A friend asked me the other day what I thought of Access/PalmSource's recent announcement of the Access Linux Platform (formerly known as Palm OS). I think it's interesting, and there are some hopeful signs. But my main takeaway is that we should probably stop thinking of this thing as the successor to Palm OS, and instead judge it as a new mobile OS based on Linux. Here's why...
When you do a pre-announcement like this, you're usually looking to accomplish a couple of things. You want to make your customers have faith in the future. You want to generate good buzz among the press, analysts, and the online community. And you want to convince possible allies and licensees to work with you. From that standpoint, it looks like the announcement was at least a partial success.
The Linux community is a critical audience for Access/PalmSource right now – one of Access's first goals must be making its mobile Linux the preferred version among the Linux community. Their support will help win licensees. To help make this happen, Access has released some Palm OS code to the open source community, and it has promised to incorporate some Linux standard technology in the new OS.
The reaction on Slashdot wasn't conclusive, but there was a very supportive article on Ars Technica. It said exactly the sot of things you'd like to hear from the Linux community. (If you don't know Ars Technica, it's a very good hangout for technophiles. It often posts much more thorough analyses than most other websites, so it's a very useful resource.)
There were also encouraging noises from parts of the Palm OS developer community. David Beers wrote a nice commentary. David is a prominent Palm OS developer, and although he wants the platform to succeed, he's not at all a fanboy. I'm sure Access wants to hang onto as many Palm OS developers as it can, so posts like this are encouraging.
Analyzing the quotes
One of the traditional elements in a pre-announcement press release is the quotes section, where you get all those stilted quotes from various allied vendors. It usually reads a little like old Soviet propaganda -- and like propaganda you learn more by reading between the lines than you do from the actual quotes.
The game works like this: The company issuing the press release wants quotes from as many prominent companies as possible, and wants the language to be as supportive and specific as possible. The people providing the quotes usually don't want to make too many specific promises, and are often more interested in promoting their own products than in saying anything nice about the actual subject of the press release.
Typically business development people spend a lot of time negotiating these things, down to small details of the quotes.
Access's performance in the quotes game was mixed. The quotes section starts with useful endorsements from LIPS and OSDL, both of which are Linux organizations. I think the placement of these quotes up front shows how much importance Access puts on the Linux community. LIPS (the Linux Phone Standards Forum) consists of France Telecom plus a bunch of Linux and telephony infrastructure companies. OSDL (Open Source Development Labs) is the home of Linus Torvalds and calls itself the center of the Linux community. OSDL's founding members include IBM, Intel, NEC, and HP, so it has a lot of heft. The OSDL quote helps to legitimize Access in the Linux community (I was kind of surprised Access put its quote second on the list).
Wind River was also quoted, which is good because you want the OS to work with standard distributions of Linux. And I was very pleased to see quotes from two mobile operators, NTT DoCoMo in Japan and Telefonica in Europe. Those are very significant because they signal to handset companies that there's a market for devices based on this software.
There are also quotes from several phone component manufacturers – Freescale (formerly Motorola Semiconductor), Intel, Samsung Semiconductor (not the mobile phone group, alas), NEC's semiconductor team, and Texas Instruments. Even though many of the quotes are very noncommittal (basically saying "we like anything involving Linux, and we hear Access is using Linux"), quotes from companies like these are helpful because they reassure potential licensees that a lot of components will be available for phones based on the software.
And there's a quote from Motricity (the parent company of software distributor PalmGear). This seemed strange to me because Motircity doesn't have any direct involvement in the development of the OS. I interpret the quote as a sign that Access was trying to scrape up as many partner quotes as possible.
Who's missing?
There are several glaring omissions from the list of quotes. Before I go into the details, I want to acknowledge that it's easy to read too much into the absence of any particular company from a quotes list. Sometimes there's an innocent explanation – their lawyers didn't like the quote, or an executive who needed to approve it was on vacation. But still, a couple of things stood out to me...
The first is the absence of other operators. Orange in the UK has historically been a strong Treo supporter, and it's owned by France Telecom, which is a member of LIPS. So I was quite surprised that there was no Orange quote. Even more surprising was the absence of any US operators. T-Mobile hasn't ever been warm to Palm OS, and Verizon is very conservative, so I wasn't alarmed that they weren't quoted. But where the heck is Sprint, the original champion of the Treo? And where's Cingular, which has lately been one of the biggest Treo endorsers? I think their absence is not a good sign.
It was also disappointing that neither of the major Chinese phone operators was quoted. Much of the development work on Access Linux is being done in China, and the country is mad for Linux, so you'd think at least one of the operators would be willing to say something positive about the OS.
There's no quote from Monta Vista. That's kind of spooky, since MontaVista and PalmSource had announced plans to work together just last August. I presume the relationship is not going well. I was also disappointed not to see a quote from the CE Linux Forum, an embedded Linux consortium that includes a number of major consumer electronics companies. Access and PalmSource are both members, so you'd think they could have gotten some sort of quote.
But my biggest question was, where are the licensees? Where are Samsung, LG, GSPDA, Garmin, Symbol? Where's Palm? Given all the work that Palm has been doing to reassure its Palm OS-using customers, I was very surprised that there wasn't a quote from them in the press release. It's possible that the licensees didn't want to hint at a pre-announcement of a future product, since that could hurt their current sales. But I'm wondering if there might also be business issues.
Access's announcement said that the new Linux platform will be available to licensees as an SDK (software development kit) by the end of the year. You use the SDK to write applications, but you need the PDK (product development kit) to actually develop a device. As far as I know, Access hasn't even given a public date for the PDK, other than to say that it'll be after the SDK. Unless there's some sort of special pre-availability release to certain licensees, or Access is sand-bagging the date, we're going to see a very long runway until devices are released with the new OS. Palm typically takes a year or more to build an OS into a new device (much of the delay is because they have to rework their proprietary PIM apps to run with the new OS). That might mean you wouldn't see a Treo based on the new OS until late 2007 or maybe even spring of 2008. Perhaps an Asian phone vendor could ship something sooner, but I think you'd still be looking pretty late in 2007.
That's not a life-threatening disaster for Access, since they have deep pockets and can take the time to get the product right. But I think it might be a very significant business problem for Palm. Most of the carriers are now heavily into their migration to 3G. Even six months ago, they were very reluctant to consider adding any non-3G products to their smartphone product lines. There are strong rumors of a Treo 700p, running on Sprint's EVDO 3G network, to ship this summer. I can see that happening since Palm traditionally did its own work to adapt Palm OS to Sprint and Verizon's networks. But I don't know if Palm has the capability to adapt the current version of Palm OS to work with the UMTS 3G standard used by the world's GSM operators. If not, Palm might not be able to ship a Palm OS compatible Treo on 3G GSM networks until the end of 2007. That would have a huge impact on potential Treo sales in Europe, Africa, parts of Asia, and parts of the US.
Some people have speculated online that Palm may be planning to move completely to Windows Mobile. I doubt that's their intent, but given the strong demand for 3G among GSM operators, Palm may not have a choice but to put a lot more investment against Windows Mobile, since it's compatible with UMTS right now.
That's why Palm's silence on the new OS worries me.
So I end up feeling that the announcement was a mixed bag. It looks like Access is assembling a credible (if complex) mobile Linux product. Given the endorsements from Telefonica and especially NTT DoCoMo, I think it has a chance to get some design wins. But I'm very worried about the situation with Palm and the US operators.
Is Access too late?
Not unless you think the phone market is about to standardize down to a single OS, and I see absolutely no sign of that. Most users don't really care what the mobile OS is, they just want a product that works well. So I think the door will be open when Access finishes. But because of the delays, and the uncertainties with Palm, I'm starting to feel strongly that we should view the Access platform not as a direct continuation of the Palm OS, but as a new entrant that happens to inherit some technologies from PalmSource.
I mean this not just in technical terms, but in business terms. If you view Access Linux as a continuation of Palm OS, you immediately notice that a lot of key Palm Economy players haven't lined up to endorse the product. It's pretty disturbing. On the other hand, if you view Access Linux as a new mobile OS based on Linux, it's doing extremely well to have so many companies endorsing it when it's still 18-24 months away from shipping in phones. The future's pretty bright for something, but I'm not sure we should think of that thing as Palm OS.
Access Linux Platform and the future of Palm OS
A glimpse of the future: the multi-touch screen
One of the fun things about working in high tech is that you'll occasionally get a look at something new that you know is going to have a big impact in the future. I got that feeling when I first saw a development version of HyperCard at Apple (back when they called it WildCard).
Today I had that same feeling when I saw a video called Multi-Touch Interaction Research. It was produced by researchers at NYU who are exploring what you can do with a tabletop video touchscreen that can track separate inputs from every finger that touches the screen.
Some of the demos are just fun geeky stuff, such as an interactive lava lamp where you can move blobs around and merge them. But several other demos show people manipulating 2D and 3D images and maps faster and more fluidly than you could possibly do with a conventional graphical interface. I could picture someone using a system like this for page layout, architecture, or industrial design. It would also be fascinating to see if you could lay out a relational database visually and use finger touches to navigate it quickly.
Be sure you watch the whole video; it gets more interesting as it goes on. The lead researcher has done some other interesting stuff as well, which you can read about here. Check out the touch-sensitive LEDs.
Although the table top screen in the video is cool, I'd settle for having this interface on a tablet computer.
Will HP's new mobile organization make changes?
Last week HP Personal Systems Group (PSG), the organization that makes all of its PCs and mobile devices, announced that it has split its handheld business unit out of the notebook computer team, and has recruited Dave Rothschild as VP of the new business unit. I think Dave's a good choice, and he's an example of how everything's interconnected in Silicon Valley. He was CEO of Pixo, a mobile OS company whose software was incorporated into the iPod. At Pixo, his head of engineering was Larry Slotnick, who went on to run engineering at PalmSource. Earlier in his career, Dave was on the PowerBook team at Apple, where he would have known Satjiv Chahil, who is now head of marketing for PSG. Satjiv was once at Palm, where he worked with Todd Bradley, who is now executive VP of the whole PSG organization.
I ought to make a chart of this stuff – it's almost like a big three-dimensional soap opera.
Rothschild will be based in California, but the bulk of the mobile team will remain at Compaq's old headquarters in Houston.
Anyway, it's fun to speculate on what the change means. HP has been steadily losing sales in the mobile market (it was down 20% year over year in Q3 of 2004). Meanwhile, the Palm Treo has been growing rapidly, and is now available on Windows Mobile. There's a real possibility that Palm could become the leading Windows Mobile brand, which would not go over well at HP.
I think neither Dave Rothschild nor Todd Bradley will be content to just re-sell generic devices made by HTC and the other Taiwanese ODMs. They might also be willing to consider offering operating systems other than Windows Mobile. I hope we'll see much more interesting products from them in the next 12 to 18 months.
Microsoft vs. RIM Blackberry: This time we mean it (sort of)
Microsoft has once again declared war on the RIM Blackberry. This is probably the third or fourth time they have done so, and like the other times the full solution from Microsoft isn't quite shipping yet. But it's closer than it was before, so this is a good time to check in on the situation.
In the early 1990s, Microsoft went through a harrowing experience with IBM over the OS/2 operating system. First they worked together on it, then Microsoft shifted its focus to Windows. There are a lot of theories on whether the cooperation between the two companies was ever sincere, but what's clear to me is that along the way Microsoft learned a lot of handy business practices from IBM. One is FUD (fear, uncertainty, and doubt), the art of tantalizing customers with your future plans while at the same time scaring them about problems with competitors.
IBM was so well known for FUD that it spawned an off-color joke in the tech industry. I'm going to repeat it here because it vividly captures the current situation. I've tried to clean it up so it won't offend anyone. My apologies in advance if you're offended anyway.
Three women were at lunch comparing notes on their husbands. The first woman said, "My husband is from France. Every evening he holds me in his arms and fulfills my wildest fantasies." The second woman smiled and said, "My husband is from Italy. Every night he comes home early and devotes himself to my needs for hours." The third woman shook her head and said, "My husband is a sales rep from IBM. Every night he sits on the edge of the bed and tells me how great it's going to be until I fall asleep."
That's basically what Microsoft has been doing with Direct Push, its RIM-like mobile e-mail solution. The Microsoft faithful have been waiting for Direct Push a long time – Microsoft has talked about mobile e-mail for years, and this particular solution was first discussed publicly about a year ago. Some people on the mobile websites have been getting mighty testy about the delays.
The surprising thing to me about this week's announcement is that Microsoft is still sitting on the edge of the bed. Devices with the software built in won't be available until later this year. Upgrades are promised for existing devices, but again there's no date for availability. Several operators announced that they will support Direct Push, including Cingular, T-Mobile, Orange, and Vodafone. But I couldn't find any firm availability dates, just target quarters.
The other thing I'm not clear on is the business model for Direct Push in the long term. Microsoft's core pitch for its mobile mail solution is that it'll be free – the features are being built into Exchange Server, so any company with the latest version of Exchange gets free mobile e-mail automatically. There's no need to buy a RIM server, and if you have an IP connection, there's no need to pay e-mail service charges either.
This is supposed to be Microsoft's killer advantage over RIM. But the operators carrying Direct Push are all talking about charging around $30 a month or more for it – about the same as you'd pay for RIM service. Reuters even quoted Pieter Knook, Microsoft's SVP of the mobile team, as saying, "they (the operators) are pricing it pretty much the same."
I can understand why the operators don't want to give away Direct Push access. Many of them just installed RIM servers and are presumably getting a cut of the service fees from RIM. They wouldn't tolerate Microsoft destroying that revenue stream. If you thought iTunes got a frosty reception from the operators because it might interfere with their potential future music stores, picture how they'd feel about Microsoft messing with their existing mobile e-mail businesses.
As a result of all this, it's hard to tell how enthusiastic the operators are about Direct Push. They're usually willing to attend a product announcement with Microsoft, just for the PR value. But if they don't like the economics of it, they may leave it on their price lists but put the aggressive marketing against other mail systems. My guess is that they don't want any single mobile mail vendor to dominate, so they would have more options and more negotiating leverage in the future.
The operators' involvement changes the market dynamics around Direct Push, and I'm not sure that all of the people predicting RIM's demise have thought it through. It looks like the free thing about Direct Push will generally be the server, not the service. That's obviously important to IT managers, but it's not very meaningful to the users and departmental managers who have been some of the most passionate supporters of RIM. They generally don't have to pay for a server installed by the corporation, or deal with the hassle of maintaining it. So for them, switching from RIM to Windows Mobile would mean retraining and lost productivity for no direct cost savings.
Rather than setting up a classic Explorer vs. Netscape conflict in which the users themselves benefited from Microsoft's giveaway, Microsoft may be creating a user and department vs. IT conflict within corporations. I don't know how that's going to play out. In general, IT hasn't been very successful at driving uniform mobile standards in corporations the way they did with PCs. Mobile devices are cheap enough that most employees buy their own, and because they're used for both personal and corporate use it's much harder for companies to dictate the choice of device.
Perhaps Microsoft is counting on a second wave of mobile e-mail deployment in which corporations will provide Windows Mobile devices to all employees. In departments where there is no RIM today, it'd be much easier to get Microsoft embraced as a standard. But I'm not convinced that mobile e-mail is ever going to be as broadly used as, for example, desktop e-mail is today. In the user research I've been involved in, some people are communication fanatics who eagerly embrace mobile mail, but a lot of others don't really want it. Even if you gave them a mobile mail device, they might not use it much – in which case the corporation would have trouble justifying $360 a year in data service charges per employee.
There's going to be more mobile mail deployment in corporations, but I think the penetration is going to vary enormously by company and by industry. Companies have personalities, just like people. I think some of them will embrace mobile mail broadly and some won't. The patchier the deployment, the better for RIM, because IT departments will have less control over the deployment decision.
Does this mean RIM is safe?
Hardly. The idea of reducing the number of servers a company supports is intensely appealing to IT managers, and Microsoft has a history of crushing competitors in similar situations. History isn't prophecy, but RIM must at least show convincingly that it can counter Microsoft's pitch.
So far its performance is not at all encouraging. Some publications reported that RIM was not available to comment on the Microsoft announcement, which was pretty surprising to me considering the importance of the issue. RIM should have made sure everyone had its perspective. Other stories quoted RIM CEO Jim Balsillie as saying that RIM's solution is still better than Microsoft because it's more secure and uses less network bandwidth. That may or may not be true, but by making that sort of detailed argument its main pitch, RIM loses automatically. Essentially, RIM is acknowledging that Microsoft has copied most of its functionality, and we're now reduced to arguing minutiae. I tried that personally at both Apple and Palm, and it doesn't work. Once Microsoft has copied 90% of your solution, and especially if its product is free, most customers will either default to Microsoft because it's less of a hassle, or wait patiently for Microsoft to deliver the remaining 10% functionality.
I think RIM would be much better served if it went on the offensive, to convince its current customers that they'd be fools to remove their RIM servers, and to persuade new customers that there's a compelling, positive reason to buy. Communication fanatics care about all forms of communication, not just e-mail. It would be nice to see RIM try to add other types of communication to its solutions. Also, RIM has been working for years on other services, many of them enterprise apps, that can run on its servers. Now's the time to publicize those. (Or, if the additional services aren't compelling enough to give the company an edge, now is the time to ask what RIM's engineers have been doing for the last three years.)
The time may finally be approaching when RIM will need to choose between its device business and its server business. For a couple of years the story inside the industry has been that RIM knows it's a server company; that's why it was willing to license its client software to other firms. But that client software has been agonizingly slow to appear, and now RIM may face a stark choice. If it wants to preserve its device sales, it should make Blackberries work with Microsoft's e-mail system in addition to its own servers. Then there would be no reason to remove Blackberry from corporations. But that could hurt RIM server sales. On the other hand, RIM could keep its devices tied to the RIM servers, but in that case it might lose the whole company.
If I were running the place, I'd allow Blackberry devices to connect directly to Direct Push. If the RIM server is truly superior, customers will continue to buy it no matter what other options are on the devices. If the server's not superior, tying the devices to it won't save the company. I think RIM's not big enough to win by holding its customers prisoner.
Now the damage caused by RIM's legal situation with NTP becomes visible. For the last year or more, when RIM should have been preparing for the Microsoft assault, it has been distracted by the patent lawsuit. I don't know how big the distraction was for RIM's execs; maybe they were able to compartmentalize their thinking and focus on Microsoft anyway. But that would require amazing mental discipline. I don't think most managers could do it.
For a long time I've been puzzling over why RIM has fought the NTP case so vigorously. I even asked a friend who's an attorney and has worked a lot of major corporate and government cases. We agreed that most companies would have settled long ago, just to get the thing out of the way. Why didn't RIM do it? I believe pride is a factor. RIM is still controlled by its founders, and sometimes the people who built a company are violently opposed to letting anyone else benefit from what they see as their work. One of the angriest business documents I've ever seen is the public commentary that Jim Balsillie wrote for the Wall Street Journal. A sample: "Unlike NTP, RIM actually created something -- a company and a new market segment through over 20 years of innovation, risk-taking, partnering, customer service, growth and re-investment."
I think it's also possible that as the case has progressed, RIM's management has started to worry about shareholder liability if they settle before the last possible instant. Suppose RIM settled and the next day the patent office invalidated NTP's patents. Could shareholders sue RIM for settling too soon? I don't know, but it's the sort of thing management teams worry about these days.
I should add that I'd feel a lot more sympathetic toward RIM's managers if they hadn't been so quick to sue competitors who violated their patents in the past.
Regardless of the internal distractions, the biggest damage caused by the case is distraction to RIM's customers. RIM needs customer loyalty more than anything else right now, and rather than rallying the troops it has to answer things like a Gartner brief recommending that companies stop Blackberry deployment because of the lawsuit. It's also spending precious time explaining its workaround to avoid the NTP patent, which is creating its own set of uncertainties. Inconvenience and uncertainty are deadly when you're selling against Microsoft to IT managers. At some point, the managers will just throw up their hands and say, "forget it, we're moving to Microsoft's solution." And once that happens, there's no getting those customers back.
I think this is exactly what Microsoft is counting on, and it's a reason why they once again pre-announced their mobile e-mail solution even though it's not actually available. Microsoft probably hopes to stall RIM sales for now, and eventually to win the IT managers over to its side, exsanguinating RIM in the process. That would leave the operators with no choice but to support Microsoft's solution, even if they feel ambivalent about it.
I'm not saying that RIM is in danger of being wiped out overnight. But unless they elevate their marketing game, and get rid of the distractions quickly, I think their growth may be capped and they'll gradually be turned into the Lotus Notes of mobile e-mail.
Watch your back
The other interesting side effect of the Microsoft-RIM conflict is its impact on other companies. The other e-mail server companies, like Visto and Good, are obviously in danger of being squeezed between the titans. I don't think they're necessarily dead, but they'll need to be very crisp about their advantages.
The mobile operating system situation is more tantalizing. In the process of defending Exchange server from Blackberry server, Microsoft is opening some interesting opportunities to attack Windows Mobile. Microsoft is licensing other companies to sync directly to Exchange. There's already a client for some Symbian devices, and you've got to believe that Access would do one for Palm OS. If you really can push mail from Exchange on a level playing field to any device, one of the most potent arguments for Windows Mobile has been undercut. Microsoft might win on the server side only to lose the mobile device battle.
I'm sure Exchange is the more important franchise in their minds. But I bet they're trying to come up with ways to win in both.
How to read tech analysts' shipment reports and forecasts
We're entering what I like to think of as the silly season, the time when the major tech analysis companies issue their quarterly reports on mobile device sales. IDC already released its report on Q4, while Canalys is due any day. These reports always generate press coverage; some of it insightful, most of it just repeating whatever the analysis companies said.
Once all the reports are out, I'm going to look through them and try to give some comments on what I think they mean. But in the meantime, I thought it would be good to post a note on the numbers themselves – how they're gathered, what they mean, and what to watch for.
First, let's differentiate between shipment reports and forecasts. The shipment reports typically discuss what happened in the previous calendar quarter, and are issued about a month after the quarter ended. Forecasts are generally issued about once a year, and predict what sales will be in the next five years or so. We'll do forecasts first.
"You don't actually use these things to make business decisions, do you?"
--A horrified industry analyst, when she realized why we had requested the latest forecast
I think tech industry forecasts are worthless. Completely worthless. That may sound harsh, but think about it for a minute – can you reliably predict the future? Can anyone you know do it? If anyone could predict the future, don't you think they'd get rich off the stock market rather than working at an analysis company? I once asked a very senior manager at one of the biggest tech analysis firms how they created their forecasts. He laughed. "The process involved pizza, beer, and a dart board."
Here's an example of how bad tech forecasts can be: In the handheld market, the big analysis firms once predicted that handheld sales would be 60 million units a year by now. Instead they're 20 million. That's a margin of error of about 200%. If NASA forecasted that badly, Neil Armstrong would have landed in Arkansas.
Since the forecasts are useless, why do the analysis companies create them? Two words: publicity, and money. If you create a forecast and issue a press release about it, a lot of reporters will write articles on it, all of them crediting your company and publicizing its name. The tech websites will repost your press release, and even more people will read about your work.
The other reason to do a forecast is because companies will buy it. If you work in a company and you're tasked with creating a business plan, your management will insist on having a forecast as a part of it. No one believes an internally-created forecast, because the employees are assumed to be biased. So you buy an external forecast. If management is trying to be especially conscientious, you'll be asked to buy several forecasts for due diligence.
I've seen companies assign teams of senior people to spend months massaging and cleaning and polishing the industry forecasts, so they can be prepared for use in the business plan.
It's all a waste if time. When you start with a cow pie, no matter how much you polish it, all you'll get is a polished cow pie. Companies would be much better served by getting together their brightest people, asking them to make a guess, and then writing that down. Chances are the folks in your company are more in touch with the market than the analysts (you talk to a lot more of your customers than they do).
Now let's talk about the quarterly shipment numbers
To be fair, I should acknowledge that the quarterly numbers are a lot more accurate than the forecasts. But there are still major problems. No one, absolutely no one, knows what's really happening in mobile device sales. The market's too complex, and some critical numbers simply aren't available. For example, Dell won't tell anyone what its precise unit sales are by product line. It's also notoriously difficult to get phone shipment numbers out of the operators. Sometimes that seems to be because they view the information as confidential, and sometimes it seems to be because the operators themselves don't have very good inventory tracking programs for their retail stores (they care a lot more about how many service plans they sell than which phones).
The most accurate sales numbers generally come from two companies, NPD and GfK. Both of them directly track sales of electronic devices through retailers (NPD in the US, GfK in Europe and several other countries). So, for example, with the NPD numbers you can find out exactly how many handhelds were sold last week at retail in the US. You'll get a database that includes brand, model, average selling price, and a lot of other information. But those numbers won't include the things NPD can't track -- Dell, direct sales by any manufacturer to a business, and smartphones and other devices sold through the operators.
You'll also never see the NPD and GfK numbers in public. They're pretty close to monopolies in sales tracking, and they charge enormous sums of money for their data. Nothing is given away free.
That means most of us are left looking at the quarterly shipment numbers compiled by companies like Gartner, IDC, and Canalys. At all three companies, the methodology is basically the same – they call every hardware vendor, ask them how many units they shipped in the quarter, and total up the numbers. The people who make the calls and compile the numbers are generally honest and hard-working, and they're doing the best they can with the (limited) resources available to them. But there are several things you need to be aware of when reading their numbers:
--The vendors can lie. It's hard for a relatively small company like Palm to lie about its unit shipments; you can just take Palm's quarterly revenue and divide it by whatever you think the average selling price is for its devices. But for a large company like Dell or HP, mobile devices are such a small percentage of their overall sales that there's no independent way to check their numbers. I am not saying that Dell or HP fabricate the numbers they report to the industry analysts; they're pretty conservative about their reputations, and US stock market regulators frown on a company lying about anything that might move its stock price. But the rules are looser in some other parts of the world, and I've heard persistent rumors of other companies cooking their shipment numbers to make themselves look good in the quarterly reports.
If you think about it, people working in tech companies have a very strong financial incentive to mislead the share tracking companies. It's fairly common for sales and marketing managers to have performance bonuses tied to market share. Guess how share is measured. It's like asking an eight-year-old to fill out his own report card.
--The numbers measure shipments into stores, not sales to customers. When a big company like Nokia ships a new smart phone, it rushes hundreds of thousands of units into stores and distribution warehouses. Those first shipments typically happen in a single quarter, and can cause a company's share to rise dramatically in the quarter of first shipment, and then plummet the next. The analysis companies and press rarely explain this, which is why you'll get dramatic press reports that a particular handheld or smartphone company jumped from nowhere to become a top five vendor in a single quarter. Ask yourself if that's really possible – do people really change their buying preferences that quickly? And does it happen every quarter or two?
--The third problem with the quarterly numbers is that they don't report shipments by model (because companies refuse to give out their model-specific shipments). So all of Nokia's smartphone sales are reported as a single lump, or at best are cut into a couple of not-very-helpful categories such as flip phone vs. candy bar phone. This makes it incredibly difficult to figure out what's happening in different market segments.
--The fourth problem is that different analysis companies cut the mobile market differently. To Gartner, a RIM Blackberry is a PDA but a Palm Treo is a smartphone. To IDC and Canalys, both are smartphones. This makes for huge disagreements about market size. Gartner says the PDA market is growing at a healthy clip; IDC says it's dropping steadily. (By the way, if you want to hear some catty comments, ask Gartner or IDC or Canalys to tell you what they think of the way the other company classifies RIM shipments.)
Given all of these challeges, why do the analysis companies bother to compile the quarterly numbers? Once again, publicity plays a role. The quarterly score-keeping press releases get lots of coverage. (I just did a Google search for "+Gartner +PDA +share". It produced 243,000 hits.)
But also, I have to admit it – as bad as the quarterly shipment numbers are, they're better than nothing. If you know their flaws, you can try to correct for them, and sometimes you'll be able to dig out a few insights. That's what I'm hoping to do after the new round of shipment press releases comes out.
The turning point creeps closer in music
A couple of follow-ups to my post regarding music distribution.
--"If Aerosmith sold only 100,000 copies on the Internet, we'd make more than selling a million for a big label. No matter how you slice it, everybody's making more than the band." --Aerosmith's Steven Tyler, noting that the band's recording contract is up for renewal after the next album
--The LA Times runs a lot of articles giving the entertainment industry's view of technology. Some of them are a tad...skeptical. But there was a very interesting article today on Pandora, an online service that creates a customized music feed for you based on your favorite songs. You tell it which songs you like; it picks songs that have similar aural characteristics and plays them for you.
I haven't spent enough time with Pandora to decide if I like it or not; in general, I'm not a big fan of listening to music on my PC. But I love the spirit of what its founders are attempting – they want to help people discover new music that they wouldn't have found otherwise. I think services like Pandora will play an important role in removing the middleman from music. If new artists can be discovered more easily, artists will be less dependant on the record labels' marketing infrastructure.
Pandora doesn't advertise; it relies on word of mouth and blog referrals to get traffic. So I'm happy to give them a plug here.
An apology to my RSS readers: You have probably received more than one copy of this post. This is the third time I have posted it to my blog. The first two times, it mysteriously disappeared after a while. I presume this is related to the serious technical problems that the Blogger folks have been reporting all weekend. Their status report includes the not so reassuring message: "The Blogger and Google engineers and ops folks are not just sitting around waiting for the next failure; we’re actively improving our infrastructure to lessen both the planned and unplanned Blogger outages."
I know they mean well, and it's a free service, so I shouldn't complain. But I have to say that I'd expect Google, of all companies, to run a reliable service. It makes me wonder what else might be screwed up behind the scenes.
