Technology News and IT Business Intelligence

Recent IT industry events have created a field day for those who think the news tend to come in “threes”:
During a five-hour-plus long event highlighting the conclusion of its Sun Microsystems deal, Oracle discussed plans for the company’s hardware division, and said it would continue investing in Sun’s Sparc- and X64-based systems and storage hardware. The company provided a Sparc road map and said it was planning upgrades for systems based on both the Sparc T series (now made by Oracle) and the Sparc64 chips made by Sun partner Fujitsu. However, there was no discussion of the status of UltraSparc-RK “Rock” processors and related “Supernova” systems, which are rumored to have been discontinued.
Oracle Co-President Charles Phillips commented extensively on the company’s plans to build integrated systems/appliances for online transaction processing (OLTP) and other Oracle database-intensive business applications. Only general guidance was offered regarding the availability of these new solutions.
Intel introduced the Itanium processor 9300 series (codenamed “Tukwila”), which the company said delivers more than double the performance of its predecessor, boosts scalability, and adds reliability features to the platform. The new chip boasts twice as many cores (four versus two) as its predecessor and eight threads per processor, plus significantly improved cache, interconnect bandwidth, memory bandwidth and memory capacity.
Intel discussed plans for “at least” two more generations of Itanium: “Poulson,” (scheduled for delivery in two years) will add an advanced multicore architecture, instruction-level and hyperthreading enhancements, and new reliability features. Future Intel Itanium processors in development will support socket and binary compatibility with 9300-based systems and software. The company expects OEM systems based on the new processors to ship within 90 days.
IBM’s Power Systems group launched its next-generation Power7 microprocessor, along with a quartet of business class, enterprise class, high-end and high-performance servers featuring the new chips. According to IBM, Power7 systems can deliver four times the performance, four times the virtualization capabilities, and three to four times the energy efficiency of previous generation POWER6+ systems, but will sell for the same price as those solutions.
Power7 processors can now run up to 32 simultaneous tasks — with eight cores and four threads per core. The chips also support more memory and throughput and offer new features, including TurboCore, Intelligent Threads and Active Memory Expansion. These features will make Power7 particularly valuable for demanding enterprise applications, as well as for the basis of workload-optimized IBM solutions like last year’s Smart Analytics Systems. In addition, Power7 systems’ robust performance and flexibility make them appropriate for increasingly complex Smarter Planet workloads and processes. IBM’s new Power7 systems will begin shipping between February 19 and March 16.
While these announcements all focused on their respective vendors’ latest/greatest microprocessor architectures (RISC for IBM Power and Sun Sparc, EPIC for Intel’s Itanium) for supporting enterprise-class Unix and Linux workloads, what was really going on beneath the surface? In short, the trio offers excellent examples of vendors engaged in customer preservation (Oracle), partner management (Intel) and forward thinking (IBM).
It’s important to consider the general state of the Unix market before slicing and dicing the announcements themselves. Once considered a nearly unassailable bastion of enterprise-class business and high-performance computing (only mainframe systems have a higher status), Unix solutions have been under continual pressure from below for the past half decade, due to the expanding capabilities and popularity of servers leveraging x86/64 Intel Xeon and AMD Opteron processors. In fact, x86/64-based systems have essentially eclipsed RISC and EPIC in high-performance computing and supercomputing environments.
The battle is likely to become increasingly fraught with next-gen x86/64 processors, including Intel’s Nehalem EX, waiting in the wings. How are Unix vendors responding? Not surprisingly, by emphasizing their platform’s already robust RAS (reliability / availability / security) features, as well as expanding virtualization and other capabilities that even the best x86 solutions have trouble meeting, let alone surpassing. Such strategies have tended to force Unix solutions into higher and higher market niches, but upwardly ratcheting performance has also allowed vendors to explore, develop and inhabit entirely new commercial opportunities, including workload-optimized systems.
So, what did the announcements say about the status of these vendors? Perhaps more importantly, did any of the three reveal anything appreciably new or unexpected?
Oracle Sparc
In the case of Oracle/Sun, not much. The marathon webcast was hours longer than other vendors’ comparable acquisition events, but painted Oracle’s plans for the Sparc server business with a broad brush.
Yes, Oracle will continue selling and developing existing Sparc processors and systems (an issue about which CEO Larry Ellison seemed notably unenthusiastic when the company first announced its plans to buy Sun). Yes, Oracle will develop new Sparc-based solutions, setting its sights on workload-optimized servers/appliances. However, that doesn’t show much in the way of imagination or innovation — Oracle has been shipping similar systems based on HP hardware for months, and IBM’s workload-optimized systems are arguably more sophisticated in terms of targeting specific industries and markets.
Oracle also said that it plans to increase its overall research and development budget some 55% from USD$2.8 billion in the past fiscal year to $4.3 billion in the year ahead. But how much of that budget, plus time and effort, will be spent to resurrect a Sparc platform that has fallen on hard times? That remains unclear.
Though no company wants to give its competitors a clear view of its strategic plans, the lack of transparency also doesn’t really matter if the essential purpose of Oracle’s discussion was, as I expect, to reassure current Sun customers and constrain them from jumping ship to IBM and HP, where many have already found comfortable homes.
Without clients’ good will, Sparc’s marketplace position will continue its slow decline, and could sap enthusiasm for continuing platform development. What should Sun customers do? Carefully watch how Oracle pursues to its Sparc/system plans, and keep an eye on what’s happening in Power and Itanium systems.
Intel Itanium
The timing of Intel’s announcement says almost as much about the state of Itanium as did Tukwila’s technical details. Coming on the same day and nearly at the same time as the Power7 launch, Intel appeared to be looking to overshadow IBM as much as trying to establish thought or market leadership. Some may see this as reading too much into press release minutiae, but there were also some curious issues around the launch, including the low-key responses of Itanium OEMs.
Also significant: The considerable three-month lag time between Intel’s announcement and the likely appearance of 9300 systems suggests the event may have been a bit premature. So, what was the point? First and foremost, to keep partners — especially HP — happy. Since HP and other Itanium OEMs have handed off microprocessor development to Intel, it behooves the company to be aggressive in offering those partners good news to take to market.
Overall, Intel deserves credit for delivering a 2X bump in performance, especially since less than a year ago, the company decided to incorporate DDR3 memory into Tukwila rather than the buffered DIMM memory of previous-generation Itanium chips. Despite that, it seems worth considering Itanium’s long-term prospects. At this point, HP represents some 85% of the Itanium market — a massive position, especially for a microprocessor once intended to become the Industry Standard platform for 64-bit enterprise computing.
That isn’t likely to change appreciably over time, but I’m not as pessimistic as some other analysts about the outlook for Itanium. Though Itanium is feeling the same upward pressure from x86/64-based servers as other Unix platforms, development will likely continue as long as vendors’ solutions, particularly HP’s Integrity systems, remain profitable. However, if HP ever begins porting HP-UX or its other legacy platforms to x86/64, it will likely mark the official beginning of Itanium’s end.
IBM Power7
In comparison to Oracle and Intel, IBM’s Power7 announcement had all the confidence of a vendor in firm control of its circumstances and thinking far ahead of its peers, and with good reason. Less than a decade ago, IBM trailed both Sun and HP in Unix sales. Today, it leads both those rivals, owning some 40% of the $16 billion Unix market.
In part, that success came as disaffected Sun and HP customers jumped ship to Power. Why? Because as Itanium and Sparc development hit potholes, snapped axles, and headed into the ditch, IBM Power stayed remarkably on track and true to the company’s long-term road map.
Power7’s significant performance improvements mean that any competing vendors’ platforms or systems are unlikely to pressure, let alone alter, IBM’s current Unix performance leadership position; Power6/6+-based systems own over a hundred #1 industry benchmarks.
The Power7 announcement also demonstrated an interesting development in IBM’s marketing strategy: Rather than specifically highlighting next-generation microprocessor improvements, which were considerable, the company instead focused on how Power7 is helping drive end-to-end system innovation. The result? IBM made strong cases both for Power7 delivering significant benefits to traditional business applications and for providing the engine in next-generation Smarter Planet workloads and processes.
How this will play in the market is an unknown. But as systems become ever more complex, it seems possible, if not likely, that microprocessors will increasingly take a back seat to overall systems evolution. If that is the case, it will require Oracle to further ramp up its Sparc efforts, and Intel to tighten development and messaging efforts with its OEM partners.
Overall, the events of the past weeks portend an increasingly interesting future for RISC- and EPIC-based systems. Far from the inevitable death spiral some have prognosticated for this sector, both IBM and Intel’s efforts suggest that innovation and competition remain alive and well in the Unix market.
Even the uncertainty around Oracle/Sparc is better than Sun’s previous wallowing in the Slough of Despond. That said, I also believe that IBM’s Power7 represents the current bar by which upcoming Itanium 9300 and Sparc systems will be judged. If Oracle, HP and other system vendors cannot or will not step up their games, the market for Unix servers will likely be a very different place in three to five years than it is today.

I read “Windows Phone 7 Series is a lost cause” with great interest. In it, my Betanews colleague Joe Wilcox lays out the reasoning behind his apocalyptic conclusion that Microsoft has used up its ninth life in trying to extend its desktop OS dominance into the mobile OS space.
He makes a number of rational, indeed valid, points about why Microsoft won’t be a top-tier mobile OS vendor now, anytime soon, or ever. Microsoft’s Windows Mobile franchise has been in freefall for years, thanks largely to a legacy OS that was completely out of tune with today’s market, and a product development roadmap marked by countless delays and occasional lipstick-on-a-pig refreshes of the increasingly creaky product. So since it’s hard to argue with the facts, with the numbers, and with history, it’s also hard to take exception to his thesis.

But I’ll disagree with him anyway. Because for all the headlines that Apple and Google have generated with their respective iPhone and Android universes, Microsoft remains the company whose software we touch when we get off the road, get into our homes and offices, and get down to work. And as much as some of us like to malign Microsoft for clinging to yesterday’s business model long after the rest of the world has moved on, Apple and Google have hardly been poster children in playing nice with our data or playing nice with developers. Microsoft may be down, but it’s more than a little unfair to say that it’s completely out.
Mobile: The platform Microsoft can’t refuse
First, the why: Microsoft cannot afford to abandon the mobile market any more than General Motors can afford to walk away from next-generation propulsion technologies. Like GM, Microsoft is faced with making huge investments to catch up in areas where others have leapfrogged it. When GM finally does bring such products to market, starting with the Volt next year, it’ll lose money on every one sold. The cars themselves will likely underwhelm, as they’ll be first-generation examples of radically new technology selling for significantly more than existing offerings from competitors. Toyota’s recent troubles notwithstanding, the strength of its Prius branding should hold.
But here’s the kicker: If GM continues on its same old path, it’ll be dead in five years. Not bankrupt-and-bailed-out-by-the-taxpayer dead. Dead-dead, because the world will have long since moved on from the traditional solutions on which its original business was based.
On reflection, this looks a lot like the Microsoft of today. Its legacy revenue streams — namely Windows and Office — won’t exist in any recognizable form in five years. Windows, in particular, will decline largely due to the shift from desktop to mobile. Despite the fact that big operating systems just don’t fit into our world view anymore (does anyone even care about what OS the iPhone runs?) Microsoft needs to find a new revenue source to replace it.
So Microsoft abandoning its mobile efforts would be akin to GM deciding it doesn’t want to be in the transportation business anymore. It’s unheard of, and it won’t happen for either company anytime soon.
Who needs hardware?
What will have to change, however, is Microsoft’s view that it has to own the OS in order to own the revenues that ultimately stream through it. I don’t buy that for a second. Google’s done just fine making money off of services that run on countless hardware and software platforms, all of which are owned and controlled by companies other than Google. While Google’s Android, Chrome, and Chrome OS initiatives are all designed to return some gatekeeper-like powers to Google by giving it greater control over the mobile OS, browser and desktop browser experience, the company will survive quite nicely in the unlikely event that all three initiatives simultaneously implode and fail to gain further market traction.
(That said, I’ve got issues with the decision to pursue both Android and Chrome OS, but we’ll discuss that another time.)
Apple’s model, of course, has always been hardware-based. And a good-enough OS with a good-enough developer community that allows it to sell zillions of high-margin devices is good enough for the company and its shareholders. In this respect, it’s somewhat unfair to compare it directly to Microsoft, which never bundled desktop or mobile versions of Windows into self-branded hardware.
However similar or dissimilar they may be, they still compete against each other when we head down to the wireless store and ogle the shiny new devices. And for all their success to-date, Apple and Google have both made critical errors along the way that leave room for others to carve out enough market share to, if not dominate, at least survive. Apple continues to tick off developers with an opaque app approval process that discourages long-term partnership and threatens to sink lesser-capitalized small developers. Google’s push to become a player in social media — latest salvo, Buzz — has opened it up to the kind of privacy firestorm that threatens to derail Facebook’s quest for global social media domination.

Is the OS the only avenue?
Into this breach steps Microsoft, which wisely — and finally — dumped its old Windows Mobile architecture in favor of a clean-sheet design…or at the very least, dumped it off the roof onto the top-floor balcony, where it may be called “Windows Mobile Classic” (a new euphemism for “dumped”).
As sweet as Windows Phone 7 Series seems to look and work, it won’t threaten the iPhone or Android. Not soon and not ever. But Microsoft’s mobile end game isn’t limited to the mobile OS itself. Its upcoming Office 2010 suite will be more Web- and mobile-friendly than any previous version of its venerable productivity offering. Its search partnership with Yahoo positions its Bing search engine favourably as a distant #2 to Google. Its Xbox Live and also-ran Zune marketplaces are finally being pulled in a consistent direction.
Even if Microsoft’s new mobile OS dies on the operating table, that won’t stop the company from throwing everything it has into ensuring it remains more than relevant as consumer attention shifts away from its traditional desktop strengths and toward the mobile Web. It’s almost too easy to write the company’s efforts off solely based on its well-regarded but late-to-the-party new mobile OS. There’s so much more to this story.

An Australian federal court has ordered game hardware distributor RSJ IT Solutions, parent company of GadgetGear, to immediately stop selling the R4 DS modification chip that allows pirated games to be played on the popular handheld console.
The R4 chip is a microSD reader that fits into the Nintendo DS’ Slot-1 port and bypasses all security functions, so the user can play music and movies, read text files, create homebrew software, and, of course, play copied games. It usually retails for around $45.
Nintendo has been trying for several years to control the distribution of the R4 cart, and in 2007 the company famously said, “We are keeping a close eye on the products and studying them. But we cannot smash all of them.”
But that has not stopped the game company from trying, and the R4’s availability may weaken as a result of this suit. Australian publication IT News said today that RSJ IT Solutions must file an affidavit by the end of the week which identifies all of the suppliers of the R4 chips, and pay Nintendo $520,000 in damages for selling a device that facilitates piracy.

It could possibly be at least as significant a technology upgrade as Windows 7 itself: the replacement of Microsoft’s current Web browser — and with it, its rendering engine for dynamic text — with entirely new code for Internet Explorer 9. With both Microsoft’s forthcoming Office Web Apps and now its Windows Phone 7 Series dependent on dynamic rendering (as ascertained from demos at MWC last Tuesday), as well as JavaScript performance, the judgment of the company’s mobile applications performance could depend entirely on the capability of its new Web browser.

After Microsoft’s latest refresh of its conference schedule for MIX 10 in Las Vegas in four weeks, a non-committal statement on its conference blog, under the heading, “Internet Explorer 9 at Mix 10″ reads, “After all, what would our premier web conference be without a browser update!?” Although the time and date for this “update” have yet to be set, the notice appears beside a picture of Dean Hachamovitch, Microsoft’s IE General Manager and one of MIX’ most popular speakers each year.
The wording of the notice — probably intentionally — left the definition of “update” open, so attendees may speculate as to whether this means an update of the software or a news update on the browser’s progress. Microsoft will say no more than this at this time.

However, at PDC 2009 last November, Hachamovitch and Windows Division President Steven Sinofsky both set a kind of roadmap for the browser — one which leads directly to MIX. Web developers attending the conference will need to see how the new browser functions, especially with respect to its all-new support for Direct2D rendering (a Windows-only feature that has potential to flatten its competition), as well as improved support and functionality with Silverlight (a cross-platform feature).

A demo from a Steven Sinofsky keynote to PDC 2009 in November showed vastly improved text rendering through Direc2D.

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What we saw three months ago were promises that early builds of IE9 were scoring 32% on the Acid3 standards compliance test (up from 20% for IE8), posting speeds in the SunSpider general computational performance test that were comparable to those of daily builds of the then-latest Mozilla Firefox 3.6 betas. An early build of IE9’s rendering engine, which Hachamovitch showed us personally, rendered a Virtual Earth map on a netbook computer with astounding ease and fluidity.

However, that was using Direc2D rendering, which as a Windows feature, isn’t exactly a Web standard. Internet Explorer has gotten into trouble in the past for promoting a Windows-centric, or at least Windows-leaning, axis around which Web pages could revolve, compelling developers to support the platform with the biggest installed base rather than the standard promoted by independent agencies such as W3C. Then when both standards and software performance evolve at speeds faster than Microsoft has been able to keep up with, developers reluctantly continue to seek compliance with rendering to the older model — in many cases still today, IE6 on Windows XP. Early criticism of Microsoft’s strategy with IE9 took the company to task for, as they described it, engineering a repeat of history.

This time, Hachamovitch and others at Microsoft have told us, will be different: Direc2D rendering is already something that software developers are being taught today, and that they could implement today if they so desired without paying anyone a license fee. So if Microsoft sets a new standard, there’s nothing holding back followers who are willing and able. But that requires Microsoft to set a standard, which makes it imperative that the company make a bold statement when MIX 10 convenes in four weeks’ time.

It has been just about one year since Amazon launched its Kindle app for the iPhone and iPod Touch; and today, thanks to popular demand, it has come to BlackBerry.
Like the iPhone app, Kindle for BlackBerry is free, and doesn’t require a dedicated Kindle e-reader to use. Within the app, users can browse the Kindle Store and download e-books directly, and if you have already purchased Kindle e-books, you have access to your entire library, synced to the last place you left off in each book.

Unlike the iPhone app, Kindle for BlackBerry users cannot yet create annotations or highlights. Amazon said this feature will be added in future versions of the software, along with the ability to scroll text line-by-line, and search for text within books. Furthermore, the app does not have access to Kindle newspapers, magazines, or blogs, and service is limited to US customers.

BlackBerry users can download the Kindle app within their mobile browser at amazon.com/kindlebb.

AT&T announced today that it will start selling Android devices, and the first one will be the unique Motorola Backflip, beginning on March 7.
While T-Mobile began selling Android devices as soon as the first became available in late 2008, the other major carriers have been slower to catch on. Sprint announced its first, the HTC Hero, in September 2009; and Verizon’s first, the Motorola Droid, came just one month later.

According to a number of unsourced reports, AT&T could have actually had an HTC-made Android device in Q3 2009, but it had difficulty “passing AT&T validation.”

The Motorola Backflip will be available for $99 after mail-in rebate and two-year service contract which requires both a voice plan and a $30 per month data plan.

Additionally, a new page on AT&T’s Web site dedicated to Android says the first smartphone from Dell will be coming to the network soon. This confirms reports from last October, which said the carrier would have a Dell smartphone “as early as 2010.”

The PC maker launched its first device in China earlier this year, and told us that it didn’t have plans to launch that particular model in the United States. However, the company has recently been showing off a 1 GHz Snapdragon-powered Android tablet called the Mini 5 which it says will definitely be coming to the US this year.

It’s no surprise that Microsoft has begun distribution of the first beta of Outlook Social Connector, the Office plug-in that adds a list of each contact’s social network activity to Outlook. It’s also no surprise that business contacts network LinkedIn is Microsoft’s first partner — that fact has been known for some time. What is interesting is that today’s beta release also contains a version that supports Outlook 2007, adding to it one key feature that could very well have been a reason to upgrade to Outlook 2010: the People Pane.
Only the 32-bit beta is available at present, so users of 64-bit Office 2007 will have to wait, although the beta will work in 64-bit Windows. Once installed, the new People Pane appears in both the Mail and Contacts panels, and in e-mail messages. Surprisingly, it also new Outlook functionality that doesn’t even require social network connections. The People Pane is built into the latest Outlook 2010 Release Candidate, so you don’t need to download the separate beta package; if you have the RC, you already have Social Connector. You don’t actually need any social network connections at all to make the People Pane work. However, to expand its functionality to see social activity, you need a “connector” package; and the first such package available comes from LinkedIn, and is available for download here.

In our tests today, we noted that the Social Connector beta (which should, by all rights, be called the People Pane) collected its photos of contacts not from LinkedIn (which does use photos) but from Outlook’s existing database. So even though you may make contact with several people in LinkedIn who are not necessarily enrolled in your list of Outlook contacts, at least for now, there’s no automatic device in Outlook for importing a LinkedIn contact as an Outlook contact. This was the case for us, even though the Profile Pane clearly reads, “Connect to social networks to show profile photos and activity updates of your colleagues in Outlook.” Of course, you could have your LinkedIn friend send you a vCard.

On the other hand, this critical separation between the social network and the e-mail client does cast light on a fundamental, and in many regards, beneficial difference between this system and Google Buzz in Gmail. When you select an e-mail from a known contact or the entry for that contact in Outlook’s database, the People Pane recalls that person’s LinkedIn activity (as well as from other connected networks), and Outlook merely reports it — the connection is one-way only. Your LinkedIn contacts do not see your e-mail contacts in Outlook, and you don’t use LinkedIn any differently than you did before.

More social connectors are expected to be made available soon, but not from Microsoft directly. A company spokesperson tells Betanews that, although LinkedIn did develop its connector in partnership with Microsoft, in typical situations, it will be up to outside developers to create new connectors that merge social networks’ APIs with that of Outlook. So while Twitter and Facebook connectors are quite likely, perhaps even before Outlook 2010’s general release this June, the theoretical ability for Outlook to connect with Google Buzz will have to be tested either by Google itself (the company acts as though this is a possibility) or by independent developers.

Social Connector will be a standard feature of Outlook 2010 when it’s released as part of Office 2010 by Microsoft in June.

To spur development on the OMAP 4 family of ARM Cortex A9-based systems on a chip, Texas Instruments this week unveiled its Blaze development platform which incorporates nearly everything an OMAP developer/tester could possibly need to into a single tablet-sized device.
Blaze is equipped with two 3.7″ capacitive WVGA touchscreens, three multi-megapixel cameras, a pico projector, HDMI out, accelerometer, compass, sensors for light, temperature, barometric pressure, and proximity, Wi-Fi, GPS, Bluetooth, FM transciever, and broad support for digital microphones and stereo speakers.

As far as cellular modem support, the Blaze MDP can be connected via an expansion bus breakout connection, and any PCIe-supported modem can be used to provide 3G connectivity.

The Blaze development platform will reach general availability in mid-2010, and widespread production of the OMAP 4 platform will come in the second half of 2010.

Unfortunately, TI won’t be releasing a full sheet of specs until the device comes out later this year.

Could Windows Phone 7 Series save Microsoft’s mobile platform? Yes. In 2007. In 2010, it’s a non-starter. That’s not easy for me to write, because with Windows Phone 7 Series Microsoft is following much of the advice I offered via blog posts over the last few years.

That advice would have meant something when given, not months and years later when the competitive landscape has radically changed. Then there is the crucial analysis given last week — that Microsoft failed to deliver on: Immediate release of new phone software and/or Microsoft phone. Holiday delivery on new Windows Phone 7 Series handsets is simply too late.

The geeks may be gaga this week about Windows Phone 7 Series, but that won’t much last beyond next month’s MIX10 conference. Apple’s shipment of iPad and presumably March iPhone 4.0 OS announcement will change geek chatter away from Microsoft mobile. (For the last two years, Apple announced new iPhone OS versions in early spring.)

Microsoft’s problem is more about timing than strategy — or technology (Hey, I like the user interface and presumed user experience, too). If Microsoft were running a marathon, its new runner would be entering the race to replace the one falling behind the leading group. But the new runner would be starting when the others already were well ahead to their 26-mile goal. No matter how good the runner, the leaders would be too far ahead to easily catch.

Sure, the market for converged handsets (e.g., smartphones) is seemingly small– about 15.4 percent of 2009 global handset shipments, according to IDC — but it grew 39 percent last year. Microsoft is reviving its mobile strategy just as competition increases among established players like Nokia and Research in Motion and newcomers Apple and Google — all while losing market share and mindshare.

Because I’m still struggling with the flu, I’m going to blast from the past, using my previous predictions for context about now and the 12 months or so ahead (I purposely have chosen posts before 2009, for predictive emphasis). In short, Windows Phone 7 Series is a lost cause because:

There is no Windows monopoly leverage to jumpstart the platform
Windows Mobile has lost too much sales and developer momentum
Android adoption — by manufacturers and mobile users — is too great
Microsoft doesn’t have an end-to-end software plus hardware plus services platform

Now for some long-form explanation:

Windows Phone has no Windows Leverage

Just the opposite, mobile devices leverage against Windows. I’ve been predicting — for years — that during this decade the connected mobile device would replace the PC as primary computing platform. I wrote in February 2008 post, “Microsoft’s Mobile Madness”:

The future of mobiles is PC replacement. It’s an inevitable outcome and one Microsoft simply isn’t accepting. Microsoft’s denial is madness, too.

The cellular phone market is:

Enormously bigger than that for PCs. For every PC in use there are three cell phones, based on analyst estimates of 3 million mobiles in 2007.
Captive, as most people carry mobiles most of the time; but not PCs.
Personal, because people care more about their cell phones than PCs. Who asks to be buried with their computers, but it’s a common request for mobiles.
More global, as more people are likely to have cell phones than PCs, particularly in emerging markets.
More connected than PCs, as cellular services reach many places than does the wired or WiFi Internet.

To update the first bullet point, combined analyst estimates put the total number of cell phone subscribers at 4.6 billion worldwide. PC install base: About 1 billion. IDC predicts the number of cellular subscribers will increase by 1.3 billion by 2013.

In July 2008 post, “iPhone 3G: Windows 95, Only Better,” I wrote: “The mobile remains the future of computing and connectivity. How long before dictation replaces typing? If you don’t need a keyboard, why would you need a PC when the cell phone offers anywhere computing, any time?” Dictation already replaces the keyboard on Google’s Nexus One.

Matters are worse, Apple and imitator Google have better platforms already because of mobile application stores. In 2005, I warned Microsoft executives they should use product activation to build a third-party application store into Windows. Developers could sell and distribute applications from within Windows, ensuring a revenue stream for them, while better protecting their software from piracy. A Windows app store would have been great leverage to mobile devices.

About three years later, Apple did with App Store on mobile devices what Microsoft failed to on the desktop. As I explained in October 2008 post, “Windows Mobile Is an Also-ran,” in Apple’s application store, developers have:

a software distribution mechanism built into every device and means for getting paid for the applications
access to millions of captive devices because people carry cell phones everywhere
digital rights management protection that hugely diminishes piracy of distributed applications

Apple claims about 135,000 mobile applications in the iTunes App Store and more than 3 billion downloads. By the time the first Windows Phone 7 Series handsets ship, Apple will offer apps for three mobile devices — iPad, iPhone and iPod touch. Meanwhile OEMs are pushing Google’s Android on ebook readers, netbooks and smartphones. The two rising stars already have leverage, with developers and mobile users, because of applications stores. Sure, Microsoft has an app store, as some Betanews commenters will surely observe. I say them: Have you looked at it lately and seriously compared what Microsoft offers compared to the Android Marketplace or App Store? Yes, games will come for the holidays, but Apple will only have widened its portable gaming lead to three devices.

Windows Mobile has Fallen Too Far Behind

The chart below, which Silicon Alley Insider put together from ComScore data, is nearly all that’s needed to demonstrate Microsoft’s mobile fall from reign. The data is for US subscriber share (from a poll of 30,000 consumers). Some other perspective: Based on global smartphone sales to end users, Microsoft’s mobile market share declined to 7.9 percent during third quarter from 11.1 percent a year earlier, according to Gartner (Q4 data isn’t yet available).

Smartphone is the category where Windows Phone 7 Series will compete with upstarts Apple and Google and leaders Nokia and RIM. IDC has released full-year smartphone shipments, but not for operating systems. For Apple, they’re synonymous — 21.5 million. Based on the first three quarters of data, it’s likely that more iPhone OS handsets shipped than Windows Mobile devices in 2009 — and that’s without accounting for iPhone touch.

Android Adoption is Simply Too Great

In June 2007 post, “Why Google Succeeds, Part 2,” I warned: “If Google and its partners can bring to mobile devices what they have to the desktop, I predict it will be game over for Microsoft. Windows’ relevance will diminish before the Web platform.” Google delivered with the G1, as I explained in September 2008 post, “How Android hurts Microsoft.” I referred to the G1 as Google’s “alternative platform to the Windows PC.”

A month later, in the Windows also-ran post, I wrote:

Once Android reaches the world markets, it will be too late. Microsoft has no Windows desktop leverage to drive mobile development or sales. The question now: When will HTC make Android a priority over Windows Mobile? That will be the day when all doors close Microsoft’s mobile operating system into a tomb.

Android has global reach (and competes with Windows Mobile/Phone for same licensees), nearly all of the coolest HTC handsets run Android and Google claims surprisingly brisk sales. Yesterday, at Mobile World Congress, Google CEO Eric Schmidt said that 60,000 Android phones ship every day. That works out to nearly 22 millions for the year, but the figure could be hugely conservative. According to IDC, 1.35 million Android phones shipped in third quarter (Q4 data isn’t available), or 14,674 a day. That puts daily shipments up nearly 4 times in less than two quarters. If the growth curve continues, and Schmidt’s figure is accurate, Android shipments would easily exceed iPhone as early as this year (but not when combined with iPad and iPod touch).

“Android is reaching the mainstream,” IDC analyst Kevin Restivo expressed during our Skype chat earlier today. “Awareness efforts are paying off in the form of increased distribution, which is widening quarterly. More importantly, additional models are being offered by Android manufacturer partners — hence increased sell-in.”

The day of Android as “alternative platform to the Windows PC” has come. Yesterday, Schmidt said that Google’s priority would now be mobile applications “first” before desktop apps: “Our programmers are working on things mobile first.” While Microsoft has little Windows monopoly leverage for Windows Phone 7 Series, Google has huge leverage from search and supporting Web services.

There’s No Microsoft Phone

For years, Microsoft has rallied behind the banner of software plus services. But in January 2008, I boohooed Microsoft for failing to add hardware to the equation. In post, “The Minus in Software Plus Services,” I explained that Microsoft needed to add hardware to the software-plus-services equation. At the time, there was no Google phone. I wrote:

Microsoft enters 2008 in position to leapfrog Google by early 2009 or 2010, depending on how both companies execute. The company that best delivers software plus hardware plus services will best the other. Yes, that’s a prediction.

Google has done much better than Microsoft delivering software plus hardware plus services — to the point of having a phone (the aforementioned Nexus One). But Apple has done even better, as I acknowledged in post “iPhone 3G: Software + Hardware + Services.” Apple’s approach is one stack it controls. Google has it both ways — three, really, considering open source — by making Android available to hardware manufacturers and shipping its own handset. Microsoft is a licensor only. There is no Microsoft phone.

Apple is making huge margins from selling iPhone as a single software-plus-hardware-plus-services device. The iPhone accounted for about 36 percent of Apple’s fourth calendar quarter $15.6 billion revenue. Microsoft will compete against Apple, which makes mountains of money off iPhone, and Android, which is free. Microsoft will charge for licenses (of course) and make little for its efforts. According to Silicon Alley Insider estimates on Windows Phone 7 Series OS revenue during Microsoft fiscal 2011: “A reasonable average is somewhere in the $300 million range, which is less than 0.5 percent of the $66 billion in revenue that Wall Street expects Microsoft to generate in fiscal 2011.”

My November 2008 post, “I Believe in a Microsoft Phone,” expressed hope Microsoft would do a handset — keeping with a software-plus-hardware-plus-services approach. “The time has come,” I wrote. “It’s inevitable: Either Microsoft has a secret phone project or its mobile strategy is collapsed.” I warned that even for 2009 “Microsoft’s biggest problem is time to market,” because of Apple’s App Store/iPhone/iPod touch platform.

Time-to-market situation is way worse looking at holiday 2010. Microsoft needed to announce a phone this week, shipping within a few months. Perhaps Microsoft executives think they can show off a reasonable software-plus-hardware-plus-services strategy next month at MIX. Maybe they can without Microsoft doing its own phone. But time to market is too long — and Microsoft competes with Apple big money making software plus hardware and services (Nokia and RIM, too) and Google free. Microsoft has started the marathon late. Apple, Google, Nokia and perhaps even RIM will set the agenda for your mobile future. Microsoft’s mobile platform is a lost cause.

Well, it’s final: New releases from Warner Home Video will not be cheaply rentable until four weeks after the DVD is released in stores.

In January, Netflix acquiesced to the studio’s demands and imposed a 28-day rental blackout for new release Warner films; and yesterday, the results of the Warner/Redbox lawsuit were released, showing that Redbox will be doing the same.

Hollywood studios are of the opinion that low-cost rentals such as those from Netflix and Redbox actually devalue new releases, and that a four-week window will encourage full-price sales of the films. Redbox disagreed with the notion that its service undercuts full-price DVD releases, and sued Universal, 20th Century Fox, and Warner for the right to get DVD new releases at the same time as traditional rental outlets like Blockbuster.

The suit with Warner in Delaware District Court has ended with Warner’s 28-day blackout still in place, where Redbox does not get new DVD or Blu-ray titles immediately, but is guaranteed wholesale prices on the discs it buys when they become available.

Though the outcome of the suit is effectively a draw, the result was actually a pretty sound defeat of Redbox’s accusations in court.

“Redbox never addresses the critical fact that it has signed a number of direct deals with studios that effectively lock up over 50% of the supply of ‘new release’ DVD titles it seeks to carry; it never addresses the statements sprinkled throughout its own public filings and pleadings attesting to the explosive growth its DVD kiosk business has experienced throughout the same period of time that Warner, Fox, and Universal kiosk distribution policies have been in effect; it never asserts that a single one of its kiosk customers has actually been unable to obtain a Warner title or had to pay more for a Warner title since the implementation of Warner’s policy; and finally, it ignores the numerous inconvenient public admissions made by its parent company that its DVD kiosk business competes with a wide variety of distribution channels, technology, and content in the ‘highly competitive’ home video industry,” according to testimony from Warner Home Video officials last week.

In the end, Redbox has come out with a single benefit in that it can once again stock its kiosks with Warner titles at cheaper wholesale purchase rates and not bulk retail rates.

Unfortunately, nothing has changed for the consumer. Titles still cost $1 at the kiosk, and their availability is still delayed.

Mitch Lowe, President of Redbox said, “By agreeing to a delayed release date, Redbox can now acquire Warner Home Video titles at a reduced product cost, preserving value for our consumers and increasing customer access to Warner titles at Redbox locations nationwide.”

So who really benefits? Redbox and its investors.

“The agreement is accretive to EBITDA, and removes the risk of buying and selling DVDs on the open market,” Ari Black of Thomas Weisel Partners today wrote today. “We believe there is now a lot more certainty that Redbox will be able to maintain margins going forward.”