Motorola's and Verizon Wireless' $100 million marketing campaign for the Motorola Droid seems to be paying off with strong sales that will likely result in more than 1 million devices being sold by the end of the year.
The Droid, the only smartphone currently on the market that uses Google Android's 2.0 operating system, is Motorola's second Android device and it's available only on Verizon Wireless's network. The device is turning out to be the hit phone of the season, thanks in large part to an expensive and extensive advertising campaign.
Motorola Droid
(Credit: Motorola)Neither company is reporting sales figures. But analysts say sales look good. The companies have likely sold between 700,000 and 800,000 Droids since the device was launched in early November, according to equity analyst Mark Sue of RBC Capital Markets.
"Verizon's big marketing push for the Droid is strengthening as we close in on the holidays, and following our round of checks, we believe about 700,000 to 800,000 Droids have been sold, making our hurdle of 1 [million] Motorola Droids achievable for 4Q09 [ending December 31]," Sue said in his research note. "Motorola, for its part, has done a good job on the production side, and our survey of over 100 stores indicates strong demand, limited stock outs, and very few returns."
John Stratton, executive vice president and chief marketing officer for Verizon Wireless, said when the device was launched in late October that Verizon would be pouring in more money to market this device than any other phone it has ever sold. And now it looks like the money has been well spent. From advertisements that specifically highlight the Droid to ones that focus on Verizon's extensive and reliable 3G wireless network, it's clear that the company has AT&T and the Apple iPhone in its crosshairs.
AT&T has actually sued Verizon over the advertisements about its 3G wireless network coverage.
Some Verizon Wireless stores, especially in major cities, are selling between 100 and 200 Droids per week since the launch in early November, Sue added.
The success of the Droid is good news both for Motorola and for Verizon Wireless.
Motorola comeback
For Motorola, the Droid represents a chance to make a comeback in the cell phone market. The iconic American company that practically invented the cell phone market has struggled for the past several years now. After the runaway success of the ultra-thin Motorola Razr in 2004, the company has been unable to come up with a hit phone. And it has steadily lost market share to other competitors, such as Nokia, Samsung, and LG Electronics. It's also ceded market share in the fastest growing segment of the market, smartphones, to newcomers like Apple and Research In Motion.
Motorola's mobile devices CEO Sanjay Jha took a bold gamble more than a year ago when he decided to dedicate the company's resources to building phones using the Google Android operating system. The Droid and the Motorola Cliq, which is exclusively sold on T-Mobile USA's network, are the first two Motorola Android phones to hit the market.
But Jha said the Google Android operating system will not only be used in high-end devices like the Droid, but it will also be used to power less expensive phones, creating a new tier of smartphones that will eventually replace the basic feature phone category. Jha said the company will launch at least 20 more Android devices in 2010.
The success of the Droid is an important first step in getting Motorola back on track. But equity analyst Ittai Kidron of Oppenheimer said in a research note Monday that sales of the Motorola Cliq are falling short of expectations. Motorola is expected to sell 1.5 million smartphones in the fourth quarter. And two-thirds of them are expected to be Droids.
Kidron said the Cliq is not selling well mostly because of issues with battery life. Motorola is supposedly preparing a software patch to fix the problem. But he also noted that T-Mobile appears to be losing interest in the device and is not marketing it heavily.
But T-Mobile says that the Cliq is doing just fine. And the carrier said that it's committed to marketing the phone through the holiday season.
"The Motorola Cliq is very popular among our highly connected customers and is the only device with Motorola's innovative Motoblur solution," a company spokesman said. "T-Mobile is excited about the Motorola Cliq for the holidays and continues to showcase it prominently in T-Mobile retail stores and with recent holiday deals."
Verizon's iPhone alternative
The Droid's success is also important to Verizon Wireless, the nation's largest wireless operator in the country. It is the first device that offers a true challenge to Apple's iPhone, which runs exclusively in the U.S. on AT&T's network. While Verizon has a strong reputation for its network, consumers often complain about its lack of cool phones. Up to this point, Verizon has mainly competed against AT&T and the iPhone with RIM's BlackBerry devices. But RIM's touch-screen BlackBerry Storm, which was first introduced a year ago, was largely a disappointment.
The Droid offers Verizon customers an alternative to the iPhone on the Verizon network. This fact could help Verizon retain some consumers who were thinking of leaving for the iPhone. But it might also attract new customers who are either disappointed with AT&T's service or have heard bad things about the network.
Verizon Wireless representatives say the Droid is certainly an important part of the company's device line-up.
"We are pleased with sales over the holiday weekend," Brenda Raney, a spokeswoman for the carrier said in an e-mail. "This phone clearly fits the needs of a number of customers who are excited about its availability on the Verizon Wireless network."
But if analyst data is to be trusted, it is clear that the huge marketing budget for the Droid is at least part of the reason why the device has been so successful. The HTC Droid Eris, another Android device sold exclusively on Verizon's network, is not selling as well as the Droid, Sue said in his note. The HTC Droid Eris went on sale the same day the Droid was launched, but with much less fanfare.
Part of the problem is the fact that there are many Android devices coming to market. And the number will only increase next year. The lesson from the success of the Motorola Droid is clear. If device makers and carriers hope for break-out success, then they will have to spend big on marketing.
Nokia announced Tuesday that it will lay off about 220 employees from its R&D division in Japan, a bit more than 1 percent of the company's worldwide R&D workforce.
The layoffs are part of the company's efforts to align its global research & development operations with new products. Nokia Siemens Networks, the network equipment maker owned by Nokia and Siemens, will not be affected by the reorganization, said Nokia.
Just last week, Nokia said that it will slash 330 positions in total from its R&D units in Finland and Copenhagen as part of the global revamp.
Though Nokia is still the world's leader in smartphone shipments, it has been undercut lately by competition from Apple and Research In Motion. Recent reports have pegged a decline in market share, while Nokia's third-quarter results showed a net loss and lower sales.
Dell and China Mobile on Monday offered up more details about the Dell Mini 3i smartphone, which will be going on sale in China later this month.
The Android-based device, Dell's first smartphone, will support e-mail, instant messaging, and both MMS and SMS messaging. It will include Bluetooth and GPS capabilities and a Mini USB connector, and will accommodate Micro SD cards up to 32GB.
The quadband GSM/EDGE phone weighs 105 grams and includes a 3-megapixel camera with zoom, auto-focus, flash, video capture, and photo-editing capabilities. The touchscreen has a 640x360 resolution. Dell had already confirmed earlier this month that the Mini 3i would have a 3.5-inch high-definition screen.
Under the hood, the device is running China Mobile's OPhone software, a customized version of Google's Android operating system.
Like other Android phones, the Mini 3i will provide access to an online store, in this case, China Mobile's Mobile Market, where people can download apps, games, wallpaper, and ringtones. Users will be able to run different widgets on the home screen to keep on top of the news, weather, stock prices, and sports scores.
Dell said it has been collaborating with China Mobile for about a year on the development of the phone. The two companies teamed up earlier in the year to integrate a 3G data card for Dell's Inspiron Mini 10 netbook for the Chinese market. With more than 500 million customers, China Mobile is the world's largest mobile service provider, according to Dell.
Dell was initially mum on details when it first mentioned the Mini 3i about 10 days ago. But the company did reveal that China Mobile and Brazil's Claro would be the first global providers to carry its new smartphone.
Like China Mobile, Brazil's Claro boasts a huge subscriber base, with 42 million customers in Brazil alone. By selling the Mini 3i through both providers, Dell can potentially capture a much larger mobile audience than it could through any U.S. carriers.
Arriving in China Mobile stores by the end of November, the Mini 3i will shortly thereafter be sold directly from Dell. For those interested in color schemes, the Mini 3i will be available in Red Passion and Oiled Bronze--the image below shows the Red Passion treatment:
Dell Mini 3i smartphone
(Credit: Dell/China Mobile)Nokia said Friday that a streamlining effort could result in the elimination of as many as 330 positions from its research and development staff, or about 2 percent of its global R&D workforce.
Microelectronics research at Nokia.
(Credit: NOkia)The changes will likely hit up to 230 workers in the company's Oulu site in Finland and roughly 100 at its Copenhagen site. Nokia said it plans to offer voluntary severance packages to the affected workers and to find alternative jobs for as many people as possible.
The company currently employs more than 17,000 workers in its R&D business. It has 2,000 employees at the Oulu facility and 1,000 in Copenhagen.
Though Nokia still holds the top spot in the smartphone arena, its dominance has been eroded by competition from the likes of Apple and Research In Motion. A recent In-Stat report found that Nokia's share of the smartphone market had dropped to 35 percent in this year's second quarter compared with 50 percent in the prior year's quarter.
Another report from Strategy Analytics revealed that Apple had surpassed Nokia in cell phone profits during the third quarter, the first time that Nokia had fallen to second place.
Nokia's third-quarter results showed a net loss of $832 million, while sales dropped around 20 percent. Nokia Siemens, the network equipment maker run by Nokia and Siemens, has also been a drag on its owners, recently announcing its own layoffs and cost cuts as a result of its weak performance.
Three views of the Dell Mini 3
(Credit: Dell)Dell said Friday that it's ready to enter the smartphone business with the Android-based Mini 3.
Long rumored to have a smartphone in the works, Dell said that the first two carriers to sell the Mini 3 will be China Mobile and Brazil's Claro.
In China, the Mini 3 will use OPhone, China Mobile's customized version of Google's Android operating system. "We are excited for Dell to be among the first manufacturers to introduce new technology based on the OPhone platform," an unnamed China Mobile representative said in Dell's press release.
Dell would not offer any specifics about the software on the Brazilian phone, saying simply that "the initial Mini 3 smartphones are designed around the Android platform."
The company also did not provide technical specifications or pricing information for the phone, saying those would be revealed when the devices arrive in stores--probably late November for China Mobile and by year's end for Claro. It also did not say when the phone would arrive in the U.S. or other markets.
Dell did confirm that the Mini 3 has a 3.5-inch high-definition touch screen, a detail that Michael Tatelman, a Dell sales and marketing executive, had earlier told the Associated Press. The Mini 3 sold in China won't have Wi-Fi at the start, but Tatelman said that would come later.
Similarly, Apple's iPhone late last month made its official debut in China sans Wi-Fi.
China Mobile has more than 500 million customers, and Claro serves more than 42 million people in Brazil as part of the America Movil network, Dell said.
Dell did tout its "existing agreements with other leading global telecom providers," including Vodafone in Europe; AT&T and Verizon in the U.S.; M1 and Starhub in Singapore; and Maxis in Malaysia.
The Texas-based PC maker also played up the Internet connectivity angle of small mobile gadgetry.
"Our entry into the smartphone category is a logical extension of Dell's consumer product evolution over the past two years," Ron Garriques, president of the Dell Global Consumer Group, said in a statement. "We are developing smaller and smarter mobile products that enable our customers to take their Internet experience out of the home and do the things they want to do whenever and wherever they want."
But does the world need a smartphone from Dell? The device will have plenty of company: Android phones have begun arriving on the market in larger numbers in recent months.
Most notably, U.S. carrier Verizon Wireless last week began selling the much-hyped Droid, made by Motorola, and the more modest Droid Eris, made by HTC.
Updated at 5:31 a.m. PDT with more details and background information, and again at 8:08 a.m. PDT with clarification on the use of China Mobile's OPhone and confirmation of the screen size..
In the race for mobile phone profits, Apple has overtaken Nokia, according to figures for the latest quarter.
Apple earned $1.6 billion in the third quarter from the iPhone, outpacing Nokia's $1.1 billion cell phone profit to grab the top spot among all mobile phone vendors, said research firm Strategy Analytics on Wednesday.
(Credit:
Strategy Analytics)
This is the first quarter that Strategy Analytics has seen Apple surge past Nokia in mobile phone profits, according to Alex Spektor, the author of the research, who spoke with CNET News.
The contest between Apple and Nokia for top phone profits has been tight in recent months. ... Read more
Henry Tirri
(Credit: Nokia)HELSINKI--It will take years and a technology "breakthrough on multiple fronts" before the battery lives of smartphones will reach "good" levels, according to the head of Nokia's research center, Henry Tirri.
By "good," Tirri meant phones that can last on a weekly power charge, which will support battery utilization closer to what basic phone models require today, he said at a media interview here Tuesday.
Lamenting the current state of smartphone battery life, he noted that most high-performance models with large screens do not last more than eight hours of constant usage on a single charge....
Read more of "Smartphone batteries need 'breakthrough'" at ZDNet Asia.
Beginning Nov. 15, Verizon subscribers looking to get out of their smart-phone contracts early will pay $350 for the privilege. That early-termination fee is double the current one, but Verizon insists it's justified because of the higher prices of today's phones.
"The cost of smart phones is considerably higher than feature phones for which the early termination fees were created years ago at $175," said Verizon spokesman Jim Gerace. He added that the new $350 ETF declines by $10 per month through the life of the contract and customers can avoid it by buying their devices off contract and paying full retail price.
(Credit:
All Things Digital)
An interesting move for Verizon, which just last year agreed to pay $21 million to settle a class-action lawsuit filed by California consumers over the very early-termination fees it is now increasing. The plaintiffs in the suit alleged that Verizon's ETFs were illegal under California law and that they were designed to unfairly lock consumers into long-term contracts and prevent them from switching carriers. When Verizon settled the suit, it denied any wrongdoing, insisting that early-termination fees are simply a means of recovering legitimate costs. And to some extent Verizon does have a point.
Full retail price for the Motorola's new Droid is $559.99. With a two-year contract, Verizon sells the handset for $199.99. Theoretically, that's a $359.99 subsidy (I have no idea at what price Verizon purchases Droid from Motorola). So if Verizon allowed subscribers to break their contract after a month without paying an early-termination fee, the company would stand to lose money. And subscribers who did so could subsequently sell the device online and potentially make a profit, though a small one.
So it's certainly understandable that Verizon and other carriers want to protect the subsidies they dole out for these new smart phones. And as noted earlier, Verizon's new ETF drops by $10 each month a subscriber remains under contract. But at this rate, subscribers are still bound to pay a $110 termination fee in the 23rd month of a two-year contract. The contract is nearly over, the subscriber obligation to Verizon almost fulfilled, yet the company can still slap its customers with nearly a third of the full ETF if they break it at that time.
By month 23 of a two-year contract, does Verizon really stand to lose $110 if subscribers decide to switch carriers? Doesn't seem likely if subscribers can walk away just a month later without consequence, taking their handsets with them.
Since Verizon is pro-rating the ETF, why isn't it doing so in such a way that it zeroes out by the end of the contract?
And isn't the fast pace of innovation in the smart-phone sector such that prices-for both component and device-are dropping so quickly that high ETFs aren't really justified? Remember, you can get Apple's iPhone for $99 today. When the iPhone debuted in 2007, it commanded a price of $499/$599, depending on model.
I've put those same questions to Verizon and will update here when I hear back. In the meantime, here's what Consumers Union policy analyst Joel Kelsey has to say on the matter: "When people want to switch wireless services, the biggest cost they face is early termination fees. These fees are designed to lock people into long-term contracts and stop them from getting better deals. Early-termination fees make the marketplace less competitive. Verizon's move is painful proof that it's time for lawmakers to crack down on these fees."
UPDATE: Verizon Wireless spokesperson Nancy Stark offers the following answers to the questions I posed above:
Your first question regarding the balance at month 23 or 24 assumes that, at that point, we have recovered all of our subsidy and up-front costs for every device. That simply is not so.On your second question, while the pace of innovation plays a role in prices coming down somewhat, it also plays a role in driving up costs as more and more complexity that customers want is added to phones-from premium HTML browsers to high-resolution MP cameras with optical zoom; videoplayers; music players; dual processor chipsets; WiFi; very high display resolution, operating systems such as BlackBerry, Windows Mobile, Palm, Android-ALL with the added value (vs a desktop) of mobility, and ALL in one tiny device that ALSO allows you to talk to anyone from anywhere. phew! (by comparison, I recently paid $200 for a camera and all it can do is take pictures, and it has only middle of the road capabilities.)
But getting back to ETFs specifically. The most important point is that Verizon Wireless customers do not have to have an ETF at all if they do not want to. ETFs allow customers to have it either way: They can have no ETF and pay full retail for their device. OR, they can get a greatly discounted device by having an ETF.
Story Copyright (c) 2009 AllThingsD. All rights reserved.
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Consumer demand for smartphones seems to be unstoppable.
In the third quarter, vendors shipped a record 43.3 million devices, up 4.2 percent from last year's third quarter and up 3.2 percent from this year's second quarter, says a report released Thursday by market researcher IDC.
(Credit:
IDC)
Among smartphone vendors, Nokia still enjoys the greatest market share, according to IDC, with a 37.9 percent slice for the third quarter. ... Read more
As Apple and Research In Motion have won a greater share in the Wi-Fi handset market over the past year, Nokia has lost share.
Though Nokia is still the leading vendor for dual-mode smartphones (Wi-Fi and cellular), its market share dropped to 35 percent in the second quarter, compared with 50 percent in the same period a year ago, according to a report released Monday from In-Stat.
The report "Wi-Fi in Mobile Phones: Dual Mode Becomes the In Thing" tracked the major Wi-Fi phone vendors, including Nokia, Apple, Research In Motion, HTC, and Samsung. Among those, Apple has enjoyed the greatest growth in market share, from 3 percent in the second quarter of 2008 to 20 percent in this year's second quarter.
Market share for both RIM and Samsung has also weakened the past few quarters, though less so than Nokia's. RIM's 15.7 percent chunk of the market for the second quarter of the year was down from its first-quarter high of 17.6 percent. Samsung's share has been relatively flat but usually dips a bit from the first to the second quarter, notes In-Stat.
In sheer unit volume, Nokia has done well the past few quarters, with 9.3 million Wi-Fi handsets shipped in the second quarter of the year compared with Apple's 5.2 million shipments. However, Nokia's shipments have dropped since the first quarter of 2008 when it saw 12 million units fly out the door. Over the same period, Apple, RIM, and HTC have seen their shipments grow.
As the No. 2 Wi-Fi handset vendor, Apple has also outsold third-place RIM in dual-mode phone shipments, says In-Stat. Though RIM still has a larger market presence, not all of its Blackberry devices include Wi-Fi. HTC and Samsung rounded out In-Stat's list as the fourth and fifth top Wi-Fi handset vendors, respectively.
(Credit:
In-Stat)
The report also detailed the growth of the Wi-Fi smartphone market overall. The industry shipped 37 million handsets in 2007, and 103 million units in 2008. That rise is because of several factors, notes In-Stat, including greater functionality, lower prices, and carrier promotions. Initially targeted to the business market, smartphones are also now an entrenched hit with consumers, which In-Stat attributes to the success of the iPhone.
Wi-Fi handset shipments are expected to rise just 25 percent to 128.4 million units for 2009. That compares with a nearly 180 percent jump in 2008.
But In-Stat sees gains ahead. By 2010, the growth rate is likely to climb to 43 percent. Though that rate may not be sustainable, it should remain strong in the coming years. Wi-Fi will also become more prevalent in mobile phones. This year, 11.5 percent of handsets include Wi-Fi; by 2012, that figure will grow to 25 percent, predicts In-Stat.
To compile the report, In-Stat relied on its own data as well as interviews with Wi-Fi equipment vendors.
