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Archive for the ‘Smart Phones’ Category

Palm Pre

photos-hardware-05-20090608Now that the Palm Pre has launched … it might be time to recall that Apple holds the patent rights for multi-touch gestures on touch-screen mobile handsets.

Other touch-screen handset manufacturers have been careful to avoid a direct mimicking of Apple’s trademarked touch-screen controls (e.g. two finger pinch-in, pinch-out, etc.). But Palm is taking an “in your face” stance on the rights to multi-touch via their new Pre smartphone.

Lefty the Chimp creating prior art

Lefty the Chimp creating prior art

Notwithstanding Apple’s patent (US Patent 7,479,949) and acquisition of FingerWorks‘ IP in 2005 … Palm’s lawyers are apparently betting big on “prior art” to undermine Apple’s rights and avoid legal rulings that would support Apple’s IP. And many are expecting Palm’s team of legal eagles to prepare examples of prior art along with depositions from the “creators” themselves. Palm’s team are even helping “Lefty the Chimp,” a brilliant multi-touch artist (photo – above right) to prepare his deposition, as he has trouble with written English.

Apple's da Vinci was inspired by "prior art" ... so says Palm

Apple's Mona Lisa was inspired by "prior art" (example above) ... so says Palm

I’m reminded by my pal Daugherty that Leonardo da Vinci too was a lefty.

Ya had to do it, didn’t you Palm? Traipse out your artistic chimp and pretend he’s the great da Vinci. Let me tell you something Palm … I knew Leonardo da Vinci … Leonardo was a friend of mine … and Palm, Lefty the Chimp is no Leonardo da Vinci!

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If you believe in infomercials (your results may vary) …

… then here’s Palm’s spin: Sprint Tells Us They Have Never Seen Higher Demand for a Smartphone” 

iPhone launch (top) versus Pre launch (below). Photos by By Peter Yan, a graphic designer from Melbourne, Australia

iphone_versus_pre

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china-iphone-300x2081crystal-liu-pic-0014BusinessWeek has just posted a rather pessimistic article on iPhone’s prospects in China. If you’re an iPhone fan take a deep breath, exhale and relax. In iPhonAsia’s opinion, this article – Why China won’t fall for the iPhone – is nothing more than straw man hit piece. To win the debate using the straw man strategy, you simply define your opponent’s case using faulty suppositions. You then easily knock down your opponent’s argument like a flimsy straw scarecrow. 

Let’s examine BusinessWeek’s straw stuffing:

  • Straw One: “Nokia sold 71 million handsets in Greater China last year” 

BusinessWeek highlights these numbers apparently to show how weak Apple’s position is compared to Nokia, the dominant handset manufacturer in China. Thank you Captian Obvious. Nokia has been in China for years and Apple has not yet officially entered China. Although 1.5 million grey market iPhones in China is not a bad testimony to the potential demand.

China handset market Oct 2008

China handset market Oct 2008

What BusinessWeek fails to point out is that Nokia’s 1st Quarter 2009 “sales fell 27% from the year-earlier quarter, operating profit plunged 96%, and the average selling price for the company’s portfolio of mobile phones—a closely watched indicator of demand—fell to $86 from $94 at the end of 2008.” Don’t believe me? I just quoted from an April 16, 2009 BusinessWeek article that further notes the current Nokia handset margins average about 9%.  Here’s a news bulletin … iPhone Margins* in the US are well north of 50% when you include the carrier subsidy. If you totally eliminate the carrier subsidy (using the 16G model as an example) the margin remains at a stellar 18%.*

  • Straw Two: “iPhones are expensive.”

Peppered throughout the BusinessWeek article is the theme that the iPhone is just too expensive and therefore will not capture significant marketshare in China. What BusinessWeek fails to understand is that the iPhone will never be the “low price” leader and has no ambitions to undercut the price of basic cellphones or crippled iClones. Motorola tried the low price strategy and it has nearly driven them out of the China market

As Mark Sue of RBC Capital put it (January 18, 2007): “Motorola might want to reconsider its strategy of having yesterday’s hit phones becoming tomorrow’s free phones!”

Pssst BusinessWeek … It’s margins that matter. If you fail to pay attention to margins, you’re following the Peggy Bundy School of Economics. The majority of handset manufacturers in China need to sell 10, 20 or even 30 phones to capture the same bottom-line profit as one iPhone sale. To put it simply, iPhone does not need to capture an “elephant size” share in China to be a money-maker for Apple, China Unicom and thousands of app developers.

BusinessWeek goes on to suggest that China Unicom cannot afford to subsidize iPhone in China and they site the price for unlocked iPhones in Hong Kong at $800 per. The implication is that Apple will not be able to offer the new iPhone 3.0 in China at a price much below $800. All we can say is “stay tuned.” The new iPhone for China will retail for less than 5,465 Renminbi ($800 US).

iphone-china-unicom-11One interesting item is the rumor that China Unicom has successfully negotiated a 50% share of Apple’s China iPhone App Store revenues. The normal split has been 30/70 with the lion share percentage to developers. Under the China Unicom split, it might look something like 15/15/70. It has also been rumored that, in return for a share of the app store revenues, China Unicom will provide a “per unit” subsidy payment (amount unknown) to Apple. In the US it has been surmised that AT&T’s subsidy payment to Apple has been $300 per unit.*

  • Straw Three: “TD-SCDMA (China Mobile’s network) handsets are retailing for less than US$250”

China TelecommunicationsBusinessWeek feels that iPhone may have trouble competing with lower priced TD-SCDMA phones that will run on China Mobile’s new 3G network. This is an easy one. TD-SCDMA phones should be priced lower. In this case, the old truism applies “you get what you pay for.” The current crop of TD handsets are not smartphones and really don’t compare to iPhone. The handset competition may get better when (don’t hold your breath) ZTE, LG,  Levono, HTC, and Nokia finally introduce their TD smartphones … For now, these “coming soon” phones remain on the drawing board. They will also be dependent on OPhone, China Mobile’s new mobile operating system (MOS). OPhone has received much press but it has yet to launch. Consider also that China Mobile is taking the highly unusual step of providing R&D funding (RMB 600 million – $87.77 million US) to 12 TD-SCDMA phone and chip manufacturers. 

Why is this subsidy necessary? iPhonAsia believes the money is being fronted because handset manufacturers are unwilling to risk (spend) their own capital to develop new TD smartphones (with OPhone OS) that must be integrated with China Mobile’s value-added services platform. This process may be more technically challenging and less profitable than China Mobile’s well-paid consultants first promised.

one-billion-appsWill third-party developers abandon China Unicom and the Apple iPhone App Store (70% payout to developers) in favor of unknown opportunities via China Mobile’s new app store – a.k.a. Mobile Market? Not likely. Where would you invest your time and money? We have heard virtually nothing of the OPhone SDK and we have yet to hear how China Mobile will share their Mobile Market revenues with developers (Update: China Mobile will share only 50% of Mobile Market revenues with developers – ouch!). And then there’s the question of when Mobile Market launches in China? Thus far China Mobile has only stated by “year end.” It’s a fair bet that Apple and China Unicom will have iPhone apps “officially available” in China before Mobile Market is open for business.

  • Straw Four: The App Store is not localized for China

BusinessWeek explains that AppStore has already launched in China for Apple’s iPod Touch, but it is in English and many of the applications are international. 

I guess BusinessWeek does not believe that Apple will take steps to further localize the App Store for China. BusinessWeek is simply mistaken. Soon after the iPhone is formally launched in China, look for many new “for China” apps that have been fully localized for the China Market.

  • Straw Five: China’s mobile app companies and developer community prefer to develop in Java or Nokia’s symbian.

BusinessWeek also adds “The selection of unauthorized Chinese applications for ‘jailbroken’ phones is better …  Most won’t bother to rewrite applications for a niche phone, especially given Apple’s conrol-freakery concerning what applications it permits in its store.”

If you think that Apple might be finicky about the nature and “tastefulness” of apps in its store, then let me introduce you to the official censors in China. They invented the term “control-freakery.” If there’s money to be made, the apps will be modified, if necessary, and submitted to the China App Store.

200902041829020540776As for the contention that “China’s developers prefer Java and Symbian and won’t rewrite apps for a niche phone”… BusinessWeek is in for a surprise. iPhonAsia has consulted with many iPhone developers who are hard at work on “for China” apps. iPhonAsia recently had lunch with the CEO of Extend Logic, an IT development company based in Santa Clara and Xi’an China. Extend Logic and their China-based subsidiary Knowledge Surf, have been directly involved in training new iPhone and Android developers in both the US and China. Extend logic is one of many companies training tens of thousands of developers.

The iPhone momentum is growing, and it’s not just for fun and games … Enterprise is rapidly coming aboard the iPhone train. Thousands of corporations are now somewhere along the iPhone app development path. If you check any job board, you will find that iPhone developers are very much in demand.

Okay, so it's about 200K students**

Okay, so it's downloads, not students**

Want more evidence? The Stanford University iPhone Application Programming CS193P class is now the most popular iTunes U course with over one million (1,000,000) downloads.** How many of those downloads are from developers in China? Who knows? But it is surely in the tens of thousands.

The images below show the most popular iPod Touch apps on the iTunes App Store in China. My guess is that one or two of these apps will be available for the “niche” iPhone. 

Picture 1Picture 2

Third-generation (3G) networks are new to China and so too are app stores and proprietary mobile operating systems. There are many moving parts in China carriers’ battle for smartphone consumers. The fact is that it’s too early to pick the China’s smartphone winners and losers. But I would not count out iPhone … the pathway is littered with the corpses of pundits and paid consultants who bet against Apple’s iPhone.末端

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* Regarding iPhone margins … here are iPhonAsia’s unscientific (“back of the napkin”) calculations using iSuppli numbers for cost of goods (COG) …
iPhone 3G 8 gig model COG tallies up $174.33 (give or take) + about $50 in royalties = $224.33 in costs.
iPhone 3G 16 gig model COG is about $20 more than the 8 gig model or $244.33

Apple is selling the iPhone to carriers for about $500 to $550. The retail price is $199 or $299 (knock off a couple of bucks if sold through BB or WalMart).
That makes for healthy margins…
8 gig iPhone
Revenue = $499 ($199 + $300 carrier subsidy)
COG = $224.33 (materials + royalties)
Gross = $274.67
$275/$499 = 55% margin

16 gig iPhone
Revenue = $599 ($299 + $300 carrier subsidy)
COG = $244.33 (materials + royalties)
Gross = $354.67
$355/$599 = 59% margin

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**As Apple 2.0 points out …”although the total is more than a million downloads — 1.2 million to be precise — that’s the sum of all the course videos (15 so far). A far smaller number of people, 186,500, downloaded the introductory lecture. More recent lectures, representing the meat of the semester, have a sustained download rate of more than 200,000 per class.”

 

 

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With iPhone 3.0 software and possibly new Apple iPhone hardware coming this summer, Palm iphone-30investors may preiphonebe feeling a bit queezy. That #@$! explicative you just heard was Bono chatting with Roger “what’s a quiet period?” McNamee  … Bono and McNamee are major investors in Elevation Partners who pumped $425 million into Palm to develop the Pre. Earlier this week, McNamee boasted about Palm Pre’s performance during a time (within 10 days of a Palm stock offering) when all parties to the deal generally shut up. I have to wonder if the Palm underwriter (Morgan Stanley) was concerned that McNamee might have violated SEC rules by popping off to Bloomberg?

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dean-wormeriPhonAsia issues our 2nd Dean Wormer Award

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And the co-winners are … drum roll please … Royal Bank of Canada and Canaccord Adams

iPhonAsia comment: Opinion Alert! The following post is just one man’s opinion (yes bias) and our view is unabashedly pro Apple (AAPL). See also related post > Does RBC have a leaky Chinese Wall?

In mid January ’09, two Canadian investment research firms turned negative on Apple (AAPL) and positive on Research in Motion (RIMM). Specifically, on January 18, 2009 the Royal Bank of Canada’s Mike Abramsky placed a sell recommendation on Apple with a $70 price target. AAPL at that point in time was trading at $82.83. Soon after this RBC downgrade, Apple posted Q1 2009 earnings. Apple handily beat Street analysts’ consensus. As of today (2/6/09), Apple (AAPL) is hovering near $100 per share … some 30 points above RBC’s target price. Not long after RBC went negative on Apple (AAPL), Canaccord Adams issued a “pro-blackberry, anti-iPhone” (my characterization) research report. EXCERPT: “Canaccord believes Apple’s earnings suggest that Research In Motion has retaken its market share dominance over Apple” Canaccord placed a buy rating on RIMM with a target of $60 and a hold rating on AAPL with a target of $90.

When will RBC’s Mike Abramsky raise his $70 price target on Apple (AAPL)?

There are far less capable Apple (AAPL) analysts (e.g. Morgan Stanley’s Katie Huberty) than our Canadian friends, yet I have to wonder why a relatively sharp analyst like Mike Abramsky would dare go so negative on Apple (AAPL) and just a day later go so positive on Research in Motion (RIMM). If it’s not ignorance then what is the motivation for RBC’s and Canaccord’s calls?  We suspect that there is a decidedly blackberry odor blowing in the north winds. In my opinion, there may also be biases that leaked through the firewalls that are supposed to separate a firm’s “research” from “investment banking” activities. 

The North Winds Royally Blow it on Apple (AAPL)

The following is an excerpt from a Silicon Alley Insider post on January 18, 2009. The Henry Blodget post was titled: Apple Cut To SELL On Weak Management Team (AAPL). Read > HERE ….

EXCERPT: A Wall Street analyst has said what a lot of folks have been thinking, which is that Apple (AAPL) is a far weaker company without Steve.  Mike Abramsky of RBC cut the stock to SELL with a $70 target–a stark contrast to the near-$200 hallucinations that most of the Street is still maintaining.

The editor of iPhonAsia (Dan B) added a few comments to this post … see below. Note: This is a redacted version … full post/comments can be found > HERE

COMMENTS:

Dan B (URL) said:
Apple has a superb bench to support Steve Jobs. Apple Chief Operating Officer (COO) Tim Cook is an extremely capable executive who will take the helm at Apple and not miss a beat. As an Apple shareholder, I’ve had responsibility of attending Apple, Inc. shareholder meetings and listening to every Apple (AAPL) quarterly earnings conference call. Tim Cook presides at these events and many others. I am comfortable with Tim Cook running Apple. He is a confident and capable executive who is very much on top of Apple’s business operations, product development path and financials.              

Here are a couple of links re Apple’s executive management team and Tim Cook, Apple COO… 
http://www.cnbc.com/id/15837548/cid/118190 
http://money.cnn.com/2008/11/09/technology/cook_apple.fortune/index.htm?postversion=2008111005 
https://idannyb.wordpress.com/2009/01/15/apple-aapl-buying-opportunity-we-think-so/ 

Anna said:
Abramsky works for RBC (Royal Bank of Canada) Capital. The CEO of RBC sits on RIM’s board, and RBC has a banking relationship with Research in Motion (also HQ’ed in Canada). Apple is giving RIM a run for their money in the smart phone market. Do you think Abramsky’s call is without bias?
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dj said:
Oh Anna please grow up….there are 10,000 anal_yst kicking down RIMM everyday just because there Canadian……Mactards are so upset that AAPL is trending down an little (1/10th the size) old RIMM moving up.
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Dan B (URL) said:
You need to place a large asterisk on RBC’s AAPL assessment … There are supposed to be firewalls in place to prevent bias from creeping in to analysts’ research opinions due to investment banking business activities of their own firm (Henry is an authority on this subject). However, I rather suspect RBC’s partnership with RIM (RIMM) has had an impact on RBC’s Aramsky’s view of Apple. Read here > http://www.phonecontent.com/bm/news/2053.shtml              

RBC (Royal Bank of Canada) disclosure information: RBC is a major investor in RIMM. In addition, RCB’s Chief Operating Officer, Barbaras Stymiest, sits on the Board of Directors at RIMM. 

“RIM, RBC and Thomson Reuters share the common belief that mobile applications and services will propel the industry forward and the BlackBerry Partners Fund is being formed to help fuel innovation and activity in the mobile ecosystem.” 

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dj said:
ah Dan B..Barbaras Stymiest,has not been with RBC for over 6yrs and does not have seat on the RIMM board…..maybe you should not beleive everything you read on the Net before you do some fact checking…..but so sad for you Mactards
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Anna said:
dj —              

“Barbara G. Stymiest, FCA has been the Chief Operating Officer of Royal Bank of Canada (also known as RBC Financial Group) of Liberty Life Insurance Company since November 1, 2004. Ms. Stymiest is responsible at Royal Bank of Canada for its strategic development as well as all corporate functions including risk management, finance and treasury. She is responsible at Liberty Life Insurance Co. for directing enterprise strategy, as well as all corporate functions including …” 

http://investing.businessweek.com/businessweek/research/stocks/people/person.asp?personId=8279227&capId=109809&previousCapId=399960&previousTitle=Research%20In%20Motion%20Ltd. 

Also, from RBC’s website — somebody better tell them if she’s not the Chief officer, because she’s still listed there: 
http://www.rbc.com/newsroom/down2-stymiest.html

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Anna said:
Also, the RBC site lists her directorship with RIM:              

“Ms. Stymiest currently serves as a director of RBC Dexia Investor Services Limited, Research in Motion Limited, Symcor Inc., Canadian Institute for Advanced Research, Royal Ontario Museum and Toronto Rehabilitation Institute Foundation. She has also served on a … ” 

from http://www.rbc.com/newsroom/down2-stymiest.html 
(The Royal Bank of Canada website)************

Dan B said:
Gee… What a surprise … RBC just raised estimates for RIM today.
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Dan B (URL) said:
The “firewalls” between analysts and their firm’s banking activities are supposed to prevent bias from creeping into reports on companies they follow. Yet this bias does exist. Not only are their BOD conflicts at RBC, there are also direct investments by RBC (RBC Venture Partners) in RIM.              

http://metue.com/05-12-2008/blackberry-partners-fund-vc-fund-launches/ 
http://www.rbc.com/vp/ 

“Monday, RIM announced the formation of a $150 million fund to invest in services and applications for their rival Blackberry platform. Canadian VC firms JLA Ventures and RBC Venture Partners are lending expertise to manage the fund. The fund will be called the Blackberry Partners Fund. The fund is anchored by capital commitments from RIM, RBC and Thomson Reuters.”

* * * *

NOTE: iPhonAsia would like to give a special shout out to Jeff Macke, the recipient of our 1st Dean Wormer Award. Jeff responded through several witty post comments. He can dish out with the best of them and he made a number of excellent points. Thanks for being a good sport Jeff … but you still get the award 8)
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>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
."Son, fat drunk and stupid is no way to go through life"
Click link to listen >>>>>>>>>>>>>>>>>>>>

“Double Secret Probation”

“Nothin is over until we say it is!”

“Put a sock in it”

“If you mention extortion again”

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iPhonAsia Comment: China Mobile has now lined up three new TD-SCDMA phones from prominent OEMs – HTC/Andriod, ZTE, and Lenovo/Android. Will iPhone be the final add or will China Unicom win the prize? Apple may also introduce an unlocked Nano iPhone for all carriers in China, India and greater Asia.  MacWorld 2009 may provide more answers.

Lenovo Android phone to have iPhone styling?

picture-61EXCERPT: Lenovo will enter the touchscreen smartphone arena by using Google’s Android and with a very iPhone-like appearance, a leak frommodmyGphone shows. The unnamed device has a full touchscreen flush with the main body, like its Apple rival, and will have just a minimum of extra buttons for calling, lenovoophone-leaklganswering and stepping through menus. No keyboard is immediately visible and suggests instead that the phone may use a planned virtual keyboard for Android rather than the hardware keys required on HTC’s G1.
See images and read full post > HERE

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iPhonAsia comment: Nokia has not been able to take share in Japan (0.3 percent share in 2007), where full-featured 3G smart-phones with excellent audio/visual + superior net browsing are paramount. Sayonara Nokia … and good luck with those diamond encrusted Vertu phones.

Nokia (NOK) will pull out of Japan, the world’s no. 4 mobile market

 

Read full article > HERE

picture-26EXCERPT: TOKYO (Reuters) – Nokia, the world’s biggest mobile phone maker, said on Thursday it will stop selling mobile phones in Japan except for its luxury Vertu brand after struggling to expand its presence.

Kurara Chibana (left) and Nokia Japan's President Tyler McGee (right)

Kurara Chibana (left) and Nokia Japan

Finnish Nokia has previously said it will cut costs ‘decisively’, expecting global mobile phone sales to shrink next year amid an economic downturn.

Japan is the world’s fourth largest mobile phone market after the United States, China and India. But it makes up only a tiny part of sales at Nokia, whose products have failed to lure customers away from more sophisticated Japanese ones.

Mobile phone companies also see limited scope for growth in Japan, where 109 million subscribers, or some 85 percent of the population, already own a mobile phone. In addition, a new sales model based on higher handset prices is expected to slash annual mobile phone sales in Japan by some 20 percent.

“In the current global economic climate, we have concluded that the continuation of our investment in Japan-specific localized products is no longer sustainable,” Nokia executive vice president Timo Ihamuotila said in a statement.

Read full article > HERE

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