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Chipping Away at the Smartphone Leaders

July 26, 2013 by Leave a Comment

For several years, these two companies have dominated the mobile phone-making business, successively one-upping each other with ever sleeker, more technologically sophisticated iPhones and Galaxy handsets that left would-be rivals grasping. But now the competition is stirring, and consumers are giving another look to brands they once ignored.

Those challenges were evident in the latest earnings report from Samsung on Friday, when the company said it expected competition in the smartphone business to stiffen in the third quarter, with new models pending from LG and other rivals.

Already, the combined share of the worldwide smartphone market controlled by Apple and Samsung Electronics slipped to 43 percent in the second quarter from 49 percent a year earlier, IDC, a research firm, reported Friday.

Some of the companies that are chipping away at the leaders are familiar names attempting comebacks, like Sony, Nokia and HTC. Others are relative newcomers like LG, Lenovo, ZTE and Huawei.

“The story is no longer Apple versus Samsung,” said Bryan Wang, an analyst at Forrester Research. “Going forward, they will both face similar challenges.”

Analysts say buyers are more willing to look at alternatives to Apple or Samsung because the differences among smartphones are becoming less pronounced.

The proportion of phones running Google’s Android operating system keeps growing and technical specifications are converging. Like Samsung’s Galaxy S4, for example, a number of other phones, including Sony’s Xperia Z, also include high-definition, 5-inch screens.

That makes price, where LG and the Chinese smartphone makers have an edge, an increasingly important selling point.

Samsung remains a powerhouse, reporting big gains Friday in sales and earnings for its latest quarter. Net income rose 50 percent, to 7.77 trillion won, or $6.9 billion, from 5.19 trillion won a year earlier. Revenue rose to 57.46 trillion won from 47.6 trillion won. On Tuesday, Apple likewise posted quarterly net income of $6.9 billion, while revenue was roughly flat at $35.3 billion.

Strategy Analytics, a research firm, said Friday that Samsung had passed Apple for the first time to become the world’s most profitable maker of mobile handsets. Samsung, which does not break out results for its handset-making business, generated $5.2 billion in quarterly operating profit from the unit, Strategy Analytics estimated, compared with $4.6 billion for Apple.

Samsung had previously pulled ahead of Apple in market share, and its gains continued in the second quarter, when it controlled 30.4 percent of global smartphone shipments, compared with 13.1 percent for Apple, according to IDC.

But Samsung also showed signs of having to work harder to achieve those gains. Big-ticket promotional events like an introductory gala for its flagship model, the Galaxy S4, at Radio City Music Hall have driven up marketing costs. And while the S4 has been selling at a brisk pace, it has fallen short of some analysts’ expectations. “The strong growth streak for the smartphone market is expected to continue in the third quarter, albeit at a slower pace,” Samsung said in a statement.

Like Samsung, Apple sold more phones in its latest quarter — 31.2 million, up from 26 million a year earlier. But investors had grown accustomed to bigger gains, and the share prices of both companies have taken a beating this year.

“In a way, Apple and Samsung have become victims of their own success,” said Pete Cunningham, an analyst at the research firm Canalys. “When these companies report many billions of profits every quarter, it’s hard to say they are doing anything wrong.”

Together, Samsung and Apple still collect more than 90 percent of the profit in smartphones, analysts say. Yet that success has also emboldened more and more companies to try to challenge them.

Article source: http://www.nytimes.com/2013/07/27/business/global/chipping-away-at-the-smartphone-leaders.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Mobile Companies Crave Maps That Live and Breathe

June 10, 2013 by Leave a Comment

As mobile phones become all-in-one tools for living, suggesting where to eat and the fastest way to the dentist’s office, the map of where we are becomes a vital piece of data. From Facebook to Foursquare, Twitter to Travelocity, the companies that seek the attention of people on the go rely heavily on location to deliver relevant information, including advertising.

Maps that are dynamic, adapting to current conditions like traffic or the time of day, are the most useful of all.

The importance of such maps to mobile services helps explain why Google is deep in negotiations to buy Waze, a social mapping service used by millions of drivers around the world, for more than $1 billion. Although a final agreement has not yet been struck, people with knowledge of the discussions say that an acquisition could be announced as soon as this week.

“Context is everything — where you are, what other people have said about where you are, how to get there, what’s interesting to do when you get there,” said Charles Golvin, a principal analyst at Forrester Research who studies mobile technology.

Google and Waze declined to comment on the possibility of an acquisition of Waze by Google.

Google, of course, is no slouch when it comes to maps. The search giant’s Maps service, painstakingly compiled by the company over many years and augmented by suggestions from tens of thousands of users, is considered the gold standard of mobile maps.

For users of smartphones that run Google’s Android software in particular, maps and directions are smoothly integrated into the address book, calendar and location-sensitive applications like Web searches and dining recommendations. Even for people with other phones, Google Maps still provides the back-end technology for many applications.

“We’re seeing maps become the canvas to everyone’s app,” said Eric Gundersen, chief executive of MapBox, which provides mapping tools to a number of popular apps like Foursquare and Evernote. “The map is alive; the map is responsive.”

But largely missing from Google’s Maps — and from those of other players in the field like Microsoft and Apple — is the social component. The map is simply presented by the company.

With Waze, the mob is the map, and like a mob, it can be churning with energy. The start-up, which has only a few employees, has generated many of its maps by tracking the movements of its nearly 50 million users via GPS. In any given month, about one-third of them are firing up the app, and as they drive, they can share information about slowdowns, speed traps and road closures, allowing Waze to update suggested routes in real time. The most dedicated fans can also edit the maps directly to improve their accuracy.

“It’s not just crowdsourcing. It’s personal participation,” said Di-Ann Eisnor, Waze’s vice president for platforms and partnerships.

That sense of contributing to the common good is part of Waze’s appeal.

“They created this culture where you can really help others,” said Bret McVey, a graphic designer in Omaha who has contributed about 280,000 changes to Waze’s maps in the year he has been using the app.

Waze rewards such passion with points and badges, and the top 500 or so map editors can get direct access to Waze employees around the clock to deal with problems, like adapting the maps of Oklahoma to show road closures after this spring’s tornadoes.

In Los Angeles, said Ms. Eisnor, about 10 percent of drivers use Waze. In places like Costa Rica and Malaysia, Waze users helped create the first useful navigable maps of the country, she said.

The communal energy of Waze’s users drew the attention of Facebook, which held discussions about acquiring Waze last month. Facebook users can already sign in to Waze with their Facebook identity and share their driving with their friends, and Waze recently added new integration of its maps into Facebook’s Events feature. After the talks ended without a deal, Waze turned its attention to Google.

For Google, analysts and industry executives said, Waze would provide two benefits.

One is that user passion. “This is less about direct revenue that Google can get and really about keeping Google customers in the Google sphere and using Google services,” Mr. Golvin said.

The other is to keep a useful map out of the hands of competitors like Apple, which has struggled with its own map service, and Facebook, which is battling Google to connect its users with their friends.

Jeff Carpenter, of Des Moines, who is a volunteer editor for both Waze and Google Maps, views the second point — keeping Waze from others — as the main reason that Google would buy its much smaller rival. “I don’t think there’s anything in Waze that Google couldn’t have done over time,” he said.

Google, which also allows users like him to contribute edits, used to take months to integrate the changes. Now the company allows some changes instantaneously, he said, and others are quickly reviewed. Mr. Carpenter said Google’s maps were also better integrated into other applications. Waze must be used independently, which makes it much harder to use.

If Google does buy Waze, however, it needs to be careful to court Waze’s dedicated users. “It’s important for them to roadmap what’s going to happen, for the community,” Mr. Carpenter said. “Without the contributors, they really have nothing.”

Article source: http://www.nytimes.com/2013/06/11/technology/mobile-companies-crave-maps-that-live-and-breathe.html?partner=rss&emc=rss

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DealBook: Pearson to Take 5 Percent Stake in Nook Unit

December 29, 2012 by Leave a Comment

A Nook tabletShannon Stapleton/ReutersA Nook tablet.
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8:35 p.m. | Updated

Barnes Noble moved to shore up its struggling Nook Media division Friday, agreeing to sell a 5 percent stake to Pearson, a British publishing and education company, for $89.5 million.

In a sign of the headwinds the bookseller is facing, the company said in a regulatory filing that holiday sales were weaker than expected and that its Nook unit would fall short of projections for 2013.

The forecast underscores the difficulties Barnes Noble is having as it tries to build out its digital business and compete in a crowded market with giant companies like Amazon, Apple and Google. Sales for the first generation of e-readers have been dropping rapidly as consumers shift to tablets that can offer other forms of media like music, games and video. Just this week, Amazon was trumpeting banner sales of its Kindle Fire tablet over the holidays.

By contrast, worldwide shipments of e-readers fell by 36 percent in 2012, according to a report released this month by IHS iSuppli, a market research firm.

“The market’s growth is slowing down,” said James L. McQuivey, a media analyst with Forrester Research, referring to e-readers. “The easy customers have been snatched up. And the first customers are the best customers, who buy the most books. In the case of Amazon, you can compensate by selling merchandise to later adopters. Barnes Noble doesn’t have that luxury.”

Still, investors seemed to be cheered by the infusion of cash and the tie-in with Pearson’s large education and textbook business. That market has trailed trade books in switching to a digital format, and Barnes Noble could benefit as education books catch up. It could also try to make the Nook tablet a preferred device for educational content.

Shares in the company were up 4.3 percent, closing at $14.97.

Barnes Noble has tried to keep up with larger competitors by producing its own critically praised tablet and has claimed about 25 percent of the e-book market. But maintaining technological parity is expensive for a company that does not sell a broad range of similar merchandise. The chain has struggled under the burden of investing heavily in the Nook business over the last two years.

As a result, the company has sought partners for its Nook business for financial support. Last spring, Barnes Noble spun off the Nook division as a separate company and sold a 16.8 percent stake to Microsoft for $300 million. In theory, Microsoft will help promote the Nook through its Windows software, although a significant push has not yet emerged.

Peter Wahlstrom, a senior analyst with Morningstar Equity Research, called the move “a net positive” for Barnes Noble.

“Digital textbooks are a small, new niche market and a partner like Pearson can only help accelerate that market and that is important, but it is incremental,” Mr. Wahlstrom said.

Pearson’s investment in Nook is the latest in a series of recent steps the company has taken to focus on digital expansion and distribution of its education content and services. Higher education in the United States is already Pearson’s largest single business and in October it acquired EmbanetCompass, a provider of online learning services to North American colleges and universities, for $650 million.

That same month, Pearson agreed to merge its Penguin book publishing business — which does popular as opposed to educational books — with Bertelsmann’s Random House division, which further narrowed Pearson’s focus on educational books.

In a written statement, Will Ethridge, chief executive of Pearson North America, emphasized the advantages of the investment for the learning community. The deal, he said, “will allow our two companies to work closely together in order to create a more seamless and effective experience for students.” He added, “It is another example of our strategy of making our content and services broadly available to students and faculty through a wide range of distribution partners.”

Some analysts questioned whether Pearson was getting its money’s worth. In addition to its initial 5 percent stake in the Nook business, it has an option to buy another 5 percent. Pearson’s investment values the Nook business at $1.8 billion, more than double Barnes Noble’s market value on Friday of $883 million.

Mr. McQuivey acknowledged the potential of the education market but said it had too many variables to be seen as a reliable source of revenue.

“In the long run, if you can make the educational market explode and you get schools to give to tens of millions of children Nooks and put Pearson education content into the Nook, then it would be a long-range strategy for customers,” he said.

Instead, he said that the investment might be an effort by Pearson to help Barnes Noble stay in competition with Amazon.

Ken Doctor, a media analyst with Outsell, a research and consulting firm in Northern California, agreed that propping up a competitor to Amazon might be a motive, but he added that Pearson, with an investment of close to $90 million, was probably looking for more.

“That is why I think it is about preference and maybe really taking the Nook into an education leadership position,” he said.

Among the things Pearson might get for its investment, Mr. Doctor said, was preferential placement of its products on Nook home pages or even a say in how the device evolves over the next few years.

Article source: http://dealbook.nytimes.com/2012/12/28/pearson-to-take-stake-in-nook-unit/?partner=rss&emc=rss

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Flash-Sale Site Shifts Its Model

August 15, 2011 by Leave a Comment

On a recent day on Gilt.com, shoppers could buy 10 round-trip tickets on Virgin America for $3,585, three sessions of laser hair-removal for $352 or eight Alaskan king salmon fillets for $118.95.

That’s a reflection of how the Gilt Groupe, which made online flash sales of women’s clothes popular in the United States, is trying to refashion itself as a high-end Amazon.com — a one-stop shop for luxury goods, half of which it says will be full-price within a few years.

Kevin Ryan, Gilt’s chief executive, said the company was simply repositioning as “a broader lifestyle brand, all high-end,” adding, “Whether it’s full-price or discount is a detail.” But others say the effort reveals that the much-heralded flash-sale business is hitting its limits.

“The whole raison d’être of this flash-sale business is that it was highly lucrative,” said Sucharita Mulpuru, an e-commerce analyst at Forrester Research. “That didn’t turn out to be a reality.”

Gilt was at the forefront of flash-sale sites, which sell brands’ excess inventory at deep discounts for a limited period of time, an idea modeled on France’s Vente-privee.com. Most of the sites took off in 2009, when even wealthy people severely slashed their spending. They solved a range of e-commerce business problems, particularly the risk of buying inventory upfront, because flash-sale sites generally buy on consignment.

Also, because the sales are time-sensitive, sites have an excuse to e-mail customers every day and customers are less likely to abandon their online shopping carts because they are shopping against the clock.

But in the United States, unlike in Europe where flash sales began, the competition is overwhelmingly steep, not only from similar sites like HauteLook and ideeli, but also from discount stores like Ross and T.J. Maxx and department store outlets like those of Nordstrom and Barneys.

Compounding flash-sale sites’ problems, manufacturers have cut back on production since the depths of the recession so there is less inventory available. And even as the economy sours again, sales of full-price luxury goods are booming.

Analysts said that if stocks continue to tumble, consumers might cut back on spending yet again, which would be a boon for flash-sale sites. In July, visits to flash-sale sites were double what they were a year ago, according to the research firm Hitwise.

“If the market flattens out and stays there and doesn’t recover somewhat within two and a half weeks, consumers will change their behavior,” said Marshal Cohen, chief industry analyst for apparel at the NPD Group. “Flash-sale sites are going to market it as: ‘Why worry about the stock market? You can still indulge guilt-free.’ ”

In the meantime, Gilt is resorting to traditional models.

Last Monday, Gilt introduced a full-price men’s clothing site, Park Bond, that breaks entirely with the flash-sale model. Items on Park Bond are in-season, available all the time and not discounted. Gilt also has a full-price food site as well as sites for travel, gifts, furniture and décor, children’s clothes and accessories and local business deals.

“They’re doing what was the whole danger of the retail business in the first place — investing in inventory — and that’s the part that’s a little unintuitive here,” Ms. Mulpuru said. “I wouldn’t say it smacks of desperation, but it’s definitely an attempt to figure out how they can pivot and change their business model because the first one didn’t work out as they planned.”

Mr. Ryan said that Gilt’s flash-sale sites continue to be successful. Gilt, three-and-a-half years old, brought in $500 million in gross revenue last year. “It’s impossible to say that this has not grown very quickly in a very short period of time,” he said. Inventory fluctuates, he said, but there is enough available for Gilt to host 30 sales a day.

Rather than a sign of problems with the business, he said, the move to full-price is “an opportunity to sell more things to the same person.” Though flash sales have less inventory risk and the marketing costs are lower because people visit each day, full-price commerce has higher profit margins and Gilt does not have to create a new Web site each day, he said.

Article source: http://feeds.nytimes.com/click.phdo?i=3ba2b8b47d946c931816f836cdd25009

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In Unusual Move, Apple Previews New Software Plans

June 1, 2011 by Leave a Comment

Apple said on Tuesday that it would announce new versions of the software that powers its computers and cellphones, as well as a new Internet service that could connect these devices.

The company gave few details about the service, which it calls iCloud, but analysts think it would allow people to gain access to music, photos and videos over the Internet on multiple Apple devices, without needing to sync those devices. An Internet-based version of iTunes with those features has long been expected, and iCloud comes on the heels of deals between Apple and major recording labels that would allow such a service to go forward.

The announcement is to be made next week by Steven P. Jobs, the chief executive, at Apple’s annual developers conference in San Francisco. Mr. Jobs has been on medical leave since January, though he made a surprise appearance in March to introduce a new iPad.

Apple’s preview, posted on a company Web site, was unusual because it generally takes pains to keep any announcements or details about new products secret until they are formally unveiled. Some commentators on technology blogs were surprised that Apple was apparently not planning to announce a new version of the iPhone. Traditionally, Apple announces new products on a yearly cycle; the iPhone 4 was introduced in June of last year.

“It feels like the first time in quite a while that there hasn’t been any hardware associated with an upcoming Apple announcement,” said Charles S. Golvin, an analyst with Forrester Research. “It’s all software related.” Hinting at next week’s software could help the company lower expectations of a new mobile phone release, he said.

Mr. Golvin and other analysts say the next version of the iPhone will probably be released in September or October. The next iPhone is expected to use a chip from Qualcomm that will allow it to work on almost any cellular carrier.

In 2007, Apple released MobileMe, its previous effort at so-called cloud computing, which allows people to share contacts, calendars and e-mail among devices. But MobileMe did not work well, and it is considered a rare failure for Apple. MobileMe has also struggled to gain customers because of its high price of $100 a year; competing products from Google are available free.

The new iCloud service is expected to include revamped features of MobileMe but go further by including music — becoming a so-called cloud-based iTunes.

Apple has signed contracts with Sony Music Entertainment, EMI and the Warner Music Group to license those labels’ recordings, but it is still negotiating with the Universal Music Group, the largest of the four major labels, according to a person briefed on the talks who spoke on condition of anonymity because the deals were private.

While Amazon and Google recently released similar cloud music services, Apple’s is expected to be superior. Google and Amazon have not obtained rights for their services from labels, so they require users to upload their music collections to the cloud. In contrast, Apple’s service is said to scan people’s iTunes libraries and then make the songs in them available on any device.

Prices would be critical in any cloud music service.

“The key question here is pricing, with the only sensible model for a cloud-based service from Apple being subscription-based,” said Mr. Golvin. He also said a cloud-based music service would raise additional questions. “What is the specific benefit Apple is bringing to customers and how will people listen to their music on an airplane or other non-Internet connected space?”

An Apple cloud-based music service has been anticipated since at least 2009, when Apple bought Lala, a start-up company that allowed users to play music they already owned from the Web. Shortly after the deal closed, Apple shut Lala.

Apple has a billion-dollar data center in North Carolina that it has said will handle services like music. It is expected to discuss this at next week’s conference.

Miguel Helft contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=f4d3039d95fdd1cd6f7d4d8dce03b3f0

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The Clout of Air Alliances

May 2, 2011 by Leave a Comment

But over the past decade, three alliances — Star Alliance, Oneworld and SkyTeam — have carved up the globe into three teams of at least a dozen airlines each. These alliances offer passengers easier access to the world, but their growing power also positions them to dominate unaffiliated rivals and to control prices.

For passengers, alliances offer simpler ticketing and smoother connections on intercontinental trips, as well as the chance to earn and redeem frequent-flier miles on other member carriers. That means a passenger flying on Lufthansa can choose to earn United miles for the trip, then redeem them on US Airways — all Star Alliance members.

The main incentive for carriers to partner up is to bolster their international traffic, an increasingly important source of revenue.

“The U.S. market is a mature market — we’ve seen the shakeout, we’ve had consolidation,” said Henry Harteveldt, a travel analyst with Forrester Research. “To continue to grow, airlines have to expand abroad, but it’s impractical and, in some cases, impossible for carriers to do much expansion on their own. That’s why we’ve seen the alliances become so popular.”

International treaties dictate where carriers are allowed to operate in another country, and laws in the United States prohibit foreign ownership of a majority stake in an airline, so global alliances are also a way of expanding abroad without a buyout or a merger.

But now that the dominant carriers in each alliance have been granted antitrust immunity by the United States government and the European Union, they are free to behave as if there had been a merger — coordinating schedules and fares and sharing revenue on trans-Atlantic routes. The alliances also help the airlines save money as members shift operations to a single terminal and move toward more joint lounges and services.

“The one-roof strategy we have in airports helps save costs,” said Marie-Joseph Malé, SkyTeam’s managing director. “In London, we are all in Terminal 4. If we were separated, we would have had 60 check-in counters, which we were able to reduce to 48.”

Mr. Malé pointed to the liberalization of international aviation treaties, the globalization of the economy and advances in technology as the three main factors contributing to the growing strength of airline alliances. SkyTeam currently has 13 members, including Delta, Air France and KLM, and plans to have 19 by the end of 2012 — focusing on increasing its presence in China.

Star Alliance is the largest of the three with 27 members, including United, Continental, US Airways and Lufthansa. It is generally considered by frequent fliers to be the best alliance for booking awards, including upgrades, though cashing in awards within any alliance can still be frustrating for travelers because of limited seat availability and online ticketing systems that are not fully linked by member airlines.

Travelers with elite status on one airline can also take advantage of another benefit of the alliances — reciprocal recognition of that status by other members, which means priority check-in, boarding and baggage handling, and access to partners’ airport lounges.

Michael Blunt, a spokesman for the Oneworld alliance, said it focused on serving frequent business travelers with these types of perks, opting for quality over quantity with its dozen member airlines, including American, British Airways, Cathay Pacific and Qantas.

As part of that strategy, Oneworld is opening joint transfer centers at 10 hub airports worldwide, to help passengers troubleshoot problems like a missed connection or a delay that causes a tight connection time.

“Someone will meet you at the aircraft and they will tell you they’ve rebooked you onto another flight,” Mr. Blunt said. “Or they will take you and your hand baggage and rush you through the airport.”

But for all the talk of the benefits that alliances offer travelers, there is a continuing debate about the downside of this trend: too much market concentration, leading to higher fares. That is particularly a concern across the Atlantic, where fares have risen disproportionately as competition has shrunk.

“Something changed in the North Atlantic that allowed prices to rise three times faster than they did in any other market,” said Hubert Horan, an aviation consultant who has opposed alliance antitrust immunity. “That was due to the extreme consolidation of the industry. There is no other factor that could explain it.”

Mr. Horan helped develop the alliance between Northwest and KLM more than 20 years ago, but said he believed that the original benefit of alliances — making it easier to fly between secondary cities in the United States and Europe — was long ago achieved.

“The need to serve St. Louis to Stuttgart was filled by 1999,” Mr. Horan said. “All of the alliance activity since then has been in places where it created no value and the only purpose was to eliminate competition.”

Critics also worry that there is little opportunity for low-cost carriers to compete on trans-Atlantic routes (unlike domestic price competition from airlines like Southwest) and that the alliances will ultimately crush independent carriers like Virgin Atlantic.

In March, Virgin Atlantic announced a partnership with JetBlue, enabling customers to book trans-Atlantic tickets that include travel on both carriers. JetBlue has similar deals with Emirates, Lufthansa, El Al and other airlines, opting not to join a single alliance so it can pursue strategic partnerships instead.

Mr. Harteveldt said this approach made sense for some carriers, but that it remained to be seen what effect alliances would have on the competitive landscape as the market evolved.

“Certainly, alliances reduce competition,” he said. “There’s no question that it makes life more difficult for airlines that either choose not to be part of an alliance or aren’t asked.”

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