I have discussed the business model of Google's Android in depth with my subscribers through research reports and email. The reason is for the depth is that many outside of our closed community truly do not understand the value of Google's Android, issuing statements such as "Where are the profits?" Android, like Youtube, Grandcentral (Google Voice), and Admob, was a longer term, strategic investment that takes time to pay off. With the correct strategic implementation, long term strategic investments pay off in spades - much more so than anything that needs to show a financial return in a couple of quarters. Let me walk you through an example with samples from BoomBustBlog Research to illustrate the finer points while at the same time making a very strong case why tech companies and software developers in particular should follow independent research outfits such as BoomBustBlog!
We'll start off by reviewing anecdotal developer experiences selling Android and iOS wares, starting with a Larva Labs blog post as of August 31st, 2009 - Android Market Sales, Are Those Tears or is it Raining in Here?:
You know, timing is everything. If you hit brakes after you pass the red light... Bang! If you pucker up after you press your face against that of your sweetheart's.... You bonk her/him on the forehead. If you downgrade a nation after obvious signs of insolvency... From CNBC today: Moody's Cuts Spain's Debt Rating by One Notch
Ratings agency Moody's cut Spain's sovereign debt rating one notch on Thursday and warned of further cuts due to fears that bank restructuring will likely cost more than twice what the government expects. "(Moody's) believes there is a meaningful risk that the eventual cost of the recapitalization effort could considerably exceed the government's current projections," it said in a statement.
Moody's Investors Service still rates Spain — one of the countries now in the firing line in Europe's debt crisis — as a high grade investment proposition.
By way of comparison, the agency rates Portugal two notches lower and Greece far down with junk status.
The ratings agency said the overall cost of recapitalizing struggling banks was likely to be nearer to 40 billion euros, double the government's estimate.
In a more stressed scenario recapitalization needs could even rise to around 110 to 120 billion euros, it said.
... Moody's also noted that nine of the country's 17 autonomous regions breached budget deficit targets.
Exactly 1 year ago tomorrow, I issued the following report to my subscribers - Spain public finances projections_033010, as excerpted from the first four pages...
Comscore is out with its most recent numbers and the results are predictable for anyone who has been following BoomBustBlog for the past year. Android is literally smoking the competition in the US, and according to Gartner and others globally as well. As a matter of fact, the Comscore numbers show that not only had Android taken the number one market share spot, it has done so at an increasingly greater rate of growth - see comScore Reports January 2011 U.S. Mobile Subscriber Market Share. This must be quite disheartening for the competition.
Note: Timely subscriber research at the end of this article
In the controversial article Steve Jobs Calls End Of the PC, We Call The End Of The Fat Margin Tablet – Including The Pretty iPad, With Proof! I attempted to make clear that those that are really in the know know that looking towards the future, Apple is not the real threat. As quoted from the blog post:
The CEO of the hardware side of the recent Microsoft/Nokia alliance (Elop) put it most accurately – recognizing what I have been saying for about a year now, and that is Google/Android is at the forefront of the mobile computing wars – according to Nokia’s Elop: “Our first priority is beating Android!”.
I was in a cafe yesterday after picking up my daughter from school and noticed this guy typing on an iPad via a very small bluetooth keyboard using the iPad Apple word processor. I couldn't help but observe his progress on what I considered to be an unusual setup. The keyboard was very cramped, he had to reach up to the screen several times to give touch input to the screen, and he had to carry around two different devices to accomplish this.
The setup looked a little something like this...
Again, kudos to Apple management. How many tech companies can convince consumers to spend between a minimum of $600 to almost $1,000 for multiple devices that give you about 1/2 to 3/4 the functionality of a $275 netbook, and do so at 50% margins. This feat was doable due to one part engineering and marketing prowess on the par to Apple, one part monopolistic apathy on the part of Wintel, and one part managemetn bumbling by the various mobile computing vendors who fumbled around while Apple ate their lunch. Again, I can't over emphasize the marketing component, because this guy really looked silly trying to type this paper on this contraption.
Check out the screen shots below from Bloomberg.com yesterday. Whoa!!! What happened? How did we get here? Let's just keep in mind that what may look like analytical/intellectual superiority on my part in comparison with to the literal army of Wall Street analysts and pundits may actually simple end up being intellectual honesty and a dearth of truth destroying conflicts of interests. Then again, it does make me feel good to say that I may be smart, doesn't it?
The Wall Street Journal reports: US housing data may have understated extend of collapse.I can do naught but laugh. Are they serious? Don't they even bother to read BoomBustBlog? The WSJ story goes on to read...
The housing crash may have been more severe than initial estimates have shown.
The National Association of Realtors, which produces a widely watched monthly estimate of sales of previously owned homes, is examining the possibility that it over-counted U.S. home sales dating back as far as 2007.
... The group reported that there were 4.9 million sales of previously owned homes in 2010, down 5.7% from 5.2 million in 2009. But CoreLogic, a real-estate analytics firm based in Santa Ana, Calif., counted just 3.3 million homes sales last year, a drop of 10.8% from 3.7 million in 2009. CoreLogic says NAR could have overstated home sales by as much as 20%.
While revisions wouldn't affect reported home-price numbers, they could show that the housing market faces a bigger overhang in inventory, given the weaker demand.
In December, NAR said that it would take 8.1 months to sell some 3.6 million homes listed for sale at the current pace, but the number of months it would take could be even higher if sales are revised down. Any revisions wouldn't have an impact on homeowners, but it could have consequences for the real-estate industry. Downward revisions would show that "this horrific downturn in the housing market has been even more pronounced than what people thought, and people already thought it was pretty bad," said Thomas Lawler, an independent housing economist.
NAR said the data, which are used by economists, investors and the real-estate industry to gauge the health of the housing market, could be revised downward this summer. Lawrence Yun, chief economist at NAR, wasn't specific about whether and by how much the revisions could reduce reported sales, and he raised the possibility that the CoreLogic estimates have understated the number of home sales. "This is a very important issue, and we are looking at it carefully right now," Mr. Yun said.
Here is a sequence of events that I warned thoroughly about, and is unfolding like clockwork. Witness the massive destruction of capital, despite the fact that it could have been so easily seen at least a year in advance. Let's walk through just the past couple of months. In January, I posted "The ECB Loads Up On Increasingly Devalued Portuguese Bonds, Ensuring That They Will Get Hit Hard When Portugal Defaults". To wit...
About a month ago, I pulled the covers off of the speculation over whether Portugal would default or not. Most of the “experts” declared that a default was not in the cards. I strongly recommended that the so -called “experts” pull out a calculator and run the math. Not only will there be defaults, but the haircuts will look particularly nasty. See The Truth Behind Portugal’s Inevitable Default – Arithmetic Evidence Available Only Through BoomBustBlog followed by The Anatomy of a Portugal Default: A Graphical Step by Step Guide to the Beginning of the Largest String of Sovereign Defaults in Recent History (December 6th & 7th, 2010).
Today, in the mainstream news we find the ECB Throws Portugal a Temporary Lifeline. From CNBC:
The European Central Bank threw Portugal a temporary lifeline on Monday by buying up its bonds, traders said, as market and peer pressure mounted for Lisbon to seek an international bailout soon. A senior euro zone source told Reuters on Sunday that Germany, France and other euro zone countries were pushing Portugal to seek an EU-IMF assistance programme, following Greece and Ireland, in a bid to prevent contagion spreading to much larger Spain, the fourth biggest economy in the euro area.
The interest rate premium on Portuguese sovereign debt fell on Monday after rising sharply late last week as traders said the ECB intervened to buy government bonds on the secondary market. “They’re buying five-years and 10-years in Portugal, whatever people are offering really,” one trader said.
Newsbytes and bits of interest in the mobile computing space. h/t BoomBustBlogger H. Kwint...
- “In memoriam: Microsoft’s previous strategic mobile partners”
- Nokia also considered an alliance with RIM / Google, so maybe Windows was third choice? –
- Steven Elop: “And a huge monetary transfer” (from MS to Nokia it seems) – which leads to the conclusion Microsoft “bought” Nokia
- Probably, you saw the activist shareholders and their plan B, but the site is offline now. For those who missed it... Maybe the real website will be in Google cache tomorrow?
- NOK and MSFT also form a strategic “patent-alliance” against Apple, which might have been a consideration too, because if Apple really feels threatened I’m pretty sure they'll start litigating like last time HTC threatened them.
- For the Android-revenue growth model, this might be interesting: App Economy: The Android Market is Maturing with Growth in Paid Apps
- To add to the ‘margin compression’ news: Samsung, Toshiba, Nokia and Sony envision phone-computing without ‘dock’ (meaning the Atrix is already outdated) using Mobile High Definition Link. Mouse / keyboard via Bluetooth; no dock needed, only a ‘lousy’ cable, meaning even less margin. An industry-wide standard such as this MHDL is also bad news for Apple, meaning potential consumers / peripheral makers feel less willing to buy into Apple’- “proprietary-connector business”.
- And specifically meant to add to the discussion of margin compression when it comes to the not-yet-announced cheaper ‘mini’-iPhone: In China, sub $200 Android phones have been selling for six months now (meaning like you claimed, Apple has to play catchup). Anecdotally, $200 Android phones running 2.1 are selling right now in Chinatown, NYC. That's right! Right on Canal Street! I've seen it with my own eyes.
- Yuhua is also OK with the phones selling in supermarkets, meaning even more margin compression for the telco’s.
Ever since the summer of last year, I have been one of the very few - if not the only - commentators that have warned of impending margin compression in the current NASDAQ and general market darling, Apple. This is not speculation, it is basically a foregone conclusion. In addition, it is really not difficult to surmise. Apple enjoyed virtually competition free dominance in the graphical smartphone arena for nearly three years, but the onset of Android has not only brought heavy competition, it has brought competition that is superior in many areas. Competition, almost by definition, means margin pressure. It's simple business logic. Despite what appears on the surface to be common sense, Apple afficiandos from consumers to investors to analysts to arm chair pundits fail to grasp what should be considered a very simple concept. I have spend considerable digital ink attempting to illustrate this last year...