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Cloud, AirPlay; software matters most
Event
Amazon on 28 September announced the Kindle “Fire” Android tablet, which
leverages its cloud service. Apple on 4 October introduced (i) the iPhone 4S
(14 October launch), (ii) an updated mobile operating system (iOS 5), (iii)
enhanced AirPlay features and (iv) the iCloud service. We think hardware
specifications matter less (in both cases); software functionality matters more.
Impact
Clouds at the centre. Amazon’s device has just 8GB internal memory and no
card slot; the system relies on Wi-Fi to stream content and uses Amazon’s
cloud for storage. Apple’s iOS-devices and MacBooks will use iCloud as a
way to easily share content so that a video captured on an iPad can also be
accessed on a MacBook Air (without connecting to a PC); and secondarily for
storage. Apple expects that most consumers will prefer to keep their content
close at hand – especially given connectivity limitations – and hence offers
much more on-device storage (e.g. 64GB for the iPhone 4S). The sync model
is positive for NAND-makers Toshiba and Samsung. We believe this
approach will work better as content files become larger (eg, 1080p video). In
both cases, as users align to cloud platforms, content storage /access takes
center stage and switching costs increase for consumers.
Apple’s enhanced AirPlay features are also material, and are a threat to
game console makers. The iOS 5 update to AirPlay now lets users mirror
the display of an iOS device on a TV (in the past, AirPlay allowed for video
and music output to Apple TV, but not full display mirroring). From a games
perspective, in tandem with the iPhone 4S’s better processor (7x graphics
improvement over iPhone 4), this means the iPhone can be used as a games
controller with output to a TV, essentially dis-intermediating the console. This
is clearly negative for Nintendo (a year ahead of similar functionality from
WiiU). Sony also faces a headwind, but is better positioned with the PS Vita
handheld, which has similar mirroring capability. Any Apple strength is
positive for Capcom, which is geared to the Apple infrastructure.
Tough world for Android tablets: Sellers of expensive Android-based
tablets could thus be stuck in the middle (of Amazon and Apple’s strategy),
with the only tactic available being to cut prices. HTC, for example, has
already cut its tablet price to US$299 as an immediate response to the
US$199 Kindle Fire. Sony’s Tablet S is priced in line with Apple’s iPad, but
without a cloud offering; and we think Sony may be forced to drop the price.
Also, we think Sony’s Tablet P will sell poorly and that Sony may eventually
abandon the design.
Who makes money: Apple can because of its control of the content platform
and also through close management of procurement and manufacturing.
Amazon can by expanding content sales on its own Kindle devices and also
of physical merchandise through storefronts on all devices. Google can by
monetising mobile search and other services on an expanding universe of
mobile devices. Key component suppliers will benefit from expanding volumes
but margins may be capped due to buyer power. Pure hardware vendors that
do not offer a platform, storefront or web services (or that are not vertically
integrated into key components like Samsung) may struggle to make a profit.
Outlook
Regionally we are cautious on Android-based hardware firms like HTC and
Sony and Nintendo in games. We remain positive on Samsung and Toshiba.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Cloud, AirPlay; software matters most
Event
Amazon on 28 September announced the Kindle “Fire” Android tablet, which
leverages its cloud service. Apple on 4 October introduced (i) the iPhone 4S
(14 October launch), (ii) an updated mobile operating system (iOS 5), (iii)
enhanced AirPlay features and (iv) the iCloud service. We think hardware
specifications matter less (in both cases); software functionality matters more.
Impact
Clouds at the centre. Amazon’s device has just 8GB internal memory and no
card slot; the system relies on Wi-Fi to stream content and uses Amazon’s
cloud for storage. Apple’s iOS-devices and MacBooks will use iCloud as a
way to easily share content so that a video captured on an iPad can also be
accessed on a MacBook Air (without connecting to a PC); and secondarily for
storage. Apple expects that most consumers will prefer to keep their content
close at hand – especially given connectivity limitations – and hence offers
much more on-device storage (e.g. 64GB for the iPhone 4S). The sync model
is positive for NAND-makers Toshiba and Samsung. We believe this
approach will work better as content files become larger (eg, 1080p video). In
both cases, as users align to cloud platforms, content storage /access takes
center stage and switching costs increase for consumers.
Apple’s enhanced AirPlay features are also material, and are a threat to
game console makers. The iOS 5 update to AirPlay now lets users mirror
the display of an iOS device on a TV (in the past, AirPlay allowed for video
and music output to Apple TV, but not full display mirroring). From a games
perspective, in tandem with the iPhone 4S’s better processor (7x graphics
improvement over iPhone 4), this means the iPhone can be used as a games
controller with output to a TV, essentially dis-intermediating the console. This
is clearly negative for Nintendo (a year ahead of similar functionality from
WiiU). Sony also faces a headwind, but is better positioned with the PS Vita
handheld, which has similar mirroring capability. Any Apple strength is
positive for Capcom, which is geared to the Apple infrastructure.
Tough world for Android tablets: Sellers of expensive Android-based
tablets could thus be stuck in the middle (of Amazon and Apple’s strategy),
with the only tactic available being to cut prices. HTC, for example, has
already cut its tablet price to US$299 as an immediate response to the
US$199 Kindle Fire. Sony’s Tablet S is priced in line with Apple’s iPad, but
without a cloud offering; and we think Sony may be forced to drop the price.
Also, we think Sony’s Tablet P will sell poorly and that Sony may eventually
abandon the design.
Who makes money: Apple can because of its control of the content platform
and also through close management of procurement and manufacturing.
Amazon can by expanding content sales on its own Kindle devices and also
of physical merchandise through storefronts on all devices. Google can by
monetising mobile search and other services on an expanding universe of
mobile devices. Key component suppliers will benefit from expanding volumes
but margins may be capped due to buyer power. Pure hardware vendors that
do not offer a platform, storefront or web services (or that are not vertically
integrated into key components like Samsung) may struggle to make a profit.
Outlook
Regionally we are cautious on Android-based hardware firms like HTC and
Sony and Nintendo in games. We remain positive on Samsung and Toshiba.
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