9
Mar

Android remains a difficult opportunity for Google to successfully manage

2-Color-Design-Hi-Res-100px-widthGoogle recently announced its intention to proceed with a wireless data service. The latest spin on this decision, exemplified by an article published on the Wall Street Journal web site on March 8, 2015, takes this step as an indicator of a new, more frugal Google. But seen from a different angle it looks like an aggressive shot at Google’s partners in the Android alliance.

The title of the Journal article is Google: The Value of Thrift. The piece was written by Dan Gallagher and points to some recent steps taken by Google, which Gallagher presents as evidence of real follow through on points made during their most recent Quarterly earning report. Gallagher writes about the report: “Google hinted that it might curb its spending after a year in which capital expenditure surged 49% to nearly $11 billion.”

Gallagher finds an important example of this new campaign, at work, in some public announcements from Google about their decision to go forward as a wireless data provider. Gallagher notes “The Wall Street Journal also reported that the [wireless service to be offered by Google] will be limited to customers using Google’s own Nexus phones, which make up only a small portion of the overall Android market.”

But if I were the President of Samsung, or LG, or any other of Google’s partners in the Android mobile O/S effort, I don’t think I would be too pleased to learn the team managing the overall Android stack has just now decided to debut a promising wireless data effort (to deliver high quality/very high speed wireless data services from pipes supplied by T-Mobile, Sprint and more) for only its own phones. Why not mine too? I venture this phrase bounced around a few conference rooms when the news of this plan broke during Mobile World Congress 2015.

In my opinion this move is simply the latest in a series of steps likely to cause more headache for Google than anything else. The real sore spot, of course, is the damage a self-serving deal like this one can wreak on a very important recent effort on Google’s part to improve its penetration of the enterprise computing market. Certainly Android partners like Samsung are critically important to the success of this effort. Research has demonstrated enterprise IT organizations look at the Samsung Android device platform as one of, if not the only, line of Android devices worth serious consideration for an enterprise rollout. So why leave them out in the cold on this one?

It’s hard for me to get behind Google’s “moon shots” when they stumble around as they appear to have done on this one.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2015 All Rights Reserved

17
Apr

Intel Q1 2014 Earnings Conference Includes a Glimpse of How It Broke New Ground in the Tablet Market

During the Q&A session at the end of Intel’s Q1 2014 Earnings Conference Call, Blayne Curtis of Barclays asked a big question: ” . . . it’s pretty clear [the MCG (Mobile and Communications Group) business] is now losing $3 -$3.5 Billion, how do you think about this business? Obviously you’re trying to ramp the product set, you are a bit behind, you’re entering from the low end and that pricing seems quite tough, and you’re facing some subsidies that you need to do on the tablet side . . . Are there some milestones that you look at to get this business back profitable, or, maybe, would you consider this strategic enough that you would continue to run this as a loss?” (quoted from the Intel Q1 2014 Webcast)

Stacy J. Smith, EVP and CFO took the question. Smith emphatically affirmed the strategic importance of these markets: “It’s critical from two in one devices down to the Internet of Things” As to the MCG Group loss for the quarter, he noted: “We don’t go into these businesses thinking that we’re going to lose money. We believe we have a road map to get to profitability in that business.” (ibid).

Intel is a mature ISV. But the process for Intel to take the kind of new direction represented by the MCG product line is no different than would be the case for an early stage ISV attempting to come to market with, for argument’s sake, a new Cloud SaaS offer. In other words, the experience Curtis’ question brought under an analyst’s microscope included:

  1. a “Ready, Fire, Aim” product strategy. Intel chose to retool the Baytrail chipset from the PC market over to the tablet market. Opting for this method hastened their full scale entry to the tablet market. But the components, themselves, were brought to the task at a comparatively higher cost than comparable offers from Intel’s competitors.
  2. and a set of subsidies for OEMs for some of these higher costs

Presumably Intel’s rationale for opting for “Ready, Fire, Aim” was to quickly make a long overdue entry to the tablet market as a serious competitor. Smith noted why Intel’s market-leading experience producing SOC systems with the widest possible range of communications options promises to fuel their advance, which makes a lot of sense.

The rationale for the subsidies to OEMs is no different, I would argue, than the kind of “freemium” business model Cloud SaaS ISVs implement to persuade consumers to get started with their offers.

Disclaimer: I’m long Intel.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved