APAC the key to Micr-okia success

asiaIt was Microsoft and Nokia’s big week this week and I’m sure the two will be hoping to hog the headlines going forward as much as they did over the past seven days. Now some might have unkindly described the alliance as “the sounds of two garbage trucks colliding”, but I’ve been getting the low down on why the deal should matter to APAC, or more realistically, why APAC should matter to Microsoft.

Let’s get one thing straight, APAC is essential to Microsoft’s future success in the smartphone space, not just because it has the world’s largest and fastest growing market – China and India respectively – but because Nokia has a really good legacy footprint there thanks to its feature phone biz.

The problem for Redmond, however, is that we’re not talking about feature phones any more, but smartphones. These markets are increasingly demanding smartphones, albeit low-end handsets, not feature phones. It’s why local players like Huawei, ZTE, Micromax and others are growing at such speed.

Nokia’s stock is greatest in India, where it has been voted most trusted brand for two years in a row, despite on-going tax problems with the authorities. Yet according to IDC’s Melissa Chau its relationship with operators isn’t particularly great anymore, so to large extent Microsoft is going to have to start from scratch here.

Building a budget Lumia will be vital and Chau told me Microsoft could do two things to help achieve this:

  • Remove licensing charges – at the moment it’s built into the cost of the phone – which would wipe about $10 off per handset
  • Use its combined internal expertise now with software and hardware to tweak Windows Phone so that it can run on hardware specs more suited to a lower price point.

It also needs to sort out Asha, she told me, starting with making the handset more attractive by sticking some Microsoft apps on it, and then hopefully in time transitioning those customers to a low cost Lumia.

This ain’t gonna be easy. The competition is fierce out there and with Nokia’s star waning and a severe lack of apps in the ecosystem the best Redmond can probably hope for is cementing it in third place behind the deadly duo of iOS and Android. With four of the Lumia’s top selling markets in APAC (including no. 1 and 2) however, it must make the region a priority.

Time will tell how successful it is, of course, but time, as we all know, is probably something Micr-okia doesn’t have.


Come in Agent Elop, your work is done

nokia eventIt’s finally happened. Microsoft today announced it is buying most of Nokia’s mobile phone business for a bargain €5.44bn (£4.62bn) in cash.

The deal will see Redmond snap up the Finnish giant’s Devices and Services business for €3.79bn (£3.2bn), license Nokia’s patents for €1.65bn (£1.4bn).

It’s a dramatic last roll of the dice for outgoing CEO Steve Ballmer and neatly brings back former Redmondite Stephen Elop into the fold.

He’ll be stepping aside as Nokia boss to become EVP of Devices and Services, but must be one of the favourites now to succeed Ballmer. If so, this will be one of the most expensive pieces of headhunting in corporate history.

Nokia’s chairman of the board Risto Siilasmaa will take the reins as interim CEO while the deal goes through the usual shareholder and regulatory approvals. Microsoft said it expects the transaction to close in Q1 2014, all being well.

For Microsoft the deal is proof if any were needed that it’s no longer a software company, that it sees success in the smartphone space as crucial to its future and that it can’t rely on a partner like Nokia to deal with the hardware side of things.

A few things occur to me:

  • HTC and RIM will be pretty disappointed – who are they going to get to buy up their failing businesses now?
  • Agent Elop has now been recalled after 2 years out in the field persuading Nokia’s board to sell to Microsoft. Job done – you may now progress to Microsoft CEO.
  • China’s up and coming smartphone poster child Xiaomi was recently valued at $10bn, nearly $2bn more than Nokia at this sale. Surely over-inflated.
  • This deal, while it could theoretically ensure phones get out faster to market, is not going to make life any easier for Microsoft or its new Nokia Devices and Services division. Especially in Asia. Its lack of apps will still hold it back.
  • Is Nokia still Europe’s largest technology firm? Over 30,000 staff will now be Microsofties but it still has over 50,000 employees on its books working on the reasonably profitable NSN biz and location services. It should be in pretty good shape.

IDC analyst Bryan Ma told me that the deal would give Microsoft a shortcut or “jump start” into the hardware space, but could end up alienating OEM partners.

“It’s got device, manufacturing, economies of scale, and channels to sell into which would have all take it longer to grow organically, as well as valuable patents,” he argued.

“My concern is as much as this can help it doesn’t solve the biggest problem facing Windows Phone and Windows 8 on tablet and PC – it doesn’t have enough apps to make a compelling platform.”

Tellingly, Microsoft only devotes one bullet point on the app ecosystem in a mammoth 27-slide presentation explaining its strategic rationale, he pointed out.

Ma added that the deal could end up alienating more OEM partners.

“The whole debate Microsoft got into when it released Surface was that its hardware partners like Acer said it was stepping on their toes. This will raise questions over whether this is more salt in the wounds for them.”

As for smartphone OEMs well Windows Phone has very few of those beyond Nokia anyway so it will step on fewer toes, he said.

However, I’d agree with Canalys VP research Rachel Lashford that it’s not exactly going to attract any more into the fold either.

“It reminds me of a decade ago when Nokia owned Symbian and tried to license it out but it didn’t work out,” she told me. I can’t think of many OEM vendors would fancy going head-to-head with Microsoft on Windows Phone now.

As for Asia-specific repercussions, well I’ll be taking a look at those – and there should be some given Nokia’s legacy in India and Microsoft’s desire to crack China – in my next post.


Don’t worry Cisco, you’re not getting kicked out of China

cisco logoA lot of media reports have been flying around this past week or two predicting that US tech firms will find life increasingly difficult for them in China following the various revelations leaked by Edward Snowden.

It’s a compelling narrative and on one level makes quite a bit of sense.

If, as the PRISM whistle-blower has claimed, the NSA really is spying on foreign targets including China and Hong Kong and even allies like the EU, then the logical next step would be to assume it could be doing so with the acquiescence of US technology providers who have managed to establish a firm foothold in the country.

After all, wasn’t it US lawmakers who branded Huawei and ZTE a national security threat due to the perceived risk of the firms being forced by Beijing to modify systems to enable state-sponsored eavesdropping?

No wonder then that Chinese state-run media including the English language Global Times have called for US companies including Cisco to be replaced by domestic providers. China Daily even sourced an anonymous “industry insider” who claimed: “There is a terrible security threat in China from US-based technology companies including Cisco, Apple and Microsoft.”

There’s good reason to believe that Cisco et al won’t be overly concerned about such claims, however.

For one thing, although its kit is all over China’s network infrastructure, the market there accounts for less than 5 per cent of turnover.

Huawei is probably Cisco’s biggest Chinese competitor, especially in the telco edge router market, and has certainly been taking market share from the venerable US giant, but a rip-and-replace policy of the sort advocated in the Chinese media is simply not practical.

“I would say a few vendor replacements had considerations beyond the offerings themselves, for example for certain clients with high security sensitivity,” Gartner analyst Tina Tian told me. “But much more of it would be purely a market decision.”

As for the other US technology providers, the likes of Google Android, Microsoft and Apple between them control just about the entire mobile and desktop operating system market in China.

For that reason and the lack of strong domestic alternatives (for the time being) we’re just not going to see wholesale changes here, which could even work in Cisco’s favour, according to Tian.

“Even if China could replace all the networking equipment from foreign vendors, their data would still need to be handled by IBM, Oracle, HP, EMC, Intel and also Microsoft,” she said.


Computex 2013: chips with everything

windows OEM devicesSo that was Computex Taipei 2013. Asia’s largest IT show and the world’s second biggest was dominated this year by the launch of Intel’s 4th generation Haswell processor family, and to be perfectly honest there wasn’t an awful lot of other news knocking around, but here’s my brief take on events.

Local heroes Asus and Acer kicked things off in usual hyperactive fashion with a bevy of tablets, notebooks, smartphones and other hybrid devices. The most notable was probably Asus’ 3-in-1 Transformer Book Trio, which combines a notebook, tablet and even desktop functionality in one.

Acer’s presser was more subdued and it remains to be seen whether it’s done enough to win back some of the market share it’s been hemorrhaging over the past few quarters. It actually also depends on whether users decide they want 2-in-1 notebook/tablets – as Intel believes they do –  or a regular notebook with a smaller companion 7 or 8 inch tablet (phablet) device like the Acer Iconia W3.

How this market shakes out will be interesting to watch and to be perfectly honest no-one knows how it’s going to play out, least of all the many analysts I spoke to. It’s all about price, performance, and user experience – nail those three and as a manufacturer you’re giving yourself the best chance of success. Intel was marketing the hell out of the 2-in-1 concept at the show on the back of its Haswells and Silvermont Atoms, but I’m not convinced this will work out as intended.

It makes sense on paper – a tablet for tablet stuff and a notebook for work, in one hybrid device – but if you’re a fanboi, for example, you’re not going to want to give up your iPad, so a convertible isn’t going to cut it.

Form factor chat aside, Microsoft held its first public demo of Windows 8.1  at the show – the OS Windows 8 should have been. There are a lot of cool features in there – better search, the ability to view several apps on one screen and resize them, and the long awaited return of the Start icon. However, the experts are pretty guarded about whether it will be enough to a) rejuvenate the PC market and b) help Redmond grab more market share in the mobile computing space – tabs, phabs and notebooks.

“Being able to lock it in desktop mode and having a ‘Start Point’ will remove the chief barriers that people have with Windows 8. But that doesn’t necessarily address the things that are holding back the PC market as it is,” Forrester analyst David Johnson told me.

“Right now, at the consumer and enterprise level, non-Windows tablet adoption is massive, and Windows 8.1, while improving the tablet experience, will still be competing with Apple iOS and Android. Secondly, most enterprises are completely distracted by just getting to Windows 7 before the April 2014 deadline. They’re at capacity with that transformation and few will have the resources to worry about Windows 8.1.”

Taiwan was quite honestly the star of Computex this year.

I mean, it always has been, but the lack of news made it even more obvious. This is a country whose technology producers account for 80 per cent of the global “branded” tablet market and over 90 per cent of Intel notebooks. They might all be physically made in China but they’re designed here. The IP, basically, is Taiwanese.

It raises an interesting point about whether the People’s Republic of China can ever hope to emulate its tiny neighbour the Republic of China. The Communist Party desperately wants it to start innovating, but you can’t just turn on that tap at will after decades of stealing and copying IP.

Rubber ducks perfectly illustrate just how far it has yet to go.

Hong Kongers have been fawning over a new installation from Dutchman Florentijn Hofman for weeks now. It’s a giant, six storey, yellow rubber duck floating in Victoria harbour.

Now reports have emerged that similar ducks have been spotted across China, from Wuhan to Xi’an. They say imitation is the sincerest form of flattery, but in the tech world, it’s going to get China absolutely no-where.