The Smartphone Wars: Dinosaurs mating?
<p>Just when you thought the smartphone industry couldn&#8217;t get any more soap-operatic, everybody&#8217;s favorite pair of aging drama queens &#8211; Microsoft and Nokia &#8211; may be at it again.  There&#8217;s a rumor, from a gossip with a good track record, that Microsoft intends to <a href="http://www.bizjournals.com/sanjose/news/2012/01/05/microsoft-to-buy-nokia-smartphone.html">buy Nokia&#8217;s Smartphone division</a>.</p>
<p><span id="more-4042"></span></p>
<p>Inexplicably, there are even some people writing about the rumor who think this might even be a good idea.  I mean, a good idea for Microsoft.  It probably really would be a good idea for Nokia &#8211; they&#8217;d get shut of their idiotic alliance with Redmond and unload a crappy, chronically underperforming division for a pile of cash (the rumormonger says $19 billion).</p>
<p>But for Microsoft?  Nokia&#8217;s brand strength was probably the only thing keeping Windows-phone share as high as 5.2%.  It hasn&#8217;t been Microsoft&#8217;s software doing it, that&#8217;s for sure. Botched upgrades and a pathetically weak app ecosystem have only been the most obvious problems.  </p>
<p>If Microsoft bought Nokia&#8217;s smartphone division, they&#8217;d mismanage it into smoking rubble within two years.  &#8220;But wait, Eric&#8230;&#8221; I hear you cry, &#8220;they haven&#8217;t done too badly with the X-Box!&#8221;  Quite right they haven&#8217;t &#8211; but that&#8217;s because Microsoft runs that division as a cash generator, mostly hands off.</p>
<p>Smartphones, on the other hand, are <em>strategic</em>. That means that if Microsoft buys itself a smartphone division, Steve Ballmer&#8217;s going to poke his prong into it. Repeatedly. To, um, what&#8217;s the B-school jargon? &#8220;Maximize the synergies&#8221;. They might even be treated to more <a href="http://www.youtube.com/watch?v=wvsboPUjrGc">demented-monkey ranting</a>.  Two years.  Smoking rubble.</p>
<p>On a different subject, what are we to make of the latest <a href="http://www.catb.org/esr/comscore/">comScore  figures</a>? I have to say I don&#8217;t know. Android has fallen off the roughly 2%-per-month rate of share increase it had been sustaining for 18 months. Even at the lower rate, though, it&#8217;s still probably going to surpass 50% U.S. market share within a month or two &#8211; actually, some of the more excitable market-research outfits think it&#8217;s already there.</p>
<p>Apple fans would like the reason for the slowdown to be Apple, but there hasn&#8217;t been any corresponding improvement in Apple&#8217;s relative position.  Both Android and Apple now seem to be tracking overall smartphone market growth pretty closely. Neither the iPhone 4S nor Android 4.0 shows any sign of being a game-changer.</p>
<p>The most likely possibility is that the U.S. smartphone market has reached a sort of initial saturation point &#8211; that while there&#8217;s still growth in the offing, the first frantic rush to smartphones has finally spent itself.  </p>
<p>I rate this only &#8220;likely&#8221; because the holiday sales figures could still shock everybody.  Apple had a flat month in September which might have been people deferring purchases until they could get a 4S; it&#8217;s just possible that the larger Android wobble was their considerably larger prospective-buyer pool holding out for Ice Cream Sandwich &#8211; currently only available on a Verizon phone. </p>
<p>The saturation theory has a near-term consequence we can watch for: decreasing consumer willingness to pay premium prices for high-end smartphones. Watch for the more market-savvy vendors to start emphasizing value pricing and low-end to midline products more in 1Q2012.</p>
<p>The purchase-deferral theory has a more obvious near-term consequence we can watch for, too; huge Christmas-morning sales for Verizon. Andy Rubin was on G+ <a href="https://plus.google.com/u/0/112599748506977857728/posts/WmkvJx7UL9">talking up Christmas activations</a> recently, which suggests that Google thinks it&#8217;s going to have a good story for its next quarterlies.</p>
<p>Meanwhile, the non-sucky low-cost Android tablets that I was predicting six months ago are beginning to trickle in now, two months later than I was expecting but hey, prediction is hard.  There&#8217;s a fair amount of buzz about Velocity Micro&#8217;s <a href="http://reviews.cnet.com/8301-32494_7-57351747/velocity-micros-$150-android-4.0-tablet/">T507</a>, an Android 4.0 tablet with a 7-inch display for $150.  </p>
<p>Significantly, this is less than an iPad.  The vendors may be getting a clue that to complete with Apple they have to offer something as good for <em>less money</em>. &#8220;Premium&#8221; pricing simply will not work in that market, not for anyone but Apple now and probably not even for Apple in the longer-term future.</p>
<p>I don&#8217;t want a T507. But the specs on it hint that we&#8217;re only one product-development cycle &#8211; three or four months &#8211; from something I and a whole lot of other people will want.  If the iPad&#8217;s product manager isn&#8217;t starting to get nervous about this, he should be fired and replaced with somebody with enough sense to be worried.</p>
