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Spillikins №132. Apple Strikes Samsung – The First Offensive in The Long War

The last week was quite hectic and pretty eventful. It's late night for me in one of the most fascinating cities in the world, Hong Kong, but I soldier on and keep typing. I hope I'll have time to share my travelling experiences with you in the coming Spillikins issues. I have visited five countries during the last three weeks and I'll visit five more in the next three weeks. The week was so rich for the news that I will have to stick only with the biggest ones – the ones that are really interesting and make you think. Let's get down to it.

Apple vs. Samsung – It's On

I have been watching the Apple/Samsung confrontation with a great interest but I never expected the companies to get so serious so quickly. I suppose no one could have predicted it and what we the news we get today are extremely interesting. I remind you that Apple got the action going back when no one really believed that such litigation was possible. I recommend getting familiar with the chronology of this conflict:

Apple sues Samsung and Receives Counterclaims

Apple started the offensive by filing up a lawsuit in an Australian court claiming that Samsung Galaxy Tab 10.1 is a copycat of Apple iPad2. Sales of the Samsung tablet were banned in Australia for a time being postponing its release. This did not affect the Samsung due to the insignificant role of the Australian market for the company. However, Europe is a whole different level and the court in Dusseldorf has put the Samsung tablet sales on hold in the EU until the circumstances are clarified. Dusseldorf is famous among patent lawyers for banning sales in no time. Europe has not yet seen patent cases this big – it is an actual full scale patent war. The ban covers all new shipments of the Samsung tablet, the ones that are already there can go on sale. The ban also does not cover the Netherlands but Apple has already filed claims to stop the sales in the Netherlands as well to cease the Samsung sales all across the EU.

Apple has undermined the sales of its biggest competitor which cannot yet compete as an equal – Apple iPad2 remains the best tablet on the market. However, the Samsung tablet sales are too big not to be dealt with. This is a general offensive against Google and Android and Apple is waging the war not only against Samsung. This South Korean company became one of the targets for being on Android's side. There are rumors among the hardware manufacturers that Apple may go back to hardware licensing i.e. allow other companies to produce computers for Apple's OS. It may sound ridiculous now but it makes sense in the medium-term perspective. Such a move will hit Microsoft and rapidly increase Apple's share on the market. As of today, it does not matter whether Apple will actually do it – what matters is that Apple is going against anyone siding with Google. And it won't surprise me if Samsung tries to negotiate with Apple in order to produce Apple compatible devices after receiving little support from Google in terms of protecting their products. This is one of the possible scenarios of this massive war.

Initially the German court set the first hearings to September 15 but Samsung managed to shift them as early as August 25. In case the court finds Apple's claims groundless the ban will be lifted and Apple will have to reimburse Samsung for the losses which is always tricky and the sum of such reimbursements can be negotiated for months if not years.

I cannot yet tell who is going to benefit from this situation – this is only the beginning of the conflict and the situation can change dramatically in a matter of a few days. Anyway, there is no going back for the companies, the point of no-return has been passed. There is only the full-scale war ahead and Samsung has a few aces up the sleeve it has not yet used – we may see some of them in September.

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San Fran Fights Heresy by Locking Phones

I like San Francisco and I always follow news from this city. Back in 2010 the mayor started an initiative to raise awareness of the harmful effects of mobile phones. He proposed a ridiculous technique for that the city later ditched since no one could understand how to apply it to real life – I have wrote about this story in the Spillikins.

San Francisco is Now Safe from Phones

The San Fran's subway is called BART (Bay Area Rapid Transport) and it has very cute cars:

Source: www.bridgeandtunnelclub.com

In early July a drunk passenger tossed a bottled of vodka at two policemen and then attacked them with a knife. One of the officers shot and killed the assailant who was later identified as Charles Blair Hill.

Source: www.sfgate.com

The story takes a bizarre turn from this point. The incident may look simple enough but a bunch of activists organized a protest against the company they saw guilty in the death of the man. I am not going to discuss any moral implications what I find interesting is BART's response. Right before the demonstration scheduled for August 11 the company ordered to switch off the cell equipment of a number of carriers on four stations of the transit system justifying these actions by claiming that the protesters may use the mobile networks for coordination of their actions while absence of it can disorganize them.

'BART's official webpage states that the cell equipment was switched off in order to keep the passengers safe as crowding may cause injuries and even lead to death and that these measures are temporarily and are only targeted at avoiding any harmful consequences of the protests. I think BART's actions are completely justified as the safety of passengers must be the company's main priority. The protesters seem to me only a bunch of vandals who will put other people in danger while making their point – I will never approve of such behavior.

What I find so interesting is that this is, as far as I can remember, the first planned cell network shutdown in a specified zone and areas carried out by a company. I could not recall any other similar case (only governments turned to this measure before). BART had properly informed everyone so the shutdown was no surprise and they had worked it out with the carriers. As a matter of fact, it would not be possible but for the carriers – the networks worked fine outside the designated zones.

So, what can we learn from this BART experience? Firstly, companies can shutdown mobile communication services with the carriers consent. It may be very useful sometimes but leaves a lot of room for abuse. So far it is a terra incognita and there had been no precedents of this kind so it is unclear what circumstances can give a company the right to implement such measures. This BART story is a positive example but I can recall a not very democratic government shutting down SMS and voice calls in order to stop protests.

Secondly, this incident tells us how much we really depend on modern technologies even if we don't realize it. A cell phone can be a tool for coordination of many people – something what was impossible some time ago. We now have to learn to use mobile communication for everyone's good and not abuse it. I hope we will manage that or else…

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Nokia on the US Market and First Sales of Windows Phone 7

More and more managers come to Nokia from Microsoft. For example, the North American market is supervised by Chris Weber invited to Nokia by its current CEO Stephen Elop. Chris Weber started his work at the Finnish manufacturer on February 11, 2011 when his immediate supervisor told the world about his strategy for Nokia and how Windows Phone 7 would save the company. In his interview for Business Insider Chris Weber followed the official policy of Nokia and stayed optimistic, but any sensible manager under the circumstances would not see the world through pink glasses.

In the full version of the interview Chris Weber explained how he was going to fight for the North American market, where Nokia is almost unknown. Let's look at the key points and check if the strategy is viable or not.

Improve cooperation with carriers. Chris Weber thinks that it was a mistake to sell phones directly to customers without the carrier discounts. Unfortunately, this is not true, because during the last 5 years Nokia invested heavily in North America. A research centre was opened for AT&T and several models were created for the company, but nothing came out of it. Nokia models were not popular among carriers in the past and the song will remain the same, as the situation has not changed a bit. Without appropriate contacts and history in the region it is difficult to expect success. US carriers prefer to work with Nokia rivals and it is ultimately more rewarding.
Flood the market with various models offering different form factors and prices, but only with Windows Phone 7 inside. Surprisingly, how the mistakes of predecessors are repeated again. Is it a contagious disease? In the US and abroad there is Apple iPhone, which is loved or hated, but people keep on buying it, and the rest of the chasing pack. Like it or not, but we live in an Apple era. The company has only one model and Nokia is planning to offer replacements in different price ranges. So far Nokia showed it cannot compete with other companies. Moreover, Windows Phone 7 sales emphasize that no one has managed to make the platform truly popular. Why the company, which slept during the latest years, believes it can do magical tricks and make a break?
Send samples to numerous US stores. The problem is not in models themselves, but in low retail sales. Interestingly PR department of Microsoft is spreading rumors that Windows Phone 7 is not that bad and those lucky few, who made the purchase adore their handsets. It was a example of Microsoft PR, but other departments of the corporation believed it in full. I think you do not need further explanations. Top managers of the company build their strategy on myths. They do not know what ordinary customers think about WP7. Sadly, they even do not want to learn.

I could have continued this list, but it is pointless to comment ideas of a top manager, who believes himself to be a professional in the area, but it is not the case. It is a good indicator that in the near future Nokia will suffer even more defeats in the US. The company will show excellent sales of WP7 smartphones, but the figures will not impress anybody outside Nokia. It is another myth to be shattered by reality.

Production and sales of Windows Phone 7. Now let's look at possible success of WP7 from Nokia. Staska from Unwiredview.com found the information about the planned production volumes.

In September Compal will start shipping the first WP7 phone from Nokia with the overall production capacity of 2 million of phones by the end of the year. I have already mentioned why Compal was selected ahead of Nokia own facilities.

Why Nokia needs an ODM manufacturer for WP7 smartphones

During the period of time the situation has changed dramatically. As far as I know the company will still produce 2 million handsets instead of taking into account the real demand for the model in the 4th quarter (125,000 mentioned in the article). I would like to remind you that the first WP7 phone from Nokia has not a single advantage over rivals and is losing to solutions of autumn 2011. Surprisingly, Nokia is going to produce this model in numbers exceeding those of any WP7 manufacturer. Last year we saw that $500 million on advertisement and promotion of WP7 cannot considerably boost the sales of the OS and related devices. Nokia is somehow expecting to create a miracle and sell more. I am extremely sceptical about it.

I am sure that Nokia will ship a slightly lower amount of the model to its partners and report that sales figures are excellent. It is the job of its CEO, who must show he can bring success and anything goes in this battle. In fact we have a falsification of data on our hands here, but people in Nokia seem not to care as the company is crumbling apart in front of us.

The pinnacle of WP7 sales was in the final quarter of 2010 when 2.6 million items were shipped, but retail sales were much lower. Some of the models are still on shelves today. I think Nokia wants to have a repeat.

Last week brought more details around the Nokia situation. It's worth mentioning that the list of countries where Nokia N9 will not be sold officially is growing by day. When I said that the Finnish manufacturer would produce 92,000 N9 handsets fans were indignant, but they have nothing to say now. Nokia will offer the model on 3-4 major markets. The phone will not be available in India, China, UK or Germany. 92 thousands can be sold in Russia alone and this market will be targeted as the main one.

Another piece of news is connected with the fact that Nokia is closing the access to OVI interface to be followed by the Calendar app. It is logical, because Nokia is trying to save on everything and it is pointless to support the service used by few people. It sounds pretty sad.

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Samsung Introduces New Classification for the Galaxy Lineup

The success of Galaxy S and Galaxy SII makes the company use the name for different products. Last year we had players and tablets, but today we get inexpensive phones with a letter index differentiating them from the flagship. Samsung invented four symbols:

R – Royal – simplified solutions, which will cost less than the flagship to ensure mass demand. For example, in 2011 it was Galaxy R, while Samsung i9003 came one year earlier;
W – Wonder – image models below premium class, but above mid priced level models. This group will not be numerous;
M – Magical – middle of the road with good value for money;
Y – Youth – budget solutions for young people;/li>

In combination with letters you can use different words like Galaxy S Plus or Galaxy Pro, etc. To my mind the new system is not difficult to remember, but it offers no simplification for life. We have a simple PR move from Samsung.

Additional reading:

Classification of models from various companies

AT&T and the leak of secret materials about the 4G development

P.S. Stay healthy and have fun throughout the week. Good luck.

Do you want to talk about this? Please, go to our Forum and let your opinion be known to the author and everybody else.

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Spillikins №132. Apple Strikes Samsung – The First Offensive in The Long War

Contents:

Apple vs. Samsung – It's On

San Fran Fights Heresy by Locking Phones

Nokia on the US Market and First Sales of Windows Phone 7

Samsung Introduces New Classification for the Galaxy Lineup

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