Quick Thoughts: It’s a Smartphone and Tablet Festivus!


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–        I turn the blog over to my associate (and certified gadget geek) Artur for a pre-black Friday/Cyber Monday technology shopping guide.

–        Android and Windows smartphones offer compelling alternatives to iPhone for a lower price point and more functionality, though iPhone is still an elegant design with a compact form factor

–        With a string of tablets from Google, Amazon, and Microsoft, the iPad is likely to lose share; Nexus 7 and Kindle Fire are great deals, and Apple doesn’t do discounts.

–        Winners: Anyone with technology on their wish list this year

Take it away Artur –

“One can’t be a TMT analyst without being a tech wonk at the core.  We enjoy our work here at SSR and with Black Friday and Cyber Monday around the corner, thought it would be fun to give some of our reviews on various devices on the market this holiday season.  Collectively, we own a lot of gadgets across the platforms, but are always on the lookout for the newest and coolest thing.  We tend to “kick the tires” of devices at every chance we can.  Since the summer, each of the major platforms and their hardware partners have been announcing products and devices they hope would gain traction in what is expected to be a strong holiday shopping season.  Retail sales during this year’s “Cyber Monday” or what should be better known as “Mobile Monday,” are expected  to be up 18% with 21% of purchases occurring via mobile devices according to Adobe.  Comscore expects online shopping to be up at a similar clip giving a range of a 15-18% increase this year over last. While devices aren’t likely to be heavily discounted by retailers and the platforms and their hardware partners have been pricing aggressively, they will make up a considerable portion of holiday technology sales. Let’s start with smartphones.

Phones:  Where to begin with Android?  With devices from Samsung, HTC, Motorola, Sony, LG, and others, the platform is outselling the iPhone by a factor of 5 to 1 globally, this season’s must have Android phones undoubtedly include Samsung’s Galaxy SIII and Galaxy Note II, Googorola’s DROID RAZR MAXX HD, and if you live in Europe or in a 4G LTE-less area, the Nexus 4.  Google’s Android partners have innovated at breakneck pace largely due to greater R&D spend than Apple.  It was not surprising to see Android beat Apple to market with LTE handsets and cloud based software features like over the air syncing.  As a result, some Android handsets have delivered beyond expectations in the marketplace. Samsung’s Galaxy SIII beat the iPhone in Q3 sales according to Strategy Analytics, though that quarter was weak for Apple given consumers waiting for the iPhone refresh and reflects only 10 days of iPhone 5 sales.

The Galaxy SIII is a sleek phone that measures 0.34” thick and features a 4.8” 1280 x 720 AMOLED display with a 306ppi pixel density.  The only downside is that the device still ships with the slightly outdated Android 4.0 Ice Cream Sandwich OS and sells for the same price as a similarly equipped iPhone 5 with 16GB at $199 subsidized, though Samsung’s phones command a smaller subsidy at $350 versus the $450 commanded by Apple.  With OS updates to Android 4.1/4.2 Jelly Bean still be in the works, carriers may increase the subsidy to dial up sales this holiday season.  The wait for Jelly Bean also holds true for the Galaxy Note II touted as LeBron James’ phone of choice for its size.  It features a quad-core processor, a massive 5.5” Super AMOLED screen, and weighs only 2oz more than the Galaxy SIII. Both are great devices and will have support for at least several Android OS refresh cycles.

Google’s Motorola DROID MAXX HD is a standout for its durable Kevlar construction and makes the perfect stocking stuffer for that loved one tends to drop and break phones regularly.  Priced at a premium $299 with subsidy, the device also offers a 4.7” screen, LTE, 32GB of memory, and Android Jelly Bean 4.1 weighing in at 5.5oz.  We like it too.  With its launch of Jelly Bean 4.2 via blog while the east coast experienced Sandy, Google shocked the tech world with a new LTE-free flagship phone, the LG made Google Nexus 4. Notable is the price point, just $299 without a contract and unlocked. That would be the equivalent of getting a $150 check and a free phone with contract, assuming Apple’s subsidies.  Yes, no LTE, but the phone features all the standards of a premium smartphone a high 320ppi 4.7” display, 8MP camera, and the latest Android version.  While it has sold out in the US at the moment, we expect the phone to perform exceptionally well in markets such as Europe, where distribution models differ and users absorb more of the phone cost than carriers, and where LTE is not yet prevalent.  If you can get one, the Nexus 4 is the perfect gift for a college kid studying abroad.

Microsoft’s long awaited Windows Phone 8 launched a few weeks ago and initial reviews of the software shows that it can give both Apple and the Android makers a run for their money.  The windows interface is well organized and easy to use.  The nascent app universe so far has support for some of the more important apps: Twitter, Facebook, Yelp, etc.  Windows is poised to have a strong season with some formidable handsets: the Nokia Lumia 920 and HTC Windows Phone 8X.  While the new Lumia has similar specs to many of the top Android Handsets: the same Snapdragon processor in the Galaxy SIII and DROID MAXX, a 332ppi 4.5” display, and 32GB of built in memory, the major drawback is size.  It feels clunky with a thickness of 0.42”.  Apple’s iPhone 4 release in 2010 is 0.05” thinner at 0.37”.  The phone is also 2 grams heavier than the much larger Galaxy Note II.  Still, it is a solid attempt for Microsoft to get in the game.  Upsides include design aesthetics, 8.7 MP camera with best-in-class image quality, built-in NFC, wireless charging, and a $99 price point with contract in the US.  It’s by far the best deal out there for a Windows Phone.  During my visit to the AT&T store I also noticed the HTC 8X next to the Nokia bearing a noticeably thinner profile.  It has the highest pixel density in the market place with 342ppi on a 4.3” display, the same Snapdragon processor, and a tapered profile that gives the phone a sleek feel with the low weight of 130g.  The drawback with the HTC phone is memory.  It comes standard with 16GB, with no higher capacities or expansion slot available.  Also with the $199 price point, we like the Nokia option better.

Finally, turning to the talk of the town, the iPhone 5.  I owned one for a matter of days before returning it to switch to another phone.  I had trouble with the maps and wasn’t pleased with having to acquire several new accessories to enable the lighting connector.  The iPhone 5 is an elegant design and is currently the lightest and thinnest phone on the market, though Huawei has disputed the latter with its Ascend PS1.  Shipping with iOS 6, its users are familiar with the shortcomings of Maps and have used work arounds such as linking to Google Maps Website or downloading other map apps.  Pixel density did not change though the display did become elongated.  Unlike some other phones, the iPhone features a built-in battery which has proved difficult to live with for those of us on the go with no access to a charger.  Added to that, LTE technology tends to use more battery power to amplify signals in low power areas resulting in high energy consumption.  Contrary to Apple marketing VP Phil Schillers claims that the iPhone is designed for a “user’s hand,” appendage sizes can vary and Apple’s display may be too small for the LeBron James’ of the world.  The iPhone isn’t going anywhere and it will undoubtedly sell many more units than the preceding models, but the competition is there and there are real alternatives to Apple’s walled garden

Tablets:  Apple created the segment when Steve Jobs unveiled the iPad in January 2010 and began selling the device a few months later in April.  There was generally a longer gap between product announcement and release date for Apple’s initial products despite Steve Jobs’ preferred product release of cycle of announcing one day and releasing a few days to a couple weeks later at most.  Given the size and scale of Apple, it has been difficult for the company to keep secrets once a product goes into production.  With leaks coming from Foxconn, the iPad mini announcement came exactly as expected: a smaller version of the iPad with a scaled down screen, aluminum bezel/glass case, lightening connector, and premium price point relative to the incumbent small tablets offered by Amazon with its Kindle Fire and Google with the Asus built Nexus 7.

The iPad Mini is a beautifully crafted device, but from a hardware standpoint both Amazon and Google have made strides that have narrowed the gap and a lower price point, $199 versus the Mini’s $329 price point.  Playing with the Mini at the local Apple store, the look and feel were great, but when it came time to swipe and use the device, the display’s low pixel density was distracting.  Apple pioneered the retina display and has been rolling it out across its spectrum of devices.  High ppi pixel density devices have become the norm also among the competition.  At 163ppi, the 7.9” display is Mini’s greatest shortcoming next to the premium price.

The obvious competitor to the Mini is the Google Nexus 7, which Paul has owned since shortly after it launched in July.  The Nexus 7 touts a pleasing 219ppi and full Android Jelly Bean functionality for $199.  On a bill of materials basis, iSuppli reported that it costs Asus $167 to make the Nexus while it costs Apple $198 for the Mini.  Many components are similar with the exception of casing and the display.  Apple is going for premium pricing taking what is a nearly 40% gross margin on the product versus Google’s 16% margin for the Nexus 7.  Still Apple has a robust ecosystem and fan boys en masse will buy the Mini.  It is also priced more reasonably than the existing iPad line to attract a larger segment of the population.  We still like the Nexus 7 and would recommend it for any mini-tablet buyer.

Also attacking the iPad this season is Microsoft’s Surface running on Windows RT.  Though Windows RT is a stripped down version of Windows 8, it takes up about 10GB of space from the installed 32GB.  Priced at $499 at the entry level just like the iPad, on a net basis it has more memory than iPad and features more room for expansion all with a larger screen with the same device thickness.  Notable shortcomings with the device have been a low pixel density of 148ppi, low app availability, and some latency between apps.  To the upside, the device along with keyboard and trackpad would appeal to an office power user until the newer Pro version is released after the new year.  The clever design differentiates Surface from iPad and may gain traction with the enterprise.  We may just buy one this season.

In sum, this is an exciting holiday shopping season where evidence of the TMT paradigm shift is blatantly obvious and choices are many for the consumer. Happy Thanksgiving!”

Thanks Artur, and Happy Thanksgiving from me as well.

For our full research notes, please visit our published research site.

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