Digital Daily » Android

Chrome Netbooks Headed to Market by 2010 Holidays

John Paczkowski — Thu, 19 Nov 2009 20:15:54 +0000

Direct from Google headquarters and liveblogged by John Pazckowski, the company’s Sundar Pichai, vice president of product management, and Matthew Papakipos, engineering director for Google Chrome OS–joined by founder Sergey Brin–discuss how they plan to bring the OS to the market, then answer some questions from the audience. Third of three segments:

How will Google bring Chrome OS to market? The company is working with vendors to specify reference hardware. You cannot download and install Chrome on just any device, you will have to purchase a Chrome device. Google is looking at a launch window of late 2010, before the holidays.

Google sounds very concerned about the end-user Chrome OS experience. Pichai says the company wants to ensure that the displays, keyboard, etc., on the netbooks that run Chrome are robust and easy to use.

Pichai wraps things up, but before the Q&A, we’re shown a short explanatory video. “The first thing I want to do when I fire up my computer is browse the Internet….If there isn’t any Internet, I might not even use my computer….What if when you pressed on, your PC turned on, what if your operating system was more like a Web browser…what if it was a browser?…Chrome OS is a totally rethought computer that lets you focus on the Internet, which is what most of use our computers for these days anyway.”

Q&A
At this point, Sundar Pichai opens the event to questions:

If you’re specifying hardware components, do you have an idea of what they’ll cost?

A: “We expect Chrome netbooks to be in the price range of what people have come to expect….We are not specifying a price target.” Price will be determined at the OEM level.

Will the APIs support W3C standards?

A: “We’re working very closely with the W3C to standardize as much as we can….In general we want to see everything standardized across multiple browsers.”

Will there be an application store?

A: “The Web offers hundreds of millions of applications. Our job is to make people aware of them.”

What about desktop applications that are not available on the Web?

A: “We expect most of our users to have a second machine at home….Chrome OS is about a delightful experience on the Web….If you’re a lawyer spending your entire day on contracts, etc., this is not the machine for you.”

Will you support Microsoft Silverlight?

A: In the case of certain selection plug-ins, we are working to integrate them. No comment beyond that.

Since Chrome is open source, could people build their own variations?

A: Yes. We expect people will do many interesting things with it.

Do you see Chrome running on laptops or desktops?

A: We’re initially focused on netbook-like form factors–clamshells, etc. That said, the OS is being developed to work on other devices.

Is there any level of offline access? What happens when I’m on a plane and don’t want to pay for Wi-Fi?

A: Chrome devices are primarily intended to be Internet-connected. That said, it will have some caching abilities so, for example, you could play a game offline.

Virtualization?

A: Yes. You could run Chrome today on a virtual machine.

Are you working with outfits like Adobe to, say, build a Web-friendly version of Photoshop?

A: We’re very excited by things like Photoshop on the Web and we’re working hard to make that possible.

Will Android apps work on Chrome? Are there plans for third-party apps?

A: Pichai dodges this one. If it’s a Web app, he says, it will work on Chrome. The Web works very, very well for Google’s purposes, he adds.

Will Chrome work on both X86 and ARM?

A: Yes.

Is there a direct business model for Chrome OS or is this another variation of the-more-people-who-use-the-Web-the-better-for-Google?

A: We are working with partners. No plans for advertising. That said, Pichai notes again that anything that runs on the Web will run on Chrome. And of course, AdWords does, indeed, run on the Web.

[Sergey Brin joins the Q&A]

Do you want Android Apps to run on Chrome?

A: We are focused on creating the use case in which everything is a Web application, but hopefully we can do more in the future.

How does Chrome handle peripherals? Can it print?

A: Most keyboards, cameras, phones, etc., will work. In terms of printing…yes, Chrome OS will print and we’re working hard to make that possible.

What is Chrome’s strategic position for Google?

A: [Brin]: Call us dumb businessmen, but we really focus on user needs rather than focus on business strategies. We believe that the Web platform is a much simpler way of computing for individuals to use, and that’s a very important need in the market right now. That’s what we’re trying to fulfill.

Google's Chrome OS: "It Just Works"

John Paczkowski — Thu, 19 Nov 2009 17:51:03 +0000

Speaking at Microsoft’s Worldwide Partner Conference in New Orleans this past July, Microsoft CEO Steve Ballmer said of Google’s forthcoming Chrome OS, “Who knows what this thing is?”

Today, he found out. The operating system, a direct challenge to Microsoft Windows, was on display at a media gathering at the Google HQ this morning.

Sundar Pichai, vice president of product management, and Matthew Papakipos, engineering director for Google Chrome OS, presided over the event, which the company described as a “technical announcement.”

That meant that Google (GOOG) was not releasing a beta of the operating system this week, as had been rumored.

That said, it was an overview of Chrome, as well as Google’s plans for its launch in 2010, so let the Chrome OS liveblogging begin:

There will be no beta today. Pichai says Google is still a year away from an official launch. However, the company is making the code available today.
Pichai says that a year after launch, the Chrome browser has some 40 millions users. He boasts about the browser’s speed, noting that it handles Javascript 39 times faster than Microsoft’s (MSFT) Internet Explorer. There will be three more big Chrome announcements sometime in the future: Chrome for Mac, Chrome for Linux and the debut of Chrome Extensions.
Google’s goal is to ensure that Web applications function as well as desktop apps. Pichai says that the company is figuring out a way for Web apps to safely take advantage of the operating system in the way desktop apps do. A few examples: Graphics, video/audio applications, real-time communication, notification and local storage.

“By 2010 we expect to have all these things built into Chrome,” Pichai adds.
The advent of Chrome coincides with a perfect storm of converging trends, Pichai says, noting the tremendous popularity of netbooks during the recession, the growing acceptance of cloud apps and the rapid innovation in mobile devices. Smartphones are becoming more like laptops, Pichai adds, and laptops are becoming more like smartphones. Is there a better level of computing available for these devices?

There is, according to Pichai, and Google believes it is Chrome OS.
Among Chrome OS’s advantages, Pichai says: Speed, simplicity and security. Every application will be a Web application. There will be no desktop apps. Chrome OS is essentially a browser with a few modifications. All data in the Chrome OS resides in the cloud. Pichai: “We want all of personal computing to work that way….If I lose my Chrome machine, I should be able to go out, buy a new [one] and re-create my previous computing experience easily.”

Chrome OS will run completely inside the browser security model, he adds, noting that security is one of Google’s top priorities along with speed. “Turning on a PC should be like turning on your TV,” he says.
Chrome OS is very similar in appearance to the Chrome browser. “Chrome OS is Chrome,” says Pichai. Google made it look like a browser, because the browser is familiar.
And indeed, Chrome OS does look quite a bit like a browser. Multiple apps load into tabs, for example. It also features “Panels,” which Pichai describes as persistent lightweight windows. “All Chrome data resides in the cloud. Anything you put in the machine is immediately available to you anywhere.”
As netbooks become more advanced and battery life improves, they will evolve into entertainment devices, says Pichai, who notes that via Google Books, a netbook can become an e-reader, and, through YouTube, a video device.
A quick demo of the user interface, which seems very simple and intuitive. “It just works,” says Pichai in an unintentional nod to Apple (AAPL).

An interesting remark: Anyone who writes an app for the Web has written an app for Chrome, says Pichai, joking that Microsoft is already developing for it.
Speed, simplicity and security, says Pichai. We’re trying to make the computing experience delightful.

With that, Pichai hands the stage over to Engineering Director Matt Papakipos.

Papakipos, too, offers the “we want to make computing delightful” sound byte and notes once again that turning on the PC should be like turning on the TV.
Chrome OS eliminates the bootloader, auto-launching the browser. The OS also auto-updates itself, making sure that it’s always current with security patches, etc. Everything from the firmware to the kernel is secured with a cryptographic signature to ensure a secure boot. In the event malware is detected, the system repairs itself automatically.
The basic application security protocol for current operating systems allows apps the same privileges as the user. This presents obvious security issues. Whenever you install a new app, you’re taking a risk, says Papakipos.

But Web applications like those that Chrome OS use, are different. They are Web apps, so they don’t have system-level privileges. Additionally, all apps run in secured sandboxes that are separate from one other and from the OS. Finally, all apps must be signed and verified before each use.
In terms of file systems, Chrome’s is locked down. It’s a read-only root-file system, obviously quite different from other operating systems. All user data are encrypted and synched to the cloud. Essentially, Google uses the PC for caching. Again, if you should lose your machine, you buy a new one, fire it up and it synchs with the cloud, restoring your previous computing experience.
How will Google bring Chrome OS to market? The company is working with vendors to specify reference hardware. You cannot download and install Chrome on just any device, you will have to purchase a Chrome device. Google is looking at a launch window of late 2010, before the holidays.
Google sounds very concerned about the end-user Chrome OS experience. Pichai says the company wants to ensure that the displays, keyboard, etc., on the netbooks that run Chrome are robust and easy to use.
Pichai wraps things up, but before the Q&A, we’re shown a short explanatory video. “The first thing I want to do when I fire up my computer is browse the Internet….If there isn’t any Internet, I might not even use my computer….What if when you pressed on, your PC turned on, what if your operating system was more like a Web browser…what if it was a browser?…Chrome OS is a totally rethought computer that lets you focus on the Internet, which is what most of use our computers for these days anyway.”

Q&A

At this point, Pichai opens the event to questions:

If you’re specifying hardware components, do you must have an idea of what they’ll cost?

A: We expect Chrome netbooks to be in the price range of what people have come to expect….We are not specifying a price target. Price will be determined at the OEM level.

Will the APIs support W3C standards?

A: We’re working very closely with the W3C to standardize as much as we can….In general, we want to see everything standardized across multiple browsers.

Will there be an application store?

A: The Web offers hundreds of millions of applications. Our job is to make people aware of them.

What about desktop applications that are not available on the Web?

A: We expect most of our users to have a second machine at home….Chrome OS is about a delightful experience on the Web….If you’re a lawyer spending your entire day on contracts, etc., this is not the machine for you.

Will you support Microsoft Silverlight?

A: In the case of certain selection plug-ins, we are working to integrate them. No comment beyond that.

Since Chrome is open source, could people build their own variations?

A: Yes. We expect people will do many interesting things with it.

Do you see Chrome running on laptops or desktops?

A: We’re initially focused on netbook-like form factors–clamshells, etc. That said, the OS is being developed to work on other devices.

Is there any level of offline access? What happens when I’m on a plane and don’t want to pay for Wi-Fi?

A: Chrome devices are primarily intended to be Internet-connected. That said, it will have some caching abilities so, for example, you could play a game offline.

Virtualization?

A: Yes. You could run Chrome today on a virtual machine.

Are you working with outfits like Adobe to, say, build a Web-friendly version of Photoshop?

A: We’re very excited by things like Photoshop on the Web and we’re working hard to make that possible.

Will Android apps work on Chrome? Are there plans for third-party apps?

A: [Pichai dodges this one.] If it’s a Web app, it will work on Chrome. The Web works very, very well for our purposes.

Will Chrome work on both X86 and ARM?

A: Yes.

Is there a direct business model for Chrome OS or is this another variation of the-more-people-that-use-the-Web-the-better-for-Google?

A: We are working with partners. No plans for advertising. That said, Pichai notes again that anything that runs on the Web will run on Chrome. And of course, AdWords does, indeed, run on the Web.

[Sergey Brin joins the Q&A]

Do you want Android Apps to run on Chrome?

A: We are focused on creating the use case in which everything is a Web application, but hopefully we can do more in the future.

How does Chrome handle peripherals? Can it print?

A: Most keyboards, cameras, phones, etc., will work. In terms of printing…yes, Chrome OS will print and we’re working hard to make that possible.

What is Chrome’s strategic position for Google?

Time to Cut AT&T Some Slack, iPhone Users?

John Paczkowski — Wed, 18 Nov 2009 20:46:47 +0000

Since 2008, AT&T’s network in and around San Francisco has experienced an increase in 3G data traffic of 2,000 percent.

If you find this metric as astonishing as I do, consider this: The increase in Bay Area data traffic is actually below the national average–significantly below. According to AT&T (T) CTO John Donovan, 3G data traffic on the company’s wireless network has risen nearly 5,000 percent in the past 12 quarters nationally (see chart below; click to enlarge).

“Today, we’re seeing unprecedented growth in mobile broadband traffic,” Donovan said during his keynote at the Open Mobile Conference on Nov. 5. “This growth has required extensive rethinking of wireless networks as we know them, as well as significant advances in the supporting IP backbone and other infrastructure.”

A 5,000 percent increase in 3G data traffic: That’s an astonishing figure. Seems to me it’s entirely likely that any carrier that had been first with the iPhone–including catcalling rival Verizon (VZ)–would have suffered network troubles similar to those that plague AT&T today.

No other U.S. carrier offers a super-smartphone that has sold as well as the iPhone and that people use much like a laptop. Sure, Android and Palm (PALM) webOS devices are used in this way as well, but there are far fewer of them and they have significantly fewer data-hungry apps.

Research in Motion (RIMM) offers some BlackBerries that are used this way, but only some, and there are only 3,000 or so apps available for them. iPhone owners have 100,000 apps from which to choose. And while it’s obvious that there are more BlackBerries in use than iPhones, some of these rely on AT&T’s network, which only compounds the carrier’s problems.

So, really, any carrier that had been first to market with the iPhone would have seen its network overtaxed, especially after Apple (AAPL) launched the iPhone 3G and the iTunes App Store. Those events effectively upended traditional planning models for network capacity in a way that no one was prepared for.

Perhaps other carriers would have fared a bit better. Verizon’s 3G network, even back in 2007, was much deeper and broader than AT&T’s. But could it really have supported a 5,000 percent increase in data traffic without incident? I’m not so sure.

Which is not to say that AT&T is blameless. Its network has lagged and continues to do so, and the iPhone and the massive surge in data traffic it brought with it are not entirely responsible for that.

But they are obviously a big factor. It will be interesting, then, to see how Verizon’s network holds up in comparison if and when the carrier gets the iPhone.

[Image Credit: Morgan Stanley Managing Director Mary Meeker]

What Did Apple Want With AdMob?

John Paczkowski — Mon, 16 Nov 2009 15:04:37 +0000

Before AdMob accepted Google’s $750 million takeover offer, it was approached by Apple. This according to “people familiar with the matter,” who tell Bloomberg that Cupertino was also interested in the mobile advertising company.

Odd to learn that Apple (AAPL) was considering such a move. After all, advertising isn’t exactly one of its core businesses, though it might have become one had it managed to buy AdMob, which is one of the largest sellers of advertisements on the iPhone.

“If a lot of traffic goes through my devices, why can’t I become the middleman that serves ads against that inventory?” said IDC analyst Karsten Weide. “AdMob would have allowed them to do that quickly.”

Indeed. If that’s what Apple wanted. And perhaps the company is interested in expanding into online advertising, as this “Advertising in Operating System” patent seems to suggest.

That said, it’s equally conceivable that Apple met with AdMob hoping to temper Google’s (GOOG) fast-expanding footprint in the mobile space and on the iPhone. With the acquisition of AdMob, the search sovereign is now the Internet’s largest mobile advertising company, with a dominant presence on the iPhone and any handset running its Android OS. Perhaps Apple’s intent was simply to make this a more costly endeavor for Google. But perhaps it was something more.

Dell Dials Up Smartphones

John Paczkowski — Fri, 13 Nov 2009 19:00:53 +0000

[ See post to watch video ]

Dellephone: China Mobile, Claro and Then, AT&T?

John Paczkowski — Fri, 13 Nov 2009 16:22:59 +0000

After nearly three years of rumor and speculation, Dell is finally entering the smartphone market–in China and Brazil. Later this month, China Mobile and Brazil’s Claro will begin selling the company’s Mini 3, a handset designed around Google’s (GOOG) Android mobile operating system.

Why China and Brazil? Well, for one thing, they are developing markets. For another, Dell (DELL) already has partners there.

“Besides size (China Mobile has over 500 million subscribers, and Claro serves more than 42 million), we have existing telecom partnerships with them,” Dell blogger Lionel Menchaca said in a post. “Back in April, we were the first to embed China Mobile’s technology into our Mini 10 netbook. And if you’ve been watching, you know Dell has agreements with lots of other providers like Vodafone in Europe, Australia and New Zealand. We’ve partnered with AT&T and Verizon in the United States to offer mobile broadband on different products, and we have agreements with other carriers in Asia.”

Interesting. Presumably this means we’ll see the Mini rolled out in short order in these other countries as well. As you may recall, Dell was rumored to be building an Android handset for AT&T (T) in early October.

Layoffs Begin at AOL

John Paczkowski — Tue, 10 Nov 2009 17:30:52 +0000

[ See post to watch video ]

100,000 Droids Dropped During First Weekend

John Paczkowski — Tue, 10 Nov 2009 15:36:44 +0000

The Droid invasion appears to be going according to plan. Motorola’s new Android-based handset arrived at Verizon Wireless stores last Friday and analysts say it’s selling quite well.

Indeed, Broadpoint AmTech analyst Mark McKechnie estimates Verizon (VZ) sold about 100,000 Droids in its first weekend. McKechnie believes the carrier had about 200,000 units on-hand at launch, and most stores he surveyed had sold at least half of their stock over the weekend.

That’s not nearly the one million iPhones Apple (AAPL) sold during the first weekend of its latest model debut, but it’s impressive nonetheless. Certainly, Motorola (MOT) hasn’t moved that many handsets in so short a period in a very long time–if ever.

“I see the first few days as encouraging,” McKechnie told Bloomberg. “There seems to be pretty good demand–they’ve taken the right steps and picked a good partner with Google on the Android side.”

Citigroup (C) analyst Jim Suva agreed, noting that Droid doesn’t require iPhone-like sales to be successful. Said Suva: “Although the press is stating the Droid launch was not as successful as the iPhone launch, we don’t believe investors expected an iPhone-like launch, but rather a first step in a cadence of products that will help bring Motorola’s handsets out of the death spiral experienced during the past three years.”

Then there was this from RBC’s Mark Sue, who declared that anyone expecting a launch reminiscent of the iPhone’s was expecting too much: “Motorola’s Droid landed at Verizon and while the new device is not the be all and end all for Motorola it’s an important beginning for a company that sorely missed out of a growing market,” he wrote. “There were no around-the-block lines of consumers waiting to get their hands on a Motorola Droid, yet investors shouldn’t expect them either. We’re looking for a steady ramp instead towards our estimate of approximately 1M units in 4Q09.”

Weekend Update 11.07.09–Big Trouble in Little China Edition

Drake Martinet — Sat, 07 Nov 2009 20:30:07 +0000

Big news often comes in small packages and BoomTown was all over the little moves that meant big stories this week. Kara covered a massive redesign of Microsoft’s MSN homepage that follows the old car-racing-mantra-turned-Web-design ethos: Add power and lightness. Everyone breathed a sigh of relief when BoomTown covered the end of the Skype ruckus. All is forgiven, and all it took was a sizable stake in the company and seats on the board. Kara rounded things out by running a quick post about a spankin’ new feature from AllThingsD: Every Friday, the just launched “Almost Famous” will cover interesting start-ups through the eyes of their chief geeks. Kara’s all about geek love.

Digital Daily isn’t usually big into bean-counting, but this week the numbers were where it was happening. The first sales figures came back from Apple’s iPhone launch in China, and the numbers weren’t good. As of pub time for the post, only 5,000 iPhones had been (legitimately) purchased. If the Chinese numbers were a picture of modesty, the App Store’s numbers were parading through Time Square in an orange jumpsuit singing Eddie Grant’s “Electric Avenue.” The two-year-old App store’s epic popularity has pushed its already outsized download numbers past the two-billion mark. Not to be outdone with unprecedented flash, Google (GOOG) violated its own nonrule late in the week and ran a semi-ad on the Google homepage. You say ad, they say synergy, but at the end of the day it was a direct promo for Motorola’s (MOT) new Droid, which runs on Google’s Android platform.

MediaMemo started the week off right with a fresh bite from Apple (AAPL). Peter covered the revamp of Apple TV, which will now be offered for $30 a month. News from News Corp. was no surprise this week, when MediaMemo brought us the story that the media empire (and AllThingsD’s uber-parent company) was doing fine as long as you only pay attention to cable and movies. Broadcast and print? Eh, not so much. Finally, Peter asked a few probing questions of Google CEO Eric Schmidt in regard to his company’s suspicious addition of a “blog” tag attached to some Google News postings. Schmidt speculated, but the ultimate answer wasn’t, as he suggested, because of your mother.

Deep in his Personal Technology bunker, at an undisclosed location somewhere in rural Maryland, Walt got to take a crack at the new Motorola Droid this week, and his response was, well, very positive. He praised the Droid’s exceptional battery life and call clarity, even if the touchscreen wasn’t quite up to the iPhone bar. All in all, he said it was a win for Verizon (VZ) and the Google’s mobile OS.

Mossberg’s Mailbox continues to fill with questions about the speculative Apple tablet. Walt offered some other sage advice about making the Windows 7 switch with 64 bits, and what to do with all that grief over the death of Microsoft’s (MSFT) Outlook Express.

Katie was sweatin’ to the newbies this week, with an energetic review of Fitbit, a wireless fob for tracking calories and exercise stats. The Bluetooth headset-sized clip attaches to your waistband and uploads your activities to the Fitbit Web interface, where you can track how many calories you did or didn’t burn. You can also add water consumed and calories eaten. The Fitbit has been shipping since September, but won’t appear on retail shelves until after the holidays. No word yet on if it will include a “Cheesecake Factory” tab to the interface so as to allow for calorie counts that require exponents.

Like any good gadget lovers, we are all about the small and mighty here at AllThingsD. Stay tuned in with your RSS reader, Twitter feed or the good ol’ homepage. We’ll keep bringing you the little things you need to know.

Droid Has Landed All Right–Right on Google's Homepage

John Paczkowski — Fri, 06 Nov 2009 21:09:59 +0000

“There will be no banner ads on the Google homepage or web search results pages. There will not be crazy, flashy, graphical doodads flying and popping up all over the Google site. Ever.”

– Google Vice President of Search Product and User Experience Marissa Mayer

“People wouldn’t like [ads on the homepage]. We prioritize the end user over the advertiser.”

– Google CEO Eric Schmidt, August 2009

Well, this is a first, I think: Google is promoting a consumer electronics device on its front page. Surf over to Google.com right now and you’ll find this pitch plugging Droid, Motorola’s (MOT) new Android smart phone: “The Droid is on sale now. Learn more.”

The text is simple and at just 42 characters, it jibes well with Google’s (GOOG) minimalist design ethic. Click on that “learn more” link and you’re taken to a mobile partners page that touts Droid’s Google-enabled search prowess. Only then are you presented with a big “Get the Verizon Droid Now” button that takes you to Verizon Wireless (VZ), where you can purchase the device.

So is it an ad? Google will almost certainly argue that it is not. But clearly, it commercializes the page. Droid is a consumer product sold by another company and Google is branding it on its most prominent page. Wonder how much that spot is worth.

Furthermore, it’s interesting to see Google leveraging search–a product in which it enjoys a de facto monopoly–to promote a second product that isn’t yet dominant (Android). More so, given this remark from CEO Eric Schmidt, made just yesterday:

“Hopefully, we won’t repeat the mistakes that Microsoft made 10 years ago that ultimately led to all these things that happened to them.”

I’ve asked Google for comment and will update this post if and when I receive a reply.

UPDATE Here’s Google’s comment on the Droid promotion via company spokesperson Gabriel Stricker:

We are currently running a homepage promotion for Droid. From time to time we include a link on the Google home page that points users to exciting and important information, whether it be relief opportunities in the wake of a tsunami or hurricane, awareness about an important cause, or information about a new product. The Droid is a hardware collaboration that we’ve been very active and involved with, so it makes sense that Google has an interest in getting the word out.

UPDATE Turns out this is not the first Google has promoted a handset on its homepage. Last October it plugged another Android device there, the T-Mobile G1.

Is Verizon's New Early-Termination Fee Anti-Consumer?

John Paczkowski — Fri, 06 Nov 2009 19:06:09 +0000

Beginning Nov. 15, Verizon subscribers looking to get out of their smart-phone contracts early will pay $350 for the privilege. That early-termination fee is double the current one, but Verizon insists it’s justified because of the higher prices of today’s phones.

“The cost of smart phones is considerably higher than feature phones for which the early termination fees were created years ago at $175,” said Verizon spokesman Jim Gerace. He added that the new $350 ETF declines by $10 per month through the life of the contract and customers can avoid it by buying their devices off contract and paying full retail price.

An interesting move for Verizon (VZ), which just last year agreed to pay $21 million to settle a class-action lawsuit filed by California consumers over the very early-termination fees it is now increasing. The plaintiffs in the suit alleged that Verizon’s ETFs were illegal under California law and that they were designed to unfairly lock consumers into long-term contracts and prevent them from switching carriers. When Verizon settled the suit, it denied any wrongdoing, insisting that early-termination fees are simply a means of recovering legitimate costs. And to some extent Verizon does have a point.

Full retail price for the Motorola’s (MOT) new Droid is $559.99. With a two-year contract, Verizon sells the handset for $199.99. Theoretically, that’s a $359.99 subsidy (I have no idea at what price Verizon purchases Droid from Motorola). So if Verizon allowed subscribers to break their contract after a month without paying an early-termination fee, the company would stand to lose money. And subscribers who did so could subsequently sell the device online and potentially make a profit, though a small one.

So it’s certainly understandable that Verizon and other carriers want to protect the subsidies they dole out for these new smart phones. And as noted earlier, Verizon’s new ETF drops by $10 each month a subscriber remains under contract. But at this rate, subscribers are still bound to pay a $110 termination fee in the 23rd month of a two-year contract. The contract is nearly over, the subscriber obligation to Verizon almost fulfilled, yet the company can still slap its customers with nearly a third of the full ETF if they break it at that time.

By month 23 of a two-year contract, does Verizon really stand to lose $110 if subscribers decide to switch carriers? Doesn’t seem likely if subscribers can walk away just a month later without consequence, taking their handsets with them.

Since Verizon is pro-rating the ETF, why isn’t it doing so in such a way that it zeroes out by the end of the contract?

And isn’t the fast pace of innovation in the smart-phone sector such that prices–for both component and device–are dropping so quickly that high ETFs aren’t really justified? Remember, you can get Apple’s (AAPL) iPhone for $99 today. When the iPhone debuted in 2007, it commanded a price of $499/$599, depending on model.

I’ve put those same questions to Verizon and will update here when I hear back. In the meantime, here’s what Consumers Union policy analyst Joel Kelsey has to say on the matter: “When people want to switch wireless services, the biggest cost they face is early termination fees. These fees are designed to lock people into long-term contracts and stop them from getting better deals. Early-termination fees make the marketplace less competitive. Verizon’s move is painful proof that it’s time for lawmakers to crack down on these fees.”

UPDATE: Verizon Wireless spokesperson Nancy Stark offers the following answers to the questions I posed above:

Your first question regarding the balance at month 23 or 24 assumes that, at that point, we have recovered all of our subsidy and up-front costs for every device. That simply is not so.

On your second question, while the pace of innovation plays a role in prices coming down somewhat, it also plays a role in driving up costs as more and more complexity that customers want is added to phones–from premium HTML browsers to high-resolution MP cameras with optical zoom; videoplayers; music players; dual processor chipsets; WiFi; very high display resolution, operating systems such as BlackBerry, Windows Mobile, Palm, Android–ALL with the added value (vs a desktop) of mobility, and ALL in one tiny device that ALSO allows you to talk to anyone from anywhere. phew! (by comparison, I recently paid $200 for a camera and all it can do is take pictures, and it has only middle of the road capabilities.)

But getting back to ETFs specifically. The most important point is that Verizon Wireless customers do not have to have an ETF at all if they do not want to. ETFs allow customers to have it either way: They can have no ETF and pay full retail for their device. OR, they can get a greatly discounted device by having an ETF.

No Christmas in Palm-ville

John Paczkowski — Wed, 04 Nov 2009 20:04:23 +0000

With a handful of new Android handsets arriving at market in the coming weeks, including Motorola’s (MOT) much anticipated Droid, Palm’s (PALM) prospects for blowout winter holiday sales are dimming.

Earlier this week, analysts at Citigroup (C) and CL King voiced their concerns about the company in the wake of another ugly quarter from carrier partner Sprint (S). Now Standard & Poor’s is doing so as well. In a note to investors today, analyst James Moorman whacked down his price target on the company’s shares to $10 from $12 and reiterated his “Strong Sell rating.

“We believe the upcoming holiday selling season will be very competitive for handset vendors and think Palm could see competitive pressures,” he wrote. “We believe the small price difference between the Pre handset (especially when on sale at third party vendors) and the new lower-end Pixie could limit Pixie sales and confuse consumers during the launch.”

Indeed. As I noted here last week the $99 price Sprint has set for the Pixi is identical to the Pre’s on Amazon (AMZN). And the Pre has a faster processor, a better screen, and Wi-Fi support as well.

Not the most desirable circumstances for heading into the holiday season.

Palm: On a Road to Recovery or a Highway to Hell?

John Paczkowski — Mon, 02 Nov 2009 16:15:15 +0000

With Palm’s shares up more than 900 percent since January, they were destined to suffer a correction someday. And now it seems that day has finally come.

Shares in the handset maker fell some 23 percent last week amid concerns about increased competition from Google’s (GOOG) Android operating system, which is being rolled out on a number of devices at a variety of carriers, including Palm partner Sprint (S).

This morning, analysts at Citigroup (C) cut their recommendations to sell from hold on Palm (PALM) while simultaneously raising their rating on Motorola (MOT) because of its “compelling” new Android handset, Droid.

“Motorola is launching of one of the most compelling offerings at [a] time when many investors have given up on the company’s handsets,” Citigroup analyst Jim Suva wrote in a research note.

“The revolution of product and application service offerings,” Suva added, “is going to start to crack open the enterprise door and could pose a risk for BlackBerry. Major shifts in promotion support creating a promotion commotion in the months ahead favor Motorola and post a challenge for RIMM and PALM.”

Over at CL King, analyst Lawrence Harris is similarly dubious of Palm’s prospects in the months ahead. Noting that Sprint executive David Owens said last week that the carrier plans to peddle a number of new Android devices from HTC next year, Harris sees unfavorable implications for Palm.

“Historically, Sprint has been Palm’s largest customer. Indeed, in the August quarter Sprint accounted for 85 percent of Palm’s revenues,” Harris wrote in a note to investors. “In FY09 (May) Sprint represented 43 percent of total Palm sales. Sprint has a U.S. exclusive on both the Pre and the Pixi through calendar year end. The Pixi will be launched at Sprint on November 15 for $99.99. The Pixi is fairly similar to the $149.99 Pre. Verizon has stated that it will begin offering the Pre in early CY10.”

Expounding on his analysis, Harris notes that “According to a report on Mobile Today, a U.K.-based publication, initial sales of the Pre through Telefonica’s O2 unit in the U.K. have been slow. If this report is correct, than the bulk of Palm’s sales over the next few months will probably continue to be generated through Sprint.”

That Sprint will soon add some slick new Android handsets to its lineup is worrisome, then, indeed. For Palm, it seems, driving conditions on the road to recovery are looking increasingly hazardous.

Motorola on the Rebound

John Paczkowski — Thu, 29 Oct 2009 18:00:34 +0000

[ See post to watch video ]

Motorola, Profit No Longer Mutually Exclusive

John Paczkowski — Thu, 29 Oct 2009 12:59:59 +0000

Motorola’s ambitious turnaround strategy is beginning to pay off. Posting earnings this morning, the company said it managed a surprise profit in the third quarter despite a decline in revenue. For the period, the troubled handset maker reported a profit of $12 million, or a penny a share, compared with a year-earlier loss of $397 million, or 18 cents a share. Sales fell 28 percent to $5.45 billion from $7.48 billion.

Not the prettiest of quarters, but that penny-a-share profit beat the consensus estimates of analysts, who had expected the company to simply break even.

“We delivered on our commitment to improve the financial performance of Mobile Devices and to commercially launch two smartphones in time for the fourth-quarter holiday season,” Sanjay Jha, co-CEO of Motorola and CEO of Mobile Devices, said in a statement.

“The introductions of our new products powered by Android,” Jha continued, “are important milestones as we begin to address the mobilization of the Internet and the growing demand for modern smartphones. Next year, we will continue to expand our smartphone portfolio and deliver improved financial results.”

Glad those layoffs are paying off for someone.

Which is not to say that Motorola’s suffering is over. Sales at the company’s struggling wireless division dropped a precipitous 46 percent to $1.7 billion. Its estimated global market share is now 4.7 percent, compared with 8.4 percent it claimed in 2008. An ugly decline indeed.

That said, with some strong new Android handsets in the pipeline, things are beginning to look up for Motorola (MOT). At $8.44, company shares are trading up six percent this morning.