Reggie Middleton is an entrepreneurial investor who guides a small team of independent analysts, engineers & developers to usher in the era of peer-to-peer capital markets.
1-212-300-5600
reggie@veritaseum.com
Google has fired a shot across the bow of the smartphone market, and it quivers in response
Yesterday, Google's Motorola division released the Moto G, a $179 full featured smartphone with a screen resolution and size superior to the $650 iPhone 5S, and an all day battery that bests the iPhone and Samsung Galaxy S series as well. This is a fully functional smartphone that is priced below the cost (as in the cost to build!!!) iPhone 5S and Samsung Galaxies (as in all of them!). Needless to say, this threatens to give Google significant market share in the low and mid-tiers, not to mention full vertical integration (the hardware, software, app ecosystem, cloud and services will belong to Google - leaving only the wireless pipes for it to contend with, and I would not sleep there either [Google Fiber in your diet}).
Google's cost shifting business model allows them to sell this phone below the actual cost of manufacturing and development of many if not all of its competitors. For those not familiar with the concept of cost shifting...
This is how Google did it...
For those who do not remember the importance of market share on margins, let's reminisce on post past...
Looking Through Windows To See The Big Data On Fruit - Or Android Gets 'em Again
In early 2010 I warned on Blackberry (then RIMM), with market share loss to Android being the prime determinant... Many More Black Eyes for the Blackberry? A Complete Forensic Analysis of Research in Motion. I put significant data out in the public domain to illustrate my point and put explicit price points out for subscribers, ie. RIM Smart Phone Market Share, RIP? Was I right?
Blackberry market share vs margin correlation analysisBlack
I explained this in detail in the post "Cost Shifting Your Way To Prominence Using The Network Effect, Or Google Wins - Apple, RIM & Microsoft Have ALREADY LOST!". Failure to achieve the network effect effective is tantamount to a failure to be able to control you margins, long term. Of all people to of know this, who do you think preached it most convincingly?
Margin compression was sure to kill Blackberry, even if they did hit their sales numbers, which they didn't and couldn't!!!
Related reading...
The Smallest & Liveliest Of The DeadBeat Carriers Successfully Launched Wireless WMDs
Within two years of getting the mobile computing crown (toppling Apple and insuring that Nokia and Blackberry didn’t stand a chance), Samsung is already prepping to relinquish it. I know, the hoi polloi screams from the common street analyst’s rooftop, incessantly chanting “… but Samsung is dominating handset sales, creating and literally owning categories, and essentially out Appling Apple!”
Well, the reason why I apparently out-maneuver the Street in this space (as in others) is not vastly superior intellect nor a LiPoSilica Oxide powered crystal ball borne from some extraterrestrial technology. It’s actually so much simpler than all of that.
See also...
5:31 Reggie Middleton Wins The CNBC Stock Draft 21 Stocks, 7 Traders, One Winner
Buy Apple till $1000! Hurry & get this Facebook IPO while its hot! Short Google to go long Apple! Reggie Middleton shorts Wall ...
Reggie Middleton goes for his 2nd consecutive win on the CNBC Stock Draftinvestment challenge. Look at the amount of ...
Subscribers, see also...
Google Q1 2013 Valuation Note - Retail
(Technology)- Google Q1 2013 Valuation Note - Professional & Instititional
(Technology) - Google Q1 2013 Valuation Note - Professional & Instititional
(Technology)
Subscribers, download the Q3 2013 valuation reports (click here to subscribe).
Apple 4Q2013 preliminary update- Apple 3Q2013 Valuation Update - Retail
(Technology) - Apple 3Q2013 Valuation Update - Pro & Institutional
(Technology)
The update from two months ago is also of value for those who haven't read it. It turns out that it was quite prescient!
