MOBILE & WIRELESS NEWS UPDATE
Smartphone, Tablet Races: 4 Telling Numbers
Hardware makers and network operators provided insight on adoption of the hottest mobile platforms--Android and iOS--via financial reports this week. Here are four things we learned.
1. It's Apple, Samsung Versus Everyone Else: Globally, Apple sold 37 million iPhones in the fourth quarter of 2011 and 93 million for the entire year. Samsung sold 36.5 million smartphones during the fourth quarter and 97.4 million for the entire year. Nokia ranks a distant third, with 19 million smartphones sold in the fourth quarter and 77.3 million sold for the year.
In terms of percentages, Apple accounted for 23.9% of global smartphones sales during the fourth quarter, and 19% for the year. Samsung accounted for 23.5% of all smartphone sales during the fourth quarter and 19.9% for the year. RIM, Motorola, LG, Sony Ericsson, and others are battling for Apple and Samsung's scraps.
Same goes for tablets. Considering the poor numbers from RIM and Motorola (each sold about 1 million tablets in 2011), Apple and Samsung own the tablet market for now.
[ Apple's tablet has come a long way in two short years. Take a look back and a peek ahead in Apple iPad: Happy 2nd Birthday. ]
2. Android And iOS Will Lead For Foreseeable Future: Together, Android and iOS own approximately 76.3% of the U.S. smartphone market. Android has 46.3% of the market, while iOS has about 30%. RIM's BlackBerry platform is third with about 15%. The remaining 10% is owned by Windows Mobile, PalmOS, webOS, and Windows Phone.
RIM's current BlackBerry platform will continue to see losses in overall marketshare as the company prepares to release BlackBerry 10 and new smartphones later this year. RIM will be starting with zero presence with the new platform when it launches. Will it catch on? Will it surpass Windows Phone? Apple CEO Tim Cook thinks Microsoft's Windows Phone--and not RIM's BB10--will take the third spot in the market. Even if it does, Android and iOS will only continue to cement their lead.
3. Android Tablets Gaining In Popularity: Apple notched a massive 15.4 million iPad 2 sales during the fourth quarter of the year. While cheapo tablets weren't much in the way of competition, it appears as though Android's presence in the tablet market is eroding Apple's lead, bit-by-bit.
New data released this week by Strategy Analytics shows that the iPad owns 57.6% of the global tablet market. That's down markedly from the previous year's 69%. Where did Apple's lead go? Straight to Android. Android's share of the global smartphone market swelled from 29% is 2010 to 39.1% in 2011. If Android tablets make similar gains in 2012, Apple and Google will be neck-and-neck in the tablet space before we know it.
4. Still Plenty Of Room For Growth: AT&T says 56.8% of its 69.3 million postpaid subscribers have smartphones, up from 42.7% a year earlier and 32.8% two years ago. Smartphones represented more than 80% of AT&T's postpaid device sales for the quarter. Verizon's smartphone penetration is 44.5% of its postpaid customers. That's up from 39% in the third quarter of 2011, and closing in quickly on the 50% mark. (Sprint and T-Mobile haven't shared their latest numbers yet, but the percentages are probably on par with their larger competitors.
These numbers tell us that there are tens of millions of U.S. consumers using feature phones and not smartphones. That means smartphones, tablets, and other smart devices have tons of room to grow--and they will. Data plans are cheaper now than they were five years ago and offer more flexibility. Smartphones no longer cost $500 at the register. With high-profile devices launching on a near-weekly basis, the nationwide penetration of smartphones will continue to swell until the majority of Americans are smartphoniacs.
Stolen iPhone Saved By iCloud
During her morning commute on Thursday, Megan Juliano set her Apple iPhone down for a moment on the adjacent train seat. She had just received a text message and after reading it, she was eager to get back to studying for the GMAT on her iPad.
Moments later, the train she was taking from Penn Station in New York City to Great Neck, Long Island, stopped at Flushing Main Street and the doors opened. Juliano looked up to see someone snatch her iPhone and bolt out the doors.
Juliano, a senior financial analyst at InformationWeek's parent company, UBM TechWeb, got up as as the doors signaled they were about to close. Holding the doors, she shouted as the suspect ran. "I yelled, 'Hey, he stole my phone!'" she said.
A conductor emerged from the train farther up the platform, just as the suspect ran past. He too raised the alarm but the suspect escaped before anyone could take action.
[ The iPad turned two on Friday. Read Apple iPad: Happy 2nd Birthday. ]
After a brief delay, the train continued and Juliano disembarked at the Great Neck station where she met with MTA police. She feared her phone was lost. One of the MTA officers she met with contacted another MTA detective, Ed Ruiz, and provided him with Juliano's iCloud login and password.
Through iCloud's Find My iPhone feature, which can place registered, active iOS devices on a map, the MTA was able to observe the location of Juliano's iPhone. It wasn't far. Ruiz and his partner, Detective Brian Longaro, drove to the location. They had a good description of the suspect: He was apparently the same person a conductor had found hiding on the train earlier and had ordered off for lack of a paid ticket.
Juliano meanwhile, having filed her report, continued her journey to work at UBM TechWeb's Manhasset office. One small consolation was that her iPhone was a personal device, so she didn't have to worry about losing company data.
At the office, she logged into her Windows laptop and into her iCloud account. She contacted Ruiz to find that he and his partner were looking around a large parking garage, but had not located the suspect.
When she refreshed the iCloud map, the phone's location had changed. Juliano asked whether a car had just left because it appeared that her phone was on the move.
"As I refreshed the map, they followed it," she said. "It was wild."
Because UBM TechWeb's Manhasset office has an open work environment, Juliano's colleagues noticed something was going on. A crowd began to gather around her as she tracked her phone's movement and relayed turn-by-turn directions in real-time to the MTA detectives, who still had not made visual contact with the suspect or the suspect's vehicle.
The detectives followed her directions through the borough of Queens, from Flushing to Hunters Point. The phone stopped moving for a few minutes, but the detectives weren't sure which car they were following. Then the phone was moving again.
The second time it stopped, the detectives noticed a car pulling out of a driveway just as Juliano reported that the phone was again moving. And then it was stationary once more. Juliano, conversing with the detectives through her phone headset as she refreshed the map, said the phone was at an intersection. The car the detectives had identified was stopped at a light.
Ruiz said that he and his partner pulled up behind the car, got out, and knocked on the car's window.
"We asked him if he had the phone and he had the phone," said Ruiz, chuckling as he recounted the incident. The phone was in plain sight beside the driver. The driver was arrested, but he turned out not to be the person who had taken the phone. The man arrested was in his fifties but the initial suspect is believed to be in his twenties.
Ruiz and his partner had recovered Juliano's iPhone in about four hours. "That's not common," Ruiz observed, noting that although some phones can be tracked using GPS signals, they're often turned off once stolen, making recovery much more difficult. He said that cellphone thefts are on the rise.
Juliano said she was thrilled. "I'm very happy about it," she said.
It's no longer a matter of if you get hacked, but when. In this special retrospective of news coverage, Monitoring Tools And Logs Make All The Difference, Dark Reading takes a look at ways to measure your security posture and the challenges that lie ahead with the emerging threat landscape. (Free registration required.)
Kindle Fire Sales Hit 6 Million In Q4
Amazon's Android-based tablet expected to boost year-end revenues, which the company is slated to report Tuesday.
While Amazon specializes in hawking bestsellers of the literary kind, new numbers show that the online retailer can claim a blockbuster of its own making with the Kindle Fire. Amazon shipped as many as 6 million Kindle Fire tablets in the fourth quarter of 2011, according to a revised estimate by Stifel Nicolaus analyst Jordan Rohan, who previously pegged sales at 5 million units.
In a note Sunday to investors, Rohan said Amazon's competitive pricing--the Kindle Fire sells for $199, compared to $499 for the least expensive Apple iPad 2--is a major reason behind the Android-based tablet's popularity. "Kindle Fire has staked out an important market position due to its loyal Amazon customer base and attractive device pricing," said Rohan.
Further evidence of Kindle Fire's strong sales can be found on Amazon's own best sellers list. The tablet remains the top-seller in the electronics category, a position it's occupied for weeks.
[What's the takeaway from mobile device makers' financial reports? See Smartphone, Tablet Races: 4 Telling Numbers.]
Previous studies have shown that Amazon actually loses money on Kindle Fire device sales, but hopes to more than recoup those losses through increased sales of books, movies, and other media that Kindle Fire users can purchase through Amazon's Web store.
Kindle Fire boasts some impressive specs for a sub-$200 slate. The 7-inch LCD screen displays 16 million colors in high-resolution, at 169 pixels per inch. In-plane switching technology provides wide viewing angles. A dual-core processor, reportedly from Texas Instruments, provides quick responsiveness.
The device weighs just 14.6 ounces, making it possible for most people to hold in one hand.
Kindle Fire also provides out-of-the-box integration with Amazon subscription services for movies, TV shows, games, and music. And it boasts a new browser called Silk that splits rendering tasks between the tablet and Amazon's big iron EC2 servers in the cloud, an approach that Amazon says is faster than traditional browsers, but has also raised privacy concerns.
Amazon is scheduled to release fourth quarter results on Tuesday, when market watchers expect the company to disclose more information about sales of Kindle Fire, which went on sale in the United States on Nov. 15. Wall Street analysts are, on average, expecting Amazon to report earnings per share of 19 cents, on revenue of $18.2 billion, according to data from Thomson Reuters.
Amazon shares were off 1.61%, to $192.23, in early trading Monday.
The Enterprise Connect conference program covers the full range of platforms, services, and applications that comprise modern communications and collaboration systems. It happens March 25-29 in Orlando, Fla. Find out more.
Nokia Numbers Show Microsoft’s Mobile Madness
Every Windows Phone 7 device Nokia shipped in Q4 cost Microsoft $250, minus a royalty. But Microsoft is burning this cash with good reason.
In a filing, Nokia revealed that Microsoft paid it $250 million last quarter to churn out Windows Phone devices like the Lumia 900, and that it expects to receive billions more in Windows Phone "platform support" payments. That makes the Lumia line the most expensive phone going, at least from the standpoint of Microsoft.
Microsoft's alliance with Nokia is essentially an OEM relationship, except in this case the OEM keeps all the money but for the paltry "minimum software royalty commitments", estimated by some analysts to be as low as $15 per device, that Nokia hands back to Microsoft.
Nokia said it "sold" 1 million Lumia devices in the quarter (in quotations because there is no easy way to tell how many units actually made it to consumers or are simply idling in channel inventories). That means every Windows Phone 7 device Nokia shipped in Q4 cost Microsoft $250, minus the royalty. That's for phones, like the Lumia 710, that can be bought for $50 or less with a standard carrier contract.
Ordinarily, this would be madness. Even a kid with a lemonade stand knows you're supposed to sell stuff for more than it costs to make. But these are not normal times at Redmond. Microsoft's willingness to extend what is basically a billion-dollar bribe to Nokia, still the world's biggest handset maker by volume, to ditch Symbian and use Windows Phone as its default OS shows how desperate the software maker is to get back into the mobile race, where it badly trails Apple and Google.
There's good reason for that desperation. Microsoft's ownership of the desktop allowed it to dominate the computer industry through much of the 1980s and '90s. But in the so-called aughts and beyond, study after study shows that mobile is becoming the new desktop--for everyone from consumers to knowledge workers.
And Microsoft's presence in mobile is miniscule. Gartner estimates that Windows' share of the U.S. market is just 1.5%. Google, meanwhile, has already got more than half of the market sewn up.
That's a huge problem that goes well beyond the fact that Microsoft is making little or no net revenue from its mobile OS. The real value of any mobile platform nowadays is that it's a gateway to where the real money will be made--the cloud. It is from mobile devices that more and more consumers and businesses access lucrative online services like search, social networking, e-commerce, and entertainment. That's why Windows Phone is designed to put Bing right in your face, where it must be to override most users' instinct to Google what they're looking for.
The cloud also is where advertisers and merchants want to be. Amazon is selling the Kindle Fire at a loss-leading $199 because the device is merely a portal that individuals use to buy Amazon goods and services.
Microsoft's ability to generate revenue from cloud services, the source of most of the tech industry's growth over the coming years, will be severely crimped if it can't drastically increase its presence on mobile clients, and that includes tablets as well as smartphones.
Hence, CEO Steve Ballmer's willingness to use his biggest weapon--cash. Microsoft's got a ton of it, $51.7 billion, including short-term investments, to be precise. And it's becoming increasingly clear that Ballmer will employ that war chest to buy his way into strategic markets where Microsoft has fallen behind. Mobile is about as strategic as it gets right now.
So is it madness for Microsoft to pay Nokia $250 per device to make Windows Phones that might generate as little as $15 each in license fees? Sure, but it's not the sort of madness that implies lunacy. It's more in line with Webster's second definition of the word: "frenzied behavior." The company's efforts to become a legit mobile player had better be frenzied, otherwise its cloud ambitions could all but evaporate.
Social media are generating tons of data, but that data only becomes truly valuable when examined in context. Attend the virtual Enterprise 2.0 event Social Analytics: The Bridge To Business Value, and learn how social analytics will provide the bridge to unlocking business value. It happens Feb. 16.
Mobile Payment Technology Gotchas
Implementing mobile payment systems presents a high risk, high reward opportunity.
An enterprise approach should follow a comprehensive and compartmentalized architectural approach based on the business needs, the opportunity, any risks, or disruptive elements of technology adoption, said Michael Iseyemi, global chief security officer for Aditya Birla Minacs. Specifically to mobile payment, the most important considerations in addition to the aforementioned items are security of the stored data, the security of the data transmission while it is in transit, and who the data is being transmitted to.
Organizations are finding it difficult to keep these principles in mind during the headlong rush into mobile payment system development, said Randall Rivera, senior enterprise architect for Excellis Interactive. His firm is currently working with a lot of Fortune 500 companies to help them securely build a mobile component into their business strategies. One of the first thing he advises them to do is take stock of what their current e-commerce systems already look like and try to leverage what security measures they already have in place.
At the end of the day, mobile is just another outlet and it should work under the same umbrella as other systems, he said. If you architect it properly, all of the systems go under the same service. If you've got the infrastructure to leverage, don't build it from scratch.
Smartcards: Still A Smart Choice?
Despite recent compromises, smartcard technology still has high potential for retail, enterprise security, and other uses.
While smartcards are in use today in a variety of applications, there has always been a great deal of trepidation about their widespread deployment. This is the result of several factors, some of which have been mitigated in recent years and some of which have not. These include:
-- Privacy concerns: Any technology that can be used to collect or share personal information will always draw the ire of privacy advocacy groups, whose voices can be quite loud and politically active. For every customer that would appreciate a customized purchasing experience that would be created as a result of smartcard technology, there is another who does not want personal spending habits collected, sold, and fed back upon walking in a retailer's door.
-- Lack of standards: The absence of industry standards crippled early innovation in the smartcard market, and successful deployments of any smartcard-like technology were proprietary and application-specific. Today, a handful of standards have shaken out, and these standards are setting the stage for the broader adoption of smartcard-enabled applications.
-- Security issues: There are varying levels of concern when it comes to smartcard security. From an enterprise perspective, there is always the threat that an employee's smartcard could be lost or stolen and then misused. Could it happen? Absolutely. However, well-communicated policy about not sharing PINs, along with the requirement that any lost card be immediately reported, will significantly reduce the security threats associated with a lost or stolen smartcard.
Hardware makers and network operators provided insight on adoption of the hottest mobile platforms--Android and iOS--via financial reports this week. Here are four things we learned.
It was a big week for earnings. Hardware makers Apple, Motorola, Nokia, Samsung, and others reported their fourth-quarter and year-end earnings. The two largest network operators in the United States--AT&T and Verizon Wireless--also spilled the beans on their numbers. All these numbers show us some interesting truths about how the smartphone and tablet markets are evolving.
Consider these four facts that rose above the noise. 1. It's Apple, Samsung Versus Everyone Else: Globally, Apple sold 37 million iPhones in the fourth quarter of 2011 and 93 million for the entire year. Samsung sold 36.5 million smartphones during the fourth quarter and 97.4 million for the entire year. Nokia ranks a distant third, with 19 million smartphones sold in the fourth quarter and 77.3 million sold for the year.
In terms of percentages, Apple accounted for 23.9% of global smartphones sales during the fourth quarter, and 19% for the year. Samsung accounted for 23.5% of all smartphone sales during the fourth quarter and 19.9% for the year. RIM, Motorola, LG, Sony Ericsson, and others are battling for Apple and Samsung's scraps.
Same goes for tablets. Considering the poor numbers from RIM and Motorola (each sold about 1 million tablets in 2011), Apple and Samsung own the tablet market for now.
[ Apple's tablet has come a long way in two short years. Take a look back and a peek ahead in Apple iPad: Happy 2nd Birthday. ]
2. Android And iOS Will Lead For Foreseeable Future: Together, Android and iOS own approximately 76.3% of the U.S. smartphone market. Android has 46.3% of the market, while iOS has about 30%. RIM's BlackBerry platform is third with about 15%. The remaining 10% is owned by Windows Mobile, PalmOS, webOS, and Windows Phone.
RIM's current BlackBerry platform will continue to see losses in overall marketshare as the company prepares to release BlackBerry 10 and new smartphones later this year. RIM will be starting with zero presence with the new platform when it launches. Will it catch on? Will it surpass Windows Phone? Apple CEO Tim Cook thinks Microsoft's Windows Phone--and not RIM's BB10--will take the third spot in the market. Even if it does, Android and iOS will only continue to cement their lead.
3. Android Tablets Gaining In Popularity: Apple notched a massive 15.4 million iPad 2 sales during the fourth quarter of the year. While cheapo tablets weren't much in the way of competition, it appears as though Android's presence in the tablet market is eroding Apple's lead, bit-by-bit.
New data released this week by Strategy Analytics shows that the iPad owns 57.6% of the global tablet market. That's down markedly from the previous year's 69%. Where did Apple's lead go? Straight to Android. Android's share of the global smartphone market swelled from 29% is 2010 to 39.1% in 2011. If Android tablets make similar gains in 2012, Apple and Google will be neck-and-neck in the tablet space before we know it.
4. Still Plenty Of Room For Growth: AT&T says 56.8% of its 69.3 million postpaid subscribers have smartphones, up from 42.7% a year earlier and 32.8% two years ago. Smartphones represented more than 80% of AT&T's postpaid device sales for the quarter. Verizon's smartphone penetration is 44.5% of its postpaid customers. That's up from 39% in the third quarter of 2011, and closing in quickly on the 50% mark. (Sprint and T-Mobile haven't shared their latest numbers yet, but the percentages are probably on par with their larger competitors.
These numbers tell us that there are tens of millions of U.S. consumers using feature phones and not smartphones. That means smartphones, tablets, and other smart devices have tons of room to grow--and they will. Data plans are cheaper now than they were five years ago and offer more flexibility. Smartphones no longer cost $500 at the register. With high-profile devices launching on a near-weekly basis, the nationwide penetration of smartphones will continue to swell until the majority of Americans are smartphoniacs.
Stolen iPhone Saved By iCloud
During her morning commute on Thursday, Megan Juliano set her Apple iPhone down for a moment on the adjacent train seat. She had just received a text message and after reading it, she was eager to get back to studying for the GMAT on her iPad.
Moments later, the train she was taking from Penn Station in New York City to Great Neck, Long Island, stopped at Flushing Main Street and the doors opened. Juliano looked up to see someone snatch her iPhone and bolt out the doors.
Juliano, a senior financial analyst at InformationWeek's parent company, UBM TechWeb, got up as as the doors signaled they were about to close. Holding the doors, she shouted as the suspect ran. "I yelled, 'Hey, he stole my phone!'" she said.
A conductor emerged from the train farther up the platform, just as the suspect ran past. He too raised the alarm but the suspect escaped before anyone could take action.
[ The iPad turned two on Friday. Read Apple iPad: Happy 2nd Birthday. ]
After a brief delay, the train continued and Juliano disembarked at the Great Neck station where she met with MTA police. She feared her phone was lost. One of the MTA officers she met with contacted another MTA detective, Ed Ruiz, and provided him with Juliano's iCloud login and password.
Through iCloud's Find My iPhone feature, which can place registered, active iOS devices on a map, the MTA was able to observe the location of Juliano's iPhone. It wasn't far. Ruiz and his partner, Detective Brian Longaro, drove to the location. They had a good description of the suspect: He was apparently the same person a conductor had found hiding on the train earlier and had ordered off for lack of a paid ticket.
Juliano meanwhile, having filed her report, continued her journey to work at UBM TechWeb's Manhasset office. One small consolation was that her iPhone was a personal device, so she didn't have to worry about losing company data.
At the office, she logged into her Windows laptop and into her iCloud account. She contacted Ruiz to find that he and his partner were looking around a large parking garage, but had not located the suspect.
When she refreshed the iCloud map, the phone's location had changed. Juliano asked whether a car had just left because it appeared that her phone was on the move.
"As I refreshed the map, they followed it," she said. "It was wild."
Because UBM TechWeb's Manhasset office has an open work environment, Juliano's colleagues noticed something was going on. A crowd began to gather around her as she tracked her phone's movement and relayed turn-by-turn directions in real-time to the MTA detectives, who still had not made visual contact with the suspect or the suspect's vehicle.
The detectives followed her directions through the borough of Queens, from Flushing to Hunters Point. The phone stopped moving for a few minutes, but the detectives weren't sure which car they were following. Then the phone was moving again.
The second time it stopped, the detectives noticed a car pulling out of a driveway just as Juliano reported that the phone was again moving. And then it was stationary once more. Juliano, conversing with the detectives through her phone headset as she refreshed the map, said the phone was at an intersection. The car the detectives had identified was stopped at a light.
Ruiz said that he and his partner pulled up behind the car, got out, and knocked on the car's window.
"We asked him if he had the phone and he had the phone," said Ruiz, chuckling as he recounted the incident. The phone was in plain sight beside the driver. The driver was arrested, but he turned out not to be the person who had taken the phone. The man arrested was in his fifties but the initial suspect is believed to be in his twenties.
Ruiz and his partner had recovered Juliano's iPhone in about four hours. "That's not common," Ruiz observed, noting that although some phones can be tracked using GPS signals, they're often turned off once stolen, making recovery much more difficult. He said that cellphone thefts are on the rise.
Juliano said she was thrilled. "I'm very happy about it," she said.
It's no longer a matter of if you get hacked, but when. In this special retrospective of news coverage, Monitoring Tools And Logs Make All The Difference, Dark Reading takes a look at ways to measure your security posture and the challenges that lie ahead with the emerging threat landscape. (Free registration required.)
Kindle Fire Sales Hit 6 Million In Q4
Amazon's Android-based tablet expected to boost year-end revenues, which the company is slated to report Tuesday.
Amazon Kindle Fire: Visual Tour
(click image for larger view and for slideshow)In a note Sunday to investors, Rohan said Amazon's competitive pricing--the Kindle Fire sells for $199, compared to $499 for the least expensive Apple iPad 2--is a major reason behind the Android-based tablet's popularity. "Kindle Fire has staked out an important market position due to its loyal Amazon customer base and attractive device pricing," said Rohan.
Further evidence of Kindle Fire's strong sales can be found on Amazon's own best sellers list. The tablet remains the top-seller in the electronics category, a position it's occupied for weeks.
[What's the takeaway from mobile device makers' financial reports? See Smartphone, Tablet Races: 4 Telling Numbers.]
Previous studies have shown that Amazon actually loses money on Kindle Fire device sales, but hopes to more than recoup those losses through increased sales of books, movies, and other media that Kindle Fire users can purchase through Amazon's Web store.
Kindle Fire boasts some impressive specs for a sub-$200 slate. The 7-inch LCD screen displays 16 million colors in high-resolution, at 169 pixels per inch. In-plane switching technology provides wide viewing angles. A dual-core processor, reportedly from Texas Instruments, provides quick responsiveness.
The device weighs just 14.6 ounces, making it possible for most people to hold in one hand.
Kindle Fire also provides out-of-the-box integration with Amazon subscription services for movies, TV shows, games, and music. And it boasts a new browser called Silk that splits rendering tasks between the tablet and Amazon's big iron EC2 servers in the cloud, an approach that Amazon says is faster than traditional browsers, but has also raised privacy concerns.
Amazon is scheduled to release fourth quarter results on Tuesday, when market watchers expect the company to disclose more information about sales of Kindle Fire, which went on sale in the United States on Nov. 15. Wall Street analysts are, on average, expecting Amazon to report earnings per share of 19 cents, on revenue of $18.2 billion, according to data from Thomson Reuters.
Amazon shares were off 1.61%, to $192.23, in early trading Monday.
The Enterprise Connect conference program covers the full range of platforms, services, and applications that comprise modern communications and collaboration systems. It happens March 25-29 in Orlando, Fla. Find out more.
Nokia Numbers Show Microsoft’s Mobile Madness
Every Windows Phone 7 device Nokia shipped in Q4 cost Microsoft $250, minus a royalty. But Microsoft is burning this cash with good reason.
What's the world's priciest smartphone? Hints: It's got nothing to do with fruit or robots, it comes from Europe, and it carries a 10-figure price tag.
Kudos if you guessed Windows Phone--specifically the variety produced by Redmond's Nokia division. Okay, Nokia is still an independent company, at least on paper and for now. But its Q4 report showed, along with a $1.25 billion loss, the extent to which it is now functioning as Microsoft's de facto mobile manufacturing arm. In a filing, Nokia revealed that Microsoft paid it $250 million last quarter to churn out Windows Phone devices like the Lumia 900, and that it expects to receive billions more in Windows Phone "platform support" payments. That makes the Lumia line the most expensive phone going, at least from the standpoint of Microsoft.
Microsoft's alliance with Nokia is essentially an OEM relationship, except in this case the OEM keeps all the money but for the paltry "minimum software royalty commitments", estimated by some analysts to be as low as $15 per device, that Nokia hands back to Microsoft.
Nokia said it "sold" 1 million Lumia devices in the quarter (in quotations because there is no easy way to tell how many units actually made it to consumers or are simply idling in channel inventories). That means every Windows Phone 7 device Nokia shipped in Q4 cost Microsoft $250, minus the royalty. That's for phones, like the Lumia 710, that can be bought for $50 or less with a standard carrier contract.
Ordinarily, this would be madness. Even a kid with a lemonade stand knows you're supposed to sell stuff for more than it costs to make. But these are not normal times at Redmond. Microsoft's willingness to extend what is basically a billion-dollar bribe to Nokia, still the world's biggest handset maker by volume, to ditch Symbian and use Windows Phone as its default OS shows how desperate the software maker is to get back into the mobile race, where it badly trails Apple and Google.
There's good reason for that desperation. Microsoft's ownership of the desktop allowed it to dominate the computer industry through much of the 1980s and '90s. But in the so-called aughts and beyond, study after study shows that mobile is becoming the new desktop--for everyone from consumers to knowledge workers.
And Microsoft's presence in mobile is miniscule. Gartner estimates that Windows' share of the U.S. market is just 1.5%. Google, meanwhile, has already got more than half of the market sewn up.
That's a huge problem that goes well beyond the fact that Microsoft is making little or no net revenue from its mobile OS. The real value of any mobile platform nowadays is that it's a gateway to where the real money will be made--the cloud. It is from mobile devices that more and more consumers and businesses access lucrative online services like search, social networking, e-commerce, and entertainment. That's why Windows Phone is designed to put Bing right in your face, where it must be to override most users' instinct to Google what they're looking for.
The cloud also is where advertisers and merchants want to be. Amazon is selling the Kindle Fire at a loss-leading $199 because the device is merely a portal that individuals use to buy Amazon goods and services.
Microsoft's ability to generate revenue from cloud services, the source of most of the tech industry's growth over the coming years, will be severely crimped if it can't drastically increase its presence on mobile clients, and that includes tablets as well as smartphones.
Hence, CEO Steve Ballmer's willingness to use his biggest weapon--cash. Microsoft's got a ton of it, $51.7 billion, including short-term investments, to be precise. And it's becoming increasingly clear that Ballmer will employ that war chest to buy his way into strategic markets where Microsoft has fallen behind. Mobile is about as strategic as it gets right now.
So is it madness for Microsoft to pay Nokia $250 per device to make Windows Phones that might generate as little as $15 each in license fees? Sure, but it's not the sort of madness that implies lunacy. It's more in line with Webster's second definition of the word: "frenzied behavior." The company's efforts to become a legit mobile player had better be frenzied, otherwise its cloud ambitions could all but evaporate.
Social media are generating tons of data, but that data only becomes truly valuable when examined in context. Attend the virtual Enterprise 2.0 event Social Analytics: The Bridge To Business Value, and learn how social analytics will provide the bridge to unlocking business value. It happens Feb. 16.
Implementing mobile payment systems presents a high risk, high reward opportunity.
In 2011 mobile applications went mainstream, captivating consumers with fun games, useful utilities, and plenty of branding thrown in there for good measure. As businesses continue to pump out new applications to engage with customers, it is likely that developers will be asked to shift gears to reprioritize mobile apps as a marketing vehicle into something that drives top-line revenue into company coffers.
However, that kind of shift will require companies to dive headfirst into mobile payments, a prospect both thrilling and terrifying at once to savvy CIOs. Because though there is tremendous opportunity to grow the business through innovation with mobile payment and ordering systems, that opportunity brings a lot of risk. An enterprise approach should follow a comprehensive and compartmentalized architectural approach based on the business needs, the opportunity, any risks, or disruptive elements of technology adoption, said Michael Iseyemi, global chief security officer for Aditya Birla Minacs. Specifically to mobile payment, the most important considerations in addition to the aforementioned items are security of the stored data, the security of the data transmission while it is in transit, and who the data is being transmitted to.
Organizations are finding it difficult to keep these principles in mind during the headlong rush into mobile payment system development, said Randall Rivera, senior enterprise architect for Excellis Interactive. His firm is currently working with a lot of Fortune 500 companies to help them securely build a mobile component into their business strategies. One of the first thing he advises them to do is take stock of what their current e-commerce systems already look like and try to leverage what security measures they already have in place.
At the end of the day, mobile is just another outlet and it should work under the same umbrella as other systems, he said. If you architect it properly, all of the systems go under the same service. If you've got the infrastructure to leverage, don't build it from scratch.
Smartcards: Still A Smart Choice?
Despite recent compromises, smartcard technology still has high potential for retail, enterprise security, and other uses.
Imagine sailing through a checkout line, paying for your groceries simply by swiping your smartphone across a terminal. Or walking into a store and being served reward coupons on your mobile device after a near-field communication (NFC) receiver detects your presence. Picture carrying a single device at work that holds your critical data and can grant access to all the digital and physical resources you need to do your job.
Thanks to recent advancements in smartcard technology and NFC, some of these seemingly futuristic options may soon become realities. However, there are some larger security issues that preclude the widespread adoption of smartcards in some environments. While smartcards are in use today in a variety of applications, there has always been a great deal of trepidation about their widespread deployment. This is the result of several factors, some of which have been mitigated in recent years and some of which have not. These include:
-- Privacy concerns: Any technology that can be used to collect or share personal information will always draw the ire of privacy advocacy groups, whose voices can be quite loud and politically active. For every customer that would appreciate a customized purchasing experience that would be created as a result of smartcard technology, there is another who does not want personal spending habits collected, sold, and fed back upon walking in a retailer's door.
-- Lack of standards: The absence of industry standards crippled early innovation in the smartcard market, and successful deployments of any smartcard-like technology were proprietary and application-specific. Today, a handful of standards have shaken out, and these standards are setting the stage for the broader adoption of smartcard-enabled applications.
-- Security issues: There are varying levels of concern when it comes to smartcard security. From an enterprise perspective, there is always the threat that an employee's smartcard could be lost or stolen and then misused. Could it happen? Absolutely. However, well-communicated policy about not sharing PINs, along with the requirement that any lost card be immediately reported, will significantly reduce the security threats associated with a lost or stolen smartcard.