Tag: Blackberry

Three screens, one screen

Is Blackberry, Apple or Microsoft right about the way we’ll use computers in the future?

One of the points that came out of Blackberry’s Z10 launch last week was CEO Thorsten Heins’ talking about the company’s ‘one screen’ strategy.

Blackberry sees the smartphone as being the centre of people’s computer usage with them replacing personal computers and tablets as the main computing tool.

This is at odds with the rest of the phone and computer industries who are struggling with managing the three or four devices that most people use.

Apple overcame this by having different operating systems – OS X and iOS – and even then the mobile iOS is subtly forked for the different ways people use tablets versus  smartphones.

With Windows 8, Microsoft chose to go the opposite way with an operating system which works on all devices. Sadly it doesn’t seem to have worked.

Blackberry’s strategy is to assume smartphones will be their main communications device. It’s a big bet which doesn’t align with what seems to be experience of most people.

Over the last few years Blackberry’s smartphone market share has collapsed from 40% to 4%, so it’s the time for brave bets although its hard to see that customers will use smartphones instead of PCs or tablets is the right call.

It’s an interesting question though – can you see your smartphone being your main computer?

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Enter the Dragon

The development of Aliyun, a mobile phone software package, illustrates how Chinese industry is moving up the value chain.

Once up a time our parents laughed at the tinny little Japanese cars – in the 1960s companies with silly names like Toyota and Mazda could never threaten world giants like Chrysler, Ford and General Motors.

Within two decades the Japanese had moved their products up the value chain leaving their American and European competitors running scared while governments in western countries offered the new leaders of the manufacturing industries bribes to set up plants in their towns and states.

It was always obvious China would follow the same course as the Japanese, particularly given the country’s position as the world’s cheap labor supplier had a time limit thanks to the demographic effects of the 1970s One Child Policy.

So it’s no surprise that Alibaba, China’s biggest e-commerce service, has built its own mobile operating system to compete with Google’s Android.

If Aliyun follows the Japanese development path, the first version is terrible but within five years – the development cycle of software is a lot quicker than that of cars – Alibaba will be a viable competitor to Google and Android.

Chinese developers moving into the mobile market is terrible news for the also rans like Microsoft and Blackberry. As Apple dominate the premium mobile sector and Android the mass market, it’s very hard for those running third or lower to achieve the critical mass needed to be competitive. Aliyun makes it much harder for them to gain any traction in high growth developing markets.

An interesting aspect of the Wall Street Journal’s story is how Aliyun is aimed at the domestic Chinese market for the moment. This is part of China’s economy moving away from being overly reliant on exports, having locally made products that meet the needs and aspirations of a growing domestic economy is an important part of this process.

Exports though will remain an important part of the Chinese economy for most of this century and value added products like Aliyun will be important for China as the cheap labour advantage erodes over the next two decades.

Businesses who think their markets are protected because their quality is better than their Chinese competitors may be in for a nasty shock, just like the 20th Century auto makers who dismissed the Japanese were in the 1970s.

Whether Aliyun is successful or not, we’re once again seeing many of the facile assumptions about Chinese growth being tested as the country’s economy and society evolves.

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The tough world of smartphones

Competing in the smartphone market is tough as Dell have discovered.

Dell’s announcement they are going to exit the Smartphone business – for the second or possibly even third time – comes on the same day Nielsen release a survey showing smartphones are now the bulk of US mobile phone purchases.

For Dell this shows the problem they have in being locked into the commodity PC business, what was once a lucrative business is now suffering softening margins and slowing sales. In desperation they are looking to other product lines but struggle to differentiate themselves in other markets.

The difficulties of doing this in the smartphone sector is shown in Nielsen’s analysis of what phones are selling.

Of those sold in the last three months, a whopping 43% were Apple products while 48% were Google Android devices.

Even more frightening in those Nielsen figures is Blackberry’s collapse where the Canadian product has 12% of the market but only 5% of sales in recent months. It’s little wonder Blackberry’s owner RIM is laying off senior managers.

For Microsoft, that only 4% of phones were “other” than Android, Apple or RIM show just how tough the task of selling Windows Phone is going to be, something that won’t be helped with dumb marketing stunts.

Google’s apparent success in mobile isn’t all that it seems either; while the Android platform has nearly half the smartphone market it doesn’t appear to be particularly profitable.

The Guardian’s Charles Arthur looked at a number of legal cases involving Google’s mobile patents and extrapolated the claimed damages to get an estimate of how much Google earns from Android.

Arthur estimates Android has earned Google $543 million dollars between 2008 and 2011 which, given Google’s mobile revenues last year were claimed to be $2.5 billion last year, indicates Google makes more money from Apple devices than it does from its own products.

While Arthur’s estimates are debatable, they show how Apple’s profits dominate the smartphone market. Google, like Dell in computers, are locked into the commodity, low margin end of the market.

Just as Dell have learned that entering new markets doesn’t guarantee success, Google may have to learn the same lesson.

To be fair to Google, at least management are aware of being too dependent upon one major source of revenue.

Whether mobile services built around the Android platform can provide an alternative cashflow of similar size to their web advertising services remains to be seen.

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