Windows on ARM – Blue Phoenix

(RFM will return on Wednesday April 3rd)

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Windows RT in its current form looks doomed

  • When Samsung pulls its RT products, everyone will and I have also seen many product roadmaps shut down all together.
  • I have discussed the problem in detail in a previous post but in a nutshell, Windows RT fails because although it looks like Windows 8, it does not behave like Windows 8.
  • This has led to consumer confusion, disappointment and virtually no sales.
  • I am a big believer in Windows on ARM as it offers a more power efficient, cheaper alternative to Intel that should allow ultrabooks and tablets to penetrate further into the mass market.
  • For the first time in over 20 years the WinTel monopoly has been broken and the consumer stands to be a major beneficiary.
  • The problem is the limited functionality of the Windows on ARM devices and until this is fixed Windows on ARM is going nowhere.
  • The good news is that there is a new release of Windows that should debut this year (Windows Blue) and the supply chain is saying that this version should have Windows RT merged into it.
  • This is the second time I have heard this from a completely separate source and so I am beginning to hope that it is true.
  • However, if this is another fudge like Windows 8 / RT was then it will be yet another failure.
  • The pre-requisite for Windows on ARM to take off is that a consumer cannot tell the difference between a device running ARM and a device running Intel when it comes to function.
  • All he should notice is a lower price tag, no fan assisted cooling and a longer battery life.
  • Windows Blue is due to be shown at the Microsoft Build Developer Conference June 26-28.
  • I am hopeful that Windows RT will vanish leaving just full fat Windows that will run on either processor.
  • The problem of legacy software still has to be fixed, but with a credible offering on ARM, I can see developers being more willing to release their software for both processors as well as porting older software onto ARM.
  • I am also looking for signs of harmonisation of Windows Phone and Windows 8 which currently run on different kernels and are not as compatible as they look.
  • Should I not be disappointed, then I can see the Windows on ARM proposition rise from the ashes to contend once again with the mainstream.

Intel TV – Chip magnet

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Intel’s aspirations in TV are about supplying chips.

  • Intel appears to be closing in on acquiring TV shows and movies to offer to consumers as a pay-tv service.
  • Time Warner, NBC Universal and Viacom are all in discussions with Intel and success would give Intel critical mass to start offering a service.
  • This is going to be effected through the release of a set top box and a service later this year.
  • Intel hopes that the promise of a better user experience as well as integration with smartphones and tablets will draw consumers in.
  • The user experience for TV certainly needs work and there is opportunity to win over cord cutting consumers but why should Intel be any good at this?
  • Intel is a master of manufacturing chips for PCs and servers. Its real strategy is to broaden its horizons and to offer chips for other electronic items such as mobile phones, TVs and set top boxes.
  • It is here that I think that the real reason why Intel is buying up TV rights is to be found.
  • The next several years will see a huge shift in the way that people watch television which means that the hardware that they use is also likely to change.
  • I believe that Intel’s real intention is to become the main chip provider for the set top box or part of the television upon which the TV experience runs.
  • Hence, I see Intel’s coming set top box very much like the Microsoft Surface.
  • It’s a product that shows everyone what is possible and encourages them to make the devices and offer a service using Intel’s chips.
  • I suspect that Intel will also end up as a wholesaler of this content such that smaller companies who would have no hope of obtaining the rights can enter the market.
  • This is exactly the strategy that Qualcomm pursued with MediaFLO, its broadcast mobile TV service that never took off.
  • If Mobile TV had been huge, Qualcomm would have ended up providing almost all the chips to make it work as well as a one stop shop for the content.
  • I do not for one second think that Intel wants to become a provider of consumer electronics or a provider of television services both of which would have a deleterious effect on its margins.
  • By enabling competition for DirectTV, Comcast and the like, Intel is in a good position to be the silicon supplier of choice for providers of cord cutting TV services.
  • This is a business that it will be really good at rather than wasting millions trying to get into a business about which it knows nothing.

 

Ecosystems – Here comes George Orwell

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Digital Life has an increasingly Orwellian future.

  • The big ecosystem creators are slowly but inexorably nudging users towards their ecosystems.
  • It is very subtle, it is very slow but the signs are there that the long term of ambition of Google, Twitter, FaceBook, Microsoft, Apple and so on is to keep their users to themselves and lock out everyone else.
  • Under the guise of a clean-up, Google has been killing support for protocols and applications that allow users of other ecosystems to get access to Google services.
  • Twitter is just the same, having closed down its 3rd party API meaning that those wanting access to Twitter have to visit the website or its dedicated app.
  • Google Reader, Exchange ActiveSync, and Voice app for BlackBerry are all gone and now Google has pulled the plug on its site blocking service.
  • Some of these are simply not used enough to make it economic to continue support, but others simply make life more difficult for those on another ecosystem to get access to Google services.
  • If a user is on a device or an application created by an ecosystem then the ecosystem will reap the benefits of that usage.
  • Google derives a large percentage of its mobile advertising revenues from searches, maps and Gmail activity carried out on iOS devices.
  • How Google benefits from Windows Phone users getting access to their PIM (Personal Information Management) data via a third party API is less obvious and I suspect a major reason why I see the ecosystems quietly putting this sort of access to sleep.
  • This is likely to be replaced but with something where there is a clear benefit to the provider of the service.
  • In the case of ActiveSync, I would expect either Gmail and Calendar applications for Windows Phone or a method of synchronisation over which Google has more control.
  • As the walls around the different ecosystem go up, I can see users being pushed into making a choice regarding in which ecosystem they will live their digital lives.
  • The more a user spends in your ecosystem and applications, the more you learn and the greater value that user becomes to you when it comes to selling targeted advertising.
  • The ecosystems are not going to be free. Users either pay with hard cash or personal data of which I suspect personal data is going to be the overwhelming favourite.
  • Expect this trend to continue.

Dell– Not so sweet

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There is no upside in Dell without risk.

  • The “go-shop” period has produced two additional bids, but investors are going to be disappointed with the prices that have been offered.
  • At the 12th hour, both Carl Icahn and Blackstone have put in bids of $15 per share and “more than $14.25” respectively.
  • These bids are some 10% ahead of what Michael Dell and Blackstone have offered but critically they are substantially below the “$15-$17” that many investors seem to have convinced themselves the shares are worth.
  • The fact that both stalking horses have (in the market’s eyes) bid low is ringing vindication to the view that there is no real upside without a lot of risk being taken.
  • Dell is at a strategic crossroads and in its current form will simply bumble along, losing market share and revenues gradually over time.
  • When one looks at a market based and DCF based valuation of this scenario, $13.65 is not an unfair price especially when compared to the likes of HPQ and Apple.
  • To get more than that, something radical needs to be done involving risks, which the market is clearly not prepared to take.
  • Dell has two options.
    • First, to invest in R&D in order to properly address the changes that have come over the PC market.
    • Second, sell off the PC business and use the proceeds to pay down the debt raised from the deal leaving the owners with the software and services business.
  • However, Michael Dell seems to be making noises about abandoning PCs and moving into tablets.
  • Without more details, I can’t really comment, but from a high level this looks like it has disaster written all over it.
  • The net result of these bids is likely to be a longer sale process, meaning more time for Samsung and Asustek to steal market share with their superior designs.
  • At the end of the day, the price looks like it will be around $15 or 8.7x 2013 PER which compared to HPQ on 5.7x 2013 PER looks to me like a good deal.
  • If the deal were to fall through, I think that Dell’s valuation would rapidly return to that of its erstwhile peer HPQ.
  • Hence shareholders are already being offered some upside from a turnaround without having to take the risk of it all going horribly wrong.
  • Shareholders should stop making a fuss and let those who are prepared to take some risk to turn this company around get on with it.

Android in China– No Google here

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The China ecosystem is coming. 

  • Android is currently exploding in China but there are plenty of signs that this is temporary.
  • Under Google’s definition, anything that does not meet its specification cannot be called Android and this where the vast majority of the cheap Android devices find themselves.
  • While the market is growing like crazy, there is not much that can be done, but already the Chinese government is casting a disapproving eye on American technology sweeping across its mobile networks.
  • The Chinese market is more than big enough to support several ecosystems which combined with a strong desire to use home grown technology means that a huge fork in Android is coming.
  • This has already been tried unsuccessfully with oPhone and here I believe that China has learned from its mistakes.
  • oPhone was successfully killed by Google by accelerating its release schedule and making the oPhone code line obsolete but that won’t work for ever.
  • Hence, I suspect that the next few years will see China move either to its own version of Android or something completely different.
  • This fork will rip out all of the Google hooks and replace them with applications and content relevant to the local market.
  • This would have the benefit of appealing to local users but most importantly, the user data would be collected by Chinese companies such as Baidu and used to sell targeted advertising locally.
  • Out goes Google in comes Baidu. Out goes Twitter, in comes Weibo. Out goes Ebay and in comes Taobao and so on.
  • The one that might just make it through is Facebook and that’s only because it is built around users which by definition already makes it local.
  • It does not necessarily have to be Android and I can see three possibilities for replacing Android.
    • A permanent and irrevocable fork of Android. This would no longer be Android but something else and I would classify this as a totally different ecosystem.
    • Software based on Linux that is being co-developed by Huawei and Baidu. They won’t say what it is but it could be either the Android fork above or Ubuntu below.
    • Canonical is working together with MIIT in China to define a new reference architecture for operating systems in China.
    • Canonical’s Ubuntu has been selected as the basis for that reference architecture and modifications will be made to make it relevant for China.
    • I think it will be aimed at PCs through tablets to mobile devices.
    • Right now it will be open to encourage support but I am pretty certain once it gets some traction, it will be rapidly closed down.
  • Any one of these options could become the China ecosystem.
  • The only thing I don’t know is which one and when.

 

Mobile Chat – The Culture Line

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Exporting services from Japan is a license to lose money. 

  • NHN Corp, South Korea’s biggest internet company, is making a bid to expand outside its own turf with its Line, its chat application.
  • This application has been developed by NHN Japan, the Japanese internet company it acquired in 2006, but the focus is to take the fight to Facebook, Skype and Whatsapp.
  • Line already has over 100m users which puts it in my “sustainable” category for an internet service or ecosystem.
  • This is important as it means to me that it will survive as long as it doesn’t blow all of its cash trying to win the Western markets.
  • Over half of its users are in Japan with the rest spread across Asia.
  • This compares to WeChat (China) at 300m and KakaoTalk (South Korea) at 82m.
  • The Line service is free to download and use but one can buy icons and cartoons (stickers) to use in the chat and it is there that NHN Japan hopes to make its money.
  • The company freely admits that it is on a land grab and it is on that basis that it is expanding to the US and Europe.
  • The company aims to win over 500m to 1bn users globally and does not seem to care what it costs, spending a massive $224m to market the application this year.
  • Across Asia, I think this application has legs as it has an installed base of users giving a good network effect and Asia is an undeveloped market.
  • Furthermore it’s a cultural fit, as Asian users especially those in Korea and Japan attach a lot of value to cartoon characters as these are highly visible in their culture and day to day lives.
  • But in the West it’s a totally different story and here I think that NHN is making the classic mistake that so many Japanese companies have made before it.
  • The fact that something works in Japan and Asia is no indication whatsoever that it will work elsewhere.
  • Remember iMode and the billions that were wasted trying to develop that outside of Japan?
  • Furthermore, the Western instant messaging market is reasonably well developed with WhatsApp, BlackBerry, Skype, Facebook and so on.
  • When all your friends are already on one system, it is incredibly difficult to get you to switch as one will not be able to chat with one’s friends unless they all switch.
  • Also, I am afraid that cutsie cartoons are probably not enough to encourage such an upheaval especially when the users are expected to pay for them.
  • I expect that the free angle of Line is likely to be pushed hard but the reality is that all instant messaging is already or soon will become free.
  • WhatsApp is free on Android which is where I suspect iOS will go eventually despite noises about charging users $1 per year. There are just too many free alternatives.
  • Hence like many Japanese exports before it, I suspect that Line is doomed to failure outside of Asia and a colossal amount of money is about to be wasted.
  • The real killer application will be the one that can make all of these chat applications talk to each other but I suspect that the APIs to make that happen are being jealously guarded by their owners.  

Microsoft – Too brute a force

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Microsoft has loads of money but no clue how to use it. 

  • Paying developers to write applications is a well-known tactic for those trying to prop up an ecosystem that is not faring as well as it should.
  • Microsoft has backtracked on a long held policy and is now offering developers $100 per application for each Windows 8 or Windows Phone app up to a total of 10 apps per system.
  • This has been running since March 8 and will continue until June 30 but is only available within 50 US states.
  • This is a clear sign that Windows 8 and Windows Phone 8 is faring far worse than had been hoped and that one cannot blame it all on the economy or Apple.
  • Nokia has done this in the past for Symbian as well as many others who have tried to support ailing ecosystems.
  • It has never really worked and I suspect that it will not work again here.
  • This is mainly because, a lack of applications is not what I believe is hurting the take up of Windows 8.
  • Microsoft, in its typical bull-in-a-china-shop approach, is just throwing money at the problem and hoping that it will go away.
  • This is just the same as its marketing strategy around Windows 8.
  • It has made a few funky advertisements, bought lots of bill boards and tried to build awareness of Windows 8 but it will not work.
  • This is because everyone is already aware that Windows 8 exists, it is just that they have no clue why they should buy it.
  • With Windows 8, the Microsoft standard if-we-build-it-they-will-come marketing approach will not work.
  • This is because it is the way in which Windows 8 delivers digital life to the user that makes it great.
  • However, Microsoft doesn’t seem to think that this needs to be demonstrated to potential users.
  • Somehow, deep down, I am not convinced that it cares that much.
  • It will take off eventually and, while Mac OS does not seem to making much further impression on the PC market, those sales will come to Microsoft sooner or later.
  • It is the device makers that this will hurt more than any.
  • The likes of Nokia, HPQ, Dell and Acer don’t have forever for this to work as they are not sitting on a huge cash pile and 90% market share.
  • Hence, as Microsoft does not seem to care when Windows 8 takes off, it is they that must set the marketing agenda to accelerate user acceptance and delight. 

 

ST Ericsson – End of the road

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ST Ericsson has effectively committed suicide with its inability to execute.  

  • After failing to find a buyer, ST Ericsson is being split up and handed back to its parents.
  • Ericsson is taking back the LTE multimode thin modem development while STM will take back the other STE products such as application processors.
  • In a nutshell, each company is taking back the assets that it contributed to the jv in the first place.
  • ST-Ericsson has already squandered its last get-out-of-jail-free-card and the only future that it is now left with is ignominious closure.
  • The LTE technology was there, working and ready to be deployed and critically, meaningfully ahead of its rivals.
  • Unfortunately, STE inherited STM’s chronic inability to execute and the LTE modem was perpetually delayed.
  • Consequently, Qualcomm repeated its normal process of out executing everyone else and hovered up all of STE’s willing customers.
  • Now that this lead has been thrown away, STE has nothing left to offer anyone that cannot be found better, cheaper and more reliably elsewhere.
  • This fact is clear from the fact that no one is willing to step up and take it over despite the good technology that the company has and I presume a give-away price tag.
  • I am sure that both Ericsson and STM will now quietly close down all of these operations as there is no future other than on-going losses.
  • This is good news for the rest of the wireless semiconductor industry as the market is looking increasingly crowded as the merchant market shrinks.
  • In this market Qualcomm and MediaTek are holding all the cards, are the most profitable and are likely to be the last men standing.
  • TXN is long gone, Renesas is on the way out and STE will soon be gone.
  • This leaves Nvidia, Intel, Squens, Marvel, Spreadtrum and Broadcom to slug it out as Samsung LSI and Hisilicon will increasingly dominate their in house customers.
  • Looking at cash reserves and other product lines, one has to believe that it will be Intel and Broadcom that will be left when the dust settles.

Google Reader– The boring truth

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Google Reader has gone because it is not big enough. That’s all.

  • The retirement of Google Reader has nothing to do with the “free” internet model and everything to do with its size.
  • A common view out there is that Google is retiring Reader because it is free and are using the example to dish the “free” internet / software model.
  • Unfortunately the reality is much more boring.
  • Google Reader is a niche product that has not been invested in for some time and is now obsolete.
  • Other services like Google Currents offer a much richer and nicer way to scan the news and as a result there is no real reason to keep it going.
  • Smaller niche players are already beavering away to come up with replacements so that users (like myself) will have more than one alternative come July 2013.
  • As for the “free” model, this remains alive and very well as the growth figures for Facebook’s and Google’s advertising revenues show quarter in, quarter out.
  • There remain two ways to pay for the Internet: crisp, hard cash or personal data.
  • Given that cash is an ever scarcer commodity these days, I suspect that the majority of the internet will be financed via the free, personal data model.
  • I suspect that when it came down to it, Google looked at Reader and saw that the numbers of people using it were too low to justify the cost of running and hosting the service.
  • If only Google would think like this when it came to buying useless assets, then I would be a much happier investor.
  • A billion dollar London HQ, Motorola Mobility and half of an airport in California all leap to mind as useless assets that have no business being part of Google.
  • These are all signs of a company that is run for the benefit of the employees rather than shareholders and such companies inevitably come a cropper sooner or later.
  • I love the business of Google; I just think management needs to rethink its priorities and how it spends other people’s money.

Samsung Galaxy S4– All the rage

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The Galaxy only evolves slightly but it makes iPhone 5 look more and more out of date.

  • Samsung launched the Galaxy S4 with much fanfare but admitted that the device is really an evolution rather than a revolution.
  • Larger screen, industry leading pixel density, faster processor with 8 cores and some funky software tweaks were the leading features of a device that I am sure will sell in substantial volumes.
  • The US version will use a Qualcomm snapdragon while the international versions will use Samsung’s in house silicon strongly points to the fact that Samsung still has some ground to make up on its in house LTE radio.
  • Apple was fast to stick its oar in with a pre-emptive strike just ahead of the launch.
  • Phil Schiller, defacto No 2 at Apple, was up on stage attacking Android as both fragmented and with new products being out of date almost as soon as they ship.
  • These are all true but older software can be updated and fragmentation is not stopping Android from dominating the smartphone market yet. 
  • It is strange that Apple failed to highlight by far the biggest weakness of Android, which is the fact that it generates far less traffic than an equivalent priced device on iOS.
  • Bottom line is that Apple is clearly on the back foot, feeling the need to defend its turf with sniping attacks.
  • This also highlights what the Galaxy S4 really does: It makes the iPhone 5 look old and out of date especially when it comes to the screen.
  • There are other little innovations like the preview function by hovering a hand over the screen and the pausing of videos of the front camera detects the user’s eyes move away.
  • Eye tracking is a feature that Samsung is going to focus on as an area of differentiation but it is going to have to make sure that it works well.
  • I think Samsung still has a lot of work to do the much mooted scrolling feature does not seem to have been introduced and the hand tracking technology on its smart TVs is awful.
  • Net net, this puts Samsung further ahead of Apple in the technology game but this is where it differentiates and how it hopes to make up for the fact that the Android ecosystem remains inferior to iOS.
  • A minor update from Apple to the iPhone 5S is probably not going be enough this year.
  • A more radical upgrade is required but I think Apple is fully aware of that.