Daily commentary: On mobile computing

Samsung and Apple produced record profits this past quarter. meanwhile companies like Motorola, Nokia, HTC, and RIM are all losing money. It seems like a winner takes all paradigm is shaping up in the mobile space. But going forward, I would be watching trends at an industry-wide level as much as at this company level.

The first trend to watch is in terms of the shift to emerging markets from developed economies. For example, I caught an analysis today which suggested high-end saturation to me. MG Siegler of Tech Crunch who is an Apple proponent was wondering how Android handsets could still have so much share when Apple’s latest phone was selling so well on the major carriers. He questions the numbers. As I read his analysis, it occurred to me that one reason that Android is taking share is that the high end has been saturated – meaning most people who want a high end telephone have one. So most of the new mobile sales in that space come from upgrade repeat buyers or platform switchers. Nine out of ten people I know under 50 have a smart phone. To me this means that US mobile sales growth could be increasingly dominated by lower price point, lower margin units. And so mobile operators will look abroad.

The second trend to watch is market consolidation in operating systems. While the mobile space inherently has fewer switching costs than the desktop space used to because of the advent of cloud computing, there are still network effects. Developers build against platforms with reach and users that have already purchased enough of one platform’s software apps may be loath to switch. As time goes by, I believe the market will be dominated by at most three platforms, more likely two. Watch for what happens to Nokia, Microsoft and RIMM because those are the platforms I expect to suffer.

This speaks well for Samsung and Apple both in terms of growth but not necessarily valuation.

That’s it. Here are the links.

Daily commentary: On mobile computing

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