Updated 3:01 p.m. PDT with information from the conference call.
On the day that Research In Motion suffered another nationwide mobile e-mail outage, it announced it beat analyst expectations in the fiscal third quarter of 2009 with strong sales of its BlackBerry smartphones.
BlackBerry Bold
(Credit: Research In Motion)The company's earnings were up 59 percent compared to the same quarter a year ago. For the period that ended November 30, the company reported earnings of $628.4 million, or $1.10 per share, compared to $396.3 million, or 69 cents a share, for the fiscal third quarter last year.
Analysts had expected the company to report earnings of $1.04 per share on revenue around $3.78 billion.
The company said it shipped 10.1 million smartphones during the quarter. And it added about 4.4 million new subscribers. Analysts were expecting shipments of 9.5 million with 4.1 million new subscribers.
Some industry watchers have wondered if the new Motorola Droid that uses Google's Android operating system would hurt BlackBerry sales. The Droid is one of two Android devices being sold for Verizon Wireless, and it is the closest competitor offered on Verizon's network to the Apple iPhone, which is sold exclusively in the U.S. for AT&T's wireless network.
Strong sales on RIM's part indicate that the Droid and other Android devices introduced during RIM's fiscal third quarter did not present a major threat to the smartphone maker.
Still, Verizon is spending more money marketing the Droid than it has on any other phone that it has sold on its network. But RIM's co-CEO Jim Balsillie said that Verizon continues to be an important strategic partner. And he said that the market is growing so fast that there is enough business to go around.
"The proportion of smartphones to the total market is crossing 50 percent," he said. "And we see that going to 100 percent. It's just a question of when. The overall market is growing for smartphones and we have a very important place to play in that."
But he admitted that RIM can't afford to rest on its laurels. The company's devices are favorites among corporate customers.
"At the end of the day, you can't force love," he said. "You have to earn it every day. There is no free ride in this. But we have a good sense of what we are doing in this quarter and we feel we create value everyday."
RIM's strong earnings report comes on the same day the company experienced a nationwide e-mail outage for consumers using its BlackBerry devices. Earlier Thursday before the company reported results, RIM confirmed that some BlackBerry customers were unable to get Web-based e-mail. Users getting e-mail through corporate servers were not affected, though, and phone service and text messaging were also not affected by the outage.
The problem seemed to affect customers across all major carrier networks, including Verizon Wireless, T-Mobile USA, and Sprint Nextel. AT&T would not comment and referred questions to RIM, but several AT&T customers in California and in other parts of the country said they had problems as well.
RIM said it has resolved the e-mail service problems, though e-mail may be slow to come back to some customers. The company is still looking into what caused the outage.
"RIM has isolated and resolved the issue that was impacting some BlackBerry customers earlier this morning," a company spokeswoman said in an e-mail. "Some customers may still experience delays as e-mail queues are processed. RIM is continuing to investigate the cause of the issue and apologizes for any inconvenience."
Smartphones will capture 37 percent of the worldwide cell phone market by 2014, a leap from 16 percent in 2009, predicts a new report from Pyramid Research.
The report, released late last week, sees much of the growth coming from outside the U.S., notably in emerging markets. Across the globe, China is likely to outpace the U.S. as the largest smartphone market next year. Latin America will be the fastest-growing region over the next five years, with a compound annual growth rate (CAGR) of 48 percent for smartphone sales, forecasts Pyramid.
"Pyramid expects China to capture the No. 1 position in 2010, driven by operators' aggressive promotion of smartphones using wider portfolios, more attractive pricing for services, and new initiatives," Omar Salvador, senior analyst at Pyramid Research, said in a statement. "Brazil, India, Turkey, and Nigeria will be the fastest growing markets over the next five years with CAGRs of 43 percent, 39 percent, 37 percent, and 34 percent, respectively. Latin America will be the fastest growing region at a compound annual growth rate of 48 percent, followed by Africa and the Middle East with a 39 percent CAGR."
With Pyramid forecasting sales of 1.8 billion smartphones over the next five years, the market looks like a huge opportunity for handset makers and wireless carriers. However, the report notes that growth in mobile subscriptions has been slowing, putting pressure on the industry to enhance data services and applications, which are seen as two primary drivers for smartphone purchases. Pyramid believes that handset makers and carriers will need to work together more closely to capitalize on the huge sales potential of smartphones, especially in emerging markets.
But a unified smartphone strategy has proven challenging for the industry, the report notes, due to differences in payment methods, subsidies, and the levels of competition.
In countries like the U.S. where there is no limit on subsidies and there is higher level of competition, operators such as AT&T use aggressive subsidies, unlimited data plans, and specific smartphones models--i.e., Apple's iPhone--with exclusive distribution to woo customers. By contrast, Russia prevents handset subsidies and focuses more on value-added services, lower prices, and free initial test periods for smartphone consumers.
"Understanding local conditions will be vital for operators, smartphone vendors, and OS developers, as operator strategies differ substantively across markets based on the method of payment (postpaid or prepaid), the prevalence of subsidies, the level of competition, as well as the market shares of operating systems," Salvador said.
Nokia, the world's largest maker of mobile handsets, said Thursday that it plans to close two flagship stores in the U.S. as it refines its sales strategy and struggles to get a bigger foothold in the North American market.
Nokia also said it plans to close one of two stores in London. And it will look for a new location for its Sao Paolo store.
The U.S. Nokia stores that will be closed are in New York and Chicago. Nokia has 12 stores worldwide. It opened the first store in Moscow in 2005. Nokia said closing the stores is part of a new retail strategy that includes more cooperation with operators and other retailers.
Nokia's shift in strategy comes as the company indicates it plans to focus more on services and applications through its online Ovi store. Last month, the company said it plans to limit the number of devices it will launch as hardware has become less important to consumers and services and applications have become more important.
It's hardly a surprise that Nokia would shut down the U.S. stores as it refines its retail strategy, since this is one of the company's weakest markets. While Nokia still dominates the worldwide cell phone market with about 37 percent market share, the company's market share in the U.S. is only in the single digits. For years, the company has said that it plans to focus on the North American market, particularly the U.S. But little progress has been made.
Nokia executives say that the company is developing new products for the U.S. market and that it's working with wireless operators to get Nokia devices on those networks. This is important for Nokia since about 90 percent of all cell phones sold in the U.S. are sold through an operator. And most are subsidized. Nokia doesn't offer many products through carriers in the U.S., a fact that has hurt the company in the U.S. market.
But Nokia is making some progress. Earlier this year, it launched its E71x smartphone on AT&T's network. That said, other high-end devices, such as the N97, are still not offered by a U.S. operator.
Meanwhile, Nokia's competitors, namely Apple and Research In Motion, have taken advantage of forming relationships with carriers and their devices are offered with hefty subsidies. As a result, Apple and RIM have much higher market penetration than Nokia with respect to smartphones.
Apple, which makes the popular iPhone, has also been far more successful with its retail strategy than Nokia. The company now has 279 stores that it's opened in the past eight years since it opened the first Apple store in 2001. These stores have become a big revenue driver for the company, generating about $6.6 billion of the company's $29.9 billion in revenue in fiscal 2009.
Apple's flagship stores, or as the company calls them "significant stores," are especially designed to draw in visitors with eye-catching design and architecture. Some of the stores, such as the Fifth Avenue store in Manhattan, which sits below a glass cube across the street from the Plaza Hotel, have become tourist destinations. Worldwide some 170 million visitors entered an Apple store in fiscal 2009.
Apple plans to open between 40 and 50 new retail stores in 2010. More than half of these new stores are expected to be outside the U.S. Some of the countries where Apple will open new stores include the United Kingdom, Canada, Australia, Italy, Switzerland, Germany, France, and China.
Finally, some good news from Nokia.
On Wednesday, the world's largest maker of cell phones said it expects sales volumes of mobile handsets to increase 10 percent in 2010 from 2009, as the market rebounds from a worldwide recession.
"Going into 2010, the overall mobile-devices market is stabilizing, and it is growing more in the areas where Nokia has competitive advantages," Nokia's new chief financial officer, Timo Ihamuotila, said in a statement.
Nokia said its worldwide market share of 38 percent would remain unchanged next year but that the company would increase revenue by focusing on stabilizing pricing on handsets. The average selling price of Nokia's phones had slipped over the past year. In the third quarter of 2009, the company's average price for a handset was 62 euros, or about $94. That was price was stable, compared with the previous quarter, but it was down from 72 euros during the same quarter a year ago.
This past year has been a tough one for Nokia and the rest of the cell phone industry. Nokia was hit hard by the economic downturn, as consumers put the brakes on spending. And for the fourth quarter of 2008, it saw sales drop 19 percent during the quarter, compared with the same quarter in 2007. And the company's profit fell about 69 percent.
Nokia slashed its annual forecast for 2009. And to cope with the deteriorating economic situation, it also announced that it would reduce about $905 million from its budget. Much of the cuts resulted in thousands of workers losing their jobs.
Besides the economic downturn, Nokia has been facing increasing competition from companies such as Apple, with its iPhone, and Research In Motion, with its BlackBerry devices. And now the company is facing even more competition in the smartphone market from Google Android phones, which will hit the market en masse in 2010.
Even though Nokia launched a new smartphone in 2009, the N97, the company still managed to lose market share in the high-end smartphone category.
Nokia says it's made improvements to the Symbian operating system that is used to power its high-end phones. But as the market gets more crowded with devices, it won't be easy to compete against popular iconic devices such as the iPhone. What's more, Nokia still hasn't managed to crack the U.S. market, the fastest-growing one for high-end handsets.
Today only a couple of Nokia's higher-end smartphones are subsidized and sold through U.S. carriers. This is a major problem, considering that the vast majority of American cell phone users buy subsidized devices in exchange for service contracts. The iPhone is currently selling for as little as $99 with a two-year contract from AT&T. Meanwhile, the Nokia N97 costs more than $500 at full retail.
Nokia has also been focusing a lot of effort on building up its services business. The company is building a marketplace and selling services through its Ovi online portal, which enables cell phone consumers to buy music, videos, and navigational maps.
The company is expecting to generate 2 billion euros in sales next year from its services unit. And it expects to grow this number in 2011, when it's expected to have more than 300 million active Ovi users. It plans to maintain a focus on applications for its phones, targeting net sales from its services unit of 2 billion euros or more in 2011 from an expected 300 million active users by the end of 2011.
Meanwhile, Nokia's joint venture with Siemens to sell telecommunications equipment has also been struggling. In October, the company was hit with a 908 million euro goodwill write-down on the business unit.
But Nokia now believes that the Nokia Siemens venture will also gain market share in 2010, even as the communications infrastructure market is expected to be flat in euro terms from the previous year, Nokia said.
As Research In Motion opens up the BlackBerry platform, it is providing new features and integration between third-party apps and core BlackBerry apps.
Alan Brenner, RIM
(Credit: RIM)ZDNet UK spoke to Alan Brenner, a RIM senior vice president and general manager for the platform. Brenner was asked how BlackBerry competes in the crowded smartphone app market, how the handset manufacturer expects to work with developers, and what the key challenges are for the company's mobile platform.
Q: Where do you think the new APIs and the integration into core BlackBerry apps put the BlackBerry as a platform, compared with other smartphones?
Brenner: The important point is that we're different; we have a different approach from what you're seeing elsewhere in the market. This notion of enabling deep integration is distinctive, and it speaks to our traditional strength as BlackBerry.
Read more of "BlackBerry goes with the flow for developers at ZDNet UK.
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..
