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December 19, 2016

Comments

Whitejack

"Apple's brand was so strong, recalls one insider, that it sucked up all the oxygen."
http://www.businessinsider.com/how-smartwatch-pioneer-pebble-lost-everything-2016-12

Where have we heard this before? In smartphones? HTC, Sony, RIM,...

Abdul Muis

http://m.weibo.cn/2030935042/EmGu5rPRz
Nokia flagship phone with SD835

Abdul Muis

@Tomi,

Do you think BB making a bad business decision?

If, for example, I am in Bangladesh, and I bought an international model made by TCL. I believe the local company who owned the BB brand would not honor any warranty. This would hurt BB brand in the future.

Huber

@Whitejack:

- RIM committed suicide by its ill-fated tablet and by delaying Blackberry OS 10

- Sony's devices are good, but their "a new model every 6 month"-strategy combined with a bad marketing strategy dooms them. In 2016 they additionally got rid of their compact-versions with flagship specs due to a lack of demand (as if the average customer even knew they exist) and they haven't released a new tablet this year. On the other hand, they switched back to a 12-month release cycle. But then they released their new models months after the competition to make sure they fail. This is a classic self-inflicted failure.

- HTC's main competitor is Samsung. They are in decline since at least 2013, when they released the weird HTC One M7. M8 was MEH, M9 was worse than the M8 and the HTC 10 seems to be too little, too late.

Probably "Apple's brand was so strong, recalls one insider, that it sucked up all the oxygen." is also just a lame excuse for pathetic management on Pebble's side.

Whitejack

@Huber
Small correction: HTC unit sales (not just market share) have been in decline since mid-2011, incidentally the very same pace as BlackBerry. The reason is naturally the same as with RIM, like you stated above. Asymco has very nice graph about it:

http://www.asymco.com/2012/07/02/rims-tailspin/

 Tomi T Ahonen

Hi Whitejack and Huber

First on Blackberry. Huber had it right, just when the sleepy smartphone market turned into the fiercest sharktank any global industry had ever seen, and Blackberry (then RIM) was the second largest (bigger than the iPhone mind you), the company took its eyes off its only reason for the company even existing - its smartphone - and decided to invest all its modest resources into launching a direct Apple competitor product, their tablet. A bad tablet by the way, against the greatest tablet made up to that point. The Blackberry - a business-oriented smartphone with a hardware QWERTY keyboard and a proprietary hugely popular IM service (BBM was the global prototype for what became next out of Whatsapp, ie BBM was the MySpace if Whatsapp turned out to be the Facebook in OTT messaging). Apple's iPhone was the consumer-oriented smartphone without a physical keyboard that had an app store where you had to go to get most of its functionality. The best markets for the iPhone apart from its home market of North America were in Western Europe, Japan and Australia; the best markets for the Blackberry apart from its home market of North America were Latin America and Africa. Where the iPhone had China, Blackberry was nowhere in China but Blackberry had India where the iPhone was invisible in India. The Blackberry was the 'anti iPhone' by its design, by its services, by its market segment and by its geographic distribution. It had a hugely popular and fiercely loyal fan base and yes, the Blackberry sold more than the iPhone as recently as year 2010. The Blackberry was growing sales and growing market share AND the Blackberry was highly popular.

If any one smartphone was 'immune' to the iPhone and its threats, it was the Blackberry. If there ever was a smartphone that could have turned a service into a loyalty factor (again, think Whatsapp) that was BBM and Blackberry. But as we reported on this blog at the time, Blackberry management ITSELF said they did not know why they were popular in some countries and not in others. They had totally been taken by surprise by the reach of their phones to the youth segment (BBM) and didn't know how to capitalize on that. They led the whole smartphone market in many countries from Venezuela to Nigeria to Indonesia. And instead of focusing on where they were WINNING, they decided to take on Apple and try their hand at selling a tablet.

Not only was the original Blackberry tablet a total dog as a product, it was of course sold in a different retail channel than smartphones; it was not a consumer product, but a business tablet, it meant VERY long lead times to make corporate sales. Corporate IT departments will fight tooth and nail against new platforms to support (as to a tablet type of tech, they would far far prefer one that is consistent with platforms they already had like Windows, iOS or currently Android; not start a new OS that then has to be secured - and very very expensively - made compatible to all other legacy systems which in many large corporations include dozens of proprietary computer systems built by various vendors like SAP, Oracle etc). The tablet died in the market. And to make matters worse, even the tablet opporunity turned out to be far less than the PC 'experts' had hoped (many in North America suggested tablets would become a larger market than smartphones and some even thought tablets would kill smartphones). Of course THIS BLOG and I were accurate in how the tablet market turned out - and very very precisely specific, about Blackberry blunder with tablets, its a fool's errand, a business-oriented tablet OS won't succeed and the product won't help the company.

But launching an Apple competitor was expensive and took Blackberry's focus away from its key product experiencing monster growth globally. Blackberry should have been expanding its international sales force feverishly, talking to its distributors in the successful countries (to see why that country works and its neighbor might not) and especially pursue the hot youth segment that was falling in love with the BBM service and then offer them youth-oriented smartphones with top features like great cameras, bigger screens etc.

Instead the marketing and sales pushed the dead tablet. Just when the smartphone market went hyperhot, Blackberry went to take a nap. Androids zoomed in and exploded in the market. Nokia decided to commit hara-kiri out of an idiot CEO. Apple and Samsung were reaping huge rewards for being in the right place at the right time (with phones of the right price range to take Nokia's top-end customers) and Blackberry had nothing and did nothing for that opportunity (as I warned, it did not get the best opportunities from the Nokia collapse, they went to Samsung).

The drain on Blackberry meant they cut R&D budgets. The shift from keyboard-operated Blackberry OS to the BB 10 OS that was to be touch-screen operated - was as every other company trying it had already learned (and complained bitterly) far more time-consuming than planned so just like how Palm, Windows, Symbian and Linux (ie Android) had been delayed in their touch-screen versions, so too was BB 10. And then it meant all new HANDSETS from Blackberry got delayed too. Just when they needed hot new handsets, all existing competitors - and a whole slew of new Chinese Android providers like ZTE, Huawei, Lenovo, TCL etc - came in with new sexy phones - and Blackberries were suddenly the Zeppelins of the airplane age. They even LOOKED obsolete. Blackberry users were ashamed to show their phones in public.

Then came 'The Cliff'. One you step off a cliff at a mountain, you are going down, you can't get up anymore. You will die. That is roughly-speaking my theory as I explained how previous large handset makers died, like Motorola and Siemens and Palm. Blackberry's fall from 2010 to 2014 is the fastest-ever fall by a number 2 company of ANY giant global industry in history. Not just faster collapse than Motorola and Palm (and Windows smartphone OS) but faster than yes any number 2 of any industry ever, like PCs, TVs, cars, airlines, etc. FASTEST FALL OF A NUMBER 2 in HISTORY. of ANY industry. Ever. Except for one company that has fallen even faster, but not from number 2. Nokia's fall about simultaneously to Blackberry was even worse, and they fell from number 1. But at least Blackberry didn't work ACTIVELY to make themselves collapse (we found out later, that Nokia CEO had a bonus incentive that made him do all that suicidal stuff).

Now with Blackberry, as the tablet didn't work out, it was where they threw all their marketing and sales effort. Trying to sell to the business corporate buyer segment (in North America especially) when the huge growth was happening in Africa, Latin America and poorer countries of Asia, in the consumer segment especially young adults. When we had a big telecoms event in South Africa about year 2012, there was a youth panel. And they were asked about their phones, who has an iPhone, who has a Nokia, who has a Samsung, or Sony, etc. Each phone had one or two owners but they LAST were asked who has a Blackberry, each kid raised his or her hand. Of course for every older teenager at that time in South Africa (college aged) their primary phone was a Blackberry (because of BBM). But the executives in the room were utterly stunned because most of them had the new iPhones or still the sexy recent Nokias like the N8 or a new Galaxy from Samsung and you'd think 'youth loves videos, internet, Facebook' etc - but no, it was that for every kid the primary phone was the Blackberry and only if they were rich enough, they'd have a 'second phone' that had the big screen etc...

Blackberry didn't understand this. They never capitalized on it. Instead they let it fizzle out. The phones they finally brought to the market were not good enough. BB 10 was not a great OS while it was ok. It obviously then came with a severe gap in apps. The various corporate clients saw a need to update all smartphone corporate apps - if you have to do that and were considering abandoning the BB OS, that was the time to do it, and switch to Windows or iOS (or could have been Symbian or MeeGo) or possibly the new one, Android. So corporate return sales suffered. And then the glamour of Blackberry was gone in the youth sector too. An old BB could do BBM perfectly fine, so no need to replace that phone, now the new phone was a hot new Galaxy Note with its huge screen...

And that is when 'The Cliff' hits. Your sales tumble, so your accountants say 'cut costs' to remain profitable so your investors will not freak out. So you cut.. sales and marketing and R&D. And products are even more delayed, even more buggy, don't have sexy cool features (or are utterly dumb like the square-screen Blackberry). And there isn't enough marketing dollars to be seen where Apple 'hogs all the oxygen' and Samsung throws a king's ransom at taking market share, and Microsoft sponsors its new slave Nokia with gargantuan marketing budgets and Nokia itself breaks the bank with the biggest mobile marketing expenditure ever in the industry (selling its new Lumia smartphones on Windows). And Blackberry in this market CUTS ITS MARKETING COSTS. That is not going to end well.

And then the Cliff will take you. Each cycle you sell less than expected, even less money comes in, the phones are sold with ever bigger discounts, you make a loss, a bigger loss, and you fire people and fire more people and they sell less and products are even more delayed etc etc etc. You are tumbling down the cliff, heading to a certain death. Its exactly how Siemens died, Palm died, Motorola died, Nokia died and yes, Blackberry died as independent handset makers who had all been at one point either the largest or second-largest handset maker (or smartphone maker) in the world.

In no other industry does this Cliff exist. PC makers ranked number 1 or 2 in the market do not fall out of the Top 10 in 3 years. Car makers don't die this way. Airplane makers don't die this way. I don't mean CONSOLIDATION where you merge with your giant rival (like McDonnell Douglas and Boeing) I mean you FALL OUT of the market as a failure when you were the largest. In the other industries it takes a decade for a number 1 or 2, who does consistently badly to 'gently' erode its market share so much, they fall out of the Top 10. A decade, not three years. Whitejack, if you haven't read 'the Cliff' please follow the link and read it, its very illuminating. And note, when I wrote it, Blackberry was not one of the examples I used to explain the theory. Now we can see how Blackberry actually DOES fit that theory of 'The Cliff'.

As to the other stuff. Pebble haha, they drank their own cool-aid. They really thought wearables were going to be big. They had a HUGE buyout offer I think from one of the watchmakers, might have been Citizen, that they foolishly turned down (idiots). I told you on this blog before the Apple Watch was even first shown to the world, that there IS NO MASS MARKET for smart watches. Its a total technical toy and decoration, it will not sustain any real industry. And Pebble died because it tried. Now, obviously the Pebble people would not know who I am and they'd rightfully say that someone working in mobile telecoms is not going to understand the wearable tech, but I was right and they are dead. They didn't die because Apple sucked out the oxygen (howcome Fitbit is alive if thats the case). They died because they were foolish. There is no sustainable mass market in smart watches and increasingly most tech experts say so now. I said so before the Apple Watch was launched (wrote a big blog about it) and after Apple announced its iToy and after they started selling it and my story never changed. There is no mass market for smart watches. Sorry. Pebble management believed in the fairy dust. BUT they were kind of victims of the iHysteria, they believed the iBullshit.

Huber - thanks excellent points and I obviously agree with all of what you wrote.

Tomi Ahonen :-)

Abdul Muis

When Nokia and Blackberry still a king of a jungle, Nokia was, once, want to license the Blackberry stuff in their E-series devices. But BB refuse to license the BBM to nokia..... or so I told...

Whitejack

Thank you Tomi for the insights. I'm curious: Now that you explained the reasons behind fastest fall of any industry in the history for Nokia (#1 smartphone maker, self-destruct by Elop) and the second fastest for RIM/BlackBerry (#2 smartphone maker, killed itself with a tablet)...
...I checked your past numbers and at least on Q4 2009 to Q2 2010 HTC was still fourth largest on smartphone shipments. Could you shed some light on how #4 smartphone maker collapsed so fast?

Abdul Muis

@Tomi,

Just an update for your data....

http://seekingalpha.com/article/4031397-blackberry-hardware-decline-continues
"BlackBerry's hardware user base (and this includes all BlackBerry devices) continues its relentless decline. According to BlackBerry's Q2 fiscal 2017 Financial Information report, BlackBerry only had 18 million users. Total."

Jaakko

@Tomi
Former Nokia manufacturing unit in Salo is currently owned and used by TRI. What's your take on them?

http://us11.campaign-archive1.com/?u=1d34480bd339567cb5c193ac8&id=5926adce6d&e=e094d06079

 Tomi T Ahonen

Hi Whitejack

You misunderstand. HTC didn't collapse. Their decline was normal ups and downs of the most heavily contested global industry ever. It was what was to be expected by ANY of the rivals in the smartphone wars, suddenly from 2010 up about till this year. HTC didn't do that much worse than LG or SonyEricsson or Sharp in the same period, a bit worse but it didn't suddenly collapse.

HTC didn't do any really massive blunders. It made bad bets on the future, that were mostly a legacy of its roots. HTC best markets were USA and Europe where the growth had ended and all the big growth was now in the Emerging World. HTC didn't pursue that region like say Samsung did. HTC was the original launch customer for Windows so they were quite embedded to the Windows smartphone family probably too much to really take advantage of Android as well as other Android makers who cut their Windows projects far faster (freeing resources to fight on the winning platform instead).

Then there were some bad handsets, there was some bad reliablity etc, phones that seemed to come apart after 2-3 months of use, so the resale value of HTC was very poor (an important aspect in the Emerging Worlds especially). But HTC didn't make a big blunder that caused them to 'step over the cliff'. They just lost their market gradually similar to how Panasonic or Sharp or Kyocera or SonyEricsson or LG have done. It was what was to be expected.

Note that HTC illustrated how out of touch they were, in how poorly they did when Nokia collapsed. It was a 'customer give-away' to rivals. Any sane fast rival would have scooped up most of Nokia's old customers like Samsung did but HTC did not. So while HTC did suffer like all rivals, out of the suddenly very hot and contested smartphone bloodbath years, they did not feel the relief of the Nokia customer-give-away that gave rise to Samsung and several of the Chinese brands especially Huawei.

Tomi Ahonen :-)

John A

Will be interesting to see how HTC will coming back, or if the decline will continue. For Sony they seems go fairly good recently atleast with their flagship Xperia XZ:

"The Sony Xperia XZ is the most popular flagship from the second half of 2016"

http://pocketnow.com/2016/12/20/the-sony-xperia-xz-is-the-most-popular-flagship-from-the-second-half-of-2016

Maybe it has something to do with the Samsung Note 7 issues? But I think its a market for Sony if they are able to deliver top devices with good cameras and so on.

I am very interested to see what BlackBerry devices TCL will coming out with also. And of course I looking forward what Nokia will bring to the android market.

Ben

Sounds like management got greedy and bit off more than it could chew. I think QNX/BB10 was a great OS. It was a productivity machine and the email client has yet to be matched. If they could have skipped the tablet, got BB10 out a year earlier, and opened up BBM when they had momentum maybe they'd still be a player. Bad management no doubt.

The andriod runtime was a losing proposition - especially when the resources got pulled from behind it.

Not super excited about the TCL phones... just bought a nexus 5x for cheap and it's boring but not bad. The camera is better than was expected.

Tomi T Ahonen

Hi Hugh

I deleted your comment because of the profanity. If you want to engage in a reasonable discussion, you may have intended to pose a question instead of that profanity

Tomi Ahonen :-)

Abdul Muis

http://www.reuters.com/article/us-india-smartphones-china-idUSKBN14Q0ZH?

Chinese brands took their largest ever slice of the $10-billion Indian smartphone market in late 2016, accounting for more than one in every two phones sold - a growing market share that ate into sales from top-selling Samsung Electronics.

Samsung, the single most popular smartphone brand in India, commanded a roughly 30 percent market share just over a year ago. That slipped to 21 percent in November, according to tech research firm Counterpoint, the last month for which data is available.

Meanwhile - thanks to low cost, improved technology and an advertising blitz - Chinese brands like Oppo, Lenovo, OnePlus, Gionee and Xiaomi took a combined share of over 50 percent, compared to just 19 percent a year ago.

"Chinese brands are offering quality that is at par with Samsung, at a better price," said Manish Khatri, who owns two multi-brand smartphone outlets in Mumbai. "Of every 10 phones I sell, almost six to seven are now Chinese brands."

Celebrity endorsements from Bollywood actors like Hrithik Roshan and Ranveer Singh, along with huge sponsorship campaigns by brands such as Oppo and Gionee of the wildly popular Indian Premier League cricket franchise have helped improve perception of Chinese brands - once derided for their low quality.

"In a country like India, there are two religions - one is Bollywood and the second is cricket," said Arvind R Vohra, Gionee's India head, noting that both avenues have helped popularize its brand.

Chinese brand executives said innovative product features such as powerful selfie cameras with flash, quicker charging and longer-lasting batteries have also helped them thrive in India, one of the world's biggest and fastest growing smartphone markets.

In the large and ultra-competitive $120 to $440 mid-market smartphone segment, Chinese vendors have more than doubled their market share to 68 percent, while Samsung has lost 14 percentage points since November 2015, according to Counterpoint.

"Being a global company is Samsung's biggest curse," says Neil Shah of Counterpoint, adding Samsung cannot compete on price like their Chinese rivals, who are focused more on low-cost markets like China, India and Indonesia.

Shah said Chinese vendors' access to low-cost components and their expertise in designing metal casing for cheap phones has let brands like Oppo, OnePlus and Lenovo offer better quality products than Samsung, which uses plastic for its cheapest models.

Adding to Samsung's woes last year was the arrival of billionaire Mukesh Ambani's new telecom venture Jio, with heavily subsidised handsets to get customers on its 4G network.

Dyaneshwar Sarde, a 33-year-old Indian farmer who earlier used a Samsung device, said he wanted to buy a 4G smartphone to use Reliance Jio.

"Samsung phones were comparatively expensive, so I ended up buying a Lenovo a friend recommended."

India's home-grown brands such as Micromax, Lava and Karbonn are feeling the heat even more, according to Counterpoint, with their total market share having dropped to less than 20 percent from over 40 percent last year.

(Reporting by Sankalp Phartiyal; Editing by Clara Ferreira-Marques and Randy Fabi)

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