Voice Activating GSMA Mobile World Congress

Next week, Opus Research expects voice-activated services to assume a more prominent role at the GSMA Mobile World Congress. Then again, I feel like we say this every year. Then, when it’s all over, I write the obligatory survey of the exhibitors, presentations, products and services that make use of speech processing technologies for service delivery.

This year will be the same in many ways. Voice services, in general, will take a back seat to some of the more high-profile, glamorous and lucrative services. These include SMS-texting, downloading ringtones, gaming, navigation and ultimately watching (or sharing) video entertainment. But that "backseat" analogy is quite inaccurate. Voice as an input modality is taking on an increasingly important role in front of the most popular services. In short, if it works on a wireless phone, it is easier to access by speaking. Let's not forget that, although they increasingly act like computers, personal navigation systems, MP3 Players, game consoles, and wireless handsets are, at base, phones.

Blame it on iPhone and Blackberry
The multiplicity of applications and services made available through iPhones, G1's and other touch-screen smartphones are made possible by simplifying the process of product ordering and service initiation. The addictive nature of the "Crackberry" is due in some part to the simplicity of retrieving and originating both business and personal email. Frequent users are likely to do more with their phones. They will add new services, download more content or media and, most importantly, stay loyal to their carrier.

Voice-activation, by simplifying order entry and service initiation on the majority of wireless devices, should be in the driver's seat, not the backseat of any mobile conference. Below, using Nuance Voice Control 2.0 as an example, I further dramatize my point.

Say a Command: The Conversational Dialtone
Conversational access to mobile content and services is a winning proposition for wireless operators, device makers and content providers. Nuance Voice Command 2.0 (NVC 2.0) expands the roster of services that can be initiated by responding to the simple prompt: "Say a command." It integrates the broadly circulated V-Suite, which has been managed and refined by Nuance since the acquisition of VoiceSignal in May 2007, with Open Voice Search, largely based on technology, resources and business relationship acquired in late 2006 with MobileVoiceControl.

Today, a small set of high-end phones -- exemplified by the Apple iPhone, RIM Blackberry, T-Moble's G1 and other touchscreen-enabled models -- serve as showcases for a large and growing inventory of "apps" made available through carrier-run storefronts. Given that 80% of mobile subscribers are without smartphones, the coverage of popular capabilities in the press amplifies the mystique surrounding mobile search, dictation and a growing list of speech-initiated services.

Looking back nearly a decade, VoiceSignal's business development group aggressively pursued relationships with wireless device makers. As a result, by Nuance's estimation, V-Suite is available to 300 million mobile subscribers around the world. Early instantiations of V-Suite powered voice dialing on hundreds of millions of handsets. NVC 2.0 makes the services that are most popular among owners of smartphones available to the "rest of" wireless subscribers.

Sweets from the Suite
NVC 2.0 provides access to a suite of services and capabilities directly from the "idle screen" of virtually any feature phone. In response to the prompt "Say a command," mobile subscribers can initiate:

• Voice activated dialing - Classic “Call Mom!”
• Free-form Web search - To populate the search box in popular search engines
• SMS, text messaging - Including a toggle between address information and content. Initiator can say, "Send text to Derek Top (pause); Hey Derek, I’ve just emailed my advisory on Nuance Voice Control."
• Navigation and driving directions - Location-aware phones can respond to the simple command like "Get directions to 400 California Street, San Francisco, CA"
• Conversational e-commerce - Search or shop for music and other content: "Find 'Whatever You Like' by T.I."
• Mobile game playing - At least for speech-initiation of games, such as "Go to Zuma"
• Participating in social media activities, through an incantation such as, "Go to Twitter"

These capabilities are built into the product suite today, in terms of command and control. Integration with dictation and "free-form Web search" will be promoted more aggressively in the market in the next 3-6 months.

The Importance of Being Device Agnostic
Service delivery customarily requires close coordination and cooperation among mobile phone makers (both OEMs and ODMs), mobile operators and content providers. By contrast, NVC 2.0 is called "device agnostic" by Nuance management. In terms of competition, Vlingo has many of the speech-initiated capabilities but, to date, works only on the Apple iPhone and selected RIM Blackberries.

Speech-to-text transcription specialists like SpinVox, Jott, PhoneTag (formerly Simulscribe), Vlingo and Yap are positioned as voice front-ends to popular mobile services. Search king Google has also put the seal of approval on voice input, initially for iPhone users but fanning out to other smartphones. To date, with the exception of the peripatetic SpinVox spin machine, none of them has done much to raise their profiles among the population of mobile subscribers at large.

With more than 8,000 delegates and a broad waterfront of topics to cover, the GSMA Mobile World Congress may not be the best venue to raise speech's profile. But, thanks to efforts by Nuance, its partners and its competitors, we expect speech-initiated services to take on a higher profile in the coming months. Soon, the clock will start on major marketing and service delivery efforts by Nuance and carriers around the world. The message being that the general mobile public (not just smartphone owners) wants ready access to popular services. And for the vast majority of phones (i.e. those lacking touchscreens and operating systems) voice-activation is the most convenient access method.

Will eBooks on iPhone & Android Stall Kindle?

If the "Classics" app is any indication, an eBook reading experience on the iPhone can be pretty good. Now Google and Amazon have both announced that they're going to be putting thousands of books on the iPhone and Android platforms. The NY Times rounds up the announcements. You can read the Google announcement from last week here.

Overall eBook reading is gathering steam, aided by the popularity of Kindle and the emergence of the iPod as a viable eBook reader. Google and Amazon's announcements will further boost the trend. 

This morning Amazon announced Kindle 2.0 -- a much improved but incomplete device. But will the broad emergence of smartphones as eBook readers -- especially the iPhone/iPod Touch -- stall Kindle sales? Kindle isn't a phone and it isn't an Internet access device. It's a specialized newspaper, blog and book reader.

If I already have an iPhone am I likely to buy a Kindle? It's not clear that the new device will be a major success. But with the ability to access the Internet (or emphasis of that feature) and/or the ability to play video I believe it would become a true bestseller. 

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Related: Plastic Logic plans to introduce its own, larger eBook/newspaper reader. The NY Times has the story. 

Kindle 2.0 Launches: Improved but Still Not Internet Ready

So Kindle 2.0 was announced this morning. It looks like a giant white iPod Touch with a physical keyboard. Here are the "new and improved" bullets from the release:

• New Slim and Sleek Design
• New Crisper, Faster Display
• New 2 GB Memory Holds Over 1,500 Books
• 25% Longer Battery Life
• New Instant Dictionary Lookup
• New Experimental Read-To-Me Feature (Text to Speech -- awkward but interesting)
• Still Wireless, Still No PC, Still No Hunting for Wi-Fi Hot Spots
• Automatically Syncs With Original Kindle, Kindle 2, and future devices
• Earth’s Biggest E-book Store Keeps Expanding, Plus New Stephen King Exclusive

This is much better that its predecessor it appears. But it's still missing the opportunity to become a "MID" (mobile Internet device). You can see a informal video here or the official video here.

French Court Upholds 'No iPhone Exclusivity' for Orange in France

The operator-iPhone exclusivity deals are having a tough time in Europe. First there was the litigation between T-Mobile and Vodafone over T-Mobile's exclusive iPhone deal in Germany. Subsequently Vodafone became an iPhone distributor in 10 countries. The two events may or may not be related.

In France there has been similar litigation over France Telecom's (Orange's) exclusive iPhone deal with Apple. In December it was found to be a violation of French law by regulators. Now an appeals court in France has upheld the decision:

National competition regulators suspended the five-year exclusive sales deal between iPhone manufacturer Apple and France Telecom's mobile arm Orange on December 17. Both Apple and Orange had appealed the ruling.

A spokesman for Orange told AFP it would seek to overturn the ruling before France's high court of appeal, the Cour de Cassation.

Rival operator Bouygues Telecom filed suit against Orange before the French competition council in September, and was joined by France's third main mobile carrier SFR and the French consumer rights group UFC-Que Choisir.

Both Bouygues and SFR welcomed the ruling and said they hoped soon to be able to offer the iPhone in their stores, saying talks were underway with Apple to finalise distribution agreements.

Even though Apple was a party to the appeal in support of exclusivity it's actually in Apple's long term interest that the iPhone be distributed widely through multiple, non-exclusive operator relationships. Exclusivity limits the potential penetration of the device.

I believe that the US market would see several million more unit sales were it not for AT&T exclusivity. 

Kindle 2.0: When Will It Become an Internet Device?

I'll admit I'm something of a Kindle detractor. The first device, though popular, was awkward and lacked features in my view -- but it was very exciting and promising in other respects. The new Kindle device (apparently pictured on the right, though it may be a fake image) is set to arrive this month.

It looks to me like a giant iPod Touch with a keyboard. There are some additional screenshots here.

Kindle has built-in access to Sprint's 3G network in the background to enable over the air downloads.

E-books are great for planes and business travel, but the real action and future for this device -- or others like it if it fails to seize the opportunity -- is as a mobile Internet access tool (and multi-media viewing device). I wonder if Internet access will be mentioned when it debuts in the next couple weeks?

Of course, if it were to become a mobile Internet device, there would need to be an explicit mobile data plan commitment by consumers. There would also need to be a touchscreen added to Kindle (Sony's new eBook Reader has one) to fully realize the mobile Internet opportunity inherent in this tablet.

Sorting through the Microsoft Smartphone Rumors

The Mobile World Congress in Barcelona is less than two weeks away. Like CES or CTIA there are tons of announcements that will come out of the show. But Microsoft is expected to announce a range of mobile upgrades. Considerable virtual ink is being spilled over the various rumors and speculation. To recap, here's what's likely:

• Windows Mobile 6.5 (a necessary stop gap on the way to 7)
• Skybox (or some alternative name) -- a mobile storage and services equivalent of Windows Live Services on the desktop. Think of it as competitor to Apple's flawed MobileMe service
• An apps store for Windows Mobile (SkyMarket)
• What about the rumors swirling around Microsoft branded smartphone? This is very unlikely (given Microsoft's history and strategy). What about a Zune phone? More likely is a Microsoft smartphone "chassis." Mary Jo Foley explains:

Microsoft is developing some smartphone reference implementations. These implementations are taking the form of multiple smartphone chassis (at least one of which is powered by Nvidia processors).

Think of what Microsoft is doing in phones as similar to what it has done in the PC market. Microsoft often develops reference implementations and encourages PC makers that they build PCs that adhere to a set of reference guidelines/specifications.

From one of my sources, who requested anonymity: “The (Zune phone) chassis 1 spec is challenging the manufacturers to come up with something that will please customers.” This source said Microsoft was pitting a handful of cell-phone makers against one another to come up with the best implementation of the spec.

From what I’ve heard, Microsoft is focusing most of its reference efforts around the Windows Mobile 7 platform.

Despite Windows Mobile unit sales, which are considerable, all these announcements represent a form of catch up to the iPhone, Android, BlackBerry (to some degree) and the Palm Pre. And mobile is a much more risky, much less certain endeavor for Microsoft than the PC universe where it's much more firmly in control. 

As mentioned in a previous post, I spoke with Microsoft's Scott Howe recently. He stressed to me the value of "convergence" for Microsoft on the advertiser side: bringing lots of media together in an easy-to-buy platform -- including mobile. 

On the consumer side Microsoft is pushing a similar idea of a single experience across devices: TV, PC and mobile. Some of the announcements at Mobile World Congress will undoubtedly flesh out that vision through the prism of Windows Mobile. 

Survey: iPhone Users See More Ads, 25% Went to Store or Purchased

A survey from mobile social network Limbo on the attitudes and behavior of 2,000 mobile phone users in the US and UK in Q4 shows, consistent with other data, that iPhone owners are more engaged across the board and are seeing more ads. They're also responding more too.

Here are some topline data from the survey report:

• 80% of iPhone owners use mobile data vs. 60% of other mobile users
• 10% of mobile phone owners used LBS tools in Q4: e.g., map, friend finder or restaurant locator. This was true for 22% of those in the 25-34 age group. 
• 33% of mobile users recall seeing mobile ad in Q4 vs. 41% of iPhone users (reflecting greater ad penetration on the iPhone platform)
• "The vast majority of these ads were seen in text messages"
• Phone owners are 2X as likely to see ads and 4X as likely to see game-related or LBS advertising

Source: Limbo/GfK Technology (2009) 

More than 162 million consumers used text messaging in Q4, by far the dominant form of mobile data usage

Women and younger people (18-24) are most likely to respond to ads

Specifics regarding ad response:

• 16% of ad-aware consumers said they made a phone call to a number in an ad
• 1 out of 7 (14%) went to a mobile website
• 1 out of 7 "reported that they had bought a product or visited a store as a result of seeing a mobile advertisement." For iPhone users that same number is 1 in 4 (25%) actually bought something or went to a store after seeing a mobile ad (based on self reported data)

Palm Pre Coming Next Month?

The mouthwatering Palm Pre is reportedly coming in March (next month) according to an "internal [Sprint] document" obtained by the Boy Genius Report.

If advance publicity is any guide the Pre should be a big hit, which Spint (reporting Q4 earnings on 2/19) desperately needs. The question of whether it will lure new subscribers is an interesting and open one. 

T-Mobile's US operation doesn't seem to be reaping huge new customer dividends from the G1 (see Q4 earnings). Rather it appears to be preventing defections to AT&T perhaps for the iPhone. 

In the end, all US carriers will have their "defensive" Android or perhaps Palm Pre devices. When they do they'll have to poach customers from one another with incentives other than exclusive handsets. 

Android Adds Voice Search

Google has extended voice search to the Android platform via the new software update happening this week. According to CNET the Android version of voice search isn't quite as user-friendly as the iPhone version -- it requires you to press a button rather than simply holding the phone up to your head. 

Because it was trained on Goog411, which is only available in the US and Canada, Google voice search has difficulty right now with British (and other) accents. Here's what Google told us previously:

The acoustic model for Voice Search was trained, in part, by using data from GOOG-411 which has only launched broadly in the US. Since the acoustic model was trained using mostly American accents, the tool currently works best when receiving queries with American accents. While you can still download the Google Mobile App and turn on the Voice Search here, we've turned off the voice functionality by default when the app is downloaded from anywhere outside of the US. We don't have any specific launches to announce at this time, but we think this is exciting new technology and the speech recognition and understanding will only get better for other accents and jargon as we keep working on it

Google voice search on the iPhone was immediately popular and drove the Google app to number one among free apps shortly after launch. 

Dell to Make Both WinMo and Android Phones, Motorola Steps Back from Windows

The rumor now is that Dell will make both Android and Windows Mobile phones. While this is something of a hedge, it's probably smart for Dell to make both models.

Making only a Windows Mobile phone would have been almost a pointless exercise since there are already so many WinMo handsets in the market and it would have to go up against BlackBerry. Unless it was somehow a miracle device it wouldn't have provided Dell much traction or attention beyond the immediate launch period. 

If the company had to make only one phone, Android would have been a better bet -- to gain attention. However by making both it may have an opportunity to appeal to a broader range of consumers and enterprise customers (where it might be able to leverage existing sales relationships).

Price is also a big issue. Without a carrier subsidy these new smartphones phones -- unless they're spectacular -- will have limited appeal.

In one way of looking at the world, it might have been ultimately smarter for Dell to make a non-phone, Kindle-like Internet device instead of trying to enter the increasingly crowded smartphone market. 

Motorola, also planning to bring out an Android phone at some point this year, has implied that it prefers the Android OS to Windows Mobile and is "demoting" the latter in its product lineup. According to the Wall Street Journal: 

Last fall, Co-Chief Executive Sanjay Jha, who was brought in to turn around the cellphone unit, known as Mobile Devices, unveiled a restructuring that involved reducing the number of software platforms Motorola uses for its phones, and instead focuses on Web-capable phones operating on Google Inc.'s Android and Microsoft Corp.'s Windows Mobile systems.

Now there are signs Motorola is shifting away from Windows as well. Its recent job cuts included a team of more than 70 employees working on the Windows Mobile platform at its facility in Plantation, Fla.

Motorola co-CEO Sanjay Jha reportedly argued on the earnings call this morning (net Q4 loss of $3.6 billion) that Android is "more competitive" than the current version of Windows Mobile. According to Silicon Alley Insider:

Android is "more competitive" than the current Windows Mobile 6, Motorola co-CEO Sanjay Jha said on the company's Q4 earnings call this morning.

Microsoft is planning to introduce Windows Mobile 6.5 in Barcelona in a couple weeks in recognition of the fact that it can't wait for Windows Mobile 7 to come out in 2010. 

The world has moved very quickly in the last 12 months. Windows Mobile now faces a much more competitive landscape and it remains to be seen whether the OS can regain momentum (notwithstanding lots of unit sales in Q4). It would appear, at least from Motorola's remarks, that Android is indeed a threat to Windows Mobile -- as we previously speculated. 

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Related: Toshiba is preparing a touch screen Windows Mobile phone for non-US markets.

How Many Smartphones?

AdAge's Rita Chang asks the billion dollar question: How Many Smartphones Can the Market Support? She cites an NPD group survey that found about 45% of all cellphone users prefer to only use their phones for making calls (although they can access the Internet and have GPS). 

Right now smartphones make up perhaps 15% of the US handset market. Even though the culture of mobile is evolving rapidly, let's assume the NPD numbers represent a hard limit on market demand. Say, for example, 50% of the market wants a phone to act only as a voice communication device: a phone.

That still leaves 130 million people today in the US who presumably would be interested in doing other things with their phones -- i.e., mobile Internet access.

Cost is the primary factor driving the smartphone market:

• Handset cost (iPhone 3G sales took off when the price came down to $199)
• Data plan cost

The more these costs come down the more smartphones will penetrate. Culture will also drive adoption over time: if my friends all have smartphones that do all sorts of great things, so will I. However, low-cost netbooks may cannibalize potential smartphone sales for some people. (Both allow for mobile Internet access.)

We will continue to see more people access the Internet on the go, the question is: how many will be accessing the "mobile Internet." Right now that latter number is about 50 million. Within three years it will likely double. 

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Related: Report -- Intel to support Android-based netbooks. 

Acer to Launch Smartphone, Which OS?

Taiwanese computer maker Acer, which developed the popular Aspire netbook, is reportedly launching a smartphone at the Mobile World Congress in Barcelona. Dell is rumored to be doing something similar at the show.

The expectation is that Dell will launch a Windows Mobile phone. But what OS will the new Acer Smartphone carry -- or will it offer more than one? Acer's Apire netbook, for example, comes with Linux or Windows XP. Will the new smartphone offer Android or Windows Mobile or both? (I suppose it could also use Symbian.)

Acer is not a member of the Android Open Handset Alliance, which doesn't preclude the company from making an Android phone. As I said with Dell, simply making another Windows Mobile phone is unlikely to get much attention or traction for the company in mobile, unless it's very powerful or unusual in some way.

Is This the Future of Hardware Pricing?

The Acer Aspire One, one of the hordes of new netbooks on the market, costs $379 if you buy it from Amazon. However if you buy it from Radio Shack with a two-year AT&T contract you can get it for $99. The PC market may be starting to ape wireless carrier subsidies of mobile handsets.

We're potentially entering a new "free PC" era -- or the subsidized mobile-mini PC.  Sprint's Clearwire also offered a similar promotion some time ago.

This sort of pricing and plan will likely be quite popular if it shows up again. It makes sense for the carrier and it becomes a mobile Internet device for the user, who has access to the network on the go -- like paying for a wireless card and getting a PC as a gift. 

I would guess these netbooks will only continue to gain in popularity given their pricing and portability. Desktops are disappearing but conventional laptops are also feeling pressure as well. 

Verizon Wireless Reports Strong Quarter, No Word on Storm

Verizon reported a fairly strong Q4 (especially in wireless). Here are the wireless highlights:

• 1.4 million organic (non-acquisition-related) net customer additions, almost all retail; 1.2 million total net customer additions
• 72.1 million total customers; 70.0 million retail customers, up 9.9 percent, not including customers added with the Jan. 9, 2009, acquisition of Alltel.
• 12.3 percent increase in total revenues; data revenues up 41.4 percent

More wireless tidbits (verbatim from the release):

• Following the recently completed Alltel acquisition, Verizon Wireless now serves more than 80 million customers, excluding markets to be divested.
• Verizon Wireless continued to have low churn -- 1.35 percent churn among all customers, and 1.05 percent among the company's retail post-paid customers.
• Total service ARPU of $51.72 was up 1.4 percent year over year
• Data revenues of $10.7 billion for the full year were up 44 percent over 2007. In the fourth quarter, data revenues were 26.8 percent of all service revenues, up from 21.3 percent in the fourth quarter 2007. Verizon Wireless had 55.1 million retail data customers at year-end -- 79 percent of the retail customer base and a 16.8 percent increase over year-end 2007.

• More than 65 percent of the company's retail customers -- 45.5 million -- had 3G broadband-capable devices by year-end.

ZDNet, which listened to the conference call, quoted Verizon President Dennis Strigl on growing smartphones sales:

We’re selling more smartphones–37 percent of retail devices sold are smartphones. We’re also increasing focus on the retail segment. I don’t think we lost share this quarter. We have no evidence of customers slowing or trading down. Our churn did pick up a bit from last year. 

Apparently all that was said about the BlackBerry Storm was the following from the release:

Customers across the country lined up to purchase the new BlackBerry Storm, available exclusively in the U.S. from Verizon Wireless and launched in November. Designed for both consumers and business customers, the BlackBerry Storm offers customers the reliability of the Verizon Wireless 3G network and the full power of a revolutionary touch-screen, multimedia smartphone with global connectivity.

The absence of any specific numbers or further discussion may indicate that the Storm is becoming BlackBerry's Vista. 

Netbooks, Smartphones & MIDs, Oh My!

We're living in a very interesting time (for many reasons). But the confluence of several factors may be set to reshape computing:

1. The cloud and web-based services
2. The recession
3. Inexpensive, UMPCs/netbooks 
4. Pervasive Internet access

Witness the success of netbooks, which appeal mostly because of their low cost but also because they provide a more mobile Internet experience than a conventional laptop. Remarkably, as of this hour, among the top 10 bestselling computers on the US Amazon site, only one computer (a Mac) is not a netbook. All of them are priced under $500.

The NY Times writes about how the PC industry may not recover its margins given the economy and new popularity of these small laptops. I'm less interested in the computer industry's margins than the birth of this new class of devices -- or classes I should say. 

If we arrayed Internet devices on a spectrum you'd have the desktop computer on one end and smartphones such as the iPhone on the other. Between them would be netbooks and the even more nascent category of MIDs, mobile Internet devices. 

From a desktop or laptop perspective netbooks don't offer a great experience; their screens are quite small and keyboards often cramped. Many also feel like toys. However, if you compare the Internet on a netbook vs. a conventional smartphone it's great. And if you think about how easy they are to transport you're also pretty happy. 

Netbooks have full physical keyboards whereas MIDs (or Internet tablets) rely mostly on virtual keyboards. But they're also potentially more versatile than netbooks and offer a much broader range of use cases (Acer and Intel are making their respective moves in this area but so are Samsung and others). Microsoft may or may not be able to equip all these devices with a version of Windows; they open the door for more Web-based/cloud computing. 

Apple, for its part, has clearly said that it's not entering the netbook segment. COO Tim Cook (acting CEO) put those rumors to rest (for now at least) on last week's Apple's earning's call. Here's what Cook said about netbooks:

We're watching that space. But, right now from our point of view the products in there are principally based on hardware that's much less powerful than we think customers want. Software technology that is not good, cramped keyboards small displays... And so, we don't think that people are going to be pleased with those types of products. But we'll see.

We are watching the space, as you know about 3% of the industry or the PC industry last year was in this netbook kind of category. And so, it's a category we watch. We've got some ideas here. But, right now we think the products there are inferior and will not provide an experience to customers that they're happy with.

Even if it won't offer a netbook, Apple may eventually come out with a touch-screen tablet -- it may be a larger version of the iPod Touch, without the iPod -- that sits between the current iPhone/Touch and a Macbook. The right price point for Apple here is sub-$500. (Someone else has already created a Mac OS tablet. Recall the Apple Newton, which was ahead of its time and died; will a retooled "Newton 2.0" rise again?)

It will be very interesting to see the many IP-connected devices (MIDs) released over the next couple of years. The Amazon Kindle is, of course, one of these. Manufacturers will be experimenting with form factor, memory, software, pricing and so on. We're in a "Darwinian" period right now with all sorts of new computer species trying to establish a foothold.

The final issue or challenge with all these devices is connectivity. Will they require a wireless card or similar subscription or will they be like the Kindle with the network built in? Or will the hardware be free or almost free as a lure to pay for the connection service, as in the case of the recent AT&T-Acer-Radio Shack deal or the forthcoming AT&T-Dell deal.

Regardless, connectivity is an integral part of the proposition of these MIDs/netbooks. They are thus potential substitutes for smartphones in one sense. And the Internet on a netbook or connected MID is truly the Internet. 

It's not a forgone conclusion that these new categories of devices will capture the imagination and forever change computing but one gets that sense. Some of them will likely take hold and take off. But before that happens they will need to find the right mix of price, hardware/software and overall user experience. 

Storm Weakening or Gaining Strength?

There were some early rumors that the BlackBerry -- "iPhone killer" -- Storm was falling short of sales expectations and that there were a spate of returns happening. The early mixed reviews that the Storm received seemed to lend plausibility to those rumors. However, Verizon in the US was quick to try and dispel them. . . saying that the Storm, in fact, had "the lowest return rate" of any smartphone it sold.

BlackBerry has been spending millions on a media campaign to promote the phone but there are indications that it has not got the "legs" that RIM had hoped. The Wall Street Journal cites "people familiar with the matter," saying "the company sold roughly 500,000 units in the first month after the Storm's Nov. 21 launch. That is a promising start, though well off the pace of AT&T Inc.'s sale of 2.4 million iPhone 3G devices in that device's first full quarter on the market."

One of the major flaws of the device is that it doesn't have built-in WiFi. However later versions will probably rectify that error. The Bold by contrast does, and looks to my eye to be a more successful device in the near term and longer term for RIM. 

BlackBerry is firmly established in the enterprise market and my guess is that the Storm is unlikely to expand its consumer base. On the one hand, the phone is too far removed from the tastes of its core users -- enterprise customers. On the other, consumer side, the iPhone, G1 (soon other Android phones) and the forthcoming Pre are probably more attractive handsets. (Windows Mobile plans a range of announcements of more consumer-friendly features.)

BlackBerry enterprise users like their physical keyboards, which the Storm doesn't have though it tries to simulate the sensation of clicking or pressing a physical key. While conceptually innovative, the experience turns out to be both somewhat awkward and unnecessary.

Early customer satisfaction numbers for the Storm were very mixed (and quite weak compared with the iPhone):

Source: Changewave (12/08)

The Bold will live on in the enterprise, but to really compete with the iPhone RIM may need to substantially modify the Storm (though a price drop could be modification enough for some).

We'll get more information on whether RIM's Storm is gathering strengh weakening on Tuesday when Verizon reports Q4 earnings.

iPod Touch vs. the iPhone and did Pre 'Steal' IP?

CNET is running a piece that echoes my theory that an undetermined number of people are buying iPod Touches instead of iPhones. It's difficult to know how pervasive that phenomenon is but it's what I did.

Apple reported earnings results yesterday showing big sales of iPods/Touches (22.7M) and slightly lower-than-expected sales of iPhones (4.3M vs. 6.9 in the previous quarter). In my view, two things are holding people back where the iPhone is concerned:

• The general inertia that comes with an existing US carrier relationship for most people
• The perceived cost of iPhone ownership (especially the ongoing cost of the dataplan, much more than the phone). 

One test of the iPhone's $199+ cost-as-barrier would be to see how quickly the $99 refurbished AT&T phones sold. I'm not aware of whether they sold out. It's also worth noting that the cheapest iPod Touch is $229, more than the $199 for the iPhone (w/AT&T contract). So I would argue again it's not the device it's the dataplan. 

Compared to the iPhone, the iPod Touch doesn't have an input mic so it can't utilize the voice apps (although you can buy headphones with a mic for $80). It also doesn't have a camera. But, otherwise, it's an iPhone. And now, with Truphone, I've converted my iPod Touch into a phone, although it's got the hermetically sealed bathroom sound one often finds with VoIP calling

In general, I didn't want to leave my carrier Sprint but wanted the apps and iPhone experience. I suspect that there are lots of people in some version of this camp. And while it's annoying to have to negotiate the world of hotspots and pay for access at airports, the experience of using an iPod Touch on WiFi is generally superior to using the iPhone on AT&T's 3G network (as currently constituted). 

In addition, when Sprint announced that it would offer a Samsung Android phone -- but even more the Pre later this year -- I was convinced to wait before making the iPhone leap to AT&T.

Speaking of the Pre, there's the suggestion in Apple COO Tim Cook's remarks from the earning's call yesterday that Apple believes the Pre may have stolen some of Apple's IP in the design and functionality of the phone:

"We like competition as long as they don't off our IP. And we're going to go after anybody that does."

Q: Is that about Palm?

Cook: "I'm making a general statement...We will not stand for having our IP ripped off" and will use any "weapons at our disposal."

It will be widely perceived as "sour grapes" or heavy handed if Apple sues Palm. But Cook may in fact have a point with the multi-touch functionality, which offers a substantial user experience difference vs. other touch-screen phones. Palm is the only other touch-screen phone in the market, or coming to market, that offers it. 

Apple Crushes Quarter but iPhone Sales Not Huge

From Apple's Q1 fiscal '09 earnings release:

• The Company posted record revenue of $10.17 billion and record net quarterly profit of $1.61 billion
• Apple sold 2,524,000 Macintosh computers during the quarter, representing nine percent unit growth over the year-ago quarter.
• The Company sold a record 22,727,000 iPods during the quarter, representing three percent unit growth over the year-ago quarter.
• Quarterly iPhone units sold were 4,363,000 (total global sales to date are just under 14 million)

Some analysts had expected higher iPhone sales, while the figures were in line with others' expectations. Apple stock was up in after hours trading.

Considering the weakness of the economy this was a stellar quarter for Apple. Not broken out in any of the material I saw were iPod Touch sales (representing people who want the iPhone functionality but won't switch carriers). But AdMob's most recent numbers argue that this theory is correct and people are buying the iPod Touch rather than switching to AT&T to get the iPhone. (It's what I did too.)

According to Apple, international sales represented 46 percent of quarterly revenue. 

I was in one of the Apple stores in California two days ago and was really surprised by how busy it was. There was no hint of a recession and I had to wait for a considerable amount of time to get help and when I was checking out. So I'm not really surprised to see these strong numbers.  

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Silicon Alley Insider (SAI) covers the conference call with some additional datapoints: iPod share over 70% in UK and Aus, over 60% in Japan, and over 50% in Canada.

SAI correctly argues is that price is an inhibitor for many people in thinking about the iPhone. I would argue it's the data plan rather than the iPhone itself that's the culprit. Cutting the price of both the handset and the data plans would drive further adoption but if you had to do one or the other, I'd cut the data plan cost. 

Competition from other nearly as good handsets (some argue that the Pre bests the iPhone in certain ways) will also keep people back. Then there's the "inertia" that keeps people by default with their own carriers. I would imagine that iPhone sales in the US would be at least 30% to 40% greater if it wasn't tied exclusively to AT&T.