Narrative: Hardware is Hard
Each narrative page (like this) has a page describing and evaluating the narrative, followed by all the posts on the site tagged with that narrative. Scroll down beyond the introduction to see the posts.
Huawei Sold More Phones but at Less Profit — The Information (Feb 10, 2017)
Huawei was the number three smartphone maker I said was one of several missing from that recent analysis of who captured the profits in the global market, and it does actually make a decent profit (relatively speaking) on its hardware. According to the Information, the relevant business unit made $2 billion in profit in 2016, or a margin of 7.7%, which may not sound like a lot but given that almost all consumer electronics businesses generate low single digit or negative margins, it’s not bad. It was down from 11% in 2015, but Huawei invested enormously in marketing in 2016 and saw 30% smartphone growth as a result. It can probably ramp down that spending in 2017 while still seeing decent growth, which should help it get closer to its $4 billion profit goal for the year. Huawei continues to be a very interesting company to watch in the smartphone market, and is one of only a handful of companies which have managed to drive a decent profit from making Android smartphones.
via The Information
Apple Took 92% Of Smartphone Industry Profits In Q4 (not really) – IBD (Feb 7, 2017)
Every quarter, there’s a slew of headlines on this basis, usually based on analysis from Cannacord Genuity. The big flaw in this analysis (and the reason I inserted a “not really” into the headline) is that it only looks at those players that publicly report profits from a smartphone unit, plus Apple. As the article points out, the “survey” of six “major” smartphone vendors includes the #1 and #2 but also BlackBerry and Microsoft, which each shipped well under a million smartphones last quarter. It entirely leaves out the third, fourth, and fifth largest smartphone vendors (Huawei, Oppo, and Vivo) and other big names from the top 10 like Lenovo and Xiaomi. Lenovo is publicly traded, but hasn’t reported yet (and is likely to have been unprofitable in smartphones again), but no-one really knows how profitable the others are. So the headline is misleading when it talks about “industry profits” – it’s a very narrow analysis of six vendors, only two of which are in the top 10. Now, that’s not to say that it isn’t likely that Apple captured the vast majority of profits in the smartphone market yet again – it almost certainly did, and this situation highlights both the general challenges with driving meaningful profits from consumer electronics and the specific challenges associated with competing on the basis of Android in smartphones. But this – as with the flawed quarterly market share rankings with their false precision – grates every quarter because it’s shoddy analysis.
via IBD
Motorola Shares Results from Moto Mod Developer Events (Feb 6, 2017)
While LG is stepping away from its modular approach, Lenovo/Motorola seems to be doubling down on its Moto Mods strategy, holding developer events to invite third parties to come up with clever ideas for add-ons to its Moto Z range. Either Motorola is seeing more traction around the concept than LG did, or it’s simply out of other ideas for how to differentiate its phones in the market. I’ve seen little evidence that the Mods (or Moto Z) are selling particularly well, so I’m skeptical that it’s the former. But it’s interesting to see Motorola take the crowdsourcing approach here, both with these developer events and its Indiegogo campaign, which runs through March.
via Motorola
GoPro Announces Fourth Quarter and Full Year 2016 Results (Feb 2, 2017)
GoPro actually released some slightly better results for Q4, following a really tough first three quarters of the year, with the first year on year growth since Q3 2015. But revenue was still down on Q4 2014, which remains its best ever quarter, it lost money for the fifth straight quarter, and ASPs are still below previous levels. This is a slight recovery, and it obviously wasn’t helped by the problems with the Karma, but there’s not much evidence yet that GoPro can get back on the trajectory it was on before things started to go wrong after the aborted Session launch. Having cut its headcount by almost 300, it’s lowered its costs a little, but will need to get serious revenue growth going again if it’s to get back to serious profitability.
via GoPro
Sony Reports Results for December 2016 Quarter (Feb 2, 2017)
Sony’s been such an interesting company to watch over recent years, because almost every aspect of its hardware business has been challenged, and it’s even exited some, like PCs. However, it’s had something of a renaissance in the gaming space, with the Playstation outperforming the Xbox in the current cycle, and actually growing year on year in the December quarter. The other interesting hardware business to watch at Sony its smartphones, because it’s taken a unique approach for an Android vendor, which appears to be paying off. That approach has involved focusing the smartphone business on the premium segment, resulting in a smaller but more profitable business. Sony’s smartphone shipments have dropped by about half from 2015 to 2016, but its margin rose to over 8% in Q4, well above the low single digit or negative margins most consumer electronics businesses generate. There’s an interesting signal here for other Android vendors about what it could take to find success, though there probably isn’t room for more than one or two vendors pursuing this premium strategy.
via Sony (PDF)
The Sky Is Falling For GoPro – Forbes (Feb 2, 2017)
The headline here is a pun a bit overblown, but only a bit. GoPro’s Karma drone literally fell out of the skies when it was first launched, and had to be recalled, finally going on sale again this week. This piece digs into the challenges GoPro faced in moving into a totally new hardware category, provides some broader context about how hard the drone market has been for others (see also Parrot), and GoPro’s broader challenges. GoPro was one of three companies I highlighted in a piece just over a year ago about the danger of being a one-trick pony in tech, along with Fitbit and Dropbox. Fitbit and GoPro have indeed been through the ringer since then, to differing degrees, with Fitbit having a really tough Q4, and GoPro struggling ever since its disastrous Session launch. Hardware is hard, and it’s even tougher when you’re in a category with a fairly low ceiling and that’s all you do. GoPro and Fitbit have both discovered that the hard way since I wrote that piece (though Dropbox is actually doing OK, partly by diversifying more effectively than either Fitbit or GoPro have).
via Forbes
Phone startup Nextbit has stopped production and is selling its assets – Recode (Jan 30, 2017)
Chalk another one up to either the Hardware is Hard or Android is Hard narratives (I’ve tagged this against both). Another Kickstarter-backed hardware company which had an intriguing approach to an established category and got lots of interest from tech bloggers and reporters calls it quits and gets bought by a bigger existing hardware player. I was always skeptical on Nextbit – it just didn’t feel like its few unique features and design were enough to overcome the massive barriers to entry that exist around scale, distribution, and dominant existing players in the Android market. I can’t say I’m surprised to see it fail, though it’s disappointing because the team had some interesting ideas and the design was definitely more interesting than your average phone. Razer seems an unlikely buyer – this Recode piece says the group the Robin team is going to has been focused on gaming, so it doesn’t sound like we’re going to get a Razer phone from these guys anytime soon.
via Recode
Snapchat NYC Spectacles store is mostly empty – CNBC (Jan 26, 2017)
Snap’s foray into hardware coincided with its new company name, and the marketing strategy for the Spectacles was genius – very short supply combined with a sales model that made availability even narrow by focusing it on single vending machines that moved around, combined with a single permanent store in New York City. However, it’s becoming apparent now (if it wasn’t obvious from the start) that Spectacles aren’t going to be massive sellers. Yes, hundreds of people lined up early on to buy them, but the crowds have now disappeared. I’m somewhat surprised Snap hasn’t put Spectacles up for sale anywhere else yet – it’s still basically impossible to buy a brand new pair at list price unless you live in or visit NYC or happen to be in one of the other places where the moving machines have turned up. That suggests, though, that this move into hardware was more experimental than strategic, and raises the question of whether we’ll see more of this from Snap in future. There’s certainly potential for some interesting new functionality around AR in future versions, but there are few indications at this point that Snap has any big plans.
via CNBC
This is the Samsung Galaxy S8, launching March 29 – VentureBeat (Jan 26, 2017)
Evan Blass, who used to publish leaks anonymously under the pseudonym Evleaks and has a great track record of accurate reporting, claims these are pictures of the forthcoming Samsung Galaxy S8. The main changes are a full screen front, with the fingerprint sensor moved to the back, while charging switches from micro USB to USB-C, and Samsung retains the headphone jack. The smaller bezel approach has been widely rumored for the next iPhone this fall, and I think what we’re seeing here to some extent is the same rush into smartwatches in the year or two before the Apple Watch emerged, driven by rumors of where Apple was going. In the smartwatch category, we saw a variety of failed attempts to create something compelling only for the Apple Watch to dominate the market when it launched, and you always have to wonder with this pre-emptive following whether competitors will really be able to crack the concept in a way that’s as compelling as whatever Apple releases. Xiaomi already has an essentially bezel-less phone, LG is reported to be moving in that direction, and now Samsung supposedly is too. It’ll be very interesting to see how this space looks at the end of the year once all these phones (including a new iPhone) are on the market.
via VentureBeat
Why The LG G6 Won’t Have Snapdragon 835 – Forbes (Jan 24, 2017)
This is sourced reporting from a Forbes contributor who (as far as I am aware) doesn’t have a long track record in scooping news like this, so take it with a pinch of salt. But on the face of it, this makes sense – Qualcomm’s 835 chip is brand new, and Samsung would logically need bucketloads of them for its next Galaxy S phones, potentially gobbling up all the supply available and squeezing other OEMs out in the short term. Apple is famous for securing long-term access to the components it needs and squeezing others out in this way, and given the timing and Samsung’s scale in smartphones, it makes sense that it would be able to secure all the available supply of 835 chips on a short-term basis too. That’s going to be tough for other OEMs launching handsets in the first half of 2016 – even though the article downplays the jump from the 821 to the 835, there are some significant additions in the new chip which will create better performance in areas like battery life, VR/AR, and so on.
via Forbes