In-Stat: Users Find SmartPhones More Valuable than PDAs and Laptops

According to an In-Stat consumer survey, "more users of SmartPhones reported that these devices are essential to their business than the users of PDAs or laptops." The firm warned that "this does not mean that there will be automatic acceptance of SmartPhones and widespread replacement of PDAs and laptops."

Bill Hughes at In-Stat said, “Wireless manufacturers have more work to do before converged phones start taking market share from other devices instead of just complementing their sales. Users want a number of feature improvements including better keyboards, automatic synching with other devices, applications that have the same look and feel as on other devices, and expandable screens.”

Key findings include:

• SmartPhones represent about 10% of the wireless phone market today. This will grow to 25% of the overall global market over the next five years.
• In many cases, users carry devices that have redundant applications. This behavior is in spite of the desire to have fewer devices.
• Wireless phone manufacturers can offer consumers more options on a single platform with SmartPhones. This reduces costs across the board.

Steve Palley: Mobile Gaming's Vitamin Q

Steve Palley at Foci Mobile blogs that the supply side of the mobile gaming "industry can be broken down into three major components--logistics, entertainment, and medium. “Logistics” covers stuff like game discovery, downloading, and billing; it’s a catchall category for the commercial activities that connect seller to buyer. “Entertainment” simply refers to the game itself. “Medium” is all about the device that allows the consumer to first navigate mobile gaming’s logistics and then enjoy his or her entertainment...in theory, at least."

Palley writes that:

Publishers tend to believe that logistics are paramount, and wonder loudly why the carriers aren’t spending more on marketing. Carriers, meanwhile, argue that publishers should work on the entertainment factor, because it’s awfully difficult to sell boring, low-quality games. Handset makers worry about handsets playing second fiddle to carrier networks promotionally, while also jousting with publishers over consumer demand for fancy gaming capabilities in phones. Analysts roll their eyes at the other groups and try to sell them answers based on proprietary data sets.

The carriers are on top, because they control the download deck, which is the only point of sale that matters; publishers know this, so they sell to the carriers, not the consumers; and handset makers, sensing disinterest from carriers and consumers alike, optimize their devices for low-effort, high-margin forms of mobile entertainment (like ringtones).

Palley defines this as the iron triangle, which "would probably be sustainable into perpetuity with occasional adjustments. It inhibits growth and innovation, but it’s also reasonably profitable and very low risk."

He then wonders whether the new Motorola (MOT) Q "(as well as the spread of competing devices that Motorola’s competitors will inevitably release) will have profound effects on the mobile gaming market." He writes:

All of a sudden, the consumer has a mobile web browser that actually works, instead of a crippled WAP portal, meaning that he or she can easily browse on over to a game publisher’s site, look at preview graphics, and buy games from the source. The Motorola Q doesn’t just let consumers wander around off-deck, it doesn’t have a deck at all--Get It Now is missing in action! Somebody had better step into the breach and take advantage of this opportunity quickly.

In addition, the Q’s audiovisual, keyboard, network and storage capabilities open up all kinds of new horizons for game designers, who might now be able to make the kinds of games they’ve been dreaming about for years. The Q is a mobile PC, and it’s bound to push all three pillars of the mobile gaming market towards ground that PC gaming has already covered. Ultimately, this means full-fledged internet retailing, free competition, networked gaming, downloadable content, and happier, more interested customers.

Palley concludes with:

I’m not the first analyst to have this idea--M:Metrics released a similarly upbeat assessment on the Q a few weeks ago--but my personal experience with the Q has really driven the point home: this is the magical device/price point combination that mobile entertainment has questing after. Hopefully, publishers will agree, and begin to invest their resources accordingly.

Verizon calls on new phone to boost music sales

USATODAY.com writes that Verizon Wireless (VZ) is changing its cost to access mobile music with the introduction of the Chocolate cellphone by LG. The handset will sell for $149 with a service contract, and comes with a USB cable "that connects the phone to a PC, and transfers in MP3 and Microsoft's copy-protected WMA formats. The phone has a slot for a storage card. With a 2-gigabyte card, the phone can hold 2,000 songs."

According to the article, "Verizon will continue charging $1.99 for downloads to the handset, or 99 cents a song for customers who download directly to PCs," but users will no longer have to pay $15 a month for the right to access music.

Roger Entner at Ovum said by dropping the monthly fee, Verizon "now opens up the market to the youth segment. Let's be real: You want to download a song or two, you're not going to sign up for $15 a month to do that."

According to Ovum, "32% of new phones shipped this year are equipped to play music. That's forecast to grow to 75% by 2010. That's 309 million handsets today, vs. 898 million by 2010."

Entner estimated that Verizon has so far sold 3 million music downloads, and thought "Verizon will sell 5 million Chocolate phones."

In a Wall Street Journal article, Yankee Group analyst Linda Barrabee thought "musiccentric phones aren't likely to replace the iPod anytime soon." She said, "We're not at the stage where people are looking to substitute their phone for their total portable music listening experience. But as a complement to the iPod, I think there's a place for these things."

Texas Instruments Invests in 3G Handset Venture

asia.internet.com writes that Texas Instruments (TXN), along with Japanese handset makers Matsushita, NEC and Panasonic, "have formed a joint firm to develop a new 3G platform by 2007. Using a 12 billion yen joint investment, Adcore-Tech is slated to open next month in Japan as part of an effort to combine resources toward a platform for 3G handsets."

According to the article, "NEC and NEC Electronics, employing 180 workers, will hold 44 percent of the company; Matshusita and Panasonic Mobile will hold 44 percent; and TI will hold 12 percent. As part of the agreement, NEC, Matsushita, Panasonic and TI will license technology to the new company for 2.5G, 3G and beyond technology. In turn, the company will offer communications technology to NEC's semiconductor unit and Texas Instruments. Those chips then become part of phones made by NEC and Panasonic."

David Chamberlain at In-Stat said, "The more the merrier." He thought the "lack of handsets was a key stumbling block to 3G reaching its expected 2003 tipping point."

Chamberlain said that "including TI will enable those companies to expand off the island. Japanese W-CDMA isn't compatible with anything else."

JupiterResearch: Three Posts on Upcoming AWS Auction

Sharon Armbrust at JupiterResearch analyzes the upcoming AWS Auction starting August 9 with three separate posts:

1. AWS Auction: $4.3 Bil. Upfront & Plenty of Competitive Spice
2. DISCOUNT BUYERS = 61% OF QUALIFIED APPLICANTS FOR AWS AUCTION
3. BIG UPFRONTS IN AWS AUCTION FAVOR ROBUST BIDDING

Nokia Tests New Cell Phone Network

NewsFactor Network reports that "Nokia (NOK) is experimenting with a nascent wireless technology that lets mobile phone users switch between local area and standard cellular networks, providing better indoor reception and reducing calling charges when using an available Wi-Fi hotspot. The world's largest mobile phone manufacturer has set up an Unlicensed Mobile Access (UMA) pilot system in 50 homes in the city of Oulu, Finland, and has introduced a new dual-mode handset for seamless handover of voice and data connections between GSM networks and wireless LANs."
According to the article, "among the other companies rolling out UMA systems is global wireless operator BT, which is offering the Fusion device, manufactured by Motorola (MOT), It lets users seamlessly switch between wireless and broadband networks."

Yankee Group analyst John Jackson said, "I think we will start to see more products like this in the near future, because telecom operators are keen to not let their future opportunities be subsumed by the mobile players. The advantage is offering a single point of contact in the home, and while users are out and about."

IDC analyst Abner Germanow suggested that "Nokia's carrier customers view UMA as a fixed-line replacement that can improve reception in homes where it may be spotty." he said, "This is a pretty small experiment, but they have to start somewhere. They have a few dual-mode handsets available are putting the pieces together for larger UMA deployments."

Dean Bubley: iPods and musicphones..... another angle

Dean Bubley posts at the Disruptive Wireless blog his thoughts on whether or not the Apple (AAPL) iPod will "get trounced by music-capable phones." He states that "It all depends on your angle, of course. Depending upon whether you sell music, make flash memory, run an operator, build devices, provide network backhaul capacity, design headphones, or a hundred other roles, your view of "what stat is important" will vary." Bubley lists out what he thinks matter:

• Number of "music-capable" devices sold? (and do you include FM radio as well as MP3?)
• Number of "music-optimised" devices sold (eg a SonyEricsson Walkman phone vs a SonyEricsson Cybershot imaging-oriented phone which also has an MP3 function)
• Number of music-capable devices in use (ie addressable "installed base")
• Number of music tracks sold, intended for a specific device? Their value?
• Total hours of music listened to per user per day/week/year?
• Total # of people who have ever used their device for music, even if only once?
• Proportion of people who listen to music "regularly" on a platform
• Source of music listened to (or bought) - mobile download, sideload from a PC, split between online purchases vs CD rips vs peer-to-peer filesharing?
• Number of music devices per person and when/how they're used?
• Proportion of someone's total music listening given per "context" - mobile / car / home hifi / gig / club / friend's house etc?
• Total aggregate share of someone's entire disposal music-related expenditure?
• etc. x 100

Bubley then spells out some "apples-to-apples comparison with some publicly-available data, which suggests that there may still a range of 2 orders of magnitude (ie a factor of 100) in terms of regularity of purchase of "music for devices"." He gives some calculations for the UK, Japan amd iPod music downloading markets. He finds:

legal device-oriented full-track music sales, averaged across all users/subscribers (yeah, I know definitions are a little different & some people have several phones or iPods) are:

UK mobile - about 0.25 songs / sub / year, rising to 0.5+ among 3G users (and using some other stats I've seen on what % ever download any music, probably about 2 songs / active mobile-music sub / year)

Japan mobile - about 2 songs / sub / year (and at 23% of KDDI users downloading music at all, about 11 songs / active mobile music sub / year)

iPod - about 20 songs / user / year

I reckon that's about as close to "apple-to-apples" as I can get on published data..

Weekly Roundup

A roundup of mobile analysts in the news for the week ending July 30:

• Forrester Research analyst Charles Golvin via Business 2.0 about push is back on cell phones?
• Dean Bubley at Disruptive Analysis about free mobile as a triple play marketing tool?
• Julie Ask at JupiterResearch about Text Messages from My Washing Machine?
• M:Metrics analyst Seamus McAteer via BusinessWeek about A Cingular Stones Concert
• Roger Entner at Ovum via The International Herald Tribune about an alternative to cellphone service? Why not Wi-Fi?
• Thomas Husson at JupiterResearch via The Sunday Times about beauty versus brains: the mobile phone face-off
• Roger Entner at Ovum and Michael Gartenberg at JupiterResearch via the Chicago Tribune about Motorola (MOT) - more than a one-hit wonder?
• Ross Rubin at the NPD Group via BusinessWeek about GPS leader Garmion (GRMN) navigates through tight market
• Rob Enderle at the Enderle Group via NewsFactor Network about Microsoft (MSFT) Reveals Zune Strategy
• Charles King at Pund-IT, Yankee Group analyst Mike Goodman and JupiterResearch analyst Joe Wilcox E-Commerce Times about Microsoft (MSFT) Takes the Long View With Zune
• Seamus McAteer at M: Metrics and Kanishka Agarwal at Telephia via The Palm Beach Post about cellphone subscribers start to hang up on land lines

PortalPlayer Q2 2006 Earnings Conference Call Transcript (PLAY)

SeekingAlpha has the full transcript of the PortalPlayer (PLAY) Q2 2006 Earnings Conference Call. Must not have been a fun call with the recent major design loss for upcoming Apple (AAPL) iPods and the resignation of the CEO...

Ovum: Verizon Wireless' A-IMS initiative: focus on service continuity

Jean-Charles Doineau, Roger Entner and XJ Wang at Ovum write that Verizon Wireless, "along with its vendor ecosystem partners Cisco (CSCO), Lucent (LU), Motorola (MOT), Nortel (NT) and Qualcomm (QCOM), made an announcement about its IMS initiative, called Advances to IP Multimedia Subsystem (A-IMS). This initiative is emblematic of the current development of the IMS infrastructure business: pick up the good in IMS, and expand in areas not standardised."

Ovum notes that "Verizon Wireless is not the first tier 1 mobile operator in the US market to embrace IMS architecture: Sprint Nextel and Cingular made their announcements before Verizon Wireless. However, Verizon Wireless' approach clearly has more of a carriers' view on how the industry should implement the IMS architecture. A-IMS places emphasis not only on SIP-based applications but also on non-SIP-based applications."

Doineau, Entner and Wang provide an in-depth analysis of the announcement...

Google Mixes Traffic Updates Into Mobile Maps App

CRM Buyer writes that Google (GOOG) has begun "offering mobile phone users in more than 30 major metropolitan areas the ability to view highway maps with live traffic updates."

According to the article, the Google Maps app will send the most up-to-date traffic information "to the users' mobile device, and will highlight the conditions on the covered commuter routes using red, yellow, and green overlays. When mobile phone users search for driving directions, they will now see the expected drive time as well as any unexpected traffic delays. Mobile users will also have the ability to store their favorite searches and driving directions, allowing them to access frequently used routes and compare traffic conditions."

Weston Henderek at Current Analysis thought "Real-time mobile traffic solutions are in demand and Google's application is certainly solid, but that combination doesn't guarantee a successful product." He said, "If Google does not have partnerships with any of the leading wireless carriers in the U.S., then they will just be duking it out with a bunch of other companies that offer similar application. That will make it difficult to drive usage in the market."

Henderek pointed out that "wireless applications like Google Maps for mobile are driven by ease of use. Users want access to information with one or two clicks from the carrier's deck. Until Google can strike a deal with a Cingularor Verizon Wireless (VZ). Until then he thought the announcement was "media fluff."

fRegarding Google's other announcement that "users can now customize the content that appears on the mobile version of their Personalized Homepage," Henderek said, "Search engine companies have very similar content. Consumers don't really care where the content is coming from. They care about how easily accessible it is on their mobile phone."

Verizon Pushes Network Limits

The RED HERRING reports that Verizon Wireless "announced a technology advancement project Thursday that involves five of its largest equipment supplier. The project involves pushing the limits of a standard called the IP Multimedia Subsystem (IMS), which describes an efficient means of providing multimedia services such as voice, video, data, and mobile on a common IP network."

Verizon Wireless "has been working with Cisco Systems (CSCO), Lucent Technologies (LU), Motorola (MOT), Nortel Networks NT), and Qualcomm (QCOM) for about a year on the enhancement to IMS, appropriately called A-IMS for Advances to IMS."

Roger Entner at Ovum said, “Verizon Wireless is not the first Tier 1 mobile operator in the U.S. market to embrace IMS architecture. However, Verizon Wireless’ approach clearly has more of a carrier’s view on how the industry should implement the IMS architecture.”

According to the article, "One of the key aspects of A-IMS is its focus on Session Initiation Protocol (SIP), a standard that is critical to the integration of various media across IP and traditional networks. SIP is a key protocol in the management of VoIP, so one of the major areas being addressed by A-IMS is the integration of VoIP into the mobile communications sphere."

From fee to free in the U.K.

Media Life Magazine writes that offering free service is in style in the U.K. such as "when Britain’s Carphone Warehouse, a mobile phone company, began offering free broadband with certain phone packages. Then Orange, another mobile phone company, jumped in at the end of May, also offering free broadband with a particular phone package."

The article notes "the speedy rollout of the package deals, with one element or another being free, speaks volumes about the converging world of the internet, telecoms and entertainment." Ian Fog at JupiterResearch said, “It shows the tremendous pressure on the players in the market.”

Regarding competitively bundling different services, Tom Jowitt at Datamonitor said, “BT is the one potential quad play rival.”

Of course when services go for free, it's hard going back. John Delaney at Ovum said, “Ultimately the outcome is likely to be to erode the value of the service that is being called free. If you call something free for long enough, people will expect it to be free. And then if you start trying to charge for it, you will find that there is a reluctance to pay.”

Hero of the High-Design Headset

BusinessWeek profiles Darrin Caddes, vice-president of corporate design at Plantronics (PLT), and the company's efforts to use design as a key distinguishing factor for it headsets, specifically in the burgeoning Bluetooth market.

The article cites a survey from Strategy Analytics that "states that 33 million Bluetooth headsets for mobile phones were sold globally in 2005, an increase of 153% from the year before. The survey predicted that sales would grow 70% in 2006. Plantronics has ranked third in the global Bluetooth headset market with 12.3% of sales, compared with Motorola's (MOT ) 28.2 % and the 16.3% of GN Store Nord's Jabra brand."

One market Plantronics is targeting are females. Seamus McAteer at M:Metrics said, "Motorola sold 664,000 pink RAZRs so far. That's a lot of very specifically targeted handsets. Potentially, there could be a huge market for headsets for women, too."

HTC Steps Out of the Shadows

Unstrung looks at High Tech Computer Corp. (HTC), which "will step out of the shadows soon with a smartphone produced under its own name. The Taiwanese ODM (original device manufacturer) is expected to deliver another Microsoft (MSFT) Windows-based smartphone with a QWERTY-keyboard -- a sector that is becoming increasingly crowded with recent devices from the likes of Motorola (MOT) and Palm (PALM)"

Jack Gold at J.Gold Associates said, "HTC makes pretty much everyone’s Microsoft-based smartphones. They now want to put their own label on the phone and move from an ODM to a name-brand label. I’d expect them to take what they learned from working with all the other vendors -- e.g., HP -- and produce a phone with a keyboard that looks somewhat like a Q."

Todd Kort, at Gartner wondered "how the move might alter HTC's relationships with its current customers." He said, "This could backfire on HTC and cause many licensees to begin looking elsewhere for an ODM and perhaps even look toward Linux with their consumer-oriented designs. I don’t think Microsoft can be happy about this prospect."

Kort added, "[If] I were at HP, Dell, etc., why would I want to give my business to a company that is competing directly against me? I think some of the guys at HTC were unsatisfied with being the premier device ODM and they let their egos get in the way of common sense."

Apple Ponders a Touchless iPod

The RED HERRING reports that "speculation arose this week about the possibility of a touchless version of Apple’s (APPL) ubiquitous media player. According to filings in the United States Patent Office, Apple has filed for a patent on technology for an interface that doesn’t need to be touched, keeping it free from fingerprints and accompanying germs. The application was filed last September but was published late last week."

The article states "the interface—called a “proximity detector in handheld device”—looks an awful lot like one that fueled talk earlier this year of a possible Apple tablet PC."

Current Analysis analyst Samir Bhavnani said, “This enables you to have a larger screen, but maintain a small-form format. I’ve seen pictures about what a device like this would look like.”

Bhavnani cautioned against taking overly enthusiastic inferences from the applications. “What you have to remember is, many patents are filed that never see the light of day." He noted, “Apple still has a lead position—it would take a copycat six months to one year to put their product on shelves.”

Handsets on Parade

Unstrung writes about recent new products in the handset market. "The top two cellphone vendors -- Nokia (NOK) and Motorola (MOT) -- have introduced new models, and High Tech Computer Corp. (HTC) is planning to start selling smartphones under its own name in Europe."

The article looks at the many new handsets recently announced and "analysts reckon that Moto's moves should bolster its cellphone sales as RAZR sales gradually level off. Motorola has been seeing strong sales from its skinny RAZR for several quarters now."

According to Jack Gold at J.Gold Associates, "Nokia has a couple of N-series "multimedia" phones in its new summer lineup. The N73 and N93 are more entertainment-focused devices." Gold said, "The type N series seems more oriented towards the entertainment end of things. While there probably are some enterprise users who may adopt such devices, I think most will move towards the E series devices, which have more features geared towards business users."

Gold pointed out that "the E61 phones are only shipping in Europe so far, not the U.S. The company is expecting to have more E-series phones on the market by the third quarter of this year."

Strategy Analytics: Global Wireless Home Device Sales To Reach 314 Million Units By 2010

Strategy Analytics predicts that "the increasing use of broadband wireless home networks will lead to the adoption of a multitude of new wireless home devices over the next 5 years." the firm forecasts that "consumers worldwide will buy nearly 950 million wireless home devices, such as games consoles, wireless MP3 players and connected TVs, over the next five years."

Peter King at Strategy Analytics said, "Leading edge broadband users are keen to make the most of their service by connecting multiple devices to their home network. Wireless is used on the PC first, but we fully expect many other digital devices to follow the same path to wireless connectivity."

David Mercer at Strategy Analytics added, "Strategy Analytics' vision of the digital home is one where a variety of digital devices use wireless home networking technologies to seamlessly interact with each other and with the available broadband and digital services. The arrival of the first wave of wireless home devices is a signal that this vision is on the way to becoming realized."

JupiterResearch: Orange, Not Now

Seems like a number of analysts have been using their blogs to complain about poor customer service lately. Ian Fogg at JupiterResearch writes about his recent experience with Orange. He writes that "Orange simply don't understand mobile; their mobile data services are not reliable enough."

Fogg outlines his recent problem with Orange and their customer services and concludes with:

I don't like to write about one-off anecdotal stories on my blog. So, let me add this isn't an isolated incident. I regularly find it impossible to access the Internet from my mobile, mysteriously. I have stopped using Orange's email server to send email messages as I have found it can take over a day for emails to *leave* the Orange network. I have others stories about Orange's poor mobile data services but it would be a case of diminishing returns if I wrote them all up.

Mobile Data Revenue Hit $100B

Unstrung covers new research from Informa Telecoms & Media that states "global revenues from mobile data services surpassed US$100 billion for the first time last year. The figure of US$102.1 billion is equal to US$52.9 per every mobile subscription throughout the year or US$4.4 per month. Strong data revenue growth has continued into 2006, with the 1Q figure of US$28.4 billion up 17% year-on-year.

Kester Mann at Informa said, "The industry is comfortably on track to exceed last year's record total. Data revenues continue to be driven by the ongoing deployment of advanced technologies, improvements in handsets and global subscription growth."

According to Informa Telecom & Media, the 2005 figure "is on a par with the combined fees paid so far by European operators for 3G licences (US$102.3 billion)."

Motorola unveils thin phone for emerging markets

Reuters reports that Motorola (MOT) will "start selling the Motofone, its thinnest phone yet in high-growth emerging markets in a bid to compete better against bigger rival Nokia (NOK)."

According to the article, "Motorola has already received an order from one carrier for 500,000 Motofones. The phone is 9 millimeters thick compared to the 13.9 millimeter Razr and it is the first of a new slim phone design platform known as the SCPL. The phone will also include features such as local language voice commands, aimed at helping users that cannot read, and a screen that can be viewed clearly even in the glare of sunlight."

Yankee Group analyst John Jackson thought "the Motofone would help the company but noted that even though price is a big issue in emerging markets, many users there still want phones with the latest features such as Web-surfing and cameras."

Jackson also pointed out that the "fact that the latest phone is part of a larger line-up could also help Motorola to curb its expenses." he said, "It should make Motorola more cost competitive."

IDC: Substantial Market Expansion for U.S. Wireless Cellular TV and Video Content and Services

IDC has issued a new report that predicts "about 24 million U.S. cellular subscribers and customers will be paying for some form of TV/video content and services on their mobile devices by 2010, up from about 7 million this year. This growth presents new revenue opportunities for carriers, handset developers, and content providers."

Lewis Ward at IDC said, "Although our research found penetration of these services isn't likely to exceed 10% of all subscribers by 2010, video/TV services are poised to become a significant contributor to carrier data ARPU while emerging as a hotbed for community-oriented interaction and interesting advertising experiments. Broadband adoption of video/TV services is emerging as the cornerstone of growth in this market."

IDC found that "overall, blended cellular TV video/TV content and service ARPU is expected to settle in at about $6.50. This metric is comprised of three elements: a la carte content purchases, narrowband (i.e. "2.5G") subscriptions, and broadband (i.e. "3G") subscriptions. Within this mix, broadband video/TV services should grow from less than half of all revenues last year to about 85% of the total in 2010, with a substantially above average ARPU. Survey data suggest that a mix of on-demand clips and live streaming content is the most appealing to consumers."

SigmaTel Q2 2006 Earnings Conference Call Transcript (SGTL)

SeekingAlpha offers up the full SigmaTel (SGTL) Q2 2006 Earnings Conference Call Transcript...

COMPETE: Motorola Q, Sony Ericsson and Nokia attract consumer interest

Compete offers up new research on which handsets are generating consumer interest.

Compete found that "more than 5% of handset researchers evaluated The Motorola (MOT) Q in its first month of release. This made it the most considered device in its price range and substantially more popular with consumers than its apparent direct competitor: Palm’s (PALM) Treo series."

Compete noted that "the Treo 650 saw interest from only 2.3% of June shoppers, less than half that of the Q, despite being offered by three carriers, while Verizon is the only carrier to offer the Q. The Treo 700 series drew interest from even fewer shoppers: only 2.1% of handset researchers considered either the Windows or Palm operating system flavors of the Treo 700 series at Verizon Wireless or Sprint."

Compete wrote that "shoppers were more likely to compare the Q with other high-end, multi-purpose and stylish devices, rather than email focused handsets like the Treo or Blackberry series. The Sidekick II, MDA and T509, all offered by T-Mobile, were the non-Verizon handsets shoppers most frequently compared with the Q. This provides an early indication that Motorola has built a product that has appeal beyond business users and is generating significant interest among early adopters and the fashion conscious."


Compete also found that Sony Ericsson (SNE) "led growth in U.S. shopper interest while demand for other manufacturers’ devices generally stagnated during the second quarter of 2006. Sony Ericsson increased its share of consumer interest 38% in the second quarter, growing from a 4.7% share to 6.5% of consumer shopping interest for the quarter overall. The next biggest winner, Nokia (NOK), grew demand 13%. Other major players saw middling to poor performance. Samsung dropped 11%, LG demand dropped 3% and Motorola gained 2%."

Compete said that "the popularity and price cuts of the W600i, as well as the ongoing success of the entry-level Z520a, drove Sony Ericsson’s growth. Nokia saw growing interest in the 6030, 6101, and a strong launch of the 6103 at T-Mobile. Despite strong interest in the t509 ultra slim phone, Samsung could not make up for the shift of promotion away from the a950 at Verizon and the end of life of the e335 at T-Mobile and VI-A820 at Sprint."

Canalys: Smart mobile device market growth remains steady at 55%

According to Canalys, "overall year-on-year market growth of all smart mobile devices was largely unchanged from the previous two quarters at 55%, but converged device shipments (smart phones and wireless handhelds) rose 73%, while handhelds continued to slide, down 33% compared to the same period one year ago."

Canalys found that "Sharp posted the highest growth among the top five vendors, with shipments of more than a million Symbian FOMA smart phones in Japan during the quarter." Canalys analyst Nick Spencer said "Symbian has performed well in what many find a difficult market to crack. Q2 saw it break the 10 million cumulative shipment barrier there, thanks to significant volumes from not only Sharp, but also vendors such as Fujitsu, Mitsubishi and Sony Ericsson (SNE).”

In Q2, Motorola (MOT) was second-placed, and second-fastest growing, "achieved primarily from shipments of more than a million Linux-based smart phones in China in the quarter, but helped also by the initial shipments of the long-awaited ‘Q’ Windows Mobile smart phone in the US as well as its continuing sales of Symbian/UIQ devices."

Spencer added, “Motorola set itself some pretty ambitious targets for the Q. And it has done a good job on the supply side in its first quarter, especially when you consider the problems it has had bringing such devices to market in the past. But it now needs the kind of user pull that will sustain high shipment levels over the longer term. With RIM (RIMM) and Palm (PALM) regularly shipping more than a million devices per quarter each, the stamina of the competition, and user acceptance of their devices, should not be underestimated.”

Nokia (NOK) was the market leader and "shipped over 9 million Symbian smart phones during the quarter, a year-on-year rise of 35%." Canalys estimated that "more than 95% of these were S60 models, which have recently branched out from their consumer-oriented, keypad-centric designs to include enterprise-focused models such as the keyboard-based E61."

Canalys also estimated that "Palm’s Treo smart phone shipments grew as a proportion of its total units sold to 58%, up from 41% a year earlier. Palm still leads the handheld segment, ahead of HP (HPQ), Dell and Mio Technology, and actually increased its share in that category by 4% year-on-year, but total market shipments of handhelds fell 33% from over 2 million in Q2 2005, to just 1.4 million last quarter – the biggest percentage fall on record."

Chris Jones at Canalys said, “The handheld market in North America has been in decline for a while now, but it was a 42% year-on-year fall in EMEA (Europe, Middle East & Africa) that really hurt the numbers this quarter. The GPS navigation demand that has served device vendors so well in Europe over the past couple of years has undergone a huge transformation. Dedicated portable navigation devices have the lion’s share now, and we are starting to see smart phones make an impact here too for certain types of user. The navigation sector is a superb example of how quickly a market, and the fortunes of the players in that market, can change.”

Motorola Unveils Razr Successors

A couple of articles on a bunch of new handsets from Motorola (MOT). TechNewsWorld writes that Motorola presented RAZR siblings called "Krzr" and "Rizr" at the opening of its annual stock analyst conference. The company "also unveiled three other new phones, including two more technically rich Razrs geared for high-speed networks."

Ed Snyder at Charter Equity Research thought the Krzr and Rizr mark "incremental changes" from the Razr. He remarked that "Motorola is filling a Razr-like phone with more features, which is not a bad idea."

However, Snyder commented that "eventually -- to get another smash hit like the Razr -- you're going to have to come up with something more compelling."

According to the article, "both new phones have the Razr's sleek look. The Krzr is actually 2 millimeters thicker than the Razr, which is known for its ultra-thin styling. But the Razr is 10 millimeters wider than the Krzr. The Krzr has a 2-megapixel camera, and will also feature at least 1 gigabyte of removable storage, meaning it can warehouse hundreds of songs or pictures. The Krzr will work on an "EVDO" cellular network, which allows for considerably faster data transmission."

In InternetNews.com, Dave Chamberlain at In-Stat said, "The Razr has been very useful in improving their fortunes." However, "there is a danger in too much success."

He thought "Motorola must continue introducing new products, rather than tweaking the Razr."

Vodafone Growth May Help CEO

The RED HERRING reports that "on the eve of a possible unseating of its CEO, Vodafone (VOD), the world’s largest mobile phone company, outperformed expectations as it added 4.5 million subscribers."

However, according to the article, "institutional investors with control of about 10 percent of the company plan to vote against the re-appointment of company CEO Arun Sarin and a number of directors."

John Delaney at Ovum said, "The numbers look good enough to let Sarin fend off the attacks for a little longer yet, but there is that nagging question of the long term."

Regarding the company's plans to improve growth, Delaney said, “Three months on, we’re still short on specifics regarding how those goals are to be achieved. Statements of good intent will not be enough by themselves for Sarin to keep the shareholders at bay for much longer. Clearly the markets have yet to be convinced that Vodafone’s board has a plausible plan to get the company’s top line into sustained double-digit growth over the long term."

JupiterResearch: ANTI-QUALCOMM MANEUVERS DECODED

Sharon Armbrust at JupiterResearch writes about the legal battles between Qualcomm (QCOM) and Nokia (NOK), Ericsson (ERICY), Broadcom (BRCM) aimed at forcing Qualcomm "to reduce its licensing fees." She quotes the following from Qualcomm's recent earning call:

...publicly available sources can be used for one objective measure of the value of essential patents in the WCDMA standard by examining how often patents essential to the WCDMA standard were cited as prior art in the patents of other inventors.

Looking at citations is a measure of significance somewhat analogous to the way Google ranks Web pages by examining the number of links to that page. When you factor out citations by a company of its own patents, QUALCOMM has 47% of the citation-weighted portfolio of essential patents for WCDMA, followed by Ericsson at 21%. Significantly, Nokia has only 3%, NEC 2%, Panasonic 1%, and TI and Broadcom have less than 1%.

She concludes that:

The as yet unsigned license renewal agreement between Qualcomm and Nokia, due to expire April, 2007, has hung heavily over QCOM shares (off 34% from end April thr. 7/21), compounded by Nokia’s announcement it will stop producing some CDMA phones and some emerging market carriers’ jawboning they will use more 2G GSM in their networks short-term to avoid CDMA patent costs.

In the end, however, there is not going to be a way for Nokia or the carriers to get around Qualcomm patents. All players will all upgrade to 3G eventually, where Qualcomm CDMA and HSDPA patents are pervasive—all of which makes QCOM shares look oversold.

JupiterResearch: MVNO Math (ESPN Mobile and other MVNO's)

Julie Ask at JupiterResearch posts her thoughts about ESPN Mobile. She writes:

To be contrarian though, I’m going to assume that they are neither arrogant nor unsavvy about this market. There has been market research around since the beginning of time that says that consumers choose wireless carriers based on coverage at home/work, low cost or reasonably priced handsets, and cost of service. They do not choose wireless carriers for their entertainment options. We did a poll recently on our site – one percent view their cell phone as an entertainment device. We had similar data when asking consumers about their priorities when selecting a provider. I’m going to assume that ESPN Mobile knew all of these things before launching their service, and that they were not arrogant in thinking that they knew more than a hundred wireless analysts collectively.

Ask then works some numbers to come up with the following:

• 1 percent of mobile subscribers would choose a provider based on entertainment options offered
• for simplicity, we’ll assume 200 million mobile subscribers in the US (yes, there are more than this, but this number is easy)
• That means that about two million would choose a carrier based on entertainment options
• Not all of them will be able to switch in any given year because they are locked into one and two year contracts
• Making some assumptions about percentage post-paid additions, percentage of additions that are merely family members, etc. (again rough calculation), let’s assume 12 million people make a carrier decision each quarter. Over two quarters (roughly since the holiday season), that would be 25 million if we round up a bit. If we stick with our 200 million assumption, then we assume that about 1/8th of mobile subscribers have selected a new carrier since the holidays.
• If we apply that 1/8th to the two million (potential market), we come up with 250,000 subscribers who have been in the market in the past six months who said they would make entertainment a high priority. Over a year, this is 500,000.
• (not sure of the source, but I saw the number in Fierce) – someone estimated that ESPN Mobile expected to bring in 240,000 subscribers in their first year. This would indicate that they fully expected to take 50 percent of this market. That is a LOT if you consider that there are not only a lot of MVNO’s (e.g., Helio, Disney, Amp’d) in this space with similar goals, but also the carriers. Anyone heard of something called a ROKR that holds 100 songs from iTunes from Cingular? or VCast from Verizon? or “live” streaming TV from Sprint (which, by the way, a lot of people said they would buy)? We are not short on entertainment offerings today. Oh, yeah, and entertainment does not equal sports ... some of these entertainment-enthusiasts will make other choices.
• the same article estimated that ESPN Mobile will attract 30,000 subscribers this year. Six percent of this market sounds somewhat reasonable – like a goal they may have had when they started this business almost a year ago. It’s hard to imagine that they thought they would take 50 percent of the market in year one – especially going head to head with those that have been in the market for so many years.

Ask concludes with:

I don’t think they are that arrogant. They don’t have a lot of the costs that other pure plays have. Marketing is an opportunity cost on their network rather than $$ out the door. Still, acquiring customers is hard and it costs a lot. Identifying niches that the wireless carriers themselves aren’t better suited to serve is also hard. Virgin Mobile has done it – four million subscribers in four years which is amazing, but even they have messaging and product that conveys value.

They MUST have a different plan or metrics in mind that they haven't told these analysts.

It's Not Killer 3G Applications But Economics

Cellular-News covers a new research report from Signals Research Group (SRG) that looks at the cost side of the 3G equation. According to Michael Thelander at SRG, "much of the analysis and debate surrounding 3G focuses exclusively on the revenues associated with 3G without taking into consideration the impact on an operator's total cost of ownership (TCO). This type of analysis generally misses the point since if an operator is able to reduce its overall TCO by deploying 3G, the merits of the technology can also be justified."

The SRG report focused "on the principle cost drivers of an operator's CapEx and OpEx and the role that 3G can play in an operator's budget over a ten year time period."

SRG's research indicated that "for a number of different circumstances, an operator can actually reduce the long-term network TCO if it deploys 3G versus remaining with a 2G strategy. Further, the consultancy discovered that these results can also occur in developing markets, such as India, where 2G networks are already reaching their maximum capacity."

Thelander said, "Although 3G radio infrastructure is generally considered to be 'expensive,' other technology-independent cost drivers, such as site preparation and leasing costs, typically far exceed the cost of the actual hardware being deployed on the site. Thus, if an operator is able to reduce these costs by deploying a more spectrally efficient technology, such as 3G, the incremental higher costs associated with 3G can be offset by reductions in other areas of its capital expenditures."

Forrester Research: Let's not get too excited about mobile video

Josh Bernoff at Forrester Research takes a closer look at the market for mobile video. While MobiTV has 1 million subscribers, "movies come out on Playstation Portable, and Apple has sold (as of last announcement) 15 million downloadable videos at $1.99 a piece," he is still underwhelmed with the potential for the following reasons:

1. It's too small. The right size for video is a 42-inch plasma or LCD screen -- and that makes for an awfully big phone, don't you think? Instead we have the very nice 2.5-inch screen of the video iPod and the similar small screen of the PSP (and the even smaller screens of most mobile phones). Now if you happen to be running on the treadmill at the gym, or waiting for the bus, this will do. But it's no way to watch video that's produced at 1 million dollars per half hour.
2. It's too expensive. Forget the cost of the devices. Video online generally requires a subscription, and most people don't want to pay. Forrester's surveys show that even among the youth that are supposed to be all excited about this, less than 10% are willing to pay even a token amount. And advertising, which supports the rest of TV content, isn't a factor here. Advertisers need measurement, which is missing. And they need an effective delivery of video messages that's biggest enough to make an impression (see 1. It's too small.) And I'm not convinced consumers will put up with ads in mobile video, especially if they have to pay some amount for it as well.

Bernoff concludes:

So, where do I come down? Mobile video will become a niche market. There will be people interested in it, and there will be lots of content, but compared to television -- hell, even compared to online streaming video, which is doing great -- it will look very, very small.

JupiterResearch: Sending an SMS SOS...Sending an SMS SOS...

Thomas Husson at JupiterResearch posts that "ARCEP (the French telco regulatory body) asked the European Commission if the SMS market could be regulated on a wholesale basis. Viviane Reding's services have given their answer: "YES"." Husson writes that "A fair pricing according to ARCEP would be between 0,03 euros for SFR and Orange and 0,035 euros for Bouygues Telecom (the 3rd player is disadvantaged by a smaller customer base). Given the retail price are between 0.10 and 0.15 euros, there is still room for a very interesting margin."

He is "unsure to which extent this new regulation, which could well be adopted in the other EU countries, will impact the retail prices for consumers," but notes "natural trends have shown a decrease in SMS prices, because of the following":

• impact of SMS bundles (e.g O2 Bolt-ons in the UK)
• unlimited offers from MVNOs (Virgin Mobile in France)or aggressive price promotions from SIM-only offers (Simyo in Germany)
• inclusion of free SMS in voice packages

Husson concludes that:

Price-elasticity is a key issue and volumes of SMS continue to increase, as shown in the UK or in France. However, if you had regulation constraints and long-term subsitution from new messaging formats (IM in particular), the increase in volume may not offset the decrease in price. Some operators have already reported declining SMS ARPUs in 2006. Given the huge share of data revenues deriving from SMS, the cut in termination rates and the recent roaming tariffs slash, it is clearer why mobile music and TV generate such buzz in the industry.

Dean Bubley: Fudging the numbers, part 1

Dean Bubley posts at the Disruptive Wireless blog his top ten list of how the mobile industry gets creative when playing with stats. Here they are:

1. Subscribers = Users - Fudge: multiple phone/SIM ownership by many people
2. Overall ARPU numbers - Fudge: exclusion of rebates, and similar repayments that come out as "costs" rather than lost revenue
3. Data ARPU (1) - Fudge: Inclusion of revenue from enterprise & data-only devices (laptop cards, M2M modules, Blackberries) aggregated in non-SMS Data ARPU, and then using the figures to suggest that consumer use of content/MMS/etc is rising faster than it actually is
4. Data ARPU (2) - Fudge: Revenue allocation of bundling. So, I get 250 minutes + 500 texts per month for £30 (+ video / MMS / whatever). How do they decide that "inside the bundle" 1 min = 5p / 1 text = 10p ... or 1 min = 3p / 1 text = 14p ? How is this audited? How much "arbitrariness" is there when operators report "Data ARPU was 19%"?
5. Coverage % - Fudge: it's outdoor coverage, bizarrely using "percentage of population covered". Which is strange, as I always thought that most of the population lives indoors.
6. Radio downlink speeds (for 3G, or WiFi, or WiMAX or whatever) - Fudge: what's the aggregate capacity of the cell? so, how many concurrent users of your 1Mbit/s HSDPA saturate the base station, or its backhaul?
7. Comparisons mobile vs. broadband - Fudge: comparing apples & pears - people vs. households. Sometime useful, but often irrelevant as both are important metrics for different reasons.
8. Comparisons of mobile phones vs PCs - Fudge: no, most people's "computing experience" won't be on phones, even in developing countries. Have you been to many developing countries, Mr Marketing VP? Seen kids packed into in Internet shops using MSN & doing their homework? Stop using the (equally spurious) home PC penetration figures & understand the real world
9. Early mobile application market growth numbers - Fudge: often include substantial "internal" use by the mobile industry itself - application developers, competitors, journalists, testing (including automated network probes) etc, rather than "proper customers"
10. Smartphone market size - Fudge: Includes a huge number of "closed" operator-customised phones developed on theoretically open OSs (eg DoCoMo FOMA use of Symbian & Linux) which are locked-down for 3rd-party software, plus a vast number of Nokia S60-based devices bought by people who neither know nor care that their device has an open "smart" OS. The proportion of smartphones bought by individuals who knowingly choose an "open" & flexible software platform is probably less than 20%.

Weekly Roundup

A roundup of mobile analysts in the news for the week ending July 23:

• Tole Hart at Gartner via the Austin American-Statesman about when cell phone meets Web auction
• Marina Amoroso at the Yankee Group via the Fort Wayne Journal Gazette about Verizon (VZ) contract fee to fall
• Ross Rubin at NPD Group via InfoWorld Nederland about the high stakes behind Microsoft's (MSFT) Apple (AAPL) 'iPod killer'
• Rob Enderle at Enderle Group via CIO Today about Microsoft (MSFT) Joins with Nortel (NTL) to Sell Businesses on VoIP Phone Systems
• Steve Palley at Foci Mobile about Connecting Vision to Reality at The Game Initiative’s Mobile Game Conference
• Richard Windsor at Nomura and Inder Singh at Prudential Equity via Unstrung about Motorola's (MOT) handy quarter
• Michael King at Gartner Group via The San Diego Union Tribune about costly cell equipment is stolen in region

Microsoft to take on Apple's iPod with Zune products

Big news today is Microsoft (MSFT) officially confirmed it will tackle Apple's (AAPL) iPod head on with their own portable media device. here are some of the analysts commenting on the news:

• Stephen Baker at NPD Group via MarketWatch
• Shaw Wu at American Technology Research via CNET News.com
• JupiterResearch analyst Michael Gartenberg via the Associated Press
• Michael Gartenberg via the Jupiter Analyst Weblogs

Strategy Analytics: Nokia, Motorola and Sony Ericsson Set Record Highs as Global Mobile Phone Shipments Reach 235 Million Units in Q2 2006

According to Strategy Analytics, "global mobile phone shipments grew a healthy 26 percent year-over-year, to reach 235 million units in Q2 2006. Nokia (NOK) and Motorola (MOT) dominated sales and accounted for a record 55 percent combined share during the quarter."

Neil Mawston at Strategy Analytics said, "Motorola has recorded an average 52% annual growth over the last four quarters, while Nokia has averaged 32%. If Motorola can continue this breakneck pace - a stretch, but not totally inconceivable given the strength of their core designs - it would overtake Nokia in the first half of 2007. The stars would need to align for Motorola on additional new products, 3G, and component supply, but this should be a strong warning for Nokia which should feel pressure to more rapidly improve both entry- and mid-tier product offerings in terms of both designs and numbers."

Chris Ambrosio at Strategy Analytics added, "Sony Ericsson is another vendor who has achieved both balanced product design and brand relevance with its Walkman products, resulting in record highs for the joint venture in shipments, revenues and profits. The important story for Sony Ericsson is the notable improvements in getting new products out and into channel on time - and profitably. If Sony Ericsson can continue in this area, where it has struggled in the past, the Walkman and Cybershot brands from Sony have legs to provide strong growth well into 1H 2007."

Other findings include:

• Sony Ericsson jumped back into fourth position for the first time in 2 years, as demand surged for its Walkman music phones;
• The market share gap between Motorola (22%) and Samsung (11%) opened to its widest point since 1999, as Samsung continued to miss out on the boom in emerging GSM markets.

2006 Global Shipments and Market Share Estimates - Top 5 Vendors

Global Sell-In ( Millions )	Q2 '05	Q3 '05	Q4 '05	2005	Q1 '06	Q2 '06
Nokia	60.8	66.6	83.7	264.9	75.1	78.4
Motorola	33.9	38.7	44.7	146.0	46.1	51.9
Samsung	24.4	26.8	27.2	102.9	29.0	26.3
Sony Ericsson	11.8	13.8	16.1	51.1	13.3	15.7
LG	12.1	15.5	16.2	54.9	15.6	15.3
Others	44.2	48.8	57.6	197.2	46.6	47.7
Total	187.2	210.2	245.5	817.0	225.7	235.3
Global Share %	Q2 '05	Q3 '05	Q4 '05	2005	Q1 '06	Q2 '06
Nokia	32.5%	31.7%	34.1%	32.4%	33.3%	33.3%
Motorola	18.1%	18.4%	18.2%	17.9%	20.4%	22.1%
Samsung	13.0%	12.8%	11.1%	12.6%	12.8%	11.2%
Sony Ericsson	6.3%	6.6%	6.6%	6.3%	5.9%	6.7%
LG	6.5%	7.4%	6.6%	6.7%	6.9%	6.5%
Others	23.6%	23.2%	23.5%	24.1%	20.6%	20.3%
Total	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%
Total Growth YoY	17.6%	25.5%	24.9%	20.1%	29.6%	25.7%

Analysys : Mobile Operators Can Drive ARPU with Bundled Pricing,

Tekrati Research News covers a new report from Analysys that finds "the emerging approach of bundled pricing is a powerful technique for driving mobile voice usage and kick-starting much-needed new revenue from mobile data services."

Alastair Brydon at Sound Partners said, "Affordable bundled pricing has been fundamental to mobile operators in the USA achieving average voice usage that is over five times higher than in Western Europe. Bundled pricing can be even more effective when extended to multiple voice and data services within a bundle."

Brydon added that "Bundles can encourage users to adopt and use more data services than they would if the services were purchased individually."

Dr. Mark Heath at Sound Partners said, "By establishing ongoing communication with customers and offering incremental refinements to their service bundles, mobile operators can strengthen loyalty and may be able to migrate customers to higher-value bundles over time. A particular benefit of bundled pricing is that it reduces the emphasis on the price of individual services, making it more difficult for customers to compare prices among competing operators."

Analysys noted "there is growing interest among mobile operators in flat-rate pricing, whereby subscribers are offered unlimited usage of one or more services for a fixed price. While flat-rate pricing has the benefit of simplicity, unlimited service usage can have serious implications and therefore must be handled with care. Furthermore, flat-rate pricing makes operators more susceptible to price competition and could make it difficult to generate additional revenue from increased usage of existing services or take-up of new data services."

JupiterResearch: Starbuck's Summer's Perfect Storm

Julie Ask at JupiterResearch posts about Starbuck's "Summer Pursuit" mobile marketing program. She loves the campaign, and writes about some of the components:
(for the consumer)

• Short code to sign up (easy) - text "Summer" to 66268
• Trivia questions delivered via SMS - it amuses me
• I won a $5 gift card (ok, real value here) on my first right answer
• Won a drink coupon 5 correct answers later
• Entry into bigger sweepstakes

(for Starbuck's)

• Online registration
• Online opt-in for future promotions
• Trivia questions/answers tied into their products
• (will eventually drive foot traffic)

(for the carriers)

• if someone plays the entire contest, they will receive 57 SMS messages AND there is full disclosure on the web site so the player knows up front (at first I was horrified by the number of messages that I would be sending, but then I received the $5 gift card and the coupon for a free drink and I thought ... ok, at 10 cents per message, I'm already even)
• one can also submit answers via MMS (photos) - I haven't trialed this yet, but plan to so stay tuned. At 30 to 50 cents per message (answer), this could generate a lot of revenue

What she hasn't seen/what is missing:

• Wouldn't know it existed if it weren't for the press
• Coupons are being mailed to me rather than having in-store redemption right away

Ask concludes with:

I'm sure they thought of these things and there are reasons why they didn't do them, but still. So not exactly the perfect campaign, but it seems really close so far. Stay tuned for how the MMS version works with submitting photos of answers. I can only imagine that these are verified manually. We'll see.

Cell Phone Sales Spike Again

The RED HERRING reports that "mobile phone sales grew again in the second quarter after an unusually strong first quarter and may come close to hitting the billion-unit sales mark for the year." According to IDC, "sales in the second quarter fell just short of an all-time high of 237.8 million units. That represented a 2.1 percent increase over the first quarter, and 22.5 percent more than the same quarter a year ago."

IDC estimated that "phone makers shipped 470.7 million units in the first half of the year, putting them within range of reaching the billion-unit target for the year."

IDC analyst Ryan Reith. said, "Basically at the end of the last quarter of 2005, we saw a very impressive quarter of just under 250 million units. Q1 2006 was higher than anyone expected across financial firms and research firms. People came in and revised their forecasts. We revised ours a few months back."

Reith continued, “In almost all aspects Motorola (MOT) has had an excellent first half of 2006,. I understand their ASPs [average selling prices] went down, but that was not as big an issue for them. The majority of their sales are driven by the RAZR, and you can get it for next to nothing if you want to get locked into a contract. Nokia (NOK) wasn’t much of a shock.”

Yahoo a Go-Go on Moto Phones

InternetNews writes that Motorola (MOT) will start packing Yahoo (YHOO) applications. Beginning in the first half of 2007, mid-priced and high-end Motorola phones will include Yahoo Go for Mobile, a package consisting of e-mail and search, as well as an address book."

According to the article, "Motorola joins Nokia (NOK), AT&T and RIM (RIMM) as companies, including Yahoo services on their mobile devices."

Mike McGuire at Gartner said, "For Yahoo customers looking to expand access to the Web, this is a portent of things to come. Google is being relatively careful how they roll out."

McGuire believed "more services, once tethered to the desktop, may migrate to mobile devices. Some possibilities are mobile news and sports information or search results piped to cell phones. The mobile phone could also transform into yet another advertising channel for Yahoo, Google and other Internet companies."

Qualcomm provides Super 3G's missing uplink

ZDNet UK News writes that "Qualcomm (QCOM) has successfully completed a test call using HSUPA (High Speed Uplink Packet Access), the missing uplink in super-3G. The technology promises to provide speeds comparable to the downlink speeds of HSDPA (High Speed Downlink Packet Access)."

According to the article, "the test calls achieved an uplink speed of 2Mbps, compared to the 64Kbps uplink speed offered by 3G services such as HSDPA. One of the drawbacks of HSDPA as a true broadband replacement has been its unsuitability for sending large amounts of data quickly, which is where HSUPA comes in."

John Delaney at Ovum said, "We can probably assume it'll be about the same rate as HSDPA on the uplink [in real-world conditions]." Delaney cautioned that, as Qualcomm is "not part of the GSM camp… the real impact of testing HSUPA will be when it comes from one of the more mainstream GSM vendors".

Delaney added, "If Qualcomm is using this as a kind of wedge to drive GSM operators towards their kit, then that's unlikely to work."

Qualcomm Europe's president, Andrew Gilbert got all bent out of shape at Delaney's comments, calling them "absolute rubbish."

Unmaking Motorola's Q

BusinessWeek covers the the iSuppli tear-down analysis of the Motorola (MOT) Q. According to iSuppli, "it costs Motorola about $158 to build the phone. That includes components and assembly but excludes other expenses such as marketing, distribution, and licensing fees to Microsoft (MSFT), which makes the phone's Windows Mobile operating system."

Currently Verizon Wireless, the joint venture of Verizon (VZ ) and Vodafone (VOD ), is the only nework operator to offer the smartphone "at a heavily subsidized $199 with a two-year service contract, and $349 with a one-year contract."

Andrew Rassweiler at iSuppli noted that "the Q's single most expensive component is the LCD display" at a cost of $25." Rassweiler said, "Whoever made it didn't want to be identified."

Sources of other parts of the Q include:

• Intel (INTC) has two parts in the phone, a $19 XScale microprocessor and a flash memory chip. The XScale chip is produced by the unit of Intel that is being acquired by Marvell Technology (MRVL).
• Qualcomm (QCOM) supplied a chip called a digital baseband processor (about $14) that helps the device connect to digital wireless networks. Rassweiler said the "Q phone marks the first time he's seen that particular Qualcomm chip."
• Qualcomm supplied four other parts, including a power management chip. Other suppliers included Texas Instruments (TXN); Broadcom (BRCM), which supplied a Bluetooth chip; Freescale Semiconductor (FSL), which supplied a USB chip; and M-Systems (FLSH), which supplied flash memory chips. Micron Technology (MU) supplied the CMOS imaging chip, and Skyworks (SWKS) contributed two power chips.

According to the artilce, "the materials and manufacturing cost of the Q is higher than that of RIM's (RIMM) current flagship handheld device, the Blackberry 8700. The 8700 cost about $123 to make, and it sells for $299 from Cingular Wireless."

iSuppli has not yet done a tear-down of the Palm (PALM) Treo 700.

Merill Lynch: Time to Pull Plug on Mobile ESPN

MediaWeek reports that "Merrill Lynch issued a note to investors calling for ESPN to "throw in the towel" on its branded mobile phone service."

Jessica Reif Cohen and Michael Kopelman at Merill Lynch wrote that "it is time for Disney to pull the plug on Mobile ESPN." The pair charged that "since Disney launched the service with much fanfare during Super Bowl XL, the company has had little luck landing paying subscribers."

Regarding the initial $399 pricing for a Sanyo handset and the subsequent reductions in price, Merrill Lynch stated “the model does not appear to be a particularly attractive use of capital."

Cohen and Kopelman estimated that "ESPN Mobile will lure a mere 30,000 subscribers over the course of this financial year, well below their original estimate of 240,000. Along with the losses generated by a second Disney-branded phone service, ML expects that the Mouse will lose $135 million on its experiment in FY06."

Cingular Triples Its Second-Quarter Profit And Adds 1.5 Million To Subscriber Base

Investor's Business Daily reports that "Cingular Wireless tripled its second-quarter profit to $540 million as customer disconnects fell to an all-time low.

According to the article, Cingular earned $540 million last quarter, up from $147 million in the year-earlier quarter. The carrier added "1.5 million subscribers, raising its customer count to 57.3 million. Verizon Wireless has 53 million customers."

Roger Entner at Ovum said, "Cingular is getting better with network quality, which is helping to lower customer churn."

Cingular claimed "its monthly churn rate fell to 1.7% in the second quarter. That's down from 2.2% a year ago and 2.7% in 2004."

Regarding Cingular claim that "it now has the lowest dropped call rate among national carriers, ahead of Verizon Wireless," Entner stated he believed it "applies mostly to about 20 markets." He added that "Cingular still has issues with blocked calls — calls that don't connect."

Motorola, Inc. Q2 2006 Earnings Conference Call Transcript (MOT)

Seeking Alpha offers the full transcript from Motorola's (MOT) Q2 2006 Earnings Conference Call...

Switched On: The music, the money and Microsoft

Ross Rubin at NPD Group writes his regular Switched On column at Engadget about Microsoft's rumored portable music player Zune. Rubin writes that "much of the discussion around Zune has focused on the strategy shift it would mean for the software giant and the competition that it would bring to Microsoft's current hardware partners. But the company's continuous user interface refinement of Windows Mobile and expecially its deep pockets can let it fight the iPod in ways that its current partners simply can't." Rubin points out three ways that Microsoft can best leverage its war chest:

1. Player subsidization. If the Xbox consoles have been any precedent, it's doubtful that Microsoft would lowball its player's pricing too much. The company would likely rather bring out a full-featured device that wins the hearts of early adopters. However, it could subsidize expensive advanced features that may be a bit ahead of the market. The rumored inclusion of WiFi would enable Microsoft to play upon one of the benefits of subscription services – legal peer-to-peer music sharing among devices of licensed content -- and allow a tighter level of integration with the Xbox 360. This could also drive a viral marketing effect. Indeed, Microsoft, more than any of its hardware partners, can justify subsidization because it could be considered investment in the future of the Windows Media licensing ecosystem – an interest in which its current partners are only tangentially vested.
2. One intriguing rumor is that Microsoft would offer iTunes Music Store's customers the option to repurchase all the songs they've bought as protected Windows Media files. This would certainly be a bold move that would remove one of Apple customers' barriers to entry, but it smacks of the kind of win-at-all-costs freebiemania of the dotcom era. Surely, there are already customers who have spent hundreds of dollars or more at the iTumes Music Store. Completely reimbursing those customers would essentially amount to giving the player away. Imagine if Microsoft had offered a free Xbox game for every PlayStation 2 game purchased when it entered the video game console market.
3. On the accessories front, Microsoft has been driving efforts by the Consumer Electronics Association to define a standard docking interface, enabling command and control, charging and playback like the iPod's. According to the company, USB currently simply lacks the technical strength to serve as a user interface for transferring music. While rumors have circulated that Microsoft has approached iPod peripheral makers, rest assured that Zune would ship with more than a slip pouch available for it in terms of accessories. Regardless of whether the likes of Griffin, DLO, Belkin and others sign on, Microsoft can afford to seed the market with its own branded products in advance of market acceptance and charge little or nothing to license the interface, aiming at another Apple revenue stream.

Rubin concludes with:

In a recent conversation with an executive at a company that sells portable music players, I asked what he thought about the possibility of Microsoft entering his space. He put on a brave face, touting the benefits of market expansion and a halo effect, but noted that anything could happen with the entry of the proverbial "800-pound gorilla." When I noted that in this market, Microsoft wasn't the 800-pound gorilla, he replied that any company with tens of billions on the bank is an 800-pound gorilla. We'll soon see whether it can drive Apple bananas.

3G making waves, especially in midsized business

SearchMobileComputing covers recent research from In-Stat that nearly 5% of U.S. business users "have already adopted 3G services, while another 15% to 20% are "extremely interested" in adoption."

David Chamberlain at In-Stat analyst was surprised "to see the number of users who have already adopted 3G, and it signifies that 3G may soon be ready for prime time." He said, "It's entering the mainstream. There are people who are looking at it, thinking about it and planning to use it."

Chamberlain remarked "the survey also uncovered a number of reasons why 3G could be a better choice than Wi-Fi for wireless data connectivity. Across all business sizes, Wi-Fi costs roughly $40 a month per user. Most companies end up spending more on Wi-Fi bills than on cellular bills because businesses and employees place a high premium on Internet access."

Chamberlain said, "Generally, spending is higher for Wi-Fi. Cellular data spending per user is less by between half and two-thirds than Wi-Fi. Using 3G is less costly."

He added, "When you're using Wi-Fi, you've got a fast connection or you've got nothing. If you have cellular in some form, you have fast or you have not so fast, but you still have something."

Chamberlain noted, "We've really found that midsized businesses spend the most on all mobile services…they have the largest percentage of employees who are using those services."

Chamberlain concluded, "We're on the way. It's got a lot of appeal. I think people who need mobility are going to see it has a lot to offer."

ABI Research: Mobile Content Delivery Platforms Are Becoming More Robust as the Business Matures

According to ABI Research, "robust, dedicated content delivery platforms are crucial to the success of mobile content sales." Ken Hyers at ABI Research said, "The mobile content marketplace is currently something of a Wild West frontier, especially for off-portal sales. As operators increasingly move to off-portal content sales (an established trend in Western Europe and becoming more important in North America), a robust delivery platform is critical not just to operators but to the content developers themselves."

ABI points out that "when many wireless operators first began offering monophonic ringtones to their customers, a fully integrated content delivery platform was not essential. Rather than use a dedicated platform, linked to billing and customer care systems, operators and the off-portal community of merchants would deliver content and handle billing through SMSC. As content grew more complex, and off-portal content sales increased, issues such as incompatibility with mobile devices, an inability to manage more complex billing models, and the overall cost of content became important. Yet many content sale transactions have continued to rely on SMSC to handle much of the delivery and billing."

ABI writes that "the industry is currently in the midst of a transition to more complex content delivery platforms that gracefully handle the complex issues related to rich content delivery. Dedicated, integrated delivery platforms from companies such as Motricity, Tira Wireless, Qpass, and Volantis, and other fully integrated systems such as Qualcomm's BREW, are necessary to ensure a positive experience for consumers, and a profitable one for developers and operators."

Hyers concluded, "Content developers need a relationship with one of these major content delivery platform providers. By handling many of these issues, the platforms relieve operators as well as developers of some of the headaches associated with content delivery, and save them time and money."

Nokia posts strong 2Q sales and profits

Several articles plus the full conference call transcript regarding Nokia's (NOK) 2Q earnings:

• Neil Mawston at Strategy Analytics and Erik Suchsdorff at FIM Securities via Associated Press
• Jussi Hyoty at FIM Securities and Jari Honko at eQ Bank via Reuters.com
• Theo Maas at ABN Amro, Jan van der Hout at Van Lanschot Asset Management and Ioannis Papassavvas at Deutscher Investment Trust via Bloomberg.com
• Nokia Corporation Q2 2006 Earnings Conference Call Transcript at Seeking Alpha