Horace Dediu

The following interview took place by email on April 15th, 2013.

1. What are the truth and false about the 'Apple shock' currently? In what perspective should we see this?

First, I'd point out that during Steve Jobs' time the company suffered many such shocks. The stock fell many times far further than it just did for trivial and irrational reasons. Recently Warren Buffett himself pointed out that his own company had 50% drops in value four times in the past. Share prices are not always good indicators of potential and markets are not always efficient. I catalogued the dramatic share price declines in Apple during the last decade here.

Second, I'd point out that the number of people watching and commenting on Apple has grown almost as fast as its sales and earnings. When Apple was small the people who studied Apple were few. (You could see this today for other, modest tech companies. There aren't 50 analysts writing reports every day and 2000 bloggers tweeting about Lenovo even though it's a successful and growing PC company.) Because of this growth, I would guess 80% of the observers have not observed Apple's prior painful episodes first hand. For them this is the first time a "dominant" Apple has slowed. The amplification of so many voices raising alarm makes it seem truer, but it isn't.

Third, the failures being cited are not significant. In terms of increased competition, before Samsung there was Nokia and Motorola and the mobile Operators and Microsoft and Dell and many others long forgotten. They were all about to "defeat" Apple. As a quick example when Apple was "the iPod company," iTunes was considered vulnerable and fragile due to DRM concerns or the Beatles not being on it. Microsoft was launching "Plays for Sure" and Zune and Creative was suing Apple over patents. These battles are long forgotten. Before those there were concerns about the viability of the Mac that go back decades. At the time those were actually very valid concerns. At the time Apple did not have half a billion users. It depended on one product. But what saved them was a process of development of new products not the products themselves. iPod faded, Mac faded. What mattered is that they created new things to replace them.

Finally, what is not commonly understood is that the mechanism for creating things at Apple is unchanged. Its functional organization is inherently unstable and chaotic, sometimes looking like it will derail. But that's the way it was designed to be. You just have to have faith that it's a system that works. Those who did in the past were well rewarded.

2. What possibilities out of 1~10, do you think, Apple will suffer the same downfall as Steve jobs has left the company in the past in current?

The threat is negligible. During the first departure of Jobs, the intention of management was to make the company into "a proper company." The plan was, essentially, to remove the chaotic model that Jobs had put in place and replace it with something more "rational" and "grown up." After he returned he set about not just returning the company to the way it was but to also codifying and identifying exactly what that was so that it did not happen again. You have to appreciate that the greatest thing Jobs ever created was not a product but Apple itself.

Note that Apple managers stay in their roles the whole time they are there, sometimes for decades. There is no "general purpose" manager and the whole company has been organized along these functional lines. The way to think about it is that during his first departure the new management tried to undo what Jobs had built which is why it became dysfunctional: the DNA did not match the body it was operating. His return re-aligned the culture and operations to what was originally developed. As long as new management does not try to undo that, they'll be all right.

3. Apple is now defined by some people, as 'the company who modifies well', not 'the company who innovates' well. What they made was ipad, ipod, iphone, apple tv and all the modifiers of the original products. Do you agree? If you do why?

Innovation is not invention. Innovation is the application of invention in ways that solve new needs. I'm always amazed at how misunderstood this term is even though the definition is easy to understand:

("Innovation differs from invention in that innovation refers to the use of a better and, as a result, novel idea or method, whereas invention refers more directly to the creation of the idea or method itself.")

Apple is an innovation machine. It does invent but that's not valuable in itself. Not all inventions are applied and not all innovations depend on internal inventions. Innovation is applied invention just like engineering is applied science. A better way to think about Apple is to think about Pixar. It's a blockbuster manufacturer. It makes blockbusters and nothing else. That means it does not make many of them and not always regularly and that the ideas may not be original, but the results are always very popular. Pixar is not like any other studio that makes some hits and some flops. Pixar is also a functional organization. It's not an accident that they were both built by the same person and that they are both successful after he left.

4. Google is forecasted to release lots of products this year, but Apple isn't really looking forward to so many innovations. Inside Apple, is the innovation team really making a new innovative product? what are their longterm plans to fight with Google, or Samsung and the rest of the competitors?

People outside of engineering organizations, especially large ones, don't appreciate the time scales involved. Products you see today were designed, planned and developed many years ago. We see plenty of evidence of this but we tend to ignore it. Consider that some prototypes end up on ebay showing they were built years before launch. It is the same with evidence presented in trials proving work on the product 4 to 5 years before it was launched. This is not the case just for Apple but all other technology companies.

For this reason, what is happening in the market and what is happening inside the company are two completely different universes. The tendency is to assume a direct relationship between market momentum and current management decisions. These are connected but with many years in-between.

For example, globally accurate Maps require a minimum of five years of development. Decisions on what ended up being Apple Maps had to have been made by Jobs himself. Namely, he must have decided whether to buy or build Maps. Contrast with Nokia's decision in 2007 to buy maps for a cost of $8 billion; instead Apple licensed and then decided to build later. In 2007 Jobs decided that it was more important to work on the product itself, meaning the iPhone (while Nokia didn't prioritize product innovation.) The results are visible today: Apple is behind and needs to accelerate with Maps and Nokia with its great maps must find a way of staying in business.

Apple is not only working on the next product but probably 15 new products, of which 14 will be discarded. Again, I cite Pixar. Each movie is produced with multiple stories, multiple character decisions and different plots in parallel. Much ends up being thrown away. We don't see any of that.

Apple is extremely "myopic" in that it is very concerned with execution and there is no visible "strategy plan".  That's by design. The product comes first and then comes the market and then comes strategy. To create great products you need to tune out almost everything else. However, they do have a "strategy" and that has to do with which problems they should attack and which they shouldn't. Usually they are successful because what they can attack nobody else can. That is due to their integrated, functional approach.

5. Isn't Apple, relying too much on semiconductor manufacturers? Meaning, isn't Apple only try to be 'stable company' to supply their products on time? sometimes when companies have disruptive technologies, they have hard time supplying products.

You're touching on the question of the problems of integration. Yes, there are vulnerabilities but that's the way it has to be. To mitigate this Apple is increasing its integration of the value chains. For example developing its own chip design and owning a lot of capital equipment.

6. If you were Tim Cook, what would you do?

I'd buy Intel and turn them into Apple's microprocessor design and manufacturing group. They won't have much to do in a few years and they'll be cheap.

7. what are the reasons that Apple try to make a 'apple watch', 'apple bicycle'? How do you define these products, since, watchs and bicycles are a total different paradigm which is a totally different industries? Is Apple realizing that smartphone industry is hard for them to innovate?

Computers are becoming more personal, intimate. It's a natural evolution from large to mini to micro to portable to handheld. I don't see this slowing and Apple should re-define the user experience during every such shift. Here again integration is essential.

8. what are some of the stuff that we don't know about Tim Cook?

I can't help you there. Only thing I can say is that people who know him have told me he's not soft and gentle as a manager. He's tough.

9. How will Samsung and Apples patent fight come to conclusion?

Again, I can't add much to this. Litigation is often a decision made outside of market conditions so it can be arbitrary.

10. how does employees or executives inside apple think about their company?

It's hard to describe this without sounding soft, but the employees at Apple tend to love the brand. You can't measure that but I can think of one proxy: the number of applicants to retail jobs are in the hundreds for each opening.

[Update: Bono made an important observation regarding Jony Ive which was published after this interview: What the competitors don’t seem to understand is you cannot get people this smart to work this hard just for money. Jony is Obi-Wan. His team are Jedi whose nobility depends on the pursuit of greatness over profit, believing the latter will always follow the former, stubbornly passing up near-term good opportunities to pursue great ones in the distance]

The following graph shows the history of smartphone volume shipments from Nokia.

 

Lumia sales have increased to 5.6 million units last quarter. Up from 4.4 during the previous quarter. Symbian devices have nearly disappeared from the market with only 0.5 million shipped.

This puts an end to Symbian sales after over a decade since sales start and two years after it was declared that sales would end.

The bad news remains that smart devices as defined by Nokia are still not profitable. If volumes grow it's possible that the cost structure (without further cuts) can be sustained and perhaps the business will get its footing.

The level of 6 million units/quarter is about where HTC and RIM are today but only half of what ZTE and Huawei are probably shipping. As a hardware business it might work, barely. It certainly helps to have $250 million as platform support payments from Microsoft.

As a platform it's still a very long haul for Windows Phone. Even if we assume a nominal $15 revenue/ Windows Phone license and ignore the kickback, at this level of sales the platform generates less income than what Microsoft gets from licensing IP to Android vendors.

The best and brightest are usually put to work on optimisation, and asked to improve the way things work. 'Can you make it better, faster, and stronger?' They will then go forward and solve the inefficiencies, and that’s where 99% of most energy is spent on. But, at some point you run out of room to improve things, and that’s when you have step aside and ask, can we make it different?

via Horace Dediu: Asymco Interview – Why Businesses are more Fragile than People.

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A report on Ùll with recollections from Don Metlon and Michael B. Johnson (Dr. Wave): what is a functional organization and why is that a thing of beauty? What do Pixar and Apple have in common? What is Horace's favorite Pixar movie? Also a new mini-installment on "Asymcar", what's wrong with cars?

via 5by5 | The Critical Path #80: Functional Structure.

The Windows PC market is contracting. The market data has been showing unit shipment declining for some time with the latest quarter having perhaps the steepest decline for two decades.

What remains undocumented however is how the market looks when considering economic value. A more complete picture would be to show revenues, average selling price (or revenue/unit), operating margins/unit and percent of profit capture.

The data is not beyond reach however. It involves combining the shipment estimates from e.g. Gartner with financial reports from the companies themselves. Some analysis is required to estimate margins but they are also not hard to obtain (e.g. from third parties.)

So here is a view of the market for the fourth quarter 2012:

The only inference I made was with respect to Apple's margins for the Mac. These are based on deriving a gross margin of 26% and adding an estimate of the SG&A and R&D "overhead" of 7.1% of sales, a figure which applies to the entire company. This yield an operating margin of 18.9%.

If this estimate is considered then the operating profits from PC operations imply that Apple generates more profit than all the top 5 PC vendors combined.

Assuming further that "other" vendors have the same profitability ratio as the top 5 combined yields a figure of 45% "profit capture of PC market" for Apple. This is not as good as its performance in the phone market, where Apple has about 72%, but it's not bad.

The real problem for the PC vendors is not that they have such low margins–they've had low margins for decades. It's that the volumes which "made up for" low margins are disappearing. Apple is not immune to a gradual erosion of Mac volumes, but they have positioned themselves for growth with devices and content commerce and services. They have essentially "escaped" PCs and indeed caused the need to escape in the first place.

The problem is what could the others do? It seems all they can do is depend on Microsoft getting their strategy right.

Sounds risky.

To anyone who has visited the current "campus", it's obvious that Apple has outgrown it some time ago. It's also obvious given the increase in headcount and operational expenses over time as can be seen below:

 

(I added Q1 2013 estimate based on company guidance.)

One can understand why, from a practical point of view, they want to consolidate what amounts to at least twice as many people back into one place.

But there is also a more subtle reason and it has to do to a fundamental distinction: Apple is a functional organization. Unlike almost every other large company it's not organized in "divisions" which have responsibility for "a business" in the sense of profit or loss. At Apple most people or teams are assigned a function like "design", "engineering", "sales" etc. When a product is being built, they are assigned to that effort. When the product is complete, they go to another product.

This is not a matter of hypothesis. Not only have we heard rumors of how one product was delayed (e.g. OS X) because the teams were busy finishing another (iOS), but Adam Lashinsky's work (sanctioned by Apple as it was) revealed the structure almost two years ago.

This structure may seem obvious to those working in small companies, but it's completely unheard of in large companies. The nearest comparison to this structure is a military organization. There you have Infantry, Armor, Aviation etc. These groups are assigned (in a combined fashion) to a particular effort or battle and then go back to the barracks when done.

Another example is the way movies are made. Disney famously built his company around the same principle.

Seen from this perspective, the architecture of their proposed campus makes perfect sense. If it was a divisional structure then each division could live in its own building or campus. In fact, each division would not have much to talk about to any other division. But as a functional organization Apple needs to move people quickly between projects. It needs to re-configure itself frequently. Being in the same building means they can do this much more efficiently.

This is why there needs to be one building and this is why the shape chosen is probably optimal: each point within can be reached with minimal routing. The fact that it's aesthetically pleasing is a coincidence.

Or perhaps not. Some say that in beauty there is truth. At least to me, the design looks to be pure logic.

The latest data on PC shipments from Gartner showed a decline of  11.1% from the first quarter of 2012. As we don't yet have the final data on Apple's Mac shipments, I used my estimate of 4.38 million units (14% growth as per NPD estimate for the US) to obtain an estimate of Windows PC shipments.

That number is 74.8 million units. In the first quarter of 2012 the corresponding calculation yields 85.1 million units. That makes Windows PC rate of decline -12%.

The historic shipment data and growth rates are shown below:

 

Note that tablet data is not yet included in the shipments summary. Windows shipments are shown in shades of Brown and tablets in shades of Blue/Green.

The decline in PC shipments is persisting and even accelerating.

Coming only a week after the iPad's launch birthday, it's perhaps a fitting testament to its impact.

The following is a slightly edited transcript of a portion of the Critical Path podcast #79. I am reproducing it here for the sake of brevity and focus of discussion.

---

I'm going to try to put together an analogy together here that maybe will help us think through the Facebook Home and the Google Fiber issue.

I've been thinking a lot about how to illustrate Google's business model. The problem is that discussion has been polarized: Two camps have formed. One camp suggests that Google is a benevolent entity that does great things and only asks that we indulge their hobby of a business model called advertising. Fundamentally they are about pushing the envelope on technology, making wonderful things happen.

That is one camp. I call them the utopians. It may not be a nice thing to call them but I frame it as being exceedingly idealistic.

The anti-utopian camp is one that suggests that Google is an advertising company primarily, and fundamentally and overwhelmingly. And anything they do technologically is in support of that. The implication is that Google is sinister and manipulative, bent on getting away with as much privacy extraction as possible.

I believe that the anti-utopians dismissing Google as an advertising company sounds a bit incomplete. It's not incorrect. It's not erroneous. It's just not a complete story.

And also the utopian view that they do everything for us out of the goodness of their hearts and that advertising is something that they are reluctant to do, saying in effect, "We only do it because it earns us enough money so that we can do good deeds." That too is not an accurate picture. Google is a business and its business management team is hard nosed and knows what they're doing and they are not purely idealistic in that sense.

And so the question could be where across this spectrum does Google lie? Possibly it moves around between these points. Where they are becomes a question of motivation and what they want to become.

But this is only one dimension. It does not help us answer the question of Home, or Fiber or Reader or Blink. Their actions seem contradictory. Holistic or selfless in one case, greedy and capricious in another.

Let's step out of this spectrum and try to think of different ways which can describe the situation.

I propose a way to think about it as: Google tries to make a business succeed through having a huge amount of _flow_ in terms of data, traffic, queries and information that is indexed. So think about this idea of them tapping into a vast stream. The more volume that is flowing through the system the more revenue they generate.

As so given this very rough analogy I try to sharpen it up by saying: imagine it more as a river. And even more than a river, as a watershed, a river basin. Perhaps a giant basin the size of a continent. The business is, let's say, capturing fish at the mouth of the biggest river, before it exits into the ocean at its delta.

And so your job (as Google) is to catch fish mostly at one point. It's the most efficient way to catch fish because you have the most flow of water at that point and building nets is not trivial.

But in order for you to improve your business, to create more opportunity, presumably, you want to essentially have more water flowing.

And so how would you do that? Think of the Mississippi river. If you've got a net down at the bottom of the river, the question is how would you engineer, through civil engineering, or shaping the earth itself, a way of catching more fish.

The answer I think, in terms of the way Google might be thinking, is that they want to create more sources of water. So they would look to connect tributaries and lakes. "How about having another river join our river?" Let's make sure that we have "everything east of the Rockies" flow into our river system.

Now, think of it this way: After you've gotten all the tributaries, what are the remaining sources?

First, you'll want to make sure that no-one can dam or stop the flow of water into your main channels. And so you become extremely anxious about people building dams. That's the number one concern.

So your strategy becomes one of "how do we avoid dam building"?

That's one part of your strategy.

The other thing you could do to improve your business would be to make it rain more. So there's the question in your mind of: If we had more rainfall, then everything will flow more rapidly and we'll get many more tiny rivers forming and joining together into our main river.

Android and the Fiber business and even Facebook fit into this analogy rather well. In this context more rainfall means more people using the Internet. If you have more people you'll have more rivers and you'll have more water and hopefully more fish. Fiber means the water will flow more rapidly: you're essentially dredging the riverbed.

But the two are very disconnected (rain, dredging and fish). So your strategy amounts to not really worrying about the ratio. You don't create incentives to people who make rain in the form of fish catch quotas next quarter.

In other words, your performance as a manager of cloud seeding efforts should not be measured in fish.

Leadership should instead simply put out the mandate of "Go out and make it rain".

So that's the notion of Google going out on these projects and doing all these "great things" for us. They make it rain. The Internet expands. There is minimal censorship.

By the way, censorship is a dam. Being blocked out of a country is a huge dam. It's actually more like building a mountain range that diverts water flow away from your watershed.

And so they have these notions of how to prevent these things from happening.

So it sounds like they are doing good things. It sounds like asking for it to rain; they want to make sure that people don't divert resources; they want to make sure that there are no barriers between the raindrop and getting access to the channel to the ocean.

So it sounds like they're doing all the good things like a good civil engineer. Like the US Army Corps of Engineers who developed the irrigation, flood control, energy generation and waterway transportation of the United States.

Google seems to be the world's "internet civil engineer". They are building all these things to make sure that we have good water (i.e internet) supply. That we have plenty of navigable channels. That's the analogy.

But let's not forget that the only reasons those things are happening is because they are catching fish at some point down the Mississippi.

From that point of view you have to ask yourself: do they deserve this concession? Because they are ultimately affecting the environment to such a degree; and the environment is the internet; and the whole scope is how the world operates.

That is where people have to step back and ask themselves: Even a group of civil engineers that have all the best intentions may realize that they didn't think of all the consequences of their actions. A lot of the criticisms may come decades later. From people who'll note an effect on the environment. Dams get silted, a lack of floods reduces nutrients to crops which then need fertilizer, which has a whole other set of problems.

That is when you have to reflect more deeply on what is right and what is wrong. So saying, as the City Council of Austin might: thank you for coming and paying for installing broadband for us. Fine, but we just don't know what the unintended consequences might be. It all _sounds_ good but we don't know if it _is_ good.

And similarly, in the case of Facebook, there is a subtle hijacking going on where Android creates more rain, and Facebook and Amazon are essentially putting down nets and catching fish upstream. They're not damming the tributaries. They're not putting up mountain ranges and saying they'll make sure the water flows away from the Mississippi. But rather they are putting nets and saying "Thanks for the rain". They took advantage of what amounts to a public resource. Here the failure of anticipating consequences falls on Google. But they could not have possibly foreseen all that? Or could they?

Then there is the question of measuring success. It's complicated and hard to measure performance. Even Google's own performance. We don't really know if the cloud projects work. We don't get to run this as an experiment that can be tweaked as data comes in.

Google does not report performance. When they go off on these rain making projects, it's natural to ask how many fish were caught as a result. Is that incremental new rainfall causing more fish to get caught. And Google won't say anything about the profitability of rain making. They will never give you a profit and loss statement for all these projects: the dam eradication project, the project dredge a channel, the project to seed clouds. They will say that these are projects that will result in only one thing, which we do measure, which is the number of fish we catch in the delta of the Mississippi down by New Orleans. But so far although rainfall seems to be increasing exponentially there are not that many new fish.

So that's where we struggle as analysts: is rainmaking good? Is the dam destruction process working? We can't answer these question. And we don't even know if Google themselves can. They might think of it as a strategic thing: it's always better to have more rain than less and more water flowing. End of discussion.

To borrow a phrase from Zuckerberg, it's above my pay grade to know what all the consequences are. I have opinions as environmentalists have opinions and sometimes they have some data to back up those opinions. For instance whether a dam project is a good thing on balance. But they are bound to have partial answers because the cost/benefit analysis is definitely missing a lot of the costs and missing a lot of the benefits as well. You can't put a number on a lot of these things.

That's where we are today. Google and Android are forces which are are very powerful but which are, to a large degree, uncontrolled, even by their own managers.

 

This week we cover a bit of Facebook Home, a bit of YouTuber economics, the best analogy ever heard for Google's business model, and we kick off Auto industry analysis with the "Five Whys"-the paradoxical questions that nobody seems to be asking about cars.

via 5by5 | The Critical Path #79: Make It Rain.

This was a good one.

On Mar 18, 2013, Rafael Barbosa Barifouse - Redacao Epoca - Editora Globo asked (and I answered):

Q: Why is Samsung creating Tizen?

A: I believe they are collaborating on Tizen development because they want an alternative to Android and because Bada was not good enough to meet that goal. Tizen's roots include contributions from Intel, Nokia and several Japanese companies so it's not Samsung's OS per se. Historically it was the "open" alternative operating system for embedded and mobile systems. See https://github.com/kumadasu/tizen-history/blob/master/tizen-history.pdf for a historic perspective.

In some ways Tizen seems to be a blend of several pieces of code including proprietary Samsung user interfaces. Samsung is presumably interested in having a unique, differentiated experience. This is something every device maker seeks. Put another way, if they did not seek this then it's unlikely that they would be profitable which would also imply that they would not invest in marketing and development of products. As Samsung invests both in marketing and development it can be concluded that they seek to offer a unique value proposition and, in today's market, that means a unique experience.

Does it make sense to create a new mobile OS when it has had so much success with Android?

Samsung would argue that the success it's had is not due to Android but to its products. Arguably they are right because if Android were the valuable component in a phone then buyers would buy the absolute cheapest device that runs Android regardless of brand. That is not the case. People still seek out a particular brand of phone because of the promise it offers. Consumers have been buying more Galaxies than no-name Android phones.

Why is Samsung the most successful company between the Android devices makers?

In my opinion it's due to three reasons:

1. Distribution. Success in the phone business depends in having a relationship with a large number of operators. Samsung had these relationships prior to becoming a smartphone vendor [because it sold all other kinds of phones]. Few alternative Android vendors have the level of distribution Samsung has. For comparison Apple has less than half the distribution level of Samsung and most other vendors have less than Apple.
2. Marketing and promotion. Samsung Electronics spent nearly $12 billion in 2012 on marketing expenses of which $4 billion (est.) was on advertising. Few Android vendors (or any other company) has the resources to match this level of marketing. For comparison, Apple's 2012 advertising spending was one quarter of Samsung's.
3. Supply chain. Samsung can supply the market in large quantities. This is partly due to having their own semiconductor production facilities. Those facilities were in a large part built using Apple contract revenues over the years they supplied iPhone, iPad and iPod components. No Android competitors (except for LG perhaps) had either the capacity to produce components or the signal well in advance to enter the market in volume as Samsung did by being an iPhone supplier.

Tizen was being treated as an OS for low and mid level devices, but recently Samsung said that it will launch a high-end device with Tizen on Q3, an area where it's very successful with Android. What has changed? What does this announcement mean?

Planning for these product launches is done a few years prior to launch. I believe alternatives to the Android line (i.e. Galaxy) have been planned for a long time. Note that Samsung also has a line of Windows Phones and historically has supported Bada, Windows Mobile, Symbian, PalmOS and LiMo smartphone platforms. Samsung's involvement with Android is only about three years old, and arguably only enjoyed two years of prominent growth. That's less than one product launch cycle and far less than a platform or OS development cycle.

I believe the company has a long term perspective and that includes a time span beyond the likely lifetime of Android [Note that platforms do have finite lives]. Keep in mind that phones last less than two years. If users are not loyal to a platform then they will very quickly move on. The "stickyness" of a platform depends on media or software consumption by the user. That level of consumption is not particularly high for most Android users. The same phenomenon happened with Symbian and BlackBerry and Windows Mobile users. Hundreds of millions switched or will switch out of those platforms. This happens far less with iOS, Mac OS X and Windows because of the significant investments users make in the ecosystems above the OS.

Is Google dependent on Samsung's sucess with Android? Or Samsung is more dependent on Android since its the most popular mobile OS nowadays?

Google is not dependent on Samsung because it's not dependent on Android. Samsung is not dependent on Google because Samsung is not dependent on Android. Android is valuable in theory but in practice its value is hard to identify. Historically it was planned as a defense against the hegemony of Windows, BlackBerry and iOS. In that respect it has succeeded. But playing defense is not enough to win a game. For Google to truly succeed in mobile it needs to define a better business model.

So far its profitability from mobile is very weak and has not shown up in the bottom line. Furthermore, it's probable that Google has 'control' over only about 40% of Android devices in use. Control here means a guarantee that users will use those devices for the benefit of Google, and, more importantly, not for the benefit of its competitors.

You can also think of it this way: If they "divorced" there would be minimal to no impact to their fortunes in the foreseeable future. Buyers of Samsung phones will still buy Samsung phones because they will look and feel very similar and Google services will still be available through browsers or apps (e.g. Google maps on iOS). Conversely, users of Google services will continue to use them because they will be available on Samsung devices, no matter what OS is running. The services Google offers are independent of Android and are cross-platform. They will make sure they are available on all major platforms (as they were before and during Android). Google is far more loyal to Search and Maps and Gmail and YouTube than they are to Android.

Do you think Google is going to merge Android with Chrome OS?

Google's chairman said they would so I assume they will.

If so, how this could make an impact on Samsung?

It depends on how the new OS would enforce licensing terms. If the result would be a restriction on Samsung services like S Pen, AdHub, Samsung Wallet, SmartTV, ChatON etc. then Samsung might reject the OS and either fork Android or move to Tizen more broadly.

The comScore mobiLens survey for the US ending February 2013 shows continuing rapid expansion of smartphone usage in the US. Even though the 50% penetration threshold was passed seven months earlier, the rate of new smartphone users was second highest ever recorded with over 1 million new-to-smartphones users every week during February.

Overall penetration increased to 57% with nearly 2% of the population switching in one month. Using the average growth rate for the last six periods, the US could see 80% penetration in another 19 months or by Q3/Q4 2014.

It remains to be seen if the consistency of growth which was preserved from 20% to 60% is maintained between 60% and 80%, but all indications so far are that it will be.

The growth in smartphones has been driven by the two dominant platforms: iPhone (iOS) and Android. Together they now make up 91% of the user base with about 40% for iPhone and 51% for Android.

Android alone gained 17 million users in the last 12 months while iPhone gained 21 million users.

iOS user gains have out-paced Android for the last four periods which resulted in a decrease in Android share of users. A reduction in Android share was also visible in the spring of last year but the current decline is not only longer but more pronounced.

The reason iOS is growing more rapidly may be due to three factors:

1. Broader distribution with three out of four major operators carrying the phone
2. Availability of three product variants with $0 starting prices.
3. Increasing awareness and use of apps and content ecosystems due to network effects.

As distribution is about to increase with T-Mobile being added to the carrier list the growth in iOS share is likely to continue even as the market expands.