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Software Side of Mobile Phones

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Brand name cellphone makers are finally beginning to realize that if they need to survive falling cell phone prices and declining margins, they need to start focusing on software and services. Motorola, Nokia and Sony Ericsson, all made moves last week, taking further steps in this direction.

Motorola bought Good Technology, a Silicon Valley based company that is a RIM competitor, and had raised $200 million or so in venture capital. Nokia is rumored to have bought Ryze, a social networking start-up, and Sony Ericsson snapped up UIQ, the Symbian derivative OS maker.

These moves come in the wake of news that Vodafone was going to standardize on three platforms – Linux, Symbian and Microsoft. Any handset maker who wants to sell through their channel in the future will have to serve up the most interesting package of applications on their handset. Which means software, a business where handset makers are not particularly good at. Hence the buying frenzy.

We had written about this shift from hardware to user interface and software nearly a year ago, after talks with handset makers. But we all know that the mobile business is not quick to change gears. Nokia in particular has been aware of this shift, and has been making moves to better position itself. It has bought Loudeye, Intellisync, and Gate5 – all to cram their phones with additional features.

Vodafone and other carriers are increasingly selling white label phones, with their own branding. Motorola, Nokia and others will have to fight for consumers attention if they want to sell their handsets, especially the more expensive ones. I bet they will start acquiring some of the cooler app makers next. Shozu comes to mind!

8 Responses to “Software Side of Mobile Phones”

  1. This is going to be a loooong time before the manufactures create anything that is remotely useful for the user.

    Simple shortcuts and applications that are thoughtfull and useful cant be delivered at this satge in the US as the ecosystem in services and apps for using them has not evolved.

    Vodafone learned this lesson the hard way in Japan by trying to leveregae phones with little or no good software. Result, exit the market and now the new owner is Softbank and look at the result. Better handsets with incredible UI= huge sales and new customers.

    I disagree that there is a war between Manufacturers and operators as mentioned above. I belive its much more of the the swiss knife effect to sell more handsets and deliver additional revenues beyond the hardware sales.

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  3. Om,

    Good summary of the acquisitions by OEMs. I believe these acquisitions are meant to further the manufacturers’ goals in selling off-deck post-sales incremental services to the consumers, rather than cramming their handsets with features. In other words this is an off-deck/off-portal rathern than on-deck/pro-operator strategy.

    The manufacturer-operator war is making an unexpected turn and is now skewing in favour of the manufacturers. SEMC, Moto and Nokia are all adding services on top of their handsets, the most notable of which is Nokia’s Content Discoverer, the evolution of Preminet. In general, operators have failed to reach their handset customisation ambitions, both in terms of ARPU and brand loyalty goals, and so manufacturers are realising they can get away with doing services. Rumours are than even Vodafone is scaling back on its 17-volume terminal customisation specs. The platform strategies announced by Orange and Voda are because the operators have realised they have to be pragmatic with their customisation, and focus on the few things they can customise well, rather than continuing the buy-tons-of-paint-and-turn-everything-red type of strategy.