22
Oct

Comments on ReCode Interview Rick Osterloh SVP Hardware Google

In the October 13, 2017 “Too Embarrassed To Ask” show from VOX Media/ReCode, Kara Swisher and Lauren Goode interview Rick Osterloh, SVP of Google Hardware. A few points stand out for me:

1) Mr. Osterloh claims he was actually hired by Google to run the Motorola unit (post acquisition), but Mr. Osterloh’s LinkedIn public profile page says he ran the Android division of Motorola Mobility back in 2007. Is Mr. Osterloh not completely pleased with Motorola’s performance?
2) When asked whether the Google Assistant feature of Google Home products is leveraging the same, familiar, web Google search service, he added “yes, but we’ve tweaked it a bit”. But he did not offer any clear assurances this leveraging is not the case.
3) Ms. Swisher started the interview by noting Google’s new call “we do hardware better than anybody else”. Unfortunately neither Ms. Swisher, nor Ms. Goode pick up on this statement during the interview. Obviously this statement voices the core of “competition to be the best”. Investors bullish on Alphabet should think about whether a strategy built around this “king of the unprofitable hill” of duplicating features, trashing prices, is a smart one promising more profitability, or not.
4) When asked about what, if any, impact concerns about consumer privacy had on the design of the Google Home product, Mr. Osterloh merely answers “if you don’t use the attention phrase, we don’t listen in”. Once again, neither Ms. Swisher, nor Ms. Goode probed any deeper on this point.
5) When asked what the key differentiator is, from his point of view, between Google’s hardware, and “everybody else”, he replied “our AI. Which doesn’t answer your question (chuckles)”.
6) When asked what drove the HTC acquisition, he answers “we hired 2K new engineers”. Once again, investors bullish on Alphabet may want to ask just why the 2K + engineers acquired from Motorola Mobility didn’t cut it, but the 2K engineers from HTC will cut it. Analysts should also take a look at the expense of moving all these people in and out of employment status at Google impacts on the bottom line.
7) Mr. Osterloh pointed to the camera features of the new Pixel phones as an example of big improvements in their hardware devices. (In a recent review of Apple’s new iPhone 8 Plus, we heard very much the same story – “the camera is terrific, 4K video, etc”) Neither Ms. Swisher, nor Ms. Goode probed further on Mr. Osterloh’s comments on this point. Too bad. Pixels & iPhones are smartphones — not cameras with phones included as accessories. Or are they? Anyone interested in what “innovation” means, should take a look at how leading manufacturers of smartphones are producing their latest models. In our opinion, “innovation” has been long gone from any of these devices. Contact us to learn more.
8) Mr. Osterloh disclosed Google Assistant is using the same prescriptive, rote, learning method as other “personal assistants” (Cortana, Siri, Alexa, etc). The lexicon is simply massively larger (he mentioned 100 million possible query strings). So the “intelligence” still isn’t their in any of these devices to “naturally” answer posed questions.

2
Feb

Consumers pass on smaller tablets to take advantage of offers for smartphones with bigger screens

2-Color-Design-Hi-Res-100px-widthOn Monday, February 2, 2015, Tiernan Ray of Barrons reported on a research note published by Canalys. Ray’s article is titled Tablets Fall 12% in Q4, First-Ever Decline, Says Canalys; 7-Inch Models Cannibalized. Ray mentions this note claims “that shipments of tablet computers fell in Q4 by 12%”.

Anyone with an interest in consumer preferences for small, smart devices for computing on the go will likely look at the Canalys claim, especially if other published research affirms the numbers, as an indication of how Apple’s product marketing has successfully convinced buyers in mature markets, and even China, to value the iPhone as a status symbol. When this product magnetism is combined with carrier incentives, consumers apparently passed up opportunities to buy tablets to obtain an iPhone 6 or 6S.

Apple does not appear to be suffering much pain from these changing consumer tastes. According to Apple’s most recent quarterly earnings report, the surge in iPhone buying more than offset the 18% drop in tablet sales Canalys notes. But will the same scenario play out next year, when Apple debut a new iPhone? Would it not make sense for analysts to discount future earnings estimates based on an understanding of just how consumers of luxury electronics might behave, over time?

Unfortunately there is not any mention of this type of skepticism in Ray’s article. When buyer sentiment can turn quickly negative when products “[fail] to wow” it is reasonable to call a market top, of sorts, for this category of products. Regardless of the size of Apple’s operations, and its deep pockets, it is not likely we will continue to see widely popular new product releases time after time after time when the only real incentive for buyers is to announce to their peers they can still afford to buy the newest pricey gadget.

The Canalys report also mentions a serious drop in sales for Samsung tablets. In my opinion there are legitimate reasons for this, not the least of which is a combination of Google’s decision to no longer support “early” versions of Android, and Samsung’s own poorly timed introduction of new tablets, too often to the detriment of customers unfortunate enough to buy a product about to be obsoleted. But I argue the luxury market condition also weigh heavily on Samsung’s results. By crafting product promotion around a “competition to be the best” assumption, Samsung rendered its own small form hardware devices fair game for buyers to cannibalize in their frenzy to consume an iPhone 6 or 6S.

Ira Michael Blonder

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

12
Jan

Another reason why the Android segment of BYOD is problematic for enterprise IT organizations

2-Color-Design-Hi-Res-100px-widthThe Wall Street Journal published an article on what appears to be a decision made by Google not to support so-called older browsers (Jelly Bean 4.3 and earlier) for Android smartphones. But Android Jelly Bean 4.3 appeared as recently as June, 2013 (less than 2 years ago). So it may be safe to assume enterprise IT organizations are about to experience another big headache as they struggle to support BYOD policies permitting personnel to bring Android smartphones (and I would add tablets) into the enterprise. Some of these devices will certainly appear current (merely half way through a typical 3 year use cycle). But permitting them for use inside corporate firewalls might be a big problem.

This article is written by Danny Yadron. The article was published on Monday, January 12, 2015 and is titled Google Isn’t Fixing Some Old Android Bugs.

It is also likely consumers wouldn’t have a problem with Google’s decision, if the devices in question were truly older, meaning the first Android smartphone which appeared on the market in 2008, and its siblings. If the set of devices was merely limited to smartphones from 2008 to, say, 2010 (a full 5 years back), then Yadron’s reference to what he contends is the same posture Microsoft adopted with regards to its Windows XP Operating System, when it decided to stop supporting the product for production computing, would make sense.

But, in my opinion, Yadron’s statement is not tenable. “The security blind spot illustrates the challenges companies face as they try to move customers onto newer products and focus security resources on patching more-current software. Microsoft . . . applied the same reasoning when it stopped supporting Windows XP, first released in 2001, in April [2014].”

When we make reference to the Windows XP operating system, we are talking about software on the market for almost fourteen years. Sure the structure of the two announcements may be the same, but to equate a decision about products purchased as recently as 18 months ago to a decision about products purchased almost 156 months ago (nearly 10 times older) doesn’t make sense.

There is really very little similarity between the stances of these two big ISVs. Enterprise IT organizations are not likely to be fooled into thinking the two statements are the same. When they face an inevitable decision about whether to prohibit the use of mobile computing devices powered by Android Jelly Bean 4.3, on-premises, or not, they are not likely to enjoy their position as an unfortunate “bad guy”/spoiler for their community of computing users. Nevertheless, the best of them will likely have to prohibit these devices (which some personnel may still be paying off) if they are to preserve the comparative security of their internal corporate networks.

Ira Michael Blonder

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

14
Nov

Any meaningful feature gap between high end and low end smartphones has been obliterated

Consumer markets for smartphones no longer present any gap, whatsoever, between high end and low end entrants as regard high value features. With this gap obliterated, industry players will do well to implement product marketing strategies with a proven effectiveness in pure commodity markets or else risk extinction. This means product marketers should emphasize methods of lowering the cost of manufacture, and secondary markets to prop up revenue expectations while closely scrutinizing new model planning.

Here’s a case in point. We just purchased, outright, an LG Optimus L90 Smartphone from our wireless data provider, T-Mobile. Our total cost to acquire this device amounted to a one-time charge of $99.99. We should also note we maintain 2 Nokia Lumia 925s, which we purchased from T-Mobile at a cost of approximately $600.00, each. We are still paying, monthly, for each of the Lumias and will likely continue to do so for at least another few months.

But with an Android KitKat O/S, and a very extensive set of app options, we can’t find anything we’ve given away by opting to purchase the LG-D415 instead of a new Lumia, or even an iPhone 6. Sure the Lumia and the iPhone 6 offer many more powerful features than our LG Optimus L90, but we have no need for them. In this writer’s opinion, when features reach a usefulness plateau as they have in the smartphone market, consumers have zero incentive to migrate up the ladder to more expensive versions of the same commodity.

Leading manufacturers of smartphones are already exhibiting a set of strategic moves befitting general agreement about the nature of the market as, in late 2014, entirely commodity driven. Accordingly, Apple is talking about producing a gold version of its iPhone 6, which is already available for custom monogramming. This move makes sense for a manufacturer with a leading product whose principal attractiveness is its position as a status symbol for a highly concentrated set of consumers habituated on only buying the leading product in the category.

At the low end manufacturers like Samsung are feeling the pain as competitors with a substantially lower cost of manufacturing, for example, Xiaomi, seize market share. For this segment of the market, app stores look to be an oasis in a profit desert. No wonder Microsoft is racing to win a place on the radar of app developers as its best hope to capitalize on the smartphone market.

Look for further consolidation in this market as manufacturers either drop out, or consumer rivals.

Ira Michael Blonder

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

31
Jan

Has the Apple Retail Store Business Peaked?

Peter Oppenheimer sums up the Q1 2014 performance of Apple’s retail store business as follows: “Revenue for the Quarter was $7 Billion, a new quarterly record, and an increase of 9% from the year ago quarter”. The remarks are included in Apple’s webcast of its Q1 2014 Earnings Report. Readers assessing the real meaning of “record” need to keep the history of Apple retail stores in mind. The first store was opened 13 years ago, in 2011.

In comparison, McDonalds opened the first version of their current fast food restaurant brand in 1948. Despite 66 years of ongoing retail operation, same store sales for the chain, for the last quarter, decreased by only 1.4% (I excerpted this number from McDonald’s Reports Fourth Quarter And Full Year 2013 Results. There are other examples of retail brands, with many more years operating experience than Apple, still growing same store sales at a faster rate than Apple calls a “record”.

So readers might want to carefully study the performance of Apple’s retail store business, especially given the announcement of a new executive manager for this business, Ms. Angela Ahrendts, late of the Burberry women’s retail fashion business.

What I found particularly worrisome was Oppenheimer’s citing Apple’s use of RFID technology within the stores. He notes “[w]e were excited to roll out iBeacon technology at our stores in the U.S. during the quarter, enabling iPhone customers to receive notifications about products and services via the Apple Store App. . . . For example, customers walking by an iPhone table could receive a message offering to check their upgrade eligibility or trade in value”.

I have no issue with the use of location based services in the store, but I don’t like hearing about a business fine tuning methods of selling follow on products to the same customers and, perhaps, downplaying the importance of finding new customers.

Is Apple’s growth strategy built on re-eating its own lunch every year or so? If it is, then I fail to see the real growth opportunity in the retail business segment.

To sum up, I found Oppenheimer’s opening statements about iOS reach into global markets, and its dominance of those markets, to be inconsistent with his description of their retail business, which seems, to me, to be focused on a perpetual marketing strategy targeted to the same customer.

Ira Michael Blonder

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