Motorola’s acquisition of TTPCom in June bought the OEM ownership of the AJAR operating system for low-end handsets. In a corporate newsletter published in October, Motorola announced that the AJAR platform would be licensed to other OEMs, following in the footsteps of Nokia’s S60 licensing strategy. I believe Motorola’s AJAR licensing will suffer from the same issues that have caused S60 licensing to fail to date.
Motorola completed the acquisition of the Cambridge-based company on 28 July 2006. TTPCom is now known as the Motorola TTPCom Product Group and fits within the Technology Office in the OEM’s Mobile Devices Division. As TheRegister points out Motorola paid a huge premium to buy TTPcom. “At first, the price tag of 103m ($192m) looks over-generous for a company that saw a 36 per cent revenue decline in its last fiscal year to 37.2m ($69m) and a slide into the red with a loss of 32.3m ($60m). But this acquisition has nothing to do with revenues and everything to do with gaining valuable technology assets for not one but two of Motorola’s most strategic growth initiatives ultra-low cost handsets and fixed-mobile convergence.”
The rationale behind the licensing strategy
AJAR is TTPCom’s operating system that includes the applications framework, applications suite and tools for voice phones and low-end feature phones. AJAR (literally means slightly open) was named after the middleground between open OSs and closed, proprietary OSs.
As Rob Shaddock, CTO at Motorola Mobile Devices explains in the TTPCom newsletter, Motorola initially licensed AJAR for use by its ODM suppliers. “We decided that it would give us more flexibility and the ability to move a bit faster if we could deliver a software platforms to the ODMs who were all using their own proprietary platforms.”, Shaddock says.
The newsletter further explains “most people in the industry thought that we ‘d be swallowed up by Motorola and that they ‘d never hear from us again. That couldn’t be further from the truth”. The newsletter continues saying that “the target is ‘ubiquitous AJAR’ for the mass market and feature phone segments. Targeting the top tier handset manufacturers and their supply chains, we aim to get this tool used right across the industry to reduce the cost of handset production and to enable manufacturers to meet the demands of operators more effectively.”
The rationale behind the AJAR licensing strategy is that “operators’ requirements are continuing to increase exponentially” (technically not true – I would say linearly, and are already showing signs of resource fatigue). “To manage the consequences, the industry needs a shared platform for the development of handset user experience – AJAR”.
So, Motorola’s plan is to license AJAR to top OEMs and create a community of value-added applications around the platform.
Can you trust a competitor as a strategic supplier ?
AJAR is targetted to low-end handsets, combining proven modem stacks with a low-memory-footprint OS platform – characteristics which are quite different S60’s target market and design goals. On the other hand, the challenges in Moto’s AJAR licensing strategy are quite similar to Nokia’s S60 challenges. Which OEM will trust a competitor to sell them a platform ? There are four issues with this strategy:
1. Risk of lock-in to the platform and lack of roadmap control – which is why Motorola, Nokia and Sony Ericsson are using internally-developed software platforms. Samsung is also known to be developing its own Linux platform, to replace Mizi.
2. Risk of IP leakage. Who will trust Motorola to build Chinese walls between the AJAR platform group and the OEM accounts groups ? “In sharing a tool like AJAR across the industry’s leading handset manufacturers it is crucial that we recognise the need for: transparency; a declared roadmap; absolute confidentiality of customer information; and a level playing field for pricing” reads the newsletter. Motorola’s words reflect a warm, intimate and trusting welcome, but it will take much more than words to convince customers to walk through the door.
3. The low-end and mid-range segment is very price sensitive and is mostly driven by internal OEM efforts. If a full operating system stack costs $5 for a high-end feature phone, how much can Motorola command for an OS for low-end phones ? The only upside to this is the tens of millions of shipments associated with low-end handsets.
4. The window of opportunity is closing. Most OEMs have already selected their low-cost platforms, although Sony Ericsson and Samsung are still valid customer targets.
The answer is no
.. and that’s why Moto’s strategy won’t be going far. All in all, acquiring TTPCom was a sane decision for a manufacturer like Motorola with an in-sourcing platform strategy. Most certainly the acquisition will help Motorola strengthen its IP portfolio in 3G+ and convergence products. It comes at the right time, given Motorola’s increase of market share, confidence and R&D spending following the wild success of the lab project that became RAZR – something which reflects on the hiring frenzy at TTPCom’s Cambridge offices.
However, putting money into building an ecosystem and selling to competing OEMs seems like money down the drain.