China Mobile playing off rumors and Blackberry deals to negotiate better iPhone terms

Rumors about the Chinese mobile phone market are flying fast and furiously today. First was the claim by Chinese newspaper Nanfang Daily that according to unnamed sources, talks to allow China Mobile to carry the Apple iPhone have broken down because of China Mobile's unwillingness to share mobile revenue and Apple's unwillingness to remove WiFi from the iPhone. Then rumors surfaced that Chinese distributor Dixintong would distribute the iPhone, a rumor that Apple denied since it was only talking with operators. And then we hear that according to China Mobile's customer service department, Research in Motion's CEO will announce pricing and launch dates for the Blackberry in China on December 11 and 12. Meanwhile, Apple is claimed to be setting up its own Apple Retail Stores in China for phone distribution.

So what's really going on? My guess is that China Mobile is using the press to try to win concessions from Apple. It knows that Apple is talking to all the Chinese carriers. So it spreads rumors that the talks have broken down and seeds another rumor that it is bringing in Blackberries for its customers instead.

China Mobile should talk to Verizon and Vodaphone to see how well their hardball negotiations for the iPhone worked out for them. By this time, Steve Jobs has competitor China Unicom on his iPhone "Favorites" dialing list too.

Full disclosure: by this time, everyone in the known universe -- or at least those who read my blog -- should know I have Apple stock.

Technorati Tags: Apple, Blackberry, China Mobile, China Unicom, Dixintong, iPhone, Research In Motion

Poor marketing strategy costs Motorola CEO Ed Zander his job

Forbes reports today that Motorola CEO Ed Zander is stepping down from the CEO position. Why? Well, the article posits that the primary reason is just bad marketing:

A two-year run of success Motorola enjoyed following the launch of its Razr phone began crumbling last year after sales slowed and the company admitted it had been trading profit margins for global market share by aggressively undercutting pricing.

Anyone can buy market share by giving up profits. Good marketing increases profits; great marketing increases profits and market share. And while Zander stepping down will provide the illusion that the company is changing, its fortunes won't change until its marketing improves.

Full disclosure: the author has no position in Motorola, but does own shares in Apple, Inc, which competes in mobile phones with Motorola.

Technorati Tags: Marketing, Motorola, Ed Zander

Google's second shot across the bow of mobile phone operators

The first shot in the open mobile phone wars was the announcement of Google's open source Android platform for mobile phone handsets. Now, the Wall Street Journal reports that Google intends to commit to bidding in the January US wireless spectrum auction. Hmmm. Sounds to me like Verizon's pledge to open its network wasn't exactly heard as a declaration of independence in the Googleplex. Good for Google; having two companies competing to deliver an open platform promise to consumers will only keep operators honest.

Full disclosure: the author owns Google stock.

Technorati Tags: Android, Google, Mobile phone, Verizon

Can video game perception evolve from gory to great?

I often think that video gaming doesn't get enough respect. But perhaps that's changing. Today's Wall Street Journal podcast had an excellent 15 minute segment on hot video games for the holidays (link via iTunes). And my avid video gamer son David and I have been watching and enjoying the Discovery Channel's excellent documentary series titled, Rise of the Video Game.

Personally, I'm not a big gamer, although in my youth, I used to stay up all night playing SpaceWar on MIT's PDP-1 (yes, there really was a PDP-1 although you have to go to a computer museum nowadays to see one). Since that time, I've enjoyed a variety of computer-based games ranging from Lara Croft to Neverwinter Nights. Today, I have to admit spending most of my gaming time with specialist products like the excellent X-Plane flight simulator and LittleWing's solid state pinball games [side comment: I highly recommend Littlewing's Golden Logres pinball game, which is a Japanese reinterpretation of the Arthurian legend. It is a great pinball game and also provides a fascinating look into how legends translate in strange and interesting ways between cultures. But that is beside the point.]. But given that annual US video gaming revenues now eclipse the annual US movie box office revenues, I think it is time the business world thought more about video gaming as a growing and important communications medium. With video games now on the verge of making us laugh and cry with their emotional impact, we should expect them to occupy a similarly prominent place in our social fabric.

I think one of the reasons that many people dismiss video games today is that they only really hear about one type of video game: first person shooters like Doom and Unreal Tournament. Imagine where the movie industry be today if the most commercially successful movie ever were slasher-flick Halloween instead of Gone With the Wind. Yet in the video game world, both the press and many adults accept the commercial success of Microsoft's first-person shooters Halo, Halo 2, and Halo 3 as evidence that video games will never amount to anything good. The Halo series are excellent games, but they appeal to a narrow taste -- specifically, those who like shooting.

And that's why it's refreshing to see Nintendo's Wii video game console doing so well in the market. Nintendo's consoles and strict game certification standards emphasize games that cover a wider emotional gamut than "target and kill." And its motion-sensing technology has forced Wii players to develop muscles in more places than their thumbs. The Wii has done so well at expanding the gaming genre and interest, in fact, that it is now in demand at retirement communities as well as in more traditional gaming homes. And it is this broad success of the Wii coupled with Nintendo's DS hand held consoles that have pushed Nintendo to become the second most valuable company in Japan today.

The Rise of the Video Game series asks the question, when will video games make us cry instead of just appealing to our demand for action? That time will soon be here. But the developers who reach this milestone won't likely be those that are working on Doom 9, any more than the producers of Die Hard 5 are likely to break into the top 100 films of all time. They'll be developers in the mold of Shigeru Miyamoto, who spent his entire career studying art and storytelling before he developed the Mario games for Nintendo. And they'll probably be doing it for the Wii.

One final note: for more from an avid vintage gamer's perspective (he owns most consoles prior to the Nintendo Gamecube, including a Sega Dreamcast), check out David's blog at VideoGameNinja.blogspot.com. Feel free to leave him a comment suggesting a topic you'd like to hear from him about; he'd love ideas for future postings.

Technorati Tags: Gaming, Halo, Little Wing, Nintendo, Rise Of The Video Game, Video games, Wall Street Journal, Wii

Vanu could put the open in Verizon's open network.

In today's Boston Globe, Carolyn Johnson makes a compelling case that Verizon's decision to adopt an open network strategy may be just what Boston-based software radio company Vanu needs to gain acceptance by a major US carrier.

Over the past decade, Vanu has developed what seems like a fairly esoteric technology - software that can control how a radio transmits and receives signals. That means a single base station at the bottom of a cell tower could be tuned for everything from an AT&T iPhone to a Verizon Wireless cellphone, instead of requiring separate racks of hardware.

With the traditional cellphone model in the United States beginning to crumble, the moment may be emerging for Vanu's technology.

I was pleased to see such a thoughtful technology piece in the Globe, whose technology coverage tends to play second fiddle to many authors at its parent company, The New York Times. And it's a nice tribute to Vanu and Vanu Bose, whom I have mentioned before as being as visionary and a person to watch. Plus, Vanu would fit nicely in with Verizon's V-initialed branding.

Meanwhile, there's commentary on Techcrunch that suggests that Verizon may not give all handsets and software access to its traditional subscribers who buy only Verizon-approved devices. Somehow that rings true to me -- the Verizon announcement and subsequent commentary sounded way too good to believe.

Technorati Tags: Vanu Bose, Vanu.com, Verizon

Ten reasons for Apple's booming holiday sales season

Leander Kahney of Wired has a compelling list of reasons he believes Apple is going to have record-breaking holiday sales. I would add just one more bullet to round out Wired's list of reasons for Apple holiday joy to 10: the iPhone's first Christmas. My projection is that Apple will sell about three million iPhones during the holiday season. And while the iPhone revenue spread over 24 months may pale next to the revenue blowout driven by 30 million iPods, those iPhone sales will be raking in a millions in deferred revenue in subsequent quarters. Think of the iPhone as the gift that keeps on giving all year long -- at least to Apple shareholders.

Full disclosure: the author owns Apple stock.

Technorati Tags: Apple, iPhone, Leander Kahney, Wired

Unlocked iPhones to sold in France for €749

According to MarketWatch.com, customers will be able to buy iPhones from France's Orange beginning at 1830 Paris time. Most interesting, though, is the fact that carrier-agnostic buyers will be able to buy an iPhone without an Orange plan for €649, and then can pay €100 to unlock it, resulting in a completely fetter-free iPhone for €749. Now, those of you armed with currency converters will note that this is still a hefty US$1,149, but it's a significant discount from the €999 or US$1,480 being charged in Germany for an unlocked iPhone.

Technorati Tags: Apple, France, iPhone, Orange

How Apple achieves that Zen Apple Store look

Apple Stores look so spare and clean that we mortals struggle to visualize the conceptual work needed to build and run them. Well, struggle no longer, because ifoAppleStore.com has found a collection of Apple Store Planograms, which visually show the incredible amount of logistical detail Apple needs to make those 200 Apple Stores the most efficient retail engines in the world, pulling in more than $4,000 in annual revenue per square foot.

Lest you are not already bowled over by those planograms, consider this: Apple just underwent a complete redesign of its stores to eliminate the cash registers, preferring instead to empower employees with wireless Point Of Sale (POS) systems. Said another way, instead of having Apple store sales bottleneck on a few checkout employees, every Apple employee now is a checkout person.

Apple has already announced that it expects to have its best holiday selling season ever in 2007. After looking at the planograms and planning associated with the Apple Stores, we suspect that that announcement is less of a projection than a sure thing.

Full disclosure: The author owns Apple stock.

Technorati Tags: Apple, Apple Store, Point of Sale, ifoAppleStore.com, Retail

iPhone competition gets crazy in France

According to Dow Jones, French site phoneandphone.com has been selling iPhones since Monday in France, stealing French telecom provider Orange's exclusive launch scheduled for Thursday. To add insult to injury, they're selling their black market iPhones for €299 instead of the standard €399. There's no indication of the source of phoneandphone.com's iPhones in the article, but you can bet they aren't a certified Apple supplier.

Of more interest to Apple watchers world-wide, though, is the fact that Orange expects to sell 100,000 iPhones before the end of 2007. Given reports of slow sales in the UK, that sounds optimistic, but then again, the French are perhaps the ideal customers for the iPhone's elegant design. My bet: they'll sell those easily in Paris.

Technorati Tags: Apple, France, iPhone, Orange, phoneandphone.com

The mark of the beast = Google?

I don't know how I missed this sign of the apocalypse yesterday, but fortunately, Fake Steve Jobs was on the case. And I always thought it would be Steve Ballmer. And given that .00 stock price implies a bit of manipulation, who says that stock traders don't have a sense of humor?

Clever marketing: Debitel launches €600 rebate for unlocked iPhone purchasers

T-Mobile competitor Debitel came up with a clever way to offer iPhones on its network. Simply offer a 600 euro sign-up bonus to customers and have them buy an unlocked iPhone from T-Mobile. Customers end up paying the same net €399 price for the iPhone and get to use it on Debitel's network.

It's too bad unlocked iPhones aren't available in the US; otherwise, T-Mobile could use the same tactic to steal iPhone customers away from AT&T.

Technorati Tags: Apple, iPhone, Debitel, T-Mobile

Verizon cracks open the locked gates of the US mobile phone business

I've claimed previously that Apple's iPhone and Google's Android phone software were going to transform the mobile phone industry here in the US. Well, today, we got some clear evidence of that effect: Verizon Wireless, the number two wireless vendor in the US, has announced that it will open its network to phones and software not sold by Verizon by the end of 2008.

Now, in any European country, this announcement would be greeted by a yawn. But here, this is big news. Carriers here have traditionally been the gatekeepers for both handsets and software on the US networks, claiming that they required such control to guarantee the quality of service on those networks. Those claims have just been, to borrow a phrase, "rendered inoperative." Verizon saw that with Google bidding on the 700 MHz spectrum next year and offering open source software to power a wide variety of handsets, it was fighting the tide to open networks. And you know what they say: if you can't beat 'em, join 'em. Kudos to Verizon for going with the flow; unfortunately, we'll have to wait until 2009 to see if its actions match its press releases.

Oh, one more thing: Don't expect Apple's iPhone to end up on Verizon's network in 2009. Apple's exclusive carrier deal with AT&T for the iPhone doesn't expire until summer of 2012. But at the same time, that deal doesn't prevent Apple from introducing a Verizon EVDO-powered tablet, either.

Full disclosure: The author owns both Apple and Google stock.

Technorati Tags: Android, Apple, Google, iPhone, Mobile phones, Verizon

The November Stock Market: Correction or Prediction?

Today, the Wall Street Journal is officially calling the recent stock market downturn a correction. If the market loses another 10%, it will officially be a bear market. The story blames the credit crunch, Abu Dhabi's bailout of Citibank, and SIV writedowns as the major causes, but I'd guess they'd add pestilence, famine, and a plague of locusts if they could garner enough fear, uncertainty, and doubt to convince the Fed to cut interest rates again.

Personally, I think this hand-wringing is overdone. Why? Because many years have a sell-off of stocks about this time. Mutual funds are readjusting their portfolios for end of the year reporting and distributions, investors are selling losing positions to offset profits before the end of the year, and consumers are trying to make sure they have enough money to cover their Christmas shopping lists. November is a great time for portfolio adjustments.

But there's another factor at work here: politics. Markets hate uncertainty of any type, and next year is a Presidential election year. If we look at the history of the Standard and Poor's 500 stock index, commonly known as the S&P 500, for Novembers before election years, an interesting pattern pops out:

Date	S&P 500 month open	S&P 500 month close	Percent change	Party elected president
11/1983	163.55	166.40	1.74%	Same President Republican
11/1987	251.75	230.30	-8.51%	Same party, different Republican President
11/1991	392.46	375.22	-4.39%	Change in president and party to Democrat
11/1995	581.50	605.37	4.10%	Same President Democrat
11/1999	1362.93	1388.91	1.91%	Split decision
11/2003	1050.71	1058.20	0.71%	Same President Republican
11/2007	1545.79	1407.22	-8.96%	Change in president and party?

When the political winds forecast a change in political party and president, the stock market tends to sell off in the prior November. When a president is likely to be re-elected, the stock market tends to rise in the November preceding the election.

Now astute readers will notice a couple exceptions here, which involve both Bush administrations. Prior to the election of George Herbert Walker Bush in 1988, the stock market sold off in November 1987 by 8.5%. I would argue that this was a symptom of the stock market not liking the uncertainty involved in the replacement of two-term incumbent President, Ronald Reagan. While George H. W. Bush was of the same party, the market still considered him to be a risky choice, and therefore, the market sold off.

So what about 1999? In that case, I would argue that the market was forecasting the election of a same party Democratic president, and therefore did not sell off. And in fact, Democrat Al Gore won the popular vote -- only the Electoral College system and decisions by the US Supreme Court put George W. Bush in the White House. Clearly the November stock market effect couldn't predict that outcome, so I've marked that prediction a split decision.

That leaves us with November 2007. The market has sold off 9% this month, and the Wall Street Journal may be accurate in claiming that the market is undergoing a correction. But given the last 25 years of stock market history, I would argue that this isn't a correction; it's a prediction. And it's one that indicates we're going to see a Democrat in the White House next year -- we just don't know which Democrat it will be.

Technorati Tags: Correction, Politics, Predictions, S&P 500, Stock market

More Kindle critiques from a product designer

My critique of the Amazon Kindle book reader was largely from the first principles of the clear communication and singular purpose required to market consumer products. Now, Canadian product designer Thibaut Sailly -- yes a real one, not one who imagines he might be able to play one on TV -- has taken a hard look at the Kindle design from a detailed product and usability perspective. She arrives at similar conclusions, but does so with more rigor and detail. Her hot/cold spots on the physical design feel right to me. Most intriguing to me is her insight that the book reader should have a cover to properly communicate its bookishness.

Thanks to Daring Fireball for the find.

For those wishing a broader insights with one the gurus of usability, check out this interview with human-computer interaction expert and former Apple maven Don Norman. My big takeaway from this interview is that technology products need more natural interaction cues instead of artificial ones. All his critiques seem like common sense until you look at today's technology products and realize that his sense is anything but common. I highly recommend his books, such as The Design of Everyday Things and Emotional Design: Why We Love (or Hate) Everyday Things as well.

Technorati Tags: Amazon, Bookishness, Kindle, Donald Norman

How iTunes unlocks German (and presumably French) phones

MacRumors has a nice note translated from the MacNotes.de (German) site detailing how Apple has complied with the court order to sell unlocked iPhones in Germany. The process is so simple, one suspects it has been designed in all along.

The unlocking process is as follows: You simply buy a regular iPhone ("locked") and pay the additional premium (999 euro total). Your iPhone's IMEI number is recorded and sent to Apple. After 24 hours or so, Apple's database is updated. At this stage, once you connect your iPhone to iTunes, the iPhone is automatically unlocked in a process that is described as taking only "seconds". You can then proceed to sync your now-unlocked iPhone with iTunes. The firmware remains at version 1.1.2 after the unlock. The process raises a number of questions and also opens the possibility of unauthorized unlocking solutions to become readily available.

The clearly awkward and probably not finished part is the need for T-Mobile to record and transmit the phone IMEI (that's the phone's unique electronic serial number used on the phone network) to Apple. Given Apple's obsession in making the whole iPhone activation a seamless and near-instantaneous experience here in the US, the concept that a customer has to wait 24 hours for a database update in Germany to use their unlocked iPhone must grate on the user experience designers in Cupertino. I expect to see some further back-end integration for T-Mobile and Orange to speed this process up in the future should the court order stand.

Technorati Tags: Apple, iPhone, Orange, T-Mobile, Unlocked mobile phones, Unlocked phones, User experience

More Amazon Kindle: is it worth two OLPCs?

RC Howe, aka my older son, has done a very nice table comparison of the $399 Amazon Kindle book reader and the less than $200, One Laptop Per Child (OLPC) computer. And the simple act of comparing the two raises an interesting question: Is a smaller form factor and more restricted functionality worth twice the price?

Oh, and if you really want to pay $399, why not take advantage of OLPC's Give One, Get One program? No matter what you may think of the technology behind the product, it's a nice piece of philanthropic marketing.

Technorati Tags: Amazon, OLPC, Kindle

iPhones still dominating the Wall Street Journal gift list

When I last checked in on the Wall Street Journal gift poll, there were about 250 votes in, and iPhones were the #1 gift vote, with 52% of respondents. Well, now there are more than 123,000 votes in and guess what? The iPhone still is garnering 63,445 or 51% of the votes. [Ed note: clicking on the above link will take you to the current poll results. I captured an image of the current results because the results could yet change.]

The surprises are farther down the list though. Whereas yesterday, the #2 gift as a Blackberry, Blackberries are now next to last at 2%. The second most popular item now is a DS Lite gaming system, followed by a tie between GPS navigators (there's that category again) and digital point and shoot cameras. And the Zunes? They are now dead last in the poll.

Technorati Tags: Apple, Blackberry, GPS, iPhone, Wall Street Journal, Zune

2007 Boston Globe Black Friday ad circulars fall from 2006

According to my count this year, we received 512 page-sized Black Friday ad circulars in today's Boston Globe (West edition), promoting the numerous sales being held on the day after Thanksgiving. That's down 19% from last year's 636 pages, but up 24% from 2005's 412.

Just for clarity, my count is of one-sided pages of approximately 8.5 x 11 size. So if someone prints a double-sided portrait layout that's 17 inches tall by 11 inches wide, that counts as four pages -- that is, two 8.5 x 11 pages on each side times two sides.

Department stores made up the bulk of these ads, with 250 pages, down from 322 last year. Electronics, on the other hand, went up to 132 from last year's 116. Hardware stores were again third with 42 pages, but sporting goods came in a surprising fourth with 36.

The big product that appeared in nearly every ad departmental ad circular? GPS navigation systems. They were everywhere. As in prior years, flat screen TVs, cell phones, and music players were also prominently featured. Video game systems were also noticeable.

My conclusion: advertising spending is down this year, as our January forecast indicated. Will holiday sales be down as well? We'll know in about six weeks or so, but I predict they will be flat to down as well.

Technorati Tags: Advertising, Black Friday

Where do unlocked iPhones end up? China

I've done a lot of interviews about gray market entrepreneurs who would walk into the 5th Avenue with piles of cash and buy 5 iPhones each. I have always assumed these phones would be unlocked and then exported for resale in other countries where no legitimate iPhone channels exist. After all, there are 193 countries with representatives in the UN, and only three of those have legitimate ways to buy iPhones today; I presumed that these iPhone buyers simply saw an opportunity to supply the other 190 countries.

But Wired News today has what I think is a pretty good clue about we can assume many of the gray market phones have actually ended up. The article is titled China's New 'Love Craze' — Black Market iPhones, and it has this telling paragraph:

The iPhone is readily available in computer superstores in most large Chinese cities. In Beijing's Zhong Guancun, a 15-story mall filled with technology vendors, almost all the stalls are stocked. Two weeks ago, the blogger of Too Many Resources for the iPhone asked several of these vendors whether they could sell him 100 iPhones. They all answered "No problem."

With more than a billion consumers, China has the potential to consume Apple's entire iPhone production output for several years, especially if Apple provided a built-in SMS program that supported Chinese. I have to assume that such a product and plan is on Apple's radar for 2008. But with no Chinese carrier signed to date, no official supply of iPhones, and no Chinese texting software, Chinese entrepreneurs have come up with their own answer for Chinese consumers looking for iPhones: No problem. And I have to believe that's because they have a pretty reliable source of iPhones through Mom and Pop US exporters.

Technorati Tags: Apple, China, iPhone, Gray market, Wired

Apple makes clever -- perhaps too clever -- use of Web media for its PC-Mac ads

I am chastened to admit that I didn't get this Mac-PC ad the first time I saw it because I didn't visually link the animation in the Web leaderboard ad with the Mac-PC commercial running in the sidebar. Now that MacRumors has explained it, I do. But because I wasn't expecting the two animations were linked, I was blind to the ad's effect the first time through. I wonder how many other people didn't get it as well.

I wonder, though, if Apple had to get some special arrangement with the ad syndication folks though, since those two page positions -- leaderboard banner and sidebar -- are usually sold as separate ad units. I'm not sure how you would build such an ad, either; while I've done animated ads in JavaScript, I've never had to have two ads in different positions pass information to one another. Anyone know how it was done?

Regardless, I'd love to see some ad retention studies done on this ad versus the more traditional sidebar videos without the leaderboard link. My guess is that short-term awareness might be lower with this ad, but long-term retention and awareness might be higher because of its unique methodology. I suspect that Apple already knows the answer, since they usually gather testing data for their ads. Does anyone else know?

Technorati Tags: Advertising, Apple, Mac-PC, MacRumors

T-Mobile debuts legal unlocked iPhones without contracts for €999

Well, that German court injunction we noted yesterday appears to have had its effect. T-Mobile is now selling iPhones without a contract for €999 or about $1,478. But wait, there's even better news:

It will also allow those customers who bought an iPhone since Nov. 19 to unlock the device free of charge so it can be used with other SIM cards. However, that will not enable customers to make use of all the functions that the music-playing and Web-browsing device offers.

I get the last part; T-Mobile can't guarantee that the carrier for every SIM card has EDGE service, so it can't guarantee Web browsing. But music-playing? That seems a bizarre restriction, so bizarre, in fact, that I suspect it is a misprint or misquote. Music playing on the iPhone doesn't require any type of phone network access, so why would a different SIM card disable it? Hmmm. I wonder if iTunes will only recognize iPhones with approved carrier SIM cards in them..... That might explain the problem.

But the big news here is that for the first time since the iPhone launched, you'll be able to purchase an iPhone in Germany and legally unlock it from its carrier. We'll likely see a similar deal arrive next week in France because of French laws requiring carriers to sell unlocked versions of phones that are locked to carriers. Note that this doesn't mean you can modify the software on it -- that's a whole different thing. But it does mean you can move it from carrier to carrier and avoid roaming charges if you sign up with a local carrier.

All I can say is that I think it ironic that consumers can only buy locked phones in the "free market" US, while consumers can buy carrier-free phones in regulation-laden Europe.

Technorati Tags: Apple, iPhone, Unlocked phones

iPhones leading Wall Street Journal's gift list

After noting that flat panel TV sellers are trying to convince consumers to upgrade their TVs this holiday season, The Wall Street Journal started a poll of what's on consumer gift lists. The poll allows readers to choose one of the following:

1. Flat panel TV


2. iPhone


3. Compact camera


4. SLR camera


5. Blackberry


6. Zune


7. DS Lite


8. GPS navigator

Surprisingly, especially given that this was all started by an article on flat panel TVs, iPhones are currently taking the #1 spot with 52% of votes, with Blackberries ranking a distant second spot with 19% of votes. And even more surprising, Zunes are tied for third with GPS navigators, each with 8% of the vote so far.

It will be interesting to see if that proportion changes overnight, but at present, iPhone interest for the holidays seems to be much higher than I would have expected.

Technorati Tags: Apple, Flat Panels, iPhone

The Kindle book reader: What were Amazon's marketers thinking?

Technology marketers, repeat after me: Ugly products, awkward user experiences, and restricted content don't sell consumer electronics gadgets.

One more time; I'm not sure it got through the first time.

Now that we're all on the same page, can someone explain to me how Amazon’s Kindle Reader ever got released to the market when it has all three of the characteristics above that kill consumer gadgets?

That was the mantra that was running through my head as I sat through Amazon's Kindle video. Strangely, the video spent maybe 20 seconds on the concept of reading a book electronically, and then proceeded to dive into all the wonderful features built into the device, like shopping at the Kindle store, pulling data over the cellular network, and looking up words in the dictionary. When a video advertising a e-book reader skips over the device's primary benefit, it's not a mark of marketing prowess.

But the Kindle is even worse than its marketing video because its:

• Hardware design screams "Blackberry" instead of book. Books are about visually presenting long-form text and pictures. But the Kindle can only display about a paragraph of text at a time on its relatively small screen compared to other products in this category such as the Sony Reader. If this is a machine designed for reading, why is so much device real-estate dedicated to a keyboard, which is not used for ordinary reading? And the person who added a thumbwheel as a pointing device for Web pages needs to get off their Blackberry and into the real world -- even RIM figured out that they needed horizontal scrolling with the Blackberry Pearl. The strange choices made in the hardware design suggest that it was designed to be a wireless Amazon shopping device that happens to read books rather than the other way around.


• Unclear purpose hobbles its software. Since book reading software doesn't put a heavy strain on most software engineers (let's see -- we need forward page, previous page, table of contents....), you'd think Amazon would focus Kindle's software on providing access to the widest possible array of book content. But instead, Kindle software focuses on providing access only to a limited number of Amazon-blessed formats. Ironically, the Kindle won't even read many eBooks that Amazon already sells online because they are in PDF format, which the Kindle doesn't recognize. And PDF eBooks that other Web sites sell will clearly be non-starters for this device. And worse, Amazon burdened the software with a lot of irrelevant functions such as Web browsing and email fetching that add cost and complexity while diluting the device's market position.


• Content restrictions pose future problems. Amazon has wrapped its content in digital rights management software that prohibits normal "first-sale" book usage like loaning, resale, and viewing on other devices. And what will happen when Sprint decides to upgrade the Whispernet (really garden-variety cellular EVDO) to a higher-performing network, just as AT&T did with its old TDMA network? Because there's no computer involved, Kindle owners will then be reduced to moving around Amazon-proprietary files via SD memory cards -- assuming they can still get these Amazon-proprietary books from from anyone -- or relegating their $400 device to paper-weight status.


• Price doesn't add up. The Kindle reader costs about the same as 20 hard-cover books from Amazon -- more than a year's worth of reading for most US adults -- but comes without any bundled content. And Amazon has snuck in some clever little fees into its service. Examples include a $0.99 to $1.99 monthly subscription fee for blogs, a $0.10 per attachment format conversion fee for emailed documents, and $9.99 to $14.99 monthly subscription fees for newspapers. The result: suddenly a low-cost hobby of reading books and magazines costs as much as an iPhone with an unlimited data subscription -- yet without the ability to make calls, get email, or play movies.

Amazon's Kindle is a great example of technology being pushed at consumers without a clear idea of its market or value. In some other market -- perhaps in enterprise software -- an ugly product with an awkward user interface and restricted content might succeed. But with the broad and unforgiving consumer market, it doesn't have a chance. The only surprise here is that Amazon thinks that it does.

Full disclosure: the author has no position in Amazon, but does have a long position in Apple Inc. at the time of writing. This blog also is an Amazon Associate, so we do receive a small commission on any purchases you might make through following Amazon links on this page.

Technorati Tags: Amazon, Apple, eBooks, eReader, Kindle, Marketing, problem solving

Vodaphone wants courts to block T-Mobile iPhone sales in Germany

From the "If you can't beat 'em, sue 'em" department, Vodafone has obtained a restraining order in Germany against T-Mobile's exclusive deal to sell iPhones. Vodaphone claims in their filing that they don't want to prohibit all iPhone sales, but simply wants the new sales practices including exclusive T-Mobile network use examined.

This seems a bit odd given Vodaphone's assertions that the iPhone will be good for mobile carriers in general and Vodaphone's UMTS network in particular (an interesting claim given that the iPhone doesn't use UMTS). But hey, it beats shutting down customer service to avoid defections to Vodaphone rivals who have iPhones. But we in America shouldn't assume that T-Mobile has a slam dunk defense either. Europe has fair-competition laws that are designed to allow consumers choice, and Vodaphone might be able to make that work for them. And in any case, we'll be seeing unlocked iPhones in France in two weeks because of a French law requiring carriers to offer unlocked as well as locked phones.

You have to admit, it's an interesting development.

Technorati Tags: Apple, iPhone, Vodaphone, T-Mobile

Piper Jaffray sees Apple's historical holiday boom repeating itself

AppleInsider has a nice summary of Piper Jaffray's addition of Apple Inc. to its Alpha list, indicating that it expects above-average appreciation over the next 90 days. The nice bit: they published a historical chart that shows that Apple stock normally rallies about 43% in the fourth calendar quarter through MacWorld.

I really like Gene Munster's work, and our price targets are quite similar. I think that now we are past November options expiration and hedge fund redemption limits for the year, a lot of the downward pressure on Apple stock is, in my opinion, behind us. Witness the fact that despite the Dow Jones being down more than 100 points at the moment, Apple stock is actually still in positive territory (Afternoon update: not any more; oh well). Once investors see the crowds in Apple stores over the Black Friday weekend and start anticipating the usual year-end Santa Claus rally in stocks in general, I expect the stock to return to a more positive year-end trend.

One more thing: I don't think today's stock price accurately yet reflects Apple's own optimism about the holiday quarter that it projected in its earnings call. My models tend to be pretty aggressive and usually are significantly higher than what Apple projects. In Apple's earnings call, Apple CFO Peter Oppenheimer projected that the company would have revenue of $9.2 billion and earnings of $1.42 per share. Given that those numbers were within 5% of what my model said (as opposed to where they normally are, which is about 20% lower), I think it very likely they are going to do substantially better than what I thought were optimistic projections.

All that said, no one can accurately predict the short-term movement of stock prices, myself included. But when I occasionally do that anyway, it's nice to have Piper Jaffray's Gene Munster for company.

Full disclosure: The author is long Apple at the time of writing.

Technorati Tags: Apple, Financial analysis

Most Leopard wireless problems resolved

I've previously noted several problems associated with my upgrade to Apple's Mac OS X 10.5 (Leopard) system. The machine that has given me the most trouble has actually been my officially-supported Titanium Powerbook; my unsupported dual 800 MHz Quicksilver PowerMac works perfectly. Why? The problem has been that my wireless networking card 1) at first wasn't even recognized as being there, and 2) once it was recognized, would show only two bars and would occasionally drop connections.

However, at this point, the only symptom remaining is that my airport display only shows two bars; all my other problems have workarounds or solutions at this point. In case others are experiencing wireless problems on Leopard, here are the solutions I've used to get to this point:

1. Safe boot recognized may airport card. As recommended in the Apple KBase document, I rebooted my Powerbook in safe mode by holding down the shift key after the startup bong. Then I rebooted normally, and Leopard recognized the airport card as it should.


2. Building a new networking location from scratch fixed my dropout problem. Rather than using my upgraded networking settings, I built an entirely new networking location from scratch, specifying all the airport networks, passwords, and TCP/IP settings from scratch. Of particular importance was setting up my Domain Name Server (DNS) addresses correctly; once I fixed those, my wireless networking seemed to work fine except for one thing: I couldn't find the Snow Airport base station at my office using Leopard's Airport Utility. But surprisingly, I found a workaround for that today, specifically....


3. 10.4's Airport Admin Utility allows me to configure my Snow Airport. Despite the fact that the new Leopard Utility named "Airport Utility" doesn't recognize or configure my Snow dual-Ethernet Airport base station, the old Tiger version of that utility named "Airport Admin Utility" recognizes and configures it just fine. And this is despite the fact that Leopard claims that that binary won't run under Leopard. Go figure. So I just copied that utility from my backup disk to my Utilities folder, and I'm back running completely wireless again.

It's clear that Apple changed its Airport drivers with Leopard, and that those drivers aren't completely bug-free. But all that said, I've now found a way to use them reliably. And given that Leopard gives me some other nice features like Time Machine and crash-free operation on my ancient and unsupported Quicksilver PowerMac, I have to say it's been worth the hassle. Like many other Apple users, just the Quicklook feature and new Mail.app capabilities have made me a Leopard convert.

Now if I can just find a way to get Photoshop 7 to run again, I'll be golden. But first I have to find my install CDs again, which isn't as easy a job as you might think, given they are now five years old.

Technorati Tags: Airport, Airport Admin Utility, Apple, Leopard, Mac OS X, WiFi, Wireless

Exploring video game glitches

I mentioned last week that my older son, Robert, had started blogging about his iPhone, programming, and Linux. Well, not to be outdone, my 11-year-old son David started blogging this week as well, except he's focusing on the vintage video games that he collects. And over the weekend, he wrote an interesting post on an aspect of video games I hadn't known about: glitches.

Many of us would call video game glitches by a more pejorative name: bugs. That's because unlike game easter eggs, they usually were never intended to be in the games, but instead snuck in because of logic or graphics flaws in the code. But with the increasing sophistication of physics engines and elaborate layout designs in games, glitches have become prevelent, subtle, and entertaining. Some gamers now focus on seeing how far they can permute gameplay through the use of glitches, and the phenomenon isn't limited to console games; glitches are often found and exploited in arcade games as well. There's a great presentation of glitching examples over at Wikipedia.

Personally, I enjoy observing and analyzing the video game industry, but I love the fact that up and coming gamers like David are interested in blogging about it even more. Any technology that gets an 11-year-old boy writing for recreation is a net plus in my book. And who knows? It might even boost his middle school English grades if he keeps it up.

Technorati Tags: Blogging, Blogs, Games, Gaming, Glitches

SiCortex's new 5832 processor computer at SC07

Wired News published a photo of the SiCortext 5832-processor SC5832 that the company showed at Supercomputing 07.. We've written about SiCortex before (originally back in 2006), having worked on developing massively parallel supercomputer operating systems in the late 1980s, and having some appreciation for the beauty of big iron. And you've got to admit, the bright blue displays on this beastie will impress your lab funders much more than your average Linux supercluster. Just make sure they stand back when that powered front cover swings up to expose the interconnect.

Technorati Tags: SC07, SiCortex, Wired

Amazon taps Associates to join the Black Friday frenzy

Today, I just received an email from Amazon Associates, asking us to link to their Black Friday sales page. They've also created a widget to advertise hourly deals on Black Friday, which I've added to the blog just to be able to track how effective it is. While not strictly social networking, I have to give Amazon credit for using the Associates network to market its Black Friday promotions -- I suspect it will pay off for them big-time, especially for those shoppers uninterested in braving Black Friday crowds.

Full disclosure: Blackfriars is a member of Amazon Associates and therefore receives a commission on products bought through the clicking on Amazon ads.

Technorati Tags: Amazon, Black Friday, Marketing

XBox's 360s Halo 3 surge peters out

In its earnings call, Microsoft crowed about how Halo 3 had finally brought its Entertainment and devices division into profitability, driving up its outlook and stock price. Further, videos like the one shown above on YouTube suggest that Halo's popularity will influence American culture for years to come. So life in the XBox gaming world is good, right?

Unfortunately, that surge in sales is so last quarter. The Wall Street Journal reports today that while Microsoft sold 3.3 million copies of Halo 3 in the few days it was available in September, October sales were only 433,800 units, suggesting that the pent up demand for Halo may be pretty-well satisfied. The result: The Nintendo Wii went back to outselling the XBox 360 console by 519,000 to 366,000 for the month of October. My takeaway: don't expect Microsoft's Entertainment division to continue those profits going forward, since XBox 360 consoles are sold at a loss. And with at least two years until there's another Halo to boost XBox sales, Microsoft had better be looking for another franchise game if it wants to beat Nintendo.

Technorati Tags: Halo 3, Microsoft, Nintendo, Playstation 3, XBox 360

PowerPoint doesn't kill; presenters do

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Communicating better doesn't have to be hard. Click through the 61 slides in Alexei Kapterev's slide presentation above, and you'll be a long way along that path. The sad part: I think I actually seen some of the bad slides he cites in real presentations.

Hat tip to Lifehacker.com for finding this gem.

Technorati Tags: Alexei Kapterev, Presentations, Lifehacker.com

Good news: Garmin realizes that bidding higher for TeleAtlas doesn't make the deal better

Global positioning system maker Garmin dropped its bid for map-maker TeleAtlas today, and the stock has rocketed up to over $100 a share again. Why? Because instead of paying $3.3 billion for TeleAtlas, Garmin simply signed a six-year extension with its current mapping provider, Navteq. That deal also has a four-year extension option.

Garmin's calculus was simple: it can build a lot of market and shareholder value with $3.3 billion over 10 years that doesn't involve owning a mapping company. And by 2017, there may be other mapping alternatives -- Google comes to mind -- that make a lot more business sense. Smart.

So what's the message here? Bidding more for a takeover doesn't make it a better deal, only a more expensive one. And when the bidding gets too rich, there's always another roadmap to success.

Full disclosure: the author has a long position in Garmin at the time of writing.

Technorati Tags: Garmin, Navteq, TeleAtlas

Black Friday minus seven and counting

It's just one week until the Friday after Thanksgiving (aka Black Friday, so-named because it is the day when retailers "go into the black", that is, make a profit) when US retailers go all out to capture holiday shoppers. I never really thought much about Black Friday until I started working in marketing, but like almost every other marketing activity, these sales involve a huge amount of preparation, creative work, and production in advance of the big day. And guess what -- some of the information leaks out in advance of the day.

Despite the threats of lawsuits for copyright violation, the Web site Black Friday Ads (bfads.net), manages to post many of the sales in advance of the day. One major innovation in this year's Black Friday sales is that while in the past retailers have opened at 5 am on Black Friday, some retailers like CompUSA and BJ's Wholesale Club are going to open at midnight to capture early birds and night owls alike. All I can say is that you've got to feel sorry for the people who work those stores and will have to prop open their eyelids with toothpicks as they prepare for the busiest and longest shopping day of their year. Let's hope this phenomenon is a one-time event.

All this said, rumor has it that there are going to be some pretty amazing deals on Black Friday. In past years, we've marveled at sub-$1,000 42-inch plasma displays; this year, Sears is offering a sub-$1,000 46-inch flat-panel TV, and Micro Center is offering a 42-inch Akai Plasma for $699.99. On computer gear, CompUSA is offering an Envision 22-inch LCD monitor for $149.99 after $130 in rebates, and Dell is selling a dual-core Dimension 531 with 24-inch LCD monitor for $659 with a $100 gift card to boot. And the list goes on.

As in previous years, we'll be counting the advertising pages in our local Boston Globe on Thanksgiving Day to gauge how robust the Black Friday ad budgets are. But there's an added benefit for Apple buyers: Not only will Apple be having its own Black Friday specials in Apple Stores, but rumor has it that Best Buy will be authorized to carry iPhones for sale for its Black Friday sales. That may be a long shot, but given Apple's penchant for marketing, you can bet it isn't going to be left out of the holiday rush.

Technorati Tags: Apple, bfads.net, Black Friday, iPhone, Marketing, Micro Center, Sears

The danger in undervaluing EMC

Here's a puzzle: Take a long-established company that sells its products to nearly every Fortune 500 company and reaps $12 billion in revenue and more than $1 billion a year in profit. Add to that another company whose market capitalization is $33 billion. Now add about 30 other companies of varying values between $100 million and $2 billion. How much should this long-established parent company be worth?

If you said only $41 billion, you must own EMC stock, because it's one of the few cases where the market claims that the whole is worth substantially less than the sum of its parts.

This past Wednesday, I spent the day listening to a stream of EMC executives talk about how the company is innovating in its business models, processes, software, consumer products, and security. And despite the very-real risk of death by PowerPoint slides and opaque vocabulary (just what is "solutioneering", anyway? It certainly isn't in the dictionary.), the day was full of unpolished gems that make me think the company is seriously undervalued. After all, this isn't your father's EMC; EMC now:

• Sells information systems, not storage. Rich Napolitano, Senior Vice President for Storage Platform Operations, said that EMC's systems-wide approach to solving customer problems was what lured him to the company from Sun Microsystems. He said, "EMC sells complete information systems just like Sun, IBM, and others; we just don't sell the servers." And in today's multi-vendor data centers, being a server vendor-neutral provider is actually an advantage.


• Has focused its acquisitions on software, not storage. EMC CEO and Chairman Joe Tucci quizzed the audience on how much of the $8 billion EMC has spent on acquisitions it had spent on hardware companies. The answer: zero. Five years ago, the concept of EMC becoming a software company seemed ridiculous. Today, it looks downright prescient. After all, Tucci noted, even the hardware guys put most of their value into software nowadays. Oh, and did we mention that the margins on software are higher -- a lot higher?


• Sees VMware as competitive weapon as well as a product. As the Wall Street Journal noted Thursday, EMC has no interest in selling the 86% of VMware it owns, despite the fact that VMware's market cap had eclipsed EMC's in recent months. But while VMware has assembled a tidy business selling its virtualization products, the bigger impact of EMC owning VMware will likely be several years from now, when EMC's other products will be able to migrate databases, application images, and content stores around network environments seemingly without regard for the underlying hardware. And when competitors try to replicate that flexibility with their products, they'll discover that without VMware's intellectual property, they'll be years behind.


• Licenses consumer software and services. EMC demonstrated Intel's SS4200-E, an Intel-OEMed home server product, based on a skunk-works EMC effort [Note to Intel: get someone to work on your consumer product naming]. But even more impressive, EMC will license its Lifeline software stack that powers that device to other hardware OEMs who wish to offer similar products for consumers and small and medium-sized businesses. And every buyer of those home server products will see "Software by EMC" logos on them too, boosting the company's name recognition and new software emphasis. Don't want to own a home server to back up your digital life? No problem -- EMC now offers in-the-cloud backup services through its recent acquisition of the online backup service, Mozy.com.


• Boasts the best security story of any enterprise vendor. In the excitement of the VMware initial public offering, the world seems to have forgotten that EMC also owns probably the leading security company in the US: RSA Data Security. While the company is best known for its SecurID authentication systems, RSA also has a huge asset base of security personnel and research intellectual property -- for example, much of the encryption technology that secures eCommerce sites -- that EMC now is building into its products. And with EMC presenters like Dennis Hoffman telling the EMC-RSA security story in self-deprecating, funny, and easily understandable ways, security will likely become as big a selling proposition for EMC as virtualization is.

So with all these plusses, why is EMC still undervalued and unappreciated by investors? Blackfriars believes that EMC's story is just too hard to understand. EMC's brand and language are stuck in its storage past, and executives like Joe Tucci are still telling EMC's story as if the only people listening are CIOs and data center managers. That's why we hear such investor-hostile slang as "information lifecycle management", "virtual provisioning", "RAID-6", and "remote RDF" in meetings like yesterday's. EMC aficionados and storage analysts know what EMC is talking about; everyone else just tunes out. It's also why the Wall Street Journal writes about VMware's ownership rather than more substantial topics; acquisitions and IPOs are a whole lot easier to present to an investor audience cogently than virtual provisioning and storage snapshots.

Another challenge EMC faces is that it has a strong brand that no longer really fits its business. EMC has spent 28 years and millions of dollars building up an IT brand that stood for high-end, gold-plated storage. But in the last five years, EMC has changed from a storage vendor to a diversified technology company appealing to everyone from enterprises to consumers, and it hasn't substantively changed its brand or what it stands for. Is it any wonder than EMC's stock price is similarly unchanged?

Other companies have faced similar challenges and overcome them. IBM rebranded itself under "eBusiness" to leave its mainframe legacy in the past. BP used "Beyond Petroleum" to convince consumers to look past its oil heritage to a greener future. Apple challenged its few but loyal customers to "Think Different". And in all those cases, companies that were considered moribund and undervalued suddenly were revitalized -- and so were their stock prices. They simply needed a clear story to rally investors behind.

One more thing: Wall Street undervaluing EMC's stock endangers the company. Unless EMC can convince Wall Street its future is greater than the sum of its parts, IBM, Cisco, or even a private equity firm like The Blackstone Group could buy out EMC to sell off its storage business and acquisitions (including VMware) and pocket billions in the process. And that would be a sad price to pay for just not telling a better story.

Full disclosure: the author has no position in EMC at the time of writing.

Technorati Tags: Berkeley Data Systems, EMC, Joe Tucci, Mozy.com, RSA Data Security, Storage, VMware

Leopard's wireless networking fix and better restart dialog

I just downloaded the new 10.5.1 Leopard update, and in the process, noticed that the restart dialog now actually gives you the opportunity to select "Not Now." That's just another one of those refreshing little upgrade tweaks that make me pleased to be running Leopard.

Oh, the wireless networking bug I had now appears to be gone on my laptop. Creating a new location and populating all the DNS info from scratch appears to have fixed my prior connectivity issues. The only two problems I have left are:

1. The Airport Utility still can't see our Airport Snow Base Station, and
2. My airport signal strength is down two bars from where it was on Tiger.

Both of those issues go away if I boot into Tiger. Now, I'm going to see if 10.5.1 fixes those too.


UPDATE: Grrrr. Rebooting with the 10.5.1 update brought my networking problems back. Bummer.

Technorati Tags: Apple, Leopard, Mac OS X, Networking, WiFi

EMC Analyst Day

Today, I am in Boston attending the EMC Innovation Day analyst conference. Don't expect any postings today unless EMC provides breaking news. But I will provide a teaser: what are we going to do about the explosion of information growing at 60% a year? I hope to find out.

Another blogger in the family

Regular readers may remember my son Robert (aka RC Howe), who saved his money all summer to buy his own iPhone (and for which he is also paying the monthly subscription fees). Well, given that he owns both a MacBook Pro and an iPhone, it was only a matter of time before he started his own blog too. You can read Robert's observations on iPhones, Linux, Leopard, and Apple and Google stock (much to my surprise) at rcetc.blogspot.com.

Highly recommended. I've already some new bits about Leopard that I didn't know (and my son didn't tell me).

Technorati Tags: Blogging, Leopard, RC Howe

China Mobile: Love the iPhone, hate paying for it

ComputerWorld has probably the most extensive article I've seen describing China Mobile's CEO's interest in offering Apple's iPhone, based upon a speech he is giving in Macao:

"Our customers like this kind of fashionable product," Wang Jianzhou, China Mobile's CEO, on the sidelines of the GSM Association's Mobile Asia Congress in Macau.

But in a speech at the conference, Wang said he doesn't like some of the new business models emerging in the mobile phone industry, including handset makers wanting to share revenue with mobile operators.

"We still think we can maintain the operator-centric model because we have the customers, the end users," Wang said.

And with 350 million subscribers, one has to expect that China Mobile's views will carry some weight. All that said, I don't expect Steve Jobs and Apple to cave either, since they didn't give in to similar objections from Verizon in the US. And after all, there's always China Unicom to talk to.

Technorati Tags: Apple, China Mobile, China Unicom, iPhone, Mobile phones, Wang Jianzhou

The battle for the right price for Apple stock

I don't think anyone has managed to miss the fact that Apple stock is down about 20% in a week (if you have, Barrons has a nice summary of the overall carnage in technology stocks). I've gotten several emails asking me 1) how and why this is happening, and 2) whether I think it will go back up. I am not a financial advisor, but I'm happy to give my opinion. But let's tackle those questions in reverse order.

Will Apple go back up again? My view is almost certainly yes. Why? Because at the end of the day, I know that the stock price will eventually follow Apple earnings. And as I've noted before, Apple is using the iPhone and Apple TV to make its future earnings nicely predictable, since it is taking cash from customers now and recognizing them as earnings over 24 months. Said another way, future Apple earnings are like money in the bank -- literally.

So that's the rosy picture: at some day in the future, Apple stock will be valued at some nice hefty multiple of its earnings. I use 35 as my Price to earnings ration for Apple stock, since that equals its annual earnings growth. But assuming you accept my projection that Apple will earn something north of $5 a share in fiscal 2008 ending in September and more than $7 a share in fiscal 2009, Apple's going to be at least a stock valued at somewhere between $175 and $245 at at P/E of 35. It's easy math.

So what's going on now that's pulling Apple stock back to $155 or maybe lower?

Well, first, the whole market is down, for one thing. The Dow Jones Industrial Average is now below 13,000 for the first time since August. So's the NASDAQ. And as you can see from the graphic above, Apple isn't even the biggest loser among tech stocks on a percentage basis -- companies like Google, Cisco, Research In Motion, and VMWare have had similar or bigger drops.

Secondly, Apple stock has had huge gains year to date, and a lot of mutual funds clean up their holdings prior to paying dividends and capital distributions to their shareholders in December. Many fund managers may simply be selling Apple stock just as a normal rotation in and out of technology around the end of the year.

Third, with the credit crunch bear crushing the stock market as a whole, Apple is likely attracting momentum short sellers, who take advantage of short-term declines in stock price to make some extra dollars, particularly if a stock is considered over-valued and the market is selling off overall. Like rainy days, there's not much to be done about short sellers other than to wait them out.

Fourth, a lot of quantitative hedge fund strategies are pulling down unrelated securities as the result of subprime mortgage losses. I wrote about this phenomenon about a week ago, inspired by the Technology Review article (registration required), The Blow-Up.". So despite the fact that Apple has almost no sub-prime mortgage exposure, automated quantitative hedge fund trading systems may make it behave as if it did anyway.

And fifth and finally, as one insightful reader pointed out, both stock options and hedge fund expirations are taking place this week. Investors usually know about options expiration dates, but what are hedge fund expirations? Turns out that investors in hedge funds have to give 45 days notice before they can withdraw their money. So if any investors want to withdraw their money before the end of this year -- say, to write off losses on their taxes or just to pay bills -- they have to give notice by the end of this week. And assuming that many hedge fund investors may already have given notice because of the down market, hedge funds may be liquidating substantial positions in high-quality stocks just to pay off their investors.

The bottom line: Think of all the red ink in the market this past week as simply a before-Thanksgiving sale on stocks. Once we are past options and hedge fund expirations this week and end-of-year selling for tax purposes, stock prices at large will eventually reflect the earnings of the companies behind them. Companies with innovative products, strong earnings and earnings growth, and no exposure to the credit industry will appreciate in value. And that's true of no company I know more than Apple.

Full disclosure: Of the companies mentioned in this article, the author is long Apple, Garmin, and Google at the time of writing, but has no positions in hedge funds.

Technorati Tags: Apple, Barrons, Financial analysis, Hedge funds, Options, Markets, Technology Review, Technology stocks

Now trendy: don't read email to avoid the tyranny of too much

The New York Times and a bizarre article this weekend describing the work of Timothy Ferris, who preaches the gospel of the 4-hour workweek. In his book, he encourages executives to outsource their email-reading to the Philippines and India and to do business by picking up the phone.

Now, I'm all for fighting the tyranny of too much, but the description in this article smacks of the Silicon Valley version of another Timothy Leary in the 1960s who encouraged people to, "Tune in, turn on, and drop out." And while I can understand the temptation to make your email someone else's problem that doesn't get paid as much and turn to real-time communication, all that really means is that the executive's voice mailbox is going to get full instead of her/his email box. Yeah, like that's going to help productivity. And an answering service, while good at screening calls, isn't the perfect solution either, since they still need a way to get "important" messages to you.

Yes, prioritization is a really good idea, but prioritizing by media type is just silly. And unless you're the NSA, the methods for prioritizing electronic communication media are vastly better than those for prioritizing voice. Dropping off the grid and becoming inaccessible sounds like a great idea until you are on the other side of that inaccessibility and can't get your business done. And you can bet those same people who embrace the 4-hour workweek will be the ones that scream the loudest when you refuse to take their calls.

I always say, if something sounds too good to be true, it probably isn't true. The four-hour workweek falls nicely into that category. I do have to give the Times credit for correct placement of their article, though; it was in the Fashion section, along with all the other fads.

Technorati Tags: email, Fashion, Productivity, Timothy Ferris, Tyranny of too much

The first shots in the mobile phone war between consumers and carriers

I've written before that Apple's iPhone and the threat of Google's Android (or gPhone) are rewriting the rules for the mobile carrier market. Well, the New York Times now thinks so too. And perhaps the most insightful point the article makes is that this is not a technology issue, but a marketing one:

At the heart of the tension between the different camps is whether the wireless network should be open, much like the Internet is today, or remain under the watchful control of companies like AT&T and Verizon Wireless, a joint venture of Verizon Communications and Vodafone. Carriers, who paid billions of dollars to build their networks, are unwilling to open them.

For others, change can’t happen soon enough. As such the alliances and partnerships struck now are likely to shape the industry over the next five years.

“It is the battle of the overdogs,” said Tom Wheeler, a venture capitalist and former chief of the CTIA, a trade group for the wireless industry. “They are all jostling back and forth to be leaders of the next generation. The question is, how do I position myself? It is a territorial battle.”

Asking this question of carriers today is a bit like asking AOL about the Internet in 1994. Because of their multi-million subscriber lists, the carriers think they are winning the battle for their hearts and minds. But if that's the case, why do so many mobile phone customers hate their carriers?

Bottom line: the carriers have made their livings to date from owning the customer (through contracts), the handset (through vendor subsidies), the network (through licenses), and the content (through content restrictions). What customers are saying is that they own the network -- period. And that's what the wireless war will be about for the next decade.

Full disclosure: the author owns Google and Apple stock, but has no positions in mobile carriers.

Technorati Tags: Apple, Google, iPhone, Mobile phone, New York Times, Android, Telcos, Telecom

Compete's data says iPhones comprise a category all their own

Elaine Warner at Compete.com has mined some intriguing data from mobile phone shoppers at AT&T. Her penultimate paragraph draws a very interesting conclusion:

The fact that consumers are not increasingly considering other AT&T handsets while considering the iPhone suggests that, whether due to marketing or other factors, the iPhone has created its own category of handset. It doesn’t fit neatly into the category of smartphone, music/media phone or camera phone, which is typically how shoppers research handsets. That hasn’t been a hindrance on demand though, as consumers continue to seek out the iPhone despite its lack of conventional categorization.

From a marketer's point of view, any product that a consumer considers unique is money in the bank, because competitors don't even get considered before purchase. Given that only 12% of iPhone shoppers even viewed another phone on AT&T's Web site (compared with 30% for ordinary AT&T shoppers), Apple has data to prove that it is driving traffic and shoppers to mobile phone operators. And if that doesn't keep them in a class of their own with consumers next year, it certainly will with those operators.

Technorati Tags: Apple, at&t, iPhone, Mobile phones

Another goose for Apple holiday sales: video rentals

According to EvanSeries.org, iTunes 7.5 sports text strings that indicate it will support video rentals. Now of course, these strings may just be the result of someone including the wrong sources in the compile, but more likely, Apple has video rentals queued up for release before the holidays, but after the European iPhone launch, which T-Mobile started at midnight CET, but won't officially begin in the UK until 1802 GMT or 1:02 pm EST/10:02 am PST for we American types.

We've been predicting that Apple was going to provide digital video rentals for about five months now. It will be nice when we can move that prediction to the "Product released" column. But it will also give a nice bump to Apple TV sales over the holidays, which we had also predicted would remain low until this release.

Technorati Tags: Apple, Apple TV, iPhone, Movies, Predictions, Movie rentals, Video