• Blog
• Company
• Services
• Clients
• Contact

Top 10 Days in 2011 for Technology

Friday, December 16, 2011

The year-end holiday season always seems like an appropriate time to reflect on what happened during the past year. While the Middle Easterners are taking their political future into their own hands, Europeans seems to have given up their economic future. The US is gearing up for its election year and the rest of the world continues to fight what the economic analysts have named the stagnation years.

In the technology world, 2011 was an unusual year with surprising consolidations, unexpected cross-market acquisitions and new multi-dollar IPOs. Here are the top 10 game-changing days for 2011 in the technology world, in order of their appearances.

February 11, 2011: Nokia partnered with Microsoft
Following Nokia CEO Stephen Elop’s "Burning Platform" memo, Nokia and Microsoft announced a new global strategic partnership. Under the proposed deal, Nokia will adopt the Windows Mobile as its principle smartphone OS, phase out its own Symbian and abandon MeeGo even before its launch. Rightly or wrongly in this reversal of strategy, Nokia’s attempt to become the third ecosystem behind Apple and Android, is now hitched to Microsoft's less-than-stellar efforts in mobile. Let' see how Nokia's first Lumia phones with Windows Mobile will do at their year-end launch in India, whether they will reverse the sharp decline in Nokia's smartphone business (-38% units shipped in Q3).

March 20, 2011: AT&T (tries to) acquire T-Mobile USA
With T-Mobile, AT&T was not just buying a rival but buying 5 years' worth of infrastructure development and a customer-friendly company in the market. In a single move AT&T managed to snag the only sizable competitor that could be integrated rapidly and have a high return on investment immediately on the acquisition completion date. Recently, the two companies took back their original merger application after the FCC chairman came out against the US$39 billion deal. Instead the two companies will seek approval from a federal judge, and will file another FCC application in early 2012. In the end, the long regulatory battle might see the last big telecommunications consolidation in the US, and the colossal breakup fee (US$3 billion) might be remembered as an minor footnote in the world of M&A.

May 10, 2011: Microsoft acquired Skype
With this US$8.5 billion cash deal, Microsoft consolidated its leadership position in the Unified Communications space in the enterprise market, and peer-to-peer communication in the consumer market. The Redmond-based company is finally putting to use US$42 billion out of the US$50 billion of its overseas cash reserve, avoiding the 30% repatriation tax rate. This expensive acquisition (the largest in Microsoft’s 36-year history) may seem costly today, but if the company manages to create a new, seamless communication experience across multiple screens (TV, Mobile, and PC today; plus Tablet tomorrow), this deal could be seen in retrospect as the best move Microsoft could have made in the lucrative global telecommunications industry with its trillion US dollar revenue per year. One hurdle is for Microsoft to assuage all its carriers and telecommunications partners around the world, that Skype is not a major competitor.

May 19, 2011: LinkedIn went public
From its initial public offering on the New York Stock Exchange (symbol: LNKD), LinkedIn raised US$352.8 million, offering 7.84 million shares (8.3%) of its total 94.5 million shares. After 3 years of low activity in the IPO market, LinkedIn kick-started of a new era of the social media IPO tsunami. Looking at the buzz surrounding the most stable and less risky of all “Big Five” IPO contenders (LinkedIn, Facebook, Twitter, Groupon and Zynga), investors are eager to jump on the next band wagon. Today investors prefer remembering Google and Apple stock prices rather than the Dot Com bust to make their decisions. Tech IPOs are back.

August 15, 2011: Google acquired Motorola Mobility Holdings
Google's ambition of reaching the most mobile devices on the planet has been reached and this day Google achieved what it wanted when it initially ventured into the mobile space four years ago with Android OS: to establish its name, credibility and loyalty with consumers. It is now time to convert this massive market share into a more steady revenue. Android generated US$5.90 per user in mobile advertising in 2010. But the figures are still pale compared to selling high-end phone devices (e.g., Apple makes US$370 profit for every iPhone sold). The Mountain View company has yet to find the next billion dollar revenue stream, as 97% of Google’s revenue is from advertising. With the Motorola Mobility acquisition, Google just entered a new billion-dollar business with a strong brand name. The mobile handset manufacturing business could be an interesting add-on to the core advertising business, if tighter development and integration could be done between software and hardware, somewhat like Apple. Whatever Google chooses to do with the US$12.5 billion Motorola Mobility acquisition, now it is the only mobile company that might be able to compete globally with Apple head-to-head... at least until the Windows-Nokia reboot, if all goes well.

September 6, 2011: Yahoo! fired its CEO
Yahoo! Chairman Roy Bostock fired CEO Carol Bartz. Bartz's reign lasted 32 months. CFO Tim Morse has stepped in as the interim CEO, while the company is still in search for a permanent leader (some people have already denied wanting filling the CEO position). Yahoo is currently evaluating a bid led by Silver Lake Partners and a rival proposal from TPG Capital for minority stake position in Yahoo! capital. Chinese e-commerce giant Alibaba (in which Yahoo! has 40% stake) and Japan’s Softbank Corp. (in which Yahoo! has 35% stake), are also interested in a deal with Yahoo! So 2012 might just be the year when Yahoo! gets sliced up.

September 22, 2011: HP also fired its CEO
HP Chairman Ray Lane announced that the board of directors has appointed Meg Whitman as HP President and CEO. Léo Apotheker stepped down as president, CEO and Director of HP. Apotheker's reign lasted less than 10 months. HP tried multiple times to rejuvenate its splendor in naming CEO's with impressive résumés and proven competence, but have ultimately failed to raise its low share price, exposing itself to hostile take-overs. Such is a large corporation's life (and its CEOs too) in modern capitalism, to live and die by quarterly numbers.

October 6, 2011: Steve Jobs passed away
Only a few days after stepping down from his CEO position at Apple, the company he co-created over 40 years ago, Steve Jobs died. More than a CEO, a founder or an innovator, he was seen as the ultimate visionary that could make dreams come true and set the standard for beautiful, functional, user-centered devices. The industry lost a unique icon known for relentless pursuit of perfection and pushed the boundaries of an entire industry. If there was only one day to remember in 2011 in the technology world, it would be this day that Steve Jobs left us.

November 4, 2011: Groupon went public
Groupon Inc. raised US$700 million in exchange of 30 million shares (or 5% of the company's common stock), which was the largest IPO by a US Internet company since Google raised US$1.7 billion in 2004. Groupon Inc., which has over 100 million subscribers in 45 countries, sells Internet deal-of-the-day coupons for everything from spa treatments to restaurant discounts. Prior to its IPO, the “world's fastest growing company” was put under severe scrutiny from the Securities and Exchange Commission for its accounting practices. Some analysts also claimed that the company that once turned down a US$6 billion offers from Google, operates like a Ponzi scheme. According to its IPO documentation, the Chicago-based company has publicly disclosed that while it was losing approximately US$100 million per quarter, the company decided to use its later investors' money to pay off earlier investors and founders (US$940 million from the US$1.12 billion VC money). Despite all the pre-IPO negative press and mismanagement, Groupon managed to stabilize its share price to its original US$20 public offering, just in time for the holiday season.

December 9, 2011: HP’s webOS goes Open Source
After deciding to finally keep its PC business in house, HP announced that it will give away the webOS (OS created by Palm, and bought by HP for US$1.2 billion earlier last year) to the open source community. This surprising news is in fact a perfect move in the current OS war. Since Android, now tied to a handset manufacturer (Motorola), faces increasing complaints from manufacturers and possible patent attacks from competitors, webOS appears to be the next clean open source OS contender. With this move, HP is positioning itself as the front lead for the next multi-screen-one-OS strategy, leading the path to other manufacturers for mobile, tablet, printers and maybe… PC. And all of that with no resource commitment.



In this year of economic crisis and political instability, the few winners in the technology space have been a small handful of internet start-ups who managed their way up and out well with impressive IPOs (with more to come next year). Similar to 2009 and 2010, the few large multinational companies with their deep cash reserves, expanded into new businesses while leaving behind their competitors. And it is tough at the top of these global corporations, where CEOs can be fired by Wall Street. NQ Logic is looking forward to seeing you in 2012.

Happy holidays to everyone.

Long Boards, Short CEO's

Friday, October 7, 2011

Rarely has the causality principle (“the same cause produces the same effect”) been more true in the technology world than in the past few weeks. Two very different multinational companies fired their CEO's for the same reason: under-performing stock price.

Yahoo! Chairman Roy Bostock fired CEO Carol Bartz on September 6, 2011. CFO Tim Morse has stepped in as the interim CEO, while the company is still in search for a permanent leader. Bartz's reign lasted 32 months.

“On behalf of the entire Board, I want to thank Carol for her service to Yahoo! during a critical time of transition in the Company's history, and against a very challenging macro-economic backdrop. I would also like to express the Board's appreciation to Tim and thank him for accepting this important role. We have great confidence in his abilities and in those of the other executives who have been named to the Executive Leadership Council.” – Roy Bostock, Chairman of the Yahoo! Inc. board of directors [Sept 06, 2011]

On September 22, 2011 Chairman Ray Lane announced that HP board of directors has appointed Meg Whitman as president and CEO. Léo Apotheker stepped down as president, CEO and director of HP. Apotheker's reign lasted less than 10 months.

“We very much appreciate Léo’s efforts and his service to HP since his appointment last year. The board believes that the job of the HP CEO now requires additional attributes to successfully execute on the company’s strategy. Meg Whitman has the right operational and communication skills and leadership abilities to deliver improved execution and financial performance.” – Ray Lane, Executive chairman of HP board of directors [Sept 22, 2011]

The troubled realities and problems are in fact much deeper and have long rooted explanations than what is mentioned in these companies' official statements. A closer look at the past few years’ of company histories should be done to understand their situations.


The Yahoo! Way


Yahoo! Inc. is an American internet corporation. Founded in California by Jerry Yang and David Filo in January 1994, the company was incorporated on March 1, 1995. The web site started out as a hierarchical directory of other websites, and was named "Jerry and David's Guide to the World Wide Web" but eventually was renamed Yahoo!, acronym for "Yet Another Hierarchical Officious Oracle”.



The iconic company is best known for being a leading web content provider, and one of the few survivors of the dot-com era alongside eBay, AOL and Amazon, but throughout its history it has always had trouble in stabilizing its revenue stream and finding great CEO's.


Terry Semel, who spent 24 years helping to build Warner Bros. into a U$11 billion company, was appointed as Yahoo! CEO on April 17, 2001. Replacing the first CEO Timothy Koogle (“TK”), his mission was to restore past growth and profitability in the middle of the dot-com bust. During his watch, Yahoo! expanded at a dramatic pace through large and costly acquisitions such as Overture for U$1.63 billion (2003), Kelkoo for €450 million (2004), HotJobs.com for U$436 million (2001), or Musicmatch for U$160 million (2004). Semel was instrumental in the Alibaba.com partnership (40% for U$1 billion stake), but was unsuccessful in buying Google, even for U$5 billion.

Despite turning Yahoo! into a global media company, Semel failed to acquire the best industry talents or integrate all the different acquisitions into one single company. In an attempt to regain investor confidence, Semel ended his six-year tenure as Yahoo! CEO on June 18, 2007 and handed over the reins to co-founder Jerry Yang. During his 5 years as a CEO at the Californian company, Semel managed to gain U$430 million in total compensation.


With Jerry Yang back at the top, morale and acquisitions were both on the rise. But the declining share price had triggered potential hostile takeover bids. On February 1, 2008 Microsoft and its solid balance sheet proposed to acquire Yahoo! for U$31 a share representing a total equity value of approximately U$44.6 billion (a 62% price premium). Yahoo! board declined the proposal but ultimately ended up giving its search business to Microsoft. After the Microsoft deal battle, Jerry Yang decided to step down as CEO.Under his watch the company has lost tens of billions of dollars in market capitalization, thousands of former Yahoo! employees, and lost credibility in the industry after the Microsoft deal fiasco.


Carol Bartz replaced co-founder Jerry Yang as CEO [January 13, 2009]. The former executive chairman of Autodesk had a single mission: to fix Yahoo!'s profitability and bring in a strategic focus to the media company. After multiple layoffs (3000 employees in April 2009, 600 in December 2010), cost cutting, missed financial targets and pale comparison with rival Google, outspoken Bartz was fired on September 6, 2011.



With 680 million users worldwide, U$6,324 million in revenue in 2010 and 13,600 employees worldwide Yahoo! is today a leading online global brand tailored to marketers and advertisers. But in a deflationary digital economy coupled with a global economic recession, Yahoo! has a harder time defending (and even less, expanding) its virtual online presence.




Undoubtedly, without its two large investments in Yahoo! Japan (35%) and Chinese Alibaba (43%), the Californian company’s valuation would be much less than the currently estimated U$23 billion. Many have been rumored to be interested in buying Yahoo!, among them Microsoft, Alibaba.com, and major Silicon Valley VC's.


The HP Way


HP is a different story altogether. The company is a more mature American technology icon than Yahoo!. Founded by Bill Hewlett and Dave Packard in 1935, today HP ships more than 1 million printers per week, 48 million PC units annually, and one out of every three servers worldwide. Similarly to Microsoft, HP is a leader in both the consumer and the business segments, a rare feat.



HP is one of the world's leading ICT companies in terms of net revenue, U$126 billion in FY10, up 10% from the previous year. The non-GAAP operating profit for the same FY10 was U$14.4 billion. With over 324,000 employees worldwide as of October 31, 2010, and over 1 billion customers around the planet, HP was the first ICT company that crossed and stayed above the symbolic U$100 billion in yearly revenue since 2007.


On July 19, 1999, HP named Carleton "Carly" S. Fiorina as president and CEO. The former Lucent Technologies executive and most powerful woman in American business, according to Fortune magazine at the time, was a unique phenomenon in the US corporate world. She led the biggest IPO in US history at the time and ran the largest telecom equipment company in the world turning in U$19 billion in annual revenue.

As her first significant strategic move, HP announced its merger with Compaq on September 4, 2001 for U$25 billion in stocks after a very lengthy and costly fight. This move was considered at the time to be the biggest merger ever in the ICT industry and a most risky acquisition. Unfortunately, the legendary HP was beginning to struggle in the competitive hardware PC business. Squeezed by IBM on the high end and Dell on the low end, HP (now with Compaq) could not satisfy their investors with their low profits. Ultimately, Fiorina, the mastermind behind the Compaq acquisition, was fired by an impatient HP board. Fiorina walked away with a U$21 million check on February 10, 2005.


On April 1, 2005, Mark Hurd was named CEO of HP. The former executive of NCR, a spin-off of AT&T that makes automated teller machines, had one clear mission: fix HP profitability. He was previously named CEO of NCR in March 2003 and engineered a substantial turnaround in the company's fortunes, while making large acquisitions. His past experience was going to serve him well in his HP adventure.

Under his watch, HP went on a frenzied acquisition mode: Mercury Interactive for U$4.5 billion (2006), EDS for U$13.9 billion (2008), 3Com for U$2.7 billion (2009), Palm for U$1.2 billion (April 2010), 3PAR for U$2.35 billion (September 2010), ArcSight for U$1.5 billion (September 2010) were among the most important multi-billion dollar HP acquisitions. But with aggressive cost-cutting, Hurd improved profitability, and grew revenue at the same time. He laid off 15,200 workers shortly after becoming CEO, reduced the IT department from 19,000 to 8,000, and consolidated the 85 worldwide data centers into 6.

HP became the number one technology company ahead of IBM, despite spying scandal from board members and other executives. HP's stock price doubled under his leadership (from U$21 to just below U$42) despite reports of low employee morale, long term debt exposure and below average net profit margin. Shockingly on August 6, 2010, CEO Mark Hurd resigned under pressure by the board over a sexual harassment investigation. He later joined rival Oracle as Co-President.


On September 30, 2010, Léo Apotheker (ex-SAP Co-CEO) became HP's new CEO and Ray Lane (ex-Oracle President and COO) was elected to the position of non-executive Chairman at HP. Apparently exhausted from all the infighting, most board members did not meet with Apotheker during the interview process. In September 2010, Léo Apotheker took the helm and, understandably reshaped the Board, bringing seven new directors, notably Ray Lane and Meg Whitman (ex-eBay CEO). A new strategy was decided and put in place by Apotheker, but the 40% drop in share price within his first 10 months of being the CEO, drastic decisions and the costly £7.1 billion Autonomy acquisition did not leave any room to turn around the troubled company. On September 22, 2011, he was fired by Ray Lane and replaced by Meg Whitman, two people he brought with him during the early board reorganization of 2010.


Meg Whitman will work for U$1 a year, and could have a target bonus as much as U$2.4 million for fiscal year 2012, depending on share price value.

Whitman decided to keep the strategy and execution begun by Léo Apotheker earlier. Since the announcement, HP's stock price gained one dollar (+4.7%).

Afraid of a possible hostile take-over (especially from rival Oracle), HP has recently hired Goldman Sachs to defend itself from activist investors.





Conclusions


Although Yahoo! and HP are very different, they are sharing the same pain in current embattled times: a declining and dangerously low share price exposes them for hostile take overs. Both boards tried multiple times to rejuvenate their splendor in naming CEO's with competence and impressive résumés, but have ultimately failed.

A few conclusions can be drawn from these two similar stories, and can be extrapolated to other troubled technology companies:

1. Boards are more transparent.
   In the past, it was quite rare that board room discussions were leaked to the mass media. Today the internet, the media outlets and attitudes regarding board authority have rebalanced the information asymmetry. More and more often, troubled technology company board discussions surface to the public knowledge as a new 'transparency' tactic to influence the inside vote or outside opinion. Unfortunately this tactic only brings confusion to the public, accelerates the downward spiral, and boards are becoming more nervous about their decisions and their consequences.
   
   
2. Boards have less time.
   Business cycles in the technology industry have accelerated over the recent decades and companies that used to think in years, have to think in months (if not days). This acceleration has drastic consequences, leading to today's common crisis in board rooms. Boards, and even more so CEOs, are now on a quarterly probation. Moreover, in this unstable economic period of speculative uncertainty, where investors with large clout and capital are trying to find a safe haven at any cost, stock prices are extremely volatile, immediately reflecting (and reinforcing) the level of faith in technology company's announcements. So rather than having a longer perspective for the company's role in the technology marketplace, investing in R&D, making bold bets, most troubled technology companies are using "leading from behind" strategy as an excuse in their lack of guts, anticipation and judgment.
   
   
3. Boards pay too much attention to stock prices.
   In choosing to focus too much on stock price and short-term results, rather than financial stability and delayed pay-offs for long-term investments, boards have turned away from their main responsibilities. Troubled technology companies are now confusing the incremental measurement of their efforts with their ultimate strategy (See Meg Whitman's compensation structure, which is solely based on share price performance). Making acquisitions with some 'synergies', loosely connected to a vision, have become a quick way to make over their financials and market perceptions for the next few quarters.
   
   
4. Boards do not anticipate end-of-growth stage.
   Regularly technology companies hit a wall of growth and cannot expand beyond their current stage for various reasons: geography, customer segment, end of product life, disruptive technology, regulations, etc. Then it is time to divest part of the companies' business, and consequently dilute their market cap and stock price. Very few boards have the fortitude to formulate, execute and support such a strategy (e.g., IBM selling their PC business to Lenovo in 2004). Troubled technology companies typically hold on to their end of life product/service and end up becoming a "too big to fail" company with a mixed portfolio and message. This ability to foresee market reactions both at the beginning and the end of a product/service life is indeed a rare and a unique capability of the boards (e.g., Apple, Google, IBM).
   
   
5. Boards do not always make a good CEO succession plan.
   Troubled technology companies always choose an outsider as their new company CEO in the hopes that an external leader could lead them to fresher insights and a faster recovery. Unfortunately, a steep learning ramp-up period, mistrust of the senior leading team and disengagement toward current strategy have been the more standard results of the initial shock therapy (quite the opposite of the insider CEO approach).
   
   

It is unfortunate that market leaders such as Yahoo! and HP are in such a despair but their boards certainly own a large part of that responsibility. It should not come to anyone's surprise that after having created much value for shareholders, companies can also destroy value for them. Such is a company's life in modern capitalism.

“A good Board can't make a company, but a bad one will inevitably kill it.” — Barry M. Weinman, Managing Director and Co-Founding Partner Emeritus, Allegis Capital [Sept 26, 2011]

Steve Jobs

Thursday, October 6, 2011

Steve Jobs Launches “iQuit”

Friday, September 2, 2011

What was feared yet expected for some times now, happened last Wednesday on August 24, 2011. Fourteen years after becoming the interim CEO [1997], Steven P. Jobs resigned from his CEO role at Apple Inc., the company he co-founded with Steve Wozniak back in 1976.

“I have always said if there ever came a day when I could no longer meet my duties and expectations as Apple’s CEO, I would be the first to let you know. Unfortunately, that day has come. I hereby resign as CEO of Apple.” – Steve Jobs, ex-CEO of Apple [Aug 24, 2011]

Almost immediately, Apple’s Board of Directors announced that Tim Cook, previously Apple’s Chief Operating Officer, would be the company’s new CEO, and that he will join the Board immediately.

In his first email to Apple’s employee as the newly appointed CEO, Tim Cook stated that he was excited to pursue Steve Jobs' vision in bringing innovation to market, and will keep the magical component of the company intact.

“I want you to be confident that Apple is not going to change. I cherish and celebrate Apple's unique principles and values. Steve built a company and culture that is unlike any other in the world and we are going to stay true to that—it is in our DNA. We are going to continue to make the best products in the world that delight our customers and make our employees incredibly proud of what they do.” – Tim Cook, new Apple CEO [Aug 25, 2011]

Steve Jobs will continue on as the Chairman of Apple's Board.


Industry Reactions


Though long anticipated, the news still sent a shockwave to the entire media world. Twitter, the blogosphere and the online media outlets relayed the information for non-stop over several days.



Praises, anecdotes, remembrances, company history and Thank you notes circulated on the digital planet at the speed of light. The formidable echo chamber around the world that followed the announcement was closer to an interplanetary rock star obituary than another American CEO entering pseudo-retirement. Once again Apple PR machine managed to acquire the attention of the whole world for few days.

The announcement should not come as a complete surprise. In January 2011, Steve Jobs took another medical leave of absence from the company, and while he remained as CEO, Tim Cook took on the day-to-day operations for Apple. Apparently Apple Board members have been discussing the potential next CEO for years, and have been talking secretly about a succession plan for many months independently.

It was time to pass the reign to the best possible successor: an insider, official number two in the Apple’s hierarchy and long time COO, Tim Cook.


Who is Tim Cook?


Tim Cook has been Apple’s acting Chief Executive since Steve Jobs went on medical leave early this January 2011. Often described as a “Southern Gentleman”, he is best depicted as a “tireless worker, a brilliant corporate strategist, and a fitness nut.” His analytical mind has been praised by many observers and his management style has been portrayed as less emotional than the one of Steve Jobs. The industry view of Tim Cook is as an intelligent and good leader and that under Tim Cook, Apple is in capable hands.

He joined Apple in 1998. During his early tenure as supply chain guru, he closed many of Apple’s production factories in California and outsourced manufacturing to suppliers in Asia. He later became COO in 2007. As COO, Tim Cook was responsible for all of the company’s worldwide sales and operations, including end-to-end management of Apple’s supply chain, sales activities, and service and support in all countries.

Before joining Apple, Tim Cook was VP of Corporate Materials for Compaq and was responsible for procuring and managing all Compaq product inventory. Previous to that, he was COO at the Reseller Division at Intelligent Electronics. He also spent 12 years with IBM, most recently as director of North American Fulfillment where he led manufacturing and distribution functions for IBM’s Personal Computer Company in North and Latin America.

As part of his nomination, Tim Cook was granted by Apple’s Board, 1 million restricted stock units, half vesting in August 2016, and half vesting five years later, in August 2021. At today’s valuation, the cash value of Cook's compensation would be above U$380 million. As COO, Tim Cook received in 2010 U$58 million in salary, bonus and other stock awards.


What Will Change?


Nothing.

It was quite clear for some time that COO Tim Cook was the guy in charge at Apple. During the medical leaves that Steve Jobs took in recent years, Tim Cook successfully stepped in, showing to the Board, the company and investors that he would be the natural candidate when Jobs' replacement was duly needed.




Investors have digested the message and the Apple Inc. stock was up by over 8% (see above graphic), a week after the announcement. Pros and Cons of the news are still being debated by the investment community, and no firm judgment has emerged since the departure of Steve Jobs, which is still good news for the Cupertino-based company.

In the long run, depending on the extent of Steve Jobs' involvement as Chairman, Apple might encounter some difficulties to maintain its phenomenal trajectory. Succession war (who will replace Tim Cook for COO, or the ‘visionary Steve’?), media coverage (who will replace the ‘icon Steve’?), patent wars (Steve Jobs is the key inventor for 313 of Apple's patents), and potential disengagement from Apple’s cult-like fan base could all be reasonable threats to the most innovative corporation in the world.




What we know for sure is that Apple will have a brand new headquarters, the authorized and recently updated biography ‘Steve Jobs’ will be out this November, and the next iPhone is scheduled for release just in time for the holiday season.

For the rest, the future will tell.


What Can We Learn From Apple?


Rather than looking forward, for once it could be interesting to investigate Steve Jobs’ legacy. Apple is a singular company in the business world. It would be too easy to summarize Apple's success story with few delightful facts, some sparkly quotes or through its founder's life story, but in reality Apple was built over 35 years as a phenomenal technology company. The technology world as a whole would have been very different without Steve Jobs as a CEO at Apple.

Few important lessons from the Apple success story can be drawn here.

1. Second Chances. It is very rare, but a technology company can have a second chance. Steve Jobs who founded the company in 1976, retook the CEO position in 1996 after being fired in 1985. At the time Apple was on the brink of bankruptcy. After a difficult turn around Apple came back to profitability years later, and has prologue its extraordinary success story since then.
   
   
2. Star-ification of Founder-CEO in the Tech World. Similarly to Bill Gates, Steve Jobs has been on the technology map for years as a a founding father of the digital revolution (Gates vs. Jobs video). After Bill Gates retired from Microsoft in January 2000, Steve Jobs was the last pioneer of that generation with worldwide profile. Since then many more names have erupted from the technology landscape such as Michael Dell (Dell Inc.), Jeff Bezos (Amazon), Larry Page and Sergey Brin (Google), and most recently Mark Zuckerberg (Facebook). Though no one in that short list garnered the media frenzy and adoration as Steve Jobs, surely someone else will step up.
   
   
3. Technology For Everyone. Until recently, the technology world was defined, understood by and built for the gadget-loving, computing enthusiast community. The cutting edge products were more for the geeks,who were clearly a separate and distinct segment from the rest of the human beings. Steve Jobs, by designing elegant and intuitive objects, has proven that technology could be understood and used daily by people who do not come from a technological background. As long as the object in question was simple to use, designed with taste, and with high reliability and quality, a certain sizable niche of the population (the more affluent however) could understand what that machine can do for it.
   
   
4. Importance of a Team of Experts. Although he was the most iconic person of the company, Steve Jobs could not have done it by himself. When he returned to Apple in 1997 after an absence of 12 years, Apple already had Jony Ive as Chief Designer, and Philip Schiller, who eventually became Senior VP of Product Marketing. Over the years Steve Jobs created a team of experts that worked well together. Today Apple’s management team is considered to be the world’s reference in the consumer electronic goods.
   
   
   Apple's Core: Who does What, via Fortune [Aug 25, 2011]
   
   
   
5. Think Big, Think Ecosystem. It was true for the iPod and the Music industry, the iPhone and the Telecommunication industry, the iPad and the Media industry and hopefully the iCloud and the Hardware industry. Today’s innovation has to make strategic sense from an entire ecosystem standpoint. A product, beautifully designed and fully integrated in Apple’s case, has to appeal to both consumers and industry at the same time. The “Build It and They Will Come” time has long faded away and countless of technology companies have and are still making the same mistake of not thinking through the end-to-end solution for buyers.
   
   
6. Speed of Innovation. Despite its 46,600 full-time employees and 137 stores around the world in 2010, Apple is still managed like a startup with a lean management, small and flexible team and clear goals. To execute well and fast, Steve Jobs implemented a strong management style and micromanaged deadlines. Most importantly, by vigorously championing its “integrated” ecosystem (Hardware coupled with Software) against the “fragmented” environment, Steve Jobs established the first “closed” technology platform that could compete fiercely with the “open” Internet. So since Apple controls everything within their 'closed' world, development and go-to-market cycle time is significantly reduced. The Apple method has recently reached its maximum effectiveness and was rewarded by the financial market with a 52% innovation premium on the stock price.
   
   
7. Reinvention of the CEO Role. Like no other, Steve Jobs has redefined the role and expectations of a modern CEO, becoming the ultimate spokesperson, salesperson and marketer for his company and products. Cries of "We love you, Steve!" are emitted at Apple events from fans, and they will surely miss the iconic presence and showmanship of Steve Jobs in the coming product launches. Perhaps he might be able to redefine the role of a modern Chairman of the Board, if his health will permit.
   

“One more thing”... there will be a before and an after Steve Jobs as CEO at Apple Inc, the same way there is a before and an after Bill Gates as CEO at Microsoft. But in creating beautiful, powerful and simple-to-use devices, Steve Jobs has managed to expand technology beyond the small technophile community and teach the world how to innovate across industries.

And we can all thank him for that.

HP's New Business Strategy

Friday, August 26, 2011

It was a busy day for Hewlett-Packard, the previous Thursday, August 18, 2011. Within the same day, HP announced that the company would

1. Acquire the British enterprise information management software company, Autonomy Corporation plc, for U$10.3 billion in cash (or U$42.11 a share), a 64% premium from their last trading stock price.
   
2. Evaluate strategic alternatives for their Personal Systems Group (PSG), including the separation of its PC business into a separate company through a spin-off or other transaction.
3. Name former IBM John Visentin, as executive vice president of HP Enterprise Services, replacing the retiring Tom Iannotti.
4. Shut down operations for webOS devices and explore strategic alternatives for webOS software.
5. Discontinue operations for the TouchPad and webOS phones.
   
6. Revise full year FY11 revenue guidance to U$127.2-127.6 billion, down from its previous estimate of U$129-130 billion.

During the FY11 Q3 financial result conference call that followed, HP’s CEO mentioned that the day's news are about transforming HP for the future:

“… I'm taking ownership for these decisions and investments with a focus on driving actions that deliver value for shareholders as we shape the new HP.” — Léo Apotheker, HP CEO [Aug 18, 2011]

Since the Q3 announcement and despite higher quarterly earnings HP’s stock plunged by 20%. More significantly the company's stock price fell close to 45% since the appointment of Léo Apotheker as HP’s new CEO on September 30, 2010.


What Is HP Today?


HP is one of the world's leading ICT company in terms of net revenue, U$126 billion in FY10, up 10% from previous year. The non-GAAP operating profit for the same FY10 was U$14.4 billion. With over 324,000 employees worldwide as of October 31, 2010, and over 1 billion customers around the planet, HP is the first ICT company that first crossed and stayed above the symbolic U$100 billion in yearly revenue since 2007.

The Palo Alto-headquartered company is ranked as number 28 in the 2010 Global Fortune 500, second after the South Korean Samsung Electronics (ranked # 22) in the ICT category. The company ships more than 1 million printers per week, 48 million PC units annually and one out of every three servers worldwide. Similarly to Microsoft, HP is a leader in both the consumer and the business segment at the same time.

After Agilent Technologies' spin-off from HP in 1999 as an independent company (a U$8 billion revenue company with 47,000 employees), HP decided to grow by acquisition at a frenetic pace. HP announced its merger with Compaq in September 4, 2001 for U$25 billion in stocks. This move was considered at the time as the biggest merger ever in the ICT industry and the most risky acquisition. It has since then never been topped, and is now a study in business schools as a best practice post-merger integration execution.

Mercury Interactive in 2006 (for U$4.5 billion), EDS in 2008 (for U$13.9 billion), 3Com in 2009 (for U$2.7 billion), Palm in Apr 2010 (for U$1.2 billion), 3PAR in Sept 2010 (for U$2.35 billion), ArcSight in Sept 2010 (for U$1.5 billion) are the key multi-billion dollar acquisitions from the Palo Alto company.



But on August 6, 2010, CEO Mark Hurd resigned, joining subsequently Oracle as Co-President. Cathie Lesjak assumed the role of interim CEO, and on September 30, 2010, Léo Apotheker (ex SAP Co-CEO) became HP's new CEO and Ray Lane (ex-Oracle President and COO) was elected to the position of non-executive Chairman at HP.

“In losing Mark Hurd, the H.P. board failed to act in the best interest of H.P.’s employees, shareholders, customers and partners. The HP board just made the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago.” — Larry Ellison, Oracle CEO [Aug 9, 2010]

Since then, HP and Oracle have turned from close partners to bitter antagonists fighting at every possible level, including legal.


HP by the Numbers


Based on the FY11 Q3 earnings report, HP's revenue is from four major business units: Services (29%), Enterprise Servers, Storage and Networking (17%), Personal Systems Group (31%) and Imaging and Printing Group (20%). The remaining 3% are from HP Financial Services, and HP Software.



Personal System Group (PSG) and Imaging and Printing Group (IPG) together represent 51% of the company’s revenue but are low gross margin business (PSG has 5.9%), or are shrinking fast (IPG growth -10% Q/Q). On the contrary, the other components of HP business (Storage, Servers and Services) are growing moderately (single digit growth) and have more motivating margins (around 15%).



With already small and ever decreasing margins, and tremendous competition from Asian manufacturers, HP's core business (PC and Printer) is less attractive. The growth by acquisition has reached its limits, and does not provide enough consolidation upside and cost cutting benefits to outgrow competitors.



The economic crisis combined with the introduction of intelligent devices from competitors in the consumer segment (smartphones and tablet PCs) have forced HP to take action.

“Secular trends impacting our PSG business as consumers are changing the use of the PC. The tablet effect is real and sales of the TouchPad are not meeting our expectations.” — Léo Apotheker, HP CEO [Aug 18, 2011]

In this new "Post-PC" era, Smatphones are expected to take over the PC world in 2012. The trend seen in Japan years back is now coming to wash the shore of the world anytime soon.



HP needed to shift its strategy and the appointment of Léo Apotheker was the answer.


HP's New Strategy


At an HP analyst summit this March, Léo Apotheker outlined the new direction that the company should take to recover fat margins and past stock price. He shared a new strategy that relies heavily on analytics software and being a cloud platform for consumer and business segments. HP’s new vision is to provide seamless, secure, context-aware experiences for a connected world.

“As an executive who has spent most of my career primarily in software, it is a world I know well.” — Léo Apotheker, HP CEO [Aug 18, 2011]

With a forecast for worldwide IT spending at around US$3.7 trillion in 2011 as companies migrate to the cloud and spend more on software and IT services, it is clear that the money is in the cloud itself, services sitting on the cloud but not in the devices that reach the cloud.



Léo Apotheker sold his vision to the HP board last August, and after three quarters of observations he is now executing his strategy. Placed in this context, all six announcements mentioned in the introduction of this entry make sense and should have been welcomed by the ICT insiders and financial analysts for the following reasons:

1. HP is spinning off a low margin PC business to generate cash for future software acquisitions. Printers, though it is still an interesting category with descent margins thanks to the ink cartridges, could be the next business to be divested.
2. John Visentin will bring the know-how and culture from the leading competitor (namely IBM) in the cloud computing and services business.
3. Both webOS and TouchPad experiments are shut down since it no longer fits in the new 'Cloud & Software' HP strategy, and should be divested.
4. Autonomy acquisition makes sense since HP would like to be the leading company in the 'Cloud & Software' market. For years the British company has been a reference in unstructured and structured data search and will represent the core of the next HP revenue opportunity.
   

What Might Come Next?


After a difficult 12 to 18 months anticipated spin-off exercise, the Personal Systems Group (PSG) could eventually be traded on the NYSE. With U$40.7 billion in revenue (FY2010), the new subsidiary would still be in the Global Fortune 500 list. This new company (Michael Dell sarcastically called it Compaq) could live independently from HP or be sold to any PC manufacturer or another player after a few months of operation (same as Motorola Mobility did recently).

The Imaging and Printing Group (U$25.7 billion revenue in FY2010) could be next in line if the PSG divestment do not bring enough cash, or if margins and growth start to decline as well.

Depending on HP's financial health (today it only has U$12.9 billion in cash before the Autonomy acquisition), more acquisitions in the software arena is highly likely.

WebOS could be sold for its patent portfolio (+1,500 patents) to one of the big three mobile players (Apple, Google or Microsoft), or to any underdog mobile manufacturer with some independent aspirations, such as HTC, ZTE or Huawei, if legal concerns and financial appetite align.



The TouchPad incident (49 days of existence) and the following fire sale fiasco should be forgotten as a mere distraction. Although, at the discounted U$99 price, HP found what the mass market wants to pay for a tablet. The tablet PC will now be a battle between the leader Apple’s iPad (74% market share in 2011), newly self appointed contender Motorola-Xoom-Google, and the hopeful Amazon future tablet.


In short, HP has definitely turned Mark Hurd’s page and moved away from the post-PC debate to go back to its core business: helping its business customer. If Léo can do the impossible turn-around that Lou did at IBM, HP could be back to business…

Google Acquires Motorola Mobility

Friday, August 19, 2011

On Monday, August 15, 2011, Google and Motorola Mobility Holdings announced that they have entered into a definitive agreement under which Google will acquire Motorola Mobility Holdings for U$40.00 per share in cash, representing a total of about U$12.5 billion. The price corresponds to a premium of 63% to the U$24.47 closing price of Motorola Mobility shares on Friday, August 12, 2011. The premium paid by Google is high enough to discourage any serious counter offer.



The transaction, subject to customary closing conditions including regulatory approvals in the US, the EU and other jurisdictions, has been unanimously approved by the boards of directors of both companies, and is expected to close by the end of 2011 or early 2012.

During a joint conference call, Google executives reaffirmed that Motorola Mobility will remain a licensee of Android and Android will remain open. Google will also run Motorola Mobility as a separate business.

“Our vision for Android is unchanged and Google remains firmly committed to Android as an open platform and a vibrant open source community. We will continue to work with all of our valued Android partners to develop and distribute innovative Android-powered devices.” — Andy Rubin, Senior Vice President of Mobile at Google [Aug 15, 2011]

The official reason for this surprising acquisition has been clearly laid out by the recently re-appointed CEO and co-founder of Google, Larry Page: patents acquisition to defend Android.

“Our acquisition of Motorola will increase competition by strengthening Google’s patent portfolio, which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies.” — Larry Page, Google CEO [Aug 15, 2011]

Under the terms of the transaction, Google has been rumored to be forced to pay Motorola Mobility an unusual U$2.5 billion in reverse break-up fee if it fails to close the purchase, representing 20% of the transaction (more than the median 4% last year). On the other side, if Motorola were to decide not to go through with the deal, it would have to pay Google a U$375 million in a break-up fee, or 3% of the deal valuation (industry standard).

The biggest acquisition so far in its 12-year existence and 100-plus acquisitions will cost Google about a third of its U$39.1 billion cash reserves (as of June 30, 2011). The transaction price is equivalent to 3.2 quarters of Google net income with 2011 Q2 financial results as reference [(U$12.5 billion – U$3.2 billion = U$9.3 billion) / U$2.9 billion = 3.2 Quarters], if you remove the U$3.2 billion in cash, cash equivalents and cash deposits on the balance sheet from Motorola Mobility's latest financial release [2011 Q2].

Most of the major Android partners have officially endorsed the deal, and welcomed Google to their side in the fierce handset-maker patent battle that is happening in the world currently. Until now, no telecom company besides France Telecom have mentioned anything regarding the acquisition.

Upon the announcement, Google stock price fell 1.2% and Motorola Mobility was up by 56%. More surprisingly, other players in the industry such as InterDigital Inc. (down 14%), Microsoft (up 1.6%), Nokia (up 10%) and RIM (up 10.3%) were also moving dramatically, indicating that the story is far from over, and is much bigger than it seems.


What Is Motorola Mobility Holdings Anyway?


Motorola was created in 1928 with its first product being a battery eliminator. The name Motorola ("Motor" and "Victrola") was adopted in 1930, and has been used as a trademark since the 1930s.



Considered to be one of the oldest brands in the US technology industry, Motorola has been most recently in financial trouble and seen as past its prime. Once considered the Apple of the 90's, Motorola was dominating the wireless market in the mid-90's (StarTAC’s flip phone) and mid-2000s (RAZR). In 1994, Motorola claimed 60% of the US market in wireless phones [Herschel Shosteck Associates], today the company has 14.5% of the US market [comServe Aug 2011].

In the last quarter of 2007, Motorola's handset division recorded an operating loss of U$1.2 billion. After many rounds of lay offs in 2008, cost cutting measures during the economic downturn and a spin-off plan for a later divestment, Motorola has managed by mid-2010 to stabilize the device division.

On February 11, 2010, Motorola finally announced a split into two independent, publicly traded companies. The two new companies were called Motorola Mobility Holdings (NYSE: MMI; cell phone and cable television equipment company) and Motorola Solutions (NYSE: MSI; government and enterprise business). Motorola Solutions is considered to be the successor to the previous Motorola.

Since the beginning of 2011, shareholders, led by billionaire activist Carl Icahn, were desperately looking for buyers. Motivated by Nortel’s recent patent sale, the largest-ever patent auction in recent history (U$4.5 billion), Icahn urged Motorola to explore alternatives for its own patent portfolio.

Monday's Google-Motorola deal will net Icahn a considerable return. His 26.8 million shares are now worth over U$1 billion, up from U$655.8 million last Friday.


What Does Motorola Mobility Sell?


As of December 31, 2010, Motorola Mobility and its subsidiaries had approximately 19,000 employees worldwide. Motorola Mobility divides its business in two distinct categories:

1. Mobile Devices segment: smartphones, feature phones, voice-centric phones, and media tablet devices. Mobile Devices net revenues represented 68% of Motorola Mobility’s combined net revenues in 2010.
2. Home segment: interactive set-top boxes, IPTV systems, and customer premises equipment (CPE). Home net revenues represented 32% of Motorola Mobility’s combined net revenues in 2010.

Motorola Mobility’s products are primarily sold through wireless carriers, network and cable operators, distributors and to end consumers. In 2010, aggregate net revenues from their five largest customers represented approximately 49% of the company net revenues. During 2010, approximately 28% of net revenues were from Verizon Communications. In 2010, the largest markets by locale of end customer were: North America (65% of market revenues), Latin America (14% of market revenues), followed by China, Europe and Other Markets (7% each).




Motorola Mobility has approximately 24,500 patents and patent applications, worldwide. The Mobile Devices business segment alone has approximately 15,200 granted patents and 6,200 pending patent applications worldwide related to various industry standards, including 2G, 3G, 4G, H.264, MPEG-4, 802.11, open mobile alliance (“OMA”) and near field communication (“NFC”).

The Home segment has approximately 1,900 granted patents and 1,300 pending patent applications worldwide, including MPEG video compression, ATSC for digital TV transmission and DOCSIS for data transmission over cable systems.

In its latest financial quarter of 2011 Q2, Motorola Mobility announced that the Mobile Devices division sold 4.4 million smartphones, 440,000 tablets and 6.2 million feature phones, a 40% year-over-year growth; saw U$3.3 billion in revenue, up 28% from 2010 Q2. The second quarter gross margin percentage for Motorola Mobility was 25.9%, compared to 25.5% in the second quarter of 2010. For the full year, the company expects shipments of smartphones and tablets to be between 21 and 23 million units, including 1.3 to 1.5 million tablets. In the Home segment, Q2 revenues were U$907 million, up 2% year-over-year.

Despite announcing a first time in 3 years U$0.22 a share dividend, a share repurchase program of U$2 billion through the end of 2012, and a U$1 billion year-to-date of foreign cash repatriation to the US in their 2011 Q2 quarterly earnings call, the Motorola Mobility stock price stayed flat.



Simply put, Motorola Mobility is a troubled handset manufacturer trying to resurrect itself after a 3-year long and difficult restructuring, in a low margin and competitive business, centered mostly in the US with a strong brand name and a large patent portfolio in the mobile industry. The company has been cleaned up, trimmed down and was up for sale.


Meanwhile, What’s Been Happening in the Mobile Industry?


Since the introduction of the iPhone in June 2007, the mobile industry has shifted to more innovation and more functionality stuffed in the small handset. This shift imposed on telecommunications companies by Apple, initially in the US and subsequently around the world, created a new category in the mobile industry called smartphones. Essentially driven by consumer demand, the industry is following Apple's footsteps with large touch screen interface, more features and higher price.



In just four years, Apple managed to create a large ecosystem with its closed, proprietary solution of hardware and software, forcing telecommunications companies around the world to accept their sale conditions and coercing leading content providers to accept the iPhone (and now iPad) device as the device of choice in the "post-PC" digital world. In 2010 Apple sold almost 40 million iPhones, and had recently, albeit briefly, topped Exxon as the most valuable public company in the world at U$350 billion in market capitalization. With a most-wanted and now available everywhere device, Apple has captured 66% of the profit of the smartphone category in 2011 Q2 around the world, among the top eight manufacturers.

With its magic operating formula and high quality devices strategy, Apple has managed to save U$76.2 billion in cash and marketable securities [June 30, 2011]. Apple has become the world’s largest smartphone vendor by revenue, profit and by volume with 18% market share worldwide [Strategy Analytics, July 29, 2011]



Google entered the mobile industry from a different angle. Google wanted their OS on all the mobile handsets but did not want to build any devices.

“We’re not making hardware. We’re enabling other people to build hardware.” – Andy Rubin, Vice President of Engineering for Android at Google (Nov 2, 2009)

Despite, and perhaps due to, its marginal and unsuccessful attempt to sell its own phone hardware (Nexus One and later, Nexus S) Google decided instead to build a modern OS for all mobile manufacturers, and distribute it for free. Since its inception on November 5, 2007, Android has been activated on over 150 million devices worldwide, with over 550,000 devices turned on every day, through a network of 39 manufacturers and 231 carriers in 123 countries.

Market share for Google’s Android mobile OS hit 48% worldwide in the second quarter of this year [Canalys Aug 1, 2011] and 39% in the US [ComScore July 5, 2011].



At this point, all other mobile manufacturers are in any one of the three categories: (1) dependent on Google for their OS (Samsung, LG, HTC, Motorola), (2) changing strategy altogether (Nokia, Windows, Palm), or (3) fighting for a piece of the action (RIM, Sony Ericsson, Sharp, ZTE).


What Is This Patent War About?


It is not the intent of this post to investigate patents and the legal mechanisms to encourage, protect, or prevent innovation altogether (Pros vs. Cons) but rather, to explain what is happening at the moment in the mobile industry as it relates to patents.

It is hard to say who started the war, but the battle today is certainly difficult to follow and very ugly. The bottom line is that companies with large patent portfolios are suing new incumbents for a piece of the trillion-dollar mobile industry.



The revenue in the mobile industry is shifting towards the smartphone business. Although the BoP consumers (bottom of the pyramid) still need feature phones, margins in the high-end device market segment are too attractive to let Apple clean the table without even trying to challenge them and their 60% gross profit margin per iPhone. One way to slow down competitor expansion and generate sizable revenue is to ask for a license fee per device sold for patent infringement.

Rumors mentioned that Apple is due to pay Nokia U$11 for every future and past sold iOS device in the recent June settlement. Microsoft has demanded that Samsung Electronics pay U$15 for each smartphone handset the South Korean company makes based on Android OS, echoing the U$5 per device HTC is already paying to Microsoft for every phone it is making with Android as its OS. It is easy to speculate that Microsoft could end up making more money in license fees against Android than from its own mobile business.

Most such fees have been passed down to consumers in the form of a price hike, and not absorbed by handset manufacturers. The real objective of this patent war is to reach a cross-licensing agreement between the large mobile handset players and to force other smaller, patent-light players to forego their strategy when facing a lengthy and expensive legal battle. Google and its 500 patents is very new in this tactic compared to Apple's 4,000 and Microsoft's 17,000 patent portfolio.



After the U$450 million acquisition of Novell’s patents by the “CPTN” group (including Microsoft, Oracle, EMC and Apple), and Nortel’s 6,000 patents by the “Rockstar” group (including Microsoft, RIM, EMC, Ericsson, Sony, and Apple) for U$4.5 billion, Google had no other option but to consolidate its patent portfolio at any cost or give up its mobile strategy. Only a few plausible companies are on the list for a quick and easy snap: Motorola (17,000 patents), InterDigital (8,800 patents), and RIM (2,033 patents).


Immediate Consequences of the Motorola Mobility Acquisition


The Google goal of reaching the most mobile devices on the planet has been reached and today Google achieved what it wanted when it ventured into the mobile space four years ago: to establish its name, credibility and loyalty with consumers. It is now time to convert this massive market share into a more steady revenue. Android generated U$5.90 per user in mobile advertising in 2010. But the figures are still pale compared to selling high-end phone devices (Apple makes U$370 in profit for every iPhone sold).

The Mountain View company has yet to find the next billion dollar revenue stream, as 97% of Google’s revenue is from advertising. With the Motorola Mobility acquisition, Google just entered a new billion-dollar business with a strong US brand name. The mobile handset manufacturing business could be an interesting add-on to the core advertising business, if tighter development and integration could be done between software and hardware, somewhat like Apple.

On the contrary, if Google can convince its handset manufacturer partners that the new acquisition is not a threat to their existence (the same way it managed the Mozilla relationship with its Chrome in-house development), Google would succeed where neither Palm (WebOS license) nor Apple (iMac license) have.

But a likely scenarios is after some time, the majority (if not all) of current Android partners (HTC, LG, Samsung, ZTE, SonyEricsson among others) may seek an alternative to the Open Handset Alliance. The Motorola Mobility and Google relationship will naturally develop into a tighter collaboration, and current Android partners may feel like second-class citizens. In such a case, Windows Phone 7, MeeGo, Bada, WebOS or HTC Sense could be viable OS alternatives for any of these handset manufacturers.

When this happens, Google can eventually streamline its handset product portfolio and software releases, as well as switch Android from open source to proprietary (i.e., becoming similar to Apple, RIM), thereby addressing the overwhelming concerns over device fragmentation of the Android ecosystem, the same concerns that choked the Symbian platform just a few years ago.


What’s Next?


If the three main deep-pocketed players (Apple, Microsoft, Google) consider the patent war finished with this last announcement, then no new acquisition will emerge in the future. If not, more companies will be targeted: RIM, Nokia, Alcatel-Lucent, Kodak and InterDigital seem to be the likely candidates. Sprint could be a stretch.

Google may be spending the next months understanding the handset manufacturing business, divesting parts of the non-core business (Motorola features phone, voice-only phone) or exiting strategically challenging areas (China), and investing in next business ventures (Google TV merging with Motorola’s TV set-top boxes). A surprising and less likely scenario could see Google keeping the patent portfolio only and selling the manufacturing business to an Asian partner.



Whatever Google chooses to do with the Motorola Mobility acquisition, now the Mountain View company became the only mobile company that might be able to compete globally with Apple head-to-head... at least until the Windows-Nokia reboot.

© 2009-2011 NQ Logic | All Rights Reserved