Samsung’s launch of a Smart Things home hub is a step forward for the company looking to pivot from the smartphone market
South Korean industrial giant Samsung is struggling, in the last year its smartphone division reported a 75% drop in revenues while their handsets, while still the world’s most popular, lost ten percentage points of market share.
The company’s smartphone division is stuck because mobile carriers in the western world are abandoning subsidies for handsets, with most developed markets now at saturation point for cellphone adoption there’s little point in chasing market growth for all but the most desperate telco.
For Samsung that’s been a problem as their premium model strategy has been based upon western consumers ordering a new phone every 18 to 24 months as their mobile contracts were renewed, now those deals are not so common a key sales channel for the Korean conglomerate has been lost.
This leaves Samsung looking for the next market and at this week’s IFA consumer technology event in Berlin, the company unveiled its Smart Things hub, a cylindrical device that connects with your TV, air conditioning, music system, and other home appliances.
Smart Things was an acquisition Samsung made last year to improve its IoT product line and the company has an open platform for connecting household devices with over 200 already certified.
For Samsung with its range of domestic equipment this may well mark the future for the business. The interesting thing though is the smartphone is still integral in today’s vision of the connected home, so we won’t see Samsung leaving the handset market soon.
For long timers in the IT industry this is a return to the Microsoft days of Patch Tuesdays, the monthly bundle of updates for Windows and Office the company used to issue on the first Tuesday of each month.
While Android has nothing the like the problems Microsoft did in the early 2000s with the explosion of malware that crippled millions of users, the risks to the Google system are real with some predicting a security armageddon.
For users, there’s a serious question in the problems facing Android system in that unlike the Windows systems the rollout of updates is controlled by the telcos or handset vendors rather than the software developers.
As a consequence many older devices simply aren’t being updated leaving millions of smartphone users exposed to malware and having no way of fixing known security problems.
The problems facing Android are common across the entire Internet of Things, how Google respond the current smartphone security problems is going to be a pointer for the rest of the IoT sector.
At the same time the company announced how some software will soon be able to run on iPhones and Android devices with an extended Software Developers Kit.
While this makes Windows more attractive for developers who no longer have to develop different versions for the Microsoft product, it’s also an admission the company’s phone strategy has failed.
For Microsoft yesterday’s Build Conference was the opportunity for the company to show their vision of the market’s future that involves computers, mobile devices, the cloud and the Internet of Things.
Whether Microsoft is part of that future is the main concern of CEO Satya Nadella.
Once again Apple beats the market and shows the way to its competitors
Once again Apple keeps surprising the market with Apple second quarter results beating the analysts’ estimates roundly and putting the company on track to becoming the first US corporation to have a trillion dollar market valuation.
Coupled to nearly fourteen billion dollars in profit for the last quarter is that the company is looking to return $200 billion of cash back to shareholders.
A particular high point in Apple’s results are its China sales with the company showing seventy percent year on year growth, showing it’s possible for western companies to sell into the PRC.
Those results are from iPhone sales and, given the Chinese smartphone market is ruthlessly competitive, it puts the managers of all US and European companies on notice that there are no longer any excuses about not performing in the Middle Kingdom.
Another key takeaway from Apple’s results is the tablet market is limited with iPad sales down 23% compared to last year.
The question now is how big are watch sales going to be? It may well turn out that the Apple Watch is similar to the iPad – a market defining product but one that isn’t the company’s mainstay.
Regardless of how well the Apple Watch, the iPad or the iPhone’s Chinese sales perform next quarter, it’s safe to say Apple will probably break more records over the next year.
Facebook and Google both put their users first in their latest updates. It’s something other business should consider.
Over the last few weeks much has been written about Google’s mobile search update that went live on Wednesday, some said it would be the death of small business on the internet while others claimed it would be the end of corporates online.
While all the focus has been on Google’s search changes Facebook quietly made a change that will probably be more vexing for many businesses.
Both Facebook and Google are struggling with making their services more useful for users, with the Google changes the intention is to make search on mobile devices more useful in giving preference to websites that work on smaller screens.
In a post on Google’s webmaster blog, Developer Programs Tech Lead Maile Ohye answered the basic questions about the search engine changes which dispelled much of the hysteria and myths about the update. The main point of Ohye’s post is that Google want to show users useful information.
Facebook have a similar problem, they have to balance the often competing interests of their users and advertisers with the main aim being keeping visitors on their site for as long as possible.
The objective of keeping users engaged is the reason for a series of tweaks Facebook announced this week that change the newsfeed visitors see.
The goal of News Feed is to show you the content that matters to you. This means we need to give you the right mix of updates from friends and public figures, publishers, businesses and community organizations you are connected to. This balance is different for everyone depending on what people are most interested in learning about every day. As more people and pages are sharing more content, we need to keep improving News Feed to get this balance right.
Facebook are putting their users priorities first in making sure the news feed is interesting and relevant, which the company believes will entice visitors to spend longer on the site and make advertising more attractive.
If it works then it’s a win for Facebook, their users and those who pay to advertise on the site. Again though, the losers are the companies and brands not advertising who thought they could get views by the quality of their content.
Unless the content is very good, those companies not paying Facebook are in for more disappointment as their reach collapses even further than its current pathetic rates.
Google’s change too is something that puts users first; rather than dumping mobile web surfers onto an unreadable page, they are making sure people get to sites that are useful.
In many ways Google is only encouraging what has been best practice for at least five years, that every site should work equally well on mobile devices as they do on desktop computers.
What Facebook and Google are showing us is the value of putting users’ needs first. If your guests are happy then your business model has a much better chance of succeeding, regardless of who the eventual customer is.
Making business more user friendly should be a priority for all companies in a competitive world.
It remains to be seen if Apple win the watch market however they safely have the smartphone business firmly under control says Kantar Worldpanel ComTech
As the annual Mobile World Congress begins to wind down in Barcelona, Kantar Worldpanel decides to stir things up with its quarterly report on the market share of mobile phones.
The news is mixed; Apple continues its rampage in the Chinese market with a quarter of phones sold in the PRC being iPhones while Android slips in Europe but picks up market share in the US.
At the top end of the market it’s clear Apple is beating Samsung and the other manufacturers are deciding to avoid entering the battle of the market at all, instead focusing on lower and midrange devices.
Competing at the price points which don’t interest Apple may not be easy though suggests Carolina Milanesi, ComTech’s Chief of Research & Head of US Business; “while mid-tier consumers might be more accessible than high-end ones, manufacturers will have to work harder than ever to stand out in an increasingly crowded marketplace.”
Diversifying away from a tough smartphone market is one reason for the focus on watches at Mobile World Congress although even in that market Apple is about to launch a blitz around its upcoming product.
It remains to be seen if Apple win the watch market for the moment though they safely have the smartphone business firmly under control.
Cisco’s Visual Networking Index predicts massive growth for mobile data use as smartphone use and the internet of things grows.
Late last month Cisco Systems released its annual Visual Networking Index that tracks the company’s predictions for the growth of global network traffic over the upcoming five years.
It’s no surprise this year’s report predicts global data traffic will grow at over fifty percent compounded each year with Cisco expecting 24.3 exabytes to be pushed around the world’s networks each month by 2019.
Most of that network traffic will come from tablet and smartphones with Cisco predicting data use will grow by up to a factor of five on those devices with devices like wearables growing fourfold.
This growth creates a challenge for telcos as they invest in capacity to deal with the increased traffic and Cisco sees half of all smartphone connections will be handed off to WiFi networks by the decade’s end.
Summary of Per-Device Usage Growth, MB per Month
Device Type
2014
2019
Nonsmartphone
22 MB/month
105 MB/month
M2M Module
70 MB/month
366 MB/month
Wearable Device
141 MB/month
479 MB/month
Smartphone
819 MB/month
3,981 MB/month
4G Smartphone
2,000 MB/month
5,458 MB/month
Tablet
2,076 MB/month
10,767 MB/month
4G Tablet
2,913 MB/month
12,314 MB/month
Laptop
2,641 MB/month
5,589 MB/month
Source: Cisco VNI Mobile, 2015
Handing half the growth in mobile traffic over to Wi-Fi connections, most of which will be connected to fiber or ADSL services will provide challenges for fixed line operators as well who will see the demand for capacity also explode over the rest of the decade.
Much of this explains the moves by companies like Telstra to roll out public Wi-Fi services to start locking users into their services. It also gives them, and consumers, an opportunity to understand how networks that mix both cellular and Wi-Fi behave.
Another aspect of the Cisco VNI survey is the Internet of Things which is going to see exponential growth as industrial and household devices start being connected either directly through the telco networks, across unlicensed radio spectrum or over private Wi-Fi systems.
While Cisco predicts the bulk of that traffic as being generated by smartphones, the company sees connected devices as growing by 45% per year over the next five years with 3.2 billion sensors connected to the internet by the end of the decade.
Notable in the prediction that Low Powered Wide Area (LPWA) networks – non cellular systems mostly operating in the unlicensed spectrum used by Wi-Fi networks – will provide nearly a third of the connections by 2019. At the same time we can expect many M2M deployments to consolidate traffic locally with much of the data processing down locally before the residual information being passed up the network.
As usual the Cisco VNI report underscores, and possibly understates, the growth in mobile data usage we’re going to see over the rest of the decade. For businesses, it’s time to plan for managing both the flow and application that smart devices are going to generate in our daily operations.
Samsung are staking a lot on their new Galaxy 6 smartphone
Having seen its dominance of the smartphone market eroded by a resurgent Apple and a range of upstart Chinese vendors, Samsung has announced it will launch its Galaxy 6 smartphone on March 1 reports the Sammobile website.
The new phone is reported to boast a curved screen measuring somewhere between 5.1 and 5.3-inches a fingerprint sensor and a 20 mega-pixel camera, which compares well to the iPhone 6’s eight mega-pixel camera.
While the proposed specs are impressive, the company has a challenge ahead as consulting firm IDC reported its smartphone shipments dropped 11% year on year last quarter in an market that grew by quarter.
Top Five Smartphone Vendors, Shipments, Market Share and Year-Over-Year Growth, Q4 2014 Preliminary Data (Units in Millions) source IDC Research
Vendor
4Q14 Shipment Volumes
4Q14 Market Share
4Q13 Shipment Volumes
4Q13 Market Share
Year-Over-Year Change
1. Samsung
75.1
20.01%
84.4
28.83%
-11.0%
2. Apple
74.5
19.85%
51.0
17.43%
46.0%
3. *Lenovo
24.7
6.59%
13.9
4.75%
77.9%
4. Huawei
23.5
6.25%
16.6
5.66%
41.7%
5. Xiaomi
16.6
4.42%
5.9
2.03%
178.6%
Others
160.9
42.9%
120.9
41.31%
33.1%
Total
375.2
100.0%
292.7
100.0%
28.2%
*Lenovo + Motorola
24.7
6.6%
19.5
6.7%
26.4%
While the numbers for the Chinese manufacturers are impressive, Apple’s shipments should also worry Samsung given the two companies are fighting for the top end consumers in the European and North America markets.
For Samsung its smartphones form a central part of its Internet of Things strategy so the success of the Galaxy 6 is critical to the company’s future plans, particularly given the lukewarm reception to the Tizen based Z1 phone on the Indian market last month.
Samsung’s China Crisis
With Samsung struggling with both its high end Android smartphones and its lower priced Tizen devices as Chinese manufacturers like Lenovo, Xiaomi and Huawei steal market share, the company desperately needs to hit the mark with the Galaxy 6.
Google as well has a stake in Samsung’s success as the Chinese manufacturers are increasingly turning to open source versions of Android for their smartphone systems. A flagship device for Android to counter the iPhone 6 is desperately needed to keep consumer and developer interest in the Google Play store and for Google’s consumer IoT ambitions.
The stakes are high for both Google and Samsung, the South Korean giant getting a mis-step with the Galaxy 6 could see it following the faded fortunes of its Japanese competitors.
Bigger smartphones are redefining media consumption, how does Google and traditional media companies respond to this?
Last week Google and Facebook announced their quarterly results with the search engine giant continuing its worrying slowing of advertising revenue. The respective changes of the two online services show how online advertising is changing.
While Google slows, Facebook is showing accelerating growth for its advertising, driven mainly by mobile users, illustrating the shift in internet usage from desktops to smartphones.
In its 2014 New Digital Consumer report, market research company Nielsen observed that US consumers in 2013 were spending more time accessing the internet on their smartphones than on personal computers; PC use had fallen seven percent to 27 hours a week while mobile use had surged 40% in 2013 to 34 hours.
Television still remained dominant with the combination of live and time shifted TV viewing making up 144 hours of the average American’s week, although it did fall slightly.
Those figures are a year out of date and there’s no doubt the numbers have accelerated since then. One of Tim Cook’s triumphs at Apple has been the release of the iPhone 6 and the larger form factors in the current generation of smartphones is a response to consumers’ demand to watch video on their devices.
Bigger Android, Windows and Apple smartphones will only seen even more people using their mobiles to watch video and surf the web.
Which puts Google’s predicament in sharp focus; we are definitely in the post-PC world yet their revenue still overwhelmingly comes in from desktop users while Facebook’s is increasingly coming from mobile consumers.
A strength Google has is that its revenues still dwarf the social media upstart’s – Google’s income is currently six times greater and its gross profit margin doubles that of Facebook’s – giving it plenty of leeway to change.
The question is where do the new revenues come from? Probably the biggest opportunity Google missed was in replacing the Yellow Pages franchises with their own local small business listings with Google Your Business (aka Google Place and Google Plus for Business) being lost in a confused and bureaucratic corporate strategy.
Compounding the problem for Google in the small business space is Apple’s entry and while Apple Maps is no contender against Google’s far superior product, an integration with Apple Pay would give Apple far more rich data to enhance listings with – not to mention more of an incentive for merchants to sign up.
With the changing web, Google are going to have to change as well. If advertising is going to remain the mainstay of their business then the company needs to find a way to capture smartphone users.
It could be worse however, a report from consulting firm Strategy Analytics estimates print media’s share of advertising revenue fell another seven percent this year. Time is running out for newspapers.
While print is ailing, the advertising battleground is mobile digital although TV still dwarfs the market. How this evolves in the next five years will define the next generation of media tycoons.
The performance of Apple and Microsoft in recent years show two very different management philosophies.
The stunning quarterly results of Apple announced yesterday compared to Microsoft’s indifferent performance illustrate how the fortunes of two different business cultures have changed.
Apple yesterday announced a spectacular result for its quarter finishing at the end of last year with revenues up 30%, profits by 38% and Earnings Per Share just short of fifty percent.
The announcement was an emphatic vindication for Tim Cook and his management team who made some big bets on the larger form factor iPhone 6 which paid off spectacularly with shipments growing 46% to 74.5 million and revenue reaching $51.2 billion, over two thirds of the company’s total sales.
One notable aspect of Apple’s success is the difference with Microsoft’s and this shows how different business cultures come in and out of fashion.
The Triumph of the MBA
For two decades Microsoft’s licensing business model was dominant and this confirmed the MBA view that companies should do everything they can to move design, research, manufacturing and distribution out of their operations – the virtual corporation where there was no inventory, few costs and even fewer risks was the ultimate aim of the modern manager at the turn of the century.
Microsoft encapsulated this philosophy with its licensing model, while the company made massive sales with huge margins – as it still does – all the business risks in the computer market were carried by resellers and equipment manufacturers. For many years the markets loved this.
Apple tinkered with the licensing model under John Sculley in the mid 1990s during Steve Jobs’ exile but was never really serious about giving away its hardware capabilities and in 2001 moved into retail with the opening of the first Apple Store.
Coupled with the App Store, Apple have come to control the entire customer journey from marketing, design, purchase and ongoing revenue after the product is bought.
King of the new Millennium
While the 1980s and 90s were the time of triumph for the Microsoft model, the 2000s have been good to Apple as shown by the revenue and profit figures.
Apple and Microsoft Revenues 2000-2014Apple and Microsoft Profits 2000-2014
The key inflection point in these charts is, of course, the iPhone’s release in 2007. Apple caught the wave of change as computer use switched from personal computers to smartphones and is now the dominant vendor.
For Microsoft the success of Apple is bittersweet; the company had a smartphone operating system in Windows CE but it was too early to the market and the devices vendors went to market with were, at best, substandard.
Microsoft’s failure with the smartphone was also echoed with tablet computers and exposed the licensing model’s reliance on vendors to supply and support decent products, even today Microsoft’s hardware partners struggle to release decent tablet systems.
Cloudy on the web
Another problem that exposed Microsoft’s weaknesses was the rise of the web where hardware and operating systems really did matter so much any more. Along with pushing out personal computer lifecycles it also had the consequence of allowing other systems into the marketplace, notably Linux and Google Android.
With OS X, Android and Linux systems no longer hampered with the compatibility issues that irritated non-Windows users in the 1990s the market was open to adopting those systems. While the PC market has remained quite loyal to Windows, although the Apple Macs are showing serious growth as well, Microsoft’s system has barely any marketshare in other device segments except servers which are also declining as business increasingly move to cloud services.
Apple have shown in the computing and smartphone business that controlling the hardware products is as important as supplying the software, a lesson that Microsoft now acknowledges with its restructure into a ‘Devices and Services’ company under former CEO Steve Ballmer.
Under current CEO Satya Nadella Microsoft is focusing on cloud services which also aren’t as profitable as its legacy operations but see it competing with companies like Amazon and Google who don’t boast the profits from their online operations that Apple makes from its hardware.
Microsoft aside, the lesson Apple gives the technology is pertinent for its competitors in the smartphone space as well; companies like Samsung, LG and the army of Chinese handset vendors are going to find their markets tough unless they can take control of their software development and distribution channels – relying on Google for Android and telcos to get their phones to customers leaves them exposed in similar ways to Microsoft’s partners in the last decade.
In the battle between business models, Apple is the current winner and shows throwing all of your business operations over the fence to partners and licensees is a risky strategy. How those lessons are applied in other sectors will test the limits of both management philosophies.
