Next disruption after smartphone

In Feb, 2011 I wrote in this blog, "it appears that soon smartphone by itself will be considered as a separate segment, decoupled from GSM/CDMA/3G and soon 4G handset market. People's expectation and usage of these device are going to drive this transformation where iPad-like device and smartphone will merge to create one single smart-mobile-device segment." I thought it would be interesting to do a reality check.
First, on smartphone, Gartner's May 2012 report says, “Smartphone sales are becoming of paramount importance at a worldwide level. For example, smartphone volumes contributed to approximately 43.9 per cent of overall sales for Samsung as opposed to 16 per cent for Nokia”  Gartner provided a table on comparative positions of different Smartphone OS in the report which shows Android's global dominance in 2012 and loss of market share for both Nokia and Microsoft.

Gartner Table :
Worldwide Smartphone Sales to End Users by Operating System in 1Q12 (Thousands of Units)

Operating System	1Q12 Units	1Q12 Market Share (%)	1Q11 Units	1Q11 Market Share (%)
Android	81,067.4	56.1	36,350.1	36.4
iOS	33,120.5	22.9	16,883.2	16.9
Symbian	12,466.9	8.6	27,598.5	27.7
Research In Motion	9,939.3	6.9	13,004.0	13.0
Bada	3,842.2	2.7	1,862.2	1.9
Microsoft	2,712.5	1.9	2,582.1	2.6
Others	1,242.9	0.9	1,495.0	1.5
Total	144,391.7	100.0	99,775.0	100.0

Source: Gartner (May 2012)

So, I appear to be on track this far. How about iPad and iPad like devices? Let's again go back to Gartner. Gartner says, "Apple's iOS continues to be the dominant media tablet operating system (OS), as it is projected to account for 61.4 percent of worldwide media tablet sales to end users in 2012."
Gartner's projection for this segment:

Worldwide Sales of Media Tablets to End Users by OS (Thousands of Units)

OS	2011	2012	2013	2016
iOS	39,998	72,988	99,553	169,652
Android	17,292	37,878	61,684	137,657
Microsoft	0	4,863	14,547	43,648
QNX	807	2,643	6,036	17,836
Other Operating Systems	1,919	510	637	464
Total Market	60,017	118,883	182,457	369,258

Source: Gartner (April 2012)

Although there is clear dominance of Apple in this segment, Android tablets are forecast to account for 31.9 percent of media tablet sales in 2012, as per Gartner. Gartner dutifully adds that once Windows 8 is realeased, it will become a game changer in this segment. Apple, however, will continue to dominate the segment for entire forecast period.
Numbers always make a very strong case, however they rarely tell the full story.
Will the consumers keep buying both smartphone and tablets? If they do, how will they use these two device differently? Tablets for reading document, watching media but smartphones for rich communication, or so does it appear.
But how strongly can one hold on to that argument? At the end, it is just the screensize that makes the difference, doesn't it? Both smartphones and tablets at present, are primarily touch-screen based. Communication protocol stacks are available on both the devices as part of the OS [Operating System], although may not be enabled. So why would you carry two devices if one single device can provide both viewability of iPad or Amazon Kindle and rich communication capabilities of a smartphone? In fact, if you had options you are likely to consider little larger screen size for tablet, especially for watching HD media content. What if the screen were foldable? That would let us spread out the screen when we need and fold it neatly to fit into smaller dimensions of smartphones when we do not need. That way smartphone could double as media tablet.
There is another option too! Thanks to large scale proliferation of 3D content, people are getting comfortable to wear special glasses. What if we could have a special viewing glass for display device? That glass would convert the smartphone to media device. Fact is however futuristic they sound, the technology is almost within our grasp. We already have OLED display that is as flexible and hundred times as thin as human hair. Called spintronics OLED, they promise to be more efficient and brighter compared to present OLEDs Within a year or two, these devices will replace all exisitng display devices on tablets or smartphones.
Thanks to continuous miniaturization of processors, multi-core CPUs already are finding their ways to smartphones, which means computing bandwidth will never be a bottleneck for these devices. One can expect to watch 3D media content over these mobile devices in very near future. If there is anything, the question is how fast will be the transition of these technologies. Given that almost entire electronics manufacturing of the world is getting concentrated in China and its neighbours, it is very likely that technology replication will be rapid bringing down the overall adoption cost dramatically for the entire handset industry. One in fact can expect that the technology upgrade will be viral pushing the latest of technology changes to the cheapest of the devices.
So it is quite apparent that display device will bring the next disruption to this segment. When it will, it is expected to sweep all the three segments of smartphones, tablets and laptops converting them to a single unified huge segment of mobile devices. It is too be seen who will ride that wave of disruption. Will it be a chinese player, this time?

Nokia in 2012: a luminous end of a glorious past?

Recently I walked into a local cellular phone shop and asked for a not too inexpensive but sturdy phone set. The salesman asked me if I am looking for a smartphone. I said that I have nothing particularly against smartphone as long as it is stable and inexpensive. Fact is I have personal allergy to all these marketing terms especially when everyone knows that there is nothing smart in a smartphone. The salesman gave me too sets, one Samsung 'Guru' that cost around Rs 1800 and another Samsung Galaxy SII, that costs around Rs 17000. Being a majorly Nokia user so far, I was a little hesitant. "No Nokia set?", I asked.
He said, "Sir, we do have Nokia set but my honest advise is that you do not buy Nokia. The Nokia phones are not like those in past, quality dropped drastically."
"Even for the basic sets?"
"Yes, Sir, even for the basic sets, we get so many complaints every month these days that we warn customers upfront; after that, of course it is their choice if they still like to buy Nokia set".

Yesterday, a friend of mine called me and told that he needed to replace his old handset with a new one and asked me if I had any suggestion for him. I told him, quite unconsciously that he should consider samsung or Sony-Erisson or blackberry models but not Nokia.
But I am sure I was not the exception. Nokia clearly lost its customer loyalty drastically in last few months. It is said that problems do not visit alone. If the customers and shoppers complain about detoriating quality of Nokia phones, the market is exceptionally pessimistic about Nokia's future. Rating agencies like Moody, S&P have downgraded Nokia's credit rating to junk status.
For last one year, we have been witnessing the impact of Nokia's CEO's landmark direction change and one does not need to go too far to sense how well Nokia is doing. Internet is abuzz with reports about how Lumia turned out to be a dud, how Nokia lost 52% of market share in just few months, how Mr. Elop, the ex-Microsoft Nokia CEO has wasted billions of dollar (e.g. in Lumia campaign) and made Nokia taste loss in last quarter by taking successive wrong decisions. Now it is debatable if Nokia would have fared better had Mr. Elop not taken those bold decisions. Fact is symbian was a dying elephant albeit 57% Phones in the market had symbian OS when Mr. Elop took over. People blame that, between 2003 and 2008, 'rather than spend its resources on building a next-generation software ecosystem—an OS that depended on novel interfaces and sensors, that allowed for outside development, that offered a brilliant user experience—the company “managed down” its cash by paying huge dividends and buying back its shares." During that period, Nokia spent 27 billion euros in dividend and share buy-back - a clear sign of organization trading long term engineering future with short-term stock appreciation. Were Mr. Elop's manoeuvre successful, Nokia could truly turn around and challenge iPhone dominance riding high on Lumia and Microsoft WP7.

Summary of the present situation

1. Nokia wanted to cannibalise Symbian with Microsoft OS but market cannibalised Nokia smartphones with Samsung and others. Android proved to be much stronger market force than WP7.
2. Nokia's deteriorating engineering focus had its toll in the low-end basic phone category too; customers are moving to alternatives to Nokia sets. People expect mobile phones to be lot sturdier than PC. Call-drops due to poor quality of handset cost customers money and fact is Samsung low-end phones are lot more stable compared to present Nokia models.
3. While Apple, Samsung, HTC have successfully established themselves in the tablet space, Nokia missed the bus altogether.
4. Nokia's network division, once a very strong market force is also struggling against Chinese competition from Huawei and ZTE, even after merging with Siemens Network.

It is interesting that all the present predicament of Nokia are hinged on single failure: its successive unsuccessful attempts to secure its platform strategy.

Is this the end of  a Glorious past?

Many argue that from where Nokia stands today, it is very difficult for it to get itself out of the mud and only viable option left is buyout by Microsoft. Although Nokia's past and stack of IP would be valuable asset for Microsoft, it is very likely that a direct buyout would bring the combined net worth further down, effectively eroding the value of Nokia to zero. A better path would be if Microsoft lets Nokia find its survival path rather than direct buy-out.
But then Nokia needs to change in many front. It must figure out its strategy for low-end phones where stability and robustness count higher than features. On the high-end segment, it has to open itself for multi-platform strategy like HTC and Samsung rather than firing all guns on Lumia. That should help Nokia to find its competitiveness against Samsung and HTC.  But above all, Nokia must find one software that its engineering should focus wholeheartedly.  Something like a platform-independent Nokia mobile software that can work seemlessly on both Android and Microsoft Windows. Alongwith that a great developer SDK could be a game changer. It could help Nokia to capture large unorganised app ecosystem making the Nokia Mobile software the de-facto platform for mobile app development. That would help Nokia to integrate tablets into its product portfolio like Apple and Samsung. On the technology front, using its strength in wireless technologies, Nokia could focus to bring the first stable 4G (LTE) smartphone that can seemlessly transition from 3G and 2G networks.
But then that would take time and lot of patience from the market. Question is if Nokia has so much time!
 Last year we witnessed Motorola going down the same trajectory ending with Google's buyout. Will 2012 witness fall of another hero of Telecom yesteryear? Negativity brings more negativity but gratification of 'I told you so' is too pale to such a loss if that happens.
A company that in its more than 150 years of history changed its core business 17 times to remain relevant and successful, if turns itself to such an end, it is not only painful, it is demeaning too.

Google is now Mobile handset maker

The 64th Independence Day of India also will be considered a red-letter day in the history of Google though for a different reason. Google announced that it bought Motorola's mobile phone unit for $12.5B in cash [Read the report at Techcrunch] With this, Google is making direct foray in mobile handset market which means they will now compete with Apple, Nokia and RIM for supremacy of this market. Mobile Handset particularly smartphone market is a big market as is evident from Gartner's latest news report.

The same report [see the table] also says that Android has moved up to become the top Mobile OS as was predicted in an earlier post. 

Incidentally Larry Page said two things : 1. This will help Google to protect and advance Android and 2. Android will continue to remain "Open". It probably will remain open for some more time, since openness actually benefits Google in the long run and secondly Google is not going to make the same mistake that Sun did with Java.
Forbes' blog argues that Google bought it because of Motorola's 14600 patents and another 6000 pending patents in the related industry and will help Google to fight lawsuits from Apple and others in future. From that perspective, this looks more like Google's corrective move after they failed to acquire Nortel's patents earlier this year. Their $900M bid failed when NORTEL board decided to sell the full company to Google's competition [consortium Microsoft, Apple, RIM, Sony, EMC] at $4.5B. How this will change the future of mobile handset market in north america, though is a very interesting question, is more an area of speculative expet opinions and better to be left for the experts. Significance of this announcement, however is both in future and in the past.
1. It marks the end of an era, an era of domination of North American telecom players. Nortel and Motorola are both history now.
2. Since this will deplete Google's cash reserve significantly, this also means that Google will direct all its salvos to get the full ROI of this acquisition. In other words Mobile Handset ecosystem is going to become Google's one of the primary business focus in a very near future. In fact if one considers another less advertised purchase, the announcement of Google buying Admob for $750M, it becomes quite apparent that Google is very serious about winning the last frontier of internet advertising i.e. mobile internet. Having the depth of handset technology from Motorola, reach of Android OS and Google's supreme leadership in internet-search and advertising, Google hass got all its cards laid out. To be seen is how Google deals with the sticky privacy issue that keeps coming up in the context of Android and consumer location tracking. However, given the huge potential the mobile internet market has, it is only predicatble that this market will continue to shape Google's future strategy in a big way. It would be interesting to watch how Apple and Microsoft answer to this challenge.