CES 2013: Microsoft Won’t Leave, Premium Smartphone Market Gets Bigger

by Brad Moon | January 9, 2013 9:52 am

This was supposed to be the year that mobile took center stage at CES.

Yes, we knew the TV makers would be making all sorts of noise[1] — they’ve got to kickstart the television-buying cycle again, after all — but CES 2013 was going to be without a Microsoft (NASDAQ:MSFT[2]) keynote for the first time in a decade-and-a-half. Instead, Qualcomm (NASDAQ:QCOM[3]) CEO Paul Jacobs was scheduled to make the keynote address on Monday night, reflecting the growing importance of mobile technology as the PC industry faces a slow decline.

It didn’t exactly go as expected.

Microsoft spent the last few months of 2012 trying to convince everyone that it was still relevant. Press events and store launches heralded its new Windows 8 operating system for PCs featuring a modern, tablet-inspired interface, along with new Surface tablets and Windows Phone 8. The message was clear: Microsoft wasn’t going anywhere.

It kind of turned out that way at CES, too.

The Qualcomm keynote got off to a bit of a bizarre start with actors portraying modern stereotypes like “the Entrepreneur” and “the Socialite” providing an over-the-top performance illustrating their mobile lifestyle. Jacobs then came on to talk about “Generation M” — that would be Mobile — and then, a special guest crashed the party: Microsoft CEO Steve Ballmer, doing what he does best, barreling onto the CES keynote stage:

Ballmer CES 2013: Microsoft Won’t Leave, Premium Smartphone Market Gets Bigger

He then got a solid seven minutes to flog Microsoft’s Surface tablets and Windows Phone 8, and to generally make the case that Microsoft is all about mobile. Qualcomm put the full 94-minute keynote online here[4], and if you skip forward to about 15:47, you’ll catch Ballmer rumbling onto the stage.

Mobile

As mentioned, mobile really was one of the central themes Tuesday. Numerous manufacturers trotted out the Android and Windows 8 phones you can expect to see in 2013. They continue to push the size barrier, with displays growing to the point where it’s obvious that Apple (NASDAQ:AAPL[5]) was just buying time by boosting the iPhone 5’s display to a modest 4 inches. Many of the smartphones had 5-inch displays, further blurring the line between smartphone and so-called “phablets” like Samsung’s (PINK:SSNLF[6]) very successful Galaxy Note II with its 5.5-inch display.

The premium smartphone market is looking to be a much tougher one in 2013, with new players entering the game and existing manufacturers boosting specs and quality in an attempt to replicate Samsung’s success against Apple.

ZTE1 CES 2013: Microsoft Won’t Leave, Premium Smartphone Market Gets Bigger[7]

ZTE Grand S

For example, China’s ZTE unveiled the Grand S[8], that company’s first premium smartphone to be released in the U.S. The LTE phone packs a 5-inch display with 440 ppi (pixels per inch) that blows away the iPhone 5’s 326 ppi display, runs Android Jelly Bean, features a 13MP camera, quad-core processor, 2GB of RAM and 16GB of storage in a 7.9 mm package.

Even Sony (NYSE:SNE[9]) looks to have a contender with the Xperia Z[10], another Android monster with 5-inch (443 ppi) display, quad-core processor, NFC and advanced battery management technology that is touted as extending standby time by 400%. It looks good, and has another trick up its sleeve: water resistance. Sony claims its flagship smartphone can be dunked under 3 feet of water for half an hour with no harm, and the touchscreen will function while wet. That’s great news for commuters. Expect Sony’s new line of smartphones to launch in March.

Xperia1 CES 2013: Microsoft Won’t Leave, Premium Smartphone Market Gets Bigger

Sony Xperia Z

Aside from crashing the keynote, Windows Phone 8 wasn’t in the spotlight much. Holdout Sprint (NYSE:S[11]) announced it will finally be offering Windows Phone 8 devices in the summer[12], which is positive news. New smartphones for the platform were announced by Samsung and China’s Huawei, but they weren’t the kind of models that can compete on an even footing with the likes of the Galaxy S III, iPhone 5 or Google’s (NASDAQ:GOOG[13]) Nexus 4.

Even worse, TechCrunch is reporting that one of Microsoft’s key Windows 8 partners, Nokia (NYSE:NOK[14]), appears to be signaling the possibility of considering Android phones[15].

The takeaway for all this is that Android manufacturers are lining up with compelling hardware that’s going make it much tougher for Apple to maintain its position in 2013.

The next generation of Android devices is bigger, faster, well-built, attractively designed and packing beautiful displays. Running the latest version of Android, they’re closing the usability gap on Apple’s iOS, too. The competition is not only better, it’s coming from more directions, with Chinese manufacturers getting in the game and a potentially resurgent Sony rejoining the fray.

Apple is going to have come up with more than a modest spec bump to keep the iPhone competitive in 2013, and it’s going to have a harder time justifying that premium price.

Of course, it could be worse — it could be in Microsoft’s position.

Windows Phone 8 will have to battle to stay relevant and needs to attract more flagship phones to its platform. With the exception of Nokia, as it stands, the platform is becoming a place where manufacturers toss a “covering the bases,” generic smartphone.

Coming tomorrow: tablets and other news.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

Endnotes:
  1. TV makers would be making all sorts of noise: http://investorplace.com/2013/01/3-big-areas-to-watch-at-ces-2013/
  2. MSFT: http://studio-5.financialcontent.com/investplace/quote?Symbol=MSFT
  3. QCOM: http://studio-5.financialcontent.com/investplace/quote?Symbol=QCOM
  4. here: http://www.qualcomm.com/ces
  5. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  6. SSNLF: http://studio-5.financialcontent.com/investplace/quote?Symbol=SSNLF
  7. [Image]: http://investorplace.com/wp-content/uploads/2013/01/ZTE1.jpg
  8. unveiled the Grand S: http://gizmodo.com/5974061/zte-grand-s-makes-it-official-everyone-and-their-mother-will-make-a-superphone-this-year
  9. SNE: http://studio-5.financialcontent.com/investplace/quote?Symbol=SNE
  10. Xperia Z: http://gizmodo.com/5973920/sony-xperia-z-and-zl-hands-on-two-phones-worth-getting-excited-about
  11. S: http://studio-5.financialcontent.com/investplace/quote?Symbol=S
  12. offering Windows Phone 8 devices in the summer: http://www.informationweek.com/mobility/smart-phones/ces-2013-sprint-finally-commits-to-windo/240145712
  13. GOOG: http://studio-5.financialcontent.com/investplace/quote?Symbol=GOOG
  14. NOK: http://studio-5.financialcontent.com/investplace/quote?Symbol=NOK
  15. appears to be signaling the possibility of considering Android phones: http://techcrunch.com/2013/01/08/nokia-confirms-its-keeping-an-open-mind-about-using-android-in-future-message-to-microsoft-dont-take-support-for-granted/

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