Category Archives: Uncategorized

Gearing up for earnings season – new offerings for readers

As regular readers will know, one of the most active times on this blog is earnings season, when I typically write a dozen or so posts on major tech companies’ earnings. You can find past examples here:

I very much plan to do the same again this quarter, starting next week, but I wanted to let you know about two new things I’ll be doing above and beyond these:

Firstly, my regular weekly Techpinions column for Insiders subscribers will be appearing each Monday for the next several weeks, and will provide something of a preview of earnings due that week. So next Monday’s column, for example, will offer a quick preview of things to look out for when companies such as Netflix, Microsoft, IBM and Verizon report earnings later in the week. I’ve highlighted the Techpinions Insiders service before: in essence, for $10 per month (or $100 per year), you get daily articles from analysts including me, often with a data-driven focus, on topics in technology. You can sign up here on the Techpinions site. This subscription will include my weekly posts for the next several weeks, but also gives you access to the back catalog of pieces, including the series I did over the last several weeks on what to look forward to from big consumer tech companies in 2015.

Secondly, I’ll be offering various products off the back of my usual reporting work, which will offer deeper insights into the companies than I can offer in individual blog posts. There will be three tiers available:

  • Overview slide decks (in PDF format) on major tech companies’ financial and operating metrics, updated quarterly after earnings are released, along with my regular quarterly reviews of the US wireless market and US cable, satellite and telecoms providers. This will be available for $10 per month, or $100 per year, as an introductory price for a single user license (multi-user and corporate licenses are also available). More information and subscription signup here.
  • Access to the underlying data behind these decks (in Excel or Numbers format), again updated on a quarterly basis. These will be sold for $500 per company on a one-off basis or $1000 for an annual subscription. I also offer the underlying data behind my US wireless market and cable, satellite and telco analysis for a slightly higher fee. This will allow you to work with the data, create your own charts, run comparisons and so on. Bundled options for multiple companies will be available too.
  • Custom presentations based on the quarterly decks and analysis. Pricing for these presentations will be custom too based on the exact needs, and can focus on single companies or market sectors (e.g. the US wireless market or smartphone ecosystems), and the presentations can be delivered in person in Silicon Valley or via Skype or phone as desired.

You can subscribe to the quarterly decks automatically through a Paypal link here. If you’re interested in any of the other offerings, please contact me (by phone at (408) 744-6244 or by email at jan@jackdawresearch.com). An example of the quarterly decks is below – it’s one I did as part of my Apple profile a few months ago, which was published on Business Insider under the headline “Here’s a giant presentation that tells you everything you need to know about Apple right now”.

Quick Thoughts: Apple SIM

Yesterday afternoon, amid a flurry of tweets and articles talking about how revolutionary the Apple SIM is, I posted this:

I wanted to take some time to elaborate on that thought and on the Apple SIM in general.

A revolutionary model

First, let’s give credit where it’s due, to both Apple and the three participating US carriers and the UK’s EE: this is a revolutionary model, and all these companies deserve kudos for being willing to innovate and try something different, despite the risks to the carriers in particular. Why might the carriers be willing to go along with this? Well, for one, they risk being left out if they don’t, as Verizon is here in the US (likely because of its overall skepticism about the new business models for device sales). But secondly, all the US carriers would like to see a much higher proportion of tablets sold come with cellular connectivity. Today, the cellular attach rate is very low, and only part of that is down to the $130 premium Apple charges for LTE devices. The rest is down to the fact that buying one of these devices has meant committing to a particular carrier and potentially a long-term contract before you even know how much use you’ll get out of the device.

This new model means you can go into an Apple store and walk out with a cellular-enabled iPad, and start using the cellular function immediately, without making any sort of commitment to a carrier at all. You can try out their service, switch carriers easily, and determine whether or not you want to continue to use the service, all without ever going near a carrier store. The downside for the carriers, of course, is a lack of lockin, though I suspect once an iPad customer decides which carrier to use they may well end up moving the device onto a family or shared data plan for a better deal than they’ll get otherwise.

Beware of assuming the same model works in phones

Having said all that, I think the clamoring over this revolutionary new model is over-done when it comes to smartphones. There are at least two fundamental differences between smartphones and tablets in this context:

  • The vast majority of people buying a smartphone already have one, running on a specific carrier
  • The vast majority of smartphones are bought with financial assistance from a carrier, either the old subsidy model or the newer financing models. As such, almost no-one pays the full cost of an iPhone up front.

The Apple SIM model works so well in the iPad context precisely because most people aren’t getting financial help from their carrier to buy a device, and because many of these customers don’t have a tablet connected to a carrier yet. They’re in experimentation mode, and the Apple SIM model works perfectly as a result.

The problem with applying this model to iPhones is that the carriers serve this other critical function of helping to reduce either the upfront or total cost of the device, and Apple doesn’t (yet) provide an alternative. As such, the model would only be applicable for people who were willing to pay the full cost of the phone up front, which is an entirely marginal market. However, if Apple were to start offering financing or leasing plans for iPhones as I’ve described elsewhere previously, then the Apple SIM model would make a lot more sense. Oh, and by the way, both of the carriers’ major holds on customers (the contract and network lockin) would be broken at once, which would be enormously disruptive.

Apple is entirely capable of pursuing this kind of model itself. This could be either the carrier financing model, with the cost of a phone spread over a 12-24 month period, or an “iPhone for life” program under which a customer pays a fee each month to always have the latest iPhone model. Under the latter model, the older device would be handed back to be refurbed and resold when the customer gets a new phone. Apple has the deep pockets to fund such a model, and it would help to smooth out its revenues across the year too even as most of the upgrades continue to happen in the third and fourth quarters.

In short, the Apple SIM is a step in the direction of a new relationship between Apple customers, Apple and the carriers. But in order to reach its full potential in the iPhone context, Apple needs to make another significant change: allowing customers to spread the cost of owning an iPhone over a longer period. Only if it does that will the Apple SIM be truly disruptive.

Thoughts on Google earnings Q1 2014

Google just reported its earnings for the first quarter of 2014. Here are a few charts and observations on what they reported.

Motorola’s best quarter in over a year, ironically

First, ironically, it looks like Motorola had its best quarter in quite a while, with revenues of around $1.45 billion in the quarter, compared with $1.0 billion a year ago. It seems as though the boost was caused by strong sales of the Motorola G. But perhaps that just reinforces Google’s rationale for getting out of the business – the low end, emerging markets segment is not where the money is, and that’s the only area where Motorola was likely to be competitive under Google. (note one quarter’s results are missing because Google closed its acquisition in that quarter and as a result only reported a partial quarter in Q2 2012).

Motorola division revenuesThe rest of the analysis below focuses on Google’s core business (i.e. excluding Motorola Mobility). Continue reading

Google’s strategic decision around maps on iOS

Charles Arthur of the Guardian wrote a very well-circulated piece this week about Comscore’s latest numbers for Google Maps and Apple Maps. The title was “Apple Maps: how Google lost when everyone thought it had won” and I have two main objections to the piece. One is that I’m not sure everyone did think Google had “won” when Google was stripped of its role as the mapping data provider for iOS, and the second is that I’m suspicious of the Comscore data he cites to back up his point. Let’s take these one by one.

The removal of Google data from Apple Maps was a strategic decision – for both companies

Firstly, Google’s removal as the provider of map tiles and other data for the native Maps app on iOS was always on the face of it a loss rather than a win. It was obvious that it would lose many users on its platform (especially as a downloadable Google Maps app wouldn’t launch for three months after the launch of iOS 6, and that for a company that makes much of its trove of user data, this was a significant blow. However, there are two points worth bearing in mind here:

  • First, Google derives value from data, but revenue only from advertising, at least in the context of Maps. Thus, the value it gained from Maps was exclusively secondary in nature. That’s not to dismiss it entirely, but it is to make the point that Google was not fulfilling its primary objective 1 – revenue generation through advertising – through iOS’s native Maps app.
  • Secondly, it is not clear that Google had all that much choice in the matter. Yes, Apple has certainly positioned the shift to using its own mapping platform as a response to broken promises on Google’s part, but the fact is that it was imperative for Apple from a strategic perspective to shift to developing and using its own mapping assets and moving away from Google’s. It’s not clear to me that Google could have fulfilled any of its larger objectives while satisfying Apple’s demands.

As such, it was a strategic decision on Apple’s part to move away from using Google, and a strategic decision on Google’s part to go along with it. That decision involved a calculation on Google’s part that it would derive more value from being able to truly own the mapping experience from Google Maps users on iOS, even a smaller number of users, than it would from being having to play second fiddle to Apple. That calculation was risky for both parties – Apple must have known how hard it would be to provide a competitive mapping experience with no track record from day one (though perhaps even it was overwhelmed by the negative reaction), and Google knew what it was sacrificing and what it hoped to gain. Continue reading

Notes:

  1. This distinction between primary and secondary value is something I hope to explore further in a future post – every company has both primary and secondary sources of value and necessarily treats them differently.