Asymco

Asymmetric Intelligence

forecast

  1. Who will buy the next 150 million Symbian smartphones?

    Research · 94 comments

    Stephen Elop stated that Nokia expects to sell approximately 150 million more Symbian devices before the transition to Windows Phone is complete. Assuming that figure is achievable (which is far from certain) I tried to understand how that figure will affect the volume and share numbers for Nokia in the coming years.

    It's very likely that the first WP phones will not ship in large volumes until 2012. Product development cycles being what they are, unless there is an ODM rebranding (i.e. taking an HTC phone and gluing a Nokia sticker on it) the minimum development time is at least 12 months. Keep in mind that Nokia does not have engineers to build such a product today and hiring them alone can take months.

    The following two charts show what a two year forecast that adds up to 150 million Symbian devices looks like. I assumed Windows Phones begin to ship in 2012 and, keeping in mind that WP7 is designed for a higher hardware specification than the current Symbian phones, I show a modest ramp for a total of 15 million units in the first year.

    I also forecast the overall market assuming continuing growth levels and calculated the effect of Nokia's share.

    The share at the end of 2012 would be approximately 6%.

    Note however that the share above depends highly on Nokia selling 150 million Symbian units in the next two years. One could question why would anyone buy a product whose platform that's been declared end of life. Perhaps there is a built-in assumption that end users are inherently stupid. However even in that scenario the question is which distributors will make the same bet with Nokia? Or, even more perplexing, which operators are willing to stock EOL products for two years when that shelf space is getting strong bids from Nokia's rivals.

  2. The parable of the the PDA: predicting the smartphone's future

    Research · 55 comments

    When reading the comments disputing the possible end of the voice-phone era I'm reminded of similar comments disputing the end of the PDA era.

    Although the Apple Newton pioneered the market in 1992 and John Sculley came up with the acronym, the Newton did not sell in significant volumes. It wasn't until 1997 with the Palm Pilot that the PDA market took off. Microsoft quickly followed with a licensed OS based on Windows CE. In 2001 Microsoft launched the Pocket PC brand to cement its attack on the PDA market. The first phones using a Microsoft OS were using something called Pocket PC Phone Edition. The first Nokia smartphones (Communicators) were built like mobile PDAs.

    The logic was quite compelling. The original PDA was built to mobilize contacts, calendars and notes. They replaced bulky paper organizers and seamlessly synced to PC productivity software like Outlook. It was a compelling product in the US where small business customers needed to keep track of hundreds of contacts. Users could even 'beam' contacts to each other via infrared. The idea of adding a phone function to the device made sense insofar as contacts could be immediately dialed from the contact app rather than typed into another device's phone keypad.

    By the early 2000's PDAs were forecast to sell by the hundreds of millions. There were millions of dedicated users who downloaded apps and thousands of developers being courted by platform builders. Palm even invented the word "ecosystem" as it refers to mobile platforms.

    However, I remember reading sites dedicated to this community and there were many people who rejected the concept of a PDA with an integrated mobile phone. They liked the fact that the PDA was not bundled with a phone plan. They upgraded PDAs in a different cycle from phones and besides, phones are for talking and PDAs were for something else.  It was even more difficult to justify the conflation of the two products when considering the corporate purchasing of PDAs. PDAs were procured by IT departments and phones came with contracts that were managed by a different department.

    What's a device vendor to do? The most avid customers of PDAs did not like the idea of burdening the product with a phone. RIM was doing its thing with moving pagers to include voice, but that was a different job to be done. The story is picked up here by this comment:

    I was hired by RIM in 1999 just before they began work on their first phone .... Coming from a two-way pager background, RIM decided that phones should have two-way push synchronization of pretty much everything that Exchange provided along with a limited WML browser. The general thought was that phones would never have sufficient power density or radios sufficient bandwidth to allow anything more. That was incredibly predictably wrong, but it's how things went down.

    Along with RIM was Ericsson, Palm, Motorola, and Qualcomm. Motorola came from a similar background as RIM and went on to build very similar devices. Both Nokia and Ericsson had come from phones and had decided feature phones should have far more sophisticated PDA functions. Palm started with PDAs then moved to the phones, but adamantly dismissed ideas like wireless synchronization for years making their first attempts at smart phone far more like early Nokia Communicators than early Blackberrys...

    So the point is that all these companies were fighting over what amounts to overgrown PDAs with phones and wireless stacks strapped on. Everyone assumed power density was no where even close to what was needed for general computing, that a full featured browser and heavy duty Internet services were impossible due to bandwidth and latency. Take a look at how our Java expert groups named standards, how people at the time talked about what features smart phones should have, and its clear that no one thought an iPhone was possible. Even Danger, which eventually went on to work on to create Windows Phone 7 and Android, was just working on a better Blackberry.

    via: shacknews

    But what does this have to do with the future of voice-phones?

    The problem is that the vendors that lost this game failed because they listened to their customers. Like with PDAs or with the original mobile phones or first generation of PCs, early adopters are not the audience that should be consulted on how to improve the product.

    Early Windows Mobile users were ecstatic about the platform and rejected new UI metaphors because they wanted a "mobile Windows". Palm fans stuck with the PalmOS even though it was well past its shelf date in the Treo because they treasured the original PDA metaphors.

    Every company paying attention to the market in 2005 would have been eagerly pursuing corporate buyers of PDAs and aiming complex products at enthusiastic PDA users.

    And yet, non-consumers should also not be trusted with their opinions. Most early surveys would show that the vast majority of consumers found that mobile phones were not good value for the money. Later the same audience would declare that smartphones were not worth buying.

    There are many voice-only users in the world who are happy with their products and not interested in any new options.

    So what's a marketer to do?

    If you can't ask early adopters and you can't ask non-consumers for hints then where can clues be found?

    What history shows is that consumers have been happy to trade up to technology that offers more option value.

    • Television went from cheap/free over-the-air broadcast with limited channel options to expensive cable with large option value in channels. Even if most of those options went unused, they are still valued.
    • Telephony went from low cost reliable landlines to high cost, less reliable but with much more option valuable mobility. Having the option to call a person vs. calling a place (where a person might be) changed the calculation of whether you make the call. Calling became much more popular.
    • Data as well went from metered dialup to unmetered high option valued broadband. From a luxury, to the least likely service an unemployed user might give up.
    • Emerging market users hungered for mobile phones even though they cost more than several months' wages because they gave access to information and increased the option value of their labor.

    Each of these huge technology transitions came associated with increased costs for the consumer, but that cost went toward the purchase of a far larger option value.

    The problem is that users cannot calculate option value in their minds when faced with a market research questionnaire. How can they envision all the ways they would use a new product they've never used before? How can they "get it" without observing it in use or spending time thinking of "how they would use it" or asking someone who tried it? In a nutshell, users are willing to pay for option value but can't envision or quantify this value without observing a finished, polished product in use.

    This is the problem faced today by branded phone vendors. Asking or observing current users of smartphones does not provide any incentive to sell low end versions. Asking or observing non-consumers seems to indicate no interest in newfangled complex or costly products.

    But the calculus that must be made is one of option value. Does the new product offer significant option value? Will this option value be easily realized? This is not easy to determine, but it's a method that is far more promising than asking users their opinion.

    The PDA was not a product that was introduced by the incumbent computer vendors because their customers did not ask for it. Once established, the PDA was not replaced by a product that PDA users asked for either.

    Smartphones are following this well trodden path. The high end devices are evolving into computer replacements nobody asked for (but everybody will use). The low end products are adding data option value to voice-oriented users who never asked for anything more.

  3. Microsoft's mobile effort: back to the future?

    Research · 41 comments

    Windows Phone 7 launched on 10 devices over 60 carriers in over 30 countries with 1.5 million of channel inventory in 6 weeks. Given the breadth of distribution, that number is not huge, amounting to less than 10k phones per operator.

    Curiously, Windows Mobile was still selling in significant volumes last quarter. Maybe even higher than WP7 is selling now. In Q3 2009 Canalys reported 3.6 million WinMo units sold. In Q3 2010  Gartner estimated 2.3 million were sold through to end users. Even nine months ago Windows Mobile was running at 3.7 million units or over 1.8 million every six weeks.

    Microsoft also announced they have 18,000 developers with 4,000 apps on the WP7 marketplace. That's one developer for every 83 devices in inventory.

    Microsoft's Achim Berg:

    our numbers are similar to the performance of other first generation mobile platforms...

    We're comfortable with where we are, and we are here for the long run; Windows Phone 7 is just the beginning.

    In terms of first generation platforms, I assume he is referring to Android and iPhone. That claim of similar volume growth is perhaps a bit too optimistic. However, he's very wrong about WP7 being the beginning for Microsoft's efforts in mobile. Not even close.

    Microsoft has had mobile software products in the market for over a decade. In 2003 Gartner declared that Microsoft would sweep Symbian aside. In 2006 they were the odds-on favorites to win the mobile platform game on the basis of developer support.

    Microsoft's Windows Mobile was selling more in 2003 than Microsoft's Windows Phone is selling in 2010. At the time, Microsoft also boasted of having a huge developer base (larger, in fact, than the number of users of the product; their .NET developer base being counted as mobile developers.)

    Furthermore, prior to the launch of iPhone's App Store, Microsoft spokespersons scoffed at the idea that Apple could field a catalog larger than Windows Mobile which led with over 13,000 apps in August of 2008.

    Dragging out these old figures isn't meant to deride Microsoft. They were not alone in failing to capitalize on early leads in mobile. Palm, Nokia, DoCoMo and Qualcomm all failed. RIM is arguably failing as we speak. Some have argued that Apple is also about to be undone by Android.

    The point is that dramatic, violent change was possible even five years after foothold markets were established.

    The question for today is: Is it still possible? Can a new platform still gain traction?

    Microsoft is clearly betting that it can. Their seemingly quixotic attack on the market can only be justified on the basis that it's still early days. They must reason that un-penetrated markets are huge and that the existing platforms are not sticky enough to prevent switching.

    At least one analyst agrees. IDC made the forecast that 32 million “Windows Mobile/Phone” devices will sell during all of 2011. I took issue with those forecasts at the time but if they deliver that volume they will get around 10% share, enough to stay on the map. If they don't then Microsoft will look more like Mobile Zune than Mobile Windows. The stakes are high.

    So even though they may have airbrushed Windows Mobile from history, Microsoft's current strategy is a direct consequence of them having failed with a seemingly strong platform.

  4. Analyzing the iPad as a computer: from a whisper to a roar

    Research · 31 comments

    [Goldman Sachs analyst Bill] Shope also expects both iPad and iPhone sales to exceed expectations in 2011; he sees sales of 37.2 million iPads next year, “which could potentially make Apple one of the largest vendors in the global personal computing market,” if you include both tablets and PCs.

    via Apple: Goldman Pounds The Table; Sets $430 Target - Eric Savitz - Tech Musings - Forbes.

    Apparently, it's not just the crazy ones who dare to think the iPad is computer.

    My forecast for iPad in calendar 2011 was set at about 33 million since last summer. I may raise it if Q4 units top 6 million.

    Meanwhile...

    He re-launched coverage of the stock for Goldman this morning, setting a Buy rating and $430 price target, while placing the stock on the firms “America's Conviction List.”

    I don't make stock price forecasts as they are based on a random number called 'sentiment'. But by forecasting earnings and assuming a range of P/E multiples between 15 and 20 (essentially in-line or below the S&P 500) values Apple's stock at between $360 and $480 by this time next year.

    Goldman's target of $430 is about in the middle of this range so I don't see it as requiring much in the way of conviction.

  5. Half of US population to use smartphones by end of 2011

    Research · 35 comments

    60.7 million people in the U.S. owned smartphones during the three months ending in October, up 14 percent from the preceding three month period, representing 1 out of every 4 mobile subscribers.[...] Despite losing share to Android, most smartphone platforms continue to gain subscribers as the smartphone market overall continues to grow.

    via comScore Reports October 2010 U.S. Mobile Subscriber Market Share - comScore, Inc.

    Separately, Nielsen reports on the same market:

    29.7 percent of U.S. mobile subscribers now own smartphones that run full operating systems.

    The most popular smartphones are the Apple iPhone and RIM Blackberry, which are caught in a statistical dead heat with 27 percent of smartphone market share in the U.S. Twenty-two percent of smartphone owners have devices with the Android operating system.

    via U.S. Smartphone Battle Heats Up: Which is the “Most Desired” Operating System? | Nielsen Wire.

    I've been tracking the Nielsen data and using it as a basis for forecasting the penetration of smartphones. While most coverage of this data focuses on splits between current OS platforms, I will look at competition with non-consumption and the impact on operator services.

    The chart on the left shows the historic penetration of smartphones since mid-2009 based on Nielsen's reports. The chart on the right is my forecast. This is an update from the last quarter's chart here. My forecast was fairly accurate with respect to platform shares in the last quarter so I've had to make only small adjustments and extended the forecast one quarter further out. [1]

    If my forecast is correct, smartphones will make up 50% of all phones in use by the end of 2011. That's up from nearly 30% today and 18% a year ago.

    One in three of all phones in use will be either iOS or Android. That adds up to about 80 million users; up from 35 million today. Overall, 120 million Americans will be using smartphones.

    Now consider the consequences for how services are delivered by operators. The most popular product operators will be selling will be unlimited data plans. One year hence, by 2012, unlimited data plans may become the largest service revenue generator for mobile operators in the US. Pricing and competition will inevitably be in a state of extreme flux. I leave the consequences to the imagination of the reader.

    ---

    [1] Note that the charts show share of phones in use, not phones sold in a particular point in time. In other words, this is measuring platform consumption, not units sold.

  6. Competing with non-consumption: Can Apple sell 100M iPhones next year?

    Research · 30 comments

    [Wedge Partners analyst Brian Blair] also contends that Apple’s production forecasts suggest the company thinks it can sell 100 million iPhones next year. “While a staggering number any way you look at it, our checks reflect full calendar 2010 builds in the 48-50 million unit range,” he writes. “While this number can change and adjust downward or upward  based on demand, we believe it is incredibly bullish that Apple feels it is possible that they could see nearly 100% year over year growth for iPhone in 2011 as this would mean that exiting 2011, Apple would have approximately 10% share in the global handset market.”

    via Apple Can Sell 100M iPhones, 48M iPads in 2011, Analyst Says - Tech Trader Daily - Barrons.com.

    Apple is, in my estimate, likely to sell at least 47 million iPhones in calendar 2010. (16 million in the current quarter, or 85% y/y growth).

    The 100 million in 2011 estimate assumes 100% growth on average. Is it really "staggering" to forecast another year of triple digit growth?

    The history of growth is one indicator. There the news is good: the product has been able to sustain that level of growth for three years.

    The second indicator is room to grow. Apple largest competitor is smartphone non-consumption. This competitor holds 76% share, but is rapidly losing share. Consider the the following chart:

    I've heard the mantra that smartphones are not for everybody and that the vast bulk of consumers will opt for voice-oriented phones indefinitely, especially in low-GPD/capita countries.

    To this I point out that there are no technical obstacles to implementing smartphone technology in all price points nor that there are any constraints on distribution, network technology rollouts or shortage of capacity to produce these products for all current mobile users (5 billion at last count). I also believe that user demand for this level of product utility will shift rather more quickly than supply.

    So, in my mind, the headroom looks pretty good as well.

    Lastly there is the question of alternative platforms. I'll get to that shortly.

  7. Analysts predict iPad sales (part IV)

    Research · 8 comments

    So far Apple has sold 7.458 million iPads and there is still a quarter remaining in the calendar year. The highest forecast immediately after the launch of the product was 7 million.

    For the record, in January I forecast 6 million units for calendar 2010 (and 10 million in first 12 months of sales).

    All analysts polled grossly underestimated the iPad. My impression is that competitors are still in denial.

    How many iPads will Apple sell? - Apple 2.0 - Fortune Tech.

    Unit sales 2010 (millions)2011
    Brian Marshall, Broadpoint AmTech7.013.0Calendar
    David Bailey, Goldman Sachs6.210.1Calendar
    Kathryn Huberty, Morgan Stanley6.09.0Calendar
    Shaw Wu, Kauffman Bros.5.010.012 mos.
    Gene Munster, Piper Jaffray3.58.0Calendar
    Ben Reitzes, Barclay's Capital2.97.3Fiscal
    Keith Bachman, BMO Capital2.55.5Fiscal
    Jeff Fidacaro, Susquehanna2.13.8Calendar
    Chris Whitmore, Deutsche Bank2.04.0Calendar
    Bill Shope, Credit Suisse1.87.4Fiscal
    Scott Craig, Merrill Lynch1.23.7Fiscal
    Peter Misek, Canaccord Adams1.23.5Fiscal
    Doug Reid, Thomas Weisel1.16.8Fiscal
    Yair Reiner, Oppenheimer1.14.0Fiscal
  8. iPad vs. iPhone: why we got the iPad forecasts wrong

    Research · 17 comments

    The iPad was announced to a loud chorus of disapproval and disdain. It's easy to forget the overwhelming scorn and insult poured on the product for months before and after sales start. Analyst forecasts were comical. At this time it looks like all 12 month iPad unit forecasts will have missed by more than 100% (mine included).

    As data on iPad performance was published for the first quarter's sales, the mood swung from ridicule to ridiculous.

    Without regard to the growth of comparable products, analysts seem to have latched on to production figures which are notoriously inaccurate. The problem with production numbers is that they are only very loosely coupled with shipment numbers to customers. There are questions of work in progress inventory, finished inventory and the actual accuracy of reports. Production also follows a ramp and is not constant over time.

    Another way to analyze a new product is to think about the distribution. Although late in the quarter some large distribution deals were made public, the channel did not have much time to be filled before the end of the quarter. Not only that but there is easily obtainable evidence that the iPad did not reach most international markets. Apple announced how they were rolling out a few countries every few months.

    This trickle of international sales indicated to me that the iPad sales pump was not yet fully primed. My initial estimate was for in-line sales of 3.3 million which I aggressively increased to 5 based on some of the production numbers being mentioned.

    This figure turned out to be 22% too high, but not as big an error as some of the other analysts.

    Another way to look at it is through comparable products. The nearest comparable product to the iPad is actually the iPhone. It was a similarly "revolutionary and magical" product launched with a similar constraint on production and distribution. It was also built and marketed by the same people. They've been down this road before and have honed the process from the iPod through the iPhone over a decade.

    If we look at the iPhone and compare it with the iPad, we see just how popular the iPad really is. It may not follow the same seasonal pattern as the iPhone, but it will probably ramp in a similar way. In the following chart I also show the iPhone Growth rate (right scale).

    The iPhone has been able to maintain over 100% y/y growth on average. I don't see a reason why the iPad can't repeat this pattern over the next three years.

  9. Gartner Predicts Mobile OS Market Share

    Research · 15 comments

    Lots of people apparently think it’s a big deal that Gartner is predicting Android will surpass iOS for second place. But why is that necessarily a good thing, given that they’re predicting Symbian will remain in first place? Who thinks Symbian is actually doing well? Nokia’s board sure doesn’t.

    via Daring Fireball Linked List: Gartner Predicts Mobile OS Market Share.

    I also noted with amusement that by 2014 "other" is slated to sell 85 million units or nearly 10% share, up from 6.1% in 2009. These "others" will be selling more than twice what Apple is expected to sell this year. Is "other" WebOS, Bada, MeeGo, LiMO? If so they're in for a healthy future.

    But dwelling on details like these is missing the point. To see how improbable this prediction is, let's go back to 2006 and ask what Gartner was forecasting would happen now.

    First thing to note is that in 2006 Gartner was busy tracking PDA sales. You might wonder why this is relevant. The reason is because a significant proportion of RIM's Blackberries counted as wireless PDAs and were therefore considered to compete with Palm's Treos, HP's iPaq and Dell's famous Axim. Nokia was in the running with its Communicators. Here is how Gartner characterized the equivalent market in early 2006:

    So I'll just come out and say it: In 2006 Gartner did not have a clue what a smartphone was. By their admission:

    Gartner defines a PDA as a data-centric handheld computer weighing less than one pound that is primarily designed for use with both hands. These devices use an open market operating system supported by third-party applications that can be added into the device by end users. They offer instant on/off capability and synchronization of files with a PC. A PDA may offer WAN support for voice, but these are data-first, voice-second devices.

    In other words, in 2006 Gartner was splitting phones with operating systems into two separate markets: data-oriented wireless PDAs and voice-oriented smartphones. The split was mostly based on the judgement of the analyst on whether a device was "voice" or "data" oriented. I suppose they used the primary input method as a proxy: numeric keypads meant the device was one-handed and therefore voice-oriented. If the device had a full keyboard and/or a stylus-actuated touch screen then it was a two-handed data-oriented device. But even this proxy was not quite enough, sometimes devices were classified whimsically.

    To make it more complicated, they bundled non-cellular but Wi-Fi enabled PDAs with wireless PDAs. This made some sense from a corporate IT point of view (their primary customer base) as these data-oriented devices would be used either on a LAN or a WAN (Wide Area Networks: what Gartner anachronistically called cellular networks.)

    The presence or absence of a cellular radio did not enter into their view of these devices. So if you asked Gartner in 2006 to forecast smartphones (as we know them now) in 2010, I suppose you'd get what they forecast for "data-centric" devices.

    So assuming that today's smartphones are mostly "data-centric" we would have to look back on their view of that market and not the voice market which was seen as an entirely different thing. Their answer should have had something to do with the market leaders and participants in 2006. As the table above shows Gartner showed that RIM, Palm and HP led in 2005 with Nokia and T-Mobile[1] pulling up the rear.

    However, from a platform point of view, at the beginning of 2006

    Microsoft Windows CE was the No. 1 PDA operating system (OS) in 2005 as 7.05 million PDAs were loaded with the OS, up 33 percent from 2004 shipments of 5.28 million units. Palm OS PDA shipments declined 34 percent to 2.96 million units in 2005.

    In late 2006, Gartner made further predictions for the year:

    In 2006, Gartner expects the PDA market to increase by 6.3 percent to 16 million units. The market will continue to be driven by broader availability of cellular-enabled PDAs from wireless carriers. Gartner estimates that 53 percent of all PDAs shipped in the first half of 2006 featured integrated cellular capability, up from 46 percent during the same period in 2005. “The share of PDAs purchased by enterprises will continue to increase; it accounted for 49 percent of all PDA shipments in the second quarter of 2006 and Gartner expects that the enterprise market will account for 52 percent of all PDA shipments in 2006,” said Todd Kort.

    At this time I have not yet dug up a Gartner "Wireless PDA OS" four year forecast from the year 2006 but I suspect it would not show devices running Google's Android operating system or any running something called iOS.

    I also seem to remember that they were suggesting that Windows would be the leading mobile platform. Although it was trailing in 2006, Gartner was quite bullish on the disruptive challenger from Redmond.

    [1] T-mobile is in the list because it was common practice in 2006 for operators to market Pocket PC Phone Edition devices made by HTC under their own name. Orange, Vodafone and Verizon also had own-brand HTC Windows touch-based devices. Now what does that strategy remind me of?

  10. Smartphone market growing faster than expected

    Research · 9 comments

    IDC raised its 2010 smartphone sales growth forecast to 55 percent from 44 percent earlier. Citing booming smartphone demand it also lifted its forecast for overall cellphone market growth to 14.1 percent from 12.6 percent.

    via Cellphone market growing faster than expected -IDC | Reuters.

    Keep in mind the 55% growth figure when reviewing analyst forecasts for iPhone growth. If their forecast is less than that then it implies market share loss. When I suggested 50% compounded annual growth rate (CAGR) for iPhone going forward 3 years, there was a lot of skepticism but this market is growing faster than most people expected.

    I still believe that Apple can grow the iPhone at least as fast as the market.

    Here are the quarterly y/y growth rates for iPhone units since sales began:

    159% 516% 88% 90% 644% 7% 100% 131% 61%

    On a yearly basis:

    2007: 3.7 million

    2008: 13.7

    2009: 25.1

    2010 first half: 17.15

    2010 (my estimate): 44.4

  11. 20 Million iOS devices sold in about 2.5 months

    Research · 11 comments

    On June 7th, 2010, at WWDC, Apple announced that they will have sold 100 million iOS devices some time during June 2010. Today, September 1st, Apple announced that 120 million iOS devices have been sold.

    Assuming that 100 million was crossed half-way through June, then the additional 20 million units must have been sold during half of June, and all of July and August. That's approximately 20 million over 75 days or 267k units per day.

    Apple also announced that there are 230k new iOS activations per day which seems consistent given that they classify these as "new" activations.

    There is one huge implication of this figure:  Forecasts for iPhone, iPad and iPods may be too low. I had forecast 20 million units for the entire quarter (12.1 million iPhones, 4 million iPads and about 4 million iPod touch). The iPhone figure assumed 65% y/y growth at that looks way too low. There is still another month in the quarter meaning that the total could be 30% too low.

    I will be updating the forecast accordingly.