It's over for Blackberry!

On February 2, 2013, I wrote this blogpost that predicted the Blackberry10 would fail and that this former pioneer of the smartphone market would die a pretty ugly death. Today's announcements from Blackberry are not the official death notice, but it is a notification for the family to come to the hospital to pay their last respects. Here is a quick summary of the news today:

• Revenue was about $1.6B versus an expected $3B. This is a Titanic miss. 
• They sold only 3.7M handsets in the entire quarter. Apple will probably sell 5M handsets this weekend!!!!
• The company has to write off $1B of inventory that it cannot sell. That is MSFT Surface like number!
• The company will shut down its consumer business and try to sustain itself on corporate business.
• The Company is now starting to burn cash and with small stockpile of only $2.6B, they can't last long.

Worse than that, there was no announcement of someone to buy the company and no white knight private equity buyout. In fact, we now know that the company is unsellable. There is nothing really to buy. Let me recap the assets:

• The Smartphone business is worth negative value.  That right,  less than zero. It is unsustainable at this level. The business will continue to lose market share and it will be unable to attract developers to build applications for the BB10 platform. Don't believe the fantasy world that some Chinese manufacturer will buy this business. They all have looked and passed. 
• The BB10 operating system is worth zero. Ask HP. They bought PalmOS for $1B and then shut it down. BB10 can't survive no matter who owns it. iOS and Android have won and Windows phone appears to have taken on the role of the third place money loser. Fourth place is not viable for anyone. 
• Blackberry Enterprise Server. People keep pointing to this like it is an important asset, but the only reason corporations have BES is to manage Blackberries. No Blackberries, no need for BES. Please don't tell me that it can be used to became a good mobile device management platform. There are tons of great solutions in the marketplace today that are better and cheaper than BES.

So what is of value?

• The Patents. I am not an expert in this area. I have heard that they are worth $1B, but that seems low to me. Patents may have declined in value and I cannot judge the quantity or quality of these but this seems low.
• The Blackberry network. This is blackberry's private, reliable and secure network. The problem is that network was designed to carry email and text traffic  Not sure it is much good to carry web traffic, denser data applications or video. That having been said, I think this asset is worth more than zero.
• BBM. This is a good application. It has a very solid following. And Blackberry is about to make this application available on iOS and Android. I am going to download it tomorrow. The BBM platform is broader and deeper than WhatsApp. WhatsApp appears to have a big user advantage. 250M users to 60M. But since BBM is not yet available on iOS and Android, it has not really been a fair fight so far. Rumor is WhatsApp is worth $1B so there is hope for this business.

So the path is pretty clear for the family members who have been called to to the hospital. Here is what you must do:

1. Get a Proper auction scheduled for the patents
2. Pull the plug on the smartphone business and commence an orderly shutdown.
3. Mash the network together with BBM and fight WhatsApp with a deeper cross functional messaging and communication app that can potentially perform better and more securely on the proprietary network. 
4. Do it quickly before you run out of cash.

Its a sad ending for once great company. But being nostalgic never helps in business. It is time to move on. Please invite me to the funeral.

Should the NFL Competition Committee Look into Seahawks Noise Advantage

NFL fans should be pretty pumped up about tonight's Seahawks 49ers game. It pits last years NFC champions versus a great Seattle team. Its a huge NFC West battle and comes with the addition of the Pete Caroll-Jim Harbaugh rivalry plus the Richard Sherman thing.

But strangely, I am not looking forward to the game. Most non Seahawk fans do not enjoy their teams trips to Seattle since the advent of their noise box stadium in 2002. You can look forward to your team committing a bunch of false starts and to struggling on offense because it will not be able to effectively audible at the line of scrimmage. Further you can count on your team being less effective at running the ball because your O-Line will not hear the snap count.

NFC teams have learned to not judge themselves against the Seahawks on the road. CenturyLink field is the equivalent of Tiger and Phil teeing it up on the mini-putt course. I mean who cares which guy is better at the windmill hole or who can most efficiently navigate the clown's mouth.  Lets just get on to the next competition at a real venue.

This is not just pre-game whining by a Niners fan. Here are the stats. Don't mean to go all Nate Silver on you, but the Seahawks have a 10 point home field point differential advantage. The league average is 5 points.

The chart to support this data is below. Seahawks season home point differential is 79.6 points. Since there are 8 home games, their per game advantage is 9.95 points.

Full Article is here.

Every team expects road games to be in a hostile environment and have to tough it out. But Century Link field tips in too far.

Microsoft Recovery Plan. Step 6. Make it Official with Marissa

Microsoft has lost over $12B in its online division since it started. If you add the aQuantinve $6B write down, you have $18B of losses. Wow!!! There is a certainly a case for dumping this division to concentrate in other areas, but I think that is folly.

Microsoft needs to stay in this business. It needs to buy Yahoo and let Marrissa work her product magic to make this a great business. Amateur hour is over, time to step up.

I think Microsoft needs to be in the online business and by extension the Internet advertising business. Here is why:

•      The Consunerization of IT is not a fad. It’s a reality. Great consumer products designed for the consumer are making there way into a core business IT market. Staying in Online allows Microsoft to be part of this trend, not swimming against the tide.
•       Google dominates here. Facebook is second, but I believe Microsoft can be a player in this large growing market and be profitable.
•      In step 2, I recommended that MSFT be a leader in mobile apps. They can’t likely be achieved without staying in the consumer online business.
•     Running Bing and Outlook.com gives them experience building and running massive data centers and huge software systems at a global scale. This knowledge can be applied to their other cloud businesses.

That having been said, Microsoft is a bantam weight in a heavyweight division that features Google playing the role of Muhammad Ali and Facebook playing the role of Joe Frazier. Here is why this deal must finally get done.

·      Market Power. Google does $40B per year in Online Advertising. Facebook does $6.5B. Microsoft does $3.2B. Yahoo does $4.8B. The combined entity will have more market power and be relevant to advertisers.

•       Economies of scale. MSFT lost $1.5B last year here. Yahoo made $1.5B. There are a lot of redundancies that can be eliminated in this combined division can be solidly profitable. Get some merge consolidation experts in there and you will be in good shape.
•       The combined entity has some really nice properties. Bing, Skype, Yahoo Portal, Tumblr plus a lot of good Yahoo Content. If they take my advice in step 2, they could have Dropbox.
•       Executive Skill synergies. Marissa is a kickass product person who is helping change the culture and re-establish Yahoo in Silicon Valley. She can team with some badass Microsoft operators and use Microsoft’s huge cash hoard to compete with the heavyweights here.

Once the deal is done, one more thing needs to get done to make this merger work. Marissa needs to make the trip across Highway 85 to Cupertino. Tim Cook and Apple needs a partner to fight Google. The MicroHoo Internet and mobile applications need to become the default apps on iPhones and iPads. Bing Search, maybe rebranded on iPhones and iPads is a must. 

Microsoft Recovery Plan. Step 5. Win the Connected Car Market and Home Automation market

I am a little less enthusiastic about this series now that Microsoft has bought Nokia. I thought the Microsoft board might be consider a different path, but it now appears that they are committed to a similar course as years past. That having been said, my Dad said "Start what you finish", so here is the next step in my plan to remake Microsoft.

There are two places where computing still sucks. The Car and the Home.

First, the Car market:

There are about 60M cars sold per year Worldwide. There are just over 1B automobiles on the roads today.  The auto industry has made tremendous strides to automate vehicle operations, but the car is still a standalone system that must be connected to the internet and the outside world.

There is a tremendous opportunity to partner with the car companies to develop a connected car that links applications to the telematics of the car to provide a better, safer car that is continuously connected to the internet.

Google has some real big assets here. They have the world’s premier mapping system and are the clear technology leaders in autonomous cars. But it is not clear how or if Google with partner with existing car companies to bring this technology to the market.

Here is what Microsoft can do:

  

• The Ford Sync partnership is a good start and can be built on to broaden the functionality and number of partnerships.
•  I  am not exactly sure what rights to the Navtech maps product were acquired in the Nokia  transaction, but hopefully Microsoft  has broad rights to use the product in cars..
• The former Navtech mapping data and applcication can be used to work with automobile companies to develop geo-aware mobile apps that will be the center of the car of the future. The car manufacturer’s will open up their telematics systems to application development and Microsoft can build applications
• This business is gong to be a hybrid cloud system. The car will not be able to 100% connected to the internet because of wireless limitation, so on board systems will be necessary. Microsoft is good at these hybrid systems and this environment plays to their strengths.
• Lastly, the connected car will need lots of approvals from Government agencies who are concerned that too much technology will distract the driver and compromise safety. Microsoft knows how to work with governments now and with the car companies they can make a connected car that is approved by the regulators. 

There is a lot of work to do here. But car companies need a big technology partner to move their products to the next level. Microsoft could be that partner.

On the Home Front, the opportunity is even bigger

At every tech conference in the past 20 years, some speaker talks about how the Internet connected refrigerator will know when your milk is empty and will then order it for you, If I hear it one more time, I will stick a fork in my eye. We have been talking about home automation for decades. In fact, I think I went to some home of the future display at Disneyworld that was created in the 60’s with GE. But lets face it we are not close to this. Not evenly remotely close.

But we can be. The home’s we live are the least “smart” of all environments . Someone needs to fix this. Microsoft could win this. They need to start winning new categories not playing catch up on ones that you have already lost.

I also think that Microsoft software and services background works well here. Unless we get 1GB Fiber to all homes soon, the home automation market is going to need software and maybe a server in the home. Microsoft could do that and then connect it to its cloud. There are three areas that it would make sense to focus on:

• The entertainment space. You already have Xbox and some great gesture technology. Apple and Google TV are very mediocre. There is still room for a  great device that does entertainment for all in the home. Watch out for Youtube though. It’s Google’s best weapon here. User generated and third party content are a powerful combination. I would not let Netflix stay independent if I were you.
• The Connected appliances – Refrigerator, Stoves, Washer, Dryer  are all possible. But I would start with heating/cooling and lighting. Very valuable to consumers and it would have a huge “green” impact.
•  Home Security. Seriously, I still have keys that let me in my house that do not have a computer chip in them. I spend money for third parties to monitor my house and the video system is standalone and not integrated. Please someone fix this!!

So, don’t despair, you lost the mobile operating system war, but there are lots more categories to re-invent. 

Since you ignored step 1, Try Step 7. Win Wearable computing

Win Wearable computing

I promised to give the Microsoft my humble advice on 7 steps to re-establish themselves as a technical leader. I had only written to step 4 when the Nokia deal was announced. Sorry, I have a day job so the advice comes out slowly. :-). But now that you have ignored step 1, let me skip ahead to step 7 and maybe, just maybe the $7B acquisition will not be a dinosaur mating session.

First if all, for those non-regular readers of this blog, please see my advice on why Microsoft should exit the phone/tablet and windows phone pace. The purchase of Nokia does not change the dynamics of the game. Developers don’t want a third platform and they will not build cutting edge application for your devices. The battle is over and you were not a winner.. You can pour billions of investment into this space and maybe you can win 5-10% of the market. Your prize for that accomplishment will be billons of dollars in losses. It will make the $18B you lost in Microsoft online properties seem like a paper cut.

But there might still be a way to win. Win wearable computing. This market is early. The winners have not been decided. Google Glass, the activity monitors, the soon to be launched watches are real early. Developers have not committed to a platform and they will build to any great device that gains market share.  These applications are not going to be phone/tablet ports, they are going to be new applications that take advantage of the unique nature of wearable devices. They battle for the hearts and minds of wearable developers is just beginning. While we have not heard much from Microsoft or Nokia in this area. I am sure you have resources on this. I would double and triple down here.  Make great wearable devices and applications that that work well with Windows and iOS and Android.

And you are likely in better shape here now that you own Nokia. They have produced some brilliant hardware over the years. Take your best and brightest and put them on this project. Surely they must be frustrated in the current phone/tablet war. I mean how motivating can it be to sit around the Monday phone/tablet staff meeting with the rallying cry; “We can be #3!!!” or “Let’s crush Blackberry!!!”

I was at a recent conference and Gary Vaynerchuck gave the audience this advice: “The biggest mistake you can make is being romantic about the way you have made money in the past” I would suggest to you that Microsoft is being too romantic about it’s past. Its’ idea is to control the operating system, then win the high margin app business on top of it. We understand it!!! You want Windows on PC/Tablets and Phones! It’s a wonderful romantic idea, but is just fantasy!!!! You have lost the phone /tablet space and you can only win if Android/Apple make a huuuuuuuuuuge mistake or that asteroid thing comes through for you.

If you want romance, pull out a copy of “Casablanca” or better yet, pop in a Betamax tape of the Windows95 launch.  But if you want to regain tech leadership, give up on phones/tablets. Win Wearables.

PS – I will go back and cover steps 5 and 6 later this week.