Carnival of the Mobilists #97

Welcome to the 97th edition of the Carnival of the Mobilists! This week’s Carnival is hosted at the VisionMobile Forum.

Carnival of the Mobilists #97

It’s been another busy week for mobile industry observers. Om Malik analyses the volume of LBS deals in 1999-2007 and shows how the number of deals is really peaking in 2007; not a coincidence given the numerous GPS-capable handset models on manufacturer roadmaps for 2008. Openwave, once the unshakeable market-share leader in mobile browsers, revealed its 1Q08 revenues and a steep drop in license and service revenue. Mozilla announces Prism, a tool that gives web applications its own window/desktop presence and shows that “the desktop isn t dead at all and that a hybrid approach is a successful way to go”, according to ZDNet’s Ryan Stewart. The blogosphere has also been buzzing with debate as to how soon will Java ME eclipse or become superceded by Java FX Mobile (aka SavaJe).

So let’s look at what’s in store at this week’s Carnival of the Mobilists.

One of my favourite analysts, Chetan Sharma has written a very detailed and analytical CTIA Wireless IT and Entertainment 2007 Roundup. Chetan writes about the openness touted by Facebook, Microsoft and RIM, the progress in mobile advertising, WiMAX picking up steam, the anachronistic pitches of US operators and how mobile video has (not really) changed. Chetan also comments on the recent activity on the LBS landscape: “I have been working in or following this space since 1995 and it finally feels that there is going to be some activity in this space after years of posturing, delays, and hype.”, which strikes a chord with my thinking; it seems that built-in GPS support by major handset manufacturers in 2008 is acting like a magnet for a horde of LBS startups and deals.

On the subject of location services, Tarek Abu-Esber talks about how Google Maps still has minor glitches. Tarek puts his engineering hat on and Fixes GPS for Google Maps on the HTC TyTN II.

Abhishek Tiwari postulates the structure of Google’s rumoured mobile OS in GPhone If I Built It. His analysis suggests that the OS would consist of three layers; base OS (where the OpenMoko distribution may be used), messaging/productivity/media (where we ‘re likely to see an integration of Gmail, Gtalk, Orkut and GrandCentral) and application ecosystem/revenue enablement. Abhishek writes thoughtfully “I see a lot of power within the contacts list. The contact list is the user s true social graph, which can offer much more than just phone numbers. “ – I totally agree that the contacts list will become the centre of the user journey, and Google might just show us how.

C. Enrique Ortiz at the mobility weblog writes about Interaction Triggers in Mobile Applications. He breaks down triggers into dial + voice, texting, URL, visual tags (2D codes, etc) and radio tags (NFC, etc). Somehow I feel there is an important learning on Enrique’s abstraction for interaction, but the article is very terse.

Martin Sauter writes about a popular topic in the mobile industry, IMS vs. Naked SIP. Martin analyses the features and capabilities which the Naked SIP protocol lacks, but which exist in the ‘operator sanctioned’ IMS architecture. Interestingly, Martin notes that Naked SIP is “already implemented in some 3G phones such as Nokia N-Series and E-Series S60 phones”, continuing to say “I have yet to see an IMS capable terminal in the wild”. This is yet another reminder that mobile operators always finish the innovation race last.

Dennis Bournique at WAP Review writes about Opera Links, Opera Mini 4 Beta 3 and Opera 9.5. Dennis attended the Rock Opera party at San Francisco (sounds cool!) and writes about how Opera Link can keep your web surfing activity synchronized across all the browsers you use, on multiple desktops and mobile devices, even if they aren’t all running Opera browsers. Dennis explains how Opera Link works and discusses the many new features in the latest versions of Opera Mini, which according to Dennis “delivers a mobile browsing experience rivaling the best browsers on the latest smartphones”.

Jason Devitt at Skydeck writes about how Sprint Will Start Unlocking Phones. Following a class-action lawsuit, Sprint Nextel has agreed to unlock customers phones at the end of their contracts and to activate non-Sprint phones on the network – however all is not lost for Sprint. Jason’s short analysis talks about how Sprint could benefit from this change, in terms of net adds and lower CPGA. I like Jason’s realistic view of the repercussions: “Data services may not work, but those looking for the cheapest option in the market won t care that they can t subscribe to VCast.”

Steve Litchfield at All About Symbian writes in fury why Motorola and Sony Ericsson need to ‘get’ it. Steve recounts his frustrating experiences from visiting the first Sony Ericsson store in London and trying to snap a picture of the Motorola Z10 at the Symbian Show.

“Motorola are appalling, quite appalling at keeping journalists informed and resourced. While, in contrast, Nokia consistently go out of their way to keep a flow of press releases coming, to provide all press materials needed, to run a sumptuous blogger relations program, to think of new and innovative ways to fire peoples imaginations, and so on.”

I was also at the Symbian Show and I have to agree with Steve: what on earth were the Motorola PR/AR people thinking when they put these basketball jugglers there, especially in London of all cities ?

My friend Ajit Jaokar at Open Gardens writes about Widget once run anywhere and Opera Widgets on KDDI handsets. Ajit makes a thought-provoking observation when he says “widgets are a much more likely driver of client side service convergence”; in other words if operators can ensure that the same widgets are available across handsets and terminals, they have a better chance of delivering service convergence and reducing churn.

Antoine RJ Wright deliberates the relevance of Web/Mobile 2.0. Antoine pauses to think out of the box of the ‘2.0 hype’ and concludes “that is where I see a lot of the web/mobile 2.0 movement failing. There are a ton of services and applications out there. But very little that has made Joe and Suzie Consumer run out and try it.”

And finally for the fashion-consious reader, Doris Chua asks What s your favourite colour for a phone?

The post of the week award goes to Chetan Sharma’s very detailed and analytical CTIA Wireless IT and Entertainment 2007 Roundup.

And if you are still reading, stop over to read our lengthy analysis on Motorola s UIQ: Diversion or U-Turn ? which postulates why Motorola’s Linux strategy has been facing an uphill struggle and why theUIQ investment does make sense as a medium-term diversion.

Next week tune in to Michael Mace’s excellent Mobile Opportunity for the 98th installment of the best of the mobile blogging! Which reminds me that it’s only three weeks until the Carnival hits the magic 100 number!

– Andreas

3 weeks to go!

Motorola s UIQ: Diversion or U-Turn ?

In a surprise announcement last week, Motorola agreed to buy 50% of UIQ Holdings from Sony Ericsson. Pending regulatory approval, Motorola’s co-ownership of UIQ questions the US-based OEM’s vision for mobile Linux handsets. Motorola has shipped more than 9 million Linux-based handsets to date, while in August reaffirmed its commitment to base as much as 60% of its device portfolio on a Linux operating system by 2012. So did Motorola have a sudden change of heart and was that a diversion or a U-Turn from Linux ?

The dent in Motorola’s Linux vision.
Motorola has to date made huge investments in building a mobile Linux platform. The investment began in 2001 by Mark Vandenbrink s Beijing-based team tasked to develop an in-market, for-market operating system with reduced costs for the manufacturer. The OS initially known as EZX is based on MontaVista’s Linux-based kernel, and uses Trolltech’s Qt/E (now Qtopia) for graphics and application framework, both of which have been heavily customised by Vandenbrink’s team. Over time, Motorola replaced the 2.4.20 kernel used in EZX with a newer 2.6.10 kernel and renamed the platform to L-J (for Linux-Java) which uses Sun’s KVM virtual machine for supporting third party applications.

During Motorola’s 6-year Linux history, the OEM has launched around 15 models (A1200, A728, A732, A760, A768, A780, A910, E680, E680g, E680i, E895, MING, ROKR E2, ROKR E6) for the Chinese market and recently the RAZR2 V8 for the US and European markets. At LinuxWorld in August 2007, Motorola re-baptised the L-J platform as the more brand-policy-friendly name MOTOMAGX and reaffirmed that “in the next few years, up to 60% of Motorola’s handset portfolio is expected to be based on Linux”. The remainder of Motorola’s portfolio would probably be powered by Windows Mobile for enterprise devices, UIQ for high-end handsets, and TTP Com’s Ajar for low-end handsets.

Yet only two months later, Motorola bought into a 50/50 ownership of UIQ from Sony Ericsson. As a Symbian spin-off, UIQ (along with its Symbian OS base) is practically a competitor to Motorola’s MOTOMAGX.

Is this is a dual supplier strategy for Motorola ? Hardly, as the OEM is under extreme financial pressure and needs to urgently trim its cost base. Motorola s operating profits have suffered a major blow in the last year, dropping from an operating profit of US$ 819 million in 3Q06 to an operating loss of US$ 332 million in 2Q07, according to Fitch Ratings. At the same time its market share dropped from 21.1% in 2006 to 14.6% in 2Q06, according to Gartner. In response, Motorola announced a reduction of 15% in R&D budgets.

Is the UIQ announcement a tactical move? Certainly not. Motorola could easily continue licensing UIQ from Sony Ericsson as it did for its five Symbian OS -based handset models to date, the A1000, M1000, A925, A920 and the recent Z8 handset.

Analysing Motorola’s change of heart
Motorola’s financial troubles are only the trigger behind Motorola’s change of heart in its Linux single-platform strategy. I would argue that there are four reasons for Motorola’s rethink of its Linux strategy.

1. Motorola has been quietly trying to develop a single-core version of its MOTOMAGX platform, in order to reach a planned 50-60% of its handset portfolio, as indicated by the announced-but-never-released MotoRizr Z6. The move from a dual core to a single core architecture would mean a major re-architecture, as a single-core OS has to run both the applications and the modem stack. Virtualisation techniques (see WindRiver, Trango and VirtualLogix) are designed to faciliate single-core OS development, but I suspect Motorola would still have to re-architect major parts of its Linux-based OS even if it used virtualisation.

[updated: a reader reports that the MotoRizr Z6 has been released in China and is based on Freescale’s Starcore single-core CPU. According to the same source, the Z6 is far better in terms of performance compared to the ROKR E2. This finding implies that Motorola is 6-9 months ahead of any other OEM in launching a single-core based Linux stack.

Well, it turns out that Motorola’s Z6 is based on a dual core Freescale MXC275-30 SoC (single chip) architecture, and not a single core one. This is according to a Freescale presentation which you can find here. The model name has been changed from MotoRizr Z6 to MotoRokr Z6, according to a LinuxDevices report, while the handset appears to be available in 20 countries according to the same report. Moreover, given that no single core Linux handset has been released by Motorola, this would strengthen the argument on how single core Linux remains a challenge for the Linux OEM champion.]

2. Motorola has invested man-centuries into building MOTOMAGX, based on MontaVista s Mobilinux Linux support package and Qt/E (an old version of Trolltech s Qtopia). Motorola has had to add lots of glue and optimisations on top of Mobilinux and Qt/E, and so a migration away from these components would mean significant re-investment. Yet this is exactly what Motorola would have to do if it is to keep its costs down for equipping more than half of its product portfolio with Linux and at the same time to migrate to a new scalable, end-to-end UI framework architecture as other handset OEMs are doing. MontaVista and Trolltech make money by selling developer seats and Motorola had in 2Q06 ordered 200 developer seat licenses (in addition to the 100 they already had).

3. Motorola s 9 million Linux-based phones up to mid 2007 have shipped in China and Latin America, primarily due to the relaxed device testing/certification and operator customisation requirements in these countries. The RAZR2 V8 which started shipping in July 2007 has been the first Linux-based phone for Western and European markets. It is likely that Moto s Linux platform strategy met with long delays due to increased requirements for handset certification (GCF in Europe and FCC in the US), the stringent network interoperability testing requirements (particularly with US operators) and the need to comply with voluminous operator customisation requirements (in Europe these measure at 4,000 lines of requirements per handset and change twice yearly).

4. Motorola has been the leading force behind the foundation of LiMo, its chairman, its chief architect, according to Nomura’s Richard Windsor. In addition, Motorola has committed to contributing to LiMo multiple software components (package model, application execution model, architecture, registry (with Samsung), security policy, certificate manager, event system+input method (with Panasonic/NEC). However, the LiMo foundation has recently more than doubled in size, while its complex licensing models and unfamiliar processes for new contributions has likely resulted in more delays and higher resource commitments for Motorola. As the leader in LiMo, Motorola may have deemed that incorporating LiMo requirements into its MOTOMAGX platform would prove too costly.

Why Motorola invested in UIQ
The number one priority for handset manufacturers is to make money from handsets. Handsets come first, while software and hardware platform strategies come second. At a time of extreme financial pressures and competition from Nokia and Samsung, Motorola had to stick to its product commitments and seek an alternative software platform for launching its handsets in 2008 and beyond.

Ajar, Its other in-house platform which Motorola acquired alongside TTPCom is designed for low-end handsets, not mid-range or high-end ones and was intended to complement the L-J platform. The manufacturer has also launched Windows Mobile based handsets, but these have been targeted to enterprises, not consumers.

Motorola has also launched five handset models based on UIQ, the M1000, A1000, A925, A920 and Z8, so why not continue persuing a typical platform licensing strategy ? Let’s do the math.

Motorola has been looking to scale it s Linux-based handsets from an estimated 2-3% portfolio share in 2007 to a claimed 50-60% in 2012. Assuming a linear growth and a steady 15% mobile device market share this would mean that the OEM would need to build around 225 million handsets based on Linux in the next 5 years, of which around 50 million in the next two years.

Now assuming that a tenth of Motorola’s 2008 and 2009 portfolio of Linux handsets would have to move to UIQ, at $3 royalty, this means a cost of $15 million to Motorola. How much is UIQ worth ? Symbian’s financial statements do not yet account for the UIQ sale, so it’s difficult to tell. Nomura reports that 1.2 million UIQ phones shipped in 2006 (a paltry 2.3% of Symbian-based smartphones), which at around $3 per-unit royalties implies $3.6 million in annual revenues, and at a x10 valuation factor, UIQ is worth around $30 million. Therefore the value of Motorola’s acquisition of 50% of UIQ is the same as the licensing cost for 10% of its 2008/9 planned portfolio of devices, were Motorola to replace Linux with UIQ on these devices.

With 1.2 million devices shipped in 2006 and nearly 150 staff, UIQ is definitely a loss-making business. Therefore, Motorola’s move was clearly strategic, with the OEM hoping that the UIQ software will help reduce platform TCO and time to market, at a time of challenged Linux strategy. Motorola would longer-term benefit from reduced licensing costs, a major stake at defining UIQ’s roadmap and hopefully a profitable licensing business once UIQ one-handed interface penetrates higher volume devices. The 50/50 split shows alignment of incentives between Motorola and Sony Ericsson, but also hints at the fragile balance between the two competing manufacturers down the road.

The sale of 50% of UIQ also makes sense for Sony Ericsson, who is dealing with a massive and rapidly growing cost base, with employee numbers more than doubling from 142 staff in February to over 350 in October, and new offices in Budapest and London.

There are two more noteworthy consequences here:

1. To support Linux developers at a low cost, Motorola essentially handed off development of its Linux SDK to Trolltech. The Norwegian software vendor was probably eager to accept, given the poor performance of Qtopia’s dual-licensing strategy and the industry alignment behind the competing GTK graphics library (LiPS, LiMo and GMAE all endorse GTK, not Qtopia).
[updated: I spoke to Trolltech who clarified that they don t have direct responsibility for Motorola’s SDK. Motorola licenses Trolltech’s Qtopia SDK and is free to make it available to handset application developers]

2. Motorola s UIQ strategy will likely lead to a reduced presence in LiMo, particularly since the OEM is heavily resource-constrained and because LiMo has specified a GTK-based graphics stack. To keep it s membership in LiMo and save face, Motorola would most easily contract an ODM to release Motorola-branded devices based on other distributions such as Linux stack vendor Celunite, who recently joined LiMo, rather than re-architect its own stack.

Repercussions for Symbian
In the short term, Symbian s industry valuation and prospects have been significantly strengthened as a result of Motorola s UIQ co-ownership. In the medium term however, Motorola does not have any ownership in Symbian, and so I doubt the co-ownership of UIQ will impact Nokia s near-majority influence (read: control) over Symbian OS.

Longer term, the OS game for UIQ stakeholders becomes quite interesting. The Symbian stack provides little value above the kernel and drivers (Symbian has essential become akin to a board support package) – read the latest specs of S60 (here) to see that not only the application suites and UI frameworks, but also the vast majority of middleware have been drawn out of Symbian OS. In other words, the value of the Symbian OS software stack is similar to that of a zero-royalty Linux-based stack from the likes of MontaVista and WindRiver.
[updated: I realise that the above argument is not backed up with hard data. I hope to delve into some research to detail the components in the Symbian stack vs those in MontaVista/WindRiver distros and what is the *sale* value of each component].

However, while academically it s possible to replace Symbian with a Linux support package (kernel, hardware drivers and base OS functions), it is an expensive undertaking, of the order of $50 million. Given Sony Ericsson and Motorola are facing difficult times competing with the Nokia giant on launching successful handsets, large-scale investments in a software platform is hardly the priority these days.

Diversion or U-turn ?
Motorola s acquisition of 50% of UIQ is clearly a strategic initiative, which will likely continue with the launch of several high-end handsets powered by UIQ in the next year. At the same time, Motorola has far too much invested in Linux. It was only late 2006 when Motorola’s Christy Wyatt, said that There isn t a group within Motorola s 70,000 workforce that isn t impacted by Linux and open source in one way, shape or form .

Consequently, UIQ is a diversion, not a U-Turn for Motorola. While R&D investments are being curtailed, the manufacturer will naturally try to re-use its assets and existing Linux-based research, especially since its mobile Linux software know-how is second to none in Western markets. Medium term, Motorola will likely pursue a dual-OS strategy (UIQ and MOTOMAGX), with the more ambitious and demanding handset projects (esp. western markets) powered by the mature UIQ platform.

Longer term, the fate of Motorola s Linux platform strategy will depend on the success of the UIQ investment and how UIQ will help the OEM constrain the total cost of ownership, cost of variant creation and time-to-market for its new handsets. Time will tell.

– Andreas

Three reasons for a Google-phone

The cat’s out of the bag. Google is creating an operating system for mobile phones, according to mainstream news media. A phone OS would make sense for the search & paid advertising giant (after all Google is a software company), but it doesn’t make sense for Google to branch out into making phones, right ? Wrong – and there’s three good reasons for a Google phone.

Beyond the gossip and rumours, details on Google’s mobile phone OS has hit the mainstream media. According to the NY times:

“In short, Google is not creating a gadget to rival the iPhone, but rather creating software that will be an alternative to Windows Mobile from Microsoft and other operating systems, which are built into phones sold by many manufacturers. And unlike Microsoft, Google is not expected to charge phone makers a licensing fee for the software.”

So why would it make sense for the Google software company to branch out into making actual phones ? There are three good reasons:

1. To seed the market
Google needs to scale its mobile platform if it is to have any relevance to advertisers. Google can do that by seeding the market with its own phone, hoping that others will follow.

2. To create a reference platform
Google creates a commercial proof-of-concept phone that is robust and cheap enough to produce, so that it forms an enticing proposition for any ODM (or even OEM) who wants to use the Google software and service platform. (as in ‘look, we did it, and so can you’). A Google-phone would not only be a proof of concept, but also a proof of viability, cost of ownership and sugar candy for ODMs and OEMs who want to get into the mobile service business (basically, everyone who doesn’t have Nokia’s operating profit margins).

3. To set pricing and marketing norms
A good platform strategy player needs to also introduce a product that runs on top of the platform; this is vital constituent of a platform strategy depending on product complementors, so as to set a precedent and the norms for product pricing and marketing. (for case studies see HBR article: With Friends Like These, The Art of Managing Complementors)

(updated: there’s actually a fourth reason)
4. To productise the Linux-based software stack
According to the same NY Times article, Google’s software stack is based on open source Linux. As experience shows, open source projects cannot be productised without the help of a commercial sponsor. What a sponsor adds is not necessarily money, but commitiment and disciplined drive to move from a beta-state software to a finished, tested, working product. While individual contributors to open source software care about scratching their own particular ‘itches’, commercial sponsors usually care about productising the software in a form that works out of the box, with zero amount of tinkering. In the case of Google’s Linux-based software stack, hardware integration, testing and quality assurance is essential in order to move the open source stack from ‘in a working condition’ to a ‘ready to integrate’ status. A Google phone would provide this needed much productisation and finishing touches to the open source software stack.

A Google-phone would make a lot of sense indeed.

– Andreas