If Apple were to pursue this route, then it would clearly put the balance of power towards the OEM, reducing the power of the carrier. However, not only would this be just one OEM, but Strategy Analytics believes that this vision is over-simplistic and that the SIM market has a longer shelf life than some are predicting, with different distribution channels for high visibility consumer products and B2B M2M deployments (even if consumer activation, provisioning and management will be done via embedded service platforms). Moreover, while consolidation in the M2M module space suggests the model will change, regulation would likely slow the switchover considerably.

It is clear, however, that carriers need to think carefully about their embedded service platform strategy, as the question is less about SIM v embedded, and more about the next phase of building analytics into embedded service platforms to ensure consumer and business customers remain satisfied and that carriers can target them with the right products and services.

Andrew Brown

The smartphone market just took another surprising turn in a year where the battleground around mobile operating systems has become more intense than it has ever been, as HP acquired Palm for $1.2 Billion.

It has been well documented that Palm’s innovative WebOS has struggled to gain a sufficient foothold in the market, and sell-through has lagged because carrier promotion has been limited. Recently Palm has essentially been shipping a 6 month old device  with limited differentiation along with suffering from mounting channel inventory issues at key carriers such as Verizon and Sprint. Outside North America, sales have also been significantly lower than expected.

While both companies had a proud history in the PDA market (including the iconic Palm V and iPaq), both companies have struggled to gain a serious foothold in the smartphone market.

Whilst $1.2B seems a high price on the face of it, there is clearly and  it makes sense as there are clear synergies, and almost as importantly, a cultural fit, with various ex-Palm employees such as Todd Bradley and Satjiv Chahil present in HP’s PSG team.

• HP lacks presence and a clear direction in its smartphone business. The acquisition of Palm offers great mobile operating system IP as well as product development. It builds out the missing mobile part of the HP jigsaw.
• Palm lacks the channel distribution, efficient supply chain and reach. It lacked the funds to accelerate its product launches and refresh cycles. HP offers Palm the ability to resolve these issues and extend its reach in carrier channels, as well as opening up new channel opportunities.
• HP has spent years optimizing its supply chain capabilities, something that Palm has found a constant challenge.
• HP could potentially be acquiring Palm as a proactive move to prevent competitors getting hold of valuable IP in WebOS. It also warns competitors away from attacking Palm with patent infringements.
• The move would allow HP will offer the valuable WebOS to licensees, potentially creating a rival to Android? Palm’s perceived value is more closely linked to its software and platform development than specifically to its devices. Under one parent, platform fragmentation could be kept to a minimum. It is unclear if there is an intention to take this path at the moment.
• HP could potentially be acquiring Palm as a proactive move to prevent competitors getting hold of valuable IP in WebOS. It also warns competitors away from attacking Palm with patent infringements.
• The acquisition offers HP the ability to scale, WebOS for an emerging tablet and larger device business, where it is a leader and where Microsoft’s Windows Operating System is not the answer.
• The forthcoming Windows Phone 7 Series looks likely to offer little in the way of customisation for mobile operators. Clearly the acquisition of Palm allows HP to put something differentiated into the market.
• HP now has a mobile piece with which to integrate its enterprise software offerings and target the mobile worker, supported by its global services business.

More details of the deal will obviously emerge in the coming days, but what is certain is that HP will increase investment in WebOS, which it perceives to be the leading mobile platform which will offer a serious and credible mobile string to the bow of a formidable, global, tech giant. Interesting (and competitive) times for the mobile devices market indeed!

Andrew Brown