Endeavour Partners - Blog

A post this morning on Engadget about the similarity between the most recent ad for the iPad, and one for the original Apple Newton gave me a profound sense of déjà vu.

It’s far from unusual to see Apple ripping off others when it comes to spots, and the same is true in reverse. But copying itself? Head on past the break to catch the similarities between Cupertino’s freshest iPad commercial and an eerily familiar Newton ad from yesteryear — something tells us the former will make a somewhat more indelible mark on the world than the latter, though.

Back in the mid-90’s, more than fifteen years ago, I was one of the pioneers of tablets with digital cellular connectivity: working in New Zealand for what is now Vodafone New Zealand we put together the Apple Newton with the Nokia DataCard and the Nokia 2110 to provide the first predecessor for today’s smart phones; this was before event the very first Nokia Communicator.

Anyway, take a look at the two videos:

There’s a discussion on Mobile Innovation about ‘When will Femtocells go Mass Market?’

We think it’s now ‘if’, not when:

1. the market in the developed world is moving to smartphones
2. substantially all smartphones will have WiFi
3. WiFi is already pervasive in the enterprise
4. WiFi is widespread in the home

So, who needs the extra cost and expense of a femtocell, when the WiFi infrastructure is already there? Vodafone is asking £160 (= US$265, €183) for its femtocell, the Vodafone Access Gateway:

Vodafone Access Gateway

A Belkin N150 Enhanced Wireless Router for BT is just £70 ( = US$117, €80) – less than half as much:

Belkin N150 Enhanced Wireless Router

Part of the discussion was triggered by a new report from Juniper Research, which puts the numbers at just 15 million worldwide by 2012. That’s hardly mass market: it’s much less than 1% of subscribers in the developed world. It’s not enough to put any sort of dent in the smartphone surge shortfall.

So for femtocells, it’s becoming if, not when…

One of my pet peeves is when people who should know better mis-spell Vodafone and Vodaphone. Shortening it to Voda is OK, but makes me think of the Star Wars Jedi Knight – and then the Weird Al song. Anyway, one of the things that makes competition in high-tech so interesting and challenging is that it is often not just ‘horizontal’.

Let me illustrate this with an example from DigiTimes this morning:

MediaTek and Vodafone have jointly announced that Vodafone has selected MediaTek chipsets for two new devices. The strategic partnership with MediaTek provides Vodafone with the opportunity to offer the Vodafone 340 camera phone at a very affordable price as well as its first entry level, low-cost touch screen device for prepaid customers – the Vodafone 541, Vodafone said.

Vodafone 541

This is one of eight Vodafone branded ‘phones launched today.

‘Horizontal’ competition is two similar businesses competing with one another for market share:

• Vodafone competing with FT-Orange in the UK
• Verizon competing with AT&T in the US

‘Vertical’ competition is when businesses compete for value capture, their share of the pie, rather than for market share amongst customers. Here Vodafone is partnering with MediaTek for chipsets, but effectively competing with other mobile phone vendors, such as Nokia, for some of the value created.

Competition can in fact be ‘diagonal’ or asymmetric, when it is amongst businesses that have fundamentally different scope of activities, or business models. Think Google giving away stuff free to generate ad revenue, competing with Microsoft’s packaged applications business.

Much of the competition in the mobile and broadband sector now takes this form; watch this space for more commentary…

As executives, analysts, and advisors we spend a lot of time arguing about metrics and data, and where we need to be to survive and thrive in the market place.  An old joke reminds us that relative performance is all that really matters:

Two hikers are cornered by a bear and climb a tree.  One of the hikers reaches into his backpack, pulls out a pair of running sneakers and starts lacing up.  The other says, “What are you doing?”

“I figure we will have to jump down from here eventually.” says the first.

“But you will never be able to outrun the bear,” says the second.

“True.  But I figure all I really have to do is out run you.”

We are bombarded with random statistics on companies and products and financial performance, but it is important to realize that context matters:

• who are the key competitors?
• what is the real playing field on which we are competing?

Getting the right basis for comparison is critical to both understanding current performance, and to deciding what to do to improve future performance.

There is currently a great deal of interest in Apple’s iPhone and the Palm Pre and comparisons abound regarding sales and usage figures.  Most of these comparisons are confusing and not terribly helpful.

For instance, the Palm Pre sold around 370,000 units in its first month of sales while the new iPhone 3GS sold roughly 1 million units in its first weekend.  iPhone users have downloaded over 1 billion applications while Palm Pre users have only downloaded about 1 million.  Clearly the iPhone 3GS is outperforming the Palm Pre on an absolute basis, but does this make the Palm Pre a failure?  What are the right measures to make an ‘apples-to-apples’ comparison?

Some additional information and framing can help us decide:

• the Palm Pre is supported by Sprint (49M subscribers) in the US while the iPhone is supported by AT&T (62M subscribers) – and Sprint has been losing subscribers while AT&T has been growing them
• the iPhone is available in 88 countries while the Palm Pre is available in only one (although it will soon launch in several others)
• the iPhone 3GS is a third generation product while the Palm Pre is a first generation product

While looking at raw recent sales statistics the iPhone 3GS has nearly a 30x advantage over the Palm Pre, but comparing the Pre against the first generation iPhone and viewing these statistics on a cumulative basis since launch, the Pre looks much better:

Palm Pre on track for strong growth

Even more compelling, however, is a comparison of one quarter of projected Palm Pre sales vs. Sprint’s prior quarter subscriber net losses.  The Palm Pre represents a radical change in outlook for Sprint, perhaps singlehandedly moving them back into subscriber growth:

The Palm Pre has the chance to singlehandedly move Sprint back into positive growth

Roughly 34% of Palm Pre buyers have been new customers to Sprint, similar to the iPhone’s 30-40% new to AT&T numbers reported at this stage.  But much more importantly, the other 66% of Pre buyers stayed with Sprint while upgrading devices rather than switching away from Sprint to other networks for an iPhone (AT&T), Blackberry Storm or Tour (Verizon), or Android G1 (T-Mobile).

It’s early days, but at least so far the Pre is doing better for Sprint than the iPhone was for AT&T at the same time. Longer term, Palm faces significant strategic challenges in building its ecosystem and attracting application developers.