Profiling the slide at Nokia (Part I)

Nokia’s slide in the smartphone segment has been well documented and the latest results from Nokia do not inspire confidence about a quick revival. Nokia’s slide draws a sharp contrast from Apple and its Apps store. Here’s profiling Nokia’s smartphone story.

Nokia’s Decline
Nokia announced a 66 percent yearly drop in Q2 profit while lowering its 2009 market share target for its cellphones. Originally, Nokia had expected market share to rise in 2009, presumably based on a successful launch of the N97 flagship device. However, outside of a core group of S60 diehards, the N97 has been universally panned in both reviews and user forums alike. And with nothing but rumors of an Atom-based Nokia Netbook on the immediate horizon.

Overall YOY sales for Nokia have fallen by 25% to 9.9 billion Euros in Q2. This is 7% higher than Q1, 2009.YOY Nokia shipped 103.2 million devices during Q2, 15% less than an year earlier, but 11% more than Q1,2009. The average selling price was also down from 74 Euros Q2 last year to 62 Euros currently. In Q1 2009, Nokia had recorded less than 100 million shipments for the first time in 2 years. Q2 2009 was slightly better in terms of volumes but the ASPs are southward bound still.

Inspite of aggressive job cuts and other measures such as moving out of non core activities, Nokia is now cutting down its profitability and market share outlook. It is now predicting its mobile phone operating profit margin will match the first half at 11.3% (less than the analysts prediction of 17.4%) and its market share will stay the same as last year (compared to original forecasts of a rise).The stock took a 15% plunge after the results were announced last week.

Analysis
The significant volumes from the lower end have helped maintain the market shares although it is pulling the ASPs down. However it is the smart-phone market where Nokia is taking a big hit in terms of both volumes and numbers. Thus, Nokia is finding harder to stay profitable because of increasing competition in the high end phone segment from the likes of Apple’s iPhone, Palm Pre, Toshiba’s TG01 against Nokia’s N 97 and 5800, which are key support to its margins. Nokia is suffering from low operating margins because it does not have really competitive products at the high end of the portfolio.

Analysts are dubbing this period as Nokia’s Motorola Moment. http://www.forbes.com/2009/07/17/nokia-apple-iphone-markets-equity-mobile.html?feed=rss_technology.

Once a giant of the handset industry, Motorola got stuck with its Razr handset model longer than it should have done, failing to catch on to other innovations that were taking place in handset making, before losing market share in China to Nokia and in the US to Apple.
Nokia seems to now be falling in the same trap. It was late to realizing the popularity of clam shell phones, late to touch screen and now late to the application store as pioneered by Apple’s iPhone, as well as high quality web browsing. The fact that remains is that Nokia has not been innovating and has only been a fast follower.

Services Company
2 years back, when Nokia had suggested a move into services based businesses, the Wall street had welcomed the efforts by a stock price spike. That was the right thing to do. However, Nokia has taken long to do what it set out to do. And its efforts have been largely diffused. Instead of getting one thing right, Nokia tried many and more different things. It launched into Nokia Music Service and Comes with Music, N-Gage Gaming and Ovi Services, Ovi Share (networking platform) and the latest being Symbian horizon (an apps store). Was Nokia doing too many things at the same time? With Nokia’s kind of ability, it could probably carry the gambit as well. The problem perhaps was Nokia trying a plethora of business models, without really doing anything really meaningful. It was a follower and not the original in most of these services. In effect, it was trying to compete, by its sheer size and presence, and not basis its technology leadership.

In many cases, the platforms existed at Nokia, long before competition had stepped in. N-Series phones were regarded as the ultimate edge in technology for a long time. Yet Nokia never regarded applications and software as a differentiating element unless Apple came along with the Apps Store. It was Apple who pioneered the iTunes and Nokia has been playing catch up with its Music store and Comes with Music.

The problem is complicated with Symbain OS. While Symbian is the most robust mobile OS and leads the smart-phone OS market share at 40%, Nokia probably needs to look at a second option to compete with the likes of Web OS (Palm), Android and Apple OS.

Apps Store: 1.5 billion downloads later, the Apple juggernaut continues

Beating the likes of Google, Nokia, RIM and Verizon, Apple has already taken the honours in the Apps store roll outs. It has also sold 1.5 million mobile applications for its iPhone and is counting more. While consumers find easy to buy apps by using the familiar iTunes interface; for apps publishers, the Apps stores provide the most efficient way to sell as operation and distribution costs are nil and the developer can afford to focus his resources in promoting his product on the Apps store.
The SDK 3 platform from Apple is also gaining more acceptance by more developers over other platforms for developing apps. To put it concisely, the competitors are unable to create a world that revolves around their products, a trick that Apple has mastered well.
The only other vendor that understands branding at that level is Nokia but then it is caught up in its own Smartphone problems and the Ovi Store has not had a great start. The other company RIM, continues to focus on the physical device at the expense of apps driven excitement.

Towards energy saving searches: Yahoo!

Google and Yahoo! are the two most prolific search machines in the world. Whenever someone looks up at something online, each click of the mouse makes the backend data centre slightly busier. These data centres index and reference the internet and are the engines of internet. However, every activity at the data centre also emits greenhouse gases.

Both Google and Yahoo! are actively trying to reduce their carbon footprints. Google has Blackle, the all black energy saving user page. By reducing the use of colour (white) into Black, the energy consumption is eased off! In fact, Blackle has a meter that shows the energy saved by using the Blackle.

Yahoo! on the other hand, had rendered itself carbon neutral in 2007 by buying offsets against its footprint. Now Yahoo! is working towards zeroing out carbon offsets. The goal is to reduce 40% in carbon intensity in data centres in 2014.More and more widespread use of the internet will increase the CO2 output. As of today, Yahoo! services 500 million users worldwide. The energy consumption from data centres only in US was 60 billion Kilowatt hour and is expected to become 100 billion Kilowatt hour in the next 5 years. Thus emission from this electronic form is a real problem and reduction a real time issue.

Yahoo is using innovations like cloud computing and virtualization to eliminate the extra and unrequired usage. Thus it is a system that is efficient, more reliable and reduces wastage in the systems.

The other small and efficient way to get cut energy usage is to use the ambient temperature of surroundings and use colder places to increase on the free cooling and reduce the electricity consumption on cooling. All things together: Smarter computers using less electricity smart buildings and smart grid, smart location and Cloud computing and virtualization can help make a difference in reducing carbon emissions.

Indian Telecom Story (Part XIII):Telco's signal delay in MNP

The implementation of mobile number portability (MNP) is slated to be delayed further, with the telecom service providers informing the Department of Telecommunications (DoT) that the phased roll out is not possible.
Further, pan-India readiness is required for the proper implementation of call routing, according to the service providers who had met DoT officials recently. The operators also mentioned that due to delay in completion of various activities, it would be difficult to meet the timelines for MNP implementation. The DoT had earlier set a September-end deadline for the first phase rollout of MNP in the country.
The service providers are seeking an extension of the date and as delays would be considered as violation of DoT’s direction. This means that MNP would be delayed by another couple of months, sources close to the development said.
Earlier in March, DoT had selected two US companies — Syniverse and Telcordia — as technology providers for MNP in the country. Telcordia will implement the technology in south and east, while east and west would be taken care of Syniverse.
India with over 400 million mobile connections, and an addition of around 10 million per month, is second largest telecom market in the world.
For earlier updates on Indian Telecom refer http://ronnie05.wordpress.com/tag/indian-telecom/

Microsoft brings gesture control to Windows and XBox

Microsoft has been working on gesture recognition as extension on Microsoft gaming console Xbox. The integration of gesture recognition in its gaming console has been named Project Natal. Depth-sensing cameras such as the one Microsoft is adding to the Xbox allow people to control their PCs, game devices, and televisions. Now Microsoft wants to bring Project Natal and its technology to Windows.

Depth camera would connect up to Windows PCs for interacting in terms of meetings, and collaboration, and communication. This was first conceptualized and developed by Microsoft research and is now being commercialized by both the Xbox and Windows units. The Xbox guys and the Windows guys have now latched onto the idea and Microsoft expects the office applications (coupled with Depth sensing camera) can be quite exciting.
In an interview to CNet, Microsoft Chairman Bill Gates, “Using your body to control devices makes a lot of sense. I think the value is as great for if you’re in the home, as you want to manage your movies, music, home system type stuff, it’s very cool there. And I think there’s incredible value as we use that in the office connected to a Windows PC. So Microsoft research and the product groups have a lot going on there, because you can use the cost reduction that will take place over the years to say, why that shouldn’t be in most office environments.”
Gates actually dropped the first hint of Natal during his joint appearance with Steve Jobs at the D: All Things Digital conference in 2007
“Imagine a game machine where you’re just going to pick up the bat and swing it, or the tennis racket and swing it,” Gates said.
Moderators Walt Mossberg and Kara Swisher mocked Gates, saying such a technology already exists and it’s called the Wii. But Gates disagreed. “No, that’s not it. You can’t pick up your tennis racket.”
He later added, “You can’t sit there with your friends and do those natural things,” he said. “That’s a 3D positional device. This is video recognition. This is a camera seeing what’s going on.”
However, there are doubts about Microsoft’s ability to execute such futuristic moves. It was about 10 years earlier that Microsoft had promised voice controlled computers. 10 years and few many generations of processors later, Microsoft has been no-where close to pioneer voice recognition as an input to computing devices. (It would have put some distance between itself and competitors if it would have executed this strategy). Instead all it has done is to release “delta development” versions, which has left it vulnerable to more innovative competitors.
Ref: http://news.cnet.com/8301-13860_3-10286309-56.html?part=rss&subj=news&tag=2547-1_3-0-20

1.5 Billion downloads later, the Apple juggernaut continues

Beating the likes of Google, Nokia, RIM and Verizon, Apple has already taken the honours in the Apps store roll outs. It has also sold 1.5 million mobile applications for its iPhone and is counting more. While consumers find easy to buy apps by using the familiar iTunes interface; for apps publishers, the Apps stores provide the most efficient way to sell as operation and distribution costs are nil and the developer can afford to focus his resources in promoting his product on the Apps store.

The SDK 3 platform from Apple is also gaining more acceptance by more developers over other platforms for developing apps. To put it concisely, the competitors are unable to create a world that revolves around their products, a trick that Apple has mastered well.

The only other vendor that understands branding at that level is Nokia but then it is caught up in its own Smartphone problems and the Ovi Store has not had a great start. The other company RIM, continues to focus on the physical device at the expense of apps driven excitement.

Facebook: 250 million users and counting, $6.5 billion in valuation

Digital Sky Technology’s recent purchase of Facebook Common stock has yet again provided a valuation to Facebook. DST’s purchase at $14.77 a share, values Facebook at $6.5 Billion currently. This valuation emphasizes and underscores the status of Facebook as the fastest-growing Internet social networking site’s and its high rank among technology and media industry heavyweights.
While the latest valuation is below the $10 billion valuation set by Digital Sky’s May investment in Facebook, which was for preferred shares, it is significant because, investors have been valuing the social network’s common stock at less than $5 billion in secondary markets in recent weeks. In the weeks prior to Monday’s pricing, investors in secondary markets had been valuing Facebook common stock between $10 and $10.50 a share, or up to $4.7 billion.
The deal suggests that Facebook has a higher market value than many established media and tech companies which generate significantly more revenue than Facebook, including CBS Corp and Salesforce.com.
CBS, which had $13.95 billion in revenue last year, has a market capitalization of $4.06 billion and Salesforce.com had a $4.72 billion market cap at Monday’s market close.
Facebook is expected to breach $500 million in sales this year, and expects revenue to grow 70 percent this year. At $6.5 billion, DST is valuing Facebook common shares at 13 times expected 2009 revenue well above the 2.2x multiple that is common for online advertising-based businesses and even the nearly 6x multiple of Google Inc, the No.1 Internet search engine in the U.S.
Analysts say that Facebook’s lofty multiple was not completely out of line given the strong growth in sales and users that Facebook is generating amid a tough business environment. Essentially, people’s expectations that this could be the next Google.
Facebook recently surpassed 250 million active users on its social network, up from 100 million users less than a year earlier, and vaulting it ahead of rival social network MySpace which is owned by News Corp. In 2007, Microsoft Corp invested $240 million in Facebook preferred shares, snagging a 1.6 percent stake, though that deal also included other elements such as an advertising partnership. That deal had valued Facebook at $15 billion.