Monthly Archive for September, 2008

Beyond entertainment

Published on September 28, 2008 in Vendors. Closed Tags: , , , , , .

I was at Ericsson last week, as an external speaker in an internal management conference for the MultiMedia division, discusssing opportunities in mobile beyond entertainment. This followed on from some work with Ericsson’s ConsumerLab earlier in the year.

In looking “beyond entertainment” the focus was on applications of mobile that enable other industries to connect with their users more effectively, with the effect of getting mobile deeper into people’s lives.

A good example here is the trial run by O2 and Nokia in London of integrating an Oyster Card (NFC ticketing system used in London), a Barclaycard and a mobile phone to enable people to have 3 accounts with the single device. Although there were some technical issues, I understand the trial gave positive results in many areas and work is starting to scale it up to include other operators.

Another good example is the Blood Donor database in Sri Lanka where they have improved their management of blood stocks by sending text messages to donors with a certain blood type as stocks of that type of blood are used up.  This makes it easier to have enough of the right type of blood in the right areas.

There are lots of examples from different sectors and countries around the world. Ericsson, along with many other vendors and operators, is already active in a number of projects of this type but the approach so far has been rather piecemeal.

The main points of the discussion were:

  • Many companies in the mobile industry have been over-focused on entertainment applications for multi-media technologies, and there’s little evidence that this is paying off for the industry. How many TV services on operators’ portals are profitable or having a significant effect on average revenue per user (ARPU)?
  • Entertainment applications are fine, but tend to focus more on younger people – who do not  have a high share of the wealth.
  • There are good opportunities in other sectors, and within that, there are many opportunities to embed mobile data services deeper into society.
  • These can bring significant benefits to organisations that implement them, as well as making people’s lives easier.
  • They can also bring benefits to the mobile industry in the form of new sources of revenue, plus expand the use of mobile data into broader segments of the population.

It’s important not to be naive or rosy about the opportunities, though.  It’s not a simple landscape, with high technical complexity, high project complexity, unpredictable business models plus low economies of scale because so many of the projects are national or local in scope.

But, as economic conditions deteriorate, and users check their discretionary spending more closely, I think it’s a good time for vendors and large operators to start being more systematic about addressing a broader set of sectors – not for enterprise applications but for linking that sector to its users in the population. It’s not going to be a quick win, but the long term business opportunity is sizeable.

I’d be really interested to hear of further examples of this sort of project, including any information on the benefits and difficulties experienced.

RIM hit on second quarter results

Published on September 26, 2008 in Vendors. Closed Tags: , .

You have to feel a little sorry for RIM – still THE mobile device vendor for Wall Street and reporting its Q2 results in the middle of the wrangling over the biggest ever banking rescue in history. However good the results yesterday, the shares were going to suffer.

The results were strong but missed analyst expectations slightly.  It shipped 6.1m devices in the quarter, up 13% sequentially and 103% over the year. This brought revenue of $2.58bn, growth of 15% sequentially and 88% year on year. Operating profit was $702m, which is an operating margin of 27%, down from 28.8% in the prior quarter. EPS were 86 cents per share, missing expectations slightly.

But it was a reduced outlook that did the damage, with RIM’s share price dropping 20% on its new guidance of a lower gross margin and EPS of 89-97 cents per share, where analysts had forecast 98 cents per share.

RIM has ridden the spectacular growth of the smartphone segment well. It has not been walloped by the iPhone – as many predicted – and it holds 17% world share of that segment according to Gartner, overtaking Windows Mobile devices. But it is over-exposed to the US, with 54% of smartphone shipments there.

Smartphones are the highest cost devices, but have traditionally been the most profitable. As economic conditions worsen smartphones will be affected – average sales prices (ASPs) are coming under pressure, but the high costs don’t go away.

RIM is also heavily exposed to corporate purchasing. This is set to suffer in the coming quarters, according to my friends at UKHotViews with decisions being deferred and budgets being cut.

RIM has been working hard to reduce its exposure to the US and large corporates, expanding its carrier relationships around the world, building up a portfolio of interesting services to work with its devices and generally scaling the business to serve a broader variety of countries, carriers and segments. This is exactly the right thing to do.

In the consumer markets RIM has the Pearl. When this launched in September 2006 I irritated the company by saying that the Pearl would sell well, bringing short term success, but that the RIM would need to adapt to the pace of the consumer phone market – expanding its portfolio and releasing new models at the right rate.

The Pearl has sold very well, has been through a couple of refreshes, is available in various colours and will shortly be joined by the Flip Pearl.  But the warning signs are there. RIM has not broadened its consumer portfolio; the Flip version has had a lukewarm reception and will appeal mostly to the N.American market; plus roughly half of Pearls are sold without the email service activated, i.e. just because it’s a cool phone.

We shouldn’t forget that RIM is still a relatively small player – able to pick up market share with existing products and unable to do everything at once. But it is starting to need broader international appeal more than ever before.

Nokia services and segmentation: one size does not fit all

Published on September 15, 2008 in Vendors. Closed Tags: , , , .

I have recently done some competitive analysis work on Nokia’s new S60 push email service, which has thrown up the issue of how Nokia’s services should fit with its hardware segmentation.

The new email service, currently in beta, is a stripped out version of its enterprise Intellisync software. It is aimed at POP3 and IMAP users.  It’s a big step forward in usability on the normal S60 email software with much simpler mail account set up, a nicer UI, better contact handling when composing messages and easy use of normal mailbox folders.

However, it falls down in a couple of areas. It only handles one email account; it’s not (yet) compatible with MSN/Hotmail; it does not handle calendar appointments (if someone sends you one you cannot accept it); it does not handle IMAP folders; and compatibility with some areas of Outlook is weak.

In fairness to Nokia, the service is still in beta and I’m sure some of these will be addressed before it launches. In fairness to Intellisync the Outlook compatibility is a down to S60, not the Intellisync software. But still, as it stands today, this is an over-simplified email service.

The stock response to this would be that a push email service aimed at the mass market does not need to be stuffed full of features. That may be true for the mass market, but this is a Series 60 email service.

Series 60 is the operating system software for Nokia’s high end phones.  It is being pushed down the range, but currently ships in biggest volumes in the N-Series phones.  N-Series is mainly aimed at the segment Nokia calls “Explore”, which is sophisticated users who enjoy exploring technology and building it into their life-style. They are already heavy email users (may even be post-email). It’s worth noting that POP3 and IMAP accounts are also used a lot by small businesses. Neither group wants a dumbed-down email service.

So there is a mismatch between the features of the service and the needs of the main segment who could use it.

Nokia has one of the best researched and well thought out segmentation models of any company in the world. They use it to drive all the phone product ranges, which consist of many highly tuned variations of devices to address each segment.

But we do not see the same approach come through with its software and services.

PIM sync on Ovi, file storage and email are basic one-size-fits-all offers. N-Gage, Share on Ovi, the Music Store and Maps / Navigation are all more mature in features, and in some areas Nokia has started to use pricing variations for segmentation.

Segmentation in software and services is generally a blunt instrument compared to the way Nokia uses it with phones. Three main methods for segmenting (and these drive pricing) are:

  • Features: there will normally be Enterprise / Consumer variants at different price points. Sometimes Consumer is split between basic (often free) and Pro. Microsoft has a more ambitious segmentation with its Office suite – no fewer than 8 packages. In services LinkedIn has Free, Business, Business+, Pro and Corporate offers.
  • Add-ins: separately priced add-ins are a good way for users to adapt a core product to their specific needs. This approach is used by Mozilla with Firefox and Microsoft with Outlook for more sophisticated PIM and email management. Facebook has done especially well in attracting add-ins to allow users to customise their pages.
  • Bundling: building a larger suite spanning several applications. Although each may not be best of breed, the bundle comes with the expectation that they will all work beautifully together having been designed together. This approach is used by PC security providers such as AVG with anti-virus, firewall, anti-spam and anti-malware software. It also underpins services such as Apple’s iLife and – longer term – Nokia’s Ovi.

All of these could usefully be employed by Nokia as it builds out its Ovi services and PC software to go with it.

Nokia faces two main challenges as it does that.

First is the short-term difficulty of launching services in new areas that are rich enough to please the early adopting segments. For example with the recently announced Ovi PIM sync Nokia brings a weak track record in PIM and has launched a very basic offering into a busy market with several serious competitors such as Google, Yahoo, Microsoft. Nokia says it prefers to develop services step-by-step, evolving in the light of customer feedback, which is very sensible providing it can hit the basic threshold of what the target groups want.

Second is the longer-term challenge of ensuring that developments in hardware, software platforms, PC software and online services run along co-ordinated parallel paths, so that launches in each area support the other areas.