Google I/O announcements: Photos and Brillo the big news

Google today held the keynote for its I/O developer event. As usual, there was a disparate set of news from Google. The comment below may be attributed to Jan Dawson, Chief Analyst at Jackdaw Research. Jan may also be reached at (408) 744-6244 or jan@jackdawresearch.com and is also on-site at I/O today for in-person interviews.

Google’s event today was surprisingly short on major news, and especially on surprises. Much of what was announced was trailed ahead of time, and the Android announcements in particular were very short on notable news. The Android M release was described as being focused on quality and polish, but it felt like the other major focus was catching up with Apple, with lots of key features basically attempts at achieving parity with the iPhone. Android Pay feels like an Apple Pay clone without the base of fingerprint sensors to work with and a lack of control over the full stack. The changes to permissions also bring Android in line with iOS, where they always should have been. On Android Wear, too, there was little new, especially given the enhancements over the last few months, and it feels like the Apple Watch will do more for Android Wear interest and adoption than Google and its OEMs will over the coming year.

Brillo was arguably the biggest news of the day, as it’s a big step forward in the Internet of Things domain. Lots of IoT applications are already using Android, but Android hasn’t been optimized for these applications to date, with the OS both over-featured for most applications, and lacking IoT-specific features like communication protocols for connecting with other devices. Project Brillo feels like it could fix both of those problems, and is the first real IoT-specific platform from a company which many would-be adopters already see as a natural fit for the space. However, it also feels like this project is in the early stages, and it remains to be seen exactly when it will hit the market and start to have a significant impact.

On the consumer-facing side, Google Photos feels like the biggest announcement. Photos solves two real problems for users: consolidating all their photos in one place without having to pay an arm and a leg, and managing them automatically on behalf of users without requiring tons of human intervention. The availability across Android, iOS, and the web is another useful feature.   Separating Google’s photos feature from Google Plus is huge, because it both resolves concerns about keeping your photos in a social network and gets away from the perceptions of failure associated with the social network. The photos feature always should have been independent, and it’s a good thing that it now is.

Google Now on Tap is a great example of Google’s unique skill set in machine learning and its application to real-world problems. This continues to be what Google is best at, and the advancements shown today were a great illustration of that skill set. It’s also reassuring that Google recognized that not all people’s needs will be met by its own Knowledge Graph, and that Google Now cards will continue to expand the amount of third party app content they show users. However, the Chrome Custom Tabs feature for developers felt like an effort moving in the opposite direction, taking users back out of apps and onto the web, something which clearly benefits Google.

In virtual reality, it continues to feel like Google is trying to do virtual reality on the cheap, which may not be a bad strategy. Leveraging the devices people already have rather than forcing them to buy expensive dedicated hardware dramatically increase the addressable market while giving people more value from the phones they already own. The Expeditions project looks interesting, but we got no real information about pricing for the education market here, and that will be critical to its ability to succeed. It’s also disconnected from Google’s other major education efforts, which have focused largely on Chromebooks. The partnership with GoPro looks like a great fit for both companies – Google doesn’t want to develop cameras, and GoPro badly needs more unique IP to differentiate its products in the coming years. The fact that much of the Jump intellectual property will be open sourced, however, mitigates the positive impact for GoPro somewhat, though it’ll clearly have a head start.

T-Mobile brings Un-Carrier to work

T-Mobile today announced its first Un-Carrier moves targeted towards businesses. The below comment can be attributed to Jan Dawson, Chief Analyst, Jackdaw Research. Jan can also be reached at jan@jackdawresearch.com or (408) 744-6244.

T-Mobile’s first business effort with Un-Carrier is a logical next step in its strategy, since businesses have many of the same pain points as consumers. T-Mobile’s move towards transparency in pricing should help customers on other carriers figure out more easily whether it’s worth making the switch. It doesn’t enable true comparison shopping because the other carriers still do custom, negotiated pricing for business customers. But with most business customers currently on other carriers, that may not be so important. T-Mobile’s new business offerings should be very popular with smaller businesses, which buy services very much like consumers, with the buyers being office managers or business owners rather than professional IT directors. However, for larger businesses, rate plans are just part of the picture, and other features like mobile device management, other communications and productivity applications and wireline services will be part of the picture too, and T-Mobile can’t address any of those today. Device pooling will be popular with businesses too, though T-Mobile only offers three tiers, and this may not give most businesses enough flexibility to pick the right plan and have predictable bills each month.

T-Mobile’s extension of Contract Freedom into device payments will make customer acquisition even more expensive, but is an important additional step given how many customers are now on device payment plans with the other carriers. The trade-in of devices will help offset some of this cost, however. Locking in pricing for life will help counter some of T-Mobile’s competitors’ criticisms of disappearing promotional pricing.

Overall, T-Mobile’s new moves will help keep the momentum going around its growth and its success in getting subscribers to switch from competitors. It’s continuing to bank on the fact that adding new customers in this way will pay off long term, because these subscribers will stick around. Though there’s a risk that it attracts the most price-sensitive customers, and these customers will be more likely to switch carriers again in future, T-Mobile tells me that’s not what’s happening, and that these new customers are at least as loyal as the rest of its base. Its churn is falling over time, which lends some credence to that claim. I’ve been concerned that T-Mobile was running out of obvious levers to drive continued rapid consumer growth, but moving into business opens up a huge new opportunity for T-Mobile to continue that growth, especially because its market share of the business market is so small today.

Apple demonstrates its uniqueness at Apple Watch event

The comment below may be attributed to Jan Dawson, Chief Analyst at Jackdaw Research. Jan may also be reached at (408) 744-6244 or jan@jackdawresearch.com.

Apple demonstrated today why it’s unique among major technology companies. It combined technological innovations with partnerships with healthcare companies and the launch of fashion accessories.

In the healthcare space, many companies have tried to use technology to transform key processes, but the focus has been almost exclusively on transforming them from the enterprise out. What’s unique about Apple’s ResearchKit is that it works from the consumer-in. In other words, it empowers consumers rather than healthcare providers and in the process changes the healthcare research model.

Apple’s new MacBook extends Apple’s leadership in the PC space and illustrates exactly why Apple has been outperforming the rest of the PC industry for most of the last ten years. It advances technology in the key areas users care about – battery life, display quality and resolution, and above all usability. One concern is the reduction in the number of ports to a single USB-C port. While many peripherals now communicate through wireless rather than wired technologies, power, external microphones and other devices still rely on wired technologies. It’s likely that Apple will deal with this by providing adapters, but customers will likely have to buy new devices and cables to work with the new port. At the same time, Apple has clearly laid the groundwork with various wireless sharing technologies such as AirPlay, AirDrop and so on.

The Apple TV didn’t get the big upgrade some were expecting. The price drop reflects the fact that the device is now competing against sticks sold at $35 rather than simply boxes sold at $80-100. The HBO Now exclusive should be a big selling point for Apple TV, but the price change signals that Apple may be laying the groundwork for a bigger TV service push later.

The Apple Watch information provided today was relatively unsurprising, with little new information other than price. The prices weren’t entirely surprising either. The vast majority of sales will be for the Sport and Watch versions, and I expect Apple to sell around 20 million of these in 2015. The release of the Apple Watch will also catalyze the overall smartwatch market and help other vendors even as Apple comes to enjoy levels of market share it hasn’t had since the iPod. It will likely take some time for sales to ramp up, since most potential customers will want to look at the watches in stores and possibly even wait until early-adopter friends see and show them off. More broadly, the Apple Watch also demonstrates what only Apple could do among major technology brands, and that’s create a credible high-fashion device that can sell at every price point from $349 to over $10,000. No other technology company has the combination of technology chops and fashion and brand credibility to pull this off.

Sprint dramatically expands distribution network with RadioShack deal

Sprint has announced a deal with RadioShack to build Sprint stores within 1750 RadioShack stores as part of RadioShack’s restructuring. The comment below may be attributed to Jan Dawson, Chief Analyst, Jackdaw Research. Jan may be reached for further comment at jan@jackdawresearch.com or (408) 744-6244.

Sprint’s deal is a smart way to dramatically increase its footprint of company-owned retail locations. It’s lagged behind its three major competitors in terms of company-owned store footprint. Each of its major competitors has over 2000 company owned stores, and Sprint will now leapfrog to 2750 company-owned locations with the addition of the RadioShack stores. This gives Sprint both a much bigger opportunity to capture walk-in business from customers and a much better mix of owned versus indirect distribution, which should have a positive effects on a number of other metrics. Stores have been one of several major areas where Sprint and T-Mobile have both suffered from a lack of scale compared to AT&T and Verizon, and this deal is a cost-effective, rapid way for Sprint to make some rapid progress. In the process, it’s converting these RadioShack stores from multi-carrier dealerships to directly-owned, exclusive Sprint retailers. The fact that Sprint employees will be staffing the stores within a store is a major advantage, too, compared with third party retailers.

T-Mobile continues appeal to otherwise neglected customers with Smartphone Equality

T-Mobile today announced Smartphone Equality, a policy change which will allow the many customers who don’t have prime credit to nonetheless qualify for smartphone installment plans and other deals normally reserved for those with prime credit. The comment below may be attributed to Jan Dawson, Chief Analyst, Jackdaw Research. Jan can also be reached for further comment at (408) 744-6244 or jan@jackdawresearch.com.

When T-Mobile introduced Mobile Money, it was clearly targeted at a segment of the market largely ignored by the major carriers. This segment has lower incomes, poorer credit and often no access to traditional financial services, and T-Mobile demonstrated a willingness to go where other carriers had not. Today’s Smartphone Equality announcements is another example of T-Mobile targeting customers which are largely neglected by the big four carriers, and especially their postpaid services. It should reinforce T-Mobile’s appeal among this segment and help drive loyalty among these customers.

I’ve been concerned by some of T-Mobile’s Un-carrier moves from a business perspective, as they often sacrifice financial performance for short-term pursuit of growth. But Smartphone Equality is an example of a plan which both serves growth objectives while being well grounded in good financial sense. The plan is based on research from T-Mobile into which customers are most likely to pay their bills, and targeted carefully at customers who should present little or no additional risk. This is a smart move from T-Mobile, one that should both benefit customers and the bottom line. Unlike some of T-Mobile’s other moves, it’s not targeted at switchers but rather at existing customers, since a track record of paying bills on time is required to qualify. As such, this should help churn rates rather than simply boosting gross adds, which have been the focus of so much of T-Mobile’s efforts recently.

AT&T tries to retake ownership of Rollover Data concept

AT&T today announced that it will resurrect the Rollover concept it pioneered in the days when voice minutes dominated wireless service with Rollover Data. The comment below may be attributed to Jan Dawson, Chief Analyst, Jackdaw Research. Jan is also available for further comment via email at jan@jackdawresearch.com.

AT&T’s announcement will be seen as a response to T-Mobile’s Data Stash announcement from just before Christmas, but in reality it has been in the works and under discussion at AT&T for quite some time. Given that AT&T pioneered the concept of Rollover Minutes, it’s natural that it would want to own the concept and the brand in the data world too. AT&T’s version differs significantly from T-Mobile’s version. It’s less generous, with a single month of rollover rather than twelve months, but that should make it both easier for customers to keep track of and more manageable from a network load perspective. T-Mobile’s plan risks creating a situation similar to airline miles, where customers have a hard time keeping track of which miles (or Gigabytes of data) expire when. AT&T’s version also better mirrors the original concept, which was designed to give customers some flexibility about month-to-month usage rather than allowing them to accrue substantial unused allowances over time. But T-Mobile (and John Legere) will undoubtedly beat AT&T up about the perceived inferiority of its offer.

All of this is part of the broader escalation in the competition between the US wireless carriers that’s occurred in recent months. And as with previous moves, it’s focused on larger data allowances, which carriers have the flexibility to offer without occurring significant costs or reducing prices directly. It’s relatively low-risk for AT&T to offer, especially given the one-month limit, and fits well with its branding and history, so it should resonate with consumers. It will also increase pressure on Verizon to offer a similar deal, though Verizon has resisted recent moves to a greater extent than competitors, preferring to target discounts at individual users it considers at risk rather than sweeping discounts or widely-available offers. However, as all four major networks reach rough parity in LTE coverage over the next year or so, competition around offers and pricing will continue to intensify as a major source of differentiation, and Verizon will find it increasingly difficult to resist these moves.

Apple’s new iPads meet two of three goals for the company

Apple today announced new iPads, an iMac with a Retina Display, and a new Mac Mini, as well as providing more details on OS X Yosemite and iOS 8.1. The comment below may be attributed to Jan Dawson, Chief Analyst, Jackdaw Research. Jan may be reached for further comment at jan@jackdawresearch.com or (408) 744-6244.

Apple had three jobs to do with its iPad announcements today: convincing people who own an iPad 2 or 3 to upgrade to a newer model, winning over new customers to the iPad, and convincing people who own an iPad but have stopped using it to buy a new one and start using it again. It achieved two of those three objectives with its announcements. The new iPads are a significant upgrade over iPads that are two or three years old, which is the main target base for upgrades. They’re thinner, lighter, much more powerful, with better cameras and a Touch ID sensor, and as such anyone upgrading from a two- or three-year old iPad will notice a major improvement in performance. About 3-5% of Apple’s iPad base upgrades every quarter, and these improvements together with the lower prices on the older iPad Minis may increase that number a little.

Apple also extended the bottom end of the iPad range down to $250 for the original iPad Mini, meaning that it now has a range of iPads that run the gamut from $250 to around $1000 – there’s something for almost everyone here. And with last year’s iPad Mini at $300, the entry point for a very good iPad is now lower than it’s ever been. Apple adds about eight to ten million new iPad customers each quarter, and the new iPads should help keep that momentum going, while expanding the addressable market somewhat at the bottom end.

However, there was nothing in today’s announcements which would convince someone who’s stopped using an existing iPad to buy a new one – the new iPads do the same things better, but don’t do anything dramatically new and different. For people who have found a large smartphone and a laptop sufficient, the new iPads won’t change the equation. One other interesting note is that, having effectively achieved parity between the iPad Mini and iPad Air last year, Apple has again opened up a gap between the two in terms of performance. While the iPad got thinner, gained a new, more powerful processor and a better camera, the iPad Mini remained largely unchanged except for the Touch ID sensor and software improvements. The iPad Mini is now again clearly the poorer of the two devices, and the $100 price difference between the iPad Mini 3 and iPad Mini 2 is somewhat hard to justify.

The iMac with Retina Display checks an important box for Apple’s community of creative professionals such as photographers, videographers and designers who need a higher-resolution display to do their work on a Mac. This is a marginal business in the grand scheme of things for Apple, but it’s an important segment for Apple to keep happy. That base is still waiting for a display peripheral with the same high resolution to use with the company’s new Mac Pro which launched last year, so that needs to be high on Apple’s to-do list for the near future.

Apple’s announcements will prompt its biggest year ever

Apple today announced new iPhones, the Apple Pay payment platform and the Apple Watch. The comment below may be attributed to Jan Dawson, Chief Analyst at Jackdaw Research. Jan may also be reached for comment at jan@jackdawresearch.com or (408) 744-6244.

Apple’s new iPhones provided few surprises, with the size, new features and even the naming having leaked over the last few weeks. However, the new phones should dramatically expand the size of the opportunity for the iPhone, which has been artificially limited by its small screen size. The iPhone will now definitely have its largest quarter ever in Q4 this year, and its biggest year. It will significantly move the needle on shipments, and will further dent Samsung’s shipments in the coming months. The iPhone 6 will be the biggest seller, but the iPhone 6 Plus will be a big seller too both among people who want a bigger screen, and those who want the top of the line experience. The iPhone 6 Plus will be particularly important in China.

The Apple Watch was far less detailed in rumors and provided some big surprises. The device is first and foremost a watch. Despite the name, this distinguishes it from other smartwatches, which have focused first and foremost on notifications and fitness, neither of which have mass appeal. Apple’s watch handles these too, but does them in a different way. The smartwatch market has been limited by a lack of imagination and a focus on these two tasks, and only a truly disruptive new entrant could change things. Apple now promises to do that, with a focus on a new user interface that makes more sense for smartwatches, and truly attractive and fashionable design. Others have created smartwatches as technology products, but Apple has created a smartwtatch that’s a fashion product, and that will make a huge difference. Apple is defined as much as anything by the markets it chooses not to keep in, and by pricing the watch at $349, Apple will limit its addressable market. But it’s also likely to be the first Apple product people may buy several of for their own personal use. There’s a significant range of options between the three main lines, the five types of straps, and a variety of colors. This is critical for mass appeal among those who can afford to spend $349 or more on a watch.

Apple’s new payments platform will be a huge success over time, but it’ll be a slow burn, as it will take some time for enough retailers to support the platform to make it widespread. Apple’s focus on security and privacy is in keeping with a theme we’ve heard a lot from the company in recent months, as it seeks to set itself apart from Google and to an extent Amazon. Both those companies capture significant data about transactions when their payments platforms are used, but Apple is protecting user data both from itself and from retailers. Despite the iCloud hack fallout, Apple is reinforcing its position as the company that won’t ever sell your data, and in this case won’t even collect it in the first place. Mobile Payments have suffered from the lack of a clear reason to use them instead of traditional methods. Apple’s improved security and privacy in addition to the convenience of using Apple Pay should finally change that.

Motorola’s last pre-Lenovo hurrah

Motorola today announced what will likely be its last big set of devices before the Lenovo acquisition closes, in the form of revamped Moto X and Moto G smartphones, the Moto 360 smartwatch, and the Moto Hint bluetooth earpiece. The comment below may be attributed to Jan Dawson, Chief Analyst at Jackdaw Research. Jan may also be reached for comment at (408) 744-6244 or jan@jackdawresearch.com.

Motorola’s new smartphones build on the success it has had with its smartphones over the past year, particularly that of the Moto G, which has been Motorola’s best selling device in years. The Moto X, which was previously awkwardly positioned at a premium price point without specs to match, has received a significant upgrade. At least on paper, it now seems worthier of the company it keeps in the premium category, while receiving a price cut to make it significantly cheaper than comparable devices. But even though Motorola claims that it makes money on each device it makes, it’s losing money as a business unit under Google. Only with significantly increased scale can Motorola start to become profitable as an enterprise, and that’s where the Moto G comes in. A big seller in India and other markets, and also more surprisingly in several mature markets, the phone has been a surprise hit for Motorola. Motorola has retaken market share in countries like the UK where it has been a non-entity for several years, and has become the number two brand in smartphones in Brazil. For a company which briefly seemed on its way out, this is something of a resurrection, and the Moto G is a big part of that success.

The Moto 360 is the latest Android Wear smartwatch, and arguably the most anticipated, as Motorola has cleverly stoked interest since its early reveal at the Android Wear launch announcement. The looks are striking, and it sets itself apart nicely in that department from its major competitors. Motorola is attempting to position this device as first and foremost a watch, rather than a smartwatch, although the underlying platform is the same as other recent entries in the category. However, with a $249 price point and single-day battery life, the Moto 360 suffers from the same shortcomings as other smartwatches already in the market: they fail to meet the basic criteria for a successful product in a market for which there isn’t much demand to begin with. It will probably sell better than most Android smartwatches, but that isn’t saying much in a category that’s been underwhelming from the start. (For more on smartwatches from Jackdaw Research, see this blog post: http://techpinions.com/grading-on-a-curve-smartwatches-in-2014/33599 and this report: http://jackdawresearch.com/smartwatches/).

Where Motorola is really beginning to set itself apart is in adding value to the generic Android experience across these devices, and in making them work together particularly well. The sensibly renamed Moto Voice, Moto Assist, Moto Display and Moto Actions are real value-adds on top of Android, and will help to set the phone apart. But the Hint will extend these functions in a useful way and set the headset apart in a category which has become positively stale.

The biggest question at this point is to what extent Motorola’s strategy over the past few years will come to an end with its acquisition by Lenovo, and to what extent some of its innovations will continue under its new owner. What’s clear is that Lenovo sees significant value in the Motorola brand and carrier relationships outside of China, but what’s less clear is how much it will embrace the strategy exemplified by the Moto X and Moto G.

Microsoft’s devices strategy begins to emerge

Microsoft today announced several new devices in the form of the Lumia 830 and 730 smartphones, the Microsoft ScreenShare device and the Nokia Smart Wireless Charger. The comment below may be attributed to Jan Dawson, Chief Analyst at Jackdaw Research. Jan may also be reached for comment at (408) 744-6244 or jan@jackdawresearch.com.

Microsoft’s first big mobile announcement following the acquisition of Nokia is a reminder that the company is in transition. The mixed branding on the devices announced, somewhat confusingly combining the Nokia and Microsoft names, is a sign of the work still to be done in folding Nokia into Microsoft proper. Nonetheless, Microsoft’s strategy for the mobile business it has acquired is beginning to emerge.

Nokia’s devices had come to represent 95% of the installed base for Windows Phone devices, and as such Microsoft now very much controls the destiny of Windows Phone from both a software and hardware perspective. Nokia’s success in the past year or so has come almost entirely at the low end of the market, with the Lumia 500-series devices outselling all others by quite a margin. The challenge is to achieve the same success at higher price tiers, but Microsoft has wisely chosen to forego attempting to launch a flagship into the current maelstrom of device announcements from almost every other major vendor, including Apple next week. Instead, it’s targeting the “affordable flagship” range with the 830 and 730. Both devices are solid successors to previous entrants at this price point, boosting specs and performance and adding some nifty software features, especially around imaging. Their price points are competitive, continuing one of the best features of the Lumia 500 series devices. But there’s relatively little here to suggest that these phones will be standouts in the market. Microsoft’s past devices and services strategy left some confusion about how it would set its phones apart when it also offered its services on Android and iOS. But it’s now becoming clear that Microsoft won’t so much offer a better Microsoft-centric experience on these devices as use its newly integrated business as a way to bundle in those services at more competitive price points on its own devices. We’ll see more of this in the coming months in both the smartphone and tablet categories.

Of the other two devices Microsoft launched today, the ScreenShare is by far the more important. Google has had huge success with its Chromecast device, and despite the success of the Xbox Microsoft has lacked a mass-market TV device until now. The ScreenShare could become that device, but in its current iteration it has several flaws. Firstly, it’s priced more like the Apple TV than the Chromecast, even though its functionality is very Chromecast-like. Secondly, unlike Apple’s well-publicized AirPlay strategy, there’s been no big push around the Miracast technology from Microsoft either in the context of the Surface or Windows Phone devices. As such, many of those at whom the ScreenShare is aimed won’t even know their devices are capable of working with it. The ScreenShare should have been priced much lower, and ideally should be bundled with Windows Phone and Surface devices for at least a few months to raise awareness and demonstrate the value. At the current price it’s unlikely to be a big seller at all. But this is an important step into the home for Microsoft for the non-console crowd, and it’s hopefully the first of a bigger strategy in this space from the company.