Amazon's Q1 2012 Figures Show Kindle Going Strong

by Holly Shoemaker

Amazon announced its Q1 2012 figures on Thursday, April 26, 2012. The company’s earnings beat analysts’ expectations.

Numbers at a Glance

• Net Sales – They increased by 34 percent to $13.18 billion, compared to $9.86 billion in Q1 2011.
• Operating Income – Amazon reported a figure of $192 million, compared to $322 million in Q1 2011.
• Net income – This decreased by 35 percent to $130 million, compared to $201 million in Q1 2011.

While Amazon never discloses how many Kindle devices it sells based on type, the Kindle Fire is Amazon’s best-selling item. According to the company, nine out of 10 of its top sellers come from Kindle-related revenue, including devices, e-books and digital movies. The Kindle Fire is the company’s best-selling item.

Concluding Thoughts

Amazon has marketed its Kindle line well. While the company may not profit as much as Apple from selling a tablet, the company knows how to generate income from the accessories that come with owning a device.

A recently published survey from comScore reports that the Kindle Fire now accounts for about 54 percent of all Android tablet sales. As long as the company continues to invest in its Kindle brand, it will keep prospering in the ongoing tablet wars.

iPhone Sales Increase Despite Weak iPhone Sales from AT&T and Verizon

by Holly Shoemaker

Despite Verizon and AT&T falling below expectations for iPhone sales, Apple’s iPhone profits steadily grew in Q1 2012.

Apple's Numbers at a Glance

Apple sold 35.1 million iPhones during Q1 2012, which beat analysts’ expectations.  Much of the growth is attributed to the iPhone 4S launching on China Unicom in January and China Telecom in March. Apple’s revenue in Asia grew by 32 percent over the previous quarter.

iPhone Numbers at a Glance for AT&T and Verizon 

• AT&T announced on Tuesday, April 24, 2012 that it activated 4.3 million devices.
•  Last week, Verizon reported that it activated 3.2 million devices for the first quarter.

Analysts contribute the drop in sales to three main reasons:

• The increase in completion from Google – Approximately half of all smartphone sales from Verizon were Android devices, while AT&T sold about 22 percent of non-Apple devices.
• Apple's selling cycle – Consumers know the pattern that Apple launches new products. Analysts say that Apple may no longer have the stamina to avoid seasonal decreases in sales. Apple is expected to launch the new iPhone, or the iPhone 5, the naming convention is unknown at this time, this summer.

Concluding Thoughts

While the numbers are down for certain carriers, Apple’s profits remain high. Because the intentional market accounts for roughly two-thirds of Apple sales, it is likely that overseas sales will compensate for any decline we may see in Q2 2012. In addition, the new iPad just went on sale in March.

What I find the most interesting is that selling less iPhones helps carriers because of the cost of selling the devices. Apple makes carriers pay high upfront costs. Therefore, selling fewer iPhones sometimes helps profit margins.

Fitch Ratings Downgrades Nokia's Debt Status

by Holly Shoemaker

After failing to meet analysts’ expectations last week, Fitch Ratings downgraded Nokia’s debt status to junk on Tuesday, April 24, 2012.

Fitch Ratings lowered the company to a BB+ rating; the lowest rating is a BBB-. The agency also gave Nokia a “negative” long-term outlook, which means the company could have its debt rating lowered again.

In addition to Nokia’s disappointing numbers last week, Fitch also downgraded the company based on the following:

• The company’s decreasing number of devices and services. 
• Fitch cited concerns that Nokia would post bigger operating losses the next quarter. To avoid further downgrade, Nokia must show “substantial improvements” in Q3 and Q4 2012 and during 2013, including keeping sales consistent and earning profits on smartphones like the Lumia 900.

Despite this news, Nokia’s stock increased slightly on Tuesday.

Concluding Thoughts

Nokia’s fate will come down to the Lumia line.  The company has increased its advertising and will have to convince consumers that the Windows-based smartphone provides a solid alternative to Android or iPhone devices. While Nokia certainly faces hurdles, I am not ready to call Nokia the Finnish Research in Motion (RIM).

Smartphone Payments to Replace Cash and Credit?

by Holly Shoemaker

A new study conducted by the Pew Internet and American Life Project has found that technology experts and some Internet users think smartphone payments will replace cash and credit card payments by 2020.

Overview of Survey Findings

About 65 percent of respondents agreed with the statement that by 2020 consumers will fully adopt smart-device swiping for purchases. They also agreed that people will trust these devices and that they will replace cash and credit cards in advanced countries.

About 33 percent of respondents agreed with an opposite statement that said people do not trust Near Field Communications technology (NFC). They do not agree that these devices will be secure and have concerns regarding privacy.

The survey tested 1,021 Internet users and experts. It is important to note the survey tested non-random, opt-in people. Respondents were invited to participate via email, Twitter and Facebook from the Pew Research Center’s Internet & American Life Project and the Imagining the Internet Center at Elon University.

Concluding Thoughts

Based on the respondent pool, these results should not surprise anyone. Mobile payments will likely become another way to make payments, as we have seen with Google Wallet, or a preferred method to collect payment. However, the United States has a long way to go before thinking that most people will give up paying via cash, credit cards or debit cards.

Verizon May Offer Windows 8 Phone

by Holly Shoemaker

Despite Nokia potentially not meeting market demands by partnering with Microsoft, Verizon sees the potential of working with Microsoft to expand its product offerings.

Fran Shammo, Verizon’s CEO, said the company wants to add a third software competitor. While unconfirmed, Verizon is expected to develop a phone using the Windows 8 platform, also known as Apollo. Consumers should expect the new offering this 2012 holiday season.

Concluding Thoughts

Any additional choices mean consumers gain the upper hand in dictating the direction of the smartphone market. While we have yet to truly see how Windows-based smartphones will compete, Verizon is the largest carrier, and it does provide another alternative to iPhones and the myriad of Android phones available.

Nokia Posts Losses: Restructuring Ahead

by Holly Shoemaker

As expected, Nokia announced profits that fell short of Q1 2012 expectations on Thursday, April 19, 2012. 

Numbers at a Glance 

• The company reported a loss of $1.2 billion, or 929 million euros. 
• When compared to the last 12 months, sales fell by 30 percent to 7.354 billion euros. The figure was in line with analysts' expectations.
• In China, a growing market for Nokia, sales fell 70 percent when compared to last year’s figures.

Nokia's Response

In its conference call with shareholders, Nokia acknowledged the decline in sales, and attributed the numbers to restructuring changes. In Feb. 2011, Stepen Elop, Nokia’s CEO, spearheaded the campaign to reinvent Nokia by switching to a Microsoft Windows-based system, the Lumia line of phones. 

During the call, Elop confirmed that Colin Giles, Nokia’s head of sales, will exit the company in June 2012. The company also plans to decrease its operating costs. Elop said these moves are needed so the company may compete. In particular, the company needs to worry about Samsung. Samsung will likely dethrone Nokia and become the world's largest handset manufacturer.

Concluding Thoughts

Nokia has made significant changes and no one should overlook that the company has differentiated itself from other smartphone manufacturers. With the wide range of Android Market phones available in North America, introducing a Windows 7 phone seemed like a logical way to re-enter the North American market.

Nokia shipped two million Lumia devices in Q1, and analysts have pointed out that it took time for the Android Market to take off. The same could hold true for Nokia.

Ultimately, numbers speak louder than words, and Elop will need to prove that partnering with Microsoft was the correct choice over going with an Android smartphone. In Q4 2012, we will better know if Nokia's partnership with Microsoft pays off.

Johns Hopkins Likely to Set Benchmarks for Medical Mobile Apps

by Holly Shoemaker

Johns Hopkins University has announced that as part of its Global mHealth Initiative it has started researching and analyzing current medical mobile apps. This is an impressive undertaking as Research2Guidance, a market research firm, estimated that there are over 40,000 mobile health apps on the market.

Research Overview

Johns Hopkins will conduct 49 studies. Its goals are to evaluate current health app offerings, and examine what strategies work best to assist doctors, medical professionals and consumers. The Global mHealth Initiative will compare how well the apps work against traditional methods such as clinic visits.

Alan Labrique, director of the Johns Hopkins Global Health Initiative, acknowledged that case studies only go so far. He said people need to have the willingness to use technology and follow advice for an app to work. In the end, patients will need to embrace technology so they better understand how to monitor and change behaviors that affect health.

Concluding Thoughts

While many apps come with disclaimers, doctors and patients will feel more secure by using apps recommended from a reputable university like Johns Hopkins. Its research will add to the legitimacy of medical mobile apps and likely help standardize best practices for developers.

Nokia’s Quick Lumia 900 Fix Shows Commitment to Customers

by Holly Shoemaker

On Wednesday, April 11, 2012, Nokia announced a “memory management issue” affecting the Lumia 900. The company stated the issue was unrelated to hardware or the network. On Friday, Nokia announced it fixed the data connectivity glitch that it attributed to a bug within the phone's software.

Those who paid $99.99 for the phone, available from AT&T, will receive a call credit for $100. Nokia is offering the credit through April 21, which essentially makes the phone free. Customers may download the update from Zune or the Windows 7 Connector.

The fix came earlier than expected as Nokia planned to announce it on Monday, April 16, 2012. Resolving the bug early was a needed step for Nokia. The company announced this week that it will not meet analysts’ expectations for Q1 2012. The company is likely to fall three percentage points short of expectations.

To date, the company has sold 12 million smartphones in Q1 2012, down from the 19.6 million sold in Q4 2011.

Concluding Thoughts
 

I am surprised that Nokia found a software bug as the Lumia 900 appeared to go through rigorous testing. However, Nokia acted quickly to resolve the issue. The company's honesty is also refreshing and shows a focus on customer service. Some may count Nokia out at this point, but it is too soon to tell - the Lumia 900 has been on sale for less than a week. The company has some time to see how the United States responds to its latest phone, the brand still has international appeal, and Nokia has yet to approach the frustration level that plagues Research in Motion (RIM).

More to follow next week when Nokia officially publishes its numbers…

Is the Fix In? DOJ Sues Apple for e-Book Price Fixing

by Holly Shoemaker

I discussed in March how the U.S. Department of Justice (DOJ) started to investigate Apple for e-book price fixing. On Wednesday, April 11, 2012, the DOJ filed a lawsuit against Apple and five publishing companies for price fixing. The publishers include: Simon & Schuster, Hachette Book Group, Penguin Group, Macmillan and HarperCollins. HarperCollins, Simon & Schuster and Hachette have since settled.

Overview of DOJ’s Case

The case centers on the pricing strategy used with Apple’s 2010 iPad release. The DOJ claims that Apple conspired with the five publishers to increase e-book prices, which prevented price competition.

• Agency model – Apple and the publishers entered into an "agency model" agreement. This allowed the publishers to set e-book prices. In turn, Apple received 30 percent of the profits. Part of this component included a “most favored nation” clause, which stipulated that retailers, like Amazon, had to partake in agency deals for four months.
• Executive involvement – The DOJ said that high-level executives held secret meetings and discussed how to get Amazon to cooperate in offering books at what they deemed acceptable price levels.

Apple’s Response

Apple does not make public statements too often. It did in this case. Apple maintains it allowed publishers to set e-book prices just like developers set prices for apps. Therefore, the company claims it did not engage in price fixing.

Concluding Thoughts

Ultimately, Apple used contractual agreements to force parties into an agency model. However, the issue is a murky one as Amazon has engaged in tactics that some would call price fixing to promote its Kindle line.

Because the DOJ claims to have recordings and documents, it has a stronger case against Apple. Furthermore, some of the publishers were against the agency model from the start. Clearly the decision to promote and “force” others into an agency model was Apple’s e-book strategy to compete with Amazon. Ironically, it will have the opposite effect as Amazon now gains the prime position for setting pricing. In the end, the action taken by the DOJ will result in lower prices for consumers. It may also impact Apple's e-book textbook plan.

New iPad Tops Consumer Reports List

by Holly Shoemaker

Consumer Reports came out with its latest ranking of tablets earlier this week. At the top of the list, is Apple’s new iPad.

Report Overview

The new iPad topped the list based on the following features:

• High-resolution screen – According to the company’s testers, the screen provides the greatest level of detail and color accuracy of all tested tablets. Based on this, Consumer Reports has said it will adjust its excellence rating to reflect its assessment of the new iPad’s screen. The retina display is also ranked the best feature by iPad owners.
•  Camera – The new iPad features a five-megapixel camera.
•  Faster Connectivity – The new iPad also ranked well because of its 4G support.
•  Battery life – While many articles discuss Consumer Reports’ initial findings about potential overheating problems when running energy-intensive games, the organization’s tests showed the iPad has a longer battery life than other tested tablets.

Some Android tablets reviewed, and recommended with a “very good” rating, included the:

• Samsung Galaxy (Wi-Fi only) – This tablet ranked one point higher than the iPad 2.
• Toshiba Excite 10LE – This tablet earned high marks for being the lightest 10.1-inch tablet. It weighs in a little over a pound.
• Pantech Element – Consumer Reports said this tablet has the longest battery life of tested eight-inch tablets. The tablet is also waterproof.

Lumia 900 on Sale Tomorrow: Time to See if Nokia and Microsoft Will Compete

by Holly Shoemaker

In January, I discussed how the Lumia 900 garnered attention at the CES convention held in Las Vegas, Nevada.  I also discussed how the Lumia 900 provided the opportunity to help Nokia re-enter the North American smartphone market.

Starting tomorrow, April 8, 2012, consumers will have the opportunity to see for themselves if the Lumia 900 lives up to expectations.

Stakes High for Nokia and Microsoft

  

The success of the Lumia 900 will likely decide the fate of Nokia in the United States. After all, we have not seen a smartphone from Nokia in about five years.

Microsoft also has a lot at stake. Its release of Windows 7, while a vast improvement to Vista, did not meet many stakeholder expectations when Microsoft released it in late 2010. Current data also estimates that Microsoft holds less than four percent of the smartphone market share.

Benefits for Consumers and AT&T

AT&T and consumers will benefit from the Lumia 900. In addition to offering another choice between an Apple and Android phone, the phone runs on AT&T’s 4G LTE network – this is the first LTE-driven Windows Phone.

Those who want a lower priced phone are also in luck. AT&T will sell the Lumia 900 for $100.

Concluding Thoughts 

The prep work is complete and both Nokia and Microsoft took the necessary steps to develop, debug and market the phone. Based on the buzz, the phone should succeed. If it does not, there is always Nokia’s focus on China.