2013 Will Not Be a Good Year for E-Reader Makers

In the midst of a disappointing sales season for retailers, there have been several bright spots. One of those has to be the number of e-book readers that appeared under Christmas trees.

But the cheer is not expected to last throughout 2013. According to some technology analysts, this category of tech gadgets is expected to see a very rapid decline in its fortunes over the coming months thanks to competition from other devices.

Competition From Tablets

There are several well-known e-readers on the market including the Nook from Barnes & Noble (NYSE: BKS). Last April, the company announced a partnership with Microsoft (Nasdaq: MSFT) whereby Microsoft invested $300 million into its Nook unit. This investment is interesting in the light of Microsoft's move into tablets with Surface. 

There also a number of Asian manufacturers, but the best known of the e-readers are the various versions of the Kindle from Amazon.com (Nasdaq: AMZN). In the run-up to Christmas, the latest Kindles occupied three of the top 10 slots for electronics at Amazon's website.

But they were outsold by tablets, which occupied eight of the top 20 spots for electronics on Amazon's website.

Tablets are becoming more user friendly. . .lighter, cheaper and with longer battery life. Not to mention tablets are multifunctional. The Kindle and others are under direct fire from the mini-iPad from Apple (Nasdaq: AAPL) and the Nexus 7 from Google (Nasdaq: GOOG) that costs only $199.

It is this competition that has industry analysts so worried.

The Way of the Dinosaurs?

One worry wart is the research firm IHS iSuppli. It titled its recent report on the industry: Ebook Readers: Device to Go the Way of Dinosaurs?

According to iSuppli, total e-book readers shipments grew from a mere one million worldwide in 2008 to ten million in 2010. Shipments hit a peak of 23.2 million units in 2011. But even then, tablets had already taken the lead over e-readers with shipments of 67 million units.

In 2012, iSuppli has forecast that sales will fall 36% to just 14.9 million units. Another drastic 27% fall is forecast for 2014 when shipments decline to 10.9 million units. The firm sees sales of only 7.1 million units by 2016 as the consumer trend toward a multifunctional device – the tablet – continues.

Research firm Forrester is in agreement with iSuppli. It also believes that tablets will be become cheaper and cheaper while at the same time screens and battery life improves.

An analyst with Forrester, James McQuivey, believes e-reader prices and sales have only one direction to go. . .down. He told the Financial Times' Chris Nuttall, “Prices are falling so quickly that at some point Amazon's going to give you one for free to extend its customer relationship.”

Small Hope

As iSuppli points out in its report, it is an inexorable move from a single-use device to multifunctional devices. But it doesn't mean the complete end for e-readers. Think GPS devices and MP3 players.

There still may be some demand for the devices from one specific sector – the education industry in emerging markets.

With the growing popularity of the iPad and other tablets, it may too late to tap into the U.S. educational market in a big way. But it is a different story in the emerging world. But only if the e-reader makers grasp the opportunity quickly.

Jordan Selburn, an analyst with IHS, told the Financial Times “the future [for e-readers] is in emerging regions and in heavily subsidized opportunities.”

But in those markets, with incomes low, e-readers would have be very low-cost. Perhaps in the less than $20 range for end users. Some one (governments?) would have to subsidize the cost so e-reader manufacturers would make some profit.

So there is a bit of hope for e-reader manufacturers. But just not a lot of it.

 

This article originally appeared on the Motley Fool Blog Network. Make sure to read all of my articles for the Motkey Fool at http://beta.fool.com/tdalmoe/.

Qualcomm On the Rise, Intel On the Decline

The latest quarterly earnings statement from Qualcomm (Nasdaq: QCOM) blew away most estimates. This resulted in the company's stock actually briefly surpassing the market valuation of long-time chip champion, Intel (Nasdaq: INTC). This is not a blip. There are reasons why investors should expect this to be the continuation of a long-term trend where Qualcomm outperforms Intel.

Qualcomm had such a good quarter because it is largest seller of semiconductors for mobile phones, including the iPhone 5 from Apple (Nasdaq: AAPL) and the latest offerings from Samsung like the Galaxy S III. It is also a big player in chips for tablets. The majority of the company's revenues comes from baseband chips, which connect phones to cellular networks. These chips are sold to firms like Apple and Samsung.

Mike Burton, an analyst at Brean Capital LLC, said “Qualcomm has absolutely been one of the prime beneficiaries in smartphones and tablets.” Meanwhile, Intel is a laggard in the market for mobile phone chips and is being hurt by the steady decline in demand for PCs. PC shipments are headed for their first annual decline in 11 years this year, according to research firm IHS iSuppli.

Qualcomm's chips are based on designs from Intel's adversary, U.K.-based Arm Holdings PLC ADR (Nasdaq: ARMH). Arm designs chips that use much less power than Intel chips while still being powerful. In fact, Bloomberg has reported that Apple is even considering dumping Intel's chips from use in its MAC computers in favor of Arm-designed chips.

Clear Sailing in 2013

More good news for Qualcomm shareholders is the fact that the company forecast continued strong demand for its chips in the current quarter. Qualcomm pointed to factors such as fast-growing demand for smartphones among emerging market consumers. Qualcomm's CEO Paul Jacobs told the Financial Times “Smartphones in China are really strong right now and cell phones are staples, not luxury items any more.”

Despite a bit of a slowdown in the sales growth rate in the third quarter, the future is bright for smartphones. Research firm NPD Display Search says that 567 million smartphones will be shipped this year and that number will surpass 1 billion in 2016.

Qualcomm is not sitting on its laurels either. It is aggressively expanding into the market for application processors. These are the chips that run programs in smartphones and tablets. For example, the company will be supplying its Snapdragon product to computer makers using the new version of the Windows operating system, Windows 8, from Microsoft (Nasdaq: MSFT). Snapdragon is also the sole supplier being used by every manufacturer of Windows smartphones.

The Years Ahead

This move into application processors is not surprising. Qualcomm was quick to enter the mobile phone market too. Its president Steve Mollenkopf told the Financial Times “We saw that mobile was going to be the key market to be in some time ago and we invested in key technologies much earlier than everybody else.” Particularly Intel, which is still talking about a golden age for PCs.

In the years ahead, if current trends continue, Qualcomm will be a more valuable company than Intel.

Look at the past decade. Intel's valuation peaked at $502 billion in 2000 during the internet bubble. Its shares have fallen about 15% this year alone and about 14% over the past 10 years. Meanwhile, shares of Qualcomm have jumped about 255% over the past decade and are up roughly 8% this year.

The next decade will likely show an ever growing gap between the two companies fortunes.

This article was originally published on the Motley Fool Blog Network. Be sure to read all of my articles for the Motley Foll at http://beta.fool.com/tdalmoe/.

Nokia May Be at the 'Last Chance Saloon'

The ills of the once dominant Finnish mobile phone maker Nokia ADR (NYSE: NOK) are many and, to some extent, getting worse. The company may be at 'The Last Chance Saloon.' The bartender is Steve Ballmer of Microsoft (Nasdaq: MSFT). He is pouring Nokia not the Finnish traditional 'long drink', but what he hopes is a nice, smooth and profitable drink of Windows 8 for smartphones.

Windows 8 had better be all that Microsoft has promised for Nokia's sake. It sold fewer of its flagship Lumia smartphones in the third quarter than Apple (Nasdaq: AAPL) did of its new iPhone 5 in its opening weekend!

Poor Sales and Market Share Trend Continues

Nokia's smartphone sales in the third quarter amounted to just 6.3 million units. There were 2.9 million Lumias sold in the quarter, down from 4 million the previous quarter. In the important U.S. market, sales amounted to a mere 300,000 smartphones. That is down about 50% from the previous quarter. In addition, revenues in China fell 80% year-on-year. Much of the blame lies with the fact that consumers globally were waiting for the Lumia smartphones that run on the new Windows 8.

Right now the Windows operating system accounts for only 4% of the global smartphone market, badly trailing Apple's iOS and the Android operating system from Google (Nasdaq: GOOG). Samsung's new Galaxy III runs on Android. That's just another reason it wasn't a great shock that Nokia was bumped out of the top 5 smartphone makers in the third quarter. That was the first time that happened since researchers at IDC began compiling such data in 2004.

Sales are unlikely to improve as much as initially expected in the short term either. This quarter is traditionally the strongest for sales of phones due to the holiday season. However, for Nokia, the flagship 920 Lumia smartphone will not be available for several more weeks. It will also be available only through one carrier, AT&T. This combination will likely hold back sales despite Nokia's market-leading mapping and photo technology.

Carriers Want an Alternative

There is one huge positive in the corner of Nokia and Microsoft though. The telecom carriers such as AT&T, Sprint, T-Mobile and Verizon (NYSE: VZ) want a viable third choice to the current duopoly of Apple and Google.

Verizon's CEO, Lowell McAdam, told the Financial Times recently that “the carriers are beginning to coalesce around the need for a third ecosystem. It'll between [Blackberry maker] RIM (Research in Motion) and Microsoft, and I expect Microsoft to come out victorious.”

He may be right about Microsoft beating out RIM. According to the consumer research firm Kantar Worldwide, in Europe, Windows will overtake RIM's operating system by the end of the year. Nokia's entry-level smartphone Lumia 610 seems to be winning over cost-conscious consumers there. In a first for Windows, it now has more than 10% of the market in Italy.

The Future

Europe could prove to be very fertile ground for Nokia and Microsoft since more than 50% of European consumers have yet to purchase their first smartphone and still have older phones. The brand these consumers is most familiar with is Nokia.

Another plus is that the launch of Windows 8 should give an impetus to developers to build applications and content that is currently lacking on Windows phones. The myriad of apps and content is a huge selling point for Apple.

But getting that content is a slow process and Nokia may not have the luxury of waiting too long. It is burning through its cash position rather rapidly thanks to its continuing operating losses. Standard and Poor's has forecast that, by year's end, Nokia will be down to 3 billion euros in cash. Some credit analysts even doubt whether the company can make a 1.25 billion euro bond repayment in April 2014.

So the Windows 8 effect had better kick in and fast. The next six to nine months will be critical to the fate of Nokia.

This article was originally published on the Motley Fool Blog Network. Make sure to read all of my articles for the Motley Fool at http://beta.fool.com/tdalmoe/.

Can Apple Replicate Its Success in Emerging Markets?

The success of the iPhone from Apple (Nasdaq: AAPL) in the United States is well known to nearly every investor. The iPhone and the iPad are the reasons why the stock has performed so well for so long. But what about the future? At least as far as the smartphone market goes, the future seems to lie in the emerging markets and cheaper smartphones.

The number of entry-level smartphones, according to Deliotte, sold this year (mainly in emerging markets) is expected to soar to 300 million units. This will more than double the total number in use globally to in excess of 500 million units.

Emerging markets, especially China, are key to Apple's future growth. It is expected that in excess of 150 million smartphones will be sold in China alone this year. Apple's CEO Tim Cook has said numerous times that demand there is “mind-boggling”. China, which has surpassed the United States as the world's biggest smartphone market, is already Apple's second-largest market after the U.S. Some analysts are worried that it may be losing its touch in China since its revenues in the region for the second quarter fell by 28 percent to $5.7 billion. The same quarter in 2011 had seen revenues jump sixfold. On the bright side, iPhone sales in the quarter still doubled year-on-year.

The main reason for the drop in Apple's China region revenues is simply competition for market share in the world's biggest smartphone market. The company's main competitor right now has to be Samsung with its Android-powered phones. Android is the smartphone operating system developed by Google (Nasdaq: GOOG). Samsung's smartphones currently have 30 percent of the Chinese market compared to only 10 percent for Apple. That is due to Samsung's strong retail presence in the country, even in the hinterlands.

In fact, Android phones have been so successful in China and other emerging markets that it led analyst Benedict Evans of Enders Analysis to recently tell the Financial Times that “It is very clear that Android is hoovering up market share in emerging markets”. This includes India where Apple is actually struggling, selling less phones there than in Norway. Its market share there is about 3 percent, versus 45 percent for Android-powered phones.

Apple has more to worry about than Samsung too. Microsoft (Nasdaq: MSFT) and its partner Nokia ADR (NYSE: NOK) are placing a definite emphasis on China and other emerging markets as a growth engine. Microsoft believes that the only reason Android is so successful in China is that it happens to be on the cheaper smartphones. It and Nokia plan to match the low prices ($100-$150) while at the same time offering users a better experience with its Windows-powered phones such as Nokia's Lumia, a prototype of which was spotted in China this week.

The major plus for Microsoft's push into emerging markets with its phones later this year is that Nokia, unlike in the United States, has an almost unmatched reputation in the emerging world for producing quality products. But in China, Microsoft is covering its bases by also partnering with Samsung, HTC and ZTE.
Will Apple decide to compete on the low-end of the smartphone market? They may have to do something as the developed markets where they are so successful are becoming saturated. Most likely Apple will decide to the lower the price of their older 3G iPhone in order to make it more affordable to people in emerging markets. If they do this, these phones should sell well due to Apple's reputation. And don't forget that in China later this year Apple will, for the first time, release Siri in Mandarin.   This article was originally written for the Motley Fool Blog Network. Please read all of my articles for the Motley Fool at http://blog.fool.com/tdalmoe/.

Apple-Google Struggle Moves to Maps

The struggle at the top of the technology food chain between tech titans Apple (Nasdaq: AAPL) and Google (Nasdaq: GOOG) continues. Now the growing conflict has even spread to the world to smartphone map applications with the unveiling last month of a home grown Maps application from Apple. This is a straight on in-your-face effort to beat Google on its own home turf.

This move in essence ousted the Google Maps app that had come preloaded on the iPhone since its launch in 2007. Apple's version of Maps will come with local reviews from Yelp, 3D images of cities and turn-by-turn navigation.

What is interesting here is that this struggle over smartphone map apps is extending half way around the world to China. Here, of course, only Chinese companies are licensed to collect map survey data. So both Google and Apple have to work with local partners.

The two big players in this field in China are AutoNavi Holdings Limited (Nasdaq: AMAP) and NavInfo. Shenzhen-listed NavInfo works with major companies in China including Samsung,Nokia, Motorola and Baidu, but it is AutoNavi which has landed the really big fish in China. Apple recently selected AutoNavi as its partner for maps on its future versions of the iPhone and iPad in China. This is an intriguing choice since AutoNavi is already the partner for Google in China and has been since 2006.

This recent decision by Apple may change the battle for market share in China between AutoNavi and NavInfo in AutoNavi's favor. The latest data showed that AutoNavi had 52 million users for its mobile maps app at end of March 2012 while NavInfo had their maps app installed on more than 37 million handsets at the end of 2011.

Both companies started out with car navigation products. The main difference today is that AutoNavi is diversifying more quickly into technology for consumer devices more quickly than NavInfo which continues to be mainly focused on its auto division. This makes some sense since some of its mobile partners like Nokia are not doing so well.

NavInfo and Toyoya Motor ADR (NYSE: TM) recently formed a joint venture in China for the distribution of map data to car navigation systems in China and is scheduled to start services in 2013. Toyota will have a 39 percent stake in the venture. The joint venture combines Toyota's telematics technology with NavInfo's map production and management technology. Toyota and NavInfo's parent have cooperated on map data creation for car navigation systems since 1996.

Apple's move away from Google maps in China will hurt Google's mobile advertising sales. About a third of Google map users in China access the service via an iPhone, says Analysys International. This is important because mobile e-business in China is a growth industry. Mobile e-commerce is expected to generate $48 billion of transactions annually by 2015 in China, growing 26 times from 2011 levels. Mobile marketing itself will jump 10-fold by 2015 to about $3.85 billion. All of these figures come from iResearch.

What is important here is that for both mobile marketing and mobile e-commerce, about 20 percent of all transactions will rely on location-based technology like maps,matching merchants with consumers based on their specific location. Apple's move away from Google Maps in the burgeoning consumer market of China will obviously hurt Google.

The Chinese maps app battle looks to be just the latest conflict between the two giants. And it's one that Apple appears to be be winning for now. But the war between the two is far from over.

This article was originally written for then Motley Fool Blog Network. Make sure to read my daily market articles for the Motley Fool at http://blogs.fool.com/tdalmoe/.

Consumer Tech Hardware Wars Heat Up

The past several weeks has seen a continuing convergence between hardware and software and a ratcheting up of the competitive fires between tech giants Amazon (Nasdaq: AMZN), Apple (Nasdaq: AAPL), Google (Nasdaq: GOOG) and Microsoft (Nasdaq: MSFT) with the unveiling of new devices from both Google and Microsoft.

In actuality, the latest product unveilings indicate that companies like Google and Microsoft seem to be adopting Apple's corporate strategy. That approach involves integrated hardware and content. And it is a successful one...Apple dominates the tablet market with a two-thirds market share.

Google launched two new products – a new 7-inch tablet computer and a living-room media streaming device (Nexus Q) which runs on the latest version of its Android software, Jelly Bean. This version of Android, by the way, will offer voice search capabilities similar to Apple's Siri virtual assistant.

The Nexus 7 tablet is priced at only $199, undercutting the $399 price of Apple's entry-level iPad by a good margin. And on the content side, where Google trails Apple and Amazon, the company announced new TV and movie deals with content providers such as Disney and NBCUniversal and publishers like Hearst. Both devices also integrate the company's social network, Google+ while the Google Now feature offers live sports and traffic information based on users location.

The week prior to the launch of Google's tablet Microsoft showed off its entry into the tablet market, the Surface, which has a 10.6 inch screen. It also has a stand, two cameras and a built-in touch keyboard. The main difference between the Surface and other tablet offerings is that it will offer users an experience more akin to a laptop PC.

Microsoft will offer two versions of Surface. The more expensive version will run on Windows 8 (due out in the fall) and uses a new Intel Core processor. A lower priced version features Windows RT and runs on an ARM processor that is found in most tablets. The company has yet to reveal at what price the two versions of Surface will sell for.

Of course, Amazon is not standing idly by. The company also offers a $199 tablet based on the Android operating system. And it recently announced that, for the first time ever, it is recruiting app developers as the company prepares to roll out its smartphone and tablet (including the Kindle Fire) platforms later this year in Europe.

So can any of the new devices challenge Apple's supremacy in tablets? Of course, they can. The tech world is constantly in a state of flux. But there is one key to doing that.....

That key has to be the thousands of independent software applications developers. Without content and apps, rivals to Apple (the iPad offers more than 225,000 apps) have little chance to compete. Can Microsoft and others entice app developers into writing apps to be downloaded to their devices? Google has a decent job so far with thousands of apps available and with 20 billion downloads. Now it remains to be seen if Microsoft can get developers to come up with apps for the Surface.

This article was originally written for the Motley Fool Blog Network. make sure to read my daily articles for the Motley Fool at http://blogs.fool.com/tdalmoe/.

A Look at the Corporate Tablet Market

In the battle for the consumer market in tablet PCs there seems to be a clear winner so far – the iPad from Apple (Nasdaq: AAPL). The latest figures from research firm IDC for 2012 show that Apple's worldwide market share grew from 54.7 percent in the fourth quarter of 2011 to 68 percent in the first quarter of 2012. Samsung was second and Amazon was third.

But it is still anybody's game in the corporate market for tablet PCs, although Apple is leading. A survey earlier this year by NPD In-Stat found that 68 percent of tablets provided by companies to their were iPads. Then there is the whole BYOD phenomena. More and more corporations are allowing their employees to bring their own device to work, adding even more growth in this sector.

Companies are doing so because, once security issues are addressed, BYOD projects result increased employee satisfaction, greater worker flexibility and significant cost savings. Take Citrix Systems (Nasdaq: CTXS), the cloud networking and visualization technologies company, for example. Just three years after launching a limited BYOD program, it has already met the 20 percent cost savings goal it initially set thanks to a large drop in desktop PC support requests.

The other major players in this market include tablets based on either the Android operating system from Google (Nasdaq: GOOG) or ones based on Windows from Microsoft (Nasdaq: MSFT). Google's Android does lead Apple in sheer numbers in the smartphone sector but that success has not translated to tablets. Its growth seems to be hindered by security concerns (very important to corporations) over a lack of control over the download of apps. Meanwhile Microsoft is being held back by the fact that many employers are awaiting the release of the new Windows 8 later this year as to whether to allow employees' Windows devices.

This is a fast growth market for the telecommunications companies. In fact, AT&T (NYSE: T) recently said that over the past year it has seen “an explosion in use” of tablet PCs by corporations. The company reported that the number of companies using tablets grew by 194 percent in the first quarter of 2012 versus the same year-ago period. It added that more than 27,000 business customers have adopted mobile device management deals with the company.

AT&T and its main rival, Verizon Communications both view the trend among companies to mobilize their business operations as a significant opportunity to add a large amount of revenue to their bottom line. Both firms have invested heavily into mobile app development and services that target business customers. AT&T says that 50 percent of Mobile Enterprise Applications Platform customers purchase additional software or services from the company, justifying the investment into these apps.

Investors can be assured that this macro trend of companies adopting BYOD will only continue in the future. This is probably good news for Apple, although rivals are still nipping at its heels. But for certain, this trend will turn into a major cash generator for the large telecommunications companies as they offer to manage BYOD programs for their customers.

This article was originally written for the Motley Fool Blog Network. Make sure to read ALL of articles daily for the Motley Fool at http://blogs.fool.com/tdalmoe/.

The End of the PC Era?

The CEO of chip giant Intel (Nasdaq: INTC), Paul Otellini, recently stated that “there's a golden age ahead of us [Intel]”. He made this statement based on his belief that the age of “cannibalization” of PCs – consumers choosing tablets over laptops – would be replaced by age of “reverse cannibalization” as new Windows 8 laptops come out with touchscreens later this year. Windows is, of course, the new operating system soon to be brought out by Microsoft (Nasdaq: MSFT).

Intel and Microsoft are not the only companies hoping Windows 8 is a runaway success. Others in the PC world need it to be a success in order to turn their fortunes around.

Take Dell Computer (Nasdaq: DELL) for one. Its stock recently fell by a fifth in one day on the back of poor results. According to its chief financial officer, Brian Gladden, the PC market has turned into a low-growth ghetto. And this past week Hewlett Packard (NYSE: HPQ) took a $1.2 billion write-off on its decade-old acquisition, Compaq Computer. Its CEO, Meg Whitman came right out and said “We are betting heavily on Windows 8”.

These companies are facing a steep uphill climb against the competition - smartphones and tablet computers. Smartphone sales exceeded PC sales for the first time ever last year, with 427 million sold versus 353 million PCs sold. According to technology research firm Gartner, smartphone sales will be twice as big by 2013. Tablets, led by the iPad from Apple (Nasdaq: AAPL), looks like the next device which will capture a global mass market, with some in the industry predicting sales could rival those of PCs within three years.

As a whole, the number of “smart” devices sold annually will double between now and 2016, reaching 1.84 billion according to research firm IDC. In that period, traditional PCs are forecast to shrink from 36 percent to 25 percent of the total number of smartphones, tablets and PCs. Hardly a golden age.

Part of the decline is due to shifting consumer tastes. The emergence of web-based services has made software applications less relevant to consumers. For example, music lovers today are much more likely to turn to streaming service such as the iCloud where there favorite tunes are stored on Apple servers. The same can be said with regard to personal data too.

Intel and others are banking on consumer acceptance of hybrid PCs (which Apple thinks will never be viable) thanks to Windows 8. But these type of devices failed miserably in the past. Take Dell's Inspiron Duo which was launched to much hype in 2010. Consumers thought it was too heavy, the screen and battery life were poor and it did not even come close to the touchscreen experience of the iPad.

Windows 8, however, does seem to be the best offering from Microsoft since Windows 95. It will have an user interface, called Metro Style, that is based on colored tiles operated by touch and which is currently being used on Windows phones. Microsoft is also using a programming model that enables developers to create apps easily and computing architecture and operating system that will run tablets. The architecture is required for devices that run low-powered chips (which expands battery life) designed by the UK's Arm Holdings.

Microsoft's Windows 8 should give PC companies an opening to pull customers back into the PC universe. But that window may close rather quickly, leaving others like Samsung and Apple to further gain market share.
 
This article was originally written for the Motley Fool Blog Network. Make sure to read of my daily articles for the Motley Fool at http://blogs.fool.com/tdalmoe/.

China Is the Key to Apple's Future Growth

Any investor that hasn't been under a rock in the last few weeks is aware that Apple (Nasdaq: AAPL) once again topped Wall Street forecasts for its performance in the second quarter of 2012.


Behind the latest surge in Apple's results was the news that the company had sold 35 million iPhones during the quarter, ahead of most estimates. Sales of the iPad came in ahead of estimates also at 11.8 million, 150 percent ahead of the year ago period.

Apple itself stated that the surge in iPhone sales was due largely to strong performances in international markets. And there is the key for Apple investors. Apple's future fortunes lie in overseas markets and most importantly in China.

Consider this bit of information which came out of the recent Apple earnings conference call. Sales in greater China during so far this fiscal year came to $12.4 billion, compared to sales of $13.3 billion for the whole of the 2011 fiscal year! Sales of the iPhone in the second quarter were more than 5 times higher than during the same period last year.

And it's not just the iPhone and iPad which are flying off store shelves in China. Even Mac computer sales were up more than 60 percent in the country, well above the 6 percent growth rate for the personal computer market there and the 7 percent growth for Mac worldwide. The “cult” of Apple seems to be growing there, amazing even CEO Tim Cook who said on the conference call “It is mind-boggling that we could do this well [in China].”

China already is the second biggest market for Apple in terms of sales, trailing only the United States. The company's second quarter China sales came in $7.9 billion, accounting for a chunky 20 percent of Apple's total second quarter sales of $39.2 billion. These sales in the second quarter of 2012 pushed the Asia Pacific region to surpass the European region for the first ever in terms of revenues to Apple.

The good news for its investors is that Apple has barely scratched the surface in China. The number of point of sales in China is only 11,000 for iPhones, 2,500 for iPads and just 1,800 for Mac. Consider also that its stores in China are among Apple's most heavily trafficked in the world. No wonder that Tim Cook thinks that Apple's strong results in the country are just the tip of the iceberg.

He and Apple look to be right. Apple's success in China underscores the depth of the country's fast-growing upper middle class. As Mr. Cook said, “I've never seen so many people rise into the middle class who aspire to buy Apple products.” It is this large number of aspirational, upwardly mobile Chinese citizens that likely hold the key to Apple's future growth and success as a company.

Nokia's Last Hope: Lumia

Mobile phone manufacturer Nokia ADR (NYSE: NOK) is no longer Finland's most valuable company as measured by market capitalization. The latest fall in Nokia's share value came after the company announced a surprise profit warning and technical glitches associated with its new Lumia phones.

Lumia is the first Windows-based phone that came as a result of the collaboration between Nokia and Microsoft (Nasdaq: MSFT). It was jointly launched in the US by Nokia, Microsoft and AT&T (NYSE: T). The problem – it it had difficulty connecting to the internet on AT&T's LTE 4G network – came to light soon after the Lumia 900 phone went on sale in the US.

Even more surprising than the technical problems with its new phone was the surprise profit warning. Nokia warned that its low-end phone division – which had always enjoyed great success in the emerging markets – was losing market share much faster than expected. Sales in this division sank 35 percent in the first quarter to about $3 billion.

Low-end phones, which make up 30 percent of Nokia's sales, lost market share to both Chinese manufacturers and devices using the Android operating system from Google (Nasdaq: GOOG). The loss of market share, particularly to Samsung's Android devices, is in large part due to the fact that Nokia is dumping its current operating system, Symbian, rendering those phones obsolete in a few short years.

These recent events just continue to emphasize the fact that Nokia has been left behind in the smartphone race in the last few years. Nokia's decline has left its shareholders smarting. Its stock sank by a fifth just last week after the bad news, leaving it down 90 percent from its peak since the iPhone from Apple (Nasdaq: AAPL) was launched in 2007.

Perhaps the last hope for the company lies in its tie-up Microsoft and the resulting Lumia phones. It has not been an auspicious start for Lumia, however. Even ignoring the technical glitches, initial sales (launched in November globally) of the Lumia range of phones have been disappointing. In the first quarter of 2012, only 2 million Lumia phones were sold. In comparison, Apple sold 37 million iPhones during the same period.

It remains to be seen whether the Lumia 900, with its very reasonable $99 price tag here in the US, will sell. Nokia has even been forced to offer a $100 credit on phone bills to anyone who buys it before April 21 in an effort to stimulate dull US sales so far. Of course, both Microsoft and AT&T are hoping Lumia succeeds too.

The lack of success so far for Lumia certainly calls into question whether consumers really want a Windows-based smartphone. If it turns out they do not want Windows-based phones, the tie-up with Microsoft has sealed Nokia's fate as it now has no future options except producing Windows phones.

Some investors already think the company is doomed as the cost of insuring the company's debt soared to a record high, implying that Nokia's debt was already considered to be “junk” status. The company is not dead yet though and still has net cash of 4.9 billion euros. However, it did burn through 700 million euros in the first quarter and has stated that it must continue spending heavily on marketing the new Lumia phones. So Nokia shareholders should not be surprised to see the dividend eliminated soon.

If the company burns through its cash pile, it may resort to selling assets in an effort to keep afloat. These assets could include mapping technology company Navteq or perhaps even some of its intellectual property rights. But if Lumia phone sales don't pick up some time this year, Nokia itself may be up for sale to Microsoft or other bidders. That would be a sad end for a company that once dominated the mobile phone industry.

This article originally was written for the Motley Fool Blog Network. Please make sure to check out my daily articles for the Motley Fool at http://blogs.fool.com/tdalmoe/

Apple's SIM Card War

Not much has changed at Apple (Nasdaq: AAPL) since Steve Jobs lost his battle with cancer. The company is at again, trying to dominate its competitors. This time the battle is for the tiny sim cards which go into every mobile phone.

Apple is again butting heads with the likes of Nokia ADR (NYSE: NOK), Research in Motion (Nasdaq: RIMM) and Motorola Mobility Holdings (NYSE: MMI), which is being acquired by Google (Nasdaq: GOOG) to have its standard adopted for the next generation of slimmer phones. The goal is to have its “nano-sim” lead the technology revolution in the miniaturization of smartphones.

“Micro-sims” (not an Apple product) are currently the standard in phones such as the iPhone. The new nano-sims are thinner and about a third smaller than the micro-sim. Micro-sims must be driving Apple nuts since the company is notorious for wanting to control the entire experience with regard to all of its products. The nano-sims would be made by Dutch company Gemalto in close cooperation with Apple.

This latest battle is taking place in Europe, at the European Telecommunications Standards Institute. Apple has reportedly already gained the advantage over the sim standard offered by Nokia and others because it has offered to the European telecom carriers the design for its nano-sim for free. Apple certainly knows how to win friends.

The competition (Nokia and Motorola) have tried to point out to the telecom companies that Apple's nano-Sim could require a “drawer” to protect it. All phones may then need to be re-engineered with that “drawer” in mind, which would be burdensome to the other smartphone makers not called Apple. Nokia and the others have said that its proposed new sim card has “significant technical advantages” over Apple's nano-sim.

Why does Apple even care about the Sim card? In the past, the company even considered dropping Sims but stayed with them due to opposition from the phone carriers.

Apple is always concerned about the design and usability of its products. A smaller Sim card in the next generation of iPhones and iPads would certainly leave room for other components, such as perhaps larger batteries for the power-hungry devices. But Apple probably has something else more in mind than just adding components to the insides of their devices.

If Apple is successful in its efforts, Apple sees a world someday where iPad and iPhone users would be able to purchase their devices directly from Apple and the phone companies Then consumers could choose the carrier they want and activate the service. Apple is simply using the free sim cards to try to gain more control over an area they currently do not control – the phone carriers. Yes, little has changed at Apple.

This article was originally written for the Motley Fool Blog Network. Please see my daily articles for the Motley Fool at http://blogs.fool.com/tdalmoe/.

Sales of $100 Smartphones Set to Soar

The number of entry-level smartphones, selling for less than $100, sold this year is forecast to soar to 300 million, more than doubling the total number in use globally to above 500 million. This forecast comes from Deliotte which also said that there were already roughly 200 million such phones in use worldwide, with most of those having been sold just last year. Deliotte also predicts that due to the soaring number of smartphones sold the number of applications available on these devices will also double to more than two million.

New low-cost chip technology is what is bringing about this whole new world of low-cost smartphones, especially in the emerging economies like China and India where smartphones are now becoming affordable to everyone.

In places like India, high prices for phones have been the main barrier to widespread use of mobile devices. In fact, Apple (Nasdaq: AAPL) sells less phones in India – with 602 million active phone subscribers – than it does in Norway! But it is the cheaper smartphones which sell in India, where it is forecast that smartphone shipments will grow 70% annually through 2015.

This shift toward low-cost smartphones is even more evident in China which surpassed the United States in the third quarter of 2011 to become the world's biggest smartphone market. The Asian brokerage firm CLSA says China's smartphone market will more than double to more than 150 million units in 2012.

In western markets high-end smartphones, like the iPhone from Apple, in the $600-$800 range, dominate. In China, however, such phones account for only one-fifth of total phone sales. The remaining four-fifths of sales that sell in the $100-$150 range and, after subsidies from phone operators, cost very little.

This move toward low-cost smartphones in emerging markets may be the last hope for Finnish mobile phone company Nokia ADR (NYSE: NOK) which has lost its once preeminent position in the industry to rivals like Samsung and Apple. Nokia does have an opening here since Apple's iPhone is perceived globally as a premium product and well out of the reach of many consumers in the emerging markets.

Nokia's management is well aware of the opportunity which lies before it. At the Mobile World Congress in Barcelona last week, Nokia management did state that one of the company's strategic goals was “connecting the next billion” of the global population to the internet through smartphones.

Nokia and its new partner Microsoft (Nasdaq: MSFT) are in particular focusing on China. According to IDC, the most popular operating system there is Android. But Microsoft thinks Chinese consumers are just using Android because it happens to be on the cheaper smartphones. If it offers a better experience through Nokia smartphones, Microsoft thinks it will quickly have the most popular phone software in China. The company is also targeting China by opening mobile application stores there.

Microsoft's partner Nokia believes the smartphone which will revive its fortunes is the Nokia Lumia 610. It believes this model will be at the forefront of the new growth engine for the industry, low-cost smartphones. The 610 should sell well in the emerging markets where Nokia is still a leader. But it remains to be seen if the phone can be profitable enough to turn around Nokia's declining fortune.

The article was originally written for the Motley Fool Blog Network. Please be sure to check out my daily articles for the Motkey Fool at http://blogs.fool.com/tdalmoe/

Google's Move Into Home Entertainment

Another front has been opened in the ongoing war between two tech giants, Google (Nasdaq: GOOG) and Apple (Nasdaq: AAPL). That front is consumers' homes as last month Google started a six-month test of a device that would hook into a home WiFi network in addition to linking to other devices in the home through Bluetooth connections.

The new device was first hinted at in December when the company filed an application with the Federal Communications Commission for permission to test a prototype outside of laboratory conditions. It is believed the device is a key cog in Google's goal to establish a home entertainment hub with the capability of streaming content between various devices and with Google at the center of it all.

The development of this device is just the latest evidence of the company's push into hardware. It made a bold move into hardware with its proposed purchase of Motorola Mobility Holdings (NYSE: MMI). The pending deal will not only give Google access to Motorola's portfolio of patents but also put the company into the mobile phone and TV set-top box manufacturing businesses.

Another signal that Google is serious about hardware is the recent hiring of Simon Prakash away from Apple where he was senior director of product integrity, Apple's best quality product engineer. Mr. Prakash is a leading expert in high-volume manufacturing of consumer devices like mobile phones. It is assumed he will be deeply involved in the manufacturing process for this new home entertainment hub device as well as Motorola phones.

After all, what better way to fight Apple's reinvention of mobile computing through its iPhone and iPad devices than with one of its own senior executives.

The pending move into hardware is a real shift in strategy for Google. Previously, the company had always worked closely with hardware producers like phone makers to advance products such as its Android operating system. Another example which comes to mind was the introduction last year of its Google TV service software to bring its services to televisions where it worked closely with television manufacturers.

The question for Google investors is whether this shift in strategy makes sense.

It may not. It already has one of the most profitable business models in existence. Its 65% gross margin, thanks to its search advertising business, ranks it up with Microsoft (Nasdaq: MSFT) and its Windows business with its 73% gross margin.

Look too at the recent hardware successes that Microsoft and Amazon (Nasdaq: AMZN) had. At Microsoft, the Xbox game console became the top seller in the U.S. with revenues for it almost matching the revenues from Windows. Yet since it's a low-margin business, it pushed Microsoft's gross margin to its lowest level in several years. And everyone knows that Amazon's very popular, low-margin Kindle ereaders have been one of the key factors weighing down Amazon's profitability with gross margin of only 20%.

But Google has to do something as Apple is setting the rules for the future of technology right now. Google has to somehow gain closer control over the integration of hardware, software and services rather than letting Apple set the agenda. Apple is so very successful at doing that too. In the last quarter, its operating profit expanded by 8 percent to nearly 38%, within a percentage point of both Google and Microsoft.

Google has to hope its hardware, when it hits the market, will help it regain some ground previously lost to Apple. It really has no choice but to move into hardware or cede the consumer technology battlefield to Apple.

This article was originally written for the Motley Fool Blog Network. Please make sure to read all of my articles daily at the Motley Fool, http://blogs.fool.com/tdalmoe/

Apple Takes Lead in Digital Learning and Online Education

School-age children are quickly moving away from the traditional ways of learning, involving the use of paper, pencil and printed textbooks.....

The age of digital learning is upon us.

At the forefront of this new era is a company known to every investor – Apple (Nasdaq: AAPL).

The company recently announced its long-anticipated entry into the digital textbook market. It did so by unveiling a new “bookstore” for its iPad tablet, a new application for sharing university courses, online classes and a free publishing tool to help authors create interactive courses.

This is the company's first launch of a new product line since the death of Steve Jobs and therefore quite important.

The potential to improve students' results is significant. After all, children today have grown up with technology all around them all their lives.

The CEO of Discovery Education, a subsidiary of Discovery Communications (Nasdaq: DISCA), had some valuable insight on this subject. He said, “When they [students] go to schools and are asked to 'power down' and put technology away, you're not engaging them and you're going to lose them.”

Apple has wisely joined with partners in the educational publishing field to help sell their product. Some of the partners include well known names such as McGraw-Hill (NYSE: MHP) and Pearson ADR (NYSE: PSO).

These publishers and others unveiled a limited number of digital textbooks that are priced at $14.99 or less. Apple will take a 30% cut of the sales from these textbooks sold over its new iBooks 2 app.

This is a steep cut for Apple but its partners believe Apple can give the industry, with 1.4 billion students enrolled worldwide, just the rocket boost it needs.

Sales in the global textbook market are expected to reach $19.4 billion by 2013. The share of that market taken by digital textbooks is forecast to jump from just 3.4% in 2010 to 18.3% next year, especially if iBooks is a success.

Publishers are hoping iBooks succeed because they will also benefit from the switch to digital textbooks since they would no longer be burdened by the costs of printing and distribution of a traditional textbook.

Of course, it will not be entirely smooth sailing for Apple in this market.

Holding it back will be the price of its iPad - $499. Many schools simply cannot afford to buy iPads for use by their students and Apple made no mention in its presentation of offering schools a discount on its iPads. Currently, there are 1.5 million iPads being used by schools for educational purposes.

This may open the door to this market for lower-cost rivals such as the Kindle Fire from Amazon.com (Nasdaq: AMZN) which sells for only $199. The same publishers who are working with Apple have stated they are also involved in projects with Amazon and other tablet makers.

The educational market is relatively small for Apple, but its rapid growth offers Apple a wonderful opportunity to continue growing the company after the death of Steve Jobs.

But it is unlikely that iBooks will dominate the market as Apple does with music. The real winners here in the long term will be the publishers like Pearson, McGraw Hill and others.

Smartphone Usage Expands in Emerging Markets

There is a trend in the technology and telecommunications spaces that has gone almost completely unnoticed by U.S. investors. That trend is the rapid expansion of entry-level smartphone usage in emerging markets.

Low-cost semiconductor technology has pushed down the price of a basic smartphone to below $100 in emerging markets over the past year.

In emerging markets such as India, high prices have been the main reason there has not been widespread use of smartphones. High prices have slowed the adoption of smartphones such as Apple's (Nasdaq: AAPL) iPhone and phones using Google's (Nasdaq: GOOG) Android operating system in these markets.

The new microchip design changing the smartphone market in developing countries was developed by the British company, ARM Holdings ADR (Nasdaq: ARMH).

The company has another microchip, the Cortex A7 processor, in the works by 2013 that will further advance the use of low-cost smartphones. It will be one-fifth the size of those used in other smartphones and five times more efficient. Arm says it will enable entry level smartphones below $100 which will be equivalent to a high-end $500 smartphone in 2010.

This is an important breakthrough. The CEO of Arm, Warren East, said “The sub-$100 price point is when we can start to talk about connecting the next billion people to internet content and services over mobile devices.”

The base of smartphones costing less than $100 is already estimated to be about 200 million, with the majority of those phones have been bought in the past year.

Now research from the consulting firm Deloitte says adoption of these cheap smartphones is expected to be even more rapid. Deloitte forecasts take-up of these low-cost smartphones to more than double in 2012 to above 500 million!

This development will help Arm Holdings to maintain its dominance in the mobile phone and tablet market. Chips, using its designs, are already in on the most popular products like Apple's iPhone and iPad devices.

Needless to say, it will also raise demand for connected devices, applications and the spectrum needed to carry vast amounts of data in the emerging world.

Deloitte predicts, for instance, the number of applications available on smartphones to double in 2012 to more than 2 million as a result of the popularity of $100 smartphones in emerging nations.

It will also obviously help the manufacturers of these low-cost smartphones such as Nokia ADR (NYSE: NOK), which remains a leader in mobile phone sales in emerging markets. Nokia was expected to have sold over 400 million phones in 2011, of which more than 300 million were sold in emerging markets.

The worry here for Nokia and others is whether players like Korea's Samsung and Apple will come out with low-cost versions of their successful smartphones. These two companies have surpassed Nokia as the biggest global manufacturers of smartphones last year.

No doubt Apple and Samsung will do so – Samsung is already pushing $200 versions of its Galaxy smartphone in emerging markets.

So the window for Nokia to regain its dominant position in emerging markets may be a narrow one.

This artciel was originally written for the Motley Fool Blog Network. To read all of my daily article for the Motley Fool, please go http://blogs.fool.com/tdalmoe/

Tablet Wars Heat Up

Tablet PCs are becoming more and more popular with consumers. The research firm NPD DisplaySearch last week estimated that the tablet PC market grew 250% in 2011 versus 2010 to 73 million units.

This heady growth not surprisingly has led to a heated battle for turf in this market between Apple (Nasdaq: AAPL) and its global rivals.

Last year tablet PC manufacturers from all over the world charged into battle against the preeminent tablet PC, the iPad from Apple. They all boasted they had the device which would knock the king off the throne.

None succeeded. Apple's iPad still retained a two-third market share.

In fact, some iPad rivals failed miserably...most notably the Touch Pad from Hewlett-Packard (NYSE: HPQ) and Research in Motion's PlayBook (Nasdaq: RIMM) But that does not mean the others have given up trying.

Apple's rivals this year are counting on a new Android operating system from Google (Nasdaq: GOOG) and the arrival of Microsoft's (Nasdaq: MSFT) Windows 8 to cut into Apple's market share. The addition of improved content from the likes Samsung and Sony ADR (NYSE: SNE) will be another weapon in the battle with Apple.

The release in 2011 of the Android 3.0 version, called Honeycomb, was not a success. It was designed specifically for tablets so it, in effect, split the Android operating system into two. It therefore did not get much developer support, ending up with a small base of Honeycomb tablets that offered very few applications.

This situation should change in 2012 with the introduction of the Android 4.0 version, called Ice Cream Sandwich. It is a unified operating system which already appeared in November operating Samsung's Galaxy Nexus smartphone. Since it is a unified system, the assumption is that developers will come up with lots of apps for it.

Microsoft's Windows 8 will come out sometime in the second half of this year. The excitement here will be its touch-optimized 'Metro' interface offering a bold alternative to the traditional Windows desktop. Tablet makers like Toshiba say “we're very excited about Windows 8 and we think it will grow the market for tablets in 2012.”

Also entering the fray are the makers of ereaders like Amazon (Nasdaq: AMZN) which have hit hard with their versions of tablet PCs selling for under $250. Amazon's Fire led its Kindle tablet to sales of more than 1 million a week in December.

One important aspect to Amazon's success so far has been its ability to sell its content and services, offering consumers a quality experience.

The ereader companies, with their low prices, will likely put the squeeze on Apple's other competitors who are trying to sell their tablets at somewhere near the $500 iPad level. A survey by the consumer electronics site Retrevo last month showed that consumers are unwilling to pay more than $250 for a non-iPad tablet.

But the survey showed consumers are willing to pay $500 for the iPad thanks to its apps and content.

The launch of iPad 3 in the spring may give consumers even more reasons to stick with Apple. It will be hard to dethrone this king.


This article was originally written for the Motley Fool Blog Network. Please check out my daily articles for the Motley Fool at http://blogs.fool.com/.