Wireless Smartphone Strategies

The industry’s most comprehensive set of critical market statistics and qualitative analysis, tracking and reporting on smartphones.

October 12, 2010 04:10 David Kerr

sa photo dk

At CTIA in San Francisco last week, away from the fanfare around LTE rollouts and the next dozen tablet devices (ok, I exaggerate a little), Sprint had an announcement which will have significantly higher impact on mobile broadband adoption and revenues: Sprint ID. 

Sprint ID promises to up the ante on personalization and ease current feature phone users into the smart phone ranks.

Sprint ID offers instant personalization along key themes/packs where the operator has done the heavy lifting of identifying and group related applications of interest to different persona from wallpaper to ringtones to apps. While the one click marketing line is not quite matched by reality given pesky little things like accepting terms and conditions etc, Sprint ID is a significant breakthrough in my opinion as:

  • it broadens the market appeal of Smart phones to current feature phones users with a simple to understand offer in a range of device price points including the critical $49 and $99 levels.
  • it tackles one of the biggest weakness of all app stores: discoverability of content and simple personalization.

Three handsets were featured at launch of Sprint ID: Sanyo Zio™, Samsung Transform™, LG Optimus S™. These three devices cover key price points in the Sprint portfolio and provide customers with a range of form factors, industrial design and brand to meet their tastes. Interesting to note that both LG and Sanyo retain the right to put their own packs on their handsets as well. This is a big win for LG as its Optimus S™ will be available for under $50 with contract giving the vendor a much needed boost in the smartphone space. Samsung meanwhile continues to shine at Sprint occupying the lucrative $149 spot with its Transform™. All three devices of course require a Sprint Everything Data plan.

However, for me the more significant impact is that operators and oems are finally realizing that customers don’t buy phones or services or apps… what they really want are positive experiences

… be that socially connected, sports, education, health and fitness, fashion etc. This is something that our User Experience team has been evangelizing for the last 7+ years. Whether its 80k apps on Android or 250k on Apple store or 10K on RIM, one common experience has been exasperation at the huge waste of time, energy and emotions in finding ANYTHING!!! Which happens first, eyes glazing over or fingers cramping with so much scrolling? Either way the net result is often a disappointing experience which the early smart phone coolaid drinkers have learned to live with.

Newbies to the smart phone arena, will certainly have less tolerance and spend less time to personalize their device and enable applications. Sprint ID is well tailored to the next wave who are taking tentative steps into the smart phone space

 

David Kerr

dkerr@strategyanalytics.com


September 23, 2010 22:09 David Kerr

September 23, 2010

While there has understandably been a lot of attention given to consumer apps post iPhone and the plethora of application stores that have emerged, business mobility and enterprise mobility offer huge potential from horizontal to vertical applications and from smartphones to iPads and tablets to superphones.

In both NA and W. Europe, business customers account for under 30% of users but are the dominant streams of both revenue and profits for operators. On the device side, premium priced models from RIM, Nokia, and Microsoft Mobile licensees as well as the iPhone have long been key drivers of profits in a market where low single digit margins are the norm.  The explosion of smartphone choices has led to the battle ground moving beyond the corner office, to other executive and now increasingly the midlevel manager.

With a new range of devices competing for space in the corporate market, the issue of corporate versus individual liable has become an increasing priority for IT decision makers. Add on the complexity of managing an expanding list of OS (Android, iPhone, Windows Mobile, Symbian, Palm, MeeGo, Bada from Samsung) and the growing importance of mobile portable devices with access behind the firewall and one can already feel a corporate migraine forming…. And that’s before we even discuss device management, mobility policy, device retirement etc. etc.

I am looking forward to CTIA Fall (San Francisco October 5-7) and in particular to the Enterprise Mobility Boot Camp moderated by Philippe Winthrop of the Enterprise Mobility Foundation. The boot camp spread over two days will address many of the issue listed above with our own Andy Brown featured in an analyst roundtable on October 6th.  I look forward to meeting you there. Don’t hesitate to contact Philippe for passes to this the deep dive enterprise mobility event.

David Kerr

David Kerr
Snr. VP - Global Wireless Practice
Tel: +1 617 614 0720
Mob: +1 262 271 8974


August 11, 2010 14:08 Alex Spektor
It may be the exclusive iPhone carrier in the US, but AT&T is also becoming an attractive option for consumers looking to buy an Android handset. Though things weren’t always as they are today. If T-Mobile was the clear early leader in Android adoption among tier-one US carriers, then AT&T was the clear laggard. Let us quickly recap highlights from the US Android timeline:
  • T-Mobile launched the first Android phone in the world in late 2008.
  • It took approximately one year for Verizon Wireless and Sprint to bring to market their own models, in time for the 2009 holiday season.
  • AT&T began selling its first Android handset quite recently: in March 2010.
Less than six months later, AT&T will have as many as five Android phones in its portfolio. This won’t be quite as many as Verizon Wireless and T-Mobile, but it will put AT&T roughly on par with Sprint. AT&T will also be a leader from a variety standpoint, offering smartphones from vendors Motorola, HTC, Samsung, Sony Ericsson, and Dell.

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So, what are the key drivers for the ramp-up?
  • Catering to consumer tastes. Despite what Apple might tell you, not everyone wants an iPhone. Consumers looking for alternative features, such as a bigger screen, memory expansion, a more customizable UI, HDMI, etc., can find them among Android handsets.
  • Lower subsidy levels. Now that AT&T has lowered its monthly data plan rates, there is less revenue to offset the subsidy burden. Paying $200-$300 subsidy for an Android handset seems more attractive than Apple’s $400+ subsidy.
  • End of iPhone exclusivity? The Internet is always abuzz with rumors, and AT&T shifting its focus to other platforms is yet another sign that a Verizon Wireless iPhone is potentially in the works. The carrier may be strengthening its portfolio to offset potential losses once the exclusivity ends.
Regardless of AT&T’s underlying reasons, broadening the options available to consumers is a good thing for many of the involved parties. For example, shoppers get a wider selection of handsets and emerging vendors like Dell get exposure to a growing market. However, AT&T will need to be careful in managing the persistent issue of fragmentation. While developers and content providers will be happy to have a larger Android installed base for which to create applications and services, they will also be faced with the cost of addressing multiple models/processors/resolutions/etc. -Alex Spektor

May 20, 2010 21:05 David Kerr

sa photo dk

 

May you live in interesting times as the old Chinese proverb goes. Well in the information, communication and entertainment industry we certainly do. Some very interesting questions face our industry whether we look at:

  • the outcome of much delayed Indian 3G auction or
  • the battlegrounds around HSPA+ and LTE or
  • the surging Android ecosystem vs. weakening Symbian or
  • the upside potential for WebOS under it new owners
  • the potential disruption caused by mobile cloud phones and device

Every major technology advancement has lead to a massive disruption in the handset and infrastructure vendor community.

  • In 3G, Motorola’s slim myopia led to its near ruin and has provided huge growth for Samsung and a foothold in international markets for LG and SEMC.
  • On the infrastructure side 3G was expertly grasped by Huawei and ZTE leading to a new wave of M & A and a new world order which counts Nortel as a victim and seriously challenges ALU.

So how will the migration to 4G change the playing field?

  • Who will benefit most on the operator/service provider side?
  • Will Cloud Phones be disruptive in LTE?
  • Will operators find a path to realign the traffic/revenue mix with mobile broadband devices?

I would welcome your thoughts on these key questions. Also don’t forget to join our client webinar on Thursday May 27.

 

David


April 29, 2010 06:04 tkang
Apple’s profit hit a spectacular 30% operating profit margin and this is probably one of the highest levels a hardware manufacturer has ever or will ever achieve. We’ve seen these ratios in the services and software industries but not in hardware. Below are Apple’s operating profit margins by quarter. Q1.2009 : 26% Q2.2009 : 27% Q3, Q4.2009, Q1.2010 : 30% (Revenues are growing 20~40% year on year) How did Apple pull this off and how can this be getting better every quarter now? Apple is an innovation company and they concentrate on delivering high quality products. This is the case of the Mac PC and many other products. The big disconnect is the price of these machines, they are good quality products but they also come with a high price tag which is a big obstacle for consumers. Without huge volumes there is less scale of economy and the cost can’t be driven down. But when it comes to mobile handsets there’s a different factor called operator subsidies. This is where the magic starts for Apple. The typical handset in the US cost about $150 in wholesale price and with the typical $50~$150 subsidy the handset was sold to end-users at about $90. The most expensive phones were around $350 at the time and these were sold at $199. Apple first introduced its iPhone at this price range but gradually raised the price of each new device. With the help of operator subsidy, the iPhone could be continuously sold at an acceptable price: $99~$199. As the iPhone broke the ceiling price of high end phones each year, operator subsidies increased. Apple is enjoying the fact they can deliver products with superior quality to more people at a moderate price point, at the expense of some one else. They didn’t have to push the price down to create demand. They even did the opposite: raise (wholesale) price, improve quality, increase profit. If your local car dealer starts giving away BMW 7 series at the price of a Honda, it’s hard to resist. Of course you have to buy gas at the designated gas station for the next 2 or 3 years but I’d do it. Steve Jobs said in 2004: “Apple's market share is bigger than BMW's or Mercedes' or Porsche's in the automotive market. What's wrong with being BMW or Mercedes”? Steve Jobs must be very happy now. He has finally found a way to sell his BMW like a Toyota or Ford without comprising quality, (wholesale) price, or even any profit. “Our belief was that if we kept putting great products in front of customers, they would continue to open their wallets.” - Steve Jobs, 2003Congratulations Mr. Jobs you’ve proven yourself right but you wouldn’t have made it without the operator subsidies.(Related report: Is Apple iPhone a Panacea for Operators? )

April 29, 2010 06:04 tkang
Apple’s profit hit a spectacular 30% operating profit margin and this is probably one of the highest levels a hardware manufacturer has ever or will ever achieve. We’ve seen these ratios in the services and software industries but not in hardware. Below are Apple’s operating profit margins by quarter. Q1.2009 : 26% Q2.2009 : 27% Q3, Q4.2009, Q1.2010 : 30% (Revenues are growing 20~40% year on year) How did Apple pull this off and how can this be getting better every quarter now? Apple is an innovation company and they concentrate on delivering high quality products. This is the case of the Mac PC and many other products. The big disconnect is the price of these machines, they are good quality products but they also come with a high price tag which is a big obstacle for consumers. Without huge volumes there is less scale of economy and the cost can’t be driven down. But when it comes to mobile handsets there’s a different factor called operator subsidies. This is where the magic starts for Apple. The typical handset in the US cost about $150 in wholesale price and with the typical $50~$150 subsidy the handset was sold to end-users at about $90. The most expensive phones were around $350 at the time and these were sold at $199. Apple first introduced its iPhone at this price range but gradually raised the price of each new device. With the help of operator subsidy, the iPhone could be continuously sold at an acceptable price: $99~$199. As the iPhone broke the ceiling price of high end phones each year, operator subsidies increased. Apple is enjoying the fact they can deliver products with superior quality to more people at a moderate price point, at the expense of some one else. They didn’t have to push the price down to create demand. They even did the opposite: raise (wholesale) price, improve quality, increase profit. If your local car dealer starts giving away BMW 7 series at the price of a Honda, it’s hard to resist. Of course you have to buy gas at the designated gas station for the next 2 or 3 years but I’d do it. Steve Jobs said in 2004: “Apple's market share is bigger than BMW's or Mercedes' or Porsche's in the automotive market. What's wrong with being BMW or Mercedes”? Steve Jobs must be very happy now. He has finally found a way to sell his BMW like a Toyota or Ford without comprising quality, (wholesale) price, or even any profit. “Our belief was that if we kept putting great products in front of customers, they would continue to open their wallets.” - Steve Jobs, 2003Congratulations Mr. Jobs you’ve proven yourself right but you wouldn’t have made it without the operator subsidies.(Related report: Is Apple iPhone a Panacea for Operators? )

March 22, 2010 21:03 Neil Shah
With Q3 FY 2010 financial report released this week and the outlook is still gloomy for Palm, it is being titled as a candidate for a “potential” buyout. But the future is in its own hands, and for the company like Palm it still has enough potential to weather out of this state and see some sunlight. There are some key areas where Palm has to rework its strategy. Palm has a good product line with likes of Palm Pre Plus & Palm Pixi Plus, and powered by a striking Linux core webOS platform enabling an intuitive UI covering all the basic traits to suit the targeted North American market. But still it’s unable to leverage on this appealing product line. The major issue for this lacklustre performance is due to its competition against the smartphone giants- Apple with a richer user experience and sea of applications, Samsung & LG growth with their manufacturing strategy customizing to satisfy mobile operator’s market segments, Blackberry with strong enterprise growth as well as remarkable entry into consumer segment, and the growing entrant Google with its open Android Platform. It is clear that Android, Mac OS X, Blackberry will dominate the North American market and Palm will be a secondary priority for the operators in spite of an innovative webOS platform. Based on the latest results, roughly half of the Palm’s shipments are in carrier channels struggling to sell through and the pressure is likely to increase further as Apple iPhone and Android begins the next innings with major software and hardware revisions in the following quarters. Perhaps Palm need to embrace growing platforms like Android, where operator and consumer interest is on the rise. By developing cross platform interfaces and services such as the Synergy, Palm can still provide a unique user experience on top of Android without betting the farm on webOS. Also, with positive outlook on HTML’s growth and adoption in mobile phones, from the applications development point of view Palm is at an advantage in leveraging its HTML/CSS written webOS in an opportunity to create new revenue vistas through mobile web browser based applications easily which may attract the operators participating in the recently announced “Wholesale Applications Community” at GSMA World Congress in Barcelona. Palm should also keep an eye on in incorporating the evolving wireless technologies (ex: TD-SCDMA, HSPA+, LTE) to expand and diversify its future offerings. So, Palm should for now go with the flow instead going against it and incorporate newer platforms like Android in its portfolio by 2011 instead of pushing the sole struggling webOS devices and thus come up with unique selling propositions satisfying the consumers & operator’s needs. Palm should also focus on striking strong long-term operator relationships especially GSM operators with a well thought and executed go-to-market strategy,and clawback out of this deteriorating situation. Thus, there will not be any need for “Palm” reading, as it will control its own future. - Neil Shah

February 2, 2010 19:02 cambrosio
In a recent meeting I attended, Henry Ford’s quote was used to remind us that consumers are rarely the source of innovation. I would suggest that this maxim also applies to the philosophy of mobile technology professionals developing new, emerging devices. The wireless industry is still driven by the engineering-driven belief that giving users “faster horses” (read mobile broadband) will be the fundamental driver of future non-traditional devices.   To be fair, we should note that early efforts are progressing - the Amazon Kindle ignited e-book developments; rabid press coverage of the Apple iPad continues; recently, even AT&T reported that it had added 1 million new “emerging” devices in Q4 2009.  Hold your horses, though – the future appears bright for e-books, but the iPad is largely unproven and pricey. At AT&T, the majority of these are sensors adding little incremental revenue, a sign that AT&T and Jasper are making progress and less a sign of consumer device innovation. During 2010 we will continue to hear many companies heralding their new emerging devices as “innovative” offerings that will drive consumer wireless penetration into the stratosphere.So how can device OEMs define emerging device innovation? The worrisome truth is that they will have to go far beyond their staple expertise in industrial design. While this will continue to be important, I would offer a framework including five important elements of innovative emerging devices (which we'll dissect in more detail in coming weeks): 1)      Branding – Innovative device brands will partner with compelling service, content, or application brands to dominate headlines and also realized profits; 2)      Use Case - Emerging devices designed or optimized for one or a select few applications as the “primary” use will be easily understood by consumers, and more easily valued for service delivery by operators; 3)      The user experience – The UX will continue to be the most important factor driving innovative emerging devices. This will be the most formidable hurdle for traditional OEMs; 4)      The wireless business model - A transparent business model where the wireless costs are embedded in the device price will ultimately be the most consumer friendly option; 5)     Distribution - Big brands will innovate by leverage existing resources and strong consumer awareness, directly and via partnerships with content and service players, to drive sell-through in traditional and online consumer channels. Chris Ambrosio

January 13, 2010 16:01 Alex Spektor

As usual, this year was a fairly quiet one for mobile phones at CES. Hot consumer electronics products, like ultra-thin 3D TVs, e-books, tablets, and netbooks, all overshadowed phone announcements from the likes of Palm, LG, and Motorola.

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But one bit of important news came from an event that was held in parallel with CES. At the AT&T Developer Summit last week, the big news centered on the impending rollout of Qualcomm’s Brew Mobile Platform across the carrier’s messaging phone portfolio – complete with an app store (AT&T App Center) and “standard” 70-30 revenue sharing. AT&T’s target is 90% Brew MP penetration on mid-range featurephones by end-of-2011.

So, who benefits from the AT&T announcement?

Clear winners

  • US Carriers: Presumably, the most compelling apps would be data-enabled, so the development would drive data plan take-up. Verizon Wireless is already requiring a data plan on a number of its messaging phone models, and is rumored to expand the policy to more non-smart devices.
  • Developers: Improved revenue sharing, a unified platform, and a well-supported SDK make developing apps for multiple devices easier and potentially more profitable.
  • Qualcomm: Prior to this announcement, we were predicting the slow demise of Brew. Although it avoided the fragmentation issues of Sun’s Java ME, the relatively closed nature of Brew caused it to have narrow penetration. Breaking in at AT&T is an important win, though convincing Western European operators will remain a challenge.

Mixed impact

  • Consumers: Apps on phones mean a more powerful device, but if a consumer is ready to buy apps and pay for data, why not get a smartphone, which (after subsidy) is unlikely to cost much more? And what about consumers who might not want a (potentially required) dataplan?
  • Device vendors: A new platform can help vendors with smartphone-weak portfolios compete better, but also means more R&D work, further compliance testing, and potentially longer development cycles.

Strategy Analytics forecasts that 45% of the world’s mobile phones will have application store capability by 2014. While smartphones will account for a large chunk of app store-enabled devices, the fast-growing categories of touchscreen and QWERTY handsets are becoming the leading featurephone categories to embrace the app store business model.

Brew MP on AT&T’s messaging devices and other similar developments all point to the blurring of lines between smartphones and their less-capable featurephone cousins. While benefits of this activity extend to all involved parties, they do so to varying degrees. It remains to be seen how AT&T’s relationship with vendors, consumers, and developers evolves as a result.

-Alex Spektor


January 11, 2010 22:01 David Kerr
Afte the inevitable wave of irrational exuberance has come the equally inevitable correction and flow of negative comments regarding Google Nexus One.
  • We are now seeing a huge rebound of criticisms about customer service, implementation and execution, moaning and complaining for existing t-mobile customers who have to pay more than a new customer to get a cool device and strong complaints from developers about availability of SDK and support.
  •  Naturally, the questions about Google's ability to execute on direct sales are being raised but these shall pass very quickly in our view.
Within our wireless team we had divergent opinions from network centric, application focussed and device driven analysts but ultimatlely we arrived at the following key perspectives:
  • Consensus is that Nexus will be successful by high end tier Smartphone levels (single digit volumes in 2010 but upside potential when it rolls out beyond TMO in US and to more open markets in Europe). Nexus is likely to sell more through operator channels than direct overall. Handset volume though is not the metric by which Google will measure Nexus success nor should operators as Nexus sales are a means to an end.  If Google is successful and Nexus ends up driving usage and value for operators, they will support it with subsidies.  Otherwise, operators can passively watch Google evolve its own-branded offering with little to lose. Tier One handset vendors (SAM, LG) may have the most to lose as Google’s marketing muscle and brand coupled with compelling devices and experiences will be a strong competitor for Operator slots, subsidy dollars.
  • Handset revenues and profits are a nice to have for Google. Key to their success and long term ambition is too boost the mobile browsing ecosystem. More open devices capable of browsing/search/maps from Google or others is positive for Google.  Google needed to update and get close to parity in terms of an engaging, fun, easy browsing UI with competitive links to key apps like maps, media etc and this device achieves that goal. Google is great at creating a buzz and the media is ready to talk about something other than Apple.
  • Google Nexus and indeed the whole Android approach is not about controlling/owning the user (contrast this with Apple). Google’s key metric is advertising revenue. Google's vision is well publicized: the browser is how they will deliver services, even on mobile, and apps are a stop-gap measure as far as Google's strategic vision is concerned. Google is banking on HTML 5 as their solution to fragmentation but we believe they are drinking too much of their own coolaid here and underestimating the importance of apps. Google’s key goal is to increase eyeballs and advertising.
  • Some key elements that have not been addressed which we believe are key in Google’s future evolution and will be key to watch relate to Voice and what Google does its Gizmo5 acquisition to push Google Voice into a full VoIP proposition. This is where Telcos should be most worried and where we have yet to see all the pieces positioned on the battlefiled.