The Consolidating World of Technology, Media and Telecommunications
I haven’t posted much on the technology sector of late because I have focused on the European crisis. But I have been following the news flow in tech and I wanted to show you that news flow and make some overarching comments about it.
What I am seeing is a second great wave of consolidation in the industry. And by that I mean that every large company is getting into the traditional space of every other large company. Let’s go down a sample list of some of the changes that are afoot.
- Google Fiber is setting the telecom space alight with its third gigabit fiber roll-out, this time into Provo, UT. The telecom companies, which are now integrated wired and wireless telecoms providers see this as a threat.
- Dish Network is trying to buy Sprint Nextel in order to consolidate its presence as a media provider by buying its way into fixed and wireless networking. Again the incumbents see this as a threat and analysts expect further consolidation.
- Rumours of a three-way deal between Vodafone, Verizon and AT&T continue to surface. The point again is consolidation, where Verizon wants full ownership of its wireless network in the US so that it can have better control over its soup to nuts fixed/wireless telecom offering in the US.
- Facebook is moving into Google territory in two ways via Facebook Home on the Android platform, which puts Facebook more front and center than Google. At the same time, Facebook is steadily moving into a leadership position in online display advertising, which makes the rumours of Facebook search credible since this is where Google still derives most of its revenue. So Google is seeing Facebook as a competitor/partner now in mobile but also as a competitor in advertising and a potential competitor in search. And Facebook is also following Google into the telecom business by offering free VOIP calls using its huge social media network.
- LinkedIn is a minnow of a company compared to the others on this list. But LinkedIn is moving heavily into online content now, trying to blur the lines between social media and online media providers. Yahoo! was the first to attempt to become an online media powerhouse but they failed by stretching themselves too thin without the necessary revenue sources in core areas like search. And Google ate their lunch.
- Amazon is already king in big data but has now moved into mobile with its Kindle Fire tablets. Expect more from Amazon with a handset later this year. This will put them in the frenemy category for Google, but at true loggerheads with Apple. Apparently, Amazon is now patenting a mobile payment system as well. And this will put them in competition with eBay and PayPal.
- Apple continues to concentrate on its core business areas of integrated technology hardware and software packages. Nothing they have done has ever deviated from this model. WHat they do is design new hardware packages to extend their reach into new areas: music, telephony, television in addition to their previous core of computing. Does this put them on the defensive? Yes, if they do not continue to push out into new platforms. Rumoured now are pushes for in-car technology, miniaturized mobile technology like watches, and a more robust TV/media platform. None of these areas seems like the next big thing yet, however.
- Microsoft is getting into big data against the likes of Amazon now too. And they are beefing up their cloud offerings all around, pitting them against all the big guys – Google, Amazon, and Apple plus a host of monoline providers like DropBox. Moreover, with the surface tablets, Microsoft, the quintessential software company, is now a hardware company too. In terms of range of markets, I see Microsoft as having one of the largest product palette of any Internet/mobile company. Google and Amazon are the only companies that really compare.
One company missing on that list that comes to mind is eBay. The fact that they are missing could mean they are acquisition fodder. Could Amazon take them out? It is a deal that would make sense. But this goes in line with what I am seeing: consolidation. Everyone is getting into everyone else’s space. This is the culmination of the cloud computing transition I wrote about three years ago.
“Right now, we are watching what I believe is a game changing power struggle in the technology world as we move to a cloud computing, platform-independent world. It pits Google and its ubiquitous presence on the Net against Apple and its tentacled reach into sundry platforms both in hardware and operating system and Microsoft because of its legacy position in desktop operating systems. I see the Apple – Android wars as central to this shift.
“It won’t be winner take all because the new world will be platform independent. Instead, the winner will get the lions share of the spoils and the losers will have to innovate to keep up.
Where we came from
“The technological convergence that many of us who worked in the tech world during the bubble days a decade ago heard was coming is finally here.”
And the fact that this convergence is so all-encompassing within all of the TMT space means that it’s not just about Google and Apple or Apple and Samsung. The telecom players are in here. As are the social media companies. And Microsoft is ever present. Where I see influence fading is for the Intels, the Ciscos, the Oracle and the Adobes of the world. These companies simply do not have large enough tentacles to play in all bits of the convergence play and I believe they will eventually be eaten up.
As I wrote three years ago, it is the data gatekeeper that is most important. You can gatekeep content (media). You can gatekeep the internet access (telecom). And you can gatekeep by controlling the operating system or device interface (Apple, Google, Microsoft). Ultimately, as a big technology company you want to be the gatekeeper in these domains. And because data is moving away from personal and company-networked data to big internet-scale data streams, you need to gatekeep data across the internet to have a meaningful role in the future of computing. Amazon is there as are the telecom companies and the mobile OS providers. Facebook and LinkedIn are in the mix as content providers but they are certainly vulnerable. Companies like eBay, Oracle, and Intel are not in enviable positions. Hardware manufacturers like Dell and HP will either have to follow IBM into services or face extinction. The future of computing is the cloud and the consolidation of that space is gathering pace very quickly.
Below are all of the recent tech headlines I have, many of them relating to this topic.
Hey Apple, What The Next iPhone Really, Really Needs Is A Much Better Keyboard | TechCrunch
“The iOS keyboard remains the most offensive piece of skeuomorphism across Apple’s faux realistic, lavishly textured user interface estate.”
Can Apple afford to go cheaper with new iPhones?
The advancement of new generations of hardware components is occurring at such a rapid pace that it now may make more sense for Apple to design both a new high end “iPhone 5S” and a new low end iPhone, rather than just continuing to sell the iPhone 4S and 5 at a discount at existing price tiers.
Archos reveals stock Android phones starting at $99 | Android and Me
“Today Archos announced their first line of Google-certified smartphones, which are slated to hit Europe at the end of May. Archos has been producing Android devices for awhile, but not all of them were certified by Google, and they lacked access to Google’s mobile services like the Google Play store.
The new family of smartphones includes the Archos 35 Carbon ($99), Archos 50 Platinum ($219), and the Archos 53 Platinum ($249). Each smartphone features a “super slim design, IPS screen with amazing viewing angles, a powerful Qualcomm CPU, and the flexibility of dual SIM cards which allow the user to manage two providers simultaneously.””
Facebook enables free voice calls in US via Messenger app | Android and Me
“Early this year Facebook started testing free voice calls in Canada via their Messenger app, and now the feature is slowly being rolled out to the US. If you have Facebook Messenger already installed, just open up your contacts list and click info on any person to see if there is an option for “Free call.”
Facebook calling works essentially the same way as any other V0IP service, such as Skype, but Facebook has the huge advantage of being the largest social network and having access to all your contacts.”
Barclays: How Apple Could Go To $340 – Business Insider
“In the note explaining the $465 price target, he laid out a doomsday-type scenario that would lead to Apple’s stock breaking down further and reaching $340 a share.
In his opinion, it’s all about margins.
If Apple’s gross margins crashed to 33%, down from 38.6% last quarter, he thinks the stock tanks.
The gross margins would collapse if Apple was forced to lower the price of the iPad and the iPhone to fend off competition in the market.”
Google’s first-quarter results show mobile ad sales stabilising | Technology | guardian.co.uk
“Google dominates the mobile search market with 93% of US mobile search advertising dollars, according to eMarketer. Facebook is at No. 2, ahead of online music service Pandora Inc. and Twitter. EMarketer expects US mobile ad spending to grow 77% this year to $7.29bn, from $4.11bn last year.”
Nokia To Follow Samsung’s Lead By Launching A Phablet This Year, Along With 40MP Lumia PureView & Lighter Lumia 920, Reports FT | TechCrunch
“According to the FT, which cites people with knowledge of Nokia’s plans, the former worldwide number one mobile maker (whose crown was snatched by Samsung) is planning several high end smartphones this year — including “a device that can work as a phone and a tablet [aka a phablet]… similar in size but with more advanced specifications to Samsung’s popular Galaxy Note”. The forthcoming phablet is described as the most “innovative” of Nokia’s planned smartphone releases this year, but there is no detail on exactly what features that will translate into (beyond obviously a bigger screen). The largest screened Lumia to date is Nokia’s current flagship, the Lumia 920, which packs a 4.5 inch pane.”
Verizon’s Q1 2013 Sees Revenues Miss At $29.4B, EPS Beat At $0.68, Now Has 98.9M Total Wireless Customers | TechCrunch
“FiOS continues to more than offset DSL subscriber losses in Verizon’s wireline business, the company said, and is looking to bring as many as 300,000 customers over to its fiber network away from legacy copper-based networks by the end of 2013. FiOS now reaches 17.8 million customers, reaching 38.2 percent of potential FiOS subscribers within reach of Verizon’s current network.
In its wireless business, Verizon reported a total of 7.2 million activations for smartphones during Q1, with 28 percent new customers. 5.9 million were LTE-capable devices, down from 7.3 million during the previous quarter. It’s a sequential drop-off, but one that’s in line with a quarter following the normally very busy holiday sales period.”
With Smartphones, Consumers Think Brand And Price First, Carriers Second, Finds Compete/Google Research | TechCrunch
“Google notes that while we are still seeing some competition among handsets, it’s on the decline. Some 66% of users surveyed in March 2013 noted that they considered 2 or more handsets when buying their last device in the past year. That number, however, is down by 9% over 2011.
This speaks to the continuing consolidation we’re seeing in overall smartphone rankings, where brands like Samsung and Apple increasingly dominate in sales, to the detriment of companies like Nokia, HTC, RIM and others. (These figures out earlier this month from Kantar Worldpanel put iOS and Android sales at nearly 93% of all smartphone sales in the U.S. in the last three months, with Samsung very much the biggest of the Android OEMs.)
But look over to the next graphic and you can see quite the opposite trend. When it comes to considering carriers, some 47% of users are these days considering more than one, with that number up by 134%: in other words, carriers are gradually losing their brand grip.”
Nokia Q1 2013 Misses With Sales Of $7.6B With $0.03 Loss Per Share; 5.6M Lumias Sold | TechCrunch
“Analysts had also estimated that Nokia would report sales of 5.6 million Lumia devices for the quarter, and there Nokia was right on target, noting that the 5.6 million Lumias that it has sold are 27% on last quarter. The company has been building out the range of handsets it’s been selling in the last quarter, extending further into midrange and less expensive models. Nokia is estimating Lumia sales of 7.1 million for Q2, another rise of 27%.”
Amazon Patent Describes A Mobile Payment System That Keeps Transactions Anonymous | TechCrunch
“If Amazon were to implement this, they could become a competitor for payment intermediaries like PayPal. Given that its online marketplace already competes with PayPal owner eBay, and that it already has millions of user accounts with active credit cards on file, it’s not too much of a stretch for the company away from its core business.”
Apple And Google’s App Stores Now Neck And Neck – Except On The Metric That Matters Most To Developers: Revenue | TechCrunch
“According to a new report from app analytics firm App Annie, the iOS App Store has maintained its lead in terms of monetization, earning around 2.6 times more revenue in the last quarter. During the holiday season – when users are receiving, activating and then filling new smartphones and tablets with apps – that lead was even higher, with iOS generating roughly four times more revenue.”
Apple Supplier Cirrus Warns of Weak Results – WSJ.com
“Cirrus Logic late Tuesday warned of a large inventory write-down and said revenue for the current quarter would be weaker than expected, attributing the pitfall to “a decreased forecast for a high-volume product” from a customer.
Although Cirrus Logic didn’t identify its customer, the company’s audio chips have been used in iPhones and iPads. Apple represented 82% of Cirrus Logic’s sales in first nine months of its fiscal year.”
Official Blog: Google Fiber—on the Silicon Prairie, the Silicon Hills and now the Silicon Slopes
“Today the Google Fiber team is in Provo, Utah, where Mayor John Curtis just announced that we intend to make Provo our third Google Fiber City.”
Weeping Tim Cook Spotted Screaming For Help At Steve Jobs’ Tombstone | The Onion – America’s Finest News Source
“Eighteen months after the death of his mentor, Apple CEO Tim Cook was seen Wednesday pounding the tombstone of company founder Steve Jobs and begging for guidance in his leadership of what was once the largest corporation in the history of the world. “What the hell do I do?!” a hysterical Cook reportedly shrieked, clawing alternately at the grave marker and his own face.”
US smart sales — Benedict Evans
“there is an ongoing base of sales that goes to Android, and to some extent iPhone as well, that totally ignores product launches, and just buys a phone. Then, there’s a base of people who wait to buy the new iPhone (and of course come off their 24m contact in another launch quarter, eager to buy). And this latter base is getting bigger every year, and indeed driving all of the growth. “
Apple Shares Are Dirt Cheap; So What? – MoneyBeat – WSJ
“Shares are now trading at 9.08 times projected earnings for the next 12 months, according to FactSet, the lowest level in at least 10 years. Price-to-earnings ratios are calculated by taking a stock’s price and dividing it by the company’s earnings per share.
But even Apple’s inexpensive P/E ratio hasn’t been enough to turn the tide on its swooning stock price.”
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