Until now, many could and did argue that Android was winning the
smartphone platform war. And that the number of activations in the
latest Andy Rubin tweet
showed that Android was unstoppable (Rubin oversees Android
development). And that the market percentage of Android was ever
outgrowing iOS, so more and more Android phones were selling every
quarter. And that the number of Android apps, although behind those
available in the iOS App Store,
meant that developers were solidly behind the Android opportunity.
Licensing Issues
That Android was built ignoring other companies patents and
intellectual property (IP) was deliberately overlooked. After all, Sun
had never forced Google to buy a license for Java. YouTube was covered
by safe harbour provisions in the DMCA, so other people's content only
had to be taken down after they found it and sent in a notice.
Sure the phone business involved plenty of patents, but the
manufacturers were already licensees and would be responsible anyway.
Because Google thought that it could build a business and then sort out
the messy patent details, when everybody would be falling over
themselves to get an agreement with the new 'do no evil' Microsoft,
Android is now paying the price.
Now that Oracle
owns Sun, the first pound of flesh is due. The judge has already
made it clear by
quoting a Google email, "We conclude that we need to negotiate a
license for Java under the terms we need." It is likely that Google
will lose any jury trial - and that triple damages for willful
infringement is a strong possibility. Expected damages, in the judges
opinion, should start at around a $100 million before willful
infringement, but that might be an attempt to persuade Oracle to
negotiate and settle before trial. Only if Google agrees that any
damages don't cover the cellphone manufacturers, so Oracle can charge
suitable per phone fees, is that likely to happen.
HTC has agreed to pay
royalties to Microsoft on the Android phones it produces, and
Microsoft is now after the rest of the Android manufacturers. Android
will certainly not be completely free in the future, and it may end up
being more expensive than Windows Phone. When the strong possibility of
Apple obtaining injunctions stopping imports and damages is added in,
using another OS like Windows Phone, webOS, or MeeGo, backed by
companies with strong patent holdings, looks more and more
attractive.
Motorola Mobility
Now that Google has agreed to pay $12.5 billion, roughly equal to
its profits for the last two years,
for Motorola Mobility (MMI), the cracks in its strategy can only
widen. MMI had its glory days with the Razr but now is a
second tier cellphone maker. It has only been reasonably profitable
recently because Verizon chose its model for the quarterly Droid
promotion. The pervious two quarters, MMI lost money.
Sure, MMI has a large patent portfolio in wireless and mobile, and
with $4.5 billion paid for the Nortel patents, Motorola's patents may
be valuable - according to GigaOM,
Microsoft wanted to buy them. The problem is that many of the useful
patents are encumbered. That is, Motorola agreed to license them on
Fair, Reasonable, and Non-Discriminatory (FRAND) terms as part of the
standard setting process. This means MMI can ask for reasonable
royalties but will have problems obtaining an injunction against the
import of a cellphone into the USA in the way that Apple is trying to
stop HTC and Samsung. That Motorola is trying to defend itself using
these patents in actions brought by Microsoft and Apple, where they are
looking for injunctions to block MMI cellphone imports, suggests that
MMI may not have strong smartphone patents.
It is quality, not quantity, that Android really needs to survive as
an inexpensive and good phone OS.
Some Android Makers Are More Equal than Others
Google has already shown favouritism in recent distributions of
Android: Certain manufacturers received working versions before source
code went to the rest. This kind of behaviour makes companies nervous,
even if they are part of the inner circle being favoured. You never
know when the favours will be withdrawn or when the demands will
increase. What wonderful Google beta will you be asked to bundle
next?
This naturally leads to investigation by regulators, eager to step
on a brash company using its strengths to extend its tentacles into
other markets. This kind of bundling lead Microsoft into the
regulators' grasp, from which they couldn't react quickly enough to the
threats of the upstarts, Apple and Google.
The other problem with Google's favouritism is that it seems to
break the Linux source code licence (GPLv2) under which Android is
distributed, as it relies on Linux. For the manufacturers, this is
serious, as it terminates their right to distribute. All it will take
is one or more of the Linux contributors to successfully sue, using a
law firm on a contingency fee basis, and each manufacturer will have to
pay up or stop shipping their Android devices. This could, however,
solve the chronic funding issues of the free software movement.
500,000 Android Users Can't Be Wrong
The numbers of activations must show something. More than 500,000
choose Android every day, so it must be wildly popular. There are all
those articles and comments about it.
Android and Apple grow while Nokia and RIM shrink.
Reproduced by permission of asymco.com.
If you run Google and have all these statistics and mined data at
your fingertips, it's so easy to believe, but as Horace Dediu of
asymco.com
pointed out in a post about Nokia, few of its customers knew or
cared about its OS, Symbian, and it was shipped on more than twice as
many cellphones every quarter and had been out for years.
What really counts with Android activations is where they are.
Rubin's tweets are too short to split out the geography, but there
could be a million activations a day in China, where Android is a
standard, and it wouldn't make a difference to Google, because Baidu is
the main search engine there. Those activations wouldn't help 99% of
software developers in the West either, because their programs are of
little interest there, and those programs that are will be customised
for China by local developers, who will gain any revenue.
Look for developers to move to other platforms as soon as it is
clear that Android is losing traction in the markets that matter.
iPhone Now Verizon's Top Smartphone
A careful read of Verizon's last quarter financial presentation
suggests it sold 5.3 million smartphones, just less than AT&T sales
of 5.6 million (3.6 million iPhones). Of that Verizon total, 2.3
million were iPhone 4s, so Apple picked up over 40% of the Verizon
market with a year-old design that, unlike the AT&T iPhone 4,
can't be used on many carriers outside the US. Verizon expects the
iPhone 5 to sell even better.
Hardly a strong vote of confidence in the US market for Android.
If, as looks likely, the iPhone 5 takes over 50% of the Verizon
and AT&T smartphone markets during the holiday quarter, Google's
takeover of Motorola will look doomed. If Apple is successful in its
ITC action and gets an injunction banning Motorola from importing
Android phones, that should be the final straw. It will make more sense
for Google to pay out the $2.5 billion fee for not going ahead and pass
on Android development to an external group. Google needs to understand
that if this is a high stakes poker game, the other players are better
funded, and each has a strategy that will weaken Android and claw
chunks of Google's revenue out of the pot.
