On the demise of Nokia and more on the move to the Cloud via Adobe
I have a few threads on tech that I am going to break up into multiple posts here. The first two threads are on Adobe’s move into a cloud computing-only based software model and on Nokia’s dogged pursuit of the windows mobile platform, now going down market into the bargain basement bin. Both of these are important signposts on where the technology industry is headed and how future business will be conducted everywhere.
As I wrote last week, the internet is rapidly moving to mobile. And this is largely the result of the advent of cheap and fast mobile bandwidth which allows so many more people to access data from a wide array of devices irrespective of where they are. As a result of all of the fast and cheap mobile internet access, people increasingly feel comfortable putting their data in the cloud for storage that allows them to access content across computing platforms. And we have known this was the future for a while now. What people want is to access content across their ever-multiplying number of devices at any time and anywhere. Cheap, fast connections make this possible.
Think of technology as delineated into five subgroubs: software, hardware, content, communications, and data. What we are seeing is a consolidation across those subgroubs as companies vie for consumer attention during this switch to mobile computing. And the switch is going to put both the hardware/operating system and cloud computing/data subgroups front and center. This is where Abobe and Nokia are playing.
Adobe, a packaged software company that is dominant in the graphics, illustration and photography space, has taken the risky decision to move entirely to a cloud-based model. They are committed to supporting some of their legacy packaged software products that they used to sell in stores and over the Internet. But now, their premium software is going to a subscription-based service available only over the Internet. In essence, Adobe is becoming a cloud computing or data company instead of a software company. Now Microsoft has been making this transition with its productivity suite, Office. However, Microsoft has decided to hedge its bets and offer both platforms. And Microsoft can do this because it has the bandwidth to support development in both places. Adobe says it does not.
Now, Adobe says the advantage of the cloud is that it gives them greater revenue projection clarity. And I know this is true from having worked in that business at Yahoo! via the HotJobs division where the model was subscription-based rather than transaction-based. But I suspect the move is also due to a desire to reduce piracy since it is more difficult to access the software if it requires someone else’s username and password.
What the Adobe move makes clear is the degree to which companies – both in the technology space and elsewhere – are going to feel the pressure to move to cloud-based models. With the advent of multiple, synced, mobile computing devices, companies are literally forced into a cloud model in order to accommodate their customers’ desire to access content on the go and from multiple devices. And I believe that, while this move is make or break for companies like Adobe, regular non-technology companies will also face the pressure as well, more in terms of employee productivity than profit.
On the other piece of news, Nokia’s revamp of its bargain smartphone line is also important. What it says is that the pricing pressure in smartphones is moving downmarket. Nokia is the key purveyor of feature phones in the market. This revamp is the last nail in the coffin of feature phones as it signals Nokia’s desire to move all low-end hardware sales into the smartphone business.
Strategically speaking, the move is clearly a manifestation of the company’s desire to add economies of scale to the Windows Mobile platform they are now supporting. If they can get ALL of their customers over to the platform, they can turn what is now just an iOS-Android race into a three-horse contest that includes Windows mobile. In my view, Nokia erred in going with Microsoft to begin with. They should have chosen Android but did not because their new CEO was a former Microsoft executive. This could end up bankrupting the company or forcing it into Microsoft’s arms. Either way, Microsoft is making clear that it is also continuing to bank on mobile, both in terms of operating system revenue as a hardware platform and in terms of software revenue as a cloud computing software platform.
Many of the links below give further colour on these moves, with some more links on Apple, Samsung and Google. Note the links on Yahoo and search. My view there is that Yahoo missed the boat on search a long time ago and much of their demise has to do with this. Mayer is trying to undo the damage, but she has a long road ahead if she is going to fix it.
Also note the part about Google killing Apple in the cloud and Microsoft dissing Google’s cloud computing efforts. It shows you where these companies are starting to focus. In my view, Apple as more of a hardware company, is going to be most disadvantaged here as the hardware side of mobile turns into a commodity business. However, the teardown of the Samsung Galaxy S4 shows you that margins there are still fat. And to me it indicates we could see Apple vertically integrate into hardware component companies, especially given the news that Foxconn is looking to get into the hardware business.
“The company has no plans to release any new versions of Creative Suite going forward, but Adobe will ensure that every CS6 application will run on the next version of OS X and Windows. It will also provide the usual bug fixes and security patches, but it won’t add any new features to the tools.
This is obviously a bit of a risky step for Adobe, something Morris acknowledged in our discussion. Most users, he noted, probably expected Adobe to make an announcement like this in the coming years – the fact that it’s coming today, however, will likely be a bit of a shock. What makes him and the rest of the Adobe team believe that this will work, he told me, is that virtually everybody who has subscribed to Creative Cloud loves it. It even gets a higher rating in Adobe’s online store than Photoshop, “which is virtually unheard of,” as Morris told me.
Morris also acknowledged that there will be customers who just can’t switch to Creative Cloud and for the most part, that’s because of the online components like the Behance community and cloud storage features. Government agencies, for example, will not want to use this (or aren’t allowed to), schools won’t want their students to publish their work publicly to Behance and some enterprise customers, too, will not want to deal with these features. For them, Adobe has created special licenses and version of the Creative Cloud that still use the online distribution mechanism, but that won’t include that features that these customers will object to.”
“Adobe said that the service, which launched in April 2012, has more than 500,000 paid members and two million total members.
“By focusing our energy — and our talented engineers — on Creative Cloud, we’re able to put innovation in our members’ hands at a much faster pace,” Adobe Senior VP David Wadhwani said in a statement.
Standard pricing for Creative Cloud ranges from $49.99 per month to $69.99 per month, but Adobe is offering a variety of discounts for students and existing customers that can lower the price to as low as $29.99 per month.
The company will also offer single-program subscriptions for $19.99 a month and is making additional promotional discounts available for those running the latest desktop products, known as CS6.”
“There are lots of reasons why software companies, even those with long legacies in selling packaged software with upgrades, are happy to offer subscriptions.
Doing so means more predictable revenue, less churn and, most of all, not having to sell customers on an upgrade every couple of years.
But moving to subscription-only, as Adobe is doing with many of its key products, is a bold bet.
Microsoft, by contrast, has been agressively creating subscription products such as Office 365 that make core products available for a monthy or yearly fee. At the same time, Redmond has been using its traditional packaged products as a way to tout itself as more flexible than cloud-only rivals such as Salesforce.com.
So why is Adobe going subscription-only with products such as Photoshop, Illustrator and InDesign?”
“Although Nokia has retired its other in-house platform Symbian, to concentrate its smartphone efforts on Microsoft’s Windows Phone OS, it has continued to expand its portfolio of low end Android alternative S40-based devices — adding in a variety of new hardware and software features to devices in the range, including full Qwerty keyboards; dedicated keys for Facebook/WhatsApp; refreshed industrial design; its Bluetooth sharing technology Slam; its Xpress browser to lighten the data consumption load; preloaded social networking apps; free games downloads; and a focus on long battery life.
But keeping up with low end Androids also means improving Asha’s usability — and that’s what its latest platform refresh is all about. The Asha 501 is in fact the first fruit of Nokia’s 2012 acquisition of Smarterphone, a Norwegian company that made mobile OSes for feature phones designed to give them smartphone looks and capabilities.”
“Are you aware that results are what matter? The road to hell is paved with good intentions. Please switch to another road.”
Not an entirely unreasonable suggestion, considering Nokia’s downward trajectory the past few years. But evidently it’s not one CEO Stephen Elop is willing to entertain right now — even after a 60 percent decline in the company’s share price. Really, there’s no easy answer here: Windows Phone might be slow to ramp, but there’s no guarantee that Nokia would do any better with Android, a platform that Samsung has so thoroughly dominated.
“We’ve made a clear decision to focus on Windows Phone with our Lumia product line,” Elop said. “And it is with that that we will compete with competitors like Samsung and Android.”
In other words, for Nokia, Windows Phone is Plan A — and Plan B is that Plan A must succeed.”
“The company’s Asha line has grown up from a feature phone to something of an entry-level smartphone. On Thursday, Nokia added its most powerful model yet, the $99 Asha 501.
While it lacks as sophisticated an app marketplace as Android’s or even Windows Phone’s, it features other things popular in cost-sensitive markets, including low prices, long battery life, and the ability to access the Internet using a browser that minimizes data use.”
“A look inside Samung’s new high-profile smartphone, the Galaxy S4, shows that the South Korean electronics giant is using numerous components produced by its various internally owned subsidiaries.
A teardown analysis conducted by the market research firm IHS, due to be released tomorrow, has pegged Samsung’s cost of materials and manufacturing to produce the U.S. version of the 32 gigabyte model of the S4 at slightly above $237 per unit. Without a contract subsidy, the entry-level 16GB version of the phone costs $639 when sold by AT&T Wireless.”
“It’s improved in every area, but the Samsung Galaxy S4 isn’t good enough to topple the HTC One”
“Google Ventures is looking to become one of the top-tier VC firms in Silicon Valley, and hiring high-profile partners is part of the path to the top.”
“Earlier today, I talked to Michael Atalla, the director of product marketing for Office 365 at Microsoft. In his view, Google doesn’t really get how businesses use productivity apps.
Businesses, Atalla told me, are looking to find the right mix of tools from companies they trust. He believes Microsoft has the “broadest vision of productivity” that includes everything from the basic Office tools like Word, Excel and PowerPoint, to database servers, Skype and Lync for connectivity and real-time presence indicators, and support for multiple platforms.
Productivity, he said, “is more than just working in the browser” (a clear nod in Google’s direction), because organizations also want security policies, the ability to work with data on-premise and off-premise, and a full set of business-focused capabilities (including business analytics, for example) — some of which can’t yet be replicated in a browser or just aren’t part of the standard online productivity suites yet.
He also noted that while Google provides businesses and consumers with the same set of tools, “one size doesn’t fit all.””
“US firm’s mobile arm faces fines from European commission’s antitrust unit for trying to use patents to block Apple iPhone sales”
“The reaction to Google’s latest gadget has been a mix of wild excitement and deep apprehension”
“The new battlefront is the cloud: Google Maps vs. Apple Maps, Siri vs. Google voice search, iCloud vs. Dropbox et al, and Google Now vs…well, nothing at all, yet. This is a big deal. As we grow accustomed to an always-online world of ubiquitous computing, your phone becomes less a device in and of itself and more a gateway to its cloud services. And it’s very hard to argue that Apple is anything but the serious underdog here.
You know they have a problem when even die-hard Apple supporter John Gruber is linking to pieces like “Apple’s Broken Promise: iCloud and Core Data,” which is replete with quotes like “If they couldn’t get iCloud working, who can?” … “It just doesn’t work” … “Many of these issues take hours to resolve and some can permanently corrupt your account” … “A developer’s worst nightmare.””
“Apple’s customer privacy policies don’t jibe with Germany’s consumer privacy protection laws, and the country wants them changed so that they do.
In a Tuesday ruling, the Berlin Regional Court declared eight of the 15 clauses in Apple’s data use policy invalid because they don’t comply with German law, and forbade the company from doing things like asking customers for “global consent” to use their data.”
“Taiwanese electronics manufacturer and Apple supplier Pegatron plans to bolster its Chinese workforce by up to 40 percent in the second half of 2013, fueling speculation that low-cost iPhone is on the horizon. “
“The battle is far from over. Many cases are on appeal or are working their way to trial and an ultimate winner could yet emerge.
But so far, the courtroom wars have done little if anything to alter the sector’s balance of power. In the U.S. and Germany, where most of the legal battles are occurring, significant financial damages have been awarded in only one, albeit notable, case: last summer’s jury verdict ordering Samsung to pay Apple $1.05 billion for stealing the design and technology behind the iPhone and iPad.
The majority of the injunctions requested in both countries have been denied outright or fizzled on review or sidestepped relatively quickly with technological tweaks.”
“When it comes to the latest tablet device in Microsoft’s arsenal, however, Amazon has let the cat out of the bag. The online retailer has accidentally published pictures of a new 7-inch Acer tablet, which would break new ground as the first small tablet to run on Microsoft’s Windows 8 operating system.
It is thought to be one of a number of tablets which Microsoft will use to compete with Apple’s iPad Mini, Google’s Nexus 7 and Amazon’s own Kindle Fire device, in the tablet-makers’ intensifying battle for dominance.”
“now Foxconn, a potent symbol of the perks and perils of globalization, is taking a step that, not all that long ago, would have seemed unthinkable: it is contemplating life far, far beyond Apple.
Foxconn, which is based here but does most of its manufacturing in mainland China, wants to reduce its reliance on Apple. Its new strategy is a shift away from making products that other companies design, and toward developing products of its own, with an especially aggressive push into designing and manufacturing large, flat-screen televisions.
“Foxconn senses that the Apple aura isn’t as invincible as before,” said Jamie Wang, an analyst at the research firm Gartner. “So they are worried that they need something besides Apple’s business that will allow them to grow.””
“According to numerous sources close to the situation, Yahoo CEO Marissa Mayer recently met with top execs at Hulu, the premium video service whose big media company owners have been considering selling it for some months.
Sources said Yahoo is “in the process,” although the Silicon Valley Internet giant has not made any kind of formal bid. Other players whom sources said are considering purchasing all or parts of Hulu include: Former News Corp. COO Peter Chernin, who now has a successful and well-funded multimedia and investment company called the Chernin Group; Guggenheim Partners digital arm, which is led by former Yahoo interim CEO Ross Levinsohn; and Amazon.”
“Yahoo! Inc. (YHOO) Chief Executive Officer Marissa Mayer plans to unveil tools for Internet search, including making it easier to find information on mobile devices, stepping up efforts to nab share from Google Inc (GOOG) (GOOG).
“We’ve got some really cool things in the pipeline, which we’ll be announcing and rolling out over the coming months,” Laurie Mann, senior vice president of search, said in his first interview since being promoted to the post in February.
Some of the upgrades are being developed in tandem with Yahoo’s search partner, Microsoft Corp. (MSFT) (MSFT), while other improvements will be unique to Yahoo, he said.”
It was an incredibly bad strategic move for Yahoo to have done this deal to begin with.
“Chief Executive Marissa Mayer has been seeking to end the contract with Microsoft since joining Yahoo from Web-search giant Google Inc. last year, this person said, adding that Microsoft has indicated it wasn’t interested in doing so.
Yahoo’s revenue per search has been worse under the Microsoft deal than when it operated its own Web-search technology and advertising system. Unlike the prior revenue guarantees from Microsoft, the extension announced Tuesday affects only the U.S.”
“”For the second straight month in our tracking of the data, iOS gained on Android as a source of mobile traffic,” said analyst Gene Munster. “We believe the traffic data continues to demonstrate that iOS is not only the leading platform in the US, its users are generally more engaged with their mobile devices.”
In April, Apple’s iOS represented 69 percent of mobile traffic from the sites monitored, up 2.6 percent from the March average of 66.4 percent and 3.7 percent from February. Over the same period, Android was the main share loser, dropping from a 29.7 percent share to 26.5 percent.
Munster believes there are three reasons for Apple’s dominance in U.S. mobile Web share: the iPhone is the most popular smartphone platform in the U.S.; iOS users are generally more engaged with their devices than their Android counterparts; and the iPad’s influence in the tablet marketplace, which is seen to drive more traffic than a smartphone due to a Web-friendly form factor.”
“Apple’s handset grew its share of the market by 2.7 percent, moving from 36.3 percent to 39 percent over the three month period ending in March. The jump was the largest seen of the top five OEMs, and represented the only growth in brand marketshare besides Samsung.
The Korean company posted market growth of 0.7 percent, from 21 percent to 21.7 percent, to retain its position behind Apple. Samsung’s share of the market is over two times that of number three HTC, which lost ground during the first quarter, falling from a 10.2 percent share to 9 percent, a drop of 1.2 points.
The fairly large hit to HTC’s U.S. marketshare allowed fourth and fifth place Motorola and LG to slowly sneak up on the faltering Taiwanese phone maker. While still putting up losses, Motorola managed to keep an 8.5 percent share of the market, falling 0.6 percent. LG’s piece of the pie went from 7.1 percent to 6.8 percent during the quarter. “
“In addition to the anticipated iPhone 5 successor, Apple is also rumored to be working on a new low-end iPhone that would be targeted at customers who are not interested in carrier contract subsidies. Huberty’s note provided to AppleInsider on Wednesday suggested that Apple could achieve strong sales of a low-end iPhone in China, even if the device were sold for above the market “sweet spot” of about $160 U.S.”
“Apple Chief Financial Officer Peter Oppenheimer earned the most in fiscal 2012 — a $68.6 million package that dwarfed the $4.17 million awarded to Chief Executive Officer Tim Cook, according to data compiled by Bloomberg. Oracle Corp. (ORCL) CFO Safra Catz was second at $51.7 million, making her the highest-paid female leader, while Patrick Pichette at Google was No. 3, with $38.7 million.
The pay recognizes technology executives who finished the year with more than $230 billion in cash and investments –about seven times the total for the other companies with CFOs in the top ten. Stock awards, common at computer and Web companies, also helped boost compensation for industry finance chiefs as Google and Apple traded near record highs in 2012.”
“After a first quarter marked by a 42% rise in net profit, Samsung said its cash and cash equivalents grew to nearly $40 billion at the end of March. After stripping out debt, Samsung’s net cash position is 31.2 trillion won, or $28.5 billion. Already one of the biggest in Asia, Samsung’s cash pile is building at an eye-popping rate. Its net cash has nearly tripled over the past year alone.
Analysts expect Samsung to use that money for acquisitions to beef up in certain areas like software and medical equipment. Shareholders are likely to start seeking higher returns, either through a boost in its dividend—currently less than 1% of its share price—or a share buyback.”
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