Hardware

Making the iPhone 5C Good but Not Too Good

Apple's iPhone launch event is confirmed for September 10. It will take place at Apple's HQ in Cupertino, California. The company is expected to announce multiple devices at the event, including a new iPhone 5S, potentially an iPhone 5C and possibly an iWatch wearable device. There may also be new iPads.

The iPhone 5C is real and may come in a variety of colors (5 is the rumor) -- hence the colorful bubbles in the invitation. The forthcoming 5S is supposed to come in a champagne or gold in addition to traditional black and white. Pricing of these devices is uncertain, though the 5S will likely follow past pricing ($199 with 2-year contract, etc.). 

Some reports have suggested the 5C will cost between $400 and $500 unlocked. Carrier subsidy pricing is TBD. The real question surrounding the 5C is how appealing will it be? How "good" wil it be?

Apple is walking a tightrope.

The 5C is intended to make Apple more competitive in developing markets and at the "lower end" of the market where there's more price sensitivity. If the phone is "good enough" and cheap enough -- does the "C" stand for "cheap" or "China" or "color"? -- it could potentially cannibalize sales of the 5S. But if the phone is not of sufficiently high quality it will fail and Apple's brand will suffer.

I suspect that Apple will include a previous-generation chip in the 5C (perhaps the current 5 chip), whereas the 5S will get a new more powerful processor. There may also be memory limitations with the 5C. However the apps and app ecosystem should be the same.

The primary differentiators will thus likely be price, color, materials (plastic) and processing power/speed. But how does Apple build an attractive product that is competitive but doesn't overshadow its more profitable flagship product? That's the dilemma. 

Nielsen: US Smartphone Penetration Now 62%

Nielsen revised slightly upward its smartphone penetration data for the US market. Last quarter the figure was 61%; as of today Nielsen says that 62% of American adults own smartphones. 

Kantar research has been arguing that their data show the rise of Windows Phones in the US. However the Nielsen numbers reflect that in Q2 Windows Phones had just 2.3% market share. BlackBerry had 3%. And the remainder, 92%, was divided between the iPhone and Android. 

Apple continues to be the single leading smartphone OEM, followed by Samsung. Motorola, HTC and LG are closely arrayed after that.  

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Motorola is hoping to "reboot" its brand and sales with the new Moto X. What's perhaps most fascinating about the handset is that it targets women specifically, by positioning the phone as a personal fashion accessory.

Motorola's former (pre-Google) strategy had been very spec- and male-centric. The company had even attacked the iPhone at one point for being a "princess." At least with this model (Moto X) it's a dramatic shift for the company. 

Conflicting Claims: Which Smartphone Is More 'Satisfying'?

Last week the American Consumer Satisfaction Index (ACSI) released findings asserting that the Samsung Galaxy S3 and Galaxy Note II beat the iPhone 5 for customer satisfaction. The Galaxy S4 was not part of the study, which was conducted before the device's release. Somewhat Ironically, Korean consumers said the opposite: that they preferred Apple devices to Samsung's. 

Here are the US ACSI scores by device: 

Smartphone Customer Satisfaction 2013

Survey questions addressed the following areas:

  • Design (including weight and screen size)
  • General handset features
  • Video and audio quality
  • Software and ease of use (including OS and UI) 

What's interesting is that Apple rates higher than Samsung overall in the ACSI company scores -- though Samsung has closed the gap vs. 2012: 

 

Apple more handily beats Samsung in the JD Power ratings, where the iPhone 5 contributed to Apple's overall 2013 smartphone win. In the JD Power satisfaction scoring, Samsung is at the bottom of the group. How can these conflicting scores (within the ACSI and between ACSI and JD Power) be reconciled?

 

The ACSI report offers no real explanation for the Galaxy and Galaxy Note wins. Other than screen specs, Samsung's phones are not the highest quality Android devices on the market. Arguably HTC, LG and perhaps Motorola have stronger offerings from an overall quality perspective. However Samsung outspends them all (combined) on marketing, which has been the chief driver of the Galaxy line's success. 

My suspicion is that consumers are responding to screen size more than any other single variable or factor in rating the Galaxy S3 and Note II above the iPhone. This underscores the larger-screen imperative that Apple now confronts. The company needs to produce an iPhone with a larger screen. And according to multiple rumors, that will happen with the iPhone 6 though not the "5S," which is supposed to retain its current screen of just over 4 inches.

The new Google-Motorola Moto X chose not match the S4 and go to 5 inches after the company did considerable consumer research and arrived at 4.7 inches as the optimal screen span. Accordingly, an ideal screen size for a smartphone is probably right in-between the current iPhone 5 (4 inches) and the Galaxy S4 (5 inches). 

Moto X: Google Turns the Whole Phone into a Personal Assistant

There are a number of interesting things about Googlerola's just-released Moto X. First, it emphasizes design over specs. The latter had always been the hallmark of Motorola's previous Android ("Droid") phones. The new phone also allows for an unprecedented degree of customization:

  • 22 phone back covers (including wood)
  • 7 trim-band colors
  • White or black front/face

In fact, the way the phone is presented on the Motorola site makes it effectively into a fashion accessory. However that's how many people do treat their smartphones today. The customization, which is smart, is apparently made possible because the phone is manufactured in Texas (rather than China). 

But beyond those things, the phone can be activated or invoked without touching it. Users can speak commands to the phone and get responses or create reminders, set alarms and so on. Like Google Glass, Google Now can be initiated with a "wake up" phrase: "OK Google Now." This effectively turns the entire phone into a personal assistant. The TV spot linked below demonstrates this positioning and the functionality in action.

Previously Google Now and voice actions on Android devices had to be initiated by touching the screen: swiping up or touching the microphone icon. That's not required here (I haven't had a chance to use the device). Google/Motorola are using this "always ready" assistant capability to make the device stand out from both the iPhone and other Android devices. Below is one of the new TV commercials for the Moto X, which showcases how Google Now is now being "personified" -- much more like Siri than in the past.

Moto X is priced at $199 with a two-year carrier contract in the US. There will be a Google Play edition but there's no word at this point on unlocked pricing.

Apple's $35.3 billion Quarter Visualized

Apple just reported a $35.3 billion quarter, which was somewhat better than a year ago and beat financial analyst expectations -- largely on the strength of iPhone sales. The company also announced profit was $6.9 billion (vs. $8.8 billion a year ago). Sales outside North America accounted for 57% of revenue.

The company sold 31.2 million iPhones (vs. 26 million a year ago). But it sold fewer iPads than expected:14.6 million. Mac sales were down but Macs outperformed the PC industry as a whole, which is slumping badly. 

Below are two charts that show the distribution of revenues by segment/geography and by product line (figures in $billions): 

Unit sales of iPads were a concern for many financial analysts. The company sold 14.6 million tablet devices compared with 17 million last year and more than 19 million last quarter. While this implies market share erosion or shift away from the iPad, today Chitika released data showing that in North America at least, the iPad's web traffic share had grown since April and now stands at just over 84%. 

June iPad traffic

Source: Chitika

While Apple continues to generate huge quarterly revenues growth has slowed or declined in some cases. Accordingly there's enormous pressure from investors to bring out new products or create new product categories: TV, wearables, etc. On the earnings call Apple CFO Peter Oppenheimer said, “We are on track to have a very busy fall" though he wouldn't elaborate.

New iPads and iPhones are expected to be introduced. There may even be "surprise" products such as the rumored iWatch. 

Report: Apple Considering Building a 'Phablet'

The term "phablet," used to describe devices that operate like a phone but approach the size of small tablets, is horrible. But what may be more horrible is that Apple is reportedly considering creating one, potentially mimicking Samsung's strategy of a range of devices of differing screen sizes. 

Samsung is throwing a lot of mobile device spaghetti at the refrigerator, metaphorically speaking, to see what sticks with consumers. One might even describe its strategy as "incoherent." Nonetheless Apple may be moving toward introducing more devices with various screen sizes. That's according to an article in the Wall Street Journal:

The tests with suppliers seem to suggest that Apple is exploring ways to capture diversifying customer needs when many mobile device makers offer smartphones and tablets in various sizes.

In addition to potentially developing a device in-between the iPhone and current iPad mini, Apple is also apparently experimenting with larger screens for iPads. Most of these prototype experiments probably won't come to market.  

The huge-screened Samsung Galaxy Note has proven popular; however it's unclear how many units have sold. Indeed, Samsung has been the primary creator of market demand for larger-screen smartphones. And now Apple is feeling pressure to respond with a larger-screen iPhone. However that's not likely to be the 5S, due out later this year.

It might make sense for Apple to offer two iPhones: one with the current screen (small) and one with a 5-inch screen (large). However beyond that it makes little sense for Apple to go.

When Steve Jobs rejoined Apple as CEO 1997 one of the first things he did was to simplify Apple's product lineup, which had become cluttered and confusing to consumers. This is the danger if Apple tries to follow Samsung and create multiple device screen sizes.

Consumers do want a larger-screen iPhone but they haven't been asking for multiple devices of incrementally larger screens. It's also not clear that anyone wants or cares about a larger iPad. Maybe one with a slightly larger screen would be interesting but that would need to entirely replace the current iPad.

It makes sense for Apple to have four devices at most: iPhone (two screen sizes perhaps), iPad Mini and iPad. Beyond this the product lineup becomes muddled and confusing. And to the extent that Apple seeks to imitate Samsung's approach it may indicate the company has lost confidence in its vision. 

Nokia Sells More Lumia Handsets but Not in North America

Nokia's results this morning are something of a Rorschach test. You either see them as evidence that Nokia has stalled and Windows isn't going to save the company or you can see some momentum and success -- as a promise of more future success. 

Nokia's Q2 revenue was €5.7 billion ($7.5 billion), which was down vs. last quarter (3%) and last year (24%). Lumia sales were up 32% vs. last quarter to 7.4 million units. Overall the company sold 61 million phones, almost 90% of which are not smartphones however.

Nokia said the 7.4 million Lumia unit sales reflected strong demand for the Windows Phone based handsets. However in North America the company sold roughly 500,000 devices vs. 600,000 last quarter. Accordingly demand in North America is flat, while Windows remains under 5% in terms of market share. Nokia has had more success in Europe and other markets where its brand is stronger.  

Yet Nokia has now pulled into the number three smartphone slot after Android and iOS. BlackBerry reported selling 6.8 million phones last quarter. Becoming number three was an expressed goal when Nokia selected Windows as its exclusive OS. However the question now becomes can it do better?  

My view is that Nokia will be compelled -- notwithstanding contractual exclusivity with Microsoft -- to adopt Android at some point in the not-too-distant future or remain stuck in what amounts to neutral. 

Update: The Verge reports that Nokia CEO Stephen Elop was concerned that if the company chose Android that it would lose to Samsung. Thus it chose Windows Phone as its exclusive OS. That has been a very mixed experience for Nokia, obviously. I believe that Nokia with its brand and marketing resources would have been in a position to challenge Samsung for Android dominance. 

But the early window of opportunity, so to speak, has now closed for Nokia. 

Chinese Smartphone Maker TCL Selects Nuance's Swype as Default Keyboard for U.S. Market

As the global market for smartphones matures, it is clear that the default keyboard platform is going to be key for product differentiation. That's why it is so interesting that up-and-coming Chinese OEM, TCL Communications Technology Holdings Ltd, has expanded its licensing agreement with Nuance, making Swype the default keyboard for its line of Android-based smartphones sold in the U.S. In its latest report of device shipments, TCL claims sales volume of smartphones grew 126% in June, when compared to the same month last year, exceeding 1.3 million units. Of the nearly 21 million phones sold globally in the first six months of 2013, over 18 million were sold outside the Chinese domestic market. 4.3 million were smartphones, selling under the he Alcatel OneTouch brand as well as TCL's own Idol X branding.

Like Samsung, TCL is a well-diversified consumer electronics manufacturer with a major presence in the flat-screen TV market. Its management expects the geographic expansion of its smartphone sales to fuel growth and profits in the coming years. If it does so, it will be at the expense of Samsung, HTC and Google's own Motorola brand. Matt Revis, Vice President of Dragon Devices at Nuance, points out that the company had its choice of a number of less expensive alternatives to Swype to support touch-based input, including the "free" default keyboard that ships with the Android operating system.

"This is representative of a situation where you have a company that is positioned to grow globally and looking for an innovation partner to make it a category leader," Revis explained. "They are working with Nuance."

Indeed, it is a signal event for Nuance and Swype, which is already available for free download from Google Play. While Nuance would not provide revenue estimates for the licensing agreement, the impact can be expected to be significant, given TCL's ambitious growth expectations in the coming year. A virtuous circle has been established whereby an aggressive manufacturer recognizes that innovation will be key to growth and has recognized the need to cement a relationship with a firm that has been steadily investing in improving the technologies that support touch-based and multimodal input - both through internal development and acquisition.

PCs in Q2: 'Worst Performance in 11 Years'

Against the backdrop of a sweeping reorganization at Microsoft, intended to promote greater collaboration and faster time-to-market, hardware tracker IHS reported that PCs "delivered the worst second-quarter performance in 11 years."

The firm said that global PC shipments were down 7% vs. a year ago. IDC reported in Q1 that PC shipments were down 14% year over year. I suspect that when the IDC and Gartner hardware figures are released we'll see greater declines for Q2 than what IHS is reporting. 

IHS said that during the first half PC sales, globally, suffered "a harsh 11.2% contraction compared to the same six-month period a year ago." 

Tablets and smartphones have clearly eaten into the PC market and put downward price pressure on PCs. PC replacement cycles are getting longer. A more intangible thing has also happened: PCs have ceased to be shiny new objects coveted by consumers.

They've become instead pure utilitarian items without the ability to evoke the device-desire they once had. 

Report: iPhone Closing Share Gap with Android in US

Yesterday Kantar Worldpanel ComTech reported that the iPhone has gained on Android in the US market. The firm said the relative market shares of Android, iPhone and Windows Phones are now as follows:

  • Android: 52%
  • iPhone: 41.9%
  • Windows Phone: 4.6% (up 0.9% YoY)

The iPhone is the bestselling individual smartphone in the US, though not across the globe.

Kantar asserts that its survey data are more accurate than other sources because it operates "the largest continuous consumer research mobile phone panel of its kind in the world, conducting more than 240,000 interviews per year in the U.S. alone."

For comparison purposes comScore reports the following (May, 2013) smartphone market share in the US: 

  • Android: 52.4%
  • iPhone: 39.2%
  • BlackBerry: 4.8%
  • Windows Phone: 3.0

Comscore shows Android and the iPhone gaining in the US and all other operating systems losing share vs. last quarter.

While the iPhone may have gained in the US that trend does not appear to be global. Kantar reports that Android's share is now nearly 70% in Europe and even higher in China.  

BlackBerry Posts Fiscal Q1 Loss: Is It All Over?

BlackBerry posted a "suprise loss" (based on analyst forecasts) in fiscal Q1 of $84 million. The company announced that it had shipped 6.8 million smartphones. However of those only 2.7 million were BlackBerry 10 handsets (Z10 and Q10). 

The much-touted Z10 all-touchscreen phone seems to be a complete flop. The more "traditional" Q10, with its hardware keyboard, may wind up being more successful; it has only been on the market a few months.

These phones, it now seems clear, won't save the company. And BlackBerry is becoming increasingly marginalized in the smartphone and tablet world -- even in the enterprise it's traditional stronghold.

In terms of tablets BlackBerry said that it shipped 100,000 Playbooks in the quarter. BlackBerry CEO Thorsten Heins has dismissed tablets as mere fashion. He doesn't think the devices will exist in five years. While the iPad may not reign forever tablets will continue to exist certainly. Heins is mistaken.

The Playbook won't be getting an OS update and is effectively dead in the water. In North America it delivers less than 1% of overall tablet traffic, according to ad network Chitika. The chart above reflects the "tier 2" tablets that lag the iPad, Kindle and Galaxy in terms of web traffic. (The iPad delivers 82% of North American tablet traffic.) 

Gartner's global OS projection for 2014 shows BlackBerry having an almost non-existent market share.

Device share by OS 2014

Source: Gartner (6/13)

The hard question to answer now is "what next?" The transition-turnaround story clearly won't play to investors anymore. The stock is off 27% following the earnings releas.

Selling the company or taking it private are two options. But who would buy it? (Certainly BlackBerry would be acquired at the "right price.") Microsoft has flirted with the idea but it probably wouldn't serve Redmond because BlackBerry hardware isn't prized in the market and would be unlikely to advance Windows Phones.

Another "nuclear" option would be to start putting out BlackBerry Android-powered phones. However that would turn the company into a commodity provider of Android handsets without any meaningful differentiation. That was what Nokia was concerned about (although Nokia would have had more success with Android.) And it would be almost impossible to compete with Samsung globally. 

The company is almost out of options. 

Office Comes to the iPhone -- by Necessity

Microsoft has been in a kind of "double-bind." It has been trying to use Office integration with Windows Phone and Surface tablets to differentiate those products vs iOS and Android. However they haven't been selling particularly well (save in a few isolated countries). Yet the longer Microsoft held Office back from iOS (and Android) the more it faced the prospect of people getting used to alternative software or (Google) docs in the cloud.

Rumored for a very long time, today Office officially comes to the iPhone in app form (though not the iPad). In order to use the app iPhone owners must be subscribers to Office 365. It also requires iOS 6.1 as well and works on the iPhone 4 and above. 

The product appears to require a SkyDrive account in addition but that may be a built-in feature of Office 365. (I'm not a subscriber.) 

The new iPhone app allows users to view and edit Word, Excel and PowerPoint documents. However you can only create Word and Excel documents on the app. Users will also be able to edit docs "offline" and they will sync when the connection is resumed (think airplane flight). Microsoft promises that "formatting and content remain intact" on the iPhone and back to the 365 documents in the cloud.

As mentioned, there's no Office for iPad app but that will ultimately come in all probability. For the time being iPad users can access Office 365 through the browser. So effectively Office is available for the iPad. 

There are now hundreds of millions of iOS devices in the market globally. This year more tablets are expected to ship than laptops and by 2015 more tablets than PCs in general. In the aggregate there will be more "mobile device" users than PC users in the very near future. Thus Microsoft was all but compelled to bring Office to iOS (Android users can access via the browser). 

After Windows, Office is Microsoft's most important and lucrative product -- generating rougly $25 billion in revenue last year. The rise of mobile devices puts enormous pressure on both product lines. However the arrival of Office for iOS means there's less reason to buy a Surface tablet. 

Will iPhone Buyers Wait for iPhone 6's Larger Screen?

The forthcoming iPhone 5S wil reportedly have the same screen size as the current iPhone 5. This will be a significant disappointment to some and potentially cause them to skip the update and wait for the iPhone 6, which is supposed to deliver a larger 4.8 inch screen. That could have a meaningful negative impact on iPhone 5S sales.

A recent survey from Retrevo shows that iPhone owners/buyers want a larger screen than the 5/5S has to offer:

The survey also showed that a significant percentage of would-be iPhone buyers have a "wait-and-see" attitude about buying their next iPhone. This is becoming a problem for Apple as media-fueled rumors of better hardware in the future cause people to delay purchases, unlike Android buyers apparently: 

Despite the wait-and-see approach and yearning for a larger screen iPhone buyers are paradoxically much more loyal, according to the survey, than Android owners. This has been confirmed by other, previous surveys (e.g., ChangeWave) as well.

Pew: 81 Million US Adults Own Tablets

According to telephone survey data (n=2,252) released this morning by The Pew Internet & Life Project, 34% of US adults now own tablets. What that means as a practical matter is: 81 million adults. There may also be 20 million more people in the US under 18 who own tablets. (Our house has four.) 

I think it's relatively safe to say that if the number of tablets in the US isn't yet 100 million it's extremely close.  

A large majority of tablet owners are substituting tablets for PC usage in many instances and either buying fewer PCs overall or delaying PC replacement for a much longer period. This morning Apple will open its developer conference. A upgraded iPad/Mini is not expected to be among the announcements but it's possible. 

. Pew tablet ownership

As with other device categories, the story is largely the same with tablets. Penetration rates are higher among college educated (49%) and more affluent adults (56%). Affluent means at least $75,000 in income.   

The chart above reflects the growth of tablets since 2010 when only 3% reported tablet ownership. It's possible that by Q4 of 2014 half of the US adult population will have tablets (and 75% of affluents).

Global tablet shipments this year are expected to exceed those of laptop computers according to IDC. IDC also argues most of those sales will be at the lower end of the market (size, price).

Last week both Pew and Nielsen reported that 61% of mobile subscribers now own smartphones.  

It's Official: 61% of US Mobile Subscribers Have Smartphones

Earlier this week survey data from the Pew Internet Project argued that 61% of US adult mobile subscribers now own smartphones. Today Nielsen announced agreement with that number:

More than three out of five (61%) mobile subscribers in the U.S. owned a smartphone during the most recent three-month period (March-May 2013), up more than 10 percent since smartphones became the mobile majority in early 2012.

Comscore, for its part, says that the percentage of mobile users with smartphones is slightly less: 58%. Overall we're talking about 140 - 150 million people in the US now with smartphones.

In terms of OS market share, Nielsen reports that Android has 53% of the US smartphone market, while Apple controls 40%.

By comparison comScore says that it's 52% (Android) to 39% (Apple). Kantar (a market research division of WPP) shows a generally similar set of market share metrics for Android and iOS (iPhone).

comscore smartphones April 2013 US market

Source: comScore 

Kantar mobile market share data

Source: Kantar Worldpanel ComTech  

Where these market-share data disagree is with respect to Windows and BlackBerry. Nielsen says Windows Phone has 2% of the US smartphone market, while comScore says it's 3% and Kantar says it's closing in on 6%. 

If we look at actual web traffic in the US, the relationship between Android and iOS flips. (Here iOS may well include the iPad.) Internationally Android is ahead.

The following are StatCounter data showing traffic being driven by each of the major mobile operating systems:

US market:

  • iOS: 54%
  • Android: 40%
  • Windows Phone: 1.3%
  • Other: 4.7%

Globally:

  • Android: 38%
  • iOS: 26%
  • Symbian: 8%
  • BlackBerry: 3.5%
  • Windows Phone: 1.3%
  • Other: 23%

 

Aruba Networks Acquires Indoor Location Firm Meridian

Wireless equipment maker Aruba Networks is acquiring privately held Meridian Apps, developers of indoor GPS technologies. Aruba will combine its network-based Wi-Fi technology with Meridian’s software platform for smartphones and tablets to create services for use in public venues. Terms of the deal were undisclosed.

“GPS-based wayfinding solutions are extraordinarily popular, but they don’t work well indoors,” said Keerti Melkote, founder and Chief Technology Officer at Aruba Networks said in a statement. “We intend to address that gap by creating ‘indoor GPS’ using Aruba’s Wi-Fi infrastructure and Meridian’s wayfinding platform … This is a clear opportunity for Wi-Fi to become not only an enabling platform for BYOD, but now across industries, a revenue-producing, customer engagement platform for the business.”

The Meridian enterprise software platform targets large, indoor facilities -- including the Art Institute of Chicago and Macy's store in New York City -- to build custom-made mobile applications that help people get around in public places.

Meridian opened up it platform last November, introducing a pair of SDKs, Nav Kit and Blue Dotto. The company, based in Portland, Oregon, had previously announced a partnership with Aruba Networks competitor Cisco.

For its part, Cisco unveiled Wi-Fi location services and analytics last November, thanks to its acquisition of ThinkSmart Technologies. The features are included in Cisco's Mobility Services Engine built in conjunction with mobile chip maker Qualcomm and AT&T. Cisco has also partnered with IBM for its "Mobile Concierge" service, which enables integrated web applications to be displayed on mobile devices and provides analytics to deliver a customized shopping experience with coupons and promotions.

By Saying 'No' to Android Has Nokia CEO Elop Sealed His Fate?

There are some signs of progress for Windows Phones and Nokia's Lumia line of handsets that exclusively use the operating system. Especially in Italy and the UK Nokia seems to be making some headway. There were also some data showing an uptick in Windows Phones' market share in the US.

The following are two sets of survey-based market share data from comScore and Kantar. Kantar shows much greater growth in Windows Phone adoption in the US than comScore. Regardless, over the past 18 months Windows Phones have largely failed to make a dent in the smartphone dominance of Android and Apple devices. 

comscore March mobile market share 1

Kantar Worldpanel ComTech smartphone data

It's almost 100% certain that Nokia, with its well-reviewed Lumia hardware, would be selling more phones if there were an Android option. However Nokia CEO Stephen Elop has essentially refused to consider that option and is sticking to the company's Windows-only strategy. This comes amid intensifying investor pressure to adopt Android.

According to a recent WSJ article:  

Shareholders approved the dividend-suspension proposal, but appear to be losing patience as questions about Samsung and Apple loomed over Tuesday's session. One shareholder asked Mr. Elop why Samsung is achieving what the investor characterized as 10 times better results than Nokia, and another concluded a round of tough questions by saying that right now Nokia isn't displaying "the spirit and charisma" that Apple has.

Over the next 2 - 3 quarters, Nokia may see slightly better results but they won't show the kinds of growth desired by institutional investors. Unless or until Nokia adopts Android sales won't accelerate to any significant degree, to the increasing frustration of investors. 

One way or another Nokia will likely be developing Android devices by this time next year -- absent a Windows sales miracle. Either Elop will give in to investor calls for Android or, if he does not, he will be ousted by their calls for his head. And the first act of any successor CEO will be to fast-track Android handset development. 

Tablets to Dominate 'PC' Sales, Low End of Market Increasingly Cluttered

According to a new forecast by NPD, tablets and touch-screen laptops (tablet-PC hybrids) will dominate the computing landscape in the coming years. More conventional PCs will be in the minority. 

Tablets are a new device category really. But let's put aside the longer debate about whether or not tablets should be considered "PCs" at all. There will be more "mobile devices" than traditional PCs (including laptops) sold in the next five years.

At best forecasts can show the direction of the market. But in this case the market's direction is clear. 

Global Mobile PC Shipments, 2012-2017

Screen Shot 2013-05-06 at 9.02.39 AM

Source: NPD

Last week Acer introduced a 7-inch tablet for $169, besting the aggressive pricing of Nexus 7 and comparable Kindle Fire devices. According to one rumor the next Nexus 7 will be priced at $149. But you can already buy a 7-inch Lenovo tablet for $129 on Amazon (quality is another question). The race is on for a "decent" Android tablet starting at $99. I suspect that will come in Q4 this year or very early next.

I was recently in Best Buy and Office Depot/Max and saw the displays of tablets; there are scores of them. It will be challenging for consumers to differentiate them -- especially at the lower end of the market. There will probably be three or four broad consumer criteria for tablets: OS/brand, price, size, specs like memory or battery life. 

With the exception of Kindle, Samsung and maybe one or two others the Android tablet universe is a sea of no-name devices. Here the battle will largely be about price. Apple iPads will stand apart because of strong brand identity. However a majority consumers will be price sensitive and likely to simply go after the cheapest "decent" (Android) tablet they find. Indeed, the devices are getting so cheap they're almost disposable. 

NPD says "Windows 8 are unlikely to be a major driver of touch adoption." I agree, as presently configured, Microsoft is unlikely to sell many stand-alone tablet devices. Surface Pro tablet-PC hybrids will sell to enterprise customers but Microsoft will struggle to sell basic tablets to consumers unless it reaches that $100 threshold first.

Tablets 'Shipment' Numbers Inconsistent with Traffic Reality

I'm a big opponent of using "shipments" as an indicator of market share. It may be a directional indicator of market share in some cases. But there are times when "shipments" is simply the wrong metric. IDC's latest tablet numbers offer a case-in-point.

The firm reported the following tablet shipment figures globally for Q1: 

  • Android -- 56.5%
  • iOS -- 39.6%
  • Windows -- 3.3%
  • Windows RT -- 0.4%
  • Others -- 0.2%

Basically the positions of Android and iOS tablets have reversed since last year. Shipments are put forward as a proxy for market share by IDC. However that's a dubious proposition at best. Shipments do not equal sales, let alone usage.

The following chart reflects North American tablet traffic share as of March, according to Chitika. After the iPad's 82%, Kindle Fire has a 7% share of traffic. Samsung Galaxy tablets come in at 4.3%. Needless to say these actual traffic data show a massive discrepancy vs. IDC's shipments estimates.

Screen Shot 2013-05-01 at 5.28.34 PM

Below is StatCounter data from 2012 (via Royal Pingdom) -- I was unable to find more recent global traffic data. These data reflect something very consistent with the Chitika data above.

In these various geographic markets the iPad is generating around 80% or more of tablet traffic. Even if we assume iPad share has fallen by 10 points since last year, these data are still a radical departure from the IDC figures. 

 tablet OS faceoff

Undoubtedly lower-priced tablets and the sheer proliferation of devices will necessarily diminish the iPad's "shipments share" over time. But it remains to be seen how actual usage is impacted. For the moment market share (as measured by consumer usage and traffic data) looks nothing at all like IDC's projections.

Is Apple's Resistance to Larger Screens 'Making the Perfect the Enemy of the Good'?

The iPhone 5 introduced a 4-inch (diagonal) screen that in my view distorted the proportions of the handset. (I wanted it to be slightly wider as well.) That was an upgrade from what was essentially a 3.5-inch screen on the 4S. Yet at the time of launch the 5's new larger screen already appeared small next to some competitive devices.

Samsung's Galaxy S3 and others were at 4.8-inches or beyond. The newly released Galaxy S4 has a 5-inch screen and the Galaxy Note 2 offers a 5.5-inch screen. Samsung has also made an 8-inch tablet that works as a phone. 

Earlier this week during Apple's earnings call CEO Tim Cook was asked about a potentially larger iPhone screen, which several surveys indicate iPhone buyers want. Here's the exchange:

Analyst: [D]o you think there is a long-term case for a larger screen size or at least the larger variety of screen sizes for iPhones and for the smartphone category in general?

Tim Cook: The iPhone 5 offers as you know a new 4-inch Retina display, which is the most advanced display in the industry and no one comes close to matching the level of quality as the Retina display. It also provides a larger screen size for iPhone customers without sacrificing the one handed ease-of-use that our customers love. So, we put a lot of thinking into screen size and believe we’ve picked the right one.

Tim Cook acknowledged that “some customers” value screen size. He explained that larger displays require trade-offs (technically speaking). He added that the company won’t ship a larger iPhone display “while these trade-offs exist.” That implies the company has larger screen iPhones on its roadmap somewhere in the future.  

However Apple is indeed putting itself at a disadvantage by not offering a larger-screen iPhone. Perhaps not everyone wants it but lots of people (including me) do. An ideal device would marry the LG Nexus 4 (4.7-inch screen) form factor with iOS as its operating system. 

Apple and Tim Cook seem to be nearly alone in their belief that the iPhone's screen is vastly superior to competitor-device screens. Third party analysis shows that this is not the case. However it does come out on top in some areas. Yet the public may not be noticing these relatively subtle differences. And Samsung's display has been found to have superior resolution and better blacks. 

What consumers probably notice more is that the iPhone's screen looks small and by some measures inadequate vs. other devices. One-handed operation of the iPhone is great in a few instances but not entirely necessary. Indeed, it may not be an important feature for most people (though that's an "empirical question").

It does seem to me that screen size is one case of Apple (if it's to be taken at face value so to speak) "making the perfect the enemy of the good." And I think a "5S" without a larger screen option will be a significant disappointment to many.