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Next Smart Phone not a Smart Phone

Note: this article is the writers personal opinion. It is based upon almost 40 years of experience in small computers and communications, but it is still an opinion. It is presented AS IS. All use is at your own risk.

According to an article in Network World over half (65%) of persons choosing a new phone will not choose a smart phone, but a less featured ordinary “dumb” phone. Images showing November 2010 survey results can be seen here and here. Apparently, owners of any Android variety are more likely to upgrade to a full smartphone than other types, with most people choosing to buy a phone that lacks even basic Internet or texting.

The survey found that 49% of current Android owners traded up from a not-smartphone while 13% switched from a BlackBerry device. 11% of Android owners are on their second Android device, compared to repeat buyers of iPhone at 26% and BlackBerry at 32%. It is rather astounding that 11% of a random sample would even be on a second Android… Android is essentially only two-years old.

The most common business reason given for refusing to buy a smart phone were that the high cost of ownership and requisite service contracts was not justifiable: very few felt the devices were too complicated for them to utilize. A Dutch friend of mine once told me that in Holland phones are $5 each and include all capabilities: no roaming charges, not extra fees: they buy several and keep them in a basket for out of town guests to use. By comparison the cost to Americans of nearly $100 per month with a multitude of restrictions, abusive early cancellation penalties, and piles of extra add-on fees, is rather repugnant.

For business this should be awake up call: clearly consumers are tired of expensive and deceptive contracts that add more charges after the fact. Of course telephone companies have pulled this for years, but with the mobile market it has been far more abusive than before. The net result of American mobile plan pricing is apparently to discard 65% of the market by charging drastically more than the market will bear. Watch for a severe adjustment as enabling factors are already in place: China and other foreign powers are rapidly buying up foreign markets.

All that would be required to completely own the American mobile market is for a Nokia, a Wal-Mart or another large Chinese corporation to decide to offer a no hassles plan everywhere in the US with a flat $20 fee. The existing top heavy mobile corporations that are charging substantially above market price are not likely to adjust fast enough to survive: their thinking seems to be that they can control the market, which is a fantasy that can exist only until competition recognizes this low hanging fruit waiting to be eaten and simply takes over.

There is no such thing as a free lunch: there is only temporarily above market pricing followed by a market adjustment. Such a take over could be achieved in one or two months, suddenly resource starving the existing American players with an extreme interruption in their cash flow that would force them to either accept their rival as their Hegemon by stock exchange or merging, or at least forcing them to sell off their towers and fiber and drastically resize human assets sufficiently to meet payroll in the third month. With something like a $32b trade imbalance right now China does have the cash required. At that point market terms could be set by the survivor, most likely a 50% correction (prior $60/month average – minimum $20/month)/2 resulting in a flat market price near $39.95/month.

Android Partners poised to invade iPad Earth

From an article in eWeek,, it would seem vendors using the Android platform, including very significant player Motorola, are building upon their past successes competing with the iPhone to forge strong alternate products to the iPad. In part the article says:

Just as Google and its carrier partners countered the iPhone with the Nexus One and several other solid Android smartphones, the partners believe they have a solid answer in tablets powered by the forthcoming Android 3.0, or Honeycomb operating system.

The Motorola Xoom will launch running Android 3.0 next month, followed later this year by LG’s G-Slate, Asus’ Eee Pad Transformer and unnamed tablets from Samsung.

The Xoom sports a 10.1-inch screen powered by the Nvidia Tegra 2 dual-core processor, which means it should easily be faster than the iPad.

The Xoom also boasts front- and rear-facing cameras, the chief hole the iPad has yet to fill, though that should change with the iPad 2 launch this spring.

Multitasking is another big gap for the iPad, where only one application runs at a time. The Xoom also offers an HDMI output to connect the tablet to the TV to play video or games.

That would be good news for consumers: our spies tell us that the actual cost to manufacture the iPad is about $20. That means the market is ready for a severe adjustment and there may be some profit taking as initial players enter priced very high, near the iPad price and then prices drop as more vendors enter the arena until ultimately we have iPad alternates SRP around $189: that’s enough for a 60% margin on retail for the retail seller, a 100% margin on cost for the manufacturer, and another 100% margin on cost for the middleman / warehouse.

Business mobile vendor, RIM has their own iPad killer wannabe, the PlayBook, which looks like a iPad done in tasteful business Black. It multitasks well, will run a whole business day on a charge, and has enough calculating power to allow playing video intensive games such as Quake. It also has an HDMI port so you can plug into large video screens for viewing videos, two 5 megapixel cameras, one forward facing and one rearward facing for conferencing, has no qualms about running Flash, and will tether to the business person’s BlackBerry. The PlayBook is thinner than your little finger and weighs less than a pound, but it is about the same LxW dimensions as the iPad.The eWeek article,, says:

RIM’s PlayBook represents the company’s hope for breaking into the rapidly burgeoning tablet market. The screen measures 7 inches, and power comes courtesy of a dual-core processor. RIM will market the PlayBook toward businesses increasingly interested in tablets as productivity tools. In keeping with that, the device includes PDF support among other features.

Motorola is no small outfit — they know how to promote mobile devices and they wouldn’t back a looser. RIM is solidly entrenched in the business market and they are not going to disappear anytime soon. This is going to go.

It will also motivate Apple to innovate some more, which is also good. Anytime  a company has a 3,000% profit margin on cost they have a reason to innovate and protect that profit, and alternate vendors have a reason to go after that market like starving wolves.