Would-be iPhone killers

While I’ve generally been bullish on the iPhone, the one part of Apple’s strategy I've questioned is the decision to grant AT&T an exclusive in the US (and other carriers overseas). Sure, the exclusive guarantees Apple a piece of the ongoing revenues in the US and Europe.

But excluding three-fourths of the US market (less in Germany or the UK) guarantees that competing carriers will be aggressively promoting competing products rather than selling more iPhones (as has happened for Motorola, Nokia and others when they had a hot product available across all carriers).

The Christmas season ads seem to be highlighting which phones AT&T’s rivals see as “iPhone killers.” What’s the lineup?

• AT&T (ca. 27% market share) has the iPhone, although the ads seem to be designed (and paid?) by Apple, not AT&T.
• Verizon Wireless (ca. 26%) had been promoting the LG Chocolate (as a music phone) and now is promoting LG’s Env as a web-browsing and messaging device.
• Sprint (falling towards 20%) is now promoting the HTC Touch, a Windows Mobile device from Taiwan (originally in GSM) with its supporters and detractors.
• T-Mobile (11%) is today promoting the HTC Shadow — yet another Windows Mobile phone, but of course has the various Sidekick models to appeal to the teen/twentysomething demographic.

What I find interesting is the carriers are hoping to dethrone the iPhone with wannabes — Microsoft, the Taiwanese and Koreans — not Nokia or Motorola. Yes, LG and Samsung are top 5 manufacturers, but they have been known for their manufacturing and not their software.

While Palm or RIM fans might disagree, overall Nokia seems to have the deepest and most consistent software operation of any handset vendor in the world. Cognoscenti talk about the N95 as the best multimedia phone not made by Apple, but it’s nowhere to be found. Of course, it doesn’t help that Nokia gave up on the CDMA (cdma2000) market and with it Verizon, Sprint and the various smaller carriers who comprise a slight majority of the US market. Since AT&T has no need for an iPhone killer, Nokia doesn’t have a lot of options here — foreclosing most of the market to LG, Samsung and Motorola.

So is this the list of best competitors to the iPhone? Or is it the list of vendors who want to buy market share through co-marketing dollars, price cuts and other incentives to AT&T’s rivals?

End of an oxymoron

Of three doctoral students visiting SJSU to apply for our strategy job, two have presented talks about Motorola: one on the entry of a Motorola battery division into China, and the other on corporate entrepreneurship at Motorola (their internal incubator).

For these two Motorola job talks, at least one wrote in the corresponding research paper

under the leadership of Motorola CEO Ed Zander …

to which I asked “Isn’t that an oxymoron?” On Friday, investors finally forced an end to the oxymoron, i.e. Zander’s four years of leadership in Schaumberg.

Now I’ll be the first to admit that Zander got a bad hand, following in the footsteps of failing nepotism, er, family control and many years of drift in the industry they created (handheld cellphones). But still, in drafting passed-over former Sun Microsystems executives, Google got the better deal. (Perversely, Wikipedia didn’t even list the Sun affiliation of the current Google CEO, so I had to add it).

Will Motorola be able to turn it around? I sure hope so. I got to know their history and their impact upon both U.S. and telecom innovation when researching my dissertation in the late 1990s. It is tragic to see how far they’ve fallen. But, on the other hand, I thought HP had been destroyed forever (through a combination of acts of omission and commission) but Mark Hurd seems determined to prove me wrong.

One last Motorola tidbit. At one point, Motorola had a project to port Skype to its phones. The project was a technical success, but for some reason none of the operators wanted to buy a phone with Skype pre-installed so the project was cancelled. To quote the former project manager (via our visiting scholar who shall remain nameless):

“I went to our own management and they said, no way in hell would we let you do this because our customers would kill us. The operators are fighting tooth and nail from becoming a bit pipe. Imagine one megabye of code, which is what Skype is, destroying a multibillion dollar industry. I was on one call with an operator and he says, ‘We're going to save you time and money. Don't develop Skype.’ ”

Put a Leopard in your tank

All but my fellow Mac bigots can skip the rest of this post. I upgraded my Mac to OS X 10.5 today and had a few observations.

One is that the branding of the software package says “Leopard” with “10.5” in smaller print. I didn’t get the sense that this was true with Tiger (10.4), so I guess Apple has concluded that using the code name to build buzz beforehand creates a brand that’s worth using after launch.

10.5 has brought some fawning reviews but also a few noting the key omissions (notably Classic). Today’s immediate problem was the loss of NetInfo Manager.

Without NetInfo Manager, I had to solve two problems:

• Enabling root access, using the new “Directory Utility” program.
• Moving my home directory — I have multiple System partitions on different volumes, but share the same user directory across these systems. The answer is to use the dscl command to map the user directories.

In our printer driver days, we used to have multiple system configurations installed (it was much easier under OS 7.x-9.x). Still, my former coworkers thought I was nuts to set up multiple configurations on my laptop — in this case, two versions of OS X and one with OS 9.

It turns out it’s already paid for itself. When my 10.4 partition died 6 weeks ago en route to the airport, I switched my 5-year-old laptop back to OS 9.2.2 and then 10.2.8. Rather than drop everything to salvage the 10.4 partition, I decided to wait until I could do a clean install of 10.5, which turned out to be painless (other than the $70 purchase price).

Much as I like Apple’s stuff, they can’t make the hard disk more reliable. And this little episode had a good side-effect: I bought an up-to-date copy of Disk Warrior, which worked like a charm. Even my wife (Palomar’s then project manager and procurement officer) remembered how the product bailed us out of jams in the pre-OS X days. It’s a good insurance policy to have on hand.

Walt says: wait for Kindle 2.0

Thursday the WSJ’s Walt Mossberg reviewed the Amazon Kindle in his main column. (15 years ago, when I was in the computer industry, this was the most influential computer column in the country).

His conclusions: Amazon knows how to sell books and has good partnerships, but doesn’t know how to make hardware.

Amazon has nailed the electronic-book shopping experience. But it has a lot to learn about designing electronic devices.

And, in addition to the dubious idea of charging for free online content (like magazines and blogs), it doesn’t work very well.

Microsoft and some other companies have done very well by selling a lousy 1.0 and a much better 2.0 or 3.0. (Remember, Windows wasn’t usable for anything until Windows 3.1, and the mass adoption started with 4.0 i.e. Windows 95).

Will Amazon get better? Will it stick it out (rather than give up)? I suppose if your business is selling dead tree information goods, you have to do anything in your power to prepare for the day (due to cost or convenience or environmental consciousness) that people stop wanting to kill trees. This would be unlike the (US) railroads, which never prepared for the era when people would decide to spend 6 hours crossing the country instead of 72 hours.

Is Silicon Valley still dominant?

In summarizing the Nokia “Web 3.0” article, I forgot to mention one key point. The whole tenor of the article (and the accompanying series) is part of the Merc’s crusade to reassure locals that Silicon Valley is still the center of the technology world. For example, this photo caption from Sunday’s paper (not on the web):

SMART-PHONE HUB
Engineers test imaging technology at Nokia Research Center Palo Alto. The opening of the facility a year ago illustrates how the valley’s pre-eminence as an incubator of innovation has been enhanced by economic globalization, not diminished.

Monday’s Part 2 carries on the theme with the headline “Valley’s edge: Success hard to copy.” I’m sorry, but this is way too Pollyanna-ish for my taste — seriously in denial as to the reality of globalization and the product life cycle.

I have no problem saying that there are times that the jobs moving to Silicon Valley outnumber those leaving the valley, and that more such times may lie ahead. But technology jobs are moving to Singapore, Tel Aviv, Banaglore, Beijing, Kiev, and any number of other places, not to mention other technologies being created and growing where the center of action is elsewhere (like Helsinki and Tokyo for mobile phones). So as with any other high-wage, high value-added industrial cluster, Silicon Valley faces the constant challenge of re-inventing itself to find new innovations that can only be created here. It can be done, but it’s not a sure thing.

I’m sure the CEOs and VCs of Silicon Valley don’t believe that SV is invincible, because for the past decade they have been pouring their money into other parts of the world. For many entrepreneurs, there is no other option — the kids’ soccer league and public schools are here, as are their professional networks — so they will start firms here no matter what. As in the past 50 years, some of these will succeed and many will fail.

But what about employment of the rank-and-file? Like London and Geneva, the Bay Area is becoming impossibly expensive for clerical staff, schoolteachers, cops etc. etc. (For example, for hospitals Northern California has 9 of the 10 most expensive labor costs in the entire U.S., a third higher than the national average.) Eventually these labor costs will push the cost of middle class living even higher. So even with the success of valley companies, how much of that success will accrue to local employees and the local economy?