The industry is abuzz with speculation that IBM will sell its x86 server business to Lenovo. As usual, neither party is talking publicly, but at this point I’d give it a better than even chance, since usually these kind of rumors tend to be based on leaks of real discussions as opposed to being completely delusional fantasies. Usually.
So the obvious question then becomes “Huh?”, or, slightly more eloquently stated, “Why would they do something like that?”. Aside from the possibility that this might all be fantasy, two explanations come to mind:
1. IBM is crazy.
2. IBM is not crazy.
Of the two explanations, I’ll have to lean toward the latter, although we might be dealing with a bit of the “Hey, I’m the new CEO and I’m going to do something really dramatic today” syndrome. IBM sold its PC business to Lenovo to the tune of popular disbelief and dire predictions, and it's doing very well today because it transferred its investments and focus to higher margin business, like servers and services. Lenovo makes low-end servers today that it bootstrapped with IBM licensed technology, and IBM is finding it very hard to compete with Lenovo and other low-cost providers. Maybe the margins on its commodity server business have sunk below some critical internal benchmark for return on investment, and it believes that it can get a better return on its money elsewhere.
It’s that time of the year: the pilgrimage to the Mobile Mecca, Mobile World Congress (MWC), in Barcelona. This is my 10th pilgrimage in a row and, needless to say, the event has changed tremendously over the past few years – from 3GSM in Cannes to the new venue in Barcelona this year. While CTIA is still very US-centric and CES is still a lot about TVs, MWC is really the only global mobile event with a strong presence of operators and handset manufacturers from all over the world. Every year the show becomes not only more global, but also more open to new categories of players — such as advertisers and developers — willing to make the most of mobile technologies, and more open to connected devices that go far beyond the traditional definition of a mobile phone. Markets are colliding and mobile innovation is at the center of these upheavals. MWC used to be a telecom show focusing mainly on mobile technologies, but the event is now bringing together people from every industry.
In the light of today’s first announcements, here is my take on how to put in perspective the announcements to be made at MWC 2013 in the coming days:
At its recent analyst event, Ericsson outlined its strategy, product, and service ambitions. Ericsson remains the overall benchmark for network infrastructure vendors. The company has a leading market position in the growth segments of mobile broadband and network services and delivers a solid financial performance — despite the disappointing Q3 2012 results. Still, in my view, Ericsson has several challenges that it needs to address:
· The cloud strategy is built on a questionable assumption.Clearly network infrastructure is becoming more, not less, important for cloud-based solutions. Ericsson therefore assumes that carriers are well positioned to be cloud providers. But CIO perceptions suggest otherwise. CIOs tell us that carriers are far from the preferred choice for cloud-solutions (see Figure 9 in the “Prepare For The Connected Enterprise Now” Forrester report). Carriers therefore need help in addressing the potential of cloud computing. For instance, Ericsson’s cloud solutions ought to help carriers cooperate with cloud partners regarding embedded connectivity in devices and applications.
During Huawei’s 2012 EMEA Analyst Event in Amsterdam, Huawei emphasised once again its commitment to Europe and its dedication to innovation. With sales of $3.8bn, 7,300 staff, around 800 of which are in R&D, and 10 R&D centres in Europe, Huawei has positioned itself as a leading provider of network infrastructure in the region. The main themes that we picked up during the event are:
Its carrier activities are increasingly dominated by software. Huawei emphasises the role if IT and software as a core focus area of its carrier network infrastructure activities, which still account for 74% of sales, going forward. Softcom, Huawei’s strategy to drive software defined networking and to move towards a flatter network architecture, is central to this transformation. By 2017, Huawei aims to generate around 40% of its network infrastructure revenues from software-related activities. The central goal of Softcom is to decouple applications from hardware in the network infrastructure and to integrate multiple operating systems into one cloud-based operating system. To succeed, Huawei needs to attract top IT expertise. Its partnerships with leading universities and research organisations like Fraunhofer-Gesellschaft go some way.
Dan Bieler; Bryan Wang; Henry Dewing; Katyayan Gupta; Tirthankar Sen
Huawei hosted about 160 industry and financial analysts at its annual analyst summit in Shenzhen, China in April 2012. The main take-aways from the event are:
Huawei continues its drive for more financial openness and transparency. Huawei provided detailed information about its financial and operational performance. In 2011 Huawei grew revenues by 12% to reach US$32.4bn and EBIT by 9% to US$3bn. The main regional growth was registered in Latin America, up 40%. Although due to higher capex cash from operating activities declined, the cash margin stood at 9%. Huawei is easily able to fund its expansion and innovation activities. In 2011, Huawei hired 30,000 new staff, bringing the total to 140,000 globally. For 2012 Huawei targets between 15-20% sales growth.
Huawei places main growth emphasis on enterprise services and consumer devices. These market segments represent a potential target market with a combined value of about US$1.7 trillion, compared with the carrier equipment market value of about US$150 billion. Huawei repeatedly pointed out the early-stage nature of its activities in these areas. It even felt as if Huawei consciously played down its ambitions in order to downplay expectations.
Huawei must strengthen its go-to-market strategy for its enterprise business. With more than 40% of Huawei’s current business coming from China, Huawei has to continue to fine tune its go-to-market model and penetrate markets other than China in a swift manner. Huawei also has to push for stronger relationship with their partners and increase their share in the total revenue.
Around 60,000 global movers and shakers of all things mobile once again descended upon Barcelona to attend the leading annual mobility event, the Mobile World Congress (MWC). This year’s main themes centered on metadata analytics, the customer experience, and over-the top business models:
The big data opportunity fueled the fantasies of almost all MWC attendees. In the case of telcos, data analytics is seen as the driver for improving the customer experience and developing new markets. Telcos talked a lot about the opportunities of analysing user behavior and turning user data into the new operator currency. The context- and location-aware nature of mobile solutions makes the big data opportunity particularly attractive. However, despite the talk, there were practically no case studies of operators that have succeeded in monetizing data on a large scale. Progress regarding data monetization is slowed down by a lack of clear business models, but also by an OSS/BSS infrastructure that does not support real-time or near real-time analytics. Moreover, privacy concerns also act as a drag on the uptake of data analytics. Equipment vendors such as Nokia Siemens Networks, meanwhile, showcased their customer experience management and analytics solutions for telcos. The solution combines analytics and the actions that operators must take to correct or improve the end user experience, such as a level one call handler pushing the correct settings to a phone or a marketing manager setting up a marketing campaign.
During its European Analyst Summit in London, Huawei provided details regarding two crucial elements of its expanding market positioning: It outlined its intention to launch mobile devices and enterprise solutions. Although Huawei has been engaged in these activities in China for some time, it is a new and exciting step for its European strategy. Competitors should not underestimate Huawei’s ability to take business away from them in these areas.
Huawei’s mobile device range for Europe is small, but very effective. The company targets the low-end smartphone segment with a €100 device (Blaze), the mid-market (Vision), and high-end (Honour), in addition to a tablet (Media Pad). The marketing strategy is to position these devices as affordable, easy-to-use, and reliable (i.e., the “Volkswagen of the mobile devices”). All devices are touch, have fast processors, crisp screens, and retail at about €100 below competitors’ offerings. Timing is good for Huawei, given the relative weakness of the competitive landscape, especially RIM and Sony Ericsson. Initial customer feedback on sites such as Amazon.com reflects positive customer experiences.
The fact that Huawei has no consumer brand in many European countries should not be a great obstacle. Rather, Huawei could use this factor in order to involve its emerging customer base to build a brand using social networking and viral marketing. Traditional big-board advertising campaigns would be pointless: Nokia will dominate the traditional channels with its Lumia campaign in the coming months. The main channels for Huawei will be MVNOs like Fonic, consumer electronics outlets like Phone4U, as well as selected larger operators.