Quick Thoughts: Amazon, Motorola, and Nokia – Fighting the Unbeatable Foe

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–          Nokia’s new Lumia Windows phones offer subtle, differentiated advantages that could drive real share gains if marketed properly – a big if, given recent history.

–          Motorola’s new RAZR’s are spec sheet monsters that offer real competition for the wildly popular Samsung Galaxy III, and an eye-catching alternative to the iPhone for first time smartphone buyers.

–          Amazon’s new Kindles could suck some of the air out of an iPad Mini launch with their savvy focus on integration with innovative media offerings and rock bottom prices.

–          The glut of iPhone owners ready to upgrade assure Apple blockbuster sales out of the gate but the improving quality of competition will slow share growth longer term.

 

Three would be Apple rivals took their swings this week, ahead of next Wednesday’s hotly anticipated iPhone5 reveal.  Taken in aggregate, they demonstrate the vibrancy of competition in the smartphone segment and the first glimmers of real rivalry in the heretofore iPad dominated tablet market.  Working in chronological order, Nokia kicked off the week Tuesday morning in New York with its Lumia 820 and 920 models, its first smartphones featuring Microsoft’s Windows Phone 8 software.  Most analysts were ho-hum about the products, but I think this is a bit of an under-reaction.  The big potential wow is the camera.  While the megapixel count is a fairly common 8.7, Nokia coaxes demonstrably superior results from software image processing and self-focusing and stabilizing optics.  It has a screen with the same pixel density as the vaunted Apple retina display, and claims superior polarizing filters to cut down on glare, a good fit for showing those crystal clear photos.  It also introduces wireless charging as a standard feature – lay it on a charging pad and it automatically draws power.  The look is differentiated, from the bright colors and polycarbonate case, to the bold Metro interface of Windows Phone 8.  Nokia took criticism for not announcing pricing and availability, but this will only be a problem if the products are notably late to market or not competitively priced, albeit a problem that Nokia has had repeatedly in recent years.  Assuming the best in this regard, Nokia’s big challenge will be adequately communicating subtle benefits like camera quality and wireless charging to a skeptical world.

Motorola was next up with updates to its Droid RAZR line for Verizon – the mid-sized M, the big screen HD, and the big battery MAXX HD.  The big brothers will get the attention.  Even though leaked spec sheets have been circulating, the numbers are still impressive.  The 4.7-inch Super AMOLED HD screens are drool-worthy with HDTV resolution in an overall package that is smaller than the market leading Samsung Galaxy S III.  The other big selling point is battery life, with the larger MAXX model and its 3,300 mAh battery offering 21 hours of talk time, more than double the rated life for the S III.  The Motorola models are not as innovative as Nokia’s Lumia announcements, but then again, they don’t have to be.  Android is already well established, while Windows Phone 8 remains a platform underdog.  While the iPhone5 will step up the 3.5 inch screen offered in previous models, the 4 inch replacement will still be on the small side for a modern smartphone, a design decision the RAZR HD and MAXX HD are intended to exploit.

Amazon’s Kindle party this afternoon was the most intriguing event of the three.  After the cheaper and better versions of the e-reader line, CEO Jeff Bezos revealed the follow-ons to last year’s Fire tablet.   This time there are two sizes – 7 inch and 8.9 inch.  The smaller version offers favorable specs to the recently introduced Google Nexus 7, adding more storage, a second Wi-Fi band, and stereo speakers for the same price.  The larger version takes up the display resolution a notch, from 216 pixels per inch to 254, approaching the retina iPad’s 264.  Amazon touted three major elements of differentiation.  First, these are the first tablets on the market to implement the MIMO capabilities of Wi-Fi, with two separate antennae that Amazon claims will deliver 41% faster network speeds than the most recent iPad.  Second, Amazon is focused on the device as a platform for consuming media, and Bezos demonstrated a raft of innovations intended to enhance the experience of reading books, listening to music, and watching movies, and thus, drive the consumption of streaming and downloaded media media from the e-commerce juggernaut.  I was particularly enamored with the Fire’s well considered FreeTime tool that allows parents to set individual limits on daily use by content type and specific child.  My four kids won’t know what hit them when my wife and I reclaim the iPad.

The third and biggest differentiator is the prices, which are absurd compared to competing products.  The idea is to sell them at cost to as many consumers as possible as fuel for the Amazon e-commerce machine.  The profit will be made on the consumption of media content and by facilitating sales of physical products through the always present Amazon store.  This gives the Amazon Kindle Fire HD a substantial leg up over the upcoming iPad Mini, which will be required to bring home the bacon to a parent accustomed to 40% gross margins.  Of course, Amazon’s heavily modified version of Android has drawn criticism for its incompatibility with many 3rd party applications, but for the many consumers who use their tablets primarily for media consumption and simple web access, the Fire will be a compelling option.  Harking back to the first two points of advantage, I think Amazon will be able to sell a lot of tablets this Christmas, albeit with a substantial hit to their 4Q margins.

So now the attention shifts to the big iPhone announcement next week – Apple will undoubtedly wait to give the iPad Mini its own party closer to the Holiday season.  We’ve already seen what’s in iOS6 – homegrown maps, Facebook integration, tweaks to Siri, Passbook, and a raft of little things to make users lives easier and more closely tied to Apple.  As rumor has it, the updated model will see the 3.5 inch screen size featured in every iPhone to date bumped to 4 inches.  It is also supposed to support 4G LTE, which will be the biggest driver for users to upgrade and a big incentive to carriers to push the product and get all of the existing data-hogging iPhone users off of the terminally clogged 3G networks.  The iPhone 5 is expected to ditch the nearly 10 year old proprietary 30 pin connector for a new proprietary 19 pin connector, infuriating many users who will have to change out peripherals and charging cords for yet another expensive, Apple-only, non-standard solution.  Finally, in a break from the all-glass look of the iPhone 4 and 4S, the new product will apparently feature a silvery metal case.

Given the large installed base of locked in and loyal iPhone users and their long wait for true 4G LTE support, it’s a no brainer that Apple is going to sell a LOT of iPhone 5s between now and the end of the year.  The bigger question is whether it will be enough to stem the momentum of Android and keep Windows Phone 8 on the sidelines.  There, I’m not as convinced.  Big screen products like the Motorola RAZR line, the Samsung Galaxy S III, and HTC One, are the new big thing and they have the curb appeal to entice the buyer who comes into the store without firm intent.  Nokia’s got that great camera and a snappy, colorful vibe that could get real attention, and Samsung and HTC have their own Windows Phone 8 product on the way.  Blackberry, Symbian and the feature phone category still have a lot of global share to bleed out, but the iPhone value proposition isn’t as compelling as it once was.  Still, my wife is gonna get one for sure.

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