hardware

Navigation’s Destination

by Jean-Louis Gassée

The frustrations began with the (many) limitations of the Pioneer after-market navigation system in the Toyota I use while in France. I can deal with the inscrutable UI and the belligerent touch screen—“resistive technology”, indeed–but I need up-to-date maps (which are clearly antiquated on this device) and a precise reading of my speed. European roads combine baffling speed limit changes and an aggressive deployment of automated radar cameras. You don’t want to rely on your car’s imprecise speedometer if you want to drive just at—or maybe just over—the speed limit.

I need a second opinion.

A quick walk to the Louvre Apple Store and I have my prize, the TomTom GPS adapter for my iPhone, 99€. I download maps of Western Europe—including speed limits—from the App Store for $74.99 and, while I’m at it, I spend another $5.99 for one month of real-time, over-the-air traffic updates. The download is horribly slow and fails at first, even with a reliable WiFi connection, but I finally get it running. Onto the windshield. The suction cup performs its appointed function; the tilt and swivel is commendably ergonomic; there’s even a Bluetooth pairing feature for handsfree calls, indispensible in France where the gendarmes are touchy about touching a cell phone while driving. Sound quality is below par, but it’ll do. I’m in business.

(As an aside, I would have liked to have used Google’s free turn-by-turn app on my Droid X, but the Verizon network is incompatible with the European “GSM” standard.)

We head to the Basque country. The TomTom displays clean speed readings and warns me about impending speed traps. Yes, it occasionally gets confused and suggests a slower pace even as the road signs disagree, but…close enough. The Pioneer…forget it.

Things take a turn for the worse when we drive from France into Spain towards Bilbao—we want to take a look at the Guggenheim museum.

(Photo courtesy of Gaspar Serrano;

It’s a 100 km (60 mi.) drive from the no-stopping border (a pleasant affect of the EU) on the smooth E70. But just past San Sebastiàn both GPS units go crazy. They don’t know this freeway. I expect as much from the aging Pioneer unit, but what about the TomTom map I just downloaded? Not knowing about some rarely used back-country lane is one thing, getting lost around a major new European freeway? It’s not as if this is a state secret.

Approaching Bilbao, I try to get detailed directions to the Guggenheim. The TomTom app’s POIs (Points of Interest) finds it immediately. The Pioneer unit has never heard of the museum. Maybe it’s too new: After all, it did just open…13 years ago.

So the standalone TomTom wins? Unfortunately, there are problems.

On our way back to Paris, the iPhone GPS adapter starts acting up. It won’t charge the phone and the “This accessory is not made to work with iPhone” message blinks on and off at random times. I re-mate the Bluetooth and it disappears for an hour or so, but then it comes back on for good. I apply the official suggestions, no joy. It’s not the iPhone—I have a spare car charger lying around and verify that the iPhone isn’t on the fritz.

I call the TomTom Support number. They’re closed from Christmas until the New Year. “Try us again later.”

Still, it was a good trip, the Basque know how to live, the roads were clear, and I didn’t get flashed. But…

This got me thinking about the state and future of Navigation. Integrated navigation systems amount to a nice racket, an expensive option on most cars. We don’t have to have one, but we willingly pay $1,000 or more for the integration— no dangling wires, no unseemly windshield or dashboard protuberances to sully our pristine conveyances—and that’s probably enough to push a car sale into the black all by itself. A year or so later, we get a letter in the mail offering software/map updates ranging from $185 (Japanese) to $295 (Wehrmacht staff cars). They must have been watching Microsoft peddling Office updates.

During the Basque trip, I compared the TomTom (and, with flagging enthusiasm, the Pioneer), to Google Maps on my iPhone. You can guess what I saw: The E70 extension that mystified TomTom and Pioneer wasn’t a problem for Google. If you want turn-by-turn navigation with up-to-date maps—and you don’t want to get fleeced—get an Android phone with Google’s application.

Maintaining maps is a Sisyphean task. You need a lot of money, a lot of data, and a lot of people. How many companies can compete with Google on these three fronts?

Once upon a time, Nokia bought a mapping company called Navteq and TomTom bought TeleAtlas. Neither company has Google’s money or data or culture, and, above all, its goals. Google hires a battalion of contractors to minutely edit map legends and their translations. We’ve seen their odd-looking mapping vehicles that carry high-precision cameras, GPS, and the controversial but ultimately helpful WiFi SSID mapping units. (WiFi triangulation helps when a GPS signal isn’t available.)

We know Google’s strategy: They want to be everything to everyone, everywhere, all the time. This is the means to their advertising money pump (a.k.a. their business model). Google’s definition of “openness” is they want us to be always open to their stream of ads. Google Maps, a splendid product, full of clever nuances and constantly improved, is a strong component of that overall strategy.

What does this mean for the future of navigation devices?

Carmakers will continue to get an integration premium. Some, like BMW, already “sell” Google Maps. If you’re connected to the Google Cloud, the update problem disappears…the only button you have to press is “Refresh”. It’ll be interesting to see what Apple, Nokia, RIM, and Microsoft will do to up this ante.

One last anecdote.

On the way back to the airport, we’re in luck. We’re in the audience of a geeky cab driver. In addition to the cab company terminal, he has an iPhone, a TomTom, and a Coyote device. We exchange stories. He complains about the TomTom update process. Once a month, he has to connect it to his computer, a chancy, clunky experience. The Coyote unit is more sophisticated, it combines a GPS locator and a 3G link to the Cloud. (Apparently, there is some new combination between TomTom and Coyote. And I realize, too late, there is a Coyote iPhone app…) Pay a monthly fee and you get speed trap updates in real time. But the kicker is this: These updates are crowdsourced. Drivers notify the Coyote Systems of new traps and the updates spread instantly.

Cloud + Crowd = might.

We happen upon an accident. The driver punches a button on his cab’s terminal, sending time and location to the company’s servers and, as a side-effect, to other drivers.

Soon to be a Google Maps service?

JLG@mondaynote.com

iPhone = Mac 2.0

by Jean-Louis Gassée

There are two ways to interpret the equation above.

Doomsayers will sing the licensing blues. By refusing to license the operating system—iOS, in this case—the iPhone will drown in a sea of Android smartphones. We’ve seen it before: Apple is repeating the mistake that allowed Windows clones to scuttle the Mac.

Others, such as yours truly, see the iPhone—or, more properly, its pole position in the smartphone race—as a perfect illustration of lessons learned from the Mac’s struggle to find breathing room in the PC industry.

We know how the first reading of the equation continues. The Mac had immense promise, a much better personal computer than the 16-bit clone of the Apple ][ called the IBM PC. But Apple’s arrogance beleaguered the platform. Instead of following the Microsoft model—focusing on software and letting licensees create a prosperous ecosystem—Apple repeatedly nixed Mac clones and was marginalized, with the Mac market share sinking as low as 2%.

The iPhone is equally promising and, the argument goes, just as equally destined to a marginal role. Like the original Mac, the iPhone has inaugurated a new era, and will ultimately see others dominate the market.

This is a resilient meme, one that gives rise to regular kommentariat pieces predicting trouble for Jobs and his company. Last October, a New York Times piece asked: Will Apple’s Culture Hurt the iPhone? Just last week, a Fortune columnist joined the herd and declared ‘2011 will be the year Android explodes’.

Unsurprisingly, others tore the “closed = marginalization” formula apart. The new smartphone world isn’t a replica of the PC industry, the analogy doesn’t apply. John Gruber argues here that the real race is in reducing the cost of monthly agreements: A “free” Android smartphone versus a $99 or $199 iPhone won’t make much of a difference if the monthly plan costs $80 to $100. Another observer, whose nom de plume is Kontra, thinks we’ll reach a different kind of duopoly where Android will get the volume and Apple will make all the money. See “The Unbearable Inevitability of Being Android, 1995”. And take a look at this great piece felicitously titled “Fragmandroid: Google’s mad dash to Microsoftdom”.

I have my own set of questions about the Mac’s “failure”.

First, shall we agree that Microsoft “open” model is the exception rather than the rule? How many other examples of the Microsoft platform licensing model, with its caveats, prohibitions, and insistence on fealty, do we see? Have we forgotten that Microsoft’s methods led to a conviction of being a monopolist?

Second, there is the Mac’s rebirth. Last year, its US market share approached 10%, with a 90% unit share in the $1k-and-greater segment. For the past five years, Mac unit sales have grown faster than the PC industry.

Even more important: profits. HP is the leading PC manufacturer, with quarterly revenues in the $10B range and 5% operating income. Apple makes only a third of HP’s PC dollar volume per quarter—but with an operating income in the 30% to 35% range. (More details in this May 2nd, 2010 Monday Note.) We’ll have numbers for the October-December quarter in a few days. We’re likely to see a continuation of the dual rise of Mac market share and profits. In the meantime, Apple, for its sins, has been punished with the highest market cap of all high-tech companies, close to $300B.

This could be a blueprint for the iPhone’s future: smaller market share, bigger profits.

Back to the equation and my own interpretation: Applying the lessons from the Mac’s troubled beginnings.

When the Mac came out, it showed immense promise. The execution wasn’t flawless and it suffered from several important shortcomings—the lack of a hard disk, next to nothing in the way of application software compared to the PC. Steve Jobs tried—and tried hard—to get Lotus, Microsoft, and Software Publishing (of PFS: fame) to write apps for the Mac. In a pre-introduction Sales Conference in Honolulu in 1983, we were treated to a mock Dating Game where Mitch Kapor, Bill Gates and Fred Gibbons pledged to date the Mac, to write applications for the new wonder-PC. Ironically, the only “date” that produced anything helpful was Gates with Excel and Word. This was in exchange for a UI licensing agreement that produced no end of trouble.

“Never again.” This must have been Steve Jobs’ motto when, in 1997, he finally assumed undisputed leadership of the company he had co-founded. From then on, Apple was going to control its own future.

Fast-forward to the iPhone: It has the polish the early Mac lacked, it has the support of Apple’s own retail network, it has rid itself of the carriers’ mucking around with handsets and content distribution and, thanks to the iTunes infrastructure, it has its App Store, giving it a huge lead in the breadth and depth of available applications. Not everything works flawlessly but it has been an amazingly well organized campaign that has taken the establishment by surprise.

The result? A fundamentally different situation: While the Mac struggled from day one, the iPhone immediately took the prize.

So, will Android ultimately win, just as Windows prevailed?

My own guess is we’ll get to today’s version of the Mac vs. Windows wars, only faster and better. Faster meaning the iPhone skipped over the Mac’s early struggles. Better means profits. While Android clones proliferate and race to the bottom, iOS devices are likely to retain a substantial share of consumer dollars. Today, Apple reaps close to half of all smartphone profits, (see this Asymco post). That dominance probably won’t last, but in a sea of Android clones, Apple is likely to remain the most profitable smartphone maker. And this is without considering the other devices the iOS platform will power: tablets, iPods, Apple TV…

JLG@mondaynote.com

CES: The Missing Protocol

We’re done with 2010 and off to 2011 with CES, the Consumer Electronics Show. Still hungover from New Year festivities, hordes of exhibitors, store owners, and civilians brave one another and the refined Las Vegas culture in order to show off and ogle the latest gotta-have-it gadgetry.

Once upon a time, the computer industry’s signal event was the NCC, which then morphed into the now-deceased Comdex. Las Vegas cab drivers made no secret of their low regard for us dull computer types: We didn’t know how to have fun. Ah, car dealer conventions… Those guys knew how to enjoy Vegas.

Sympathetic barkers tried to lift our mood. As we streamed out of the exhibition halls at the end of a Comdex day, they plied us with cards advertising choice local businesses and practitioners: ‘Boom boom in the ROM!’ Others were magicians who offered to ‘Change your software into hardware’.

Today, computers, the old kind, are out. Consumer Electronics are in. Actually, computers still reign. They’ve taken over, infiltrated, become the soul of Consumer Electronics. Why do you think Apple dropped the ‘Computer‘ from its name? And why do Microsoft bosses, first Gates and now Ballmer, give the opening Sunday night keynote address? Obligingly, the other Wintel half follows. Intels’ CEO (Paul Otellini after years of co-founder Andy Grove in the role) treats us to nice slides chockfull of nanometers, gigahertz, and everything converged, obediently toeing the MS line.

Computers still rule, but things have changed. We now have these mobile and really personal computers, smartphones and tablets. In that arena, Microsoft and Intel no longer have the power to tell us what to think and what to do, although it won’t stop them from trying. Ballmer will show more tablets…just like last year, only better! And, just like last year, Intel will insist that they now have the right x86 processors for mobile applications.

But minds and wallets have moved on. ARM and Android are everywhere, from GPS devices to home theaters, smartphones, tablets, Internet TVs, and set-top boxes. Even Microsoft-powered Windows Phone devices aren’t using Intel processors: HTC, Samsung and others aren’t suicidal.

So it’s BS as usual, but with a twist: This is The Year of The Tablet. No self-respecting manufacturer will dare show up without a tablet. Pardon, a tableau of tablets, a full Kama Sutra of hardware and software configurations: keyboard or not, touch, pen, Android, mobile Linux derivatives, WebOS, Windows 7 adapted for tablets, ARM or Intel processors.

And, of course, Apple will be absent, preferring to run its own course unencumbered by a trade show organizer and a mess of noisy exhibitors. Results support their consistent “Think Different” mantra. [Update: the cheeky Apple event schedulers have chosen January 6th, the opening day of CES, to launch their Mac App Store.]

All well and good…but one protocol will be missing.

This being the Consumer Electronics Show, we’ll see a flood of new and improved entertainment devices, TVs, home theaters systems, security cameras and other home control products. All of which have a terrible time talking to one another and being centrally controlled, or even simply controlled. Why do you think they make baskets for remotes?

Controlling these devices from one remote is too complicated and expensive. I know a learned high-tech exec with unimpeachable command-line credentials who gave up trying to program a single remote for his home theater. He says he’d rather learn how to use each remote to turn the proper device on and off, set the channel, select the right source or program the PVR.

If you’re geeky—and lucky and take rejection well—you might be able to program a “unified” gadget, a “meta-remote”, one that will learn the right code sequences for all your devices. My suggestion is to get a Logitech Harmony device. (Disclosure: Although I used to be a Logitech director, I left the board about ten years ago and don’t own stock in the company, or in any other while we’re on the topic of possible financial interests.)

The Harmony product line comes in (too) many flavors—ironic, given the stated purpose of simplification. Stick with the Harmony One, it abandons the old ways in which the boss remote “learns” from each individual remote or, worse, where you have to pore through cryptic manuals and manually enter codes for each command. With the Harmony One, you use a Windows/Mac application connected to a Logitech server to describe your devices (make and model) and then you set up activities: Watch TV, Watch a DVD, Listen to Music, use your Apple TV (which Logitech quaintly categorizes as a Media Center PC). The server knows (almost) every device code and talks to the local application which programs the remote for you.

I’m not crazy about Harmony’s desktop app UI nor about the fact that the remote apparently needs to reboot its own little embedded computer after each programming session. Why not just update a configuration file and go? So it’s not perfect, but it works better than anything else…unless you’re prepared to move into a different league and get a professional installation—and a service contract.

Skipping through this klutz’s errors and tribulations, and assuming we now have correct setup, everything works smoothly, right?

Not quite.

You tap the Watch TV activity on the remote’s little touch screen. No TV. Tap the Help button and it takes you through a sequence of questions: Is the PVR on? No. The remote attempts to turn it on. Did this solve the problem? No. Is the TV input switched to HDMI 1? No, it was left on HDMI 2 by the previous activity. The remote attempts to cycle through the sequence of HDMI inputs because this particular TV doesn’t have a command to go directly to HDMI 1.

In other words, the remote flies blind. It has no way to determine the state of the devices it’s attempting to control. Commands are one-way messages, no dialog, no feedback. Some commands, such as On/Off, are toggles: There aren’t separate On and Off commands, just one to switch states. That’s what the TV or receiver knows and that’s what the remote has to work with. If someone had the primitive impulse to turn the TV on manually, the remote turns it off when you ask it to turn it on. Hence the clever but pained process in the Harmony’s error recovery checklist.

In an alternate universe, you take your remote, approach the device you want to control and press the Talk To Me button. The TV answers with a bitstream describing its make, model, commands, and current status. The remote then talks to your computer, or smartphone, or directly to the Net and gets the right programming code for the device. When you tap Watch TV, each concerned device, the set-top box, the TV, the receiver for better sound, acknowledges receipt and execution of the command, or else provides an error message.

Why can’t TVs, receivers and DVD players answer questions? Some devices have Ethernet or even WiFi connections and they all contain one or more micro-controllers, but they still resist interrogation. How hard would it be to program a device to provide some feedback? I’d be happy with simpler Infrared or RF (radio) exchanges.

That’s the missing protocol. Today’s consumer devices aren’t deaf, but they’re dumb. They need to talk back.

JLG@mondaynote.com

Video will be the online advertising engine

Last week, Akamai quietly rerouted loads of its client’s traffic to deflect Wikileaks related attacks. The company, based in Cambridge (Massachusetts), had a surfeit of busy days fighting massive DDoS (Distributed Denial of Service) attacks. These raids were directed at companies seen as too complacent with the US government (the so-called “Wikichickens”, as coined by the financial site Breaking Views). Akamai’s countermeasures involved quickly moving data from one server to another or, when the origin of a DDoS was detected, rerouting the flood of aggressive requests to decoy URLs.

Akamai Technologies Inc. is specialized in providing distributed computing platforms called CDN (Content Distribution Networks). Its business is mainly to reduce internet latency and to offload its customers’ servers. As its president David Kenny told me last week, Akamai runs on three main business drivers: Cloud Computing, e-commerce, and video delivery (with the associated advertising).
The first driver is very straightforward: as applications move away from the desktop, users need to feel they get about the same response time from the cloud as they do from their hard drive. The same is true for infrastructure-as-a service. All is built around the idea of elasticity: servers, storage capacity and networks dynamically adjusting to demand.
The second component of Akamai’s business stems from the need for e-commerce sites’ availability. On Thanksgiving, Akamai said it saved about $50m in sales for its e-commerce clients who came under a series of cyber attacks. On a routine basis, the technology company stores thousands of videos and other bandwidth intensive items on its servers.
The third pillar is the biggest, and the more challenging, not just for Akamai but for the commercial internet as a whole: the growth of video, and of its monetization, will become more bandwidth hungry as advertising migrates from contextual to behavioral.

A couple of weeks ago, David Kenny was in Paris at a gathering hosted by Weborama, the European specialist of behavioral targeting (described on a previous Monday Note How the Web talks to us). He presented stunning projections for the growth of internet video.
Here are the key numbers :
- Global IP traffic will quadruple between 2009 to 2014 as the number of internet users will grow from 1.7 billion today to 4 billion in 2020.
In 2014, the Internet will be four times larger than it was in 2009. By year-end 2014, the equivalent of 12 billion DVDs will cross the Internet each month.
- It would take over two years to watch the amount of video that will cross global IP networks every second in 2014.

Traffic evolution goes like this :

Let’s pause for a moment and look at the technical side. Akamai relies on a distributed infrastructure as opposed to a centralized one. It operates 77,000 servers, which is comparatively small to Google’s infrastructure (between 1m and 1.5m servers on 30 data centers). The difference is that Akamai’s strategy is to get as close as possible to the user thanks to agreements with local Internet Service Providers. There are 12,000 ISPs in the world, and Akamai says it has deals with the top 1,000. This results in multiple storage and caching capabilities in more the 700 biggest cities in the world.

This works for a page of the New York Times or for a popular iPhone application (Apple, like Facebook are big Akamai clients). In Paris, Cairo or Manilla, the first customer who requests an item gets it from the company — whether it is from NY Times or Apple’s servers — and also causes the page or the app to be “cached” by the ISP. This ISP could rely on storage leased from a university or a third party hosting facility. From there, the next user gets its content in a blink without triggering a much slower transcontinental request. That’s how distributed infrastructure works. Of course, companies such as Akamai have developed powerful algorithms to determine which pages, services, applications or video streams are the most likely to be much in demand at a given moment, and to adjust storage and network capacities accordingly.

Now, let’s look at the money side. What does advertising have to do with bandwidth issues? The answer is: behavioral vs. contextualization. Ads will shift from a delivery based on context (I’m watching a home improvement video, I’m getting Ikea ads), to targeted ads (regardless of what I’m watching, I’ve been spotted as a potential motorcycle buyer and I’m getting Harley Davidson ads). Such ads could be in the usual pre-roll format (15 sec before the start of the video) or inserted into the video or the stream, like in this example provided by Akamai.

As online advertising spending doubles over the next ten years, video is likely to capture a large chunk of it. It will require a increasing amount of technology, both to refine the behavioral / targeting component, and to deliver it in real-time to each individually targeted customer. This is quite a challenge for news media company. On one hand, they are well-placed to produce high value contents, on the other, they will have to learn how to pick up the right partner to address the new monetization complexities.

frederic.filloux@mondaynote.com

Google’s Self-Driving Car

by Jean-Louis Gassée

I want one! You probably do, too. So do millions of readers of John Markoff’s October 21st NY Times piece on Google’s revolutionary cars that drive themselves—in traffic! (More drooling on this ABC News video here.)

Is this really real, or is it a demo, another carefully choreographed PR exercise designed to enhance Google’s image as a nurturing friend of the people and their planet?

Autonomous, self-driving, driverless… The concept and implementations have been around for a while, in Europe, in Japan—the land of robotics—and, of course, in the US. In 2004, DARPA, the forefather of the Internet, launched the DARPA Grand Challenge, a driverless car competition. No entrant finished the first race, but in 2005, Stanley, Stanford’s vehicle, took the prize.

In September of this year, we saw Shelley, a driverless Audi, ascend Pikes Peak (14,115 ft/4,302 m). The car performed well although the event was marked by tragedy when helicopter filming the ascent crashed on the mountainside. The project, a joint venture between Stanford and Volkswagen’s Electronic Research Lab in Palo Alto, has since been suspended. (On a personal note, about 15 years ago I drove to the very top of Pikes Peak—slowly but easily—in a rental car. You can do it and enjoy yet another movingly beautiful part of Big Sky Country.)

How real is Google’s driverless car? Based on the DARPA and Stanford heritage, I’d say pretty real. Google was, of course, founded by two Stanford alumni, now with unlimited money and computer power. Moreover, they’ve advanced the art. Stanley and Shelley were solo drives on closed roads. Google’s car drove itself in traffic. From the Markoff article:
“…seven test cars have driven 1,000 miles without human intervention and more than 140,000 miles with only occasional human control… The only accident, engineers said, was when one Google car was rear-ended while stopped at a traffic light.”

Now that we know about the project, sighting stories surface. Robert Scoble, a noted blogger, has one. In retrospect, I now recall two mornings when I found myself driving next to the self-driving Prius on the often-packed Route 101 somewhere between Palo Alto and San Francisco. I mistook the vehicle for one of the Google Street View cars…

Henry Blodget, Business Insider’s boss, wonders if self-driving car research is a good use of Google shareholders’ assets. Perhaps the company should spin the project off to an independent venture and give the engineers a piece of the action. More

HP’s Board Gets No Respect

.

And rightly so.

You recall: Last August, HP’s Board of Directors dismissed its wunder-CEO, Mark Hurd. Well-loved by Wall Street, although not so much by employees, Hurd turned HP around after the lackluster Fiorina years. He made acquisitions, cut costs, and put the company at the very top of the IT industry. But HP’s fearless leader was accused of having entangled himself, carnally and emotionally, with a female “marketing contractor”, and of having engaged in a few financial peccadilloes in the process of covering up the relationship.

I’ll hasten to add that Hurd reached an amiable—and solid—settlement with the former soft-porn actress. By “solid settlement” I mean we’ve heard exactly nothing from the aggrieved woman, or from Gloria Allred, her highly expressive Hollywood attorney. (As a self-described “Fearless Advocate for Justice and Equality”, Ms. Allred appears to dig gold on behalf of the rejected/dejected paramours of media and sports celebrities.)

While Hurd tried to do the right thing after his alleged mistakes, HP’s Board and management repeatedly and needlessly pilloried him, barely stopping short of accusing their former CEO of fraud. (See more sorry details in this Monday Note.)

All this led Larry Ellison to publicly lambaste the HP Board for kicking Hurd to the curb—and to promptly hire him as co-president of Oracle.

Ignoring the “when you’re in a hole, stop digging” maxim, HP doubles down and sues Hurd. Their complaint? As Oracle co-president, Hurd will inevitably misuse HP’s confidential information and cause his ex-employer grievous harm.

Larry chuckles and lashes out again. He calls HP’s suit vindictive, which is true, and adds that it will make it impossible to continue as business partners, only somewhat true as each had already recently moved into the other’s business. Oracle bought Sun and HP got into software and services by acquiring EDS.

A few days later, on the eve of Oracle’s OpenWorld, the suit is settled. HP’s pain is salved by a few million dollars, and the threat of the misuse of confidential information is suddenly, mysteriously no longer an issue. One wonders about the damage HP’s Board did to the company’s reputation by treating this alleged sinner in such a bullying and ultimately lame way.

While Hurd stays out of the limelight plotting Oracle’s next moves, HP directors keep stoking the coals for their critics. In their quest for a new CEO, the Board rejects internal candidates for the third time and pick an outsider: Léo Apotheker, ex-CEO of SAP Germany. This leads to another salvo of Ellison jibes. (When Larry calls himself “speechless”, you know he’s having a good time.)

But wait, there’s more.

What does the Board do besides recruiting Apotheker? They hire Ray Lane as Chairman. As the link to his Kleiner Perkins bio proves, Lane is, without a doubt, an “industry figure”, the type Kleiner Perkins, one of the largest VC firms in the world, likes to co-opt. But the slick KPCB bio (there is, significantly, nothing on him on Wikipedia) omits an important episode: Ray’s acrimonious departure from Oracle. The more charitable souls among us hope that everything is forgiven and forgotten. But knowing the protagonists, Larry and Ray, a more realistic view is that HP’s Board brought Ray in with a specific intent: They want to strengthen the team for a fight against Oracle.

There are three problems with such a move.

First, we now have two muscular venture capitalists on HP’s BoD: Lane and Marc Andreesen, from Andreesen Horowitz (as an aside, admire the firm’s spartan site). While some argue that it’s great that HP has such connections in the VC world (as if any executive or Board member couldn’t get us VCs to return their calls), there’s a governance problem. There will be many situations in which Mark’s or Ray’s existing investments and connections will raise conflict of interest questions; they won’t be deemed independent directors. More

The Carriers’ Rebellion

Before the Steve Jobs hypnosis session, AT&T ruled. Handsets, their prices, branding, applications, contractual terms, content sales…AT&T decided everything and made pennies on each bit that flowed through its network. Then the Great Mesmerizer swept the table. Apple provided the hardware, the operating system, and “everything else”: applications, music, ringtones, movies, books… The iTunes cash register rang and AT&T didn’t make a red cent on content.

In the eyes of other carriers, AT&T sold its birthright. But they didn’t sell cheap. The industry-wide ARPU (Average Revenue Per User per month) is a little more than $50. AT&T’s iPhone ARPU hovers above $100. Subtract $25 kicked back to Apple, and AT&T still wins. More important, AT&T’s iPhone exclusivity in the US “stole” millions of subscribers from rivals Verizon, Sprint, and T-Mobile—more than 1 million per quarter since the iPhone came out in June, 2007.

(Legend has it that Jobs approached Verizon before AT&T, but Apple’s demands were deemed “obscene”. If the story is true, Verizon’s disgust lost them 10 million subscribers and billions in revenue—much more than it would have made in content sales putatively under its control. Another theory, unprovable but preferable, is that Apple went for the worldwide “GSM’’ standard, hence AT&T.)

To the industry at large, the damage had been done. Jobs disintermediated carriers. Consumers woke up to a different life, one where the carrier supplied the bit pipe and nothing else. Yesterday’s smartphones became today’s mobile personal computers and carriers devolved into wireless ISPs, their worst fear.

Enter Android.

Android is like Linux, it’s Open Source, it’s free. And it’s very good, and rabidly getting better. But with two important differences. Android is Linux with money, Google’s money. And Android is Linux without a Microsoft adversary. There’s no legally—or illegally—dominant player in the smartphone/really personal computer space. Nokia, Palm, Microsoft, and RIM were and still are much larger than the Disintermediating Devil from Cupertino.

Handset makers and software developers love Android, new handsets and new applications are released daily; see the Android Market here. The current guess is that Android will grab the lion’s share of the handset market by 2012. Nokia, RIM, and Microsoft may disagree with that forecast, and Apple is certain to stick to its small market share/high margin, vertical, bare-metal-to-flesh strategy.

Carriers get excited about Android, too. For two reasons. First, Android (and the very good bundled Google apps) allows handset makers to make inexpensive devices. Carriers and Google both encourage a race to the bottom where handsets are commoditized, but smart.

Second, because Android is an Open Source platform, carriers can work with handset makers, they can dictate the feature set and, as a result, revitalize the revenue stream. They can promote their favorite apps, content, and services sales that have been choked by disintermediation.

But it’s not a straight shot. Android lays out the playing field for a contest between Google and carriers. More

HP’s Board of Directors: Redemption or More Insanity Ahead?

HP’s Board of Directors has accumulated an impressive record of bad judgment calls, the latest being the lame lawsuit against their recently deposed CEO, Mark Hurd, who quickly joined Oracle as Co-President and Director.

The History

Once a revered Silicon Valley icon, HP was arguably the first worldwide success to emerge from pre-war Stanford where Bill Hewlett and Dave Packard studied under the illustrious Frederick Terman. Unfortunately, the insiders who were groomed to replace “Bill & Dave”—first John Young, an HP lifer (1968-1992), followed by Lew Platt, another long-termer (1966-1999)—presided over the company’s long slide into comfortable bureaucracy and middling financial performance.

In 1999, HP’s Board was seduced into giving the CEO mantel to Carly Fiorina, a gerontophiliac sales exec from AT&T/Lucent…only to fire her in early 2005. Known for her posturing and opaque pronouncements, Fiorina antagonized and mystified insiders and industry observers alike. John Cooper, CNET’s Executive Editor and longtime tech writer, characterized one of her more frustrating talks as “a Star Trek script” containing “enough business-babble to reduce even the most hardened McKinsey consultant to a state of dribbling catatonia”. Nice.

To succeed Fiorina, HP went outside again and, this time, managed to snare an experienced and accomplished CEO: As head of NCR, Mark Hurd had led the company through a successful turnaround.

About a year after Hurd’s election, HP’s Board became embroiled in the Pretexting scandal. Board members spied on employees and journalists—and even on each other—in an attempt to track down leaks of confidential strategy documents. This ugly episode led to several Board and executive departures: Chairwoman Patricia Dunn was thrown under bus; HP’s General Counsel, Ann Baskins, “took the Fifth” at a Senate hearing; another director, Tom Perkins, and several employees left as well. What Mark Hurd actually knew or did in relationship to this episode has never been clarified.

Despite the scandal and the departures, Hurd made good on his reputation as a turnaround CEO and, through carefully crafted acquisitions and cost-cutting, put HP back at the top of the computer industry in just five years. His wizardry with numbers, his sober talk, and his attention to execution left the impression that HP had finally found the right helmsman.

But then disaster struck. As discussed in our August 29th Monday Note, HP’s Board unceremoniously fired Hurd, publicly berating him for conduct unbecoming a CEO and barely stopping short of accusing him of fraud. And then, after pillorying him, the company inexplicably paid off the “disgraced” Hurd to the tune of $30M to $40M. HP shareholders sued the directors and the media roasted them.

Enter Ellison

Larry Ellison and Mark Hurd have known each other for several years. They’d been business partners when HP and Oracle allied themselves in serving large government and enterprise clients—and they’re tennis buddies as well.

After harshly criticizing HP’s trustees for firing a star executive, Ellison hired Hurd. In keeping with his leadership style, Ellison made room for the new lieutenant by summarily chucking the previous tenant, Charles Phillips, who, ironically, had also become embroiled in a “relationship contretemps” with an ex-paramour. I’ll hasten to say that I prefer Larry’s summary and clean manner to HP’s: Chuck Phillips had a successful career at Oracle, Larry wished him well on his way out, the money flowed, and everyone moved on to the next stage of their lives. More

Nokia’s New CEO: Challenges

by Jean-Louis Gassée

Here we are, back from last June’s Nokia science-fiction romp. The company has finally elected a new CEO to replace OPK, Olli-Pekka Kallasvuo. 43-year-old Stephen Elop’s bona fides are in order: As President of Microsoft’s Business Division (since January 2008) he was in charge of the Microsoft Office money machine and was part of the company’s “Leadership Team”. He was well-paid (the 2009 proxy pegged him at $4.8M, excluding longer-term items) and rumor placed him at the top of the short list to succeed Ballmer…

So what possessed Elop to take the Nokia job?

The answer must be that he’s been given the opportunity to make his mark. Having seen Microsoft from the inside, he must have realized that he was being groomed to be no more than a competent caretaker. He might even have decided he wouldn’t get, or wouldn’t want, the big prize, the CEO crown. So, I speculate, he went for the challenges of a turn-around situation.

The goal is clear: Restore Nokia to its former glory as the ne plus ultra of smartphones. But the path to this renaissance isn’t a straight shot—it’s an obstacle course.

Numbers

Mr. Elop’s most immediate challenge lies in Nokia’s financial performance. During the last three years of OPK’s tenure, Nokia lost 75% of its market cap, plunging from $40/sh in 2007 (the year the iPhone came out) to less than $10 today, although with a nice 2% uptick following the CEO announcement:

A more direct way to look at the numbers challenge is a single datum: Today, Nokia gets about €155 ($196) per smartphone, down from €190 last year. In the meantime, Apple gets more than $600 per iPhone. (See the June 2010 Financial Times story here.)

It gets worse when the total average number is considered, smartphones and not-so-smartphones together. That average now hovers around €60, which means Nokia sells very large numbers of low-end phones that yield very little profit. They’re in great danger of being squeezed by the incoming low-end Android horde.

But the numbers are a mere proxy for the bigger trial: The product itself, the smartphone.

Once the category leader, Nokia is now struggling to catch up with HTC, Motorola, Samsung and, of course, RIM/Blackberry and Apple. Pugnacious Nokia die-hards adhere to the company’s sisu, but the market has spoken—and it enunciates more distinctly every quarter. See this Business Insider chart:

Given today’s market turbulence, one can’t help but admire the charter’s ability to “see” as far as 2014—but the trend is obvious. Will upcoming products such as the N8 reverse it? Early reviews are mixed. For Nokia, the N8 isn’t likely to do what the Razr did for Motorola in 2003 or what the latest Droids are doing now. Motorola’s conversion to Android seems to have righted the ship and Sanjay Jah, the Co-CEO in charge of the company’s mobile business, is on his way to leading a self-sustaining entity, one that could finally be spun off as planned.

Software

Today, Nokia pushes devices that use older Symbian S60 stacks, newer Symbian^3 and Symbian^4 engines, as well as a mobile Linux derivative: Meego. Imagine the chuckles in the halls of Cupertino, Mountain View, and Palo Alto. Even with plenty of money and management/engineering talent, updating one software platform is a struggle. Ask Apple, Google, or HP, and the chuckles quickly become groans. Nokia thinks it can stay on the field when it’s playing the game in such a disorganized fashion? More

Smartcameras in our future?

I have two cameras in front of me: My smartphone and a Canon’s S90. And I wonder: Why isn’t there an app store for this neat compact camera?

I can download any number of third-party, post-processing photo applications to my smartphone. I can crop, filter, stitch, frame… And there will be more applications tomorrow. With my “real” camera, I’m stuck with yesterday’s features.

As the saying goes, the better camera is the one you always carry. (By the way, “Better Camera” is the name of a smartphone application…) In that sense, smartphone cameras have a major advantage, they’re always at the ready.

But…smartphones cameras have tiny sensors, tiny lenses, tiny flashes. While the technology improves with each new generation, smartphone cameras will always lag behind the resolution, speed, and depth of single-purpose compact cameras, with their better lenses and bigger sensors. And, yes, compared to even “realer” cameras such as DSLRs, the compact cousin has much to learn, but try stuffing the callipygian Nikon D3s in your pocket.

Wouldn’t it be neat to have the superior picture taking capabilities of the Canon S90 (or other competitors such as the upcoming Panasonic LX-5) and the benefits of downloadable third-party applications to perform more in-camera processing and editing, to say nothing of smartphone-like communication capabilities?

Technically, such a hybrid is easier said than done. Add the circuitry (processor, memory, communications) of a smartphone to an existing compact camera and, done poorly, you’d get a “feature-rich” monstrous contraption that does more than either donor product, but that does none of them as well. Cost would also be a challenge.

But the idea is in the air.

Years ago, enterprising geeks found a way to break into and modify Canon’s DIGIC, the camera’s on-board image processor. More