Narrative: Hardware is Hard
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Narrative: Hardware is Hard (Jan 24, 2017)
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The Verge seems to have secured the first of two exclusive looks at Android founder Andy Rubin’s new phone, from his company Essential (Recode’s Code Conference will have an interview with Rubin tonight where I’d expect him to share more). So far, there’s nothing about the software, beyond the assumption that it’ll run Android. So the focus is entirely on the hardware design, including the materials, connectors, and a theoretical ecosystem of modular add-ons (for now, there’s just one: a 360° camera). The reporting on this is all a little breathless – Andy Rubin has quite a reputation and anything he launches will be accorded a fair measure of respect. But the pitch here feels so much like almost every other new entrant in the market, a mix of straw man arguments about the current state of the market, grandiose claims about how all that will change, ambitions to build an ecosystem without any evidence that any other player is interested, and nothing at all about distribution, which continues to be the key question in the US smartphone market. We’ll hopefully know a little more by tonight, but I’m extremely skeptical that this phone will do any better than any other recent attempt to change the smartphone market. In the meantime, that won’t stop this project from getting tons of positive media attention in the run-up to an actual launch sometime later this year. It’s worth noting that beyond the phone there are some other bits and pieces too, including a smart home OS and speaker with a screen, but again the details are so short and claims so grand that I’m inclined to ignore them until we actually know something specific about them.
via The Verge
Samsung Surface Competitor Gets Poor Reviews (May 26, 2017)
Sony results for the March quarter were out this morning, and they were a pretty mixed bag (this was also the end of its fiscal year, so some of the reporting you’ll see today relates to those year-end numbers, but I’ll focus on the quarter). The mobile business, which has has its share of ups and downs over the last few years, had another tough quarter, with a year on year drop in shipments and a drop back into the red following three quarters of profits. The music business did well but for reasons that have very little to do with music – the biggest boost in revenue came from a mobile game, while recorded music revenues were actually down as the twin declines in physical and downloads more than offset streaming growth for the third straight quarter. This is a problem I’m afraid will start to afflict all three major music labels in the near future. Sony Pictures had a down quarter and year, and had taken a big write down in the December quarter which affected full year results too. But the drop in revenues year on year was mostly in TV productions rather than motion pictures, which held up better. In gaming, Sony saw decent Playstation 4 shipments in the quarter, up a little year on year, and likely continues to lead Microsoft’s Xbox line by some margin as it has throughout this cycle.
via Sony (PDF)
GoPro beat its revenue guidance for Q1 and grew year on year for the second straight quarter, though it’s still a shadow of its former self, with revenues less than two thirds of what they were two years ago in the quarter, and even less than the equivalent quarter three years ago. Meanwhile, it still hasn’t reduced costs nearly enough to get back to profitability, as its cost of sales was nearly 70% of revenue and its operating expenses accounted for about the same amount, leaving it with a -40% operating margin. That’s actually a slight improvement on a couple of quarters last year, but was much worse than Q4, The fundamental challenge facing GoPro is still that it’s essentially a one-trick pony in a market that has a fairly low ceiling at a time when smartphones and other product categories are beginning to be more meaningful competitors. It’s expanded into drones, but that’s an even more niche category than action cameras, and all its efforts at diversifying into content have failed. It may be able to bring costs down enough over the course of the year to get back to profitability but a return to sustained high growth still seems like a distant prospect.
Spotify is Hiring for a Hardware Project (Apr 24, 2017)
Spotify is apparently hiring a senior hardware product manager, even though it doesn’t currently make any hardware of its own. The job listing (which is as far as I can tell no longer on the Spotify Jobs site) suggests that Spotify is looking to create a hardware product, although there are no real details about what form it might take. Predictably, the focus is music and talk content, so this is likely an audio player of some kind. The fact that Spotify has now removed the listing suggests that it probably gave a little too much away (or didn’t expect any reporters to find the listing), though the attention this is getting now may well spur just the kind of applications Spotify is looking for even without a formal listing. A move into hardware does and doesn’t make sense for Spotify. On the one hand, given the difficulty it’s had in generating a profit from music services, it might see hardware as a source of margin. But hardware is a notoriously low margin business, with single digit margins even for large scale players, and with many consumer electronics companies actually in the red frequently if not permanently. As such, coming from a standing start into what’s likely to be an established category feels like a steep uphill battle for Spotify, and I don’t rate their chances highly. To top it all off, of course, Spotify currently benefits enormously from being a device- and platform-agnostic service, which makes it appealing for other hardware vendors to integrate it. If it starts to compete with those vendors, that attitude might start to change. Also worth noting is that the company seems to be hiring people with voice technology and natural language processing skills, which may be part of the same project, but also looks like a wider initiative at Spotify.
This isn’t good news for Fitbit, at a time when it was supposed to be recovering from a tough year and getting back to profitability and eventually growth. As I’ve said before, I suspect its push into the smartwatch market will be more of a distraction than a help to the company’s overall performance – it puts it head to head against Apple in a category Apple currently dominates and takes it out of the sweet spot it’s historically done well in. If it’s also unable to produce a decent product in accordance with its own internal timeframes, then that bodes even worse for the further push into this category following the Blaze launch last year. Another big question not addressed by this article is to what extent Fitbit will be able to integrate some of what it acquired from Pebble and Vector over recent months in this new product – so far, it looks like it’s more of an iteration on the Blaze than something completely new.
via Yahoo Finance
Here’s our second LeEco story of the day, both fairly momentous (the first was news that the Vizio acquisition had fallen through). This one fits with the recent narrative of financial troubles at LeEco, and if the numbers in here are right, then things are indeed going very badly, with revenue of $15 million versus a target of $100 million in 2016 and layoffs of around a third of the US employee base planned. I’ve been skeptical of LeEco’s strategy from the beginning, and have only become more so as we’ve seen that strategy play out in the shadow of the financial troubles of the parent company. More broadly, LeEco’s struggles in the US demonstrate how different the US and China still are as markets, and how hard it is for companies to go either way across that chasm. No big Chinese company has yet been successful in the US, and Apple remains something of an exception as a US company that has done well long-term in China. LeEco was up against this from the beginning and its focus on an ecosystem play was always going to struggle without a big known brand like Vizio at the center of it here in the US.
The Ars Technica view I’m linking to here is fairly negative on LG’s new flagship, while the Verge review also linked below is a little more positive. Both note that this is really the first widely available flagship phone to go down the “much smaller bezels” route, but while the Verge review focuses on that fact, the Ars review suggests that it will quickly be overshadowed by the Samsung Galaxy S8. The fact that this phone is launching to the public a week after the Samsung event certainly doesn’t help – almost anyone considering it has to at least be thinking about the S8 as an alternative – but until reviews are out, writing off the G6 so quickly feels premature. At least some early indications suggest that there may be one or two concerns with the S8, though I’ll withhold judgment until more thorough reviews are out. Both of these G6 reviews, though, highlight some flaws, notably some odd design choices in the hardware (poorly rounded display corners, tricky home button/sensor placement and size) and counter-productive software customizations on top of stock Android. This definitely looks like a better phone than last year’s G5, but I’m not convinced it’s going to help LG have a much better year this year than last as a result. One more thing worth noting – it seems LG has a version it’s selling in Korea with an integrated DAC which dramatically improves audio quality, but that won’t be available in the US, an odd decision.
The first part of this article gives too much credence to Xiaomi’s CEO’s projections about its future growth, taking them as given even though Xiaomi has struggled to meet its targets for smartphone shipments and growth for the last several years. But the rest of the article is interesting for what it says about where Xiaomi’s focus will be geographically going forward. Importantly, whereas one of the biggest questions about Xiaomi in recent years has been when it would come to the US, it seems to be moving in the opposite direction, doubling down on emerging markets like India rather than pushing into more mature markets. That will limit both its overall addressable market and the average selling price of its phones, given the disposable incomes in those markets and its product focus there, so Xiaomi’s future certainly won’t look very much like the one it projected a number of years ago, as a premium Android-based alternative to the iPhone.