“We’ve learned and struggled for a few years here figuring out how to make a decent phone. PC guys are not going to just figure this out. They’re not going to just walk in.”

Palm CEO Ed Colligan, December 2006

“Five hundred dollars? Fully subsidized? With a plan? I said that’s the most expensive phone in the world and it doesn’t appeal to business customers because it doesn’t have a keyboard, which makes it not a very good e-mail machine.”

– Microsoft CEO Steve Ballmer, January 2007

At 37.9 percent, Nokia’s share of the global handset market is the largest in the industry. Odd then to learn that it is not the most profitable. And odder still to learn that that honor belongs to Apple, which has been in the handset market for just two years.

According to Strategy Analytics, Apple’s third-quarter iPhone operating profit was $1.6 billion, while Nokia’s was $1.1 billion. Driving Apple’s profits: Strong sales, high wholesale prices and tight cost controls.

“We have identified at least 4 key factors underlying Apple’s success,” Strategy Analytics analyst Alexander Spektor explains. “First, Apple created a simple sub-brand–the iPhone–which was memorable and easy to remember. Second, the firm developed an attractive family of models with standout usability that enabled Apple to charge way-above-average prices to operators and consumers. Third, Apple distributed and co-marketed its handsets through top-tier carriers in numerous high-value countries. And fourth, the vendor has kept a solid grip on production costs by working with Foxconn, the world’s largest contract handset manufacturer.”

Quite an achievement for Apple (AAPL) and a major humiliation for Nokia (NOK), which has seen its dominance eroded by the likes of Apple and Research in Motion (RIMM), and not just in North America, but in Europe. Indeed, in its latest quarter Nokia’s smart-phone market share dropped by six points.

As Strategy Analytics analyst Neil Mawston noted at the time, “[Nokia has] no iPhone killer to drive a major revival in its smartphone volumes. [It] is still struggling in the U.S. smartphone market, and with competition intensifying in China as well, Nokia’s battles can only get tougher in 2010.”

Third-quarter chip sales totaled $61.9 billion, down 10.1 percent from the same quarter last year, but up nearly 20 percent from the second quarter of 2009. No doubt about it, the market for chips is improving (see chart below; click to enlarge).

“Global semiconductor sales in the third quarter were above expectations,” SIA President George Scalise said in a statement. “September sales were in line with historical patterns, reflecting increased demand from end-users as they began the build for the holiday season.”

“Amid signs that we are in the early stages of recovery in the global economy,” Scalise added, “semiconductor sales continue to reflect normal seasonal patterns. Sales are running well ahead of the worst-case scenarios projected early in the year, and we are optimistic that total sales for 2009 will be better than our mid-year forecast.”

Sales are running well ahead of the worst-case scenarios? Well, I suppose any reassurance is a good one when your industry is down 10 percent year-over-year.

New metrics from Web analytics firm StatCounter show Bing’s share of the U.S. search market in September falling to 8.5 percent from 9.6 percent in August. Its share of the global market declined as well, slipping to 3.25 percent from 3.58 percent.

Microsoft’s (MSFT) new search partner, Yahoo (YHOO), also suffered a decline. Its market share fell to 9.4 percent from 10.50 percent in the U.S. and to 4.37 percent from 4.84 abroad. Meanwhile, Google’s (GOOG) September share rose to 80 percent from 77.8 percent in the U.S. and to 90.54 percent from 90 percent globally. (See chart below; click to enlarge.)

“The trend has been downwards for Bing since mid August,” StatCounter CEO Aodhan Cullen said in a statement. “The wheels haven’t fallen off but the underlying trend must be a little worrying for Microsoft.”

Mmm, I doubt it. While a month of slight decline might herald the beginning of a trend, it certainly doesn’t guarantee one, especially in search, where surges and declines in market share are quite common. Furthermore, we haven’t yet seen search metrics from Nielsen, comScore (SCOR), and Hitwise. And all three showed Bing gaining share in August, a month that Statcounter claimed shows the beginning of a downward trend.

Clearly, there’s quite a bit of enthusiasm around the device and its Motoblur feature, which connects a variety of social networking services to the phone’s core functions.

Said Mark Sue, an analyst at RBC Capital: “Our initial take is favorable, and it seems that Motorola is carving out a niche in the crowded smartphone market by focusing on socially minded demographics as opposed to enterprise users or pro-sumers. We think it’s a step in the right direction.”

C.L. King analyst Lawrence Harris was similarly impressed. “Our initial impression of the CLIQ is that it is not an iPhone killer, but that it will be a contender,” he said in a research note issued today. “…Initial reviews suggest that the CLIQ’s build quality is excellent with a solid keyboard, two important selling points.”

And Tavis McCourt at Morgan Keegan said the CLIQ is a credible device–assuming Motorola (MOT) can sell enough of them. “MOTOBLUR clearly differentiates a Motorola Android-based smartphone from others on the market and provides Motorola a fighting chance at successfully turning around Mobile Devices with Android-based devices,” he noted today.

“The CLIQ appears to be a solid touch screen smartphone,” McCourt added, “but we will defer from offering a more confident opinion until we get a chance to test one and note that we expect the upcoming Motorola Android-based device for Verizon Wireless may be somewhat more impressive. We believe Motorola ultimately needs to sell about 2 million smartphones/quarter in order to become sustainably profitable in its Mobile Devices business.”

McCourt’s conclusion: “Given Motorola’s global distribution, this does not require a ‘home run’ product, but only a series of ‘solid’ products. The CLIQ appears to be a good first step in this turnaround.”

Why? Well, the CLIQ, or DEXT as it will be confusingly branded in the U.K., incorporates Motorola’s new “MotoBlur” service, which essentially corrals Facebook, MySpace, Twitter, Picasa, GMail and MS Exchange activity into a single feed and presents them on your phone.

In form, the CLIQ is a sideways slider. Like the Palm (PALM) Pre, the device boasts a full touchscreen and QWERTY keyboard. It’s got a 320 x 480-pixel, 3.1-inch HVGA screen and a five-megapixel camera. The CLIQ is video-capable (play, stream and capture) and supports the broad spectrum of media formats. It runs Android 1.5 (Cupcake), and Motorola (MOT) claims a battery life of six hours.

Jha says the phone is not intended to be a single iconic device–like, say, Apple’s (AAPL) iPhone. Rather, it is the first of a broad line of handsets, all running Android and Motoblur, that will be targeted at different customer segments around the world.

A wise strategy in the current market? Who knows? But at least it’s a step in the right direction. Motorola clearly needs to do something to right itself after the past few disastrous years. Hard to believe the company controlled 16.1 percent of the global handset market just two years ago. It’s market share today? A modest 6.5 percent. The CLIQ will be sold through T-Mobile in the United States.

The device’s spec sheet below; click to enlarge.

On Thursday, the virtualization software firm reported a second-quarter profit of 20 cents a share, topping the 19 cents projected by analysts. And while sales fell to $455.7 million, they still exceeded the $452.4 million the Street had been expecting.

In a conference call with analysts, VMware (VMW) execs warned not to read to much into that though, saying they are still cautious about the economy.

“It is clear the global economy has not yet recovered and there is still some uncertainty,” CEO Paul Maritz cautioned. “In a recent survey of 150 CIOs of large businesses, 40 percent expected some downward revision in their budgets in the second half of 2009. That said, there were some signs that customers were moving on with business, even if it was buying just enough just in time.”

Good thing Wall Street wasn’t expecting much from Microsoft. Because it didn’t get it.

After market close Thursday, the Redmond, Wash.-based tech giant reported that fiscal fourth-quarter net income fell to $3.05 billion, or 34 cents a share, from $4.3 billion, or 46 cents a share, in the same period a year earlier.

Revenue for the period ended in June fell 17 percent to $13.1 billion. Wall Street had been looking for earnings of 36 cents a share on $14.37 billion in revenue, according to data compiled by Thomson Reuters.

Online advertising revenue decreased $86 million, or 14 percent, to $529 million, primarily reflecting a decline in display advertising.

The company missed estimates by $1 billion. Gruesome.

“Our business continued to be negatively impacted by weakness in the global PC and server markets,” CFO Chris Liddell said in a statement. “In light of that environment, it was an excellent achievement to deliver over $750 million of operational savings compared to the prior year quarter.”

Microsoft shares are trading down more than eight percent at $23.50, as I write this.

Below is the full earnings release. BoomTown’s Kara Swisher will be liveblogging the earnings call later this afternoon.

Microsoft Reports Fourth-Quarter Results

The company delivered operational efficiency and innovation in a difficult environment

REDMOND, Wash., July 23, 2009–Microsoft Corp. today announced revenue of $13.10 billion for the fourth quarter ended June 30, 2009, a 17% decline from the same period of the prior year. Operating income, net income and diluted earnings per share for the quarter were $3.99 billion, $3.05 billion and $0.34 per share, which represented declines of 30%, 29% and 26%, respectively, when compared with the prior year period.

“Our business continued to be negatively impacted by weakness in the global PC and server markets,” said Chris Liddell, chief financial officer at Microsoft. “In light of that environment, it was an excellent achievement to deliver over $750 million of operational savings compared to the prior year quarter.”

The financial results for the fourth quarter ended June 30, 2009, included the deferral of $276 million of revenue related to the Windows 7 Upgrade Option program that was announced on June 25, 2009. This revenue deferral reduced earnings per share by $0.02.

The fourth-quarter financial results also included $193 million of legal charges, $108 million of impairments to investments and $40 million of additional severance charges related to the previously announced plan. Operating expenses were reduced by $105 million of capitalized research and development expenses due to the technical milestones reached for Windows 7. Combined, these items also reduced earnings per share by $0.02.

Significant product milestones were achieved in the quarter including the releases of Windows 7 release candidate, Windows Server 2008 R2 release candidate, as well as Bing, Microsoft’s search engine designed to help people make faster, more informed decisions.

For the fiscal year ended June 30, 2009, Microsoft reported revenue of $58.44 billion, a 3% decline from the prior year. Operating income, net income and diluted earnings per share for the year were $20.36 billion, $14.57 billion and $1.62, which represented declines of 9%, 18% and 13% respectively.

“While economic conditions presented challenges this year, we maintained our focus on delivering customer satisfaction and providing solutions to our customers to save money,” said Kevin Turner, chief operating officer at Microsoft. “I am very excited by the wave of product and services innovations being delivered in this next fiscal year.”

Business Outlook

Microsoft is providing operating expense guidance of $26.6 billion to $26.9 billion, for the full year ending June 30, 2010.

Management will discuss fourth-quarter results and the company’s business outlook on a conference call and webcast at 2:30 p.m. PDT (5:30 p.m. EDT) today.

The global PC market will suffer a rare decline this year with shipments expected to slip four percent to 287.3 million units in 2009, from 299.2 million in 2008 (click on chart to enlarge). Not since the dot-com bust of 2001 have PC sales been so slow or their outlook so grim, says iSuppli, the research outfit charting the market’s collapse.

“An annual decline in unit shipments is highly unusual in the PC market,” says Matthew Wilkins, principal analyst, for iSuppli. “Even in weak years, PC unit shipments typically rise by single-digit percentages. The last decline–in 2001–was a 5.1 decrease in unit shipments due to the extraordinary impact of the Dot-Com bust, which caused inflated IT spending levels from the previous years to collapse.”

Driving the gloomy forecast this time around: The econalypse, of course, but also, dwindling demand for desktop computers. iSuppli expects an 18.1 percent drop in desktop shipments, from 151.9 million in 2008 to 124.4 million in 2009.

Grim, I know. Still, there is a bit of good news in the report. Notebook PC shipments will rise 11.7 percent to 155.97 million units in in 2009, exceeding desktop shipments for the first time ever.

That’s the word from Gartner, which back in March was claiming the decline would be just 3.8 percent. The research outfit said Tuesday that it expects tech spending to fall to $3.2 trillion this year, down from $3.4 trillion in 2008. And it sees all four major segments of IT–hardware, software, IT services and telecommunications–suffering revenue declines in 2009 (click on chart below).

“The forecast decline in spending growth for the hardware and software segments in 2009 has almost stabilized, and only minor downward revisions have been made to these forecasts this quarter,” said Gartner’s Richard Gordon. “However, the full impact of the global recession on the IT services and telecommunications sectors is still emerging, and forecast growth in these areas has been further reduced significantly.”

That said, the company sees a rebound of 2.3 percent in 2010.

Gartner (IT) is the latest research firm to temper its projections for information technology spending this year in light of the ever-souring economy. Last week Forrester (FORR) lowered its expectations for 2009, saying the first two quarters of the year were worse than expected and that the decline will carry out for the rest of the year. It did, however, say we can expect a rebound in 2010.

This latest version of the browser offers a number of new features. Among them: Private browsing, location-aware surfing, support for emerging HTML 5 standards such as plug-in-free video and audio playing, and better JavaScript performance. It’s that last improvement that’s most noteworthy since Mozilla claims that Firefox 3.5 is twice as fast as Firefox 3, and an astonishing 10 times faster than Firefox 2.0.

Nice features, all of them, and ones that certainly reflect the goal of Firefox’s creators at the Mozilla Foundation: To upgrade the Web. “What we’re actually trying to do,” Mozilla Chairman Mitchell Baker said at our D7 conference in May (see video highlights below), “…is improve the Web itself….Our main goal is to make more capabilities available, and right now, the browser is the main delivery mechanism….We’re trying to be the delivery mechanism upon which others build innovations.”

And upon which Firefox builds market share. Though it is currently the world’s second-leading browser, with a 22.5 percent share of the global Web browser market, Firefox faces some formidable competition these days from Microsoft (MSFT), Apple (AAPL) and now Mozilla partner Google (GOOG), which is bearing down upon it with its latest “don’t-be-evil” bulldozer, Chrome.

]]> http://digitaldaily.allthingsd.com/20090630/mozilla-foundation-announces-your-new-default-browser/feed/ 3 http://digitaldaily.allthingsd.com/20090520/smartphones-selling-far-better-than-dumb-ones/ http://digitaldaily.allthingsd.com/20090520/smartphones-selling-far-better-than-dumb-ones/#comments Wed, 20 May 2009 14:33:28 +0000 John Paczkowski http://digitaldaily.allthingsd.com/?p=18003

Global mobile handset sales fell at a record pace in the first quarter of 2009. And they’re likely to do so once again in the second. That’s the grim news today from Gartner, which reports that first-quarter sales of handsets fell to 269 million units, down 14.5 percent from the fourth quarter of 2008 and 9.4 percent from a year earlier.

“There were some signs of a recovery in markets such as North America and China, but overall sales in the first quarter of 2009 registered the biggest quarter-on-quarter contraction since Gartner began monitoring the market on a quarterly basis in 2001,” said Gartner research director Carolina Milanesi. “We really don’t see demand stabilizing before the second half of 2010.”

Demand for low-end mobile phones, that is. Smart phones are doing just fine. Their sales rose 12.7 percent to 36 million units. That’s 13.5 percent of all mobile devices sold in the first quarter, up from 11 percent a year earlier. The chief beneficiaries of this trend: Apple (AAPL) and Research in Motion (RIMM).

Apple doubled its share of the smart phone market in the first quarter of 2009, nabbing 10.8 percent of worldwide sales, up from 5.3 percent in the first quarter of 2008. The company sold 3.9 million iPhones during Q1 2009, more than double the 1.7 million it sold in the first quarter of 2008. Meanwhile, RIM’s share of the smart phone market reached 19.9 percent in the first quarter, up from 13.3 per cent a year earlier. It sold 7.2 million BlackBerry devices to end users, up from 4.3 million in the same period a year earlier.

Incidentally, Nokia (NOK) remains the market leader in smart phones and handsets overall, though its share in both is declining. The company claimed 36.2 percent of the handset market in the first quarter of 2009, down from 39.1 percent in the first quarter of 2008. Its share of the smart phone market dropped to 41.2 percent from 45.1 percent during the same period.

How is it that smart phone makers like Apple and RIM are defying a downturn that’s playing havoc with their dumbphone-manufacturing colleagues? Touchscreens and app stores.

Said Gartner analyst Roberta Cozza: “Much of the smartphone growth during the first quarter of 2009 was driven by touchscreen products, both in midtier and high-end devices. ‘Touch for the sake of touch’ was enough of a driver in the midtier space, but tighter integration with applications and services around music, mobile email, and Internet browsing made the difference at the high end of the market.”

Good news for Palm (PALM), which is bringing a device that fits that bill to market on June 6.

]]> http://digitaldaily.allthingsd.com/20090520/smartphones-selling-far-better-than-dumb-ones/feed/ 0 http://digitaldaily.allthingsd.com/20090520/pre-shortages/ http://digitaldaily.allthingsd.com/20090520/pre-shortages/#comments Wed, 20 May 2009 11:00:23 +0000 John Paczkowski http://digitaldaily.allthingsd.com/?p=17937 One of the simplest ways to create a shortage, and the buying frenzy that typically accompanies it, is to announce that there will be one. And this is precisely what Sprint CEO Dan Hesse did for the Palm Pre Tuesday. Speaking at J.P. Morgan’s Global Technology, Media and Telecom Conference shortly after Sprint announced the handset’s street date, Hesse said he anticipates that supplies will be limited, at least initially. “We don’t intend to advertise it heavily early on because we think we are going to have shortages for a while,” Hesse said. “We won’t be able to keep up with demand for the device in the early period of time.”

Interesting thing to say in advance of a product launch on which so much is riding, don’t you think? Unless you’re already trying to foster the perception of excess demand. As Gartner analyst Hugues De La Vergne noted last month, “It’s important to have a success like selling out. The Pre has to live up to the hype or else they’ll lose their momentum to rival products coming out soon after.” And clearly, that’s a very real danger here. Though, to be fair, there are other possible explanations. It could simply be responsible production scheduling. It might also be that Palm’s financial situation has forced the company to temper its launch run-rate in order to retain adequate capital for marketing and customer service. Or it could be that Pre really is the blockbuster device Palm (PALM) and Sprint (S) believe it to be and no amount of supply will be enough to meet the initial and overwhelming demand for it. It could be that the Pre is the next Apple (AAPL) iPhone.

“What the iPhone has shown is that if you really do have a compelling device that is revolutionary then customers will switch to your service,” said Hesse. “We think the Palm Pre stacks up very well against the iPhone.”

We’ll find out come June 6.

]]> http://digitaldaily.allthingsd.com/20090520/pre-shortages/feed/ 2 http://digitaldaily.allthingsd.com/20090430/ericsson-thanks-a-lot-sony/ http://digitaldaily.allthingsd.com/20090430/ericsson-thanks-a-lot-sony/#comments Thu, 30 Apr 2009 12:08:53 +0000 John Paczkowski http://digitaldaily.allthingsd.com/?p=16653 Telecom equipment maker Ericsson reported earnings this morning, and while the Swedish company is obviously doing better than some of its rivals, it’s not doing all that much better. This morning the company posted a 35 percent drop in first-quarter profit, its financials undermined by its Sony Ericsson joint venture (which reported a loss of 293 million euros) and by customers postponing purchases because their local currency has collapsed. Net profit in the quarter was 1.7 billion kronor ($210 million) compared with 2.6 billion kronor in the same period a year ago.

Now we know why Ericsson declined to offer a specific business outlook for 2009 when it last reported earnings. That said, the company seems to believe that the effects of global recession on its business are limited so far. Investments in wireless networks apparently continue apace, econalypse be damned.

“I think we have had a decent start of the year,” CEO Carl-Henric Svanberg said during a conference call with analysts. “We continue to gain market share. We had several strategic wins, we’re doing good in managed–both networks and managed services. There are some but still limited effects from the economic recession and still I think this is not the time to be too precise and predicting but realize that this is a very unusual time.”

]]> http://digitaldaily.allthingsd.com/20090430/ericsson-thanks-a-lot-sony/feed/ 0 http://digitaldaily.allthingsd.com/20090401/gartner-sky-is-falling/ http://digitaldaily.allthingsd.com/20090401/gartner-sky-is-falling/#comments Wed, 01 Apr 2009 07:00:46 +0000 John Paczkowski http://digitaldaily.allthingsd.com/?p=15757 Global information technology spending will fare worse in 2009 than it did during the dotcom bust of 2001. That’s the grim news from Gartner (IT), which Tuesday predicted that worldwide IT spending will slip to $3.2 trillion this year from $3.4 trillion in 2008. If that should happen, the drop will be the greatest decline in nearly a decade. “IT organizations worldwide are being asked to trim budgets, and consumers are cutting back on discretionary spending,” said analyst Richard Gordon. “The speed and severity of the response by businesses and consumers alike to these economic circumstances will result in an IT market slowdown in 2009 that will be worse than the 2.1% decline in IT spending in 2001, when the Internet bubble burst.”

No area of technology will be immune to the decline. Hardest hit: the computer hardware sector, which is expected to see spending fall 15 percent to $324.3 billion. Seems even the promise of government stimulus packages won’t be enough to offset this ugly near-term outlook. Said Gordon, “Economic conditions have continued to erode business confidence in all regions. There is a continued general sense of uncertainty in the market and a lack of clarity of actual amount of toxic debt out there. IT organizations will look for ways to shift spending from capital expenditures to operational efficiencies.”

]]> http://digitaldaily.allthingsd.com/20090401/gartner-sky-is-falling/feed/ 0 http://digitaldaily.allthingsd.com/20090303/mac-attack/ http://digitaldaily.allthingsd.com/20090303/mac-attack/#comments Tue, 03 Mar 2009 17:55:51 +0000 John Paczkowski http://digitaldaily.allthingsd.com/?p=14065
[ See post to watch video ]