Samsung stands to lose, not gain, by open-sourcing bada

Since adopting Google’s Android platform, Samsung has witnessed massive growth in its smartphone sales, currently rivaling Apple for the top spot globally. The company’s march to become the smartphone king began in earnest last year with a solid strategy: Design one great device and tweak it slightly for individual carriers as needed. The Samsung Galaxy S was that one great device last year, and its successor, the Galaxy S II, is already Samsung’s fastest-selling smartphone ever.

But Android is only part one of Samsung’s master plan. Part two is bada, the company’s own proprietary mobile platform. While Android has boosted sales, revenue and market share, it has also allowed Samsung to invest time and money into bada as a platform and an ecosystem complete with its own application store. The upstart operating system is already doing well, reportedly outselling Microsoft’s Windows Phone 7 platform in the first quarter of this year with estimated sales of 3.5 million handsets. So why then would Samsung want to make the mistake of open-sourcing the bada platform?

How did this same approach work out for Nokia?

The talk of turning bada into an open-source project comes by way of a “person familiar with the matter” who spoke with the Wall Street Journal. The newspaper ran the story on Tuesday and reports that Samsung make take this step next year. While one can’t predict the future, it’s easy to look back and learn from the past, and in this case, Samsung need only look to Nokia, which has recently dropped to being the No. 3 global smartphone maker.

There are a number of reasons that Nokia’s Symbian platform eventually failed in the market: a slowness to modernize, a sometimes clumsy user interface and being late to the game with effective touch controls to name a few. But Nokia’s decision to consolidate the platform in 2008 with plans to open-source it and rely on other hardware partners to improve the code didn’t help either. A few niche handset makers such as Fujitsu still use Symbian, but Sony Ericsson, Motorola and even Samsung eventually abandoned the platform and moved to Android. Nokia, too, has moved on by partnering with Microsoft this past February to use Windows Phone as its primary smartphone platform going forward.

Given that Samsung is able to grow bada smartphone sales and build up the platform’s application store — prior to adding support for Android in March, the Samsung Apps store already had 13,000 bada titles and enjoyed 100 million app downloads — it simply doesn’t make sense to give up control of the platform. There’s little to gain and much to lose in the smartphone market if Samsung does open-source bada.

Samsung is improving bada quickly by itself

Perhaps bada will mature marginally faster through the efforts of outside companies or developers, but I’d argue that the platform is moving along quite nicely on its own. When bada first debuted in 2010, it looked like a relatively basic mobile operating system – so much so that I thought it was a mistake to launch the platform. Fast-forward to present day, and you’ll see that bada 2.0 has quickly gained more advanced features, and the sales figures have proven me wrong. Last month, Samsung announced capable new bada 2.0 phones and showed off this video of the updated platform, highlighting new multitasking functionality, voice recognition, NFC support and Wi-Fi Direct technology to name just a few:

Keeping control will help market share

With bada 2.0, Samsung has created what it calls a “smartphone for everyone,” meaning it’s a platform for the masses, not the early adopters, and it has done so on its own. What incentive is there to open the platform up to others? If another handset maker wants to use bada, it won’t help Samsung’s hardware sales or market share, although the company could gain marginally through its app store or media hub. There’s just no tangible benefit to take this path, and given the pace of improvement in bada, no reason to give up control of the platform.

The Wall Street Journal article indicates Samsung may use bada to power smart TVs, but in this market too, Samsung is the master of its domain: The company builds and sells its own televisions. Why bother giving competitors such as LG, Sony, Panasonic, Vizio or others the opportunity to use bada in their television sets? All that would do is give up a key differentiator that Samsung now has; it certainly won’t help sell more Samsung televisions.

Another potential pitfall: the F word

If Nokia’s Symbian effort doesn’t scare Samsung off the open-source path, then perhaps a closer look at Android might. Outside of key Google apps such as Gmail and Maps, Android is open for all to use or modify for smartphones, tablets or other devices. I have a treadmill with an embedded Google-powered touchscreen, for example. I can surf the web as I jog, and the treadmill runs custom software showing my speed and pace. This flexibility is great, but it has also helped turn Android into a fragmented mess that required new solutions.

Different devices and manufacturers use different versions of Android, leading to varied user experiences and software incompatibility. And some device makers have used Android without following Google’s guidelines, meaning the expected Google apps or Android Market isn’t on the device at all. By maintaining control of bada, Samsung avoids potential fragmentation issues and ensures an Apple-like stability of experience in terms of user expectations across multiple devices.

Samsung has what others don’t

Simply put, with bada, Samsung has an asset that few competitors can also lay claim to: a viable and growing in-house mobile operating system that’s proving popular. In other words, competing handset makers such as HTC, LG and Motorola, for example, are tied to the Google Android wagon with no chance of breaking away just yet. So far, the Android strategy hasn’t hurt these companies, and instead has brought success to those who embraced it early, and that includes Samsung.

But even as Android becomes more popular, the specter of patent suits loom, both in the case of Java with Oracle and Samsung’s own trials with Apple. And although Samsung is customizing Android phones with its TouchWiz interface, others are doing the same. HTC does this well with Sense, while Motorola’s MotoBlur has shown less success. Regardless of the user interface tweaks, at their core, these different phones all provide very similar experiences because they’re build upon the same underlying Android code.

Why then open-source the one asset that’s not only a decent hedge against such risks but is also selling handsets? It simply doesn’t make sense in my opinion, and if Samsung does open-source bada, I’ll be keen to hear the company’s reasons why it chooses to go that route.

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Not dead yet, Symbian getting Microsoft Office apps

Nokia phones running the new Symbian Belle software will gain more productivity applications in the form of Microsoft Office products. The first suite of tools, called Microsoft Apps, are expected by the end of the year with a widespread release in the beginning of 2012. A planned future update will bring Word, Power Point and Excel to Nokia’s recent smartphones by mid-2012.

Software in the first release will include Microsoft’s Lync 2010, OneNote, PowerPoint Broadcast and Document Connection, which includes SharePoint access. In addition to these and the release of the traditional Office productivity apps, Nokia says it’s also working with Microsoft to integrate mobile device management tools.

For a platform that’s essentially on a long-term death watch, the most progress I’ve seen in Symbian has been after Nokia decided to use Windows Phone for its future smartphones. It’s a bit of a head-scratcher, given that Nokia has publicly committed to support Symbian only through 2016.

Plans can change however, and I wonder if Symbian isn’t quite dead yet. Yes, as of now, Nokia is planning to shore up profits and market share with new Microsoft Windows Phone 7 hardware. But that hasn’t stopped the company from releasing new Symbian handsets, refreshing its old user interface with positive changes and now, adding productivity tools.

Granted, the recently launched handsets were likely already in the production pipeline. But if Nokia continues to invest in new Symbian hardware and major software updates — and sales begin to rise — Symbian could prove to finally be the platform it always had the potential to be for Nokia, a solid supplement to the company’s Windows Phone 7 devices and a backup plan for platform independence.

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What’s the best-case scenario for Nokia?

Nokia’s transition to Microsoft Windows Phone 7 software will cost Nokia far more market share and profits than it will ever gain by dumping the Symbian operating system. So says Tomi Ahonen, a former Nokia employee turned analyst/blogger in the mobile space. Ahonen outlines Nokia’s performance prior to the company’s February announcement of its partnership with Microsoft and sets expectations through 2013. His analysis follows Nokia’s news last week of tumbling market share, sales and revenues.

Until Stephen Elop left Microsoft for Nokia in September of 2010, however, Ahonen appeared convinced that Nokia’s Symbian strategy would eventually pay off, a scenario I disagreed with. The company’s hardware always impressed me, but in my opinion, it always lacked in user experience and software. That held true in my review of the Nokia N8 handset. Others would disagree, of course; more Symbian-powered smartphones have sold than any other platform, at least until last quarter, when Apple and Samsung both sold more smartphones than Nokia. And HTC is fast growing sales as well, thanks to its early adoption of Google Android.

Ahonen is still justifying his original belief in the Symbian strategy, saying that the platform had already improved enough to help grow sales:

Then came the new Symbian S^3 on several phones, led by the new flagship phone N8 which set a Nokia record for fastest sales in a quarter. All declining trends were turned into growth – this tells us the market loved Nokia’s new smartphones on the new Symbian S^3 operating system and this is absolute proof that Nokia was on a come-back. Whatever you may have thought of Symbian prior to Q4 of 2010, became obsolete. Nokia had indeed on its hands, a true hit series of phones and a hit operating system with the N8 setting internal Nokia records for new phone sales. Look at the facts. [Emphasis added by Ahonen]

I won’t argue with the numbers that Ahonen lays out, but I will point out that he’s missing one key number: overall market growth for smartphone sales. “A high tide will lift all boats” is a common phrase that applies, and even leaky boats will rise with the tide. Smartphone adoption is increasing around the world, and even the less competitive market players can see gains. Nokia’s smartphone sales in the final quarter of 2010 rose 7 percent, partially for this reason. But the overall market grew faster: IDC suggests that year-over-year growth in smartphone sales for all vendors was up 87.2 percent; Nokia accounted for the least growth out of the top five handset makers.

But Nokia’s Symbian past has little to with its Microsoft Windows Phone 7 future, and Ahonen’s model — meant to be simple — suggests that in a best-case scenario, for every WP7 phone Nokia sells, it will be offset by the loss of a Symbian sale. Essentially, the platform transition will be an even sales swap and by the end of 2013, Nokia will have a far lower market share than it has now:

So taking the very best case of 2012, using the best ramp-up ever, and then using the best case of growth in mass market scale, we get Nokia’s Microsoft Windows Phone 7 based smartphones – the very very best case scenario – to hit 20.3 million smartphones not at the end of 2011, not at the end of 2012, but the end of 2013. By that time, Nokia’s smartphone market share will be at . . . 8%.

The 20.3 million smartphone sales ten quarters from now seems low to me for two reasons. One is the growing smartphone market I made reference to earlier, which will help all smartphone platforms to some degree. The other is the timing, because the smartphone market is changing so quickly. If you don’t think so, look at Research In Motion, which is working through a transition of its own; the company is changing fast and as a result faces declining sales. It just reduced its workforce by 10 percent. When you’re in a fast-growing market and have to eliminate jobs, that means you’re either not competitive, not profitable or both.

In the end, Ahonen blames Elop’s decision, saying,

Before Stephen Elop killed Symbian, Nokia’s smartphone market share was 29%. Nokia towered over its rivals and was growing smartphone sales with highly desirable new smartphones. Today just five months after his ridiculously-timed announcement of Microsoft, Nokia’s smartphone market share is down to 15% and collapsing.

I agree with Ahonen that Nokia’s market share is collapsing; we’ve already seen evidence of that. And by publicly stating that Symbian was a dead end, Elop may have added more stress to an already fragile public perception. But I think it was the right call. Had Symbian continued along a path where it underwhelmed, Nokia would run the risk of having that negative vibe transfer to new Microsoft-powered phones. In fact, I wonder if Microsoft made this part of the overall deal, simply to avoid such a scenario?

Regardless of my different reasoning from Ahonen’s, I think we can both agree: No matter how sad it is to see the mighty fall, Nokia’s best days are behind it.

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Windows 7 on a phone: the 2-hour post-PC device

Fujitsu is launching a unique dual-mode smartphone tomorrow in Japan that doubles as a handheld Windows 7 computer. Known as the Fujitsu F-07C, the device works as a Symbian phone for standard phone use but can switch to Windows 7 with the touch of a button, notes SlashGear. Pricing won’t be announced until the device goes on sale through NTT DoCoMo, but since the phone has some high-end hardware, it’s likely to cost far more than even the most expensive pure smartphones available today.

If that doesn’t convince folks to buy it, perhaps the “up to two hours” of runtime in Windows mode will. I’m being facetious, of course, mainly because this is as niche as a mobile device gets, and I think Fujitsu would be better off spending the R&D dollars for this product on something with stronger mass-market appeal. While the phone will surely find a small market, I can’t help but think this is the worst possible combination of product brands when it comes to a mobile device.

Symbian was fine in its day and still has a massive global following, but even Nokia, its biggest supporter, has dumped it for Microsoft’s Windows Phone 7 platform. Speaking of Microsoft, using Windows, a desktop operating system, on a 4-inch, 1024×600 mobile device screen will be an exercise in frustration for all but the most patient. Optimized for mobile use, Windows Phone 7 is enjoyable; Windows, not so much without a mouse and full keyboard. And I suppose that Intel, which has been claiming it will power smartphones this year, can add this as a feather in its cap.

There’s a problem though: Intel’s 1.2 GHz Atom Z600 chip is under-clocked to run at 600 MHz in the F-07C, and that won’t bring stellar performance to the phone’s Windows personality. Fujitsu could probably boost the chip to run at full speed, but the handset would then use more power and that quoted “up to two hours” of Windows runtime might be closer to one. Even worse, once you run down your battery using Windows, you’re stuck without a mobile phone.

Don’t get me wrong; the concept of a full computer in your pocket has sounded cool for years. In a world of smartphones and post-PC devices, however, this approach by Fujitsu takes a traditional computer view, and some would argue that today’s smartphones essentially are pocketable computers. It also exemplifies that some companies still don’t understand the mobile space and sadly appear destined to become mobile losers.

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As bad as it seems now, Nokia’s future looks worse

After revising its earnings estimates downward in May, on Thursday Nokia shared abysmal results for the second quarter. The onetime clear leader of the first smartphone era has tumbled down to what looks like the third spot for smartphone sales, definitely behind Apple and likely behind Samsung as well. With a new CEO in Stephen Elop, Nokia is surely in a transition, but a transition to what?

My first reaction to today’s results was twofold: one of sympathy and one of optimism. I thought to myself that one of Elop’s major actions so far, choosing Microsoft’s Windows Phone 7 platform for the future, was akin to quickly yanking a Band-Aid from a wound: Sometimes it’s best to just get the pain over with. But after digesting the news a little more and thinking about the path Nokia traveled to get to its current low point, I don’t see how the bleeding is going to stop this year, now that the Band-Aid is off. Here are five reasons why.

Feature phones can’t save the day. Each time I’ve pointed out Nokia’s challenges, the company’s faithful have railed at me and rallied on the general platform of “. . . but Nokia sells more feature phones than most others combined!” While that’s always been a valid point, it’s less relevant as the world transitions to smartphones. Nokia’s own sales numbers reflect this point: Total mobile-phone-handset sales revenue declined 20 percent from the year-ago period and 25 percent from the prior quarter. Combine the sales drop with a 3 percent decline in the ASP of Nokia’s mobile phones, now 36 euros ($51.20), and you can see that Nokia’s bread and butter contributed to its $692 million quarterly loss.
Existing smartphones aren’t helping. So as feature-phone sales are in decline, one would hope that high-profit-margin smartphones can help make up the difference. That’s not happening, given that the company didn’t capitalize on the smartphone market like Apple and Samsung, for example. Apple just reported 20.34 million iPhone sales for the quarter, a 142 percent boost from a year ago, while Samsung is estimated to have sold around 20 million smartphones in the same time period. This happened while Nokia’s smartphone sales declined 34 percent from a year ago, with 16.7 million smartphones sold. The ASP did rise 2 percent, but that’s not enough to offset the sales dropoff.
A smartphone answer doesn’t exist yet. Nokia is still at least one, if not two, quarters away from even beginning a sales transition to Microsoft Windows Phone 7 devices. Elop today confirmed that Nokia would launch a Microsoft-powered device by the end of the year. That means sales and revenues in the high end are likely to continue declining throughout 2011. And there’s still uncertainty about the first WP7 handsets from Nokia: What will make them different from those offered by LG, Samsung and HTC, for example? Again, the Nokia faithful will chant that Nokia makes hardware second to none. I’d be the first to agree with that, but there are two problems with the mantra. Nokia always made good hardware, and yet that alone hasn’t saved the company. Second: Nokia may not be manufacturing its first Microsoft phones. Instead, it reportedly outsourced the production to Compal, in Taiwan. In other words: Nokia’s smartphone transition is still fraught with risks for many reasons, and it’s going to take time for Nokia to hone its skills on a new platform.
Android squeezes at the top and bottom. Clearly, Nokia isn’t competing well in smartphones, given the growth rates shown by devices running iOS and Android. It’s the latter of the two that may have hurt Nokia the most. Why? Google is activating 550,000 Android devices per day — both handsets and tablets, but the vast majority are phones — and that number is composed of devices at both the top and bottom. High-end smartphones are selling well in regions that can afford them. At the same time, cheap Android smartphones are popping up in areas where feature phones once reigned. Think of India and the next 500 million mobile users. Look to China, where Nokia moved 52 percent fewer phones this quarter as compared to the past one. In these areas, inexpensive, low- to mid-tier Android phones are arriving and offering much more functionality for just a little more money over feature phones. We’re even seeing these in the U.S.: This year offered $149 no-contract Androids with expectations of prices dipping below $100 by the end of the year.
How much destruction can one brand take? Among the many negative tangible results for Nokia today, there’s a massive intangible one as well: a tarnished brand. Tomi Ahonen illustrates the global branding Nokia has on his blog today, saying “[M]ore people use a Nokia phone than drink a Coca Cola, than wear Levis’s jeans, than tell time on a Timex watch, than wear Nike running shoes, than smoke Marlboro cigarettes, or write with a Bic pen.” As sales of Nokia devices continue to stumble, the brand itself loses value in terms of consumer and investor confidence. With smartphones, the brand is tied not just to hardware but also to software and services: Consumers are purchasing brand platforms and ecosystems when they buy a handset. Think of it this way: When consumers purchase an iPhone, they equate the full package with Apple, a company that arguably sets a high bar for the entire user experience. What will customers think of when they see a Nokia smartphone after the company’s fall from grace?

I still have the same sympathy for Nokia that I had over my first cup of morning java. It’s never good to see a global leader heading toward “has been” status, especially with all the innovation Nokia has brought to so many people around the globe. But the optimism I had dissolved faster than the sugar in my coffee, faster maybe than Nokia’s overall profits and sales.

Image courtesy of Flickr user ecastro

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