Normal consumers are more likely to try out a new product if they hear their children raving about it, or watch Diane Sawyer report on it during the evening news. Normal consumers are more likely to try out a new product when they feel left out by their reluctance to “join the movement”. Grandparents and parents are joining Facebook because all they hear from their children and grandchildren is “it’s on Facebook” or “go on Facebook to see it”.
I suspect Google realizes how popular Facebook has become with the masses and will rely on what it does best to get people to use Google+; force users (Gmail, YouTube, search) into interacting with Google+ in one form or another.
Force is the wrong word. I mean coerce.
RIMM Observations
After the market close, RIMM reported fiscal 1Q12 earnings. A few things stood out to me.
1) RIMM will begin a headcount reduction. As millions of consumers switch to smart phones from feature phones, RIMM is cutting back. While it is understandable for a company to remove redundancies and waste, the writing is on the wall; RIMM had invested for a much bigger company compared to what it now sees itself as going forward. Can things change? Sure. Will things change? Not likely. Fixed costs can sure be a killer when your products sit on store shelves.
2) RIMM shipped 500,000 Playbook tablets. Keyword being shipped. The difference between shipped and sold? When a product leaves the factory (in a boat, plane, car, truck, mule), the product is characterized as “shipped”. No consumer has purchased the unit. RIMM’s 500,000 Playbook number is largely related to RIMM filling the Playbook inventory channel (the location between factory and consumer). It’s one thing when you ship a product that people are buying (iPad), but when you are shipping a product that no one is buying, you have the classic channel stuff.
3) Management wants to buyback RIMM stock. While RIMM’s business is falling apart on all sides, management wants to spend part of its precious cash chest ($2.9 billion) on buying back its tanking stock. While buying back stock can carry a lot of different meanings, largely depending on which industry a company is operating in, stock buyback in the technology industry does not carry a positive connotation. Instead of using money to better your position to innovate, buying back a stock that finds itself on a slippery slope screams desperation and a ploy to show Wall Street that management holds confidence in the future (Wall Street rarely cares - quickly seeing through the action like swiss cheese).
4) Guidance gives perspective. In the matter of a few weeks, RIMM cut its annual guidance by 30%. Given RIMM’s size, cutting guidance by 30% in such short order is not caused by one bad product launch, or by economic concerns impacting your consumer base. A 30% guidance cut is evidence of stuffing the inventory channel with a ton of product and finding out that no one was actually buying your product. A 30% guidance cut is evidence that your fixed cost base is quickly eroding profits as your new product lineup is delayed and your old product line up is stagnant. A 30% guidance cut for a mobile phone company during the age of the mobile revolution should speak volumes for the amount of trouble RIMM is facing.
Going forward, look for liquidity to be a front and center issue for RIMM. For management to have any chance of a comeback, it needs ample cash, and a $2.9 billion war chest contains only limited opportunities.
Snapshots
While surfing the web this morning, I could only laugh at the amount of optimism given to Windows 8. Posts on how Windows 8 will truly revolutionize Microsoft (they said the same thing about Windows 7) were the cherry on top. Commenters rushed in with Microsoft support throwing around such figures as 350 million Windows 7 licenses sold to date or some other funny math that supports their claims. If I wanted to live like it was still 2004, I could go along with these individuals and drink the Microsoft kool-aid, but its time to wake up.
People are making a fundamental error. Rather than looking at tech trends, many are looking at snapshots of the current technology landscape and then extrapolating what they see into the future. Snapshots do nothing but reinforce the dying status quo.
June 2011 technology snapshots would show:
1) Nokia is still selling plenty of phones.
2) Microsoft is crushing it with Windows 7 licenses.
3) Research in Motion is still selling a boatload of blackberries.
All snapshots; singular moments in time that won’t show:
1) Mac sales are gaining market share every quarter and will soon surpass 15% of the consumer computer market.
2) iOS is becoming ever-more vibrant as a growing number of developers are now earning a honest living from iOS app revenue.
3) iPad power.
4) Android is largely becoming the non-Apple destination for anything mobile.
While Windows 8 may have its attractive points, interesting features don’t change consumer technology trends. Instead, years of successful product launches and value-added services help turn a loyal consumer base into an army of brand enthusiasts. The tech industry is still in the early stages of working through the death of a monopoly. Industries take years, if not decades, to work though such an industry-changing event. Certain brands are dying a slow death, while at the same time, being replaced by up and coming brands. Taking snapshots will never give the true picture.