Facebook Acquires Pryte, Deepens Its Commitment to Mobile Data Markets

Despite a couple of highly questionable acquisitions earlier in 2014, Facebook’s acquisition of Pryte, a Finish business with a niche in the Over the Top (OTT) content market, looks to be a very smart move, with a lot of promise.

The news of this merger appeared first on Pryte’s web site. For readers unfamiliar with the notion of OTT, and what it might mean for the mobile data market, I found the following explanation, authored by Dan York and published on the Disruptive Telephony web site to provide a useful definition: What is an Over-The-Top (OTT) Application or Service? – A Brief Explanation.

If I may use a personal example to illustrate the likely attraction of OTT content to the average consumer of high speed data services, I would characterize the level to be very high. Once consumers have the option of consuming digital content entirely in an asynchronous manner, without worries about DVRs, limits on storage, etc, they are not likely to look back. My household went through a Chromecast and is now settled on two Roku devices, which we are using every day, much more frequently than we do the cable set top boxes we also have available.

Pryte’s claims to offer providers of high speed data to mobile consumers a method of monetizing their role as the packet transport provider delivering the application direct to the customer. With Pryte enabled, a Telco like Verizon could opt to charge a premium for a specific OTT content service (for discussion purposes, say Netflix). Should the consumer opt to purchase the additional data, a Verizon running Pryte would also be able to directly assign the additional data to Netflix usage, only.

Of course, by assigning an a la carte purchase to a specific application (Netflix), the consumer is positioned in such a way both the Telco and the application provider (Netflix) can share in the revenue. What is a direct benefit of sharing the revenue? The additional cost of ensuring quality of service from Netflix to the consumer, comes off of Netflix and lands on the consumer. Netflix has already signed deals with Comcast and Verizon to purchase additional data to ensure high quality of service for its subscribers. So Pryte promises some relief to this pain, on both ends.

A lot of early comment on this deal has emphasized how it complements Facebook’s Internet.org effort and provides a method for emerging markets to pay for content as they start to consume data services. Certainly these comments make a lot of sense, but over a longer term. If the Pryte service works, as advertised, mature high speed data markets here in the US, Western Europe, and Japan could, perhaps, constitute an even quicker method of delivering revenue.

Ira Michael Blonder

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


BlackBerry Included as a Niche MDM Solution in Gartner’s Magic Quadrant for Mobile Device Management Software

As I wrote earlier in this blog, Blackberry’s recent promotion of free Blackberry Enterprise Service 10 (BES10) to anyone willing to try the product, did not seem fitting for a leader in the enterprise Mobile Device Management (MDM) market. I based my point on some information shared, publicly, by Gartner, during a recent webinar on the enterprise Bring Your Own Device (BYOD) trend. The information reported on a willingness on the part of a substantial majority of survey respondents from enterprise businesses to invest in an MDM solution.

My reasoning amounted to questioning why Blackberry would give BES10, which is an MDM solution, away for free if approximately 80% of the enterprise market plans on buying and implementing a solution. Based on this giveaway, I concluded Blackberry has faced some substantial obstacles in its effort to convince enterprise business to standardize on its MDM offer.

This apparent setback was confirmed, recently, when Gartner published its Magic Quadrant for Mobile Device Management Software. BlackBerry is included in the lower left square of the Magic Quadrant — as one of the “Niche Players” in the market.

This result is, in my opinion, an important signal of some problems in the strategy John C. Chen, BlackBerry’s CEO presented to the analyst community back in December, 2013. Mr. Chen notified the analyst community of his intention to transform BlackBerry into an enterprise software vendor, while, at the same time, lowering the company’s exposure to the mobile smart phone manufacturing business, which exhibits the characteristics of a pure commodity market.

If BES10 can do no better than achieve a slot as a “Niche Player” in the enterprise MDM market, then BlackBerry’s giveaway strategy makes sense. At least Mr. Chen should achieve wider awareness of what BlackBerry offers as a solution for this market as a direct result of this very aggressive tactic. But it will certainly be difficult to convert free users into paid customers at some later date.

It would be useful to learn more about how Gartner reached a decision to include BlackBerry in this lower left square of the Magic Quadrant, directly opposed to the “Leaders” square, at the top right.

Disclaimer: I recently closed a long position in BlackBerry. I am not affiliated with Gartner, Inc.

Ira Michael Blonder

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


Microsoft has an Announcement Scheduled for May 20, Will They Introduce a Surface Mini Tablet?

On Thursday, May 7, 2014, Bloomberg published an article titled Microsoft Said to Use Qualcomm Chips in Smaller Surface. The article was written by Ian King and Dina Bass.

The article reports “Microsoft Corp. (MSFT) is planning to introduce a new, smaller version of its Surface that will use Qualcomm Inc. (QCOM) processors for the first time,” The publication of this article, rather soon after the publication of IDC’s latest survey of the worldwide tablet market makes sense.

As I wrote in a recent blog post, IDC survey results spelt problems for Microsoft, and for NVIDIA. The former saw its likely quarterly worldwide tablet sales numbers folded into the “other category”, while the Android O/S and Samsung were reported to have grown sales, year over year, by 32%. I surmised the repercussions of the IDC report on the latter, NVIDIA, could lead to the demise of their efforts to play a major role as a tablet chip vendor.

I should also note I hypothesized Microsoft might interpret the results to be a good reason to exit the tablet market, at least with the Surface product line.

If the Bloomberg article is credible (and we will all hear the answer to this question when Microsoft holds its scheduled meeting on May 20th), then it’s clear Microsoft is digging deeper into the worldwide competition for tablet consumers, opting for, perhaps, a less costly CPU for a smaller Surface, the long awaited “Surface Mini”. Of course, we can not tell how NVIDIA has been affected by Microsoft’s decision to drop the Tegra for the Qualcomm SnapDragon processor, but it is safe to say the result will be less than positive and, perhaps, important enough “bad news” for product management to re-evaluate the extent of NVIDIA’s commitment to the tablet market.

I would not be surprised to learn at Microsoft’s next quarterly earnings report about how the Surface Mini, with the Qualcomm processor will deliver more margin, and a lower cost of goods sold. Both of these production improvements may contribute to a point or two or more of additional margin on the hardware.

Disclaimer: I’m long Microsoft and have no present position in NVIDIA, Samsung, Qualcomm or Google. I am neither affiliated with IDC, nor with Bloomberg LLP.

Ira Michael Blonder

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


Tablet Contenders Now Likely to Cannibalize Market Share as Worldwide Demand Tops Off

In a press release dated May 1, 2014, titled Worldwide Tablet Shipments Miss Targets as First Quarter Experiences Single-Digit Growth, According to IDC, IDC reported on worldwide tablet shipments for the first calendar quarter of 2014. The title mentions the quarter as a miss, but the forecast is not included in the summary. Year over year growth amounted to just 3.9%.

Microsoft® was no where to be found in the results published in the release, although the “Others” category, which is reported to have grown 11.5%, year over year, certainly includes any/all tablets running Windows 8.1, etc. Samsung was noted as growing its share of the world wide market, year over year, by 32%. Apple shipments were reported as declining, over the same period, by 16.1%.

These statistics lead me to assume markets will likely see vendors intensify competition with what I refer to as “cannibalization” strategies. These efforts can include generous trade in offers, either directly from competitors, or through sales channels (with, I would assume, competitors providing some incentive to channel partners to help pay for the effort). In fact, a visit to BestBuy’s web site on Saturday, May 3, 2014 revealed just such an offer.

As far as the likely impact of worldwide tablet markets hitting a plateau, at least for presently available technologies, on prominent contenders (Microsoft, Apple, Samsung, Google, other Android OEMs), I think it is likely Apple will have to report on some of this sales “pain”, while Microsoft may, as has been rumored, make some move towards the exit on the Surface product line. In contrast, Samsung’s substantial sales growth for these devices, year over year, may amount to good news for their bottom line, and perhaps, provide them with an incentive to proceed further in the direction of implementing their own O/S, or apps, etc.

Behind the scenes, for chip manufacturers, these results may amount to a sober wake up call. One of these, NVIDIA®, has already demonstrated substantial interest in other markets, including automobiles, and even serving graphics consumers with cloud-delivered GPU power.

But it is premature to render a definitive opinion on the impact on Intel® and its widely publicized mobile “catch up” effort. The Samsung Galaxy Tab 3 is powered by the Atom Processor. Microsoft, HP, Lenovo, Dell and Asus are all Intel OEMs, so the results may actually amount to good news for Intel. It will be interesting to read any news Intel may publish directly on its calendar 2014 performance in the Mobile market.

Consumers will likely benefit from the intensified competition. So, if you’re like me, contemplating a purchase of a new tablet, you may want to wait as these results will almost certainly produce some very attractive offers at a lower cost.

Disclaimer: I’m long Microsoft, NVIDIA and Intel, and have no present position in Apple, or Samsung. I am not affiliated with IDC. Finally, I have no substantive information beyond what’s included in IDC’s Press Release to support any of the claims made in this post

Ira Michael Blonder

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


The White House is Evaluating Samsung and LG Phones, But is this really a blow to Blackberry?

On March 20, 2014, Will Connors published an article on the Wall Street Journal Online titled BlackBerry Suffers Blow as White House Tests Samsung, LG Phones. As the title plainly states, Connors considers this review of competitive smart phones to be a negative for Blackberry. But is this a really accurate read of this news?

I found neither any mention in Connor’s article of any apparent interest, on the part of the White House in any alternative to Blackberry® Enterprise Services (BES), nor in Blackberry Secure Work Space (BSWS) for iOS® and Android. Unless and until there is mention of the White House seriously considering a move off of these software platforms, I don’t see news about the White House evaluating new smart phones as a blow to Blackberry.

On March 26, 2014, Blackberry announced its achievement of ” . . . Federal Information Processing Standard (FIPS) 140-2″ for both of the above mentioned secure messaging platforms. Readers can review the entire press release, titled BlackBerry Advances Security of its Multi-Platform Mobility Portfolio with New Cryptography Certification. BES and BSWS operate entirely correctly on any Android devices, including the Samsung and LG smart phones currently under review by the White House. With specific regard to the LG smart phone line, on December 18, 2013, Blackberry published a press release, titled BBM To Come Preinstalled On LG SmartPhones. So the LG G Pro Lite runs the Blackberry Messaging Platform, native, right out of the box. The White House statement, however, does not specifically mention this LG smart phone as under specific consideration.

Readers should also carefully consider a December 20, 2013 announcement: Blackberry and Foxconn Agree a Five-Year Deal. Is Blackberry really deeply committed to the smart phone handset manufacturing business? Or is this interest on the part of the White House merely an indicator of Blackberry successfully transitioning over to the enterprise software revenue model John Chen, CEO has made clear is its near term future?

BES and BSWS win any way the White House decides to proceed — Android smart phones from Samsung, or LG, or new Blackberry handsets manufactured by Foxconn.

Disclaimer: I’m long Blackberry

Ira Michael Blonder

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


Intel’s Reference Design for 64-Bit Smart Phone and Tablet Computers Attracts Positive Reviews from Mobile World Congress, 2014

Intel hasn’t enjoyed much success in the mobile market for smart phones and tablets. But on February 24, 2014, in a press release titled “Intel Gaining in Mobile and Accelerating Internet of Things”, Intel announced the launch of its ” . . . 64-bit Intel(R) Atom(tm) processor for smart phones and tablets . . . ” (quote is an excerpt from the press release). A reference design of a smart phone built on this processor and board showed up at Mobile World Congress. This prototype, running the Android KitKat OS, was well received by reviewers at the conference.

One of the reviews, Intel Merrifield Smartphone Reference Design, was published by Mobilegeeks.de. on the same day the Intel® published the press release for the 64-bit Atom solution. On several occasions the Mobilegeeks reviewer notes what she takes to be a major improvement in the product (as compared with Motorola’s Razr i, I would suspect), specifically the shorter length of the phone, which permits one hand gaming. There are quite a number of these reviews online. I did not find any strongly negative comments on the reference design.

So, if the mobile community actually warms up to this platform, what’s the impact for Intel? In my opinion, a right answer will be, necessarily complex. It’s certainly a positive to have a well received reference design, but the announced list of OEMs (ASUS, Lenovo, Dell and Foxconn) for this chip solution, with the exception of Leonovo (and only as the result of its plan to acquire Motorola Mobilty from Google), have zero footprint in the consumer smart phone manufacturing market. In my opinion the absence of a leading smart phone manufacturer will be a very hard obstacle for Intel to overcome. The choice to build the reference design with an Android KitKat OS will likely exclude Nokia from the list of likely targets for the platform.

Therefore it makes sense to assume, perhaps, three quarters of minimal sales for this product line as a significant smart phone manufacturer comes to the surface. At the same time each of the announced OEMs offers several table computing products. Expect to see the 64-bit Atom chip solution, with the Android OS, popping up in some tablet designs.

But HP (conspicuously absent from the above list of OEMs) just released two tablets with the 64-bit Atom processor, BayTrail, running Microsoft® Windows 8.1. You can read a review of the tablet in an article published on the PC World web site, titled HP ships first 64-bit Windows 8.1 tablets with Intel Atom. So it’s clear tablet OEMs on the Windows OS side of the market are keen on the 64-bit Atom BayTrail cousin to this solution. These sales will likely ramp up faster, but for a smaller overall market (focused on business end users).

Disclaimer: I’m long Intel.

Ira Michael Blonder

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


Short Life for Asus Transformer Speaks to Product Marketing Mistakes

On February 25, 2014, AMD published some news about its APUs: AMD and BlueStacks to Bring New Dual-OS Android Solution to Retail. BlueStacks, the manufacturer of the BlueStacks App Player product, had developed hooks for PCs and tablets powered by AMD APUs. These hooks were designed to provide retail PC consumers with a seamless experience, side by side, of Microsoft® Windows and Android computing environments.

Before analysts following either AMD or BlueStacks starting applauding, perhaps it’s worth the time to consider a recent attempt by a PC hardware OEM — ASUS — to bring to the consumer IT market the Transformer All in One P1801 and P1802 products, which provide the same capabilities. Note: the ASUS device neither uses an AMD APU, nor does it use the BlueStack App Player. But the functionality is certainly achievable with a combination of the AMD APUs and the BlueStack App Player.

In an article titled Microsoft and Google aren’t happy with mutant Android-Windows Hybrids, which was released only 17 days after this announcement, Ian Paul wrote for the PC World website: “Microsoft may be comfortable with Windows Phone and Android splitting time on a single phone, but when it comes to PCs, fuhgeddaboutit.” (quoted from Ian Paul’s article. I’ve provided a link to his entire article earlier in this paragraph).

Why would Microsoft, or, as Paul recounts, Google, care about a PC device, like Asus’, running dual OSs? After all, PC power users often run Linux virtual machines on Windows PCs? Rarely, if ever, have there been any notable objections from Microsoft or any of the Linux distributions about users compromising functionality by opting for dual mode hardware operation.

The difference here is the how the firmware for the Transformer AIO P1801 and P1802 changes the consumer experience. There is no software to run to change OSs on the ASUS device. Paul explains: “These devices run Windows when they’re in PC mode. Slide out the AIO’s screen or flip the laptop into a tablet, however, and boom! You’ve got an Android slate. The concept is theoretically appealing to users since you get the best of both worlds in one device, but Microsoft and Google apparently weren’t pleased.” (ibid). The tablet included in the product is powered with an NVIDIA Tegra® 3 CPU, while the PC is powered with an Intel® i5 CPU.

What’s important here is what looks to be a big miss by product marketing. Clearly ASUS’s product marketing team didn’t consider all of the implications of the Transformer P1801 and P1802 devices. Product marketing should have anticipated the likely reaction of Microsoft or Google to the performance of the proposed product. It’s disappointing, to me, to see how a mature PC OEM like ASUS could miss this very important point.

The lesson for early stage ISVs is to make sure product development procedures include a summary of how a proposed product will impact other software products in use in a consumer’s likely computing environment. Part of the summary should be devoted to a presentation of the “burning needs” these other software products are designed to meet.

Using the above mentioned mistake, as an example, what I think was missing from the ASUS product marketing plan was any reasonable assumption of why Microsoft would certainly want Windows 8.1 to run on the tablet feature of the dual OS hybrid PC computing device, and not just on the PC.

It will be interesting to see how hardware OEMs respond to the availability of the BlueStacks App Player and AMD APUs combination.

Ira Michael Blonder

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


HP Introduces 64-Bit Tablets, but are the Price Points Too High?

Intel® 64-bit Atom processors in a BayTrails configuration provide the processing power behind HP’s new ElitePad line of tablets for business computing.

The début of tablets running Windows 8.1 o. 64-bit processors is certainly a significant event for Intel, which promised accelerated efforts to beef up its presence in the mobile computing markets for tablets and smart phones.

But each of these tablets, with WiFi and Cellular data communications capabilities, carries a retail cost of at least $909.00, which makes any of the models more expensive than even Apple’s iPad Air tablets (the iPad Air with 64GB and comparable data communications capabilities carries an online price, via the Apple Store of $829.00 as of March 19, 2014). The effective price penalty, baked into the HP ElitePad, is not a promising development for Intel. I’m not sure whether the higher price is the result of HP passing through higher cost for 64-bit Atom/BayTrail solutions onto the consumer, or not, but the end result will likely be the same — anemic sales for these tablets.

PC World recently published an opinion on these tablets. In an article written by Agam Shah, titled HP Ships First 64-bit Windows 8.1 Tablets with Intel Atom. Shah published an estimated retail price of $739.99 for the basic model, which I did confirm on the HP SMB web site.

Competitive pricing is certain to be critically important to the success of Intel’s efforts to establish a position in the 64-bit tablet market for CPUs. Apple clearly owns the high end of the BYOD business market for these tablets. I would argue even the HP Elite Pad price mentioned in Shah’s review, $739.99, is still too high. Neither Intel, HP, nor Microsoft will benefit when the cost, for business users, to enable BYOD hardware with a native Windows 8.1 OS, exceeds the cost of the present market leader (let’s not forget the iPad Retina Mini, which includes a 64-bit processor, Wi-Fi and/or cellular connectivity, and 64GBs of storage at a retail price of $729.00). I would argue the Windows OS, while certainly a potentially valuable feature, is not critical for business consumers using Software as a Service (SaaS) cloud offers.

Ira Michael Blonder

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


Are App Stores a Looming Cash Machine?

Consumers opting to buy a Microsoft® Surface 2 will receive a $25.00 coupon in the box, along with some other promotional offers. This coupon can only be used to purchase an item offered in the “Store” feature of the Surface 2 Start Screen. But using this coupon can be a challenge. My review of the Apps offered didn’t produce much in the way of productivity. I noted lots of games, and lots of free Apps.

So why is Microsoft including the coupon in the retail customer product package? Anyone listening to Apple’s Q1 2014 webcast Earnings Call will hear Peter Oppenheimer sum up a very large business for Apple — it’s App Store. Oppenheimer estimates “[t]he App Store now offers 1,000,000 Apps in 24 different categories, and cumulative downloads have surpassed 65 Billion”. (quoted from the Apple webcast, a link to which has been provided in this post)

These numbers are not insignificant, especially for a company like Microsoft, which, historically, has always maintained a healthy developer ecosystem. Indeed, one can argue much of Microsoft’s success across the early days, following the launch of Windows, depended almost entirely on the third party developer community and the applications they brought to the public for the platform.

Oppenheimer goes on to present an even more important number: “Our App developers earned $2 Billion from sales of Apps for the quarter”. With an annual run rate of $8 Billion, any 3rd party business simply building Apps for Apple’s App Store might be looking forward to a very promising future.

Certainly Microsoft has not been slow to learn this lesson. The $25 box stuffer coupon makes sense as a means of driving customers to pump up the Store feature of the Surface, and the Windows Phone user experience. There are challenging impediments to Microsoft successfully kick starting this business, not the least of which being the small footprint of Microsoft’s mobile devices across the broad market when compared to Apple’s iOS. So a rapid, successful ramp up in phone and tablet units sold is a mandatory requirement of launching the Windows store App effort.

Ira Michael Blonder

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


Comments on Apple Q1 2014 Earnings Report

Peter Oppenheimer’s lengthy presentation at the start of Apple’s Q1 2014 Earnings Report left me with some thoughts perhaps worth consideration by some readers:

  1. Mr. Oppenheimer’s remarks, from a rhetorical perspective, are built to argue for Apple to be seen by the investment community, not as a niche player looking for the very top of the available consumers in the smart mobile device market, but, rather, as the leader in the North American market for smart mobile devices
  2. Numerous examples of enterprise business customers, and Apple customers from comparatively sized organizations in the public and the not for profit sectors are included in the preface remarks by Mr. Oppenheimer. Are they included to convince the analyst community to take Apple seriously as a vendor to the same enterprise customer base once owned by Blackberry? I think so. Readers should also note how Mr. Oppenheimer included IBM® in his remarks, much like an appeal to an authority. Perhaps IBM should take a look to ensure rigor mortis hasn’t kicked in, and the continued presence of “fire in the belly”.
  3. His remarks included comparative statements about Apple competitors, but included no mention of Microsoft® within the first 14 minutes of the webcast. Rather, his comparison about contenders in the smart phone and tablet markets were focused on Android
  4. Mr. Oppenheimer cited the IDC mobile device market report, which was published coincidental with Apple’s quarterly report. Nevertheless, the news about the IDC report (I’ve not read the report as of the publishing date of this post) includes some points at variance to the dominant position Mr. Oppenheimer claims Apple “owns” in his remarks

Here are some quick thoughts on each of the above points:

  1. In response to point 1), above: Perhaps Mr. Oppenheimer’s remarks are correct today, January, 2014 as far as the reach of Apple devices into the mainstream of the North American market for what I refer to as “small, smart, mobile devices”, But I don’t think we will listen to Mr. Oppenheimer make the same claim a year from now. From what I’ve read of the IDC report, Android devices are the fastest growing segment of the worldwide mass market for smart phones. The ultra competitive price point for Google’s Moto G smart phone, together with Microsoft’s soon to close acquisition of Nokia (and the changes in strategy and likely new attention to the lower end of the world wide market for smart phones) will certainly have a negative impact (the extent of which will have to be determined over time) on Apple’s claim.
  2. In reponse to point 2), above: Certainly Apple must be taken seriously as a vendor of choice for enterprise business customers — but only for small, smart, mobile devices. As far as the software they now ship to enable enterprise customers to manage large communities of mobile device users, I would keep my eye on Blackberry (as Citron Research has pointed out) as a real contender in this space, with the footprint required to perhaps deliver a crushing blow to Apple’s aspirations to control this market.

    I would also neither count IBM out of the market for MMS requirements, nor scoff at the improvements in market share Microsoft has likely achieved with the new Surface 2 products and the high end Nokia Lumia smart phones.

  3. In response to point 3), above: I refer, once again, to the IDC report, which notes a very strong force behind small, smart mobile devices powered by Android, world wide. I’m certain Mr. Oppenheimer has not fudged his numbers, or inflated his claims, but the future doesn’t look as promising as some of his audience might think.

    I also think Google’s Moto G is a very strong contender to both Apple and Microsoft products in the same category. The price point is “too good to be true”. I eagerly await some word from Google as to how this product is selling in the North American market.

  4. In response to point 4), above: I have more confidence in what I’ve read about the IDC report than I do in the importance of the points Mr. Oppenheimer has framed around his reading of the results. I don’t think it makes much sense to argue for Apple as the leader in the mass market for these devices. All of the steps the company has taken (at least as written about in the news) are to fortify a position as the dominant device in the very high end of the market, which makes more sense, especially over the long term, at least to me.

Disclaimer: I have no position in Apple, but am long Microsoft.

Ira Michael Blonder

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