Research #Industry · 10 comments
My thanks to Eric Hellweg, HBR editor, for offering the opportunity to write in the Harvard Business Review blog and the help in editing and sharpening the message.
You can read the article here:Google's Strategic Mistakes Drove Motorola Buy - Horace Dediu - Harvard Business Review.
Please use the forum at hbr.org for discussion.
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Research #Industry · 177 comments
Google's acquisition of Motorola is clearly designed to be an acquisition of Intellectual Property rather than an entry of Google into the phone business, but the impact on the business will be felt in many ways.
It is surely going to send some Android vendors scrambling. The situation is not without precedent however. The history of governance and ownership of Symbian shows how the licensing of platforms by licensor competitors leads to unintended consequences.
Symbian was formed to be governed in a way very similar to the original Android via the Open Handset Alliance. The company was owned by a consortium of phone vendors.[1] The shares were not equally distributed however with Nokia holding a larger share (though not a majority).
Although nominally involved in decision making, the smaller shareholders never felt entirely comfortable with the arrangement and over time some sold their shares and left the group even though they continued to license the OS.
Eventually Nokia ended up acquiring the company outright and open sourced the code. However, by then the product was obsolete and the only licensee was Nokia itself.
The lesson (and warning) was that a licensor that is also a licensee makes other licensees uncomfortable. The supplier is also a competitor. This is classic channel conflict and never ends well.
Open or not, with or without equity, these arrangements are always unworkable.
So Google's promise that
"This acquisition will not change our commitment to run Android as an open platform. Motorola will remain a licensee of Android and Android will remain open. We will run Motorola as a separate business. Many hardware partners have contributed to Android’s success and we look forward to continuing to work with all of them to deliver outstanding user experiences."
seems naive at best.
--
Notes:
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Research #Industry · 17 comments
The charts published here typically show data across two dimensions, (X-axis and Y-axis). Since many times we have to look at data over these dimensions and through time, there are no easy ways to do it without some iteration of the same chart.
As an alternative a "Motion Chart" let you look at data across up to five dimensions (X-axis, Y-axis, Color, Size and Time). This is a dynamic flash-based chart that allows you to explore several industry/vendor indicators over time. You can:
This data and chart are updated and available at higher resolution at the following (permanent) location: https://asymco.com/hire-me/vendor-bubbles/
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Research #Industry · 33 comments
I took the stacked cascade chart of profit/phone x phones sold into a multi-quarter animation subtitled "The evolution of Shipments, Revenue, Profitability and Cost structure of eight vendors selling mobile phones between second quarter 2007 and second quarter 2011."
(I recommend selecting 1080p HD view and full screen to sufficiently resolve details.)
httpv://www.youtube.com/watch?v=Vg8idQCc1D8
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Research #Market · 29 comments
This is an updated view of the AMP index including Q2 data. As a reminder, the AMP (Asymco Mobile Performance) index is an unweighted average of four “shares”:
You can see the last quarter's standings here.
The updated index figures and spark lines are shown also on the right-most column on this site.
The biggest mover was Nokia which dropped 6.5 points. The second mover was Apple, with a gain of 3.2. Samsung followed with a gain of 1.38 and LG with a 1.21 and HTC with a gain of 0.95.
RIM lost about 1 point and Motorola and Sony Ericsson remained nearly flat.
The plunge in Nokia's AMP score is nearly matched by Apple's gain over the four year time period observed.
The full picture of each component is shown below:
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Research #Market · 18 comments
ComScore's latest survey data shows the following net user gains in the US smartphone installed base:
In summary, the key data points for June:
Installed platform shares for the US market are shown in the following chart
Platform Installed base vs. non-smart devices is shown below:
The penetration of smartphones slowed down in June (though that seems to be seasonal). The following chart shows weekly smartphone adds (or feature phone losses as total user base has held constant.)
Averaging the adoption rate over six months gives a "tipping point" forecast (50% penetration) of October 1st, 2012. That still means that 155 million American mobile phone users don't use smartphones.
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Research #Industry · 16 comments
The phone vendors' ranking relative to each other on three measures of share (Unit or Volume, Revenues and Operating Profit) is shown below:
Although not much changed in the unit rankings since last quarter, revenues did see Samsung and Nokia trade places. In the case of Profitability, the chart shows a sparseness that is quite unprecedented. Only positive profit figures are charted.
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Research #Market #Theory · 99 comments
The violence with which new platforms have displaced incumbent mobile vendor fortunes continues to surprise.
This while entrants have grown share in spectacular fashion:
The picture of platform share over time looks like this:
The platform volume growth is shown in the following graph:
Or is it?
The surprising thing is that it should not be surprising. When the iPhone re-defined the basis of competition (at the beginning of the time frame of these charts) it unleashed forces which are still spinning the industry into a new configuration.
In that context, Android is a natural consequence. As iPhone created a threat, the response from all other vendors (other than Nokia and RIM) was to seek something that would sustain their business. Android was salvation.
It enabled the pursuit of better margins and hence better returns. So much so that Android offers the escape up-market they have always sought. It enables vendors to abandon the profit-free feature phones to low-end entrants like ZTE and Huawei.
LG, Samsung, Motorola and Sony Ericsson all took the bait. They are racing as quickly as possible to turn their feature phone portfolios into Android portfolios. This is certainly something that Google also wants to see happen and has been planning all along.
However one of the consequences of the modular (aka "open") approach is that the low end disruptors gobbling up low-end share are also motivated to move into the Android business as soon as it comes within reach. The only reliably predictable consequence of Android will be the postponement of displacement of the existing brands by the low-end entrants.
Clearly some vendors see the trap. For all its apparent failings, Nokia saw this outcome and chose to attempt a "Hail Mary Pass" with Microsoft. The strategic point being that because they no longer had faith in their ability to execute on an independent platform, they would pick a platform that gave them at least some control or leverage. There are serious risks and problems with this approach--something which has been covered here already--but the bet being made is a clear rejection of the slippery Android slope.
RIM is trying to resist with QNX which is a similar approach but timing may also be the undoing of this strategy. HP's approach with WebOS and Samsung's Bada are also hedges to avoid this fate.
And what about Apple?
Apple is always skating in a different direction. iOS needs to be seen as not so much a phone platform but a computing platform. Given what we know, iOS was always conceived as the future of computing. Voice, after all, is just an app on iOS. So my expectation is that Apple's iOS will continue its attack on the mobile computing market, skimming (or carving as the case may be) profits from the phone business to sustain its ultimate target of reclaiming the computing universe.
By this thinking iOS lives only by improving more rapidly than anything else in dimensions that redefine the basis of performance. In other words, doing more of what the iPhone did in the first place to set off this disruption.
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Research #Industry · 54 comments
The profitability (aka Profit/Phone x Phones Sold, aka Rawr) chart is a great way to see the "shape" of the industry at a glance, with attention to volume and profitability.
What is missing however is a perception of the sales level and the pricing of the products. To help in that regard, I prepared an extension to the profitability chart which covers the price and sales for each participant.
You can interpret this graph as an extension of the profitability chart where the "empty" or white areas above each profit area are payments to suppliers and operating expenses. Thus the sum of empty and filled areas (above zero) are equivalent to revenues. If the sum of the empty and filled areas are greater then revenues (i.e. they extend below zero) then the difference is operating losses.
The top of both empty and filled rectangles are set at the average selling price per phone (and the top of each filled rectangle is the operating profit per phone). The width of both rectangles is the volume of phones shipped.
The things you can read into this chart are:
Finally, the sum of all the areas are the overall market revenues for the quarter. Sum of white areas are expenses and sum of solid areas are profits & losses.
A natural evolution of this chart would be to animate it across multiple quarters/years.
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Research #Industry · 20 comments
Smartphones made up about 30% of global phone sales last quarter. That is a significant increase from 10% in Q4 of 2007.
From this perspective, iPhone obtained 5.6% share, Android 14.2%, Nokia Symbian 4.6%, RIM 3.6%, Bada 1.1% and Windows 0.4%.
The competition however still has 70.5%.
The chart to the right shows the challenge remaining and the progress being made.
The good news is that the non-smartphone market is not growing while the smartphone market is. In fact, the non-smart market has had a three year CAGR of 0% and a y/y growth of 1.0% and a sequential decline of 6%.
The non-smart portion of each branded vendor's business is pretty dismal:
The reason all these brands fell is because the unbranded vendors took their place. "Other" non-smartphones grew by 43%. They have been sustaining growth at the rate of 57% compounded over three years.
The following chart shows the increasing share taken by the "other" vendors in non-smartphone units:
The non-smart business is so dismal for branded vendors that I've been assuming that they will cease to build such devices in the near future.
The trend is shown in the following chart which shows the percent of units for branded vendors which are smartphones.
Motorola, Sony Ericsson and Samsung are fleeing to smartphones as rapidly as they can. LG is following as quickly as possible as well.
The only question remains with Nokia. While their smartphone business evaporates they've also made a commitment to the non-smartphone market and are thinking about "the next billion" users who, presumably, will not buy smartphones and will buy some variant of Nokia's Series 40.
Targeting the low end may be commendable, but the question they need to answer is why would those next billion buy anything other than a low cost smartphone? And if not, then what's so different about the next billion?
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Research #Industry #Market · 47 comments
Nearly all the data on smartphone shipments is now available for the second quarter 2011. Some fragments are still not public, including ZTE and Huawei (and any others) shipments. We also have estimates for the various platforms including an estimate for Windows Phone and Bada (though not for WebOS).
This allows the following chart:
Using the traditional color scheme which separates "integrated" from "modular" vendors, the chart shows overall volume growth and how the volumes are split among vendors.
The market grew at about 73% y/y and 50% compounded over three years and 9% sequentially. The y/y growth rates for individual vendors were:
In terms of unit share, the pie charts below show the before and after (three year span):
And the stacked area below shows every quarter over a four year period.
The story is largely unchanged since last quarter except perhaps in the rapidity or deterioration in Nokia's performance and Samsung's partial exploitation of that decline.
It should be noted that not all of Samsung's volumes are licensed platforms. An increasing share of Samsung smartphone volumes is Bada, an internally developed OS.
In the charts above I arranged the bars to place Nokia and RIM in the middle to show their double envelopment. A pincer movement is only an analogy but perhaps it's evocative of what's happening.