Google Sells Motorola Unit to Lenovo - I told you this would happen...

In August 2011 Google bought Motorola's handset business for 12.5 Billion dollars. Today we learn that Lenovo has bought the handset business for 2.9 Billion dollars but Google keeps most of the patents it acquired from Motorola.

I wrote right from the start that Google's primary interest was the patents portfolio and Google would sell the handset unit most of all because this purchase caused irritation in the Android handset manufacturer community who didn't want their software operating system provider Google to simultaneously compete with them on making the hardware. That thesis was repatedly proven by press stories that the Android manufacturer community was not happy - and led to several significant developments of rival operating system projects (Firefox, Tizen etc) to purchases of operating systems (Palm WebOS bought by LG from HP).

Now its happened. This has several important impacts to the smartphone bloodbath. First its another consolidation move (and we are still likely to see more of these). So two smartphone brands (arguably 3) become one (by three meaning Google as smartphone maker plus Motorola as its 'independent' brand merge to Lenovo's ownership and eventually all of it will only be known as Lenovo brand just like how Lenovo did with its original IBM PC business purchase.

LENOVO

What does this do to the smartphone battle? Lenovo is currently mired in that mid-field battle with Huwaei, LG, ZTE, Sony, Coolpad/Yulong and HTC for who gets to be called 'third largest smartphone maker' behind the giants Samsung at 1 and Apple at 2. Huawei is the latest also-ran who sits in the 3rd ranking position for Q4 of 2013 (while we still await the last tidbits of the data to complete the Q4 and full-year 2013 results on this blog). Motorola was some years ago the world's second largest handset maker and has been as high as 4th largest smartphone maker but currently isn't even near the Top 10. Still they make in the 12 million to 15 million smartphones per year. So when we add Motorola shipments to Lenovo's latest, we get roughly 6% market share and over 60 million total shipments of smartphones annually. That is the level where Lenovo now climbs to, well above the Huawei level in the 5% market share stage. As Motorola is all running Android as is all of Lenovo, and Motorola has completed its migration of dumbphone production to smartphones the transition to Lenovo unified smartphone portfolio running Android is relatively easy (vs say MIcrosoft's purchase of Nokia where they still have to manage the costly transition from Nokia dumbphones - 89% of the handsets sold in Q4 under the Nokia brand were dumbphones and only 11% were smartphoens - to Windows based smartphones)

So Lenovo now will have about 6% market share and becomes rather clearly number 3 in the smartphone race. Note that just in 2012 Lenovo was ranked 10th largest smartphone maker and powered by mostly only in-China domestic smartphone sales (China towers as the world's largest smartphone market now more than twice as big as the USA) Lenovo had climbed to 4th biggest smartphone manufacturer. It now becomes the clear number 3. In the global handset race Lenovo will be ranked 5th as Microsoft/Nokia and LG are bigger when their dumbphone sales are added to their smartphone sales.

More importantly for Lenovo, it gains a global brand and global distributor channel via Motorola and can far more rapidly boost its market penetration by the Lenovo brand into local national smartphone markets. Motorola's strongest markets left are in the Americas North and Latin America where Lenovo had not yet done meaningful market entry in smartphones (while Lenovo had already entered many Asian markets and some Europeans already). While its market share is modest it is also well trusted in Africa and Middle East. Lenovo should be able to build very powerfully onto the Motorola brand and gains a big leg up ahead of its Chinese rivals Huawei, ZTE and Coolpad/Yulong who are all in the process of also expanding abroad.

The Motorola business has been making losses for years. The Motorola handset business has been declining in sales numbers at alarming rates until Google bought it and stopped releasing unit sales numbers - suggesting quite clearly that the troubles continued. So this is not a healthy unit. But it is a global brand which has a global distributor network something that Lenovo did not have in handsets (remembering that the PC sales distribution channel is very different from the far larger handset industry distribution system that depends on mobile telecoms operator/carrier support), Can Lenovo turn this business around? I think the IBM laptop business purchase shows a very good signal that Lenovo is able to buy a 'US' business and make it work and grow. Yes IBM's PC business was profitable when Lenovo bought it vs Motorola's loss-making but I think this is very promising compared to say Microsoft's bad history of buying hardware makers like its purchase of Danger that it messed up totally into the aborted Kin phones launch. Time will tell but I think Lenovo has a good chance to capitalize on this purchase and propel itself to a safe third-ranking in smartphone wars of the years to come.

I should note that this clearly proves that Lenovo was serious when we heard rumors that Lenovo was looking at buying RIM/Blackberry - and Nokia. I did say on this blog several times that Nokia shareholders would have been better served if they allowed the handset business to be bidded for openly (Lenovo was not the only one interested in addition to Microsoft) and that very likely Nokia could have sold only part of its handset business to some other buyer than Microsoft to get enough cash to continue but still keep at least part of its handset business... (Note that Lenovo also made a $2B purcase of some IBM server business just a few weeks ago so Lenovo obviously had that itch it wanted to buy someone and had plenty of money to burn.) But yeah, that is water under the bridge but I wanted to point this out against those who accused me of imagining things and not being in touch wtih the industry anymore haha...

GOOGLE

What does this do to Google? Google has been having trouble in its Android manufacturer partners base as many of those in partners were pursuing various alternate operating systems to Android in some capacity or another. There is also some talk of some Android partners possibly re-joining Windows in part (most of all Sony possibly launching a business-oriented Vaio branded smartphone running Windows). This sale very clearly establishes Google's ambitions as 'pure' of not wanting to compete with its handset manufacturer ecosystem. That it was true as so many of us speculated at the time in 2011 that Google's primarly reason for buying Motorola was the patents portfolio that Google didn't want to own the handset manufacturing business. Google is a software and services company at heart. So those doubts and irrituations now recede for Google and this should help stabilize the Android base and possibly even gives motivation for some handset makers NOT to pursue alternate OS platforms. Good move by Google. Obviously the Motorola handset business never turned profitable under Google's ownership and the handset sales numbers dimished while the overall industry grew.

MICROSOFT

I should mention Microsoft and its Windows Phone OS platform as well as its Nokia purchase. I accurately predicted that when Nokia would sell its handset business or parts of it, that MIcrosoft would almost certainly end up owning the Lumia unit because Microsoft could not afford anyone else buying the Lumia unit and then ending Nokia's silly Windows project and shifting that to Android. (Microsoft obviously ended up owning all of Nokia's handset business).

I have since said that MIcrosoft will never be able to make the Nokia Windows Phone smartphone business into a viable significant-sized business into the double digits market share. Never. I have also said that in the long run MIcrosoft's Nokia handset business will be a drain to profits and it will be eventually winded down and ended quietly. I still beleive this except now after the Google Motorola purchase I would add a new scenario - Microsoft may at some point decide to sell what remains of the Nokia handset business while still trying to continue on the Windows Phone OS side...  Now that Google no longer owns a handset manufacturing unit the contrast to Microsoft is even more glaring and that irritation that Google felt, will be transferered to ever bigger irritation by Windows hardware manufacturer partners against MIcrosoft. Not just in smartphones but also in PCs because of Microsoft's growing efforts in the larger computing world through its tablets like the Surface and the Nokia phablets. Microsoft's PC side is not helped by this, but the smartphone side is definitely damaged by this. What bad future the Windows Phone platform faced before today - just got even worse.

SAMSUNG

Samsung now sees clearly who is the new number 3 rival to monitor in addition to Apple's iPhone now that Nokia/Microsoft is a non-player. The new number 3 to consider as emerging rival is Lenovo. Not Huawei not LG not Sony. Lenovo. For us in the Bloodbath-watch year 5 Who is Left Alive we have yet another death and the year starts with consolidation. Who is left alive? I believe this year will see still mroe consolidation...

PS first Samsung Tizen phone leaked via Korean gaming site Moveplayer.net and is called the ZEQ 9000 - see it here for example at Digital Trends. 

Comments

[RottenApple]

@Simon:

"But millions of Americans do rely on that capability. Many Americans do not ever send checks (cheques), but they still receive them. That's why banking apps are so important in the USA. "

Yeah, the American banking system is really, really outdated. Europeans normally just transfer the money directly to the receiver's account without such hassles. Checques are just a waste of productivity.

@Baron95:

"Even the very best attempts (Facebook for instance) of having HTML/HTML5 pseudo apps failed"

I can't say I'm surprised. HTML5 ist a textbook example of a design-by-committee failure, going for the lowest common denominator. But this doesn't mean that the next attempt at standardization won't be good enough to replace native apps. Don't pretend that the infrastructure as we know it is safe. These things tend to change faster than anyone might expect.

I think anybody with even half a brain has realized by now that platform fragmentation is bad for everybody except those who depend on this kind of customer lock-in (and that'd be only Apple right now.)

I think the current system of having a dedicated app for every service is a very undesirable outcome, no matter how much current alternatives suck. But if the situation is undesirable (remember: every shitty service provider currently has to support 2 or 3 different platforms, depending on where they set their boundaries) expect something to be done about it.

And that doesn't even consider those services that offer an intentionally degraded mobile experience just to sell their apps which allow them to gather more information about their users etc.

"Samsung? Zero."

You do realize that Samsung has its own Android app store, right? So while it may be low it's certainly not zero!

[Tomi T Ahonen]

Hi gang..

I've been on vacation, am now back. I'll do a few replies here now. Regulars please don't worry, I'll go clean out the garbage over the next few days. I have some big blogs coming and wrote on today's Nadella announcement already as the shortest blog entry evah on this blog haha

A few quick replies

John Fisher - I'll do the Samsung analysis when we have the final data for the Q4 and full year 2013 performance (we have 3 of the four analyst houses already reported, waiting on Gartner to finalize their count)

So Vatar - I would love to have some hope to agree with you, but no. That will never happen. Microsoft knows now it is losing the future to Google, Apple and Samsung. The foundation on which Microsoft was built is disappearing on desktops and laptops - consumers shifting wholesale to tablets and the vast new market is smartphones. If Microsoft is forced to live off what will remain in the big enterprise market for some desktop, server and Windows licenses they go the way of the Dodo bird. Microsoft desperately needs to claw its way back into the game and the game is mobile. That is why no matter how much some silly - but uncannily accurate pest - analyst Ahonen is claiming that Microsoft can't win with Nokia in mobile, they have to put their best effort into it. And there is enough arroance in Bill Gates, (Steve Ballmer) and the rest of the gang at Microsoft to delude themselves that with only enough time and effort, they can do it. I think my regular readers know the evidence is overwhelming that the global carrier community will support ANY other tech brand ahead of Microsoft. Even with Billions upon Billions thrown at Windows it wasn't even able to sustain 1 to 1 transition from 'obsolete' Symbian under the Nokia brand. Now that Nokia is no more and its pure 'Evil Empire' Microsoft Lumia phones - the damage will only be worse. As Tero Kuittinen wrote on Forbes, the US analysts misanalyze Nokia and its customers and this latest Q4 shows to alarming degree how poisonous the Microsoft brand is alone, without Nokia to mitigate against it.....

Winter - I see those rumors. It will never happen. If Microsoft were to allow a Nokia Android phone, that would spell the end of all Windows including desktop because Microsoft itself was now going Android. Its exactly like when Sony released its first VHS video recorder. That day Betamax died. Microsoft are not that stupid.

eduardo m - I wish I knew haha.. But its reasonable to assume that the Nokia-Microsoft original partnership deal included some exit clause by which Microsoft had the right to buy the Lumia unit if Nokia wished to get rid of it (and have some kind of exclusivity that for example Nokia was not allowed to pursue bids on it from rivals or something like that). I would find it extraordinarily weird if Nokia agreed to a contract that forbid all Nokia handset business sales to rivals. Ie dumbphone sales and Symbian/MeeGo/Maemo/Meltemi smartphone unit sales... but judging by the Elop bonus clause and that the Chairman initially forgot it even existed - a clause that is OBVIOUS overriding conflict-of-interest vs Nokia CEO fiduciary responsiblity - the Nokia Board seemed capable of some massive blunders especially in contracts...

I'll post these and do more replies

Keep the discussions going!

Tomi Ahonen :-)

[Tomi T Ahonen]

Leebase

Very good comment and good calls you've made often as we both know. Its while I don't always agree with you, I often agree with you and I very often learn from you both here and on TW. Now to a few of your points

Google/Sammy coming to terms.. maybe maybe but maybe not quite. We have to see what becomes of Tizen. The delay/non-launch notices are very damaging especially NTT DoCoMo but Tizen isn't dead yet. If Sammy had really kissed and made up with G, they would have ended pouring tons of funds into Tizen. Instead we see the first Tizen phone already in the press. So yeah, it might be that Tizen will quietly be killed. If so, then this Google sale of Motorola is probably the defining moment. But Samsung are Korean they are competitive and very very smart. They know this industry probably as well as Nokia knew it and definitely better than Google know it. I am pretty certain Samsung will play the Tizen card for a long-term play and as long as they get some support from some carriers and get some rival handset makers onboard, Tizen may well still be the strongest of the pretenders/contenders. Like they say, the jury is out on this one. We'll know when either Tizen ships or is quietly shut down. Up to then its anyone's guess.

About Lenovo and Moto. You say no synergies. Actually I think massive synergies. Lenovo is huge in China (Moto nowhere). Lenovo has already gone into India Russia and some other Asian countries. Moto is biggest in the USA (Lenovo nowhere). Moto also strong in LatAm (where Lenovo isn't even aiming yet). Lenovo has very good high-end devices but lacks the distribution. Motorola of old had strong distribution and still has remnants of it plus a brand that is well thought of even in Europe. These two have very little overlap and strong complementary parts. The patents shifting over are also very good for Lenovo otherwise still a whippersnapper kid in the big boy's game of mobile. Finally the IBM purchase says Lenovo understands US management and can make it work with Chinese leadership...

on the 'never 10%' happening in many countries. Yes. That is cannibalizing HUGE Nokia market share for modest Microsoft market share, to terrible blood-letting on Nokia's behalf. It will keep on shrinking, not growing, on an annual basis as the last remnants of Nokia loyalty are lost and its pure Microsoft Lumia... Read Tero Kuittinen's Forbes article for the way US analysts misanalyze Nokia and its loyalty and how poisonous Microsoft has been...

Keep writing and thinking Leebase your comments are always among my faves on this blog! Happy new year my friend!

Tomi Ahonen :-)

[Tomi T Ahonen]

Leebase

Oh one more. Back to Sammy and the Goog. We heard a little while ago that the original Tizen phone was delayed (might mean cancelled with replacement coming). If we eventually see a Tizen flagship from Samsung that is 'amazingly' good then trust this to have been a Steve Jobs'esque moment by Kwon Oh Hyun... If you remember Steve Jobs saw the original Apple iPod-phone prototype and killed it, saying it wasn't Apple-esque enough. That was a phone that looked like it came from Nokia or Motorola with buttons etc. Then they went back to redesign the phone from scratch and more than a year after that Jobs finally showed us the astonishing iPhone. I am hoping this is what happend at Samsung. That the first Tizen phone was to bland, a pale copy of what already exists in the Android world. Then the CEO knew it would be very much a revitalizing opportunity to truly shake the industry but he had one chance of it only, so he said 'not good enough' and sent the boys back to do a total redesign into something awesomely amazing.. Its me obviously hoping against hope that Tizen ain't dead haha... but it may be. That could explain the NTT DoCoMo rejection etc. That they know something far better is possible but they really have only once chance to do a big splash and the first attempt wasn't good enough (incidentially what Elop should have done obviously with the Lumia 800 haha)

Yeah. Speculation but we may find out the truth eventually - assuming Tizen isn't killed.

Tomi Ahonen :-)

[Tomi T Ahonen]

John Fisher

About the 18% profit drop. I hope you saw that Samsung clarified that this was not structural, it was a one-off based on the enormous surprise bonuses the company paid to celebrate Samsung's rise to biggest in world. I agree that declines in profitability should be obseved and considered. This blog is not a finanacial analyst or Wall Street type blog about share evaluations etc. This is a tech blog about the digital and mobile industries and here what matters is the platform. As long as a platform player is profitable (at ANY rate) it is still viable to continue and then market size trumps profits - for the ecosystem (not for investors who I mostly forbid discussions about share prices here. Obviously the level of profits is of big importance to investors but like I said that topic is forbidden on this blog). As long as the player is profitable, that is good enough to be sustainable, and the bigger the profits are no longer a factor. We note that Apple makes currently the biggest profits in tech but they would be equally viable with a fraction of the profits. In the long run, a company could trade excessive profits for better market performance and for my readers - mostly industry people like developers - they want to know what platforms are succeeding to guide their strategies on where to invest their R&D resources...

So yeah, I hear you that Sammy announced 18% drop in profits. It is of big interest to investors, not to readers of this blog. I then note that this was a one-off that caused the drop so it won't really matter either in Samsung's own viablity into its future. The handset unit profits should - if that was the only real reason - rebound strongly in Q1... But like I said, no discussion of share prices etc here!

Tomi Ahonen :-)

[Tomi T Ahonen]

Baron 9-5

the 'clear' number 3 for Lenovo is simply on clear numbers. The distance between rankings 4 through 7 is only measured in fractions of one percent. The distance from 4 Huawei to 3 Lenovo is more than 1 whole percentage point. That is 'clear'. The future is not clear as you say, its now up to how Lenovo executes. Please read my earlier reply on that, the signs are exceptionally good that Lenovo will use this to grow, not shrink its market share in the short to mid term.

AtTheBottomOfTheHilton - its not how Lenovo comes. It is that the moment they finish the purchase the ARE number 3. Its when these two are added together. What you talk about is future execution yes that remains to be seen. But I provided guidance here - I believe first in the world - of the size of the new smartphone maker when Lenovo and Google-Motorola are added together. One other analyst house, I think Strategy Analytics or IDC, has also now stated the 6% number but I said it first haha...

Henrik Hergard - I undestand how you are arriving at you optimism. Now a dose of reality. That above 10% that you see in Kantar. Go back 2 years and you'll find Nokia at over 30% and as high as 60% in those markets using Symbian. Windows global market share is 3% not 10%. It is not growing it is DECLINING now after the Nokia brand effect is removed and all that is left is the Evil Empire also known as Microsoft. Microsoft may have a good brand in PCs, but it is a poisoned deadly brand in mobile. It will not get better with Microsoft it will only get worse. Mark my words Windows Phone or Microsoft-Nokia-Lumia will never reach 10% in market share no matter how man more billions they throw into the endless void that is smartphone marketing. The only short time span that Microsoft can report over 10% market share in mobile industry is when they count the Nokia Asha and dumbphones into their slice of the global handset pie - not the smartphone pie. And that party is going to end before this year is done. Even counting all dumphones and Ashas that Microsoft-Nokia sells, that market share is under the 10% level (was 15%) by Q4 of 2014. Take it from the most accurate forecaster of the mobile industry...

PS if you are new to the blog go back a couple of months where I wrote the big blog about Nokia sold to Microsoft where I also discuss the chances of Microsoft making it work (there are none, I explain the reasons why, with evidence)

WonTheLottery - thanks, great comment. And while it may not seem so for many of the past months, this blog is much more than just smartphones - only the Nokia saga and the overall smartphone bloodbath has been a very exciting multifaceted story the past few years. I do talk about Augmented Reality and Social Media and the mobile industry outside of handsets etc. Only they dont' get as much attention now as the smartphone wars have raged so hot. I hope to return the balance more. I wrote the book Digital Korea which was totally about the South Korean digital miracle covering all those areas from the intelligent cars to robotics to virtual reality worlds to digital money etc...

About Huawei vs Lenovo - you make good points and I do see Huawei and LG the strongest challengers to Lenovo's position at number 3. But this industry is not about who makes the best phone, it is about the carrier relationships and retail channel support as we see time and again and again and again. In that race without the Moto legacy of massive global reach while Huawei sells in most markets and Lenovo did most of its business only in China, Lenovo was able to almost match Huawei (would have been number 4 without Moto). Now with Moto that already-very-competitive Lenovo gains the world. I think they enter this race as the clear favorite to hold onto that number 3 ranking and grow more in 2014 than either Huawei or LG.

duke - haha yeah but lets be honest. Windows Phone IS the number 3 platform now albeit that it only has 3% market share haha.. That is because Samsung abandoned bada while it was growing very strong to focus on the now-delayed Tizen; and as Blackberry fell so fast it would have set the world record for collapse were it not for a crazy Canadian taking control of Nokia.. (PS my new Windows 8.1 on this fantastically great Samsung Ultrabook - is the RUINING aspect of it. I long for my old heavy slow Fujitsu every single day wishing I could have the older Windows XP on this fantastic Samsung machine.... Every day I find yet another annoying thing about the software! I HATE MICROSOFT !!!)

Tomi Ahonen :-)

[Tomi T Ahonen]

John Fischer - hey, that was a low blow and you know it.. If you've been reading this blog for many quarters with the end-of-quarter analysis you know very well that I don't report on speculation of market performance when I do the quarterly updates. I only report on those manufacturers who actually publish their unit numbers, or who have an executive quoting it in the press. Samsung very rarely gives us their number as for example HTC also doesn't. For them I totally ignore their other quarterly results info until we get the next best data point - the average number as reported by the big four analyst houses - Gartner, IDC, Strategy Analytics and Canalys. So my Samsung number has to wait until we hear from all four (three have reported already but we await Gartner). Only then do I comment on the missing top 10 players. So my treatment of Samsung now - that once again they refused to give us their precise number of smartphones shipped in Q4 - forces me to ignore them until I get to calculate the average as estimated by the four big analyst houses to have a reasonably close proxy as our 'official' number. Then - and only then - will I discuss Samsung's performance. As almost every quarter in the past years... No change at all here in my treatment of the Samster..

As to 'hours later' that is my usual speed of giving the market share analysis of EVERY top 10 smartphone maker that reports a number when they release their quarterly results. Nokia, Apple, LG, HUawei whoever.. if we get the number I am often within minutes on Twitter and then within an hour up here on the blog. Nothing different with Apple this time. The only times I can't be that fast is if I am on a plane or otherwise out of internet coverage. I schedule my sleep so that I am awake when the results of major players come as they are on different time zones mostly from where I live here in Hong Kong haha... I tend to be the fastest in the world to give a company-specific market share count in smartphones on a quarterly and annual basis.. If that is not of value to you, please stop reading this blog. I mentioned Apple grew unit sales but that is in an industry that is in hypergrowth. The relevant metric here IS market share which I emphasize, as this is not an investor blog this is a mobile industry blog where the profits don't matter or unit sales growth (that would matter to investors) but the actual addressable market - ie market share - matters to the developers. That the iPhone market share is seriously shrinking - is indeed the big news of relevance to my readers - and many Wall Street analysts note it too by the way.

Tomi T Ahonen :-)

[Tomi T Ahonen]

I removed some comments that were about the stock market or evaluations etc

Tomi the nasty blog policeman who keeps this blog always on the topic and not on the irrelevant nonsense. If your investment advice comes from commenters on blogs you really need to reconsider your investment strategy :-)

[Tomi T Ahonen]

Baron 9-5

I've warned you before. Don't post lies about what I write. There are many bloggers and experts and some in the comments here who talk about the handset subsidy artificially maintaining Apple market share. I never said so. I have said that handset subsidies are an anachronism and they distort the markets and I sometimes use the exmaples from markets like the US where consumers are misled to think the real price of an iPhone is 199 vs some other handset at say 99 dollars when the real cost of an iPhone is well above 600 dollars. But I have never said that Apple's current position is upheld by the archaic practise of handset subsidies. That the iPhone sells about as well in industrialized markets where there are no or minimal handset subsidies like Italy, Belgium, South Korea, Singapore and Hong Kong, as well as markets of extreme or total subsidies as Japan, USA and the UK, says that the iPhone market success is not dependent on subsidies. Please do not suggest that of my writing else point to the date on this blog that I posted such a thing (and then I'll go add a correction to that blog as it would be stupid of me to suggest that and I don't want even my older blogs to contain obiously false info).

I tolerate your contributions here Baron 9-5 inspite of your very severe views and at times belligerent tone but you know you are on a tight leash. Don't suggest I said something you know I didn't say.

Tomi Ahonen :-)

[Tomi T Ahonen]

Huber

THANKS !! that was very nice of you to point John Fischer to my previous posting about that very specific point about Samsung's profits.. I have the best blog commenter community on the planet I am sure. The gang here is so good, knowledgable and active. I learn so much from the comments.... and I love it when some of you who know me and my writing, jump in to answer a particular person who has a legitimate question or gripe haha...

Beers on me whenever wherever we meet Huber!

Tomi Ahonen :-)

[Tomi T Ahonen]

Leebase - good comment on the 3 kings of the industry. About Apple however. I think Apple has to do another iThing. Like iPod revolutionized and revitalized the music player industry, iPhone for phones, iPad for tablets, Apple needs another one of those. Not trying to build a totally new industry (like Newton) ie iWatch, iGlass etc, but rather take some industry seen as stagnant and reinvent it. Television would be a good candidate but so would be videogaming consoles, digital cameras (stand-alone) or some other totally bizarre industry like cars or bicycles or refridgerators or microwave ovens or whatever. Apple's time in milking the music player market is obviously past. The iPhone is now at about its peak. The iPad will fall faster than the iPhone did because Samsung and Android were so well 'on the ball' to run close clones far faster than the Nokias and Motorolas back then were to copy the iPhone. So Apple should perhaps this year or latest next year, give us the next astonishing iGadget that everyone will want, that will totally revolutionize that particular industry and power Apple to huge new 'market space' and boost its profits - plus add again to the iOS ecosystem far beyond the phones, Macs, tablets and media players...

Samsung and Google you are dead-on. The real key I think to G future is the data mined to do incredible targeted marketing of the future that makes today's contextual ads in G searches seem like papyrys rafts compared to a nuclear-powered aircraft carrier..

Tomi Ahonen :-)

[Aminiesta]

So any possibility Nokia will buy back it's handset unit from Microsoft after 4 or 5 years from now?

[RottenApple]

Why should they? They'd be better off starting from scratch if they want to re-enter the business.
In 4-5 years Microsoft's handset unit will be completely worthless with their sole focus on WP.

[RottenApple]

@LeeBase:

"Why does Apple need another iThing?"

For two reasons:

1. Not doing it would undermine their reputation as master innovator.
2. Every hype will come to its end. Smartphones and tablets are 'the thing' right now, but as easily as they disrupted desktop computers there's absolutely no guarantee that some newer technology won't disrupt them in turn - in fact it'd be foolhardy to assume it won't happen. So, whatever Apple does, they can't rest on their past laurels or they go down eventually.

[E.Casais]

@RottenApple

"Why does Apple need another iThing?"

3. Because of network effects. Apple products are premium ones, and are designed to interoperate and be compatible in the Apple family. Achieving any network effect in a numerically limited premium customer base and avoiding this segment "leaking" to competing, open, cheaper products is by extending the set of interacting devices to cover every possible computing gadget. Apple does not just want to go into iWatches, iGlasses, iDashboards and iTV -- it must do it, otherwise customers will wonder why they should limit themselves to a brand that is incompatible with a wide range of cool devices, and then will start mixing and matching devices from other platforms.

[Tomi T Ahonen]

Hi LeeBase RottenApple and e.Casais

About why another iToy? First just a note to you regular guys. You know I hate inviting any debate here about stock market nonsense. It only becomes then a long pointless argument about any share price today, is it too high, is it too low, should I sell, should I buy. Lots of heat and no light. And a massive waste of all of our time trying to find the one useful comment amidst the hundreds. So with that in mind lets talk a bit about Apple investors. I trust we've hidden this chat now so deep into the thread that I can allow from this point on in this thread anyone to join talking about the Apple share price and expectations and reality etc.. Lets hope this won't turn into a monster haha..

So my thinking why another iGadget. I am very afraid that the Apple share price is now based on totally unreasonable expectations that Apple cannot continue to meet. The Apple share price is not based on reality - yes they make massive profits - but rather on a cult-like or religious belief that every quarter Apple will again be better than the last. That there will be iMiracles every single time. If that ends, the share could see years of unstoppable erosion. A bit like Nokia was. Its ten year run to become the first-ever tech device with one Billion concurrent customers - not just biggest phone maker but biggest camera provider, biggest music player providers, biggest clock/watch maker etc etc etc - and totally steady strong profits quarter out and quarter in, had created a level of expecation that nobody could fulfill. Then started the disappointments. And suddenly all that excess expectation started to escape and some investors became disillusioned and got out while they could. Others who were more hopeful remained, but every period more of the departures were than those who stayed and the magic of Nokia just rubbed away. Some said it was the iPhone, others said it was the Chinese cheap makers, others said it was Samsung or whatever but that huge expectation that somehow Nokia would forever be on top - that was unsustainable.

So - I love Apple.. I fear that their current share price has hope and unreasonable expectation built in, and the moment Apple makes a modest stumble, which will come at some point, that could turn out to be a house of cards that falls. The Mac sales cannot grow to any signicant degree to help, as the global (non-tablet) PC market is already in decline. We just heard that for example Sony is selling its Vaio unit to concentrate on smartphones. Thats how much synergy today there remains of the convergence of smartphones and laptops haha.. The iPod is in severe decline said Apple in the latest results. So the iPhone still grows units but its market share has peaked and the iPad has lost its invincibility cloak and now has to fight like mere mortals against a sea of Android tablets. The pattern will repeat of course what we saw with the iPhone. That means.. if Apple wants another cycle of 4 or 5 years of magical growth and astonishing news of great leaps forward, it needs to shift the story away from iPods, Macs and iPhones. While the iPhone (Mac) and iPad can sustain its revenues, it needs the next hot iThing to keep up the aura that nobody is like Apple.. Else if Apple sees its share price turn from unstoppable growth to unstoppable decline - I think because of the severe emotional connection, the Apple investors would react with even more passion about the 'disappointments' regardless of the real fundamental underpinnings of the strong and profitable company. Remember Nokia utterly dominated its industry and grew smartphones in 2010 more than the iPhone or Blackberry but Nokia investors were punishing Nokia as not being good enough. It weathered the whole global economic crisis without one quarter of a loss in the handset unit - the only quarter that they reported a loss was caused by the networking unit and as it was absorbing the purchase of Motorola's networking unit - another big unprofitable unit. You can't blame the CEO for the losses it inherits in that purchase and should cherish how well Nokia got that mess under control in the NSN unit haha... But yeah. I see the warning of history in the inflated expectations at Nokia, which then caused the CEOs both Kallasvuo and Elop to do frequent layoffs to try to keep the investors happy in controlling costs - remember Nokia never once reported a loss in its handsets unit until obviously the Elop Effect. And with that. The Nokia share price fell 55% over three years and Kallasvuo was fired. While Nokia was growing and reporting profits.

I see a danger this same fate awaits Apple and would push it to emergency measures that would destroy the company we all admire. That is why I think its very soon necessary to postpone that possible disaster, by the next iMiracle to move the goalposts down another few years...

Its funny until you asked it LeeBase, I hadn't really ever thought through 'why' I felt Apple needed to do this but I just knew in my gut it did. Now I recall clearly the MBA courses about tech trends and cycles and new market spaces etc... All comes back but until you asked it, it was just a gut feeling..

So guys what do you think. Discussion of stock market issues is allowed in this thread from now on haha..

Tomi Ahonen :-)