Former Morgan Stanley financial analyst, now KPCB partner, Mary Meeker did one of her patented blizzard of stats/data dump presentations at Stanford University the other evening. The slides (available here) are essentially an updated version of a presentation given earlier this year.
You know most of the material by now. However, below are the most interesting slides I culled from a much longer set. They go to device adoption and mobile ad revenue projections.
The noteworthy thing about the above chart is that it argues there are 172 million smartphone subscribers in the US. If that's true it would mean a smartphone share of something like 68% or 73% depending on the base used. This is undoubtedly high. But it's not unreasonable to argue that there may be 60% smartphone penetration by the end of Q4 in the US (or early Q1).
From the chart below: there may not in fact be 5 billion individual mobile phone users around the world. There are "only" 7 billion people on the planet. It's probably more accurate to assert there are something like 5 billion subscriptions/SIM cards (there are some dual subscriptions). Still the global smartphone growth opportunity is massive.
The following chart is based on Pew survey data, showing that 29% (as of earlier this year) of US adults owned a tablet or eReader. Tablets are going to be the number one electronics gift item this year. We could be looking at 80 million total tablets in the US in Q1 2013.
What's most interesting about the slide below is that it projects tablet ownership to pass PC ownership by the end of next year; in other words: more tablets than PCs. This may be a aggressive forecast but it's not out of the question.
The final slide is about mobile advertising and app revenue. There are many sources behind this projection. It envisions a $20 billion global market by the end of the year, with mobile advertising around $6 or so billion.
US mobile advertising was worth roughly $1.2 in the first half and is on track to be somewhere between $2.6 and $2.8 billion for the full year 2012. Globally mobile ad revenues will probably reach between $5.5 and $6 billion by the end of Q4 this year.
As part of General Motors' MyLink in-dash telematics system (GM's answer to Ford's Sync), the Chevrolet division is incorporating Siri access into two 2014 models: Spark and Sonic vehicles.
Users with iPhones will be able to use Siri to execute a number of commands:
Siri's full capabilities won't be incorporated at this point however. Anything that requires a visual display of data won't be available so as not to create safety hazards while driving. Siri and the iPhone connect to the MyLink system via Bluetooth.
MyLink is designed to be broadly integrated with iPhone and Android devices. The console operates very much like a small tablet device embedded in the dash.
The MyLink "infotainment" console is already modeled on the smartphone apps metaphor. MyLink also has a built in virtual assistant, which will operate in those models that don't enable Siri access. It will also remain available to drivers in the Siri-enabled Spark and Sonic vehicles as well for a broader array of functions than what Siri will permit.
What's perhaps more interesting than the integration of Siri is the adoption of the concept of the virtual assistant more broadly. My colleague Dan Miller is about to publish a report on "PVAs" (personal virtual assistants) and their impact on a range of use cases including enterprise customer care. Built on decades of speech processing research and technology development, as well as advances in "AI," virtual assistants are changing the way we "search" and interact with devices and technology.
The following video demonstrates MyLink's features.
There's lots of news today about the role mobile is playing in the just-started holiday shopping season. Most notably IBM reported a couple of days ago that on "Black Friday," mobile buying "soared with 24 percent of consumers using a mobile device to visit a retailer's site, up from 14.3 percent in 2011. Mobile sales exceeded 16 percent [of online commerce], up from 9.8 percent in 2011."
But even more noteworthy than the increasing role that mobile is playing in holiday shopping, is the discrepancy between iOS and Android in terms of web traffic and user purchase behavior.
Call it the "Android paradox." In the US Android handsets represent 52.5% of smartphone market. Apple's iPhone holds 34.3%. The share that is controlled by iOS is larger when the iPad is factored in but Android is the dominant OS in the US and globally.
When you look at mobile internet visits, however, the relationship shifts -- with the iPhone and iOS driving much more web traffic than Android. Apple's devices also generate much more in the way of e-commerce sales vs. Android. Website Fab.com reports that 95% of its mobile sales are coming from iOS devices.
IBM reported that 58% of consumers (of the 16% who bought something on a mobile device) used smartphones to shop for deals, while 41 percent used tablets. Here's how the traffic distribution broke down on Black Friday in the US:
The iPhone and iPad combined for the bulk of mobile shopping, while on the tablet side the iPad generated 88% of the traffic in its category. There's something very strange about the fact that iOS users generate much more internet traffic and mobile buying than their Android peers -- given that there are more Android users out there.
There have been various attempts to explain this traffic and commerce discrepancy, chief among them the theory that Android owners are less sophisticated, affluent and engaged. While there's clearly some validity to this theory it doesn't entirely explain what's going on.
The battle between Apple and Android is quickly turning into a face off between Apple and Samsung as the latter obliterates all other Android competitors. This morning Samsung announced massive Q3 profit, while IDC estimated that the Korean conglomerate had shipped just under 57 million smartphones in the quarter.
By comparison Apple sold just under 27 million iPhones in its fiscal Q4, which ended September 30.
A noteworthy aside related to the chart above, Nokia is gone from the ranks of the top global smartphone vendors.
In contrast to Samsung, HTC, which had been one of the early leaders with Android, is now really struggling. The company saw a nearly 50% decline in revenue for Q3. In part because it's getting squeezed out of the Android market by Samsung's success, HTC has turned its attentions back to Windows in an effort to diversify revenues.
However, unless or until Windows Phones start to gain share, the smartphone landscape is really about Apple and Samsung. Everyone and everything else is just an "also-ran."
Yesterday the first reviews of Microsoft's Surface RT tablet came out. (RT is the iPad competitor starting at $499; a more laptop-like Windows Pro tablet will debut later at higher cost.) There were some positive reviews, a bunch of mixed reviews and a few that were largely negative. Here's a sampling of comments:
Many of the reviews argue and hope that the RT tablet will improve over time and that a second or third generation version of the device will be significantly better after Microsoft addresses some of the weaknesses, bugs and criticisms.
Surface RT had appeared to be off to a good start, selling out pre-orders. However one tech blog, critical of the device and calling it dead on arrival, suggests that the majority of the pre-order sales were to Microsoft itself for employees:
I've heard that Microsoft made 250,000 initial Surface RT tablets, half of which (125,000) were the now sold-out 32GB model. But of those 125,000 tablets, a full 80,000 were purchased by Microsoft itself for employees. That means only 45,000 consumers and corporate IT managers have plunked down for Surface RT.
It's hard to know how much credibility to assign to such a claim. If it's true however it indicates either a lack of public awareness or a lack of interest.
While Windows Pro tablets will compete with higher-end laptops (at similar higher prices), RT competes with the iPad and the larger Android tablets. In that context, given the mixed reviews, Surface RT will probably struggle. Accordingly the first generation device probably will only see modest sales, suffering essentially the same fate as Windows Phones have suffered to date.
The broader Windows 8 operating system has received many positive reviews but some very mixed ones as well. Microsoft is praised for boldly overhauling the PC OS but dinged for creating potential confusion for consumers. There have been a few Microsoft observers who have even predicted "disaster" for the company.
The Windows 8 handsets are shortly to be released as well. The Nokia Lumia 920 has been lauded for its design but the device is no blockbuster or savior for Nokia or Microsoft in the mobile arena.
With potential consumer confusion over Windows 8 (the OS) and the probability that Microsoft powered handsets and tablets will be overshadowed by Apple and Android devices in holiday sales, the company is unlikely to get the immediate sales boost it needs. Indeed, the new Microsoft tablets and Windows Phone 8 devices were supposed to reset the company for the new multi-platform era. However so far it appears that Microsoft has right now only made a kind of down payment on potential future gains.
For several reasons I had occasion to look back at some of the mobile predictions I made in January. At the risk of sounding self-important or boastful many of them have come to pass. In fact I was somewhat surprised by the number, which is why I'm posting about it now.
For review, here are the original predictions from January:
Here are my comments and updates on each item:
Not bad . . .
Digital marketing agency RKG has released a Q3 report (based on aggregated data from its client base). The report covers search optimization, paid search, social media, email, comparison shopping and mobile. I'll focus here only on the mobile data.
The firm said that tablets (mostly iPads) and smartphones combined to drive 21% of organic search traffic in the third quarter. RKG commented that "this was nearly double the level we saw in Q3 last year." Because of the iPad and iPhone, iOS dominates organic search traffic from non-PC devices. According to the RKG report, "iOS held a 77% share of mobile organic search in Q3, an increase from 75% in Q2."
Operating System Share of Organic Search
RKG also said that "revenue per click" (RPC) was almost the same on the iPad as it was on the PC, while smartphone RPC "languished at roughly a fifth that of desktop." Part of this is because only e-commerce events are being measured and captured. RKG and its clients aren't seeing the indirect impact of smartphones on conversions or purchases that happen later on PCs, tablets or in stores. Accordingly these data are somewhat skewed.
What's interesting to observe in a more "apples to apples" context, however, is the discrepancy between iPad owner-users and Android tablet owners: "the iPad generated an average RPC that was more than double that for Android tablets, including the Kindle Fire and Nexus 7."
Mobile vs. Desktop: RPC by Device
From a paid search marketing standpoint tablets and smartphones cost less and outperform PC (search) advertising. The discrepancy between costs and performance was greatest on smartphones. One reason why this may be so is that many marketers and platforms aren't necessarily valuing mobile correctly because of the conversion-tracking problem. Nonetheless it's a great opportunity for those that aggressively embrace it.
Mobile vs. Desktop: CPC vs. CTR
Appcelerator released its Q3 developer survey. The quarterly survey this time polled more than 5,500 developers globally on their attitudes toward various platforms and future-trend predictions.
The survey result that's going to get most of the attention is the one that found 66% of developers believe "that it is 'likely to very likely' that a mobile-first social startup will disrupt the market for social applications on mobile devices and take market share from Facebook." Indeed, this describes Instagram before Facebook acquired it for roughly $1 billion.
Other top-level survey findings include the following:
The survey also indicated that developers were interested in Windows Phone 8 smartphones but that they were taking a wait-and-see approach. Only when Windows Phones crossed relatively high penetration levels would developers turn their attention to the platform in earnest. However developers were more sanguine about the prospects for forthcoming Windows 8 tablets.
It's also interesting that despite sales developers don't seem very interested in the Kindle Fire. Perhaps that will change if the recently upgraded line of Kindle tablets sell well.
Finally it's curious that despite continuing market-share gains developer interest in Android continues to erode. This must be a reflection of the challenges of making money on the platform.
Much like President Obama's speech at the Democratic National Convention, the iPhone 5 announcement today "did what it had to do." It had to deliver a 4G capability as well as a larger screen. It did both, with a 4-inch display as opposed to the current 3.5-inch display.
In addition it offers a slightly longer battery life, a better camera and it's thinner. It also uses a new chip for better performance overall. It has enhanced audio and a smaller dock connector. It doesn't include NFC. While NFC wasn't widely expected it's still a major disappointment to the industry given Apple's ability to elevate new technologies and educate consumers about them.
The handset is the same width but taller than the iPhone 4S, which might make it aesthetically awkward. I haven't seen one in person yet. On a personal note, I would have liked to see hardware that was more of a departure from the 4S but I suppose that will have to wait.
The 3GS has been discontinued. The iPhone 4 now becomes free with a two-year carrier contract. The 4S drops to $99 and the 5 costs $199 for the entry level model (which is what most people buy). In the US it's available from Sprint, AT&T and Verizon.
This phone will probably sell well -- just how well remains to be seen. Pre-orders start on Friday with delivery on September 21.
As many of the pundits remarked after Obama's speech last week, it wasn't entirely inspiring but it "gets the job done." The same can be said for the iPhone 5.
If you're interested in more detailed coverage there's much much more, about every aspect of today's announcement, on Techmeme.
Apple's rivals have been trying to get out in front of the iPhone 5 and the announcement today. Nokia held its Lumia/Windows Phone 8 event last week. Motorola (Google) announced a number of new Android handsets and, of course, Amazon had its big Kindle Fire press conference last week as well. All of these anticipated the iPhone 5 announcement today and tried to preempt it to some degree.
Last night Google's Hugo Barra casually posted some stats on his Google+ page: "Today is a big day for Android... 500 million devices activated globally, and over 1.3 million added every single day."
Android is the dominant smartphone platform in the world -- in case you forgot. And Google wanted to get that stat out there and inserted into the blizzard of articles that will be published today about Apple and the iPhone: " . . . but Android is the market leader with 500 million devices activated globally."
The iPhone 5, as I said on my personal blog Screenwerk," is a critical release for Apple because Android phones have caught up or in some cases surpassed the device (i.e., LTE support, NFC). The new iPhone today must offer a larger screen and LTE support at a minimum to maintain consumer interest.
An unintended leak on the Apple site indicates that there will in fact be LTE support. We'll see what else in less than a half hour.
Google introduced a new YouTube app for the iPhone today, ahead of the release of iOS 6 which removes YouTube from the group of pre-installed apps on the device. There are a number of feature improvements over the current built-in YouTube app.
Depending on your perspective, one of those "improvements" will be pre-roll ads. The current YouTube app didn't feature any advertising, thus depriving Google of a potentially significant mobile ad revenue stream. The new app will have ads and pre-roll.
Here are some screenshots of the new YouTube app:
Below is a side-by-side comparison of the current and new YouTube apps for the iPhone:
The new app is nice and a bit simpler visually. But what's more interesting is what it suggests about another potential Google app for the iPhone: Maps. The question is whether (or more likely when) Google will introduce a more complete mapping app for iOS.
Just as it does with the pre-installed YouTube app, Apple iOS 6 will remove Google completely from mapping on the iPhone, replacing it with Apple's new mapping application. That could mean a potentially significant loss of local query volume for Google -- unless the company dramatically improves its HTML5 mapping experience and/or releases a new iOS Google Maps app.
There's a small possibility that if Google were to submit a new Maps app to Cupertino it might get blocked as trying to replace a core feature of the device. However there are numerous third-party mapping apps that already exist for the iPhone so I doubt it. In the event Google did submit a new iOS mapping app it would ironically mean a much better Google Maps experience for the iPhone than has been the case to date. In all probability it would also include Google Navigation, which had been missing or withheld from maps on the iPhone.
Google's dilemma is that it uses Maps and Navigation for Android as something of a competitive differentiator vs. the iPhone. If Google were to provide the same functionality to Apple it would potentially remove that particular incentive to buy Android devices.
With Android increasing its dominance around the globe, the US market seems to be something of an anomaly. Measurement firm comScore reported this morning that Apple has gained share in the US.
The iPhone now represents one out of every three smartphones in the market. Android also grew its share slightly, while Windows has continued to lose share according to comScore:
The firm also said that 114 million US adults own smartphones, representing just under 49% of the mobile subscriber population (using a base of 234 million). Nielsen, Pew, Flurry Analytics and others have found, however, that more than 50% of US adults own smartphones.
Flurry asserted recently that more than 70% of US adult mobile subscribers owned smartphones.
Whether or not responding to the recent Apple patent victory in US federal district court, Samsung has said it will be first out of the gate with a Windows Phone 8 device. The new device, announced yesterday, is called "Ativ S" and will be out before Nokia's first Windows Phone 8 handset. Indeed, Samsung will be formidable competition for Nokia with the new OS.
Meanwhile an analyst at Bernstein Research argues that US consumers simply aren't interested in the Microsoft mobile OS:
“Our research shows that for many years, poor sales of Windows-based phones stem from a deep and stable lack of consumer interest for the product. Despite numerous and repeated efforts of manufacturers (Nokia, but also Samsung and HTC) and Operators to develop an alternative to Android and Apple based on Windows, and despite the launch of numerous phones based on Windows with strong features, reviews and marketing support, the operating system remains cornered to less than 5% market share in smartphones.”
Currently Windows Phones' market share in the US is 3.8% according to the most recent comScore figures:
A consumer survey conducted by Opus Research in April indicated something quite similar in terms of demand for Windows Phones:
My next mobile phone will likely be . . .
Source: Opus Research, April 2012 (n=1,504)
These responses won't necessarily translate into sales figures -- Android is obviously leading the market -- however they do indicate a level of interest or demand for the various handsets and operating systems.
Both Microsoft and Nokia have high expectations for Windows Phone 8. It's not clear what will happen if consumer demand fails to materialize.
Many retailers are wringing their hands over the so-called "showrooming" phenomenon, where consumers visit stores to investigate and try products but ultimately make purchases through Amazon and other e-commerce sites. There have been various articles written about how traditional retailers can combat this. Some emphasize loyalty programs while others focus on more "defensive" measures such as developing proprietary SKUs (e.g., Target) so consumers can't scan products in the store and obtain competitive pricing information.
Yet the use of smartphones in stores will only continue grow. It's important for retailers not to fight but to embrace the trend.
While a recent Google survey found only 31% of smartphone owners used them in stores (among apparel shoppers), another survey of 1,557 US adults, conducted in March by Deloitte, found that 61% of respondents used their smartphones in stores.
In addition, data from multiple sources (i.e., InsightExpress, Google, Nielsen) published last year and earlier this year indicate much higher numbers: up to 80% or more use or have used their devices in stores while shopping.
The flip side of "showrooming," the discussion of mobile consumer shopping continues to focus on "m-commerce." However mobile's biggest impact wil be on in-store sales (just as the PC Internet's biggest impact is on in-store sales and not e-commerce). The Deloitte study confirms or reinforces this notion.
The chart below mashes up data from several sources to project that mobile will influence almost $700 billion in offline shopping by 2016.
As with most forecasts these figures are likely to be wrong but it's directionally accurate to say the influence of mobile on traditiona retail will grow dramatically.
What's interesting about the first chart above is how progressively more people use their smartphones as they approach "shopping day." This argues that retailers can provide mobile sites and apps that will support and address consumer needs along a spectrum of time and need: when they're planning to shop to when they're actually in the store.
Mobile apps can provide information that supports the sales and customer service function in stores. (Store and inventory maps could help customers find products; out of stock intems could be ordered for home delivery.) These things can be combined with loyalty incentives and even (eventually) mobile payments in stores. US retailer JCPenney, for example, is ditching its current POS and cash register systems for mobile payments and new payment kiosks.
The larger point is that a great mobile retail app can improve and enhance the customer experience. Retailers don't have to fear mobile.
As Deloitte commented in its report, mobile can increase in-store sales: "Our survey shows that 85% of consumers surveyed who used a retailer’s native app or site during their most recent shopping trip actually made a purchase that day, compared to only 64 percent who didn’t use the retailer’s app or site."
Mobile industry and carrier watcher Chetan Sharma has pulled together mostly carrier-published data for a mid-year update across a range of topics relevant to the wireless industry. I pulled four of his slides below; however you can see the full presentation here.
The first slide below shows increasing smartphone penetration in the US and abroad. No surprise here; this has been in the survey data for months. In Q2 smartphone sales exceeded 70% of new handset sales in the US.
Outside the US smartphone penetration isn't rising quite as fast. However it will accelerate and US smartphone growth will start to slow over the next 12 to 24 months. Feature phone sales in the US are now clearly in the minority.
The next slide shows handset market share by manufacturer, with feature phone sales representing only about 30% of total handset sales this year.
Particularly striking in the chart above are the following:
The graphic above shows the relative shares of voice and data on US carrier networks. Data, in red, now entirely eclipses voice. In 2009 the two were had nearly equal shares of traffic on carrier networks.
Finally, the following chart shows the ratio of WiFi-only tablets tablet sales with carrier network connections.
I'm drawing a few inferences but it appears the data show consumers are avoiding additional carrier fees and service plans, preferring to run tablets on WiFi networks. Notwithstanding some of the new shared data plans it appears that carriers will not derive significant new revenues from the growth of tablets.
With nearly 50 million tablets in the US market, carrier-networked devices constitute roughly 8% of the total. The lure of discounted devices in exchange for two-year contract commitments isn't succeeding in getting customers to pay additional carrier fees. Beyond basic consumer resistance to new fees, the $199 Kindle Fire, Nexus 7 and potentially forthcoming 7-inch iPad, undermine the appeal of carrier discounts.
Microsoft did a nice job in reinventing its mobile OS with the advent of Windows Phones. There are ways in which the "Metro UI" is beautiful and strikingly different than iOS and Android. However the UI also represents the greatest barrier to adoption of Windows Phones.
Until people have a chance to use and familiarize themselves with Windows Phones they won't buy them because of the perceived unfamiliarity. Agressive discounting in the US may convince some to do so however. But as long as there are relatively few Windows Phones "out in the world" the impulse to buy them will also be limited.
It's Microsoft and Nokia's version of the "chicken and egg problem." Targeting new smartphone owners is probably the best strategy to gain share for the companies in the near term. Once they have some users they can upsell them to more expensive and high-powered phones.
Among developers however, Appcelerator has discovered that there's an increasing appreciation for the Metro UI. In a survey of more than 2,000 mobile developers, 44% of them characterized the metro UI as "different and beautiful" compared with iOS and Android.
That 44% hasn't yet translated into a belief that Windows Phones will succeed -- even in the enterprise, where Microsoft has had historical advantages over competitors. Developers in this survey do think that BlackBerry is essentially dead in the enterprise (which would mean death for the company overall) and thus by default that Windows will be the "third ecosystem."
Speaking purely for myself, the Windows Phone homescreen is a barrier to adoption. While the "live tiles" are supposed to facilitate quick access to content and enable us to "get back to our lives" I find them awkward and off-putting. I think the modifications of Windows Phone 8 make it worse.
The "inside" of Windows Phone is much better and more pleasing. Regardless, I think the outlook for Windows Phones (and by extension Nokia) remains very mixed at best. Unless or until Microsoft and Nokia can get these phones in people's hands they'll have trouble winning share.
I was in a meeting when the Apple quarterly results came out this afternoon. As you've read, the company had revenue of $35 billion and profit of $8.8 billion. Still, this was below most analysts' expectations. Shares fell 5% in after-hours trading accordingly.
Quarterly device sales were as follows:
All the numbers came in under expectations except for the iPad; 17 million is a new quarterly record (vs 11.8 million last quarter). To date Apple has sold 83.8 million iPads on a global basis.
Sales of iPads will probably cross the 100 million threshold by the next earnings announcement. If not, then certainly by the end of the year.
CEO Tim Cook said that iPhone sales were likely depressed by talk of the forthcoming iPhone and consumers waiting for the new model.
One of the chief innovations Google is bringing to its "Jelly Bean" Android update involves local search and related functionality through Google Now. I've written fairly extensively already about these new features on my Screenwerk blog and Search Engine Land. In short, the new Android OS offers information "cards" (structured data) in response to a range of query types, especially local.
This is at once an evolution of the Google search experience for mobile devices and an effort to better compete with Apple's Siri. The information (search result) is more attractively presented and substitutes for the traditional page of search results, which still can be found by scrolling to the bottom. In addition to the image above right, below are a few example screenshots:
This new presentation is more consistent with what mobile users want ("answers") and offers a better experience overall than a conventional page of "blue links." The potential problem for Google is that this approach goes much further in the direction of substituting "Google's own content" for third party information, which is at the center of Europe's antitrust dispute with Google.
The issue of of Google showing its "own content" at the top of search results or in a preferential position is one of four "concerns" raised by the EU in May along with an invitation to settle. Because it goes to the heart of Google's control over the search results page and the company's ability to experiment and innovate with new content presentations, it's one of the most potentially challenging issues for Google to negotiate with the EU.
Google has been trying to avoid a formal antitrust action by European regulators. But just as it was negotiating to settle the case, EU Competition Commissioner Joaquin Almunia, last week, asked Google to make "broad changes" to its mobile services. While it's not clear specifically what he is asking for, the path adopted by Jelly Bean -- which completely marginalizes third party content in a range of cases -- exacerbates one of the EU's fundamental "concerns" about Google.
Google is not going to want to be locked into any specific search results page in mobile. It will demand the ability to change the look and feel of the page and to innovate around the way it presents content. But to the extent any such innovations don't involve equal exposure of third party information the Europeans will probably have strong objections.
The next couple of weeks should determine whether Google will be able to negotiate a settlement or whether the company will face a formal antitrust action (and potentially billions in fines) from the EU.
The Online Publishers Association followed up its 2011 tablet users survey with the release of an encore study (n=2,540 online adults). It contains a rich trove of data about US tablet usage among adults. According to the survey Android and the iPad have roughly equal shares of the US tablet market. This finding is contradicted by other data sources that show more than 90% of all US tablet traffic comes from the iPad.
The survey found that 31% of the Internet audience (vs. all US adults) owned a tablet today -- or 74.1 million users. Here are a selection of other findings:
Tablet owners have bought plenty of apps but they prefer ad-supported free apps if given the choice. Below is the list of paid-content categories, according to the survey:
The following were the top product-research categories on tablets:
Generally speaking attitudes and response to advertising are positive among tablet owners, with large numbers using the devices for research and buying. According to the survey, tablet owners spent an average of $359 buying products on tablets in the past year.
There are also plenty of indications in the survey that people prefer their tablets to other devices for the various activities they're engaged in.
We can now say that the Microsoft-Nokia partnership isn't working for either company. Nokia's woes are well documented: more job cuts, more losses, more deterioration in the core business. Lumia sales are weak on a global basis, especially in North America where Nokia was plotting its comeback. The company is in an accelerating state of decline, much like RIM now.
For Microsoft, which gave Nokia preferential treatment and established a special relationship, Nokia's fall has to be particularly disconcerting. Redmond is already providing billions to Nokia in support and marketing help. Just like the struggling economies of Europe, Nokia needs a bailout. The company is now a takeover target.
That raises the question: Will Microsoft be forced to buy Nokia, defensively? Most of the Asian handset makers have favored Android over Windows Phones. Indeed, Nokia should consider adding Android phones to its lineup -- unless precluded by its agreement with Microsoft. And that's probably the case.
Right now Nokia has about $12 billion in cash in the bank. Absent a takeover, that cash will prevent the company from disappearing any time soon. But it can't continue to operate in the current manner. Its exclusive relationship with Windows/Microsoft simply hasn't worked. Enough time has passed to make that statement.
There's almost no chance, given the current state of things, that Windows Phones will become the number two smartphone OS, as predicted by Gartner and IDC. Those forecasts were largely based on the reach and perceived brand strength of Nokia. That brand strength doesn't exist in North American and it's declining in other markets.
The chances are growing that someone will bid for Nokia. Rumors are circulating that it could be Samsung (denied by the company) or China's ZTE. However Microsoft will probably be forced to buy Nokia if it comes to that. By default the company would then be following the advice of several tech bloggers who suggested the same to compete with Apple with a more holistically integrated device.
Microsoft's Bing Maps also rely increasingly on Nokia's data and backend, another reason Microsoft may want to acquire the company. Nokia also holds valuable patents that enhance the takeover value of the Finnish company (and Android licensing value for Microsoft).
There will likely be some radical change to Nokia (sale or replacement of CEO Elop) by Q4 of this year if sales don't dramatically improve -- and they're not likely to with the iPhone 5 and Galaxy S III coming.