Motorola Inc. (NYSE: MOT) and Verizon Wireless, a joint venture between Verizon Communications Inc. (NYSE: VZ) and Vodafone plc (NASDAQ: VOD), have launched the latest in a line of smartphones, the Droid X, using the Android operating system from Google Inc. (NASDAQ: GOOG). The Droid X smartphone is expected to begin shipping in mid-July, less than a month after the new Apple Inc. (AAPL)iPhone debuts.
The Droid phones are aimed squarely at the phenomenally successful iPhone from Apple.
Apple Inc. is releasing its iPhone 4 on five continents today, the company’s first iPhone with 4G capability.
The Droid X does not include 4G capability and its intended target market may not be iPhone users, but a smaller, and perhaps easier to pick off target, the Evo 4G from HTC, sold by Sprint Nextel Inc. (NYSE: S). The Droid X and the Evo 4G are quite similar in form and function, and the lack of 4G capability in the Droid X won’t hurt Verizon and Motorola much because Sprint’s 4G network is still limited. (Related Article: Motorola Droid single handedly saves MOT stock)
The new Droid X also has to battle with its own siblings, the original Motorola Droid and the HTC Droid Incredible. While it’s often the case that to move ahead in the technology market a company needs to cannibalize its own products, it might not make sense to do that while the product is still virtually new and still selling very well. The HTC Incredible was first made available to customers on April 29th.
What could be happening is that a Verizon-Google-Motorola nexus is forming that will eventually push HTC out. Isolating Sprint and HTC could pay dividends for Verizon and Motorola, but might not be so good for Google, which is selling platforms for mobile advertising, not smartphones.
Android-based smartphone shipments are growing faster than iPhone shipments and BlackBerry smartphone shipments from Research in Motion Ltd. (NASDAQ: RIMM). Google needs to figure out a way to keep all its Android users happy, while at the same time putting extra effort behind Motorola. It’s not impossible to do that, but it needs to be done in such a way that everyone feels like a winner.
All the ink and pixels that have been spilled on smartphone features and 3G v. 4G networks obscure the real reason for the smartphone feature wars. And that’s mobile advertising, not hardware or apps.
Apple has the most successful apps store in the world, yet according to one estimate the store has contributed about 1% of the company’s revenue, about $428 million, since the store opened two years ago. Only $189 million has gone to the bottom line.
The apps store is intended to drive iPhone hardware sales. Apple has a huge first-mover advantage in hardware design, but that advantage can be overcome by sheer numbers. As Android gains a larger share of the operating system market, it strengthens Google’s position in mobile advertising.
The Droid X may or may not turn out to be another big winner for Verizon and Motorola. Any way you look at it though, it is another winner for Google.
(NKE)
Nike, Inc. (NYSE:NKE) reported fourth quarter 2010 earnings after the market closed yesterday. Diluted EPS came in at $1.08, better than previous estimates of $1.06, and up substantially from $0.70 in the same period a year ago. Revenues for the quarter totaled $5.1 billion, up from $4.7 billion a year ago and in line with expectations.
In related celebrity news, the company’s Nike Golf division posted a drop in revenues of 2%. Whether or not that can be attributed to Nike’s decision to stick with Tiger Woods is arguable. The company’s Cole Hahn division also saw revenues fall by 2%, and Woods doesn’t have anything to do with that division, so it seems that all the sound and fury did not signify much.
The company reported that footwear and apparel scheduled for delivery between June and November of this year totals $8.8 billion, up 7% from a year ago. Excluding the effects of a weakening euro, the increase would have been 10%. In Europe, future orders are down 2% on a revenue basis although the value of the orders would have been up 11% excluding the effect of currency changes. Revenue from future orders in China are up 19% and from emerging markets orders are up 30%.
In the company’s conference call Nike’s president and its CEO both addressed how the company plans to grow its sales in China. The company plans to move more forcefully into markets in the smaller cities and is considering introducing new products at lower price points to address those markets.
Nike remains “bullish” on China as a market for its Nike-branded products and has no plans to drop prices for those products. In smaller markets, what the company refers to as third- and fourth-tier cities, Nike says it is “looking at the [product] portfolio to help supplement” the opportunities it sees in these smaller markets.
While the earnings report was generally positive, the outlook on revenue from Europe due to a declining euro cast some doubt on the company’s projections. Analysts estimate EPS for the first fiscal quarter of 2011 at $1.14 and revenues at $5.19 billion. Unless Nike can increase its market share in Europe to offset the negative impact of the currency exchange rate the company will struggle to hit those estimates.
Shares of Nike fell 2.2%, to $70.95, in after-hours trading following the earnings report.
Paul Ausick
