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Spillikins #117. Playstation Network Ц Hackers Attack

It is now the time of May holidays in Russia and I am on a business trip and I was looking for excuses not to write this issue of Spillikins. But having browsed the news I understood that I have to comment on major events otherwise the reader might lose the track of events and there would be a huge gap in our discussions. I have bot included Samsung's quarterly results that show great sales of smartphones with a 500% rise making Samsung number 3 smartphone manufacturer right after Nokia and Apple. During this first quarter only the company has sold 12.6 million handsets with the share of 20% of Bada phones. Galaxy S2 will be released in May and as many believe it will become a bestseller Ц the company expects to sell 14 million handsets in just one year while for the same period of time 10 million handsets of the first Galaxy were sold Ц I personally think that this goal will be achieved.

There is a ton of news and, unfortunately, not all of it is good. But let's dive into the world of telecom and see for ourselves.


  1. Nokia Starts Massive Layoffs
  2. Apple Denies GPS Tracking
  3. Windows Phone 7 Sales Fail around the Globe
  4. Sony PlayStation Network Is Cracked
  5. Sony S1 and S2 Tablets Ц Sony Style Without Future
  6. South Korea May Ditch Payment for SMS
  7. Motorola Failed to Come Up with 4G
  8. 1Q2011 Results Put HTC in the Driving Seat

Nokia Starts Massive Layoffs

Nokia published the quarterly results, signed an agreement with Microsoft and got down to the next step of destroying the company. Back in February when Nokia CEO Stephen Elop announced the cooperation with Microsoft it was already clear that Nokia would not be needing thousands of Symbian and MeeGo developers. Many Nokia fans listened to the fairy tale about how quickly and easily those developers will switch to the Microsoft software and start developing new products for Windows Phone 7. The problem is that Microsoft did not allow Nokia to customize the interface of Windows Phone 7, moreover, Nokia is against the idea of any one including themselves receiving this right.

Sounds crazy? Not at all. Imagine that you have to compete with HTC that can in a few weeks port the Sense interface to Windows Phone 7.x. This overlay on its own is a big market advantage Ц it is well known and will definitely become a purchasing factor for users. Is Nokia capable of creating anything similar in the near future? The answer is no. And this is not just a matter of developers but mainly of interface designers. Unfortunately, the company is stuck in the last century and is not even trying to move forward. Below you can see a link to revelations of a former Nokia developer (in Russian) Ц you can understand how grave the situation of the company is.

Let's now consider the layoffs. As was expected, Nokia is getting rid of the army of Symbian developers who became redundant for the company. By the end of 2012 4000 employees will be laid off, 1400 of them in Finland only, most of layoffs will take place in Britain and Denmark Ц that is where the main developers centers of the company are situated.

In Finland Nokia gathered employees outside the workplace to announce this news Ц as someone joked in my blog to "tp shower them with flowers and cash and assure they won't lose their jobs". In February the MeeGo team was told that no one would be fired as well as the NavTeq team (the Nokia cartography division). Now it's official that there will be large-scale layoffs in MeeGo, the last phone on Maemo 6 will be released in October with only 92 thousand manufactured handsets. This is rather a gift to the company's fans, a PR move than actual business. Unfortunately, MeeGo is officially dead.

Inside Nokia there are rumors that this is just the first wave of layoffs and I think they true. Nokia is planning to cut expenditures by one billion euro by 2013 as compared to 2010. And 3000 employees (besides 4000 that will be fired) will be transferred to Accenture under the pretense of developing Symbian. I think this is a case of postponed layoff aimed at alleviating the effect on the market.

The pattern of this story suggests that Nokia will be rapidly losing its market and as a result in 2012-2013 we might see further austerity measures. May reviewers today do not take into account that the mentioned layoffs consider the staff employees of Nokia. But we must also remember that there a lot of Nokia collaborators outside the company so the total number of lost jobs across Europe will be tens of thousands Ц this is all very sad.

Also now we can look into the future of the current CEO Stephen Elop. His job was to conclude the deal with Microsoft and he won't be needed after it. Depending on the situation he might be replaced either in the end of 2012 or in the beginning of 2013 Ц the Moor has done his duty, the Moor can go. So far there are no candidates for his post but I won't be surprised if the story follows one of the two scenarios: number one is optimistic and corresponds to the current management thinking. They will choose someone to carry on the current strategy. The requirement for this scenario is that the company does not fail completely and does not lose all its market. The second scenario is pessimistic that considers the possibility of the company annihilation in 2012 which will require old guard to take charge and the best candidate for that is Anssi Vanjoki who is popular inside the company, has a reasonable outlook and is capable with proper support to salvage what would be left of Nokia by that time. And unfortunately, I am inclined to think that the second scenario will come true.

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Apple Denies GPS Tracking

can catch on the beginning of the story in the previous issue of the Spillikins.

The scandal received an unexpected continuation: firstly Steve Jobs responded to one of the letters saying that the story is exaggerated and Apple is not watching their customers. Then Apple top managers in an interview to All Things D explained what data phones and tablets gather. It turns out that the notorious file does not store information about certain device or person but about the locations the user has visited. Senior VP Paul Schiller compared this data collection to counting how many people have visited a coffee shop. So Apple does not collect personal information but operates a large array of data while the file on your device presents some intermediate stage of data processing. Moreover, Steve Jobs has prompted that the company is going to use these data in the future for navigation (traffic speed, jams etc.). This makes sense as such data collection allows the company to get very precise values for free. But there is the issue of whether the users are willing to participate in the company's initiatives which they cannot refuse (GPS activation confirms your consent to provide such data which, once again, is not personal).

This is similar to distributed computing Ц like the first SETI@HOME project where the participants received a free screen saver and while your computer was idle (or you could run it on the background) the applications processed the data from the telescopes. Many people including me installed this application Ц it was nice thinking that you are assisting the search for extraterrestrial civilizations. Today there are similar project that search for new molecule structures for new medicines and other similar projects. The difference between these projects and what Apple is doing is the users' awareness and informed consent to participate. And I would like to have an opportunity to choose whether to help someone or prefer to save the battery charge. I think this is the main issue here Ц the users must have a choice.

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Windows Phone 7 Sales Fail around the Globe

Microsoft has presented the quarterly results but did not give any numbers concerning the sales of Windows Phone 7. I must remind you that not a single manufacturer has still provided any numbers on sales of Windows Phone 7 smartphones. Moreover, LG reps officially stated that the company is disappointed with the sales. Other manufacturers also have not been showing a lot of enthusiasm; same story with carriers. It would be very interesting to get any numbers from Microsoft but the company keeps silence.

Why? The reason is simple Ц despite the fact that WP7 phones were given for free to practically every employee of Microsoft in many countries and despite the huge ad campaign there was no miracle. The market has not accepted this product and the data coming from carriers and retailers are disastrous. In 2010 Microsoft claimed that the company (or to be precise the manufacturers, not Microsoft itself) shipped 1.5 million handsets which a spectacular number for a new OS on the market. But what are the sales rates to final customers without the free handsets they gave to employees? Ok, let's make a note here that the following number is my personal calculation (I do not want any trouble for Microsoft employees). Get ready. According to my assessment the retail sales have amounted to 674 thousand handsets. And in Q1 2011 the gap between the shipments and the sales has grown even bigger while the time of between the shipment and the sale of a handset is still growing (as of April).

A failure? Definitely yes. Unfortunately, despite the ecosystem and developers support Microsoft failed to create a product that would be attractive to users. The growing pains are similar to all the newcomers of the market Ц the attempt to create top smartphones failed to compete with existing solutions. This is an attempt to beat Apple on home field. Instead of trying to compete with Apple in mid-range segment where Apple is not present and the Android share is not as big as it will be in a year Microsoft chose the wrong path and got where they were headed.

It is a pity but the scenario of events shows that the brave giving up of Windows Mobile in favor of a completely new OS has led to another failure. See for yourself, the announced for fall OS update under codename Mango has been renamed into Windows Phone 7.5. The company is repeating its past mistakes. The number of updates in the pack is not enough for a new index and title of an intermediate version. Microsoft is way too slow with updating this OS.

The logic behind this decision is obvious: in 2012 Microsoft is going to present a whole new family of products with "8" in their names including, naturally, Windows Phone 8. But there will no revolution Ц the competitors are doing business and they offer a much higher rate of development and application of new technologies. What Microsoft has in store is completely new experience on someone else's path since the company failed to find their own.

Further reading:

Windows Phone 7: Mango Update

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Sony PlayStation Network Is Cracked

Two weeks ago hackers attacked PlayStation Network. Initially Sony kept the incident secret, but then shut down the service to localize the issue. In particular, last week we learned that hackers got access to 77 million entries of gamers in PSN and 10 million credit cards used to pay for particular games. At the moment Sony cannot assess the losses or the information targeted by hackers. The unprecedented move to shut down the service is associated with the fact that the company does not know what was stolen. Nevertheless, Sony turned to FBI as the data center in San Diego, California was attacked.

All users are offered one free subscription month and Sony will also provide some free games within this month. Sony executives looked down at the press conference, which means the acknowledgment of their fault.

This story can give much food for thought. It has always been clear that online databases are vulnerable, but users could have helped the system by following simple recommendations. Make sure you have a unique password for every service and do not use the details of your main credit card (get another one for online payments). Be sensible.

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Sony S1 and S2 Tablets Ц Sony Style Without Future

I have managed to get a sneak preview of Sony tablets during the congress in Barcelona. Models were shown to partners behind closed doors. Names of products were not selected yet, but the company was planning to start selling them in May. Time has passed and the models retained the design, but the price and release dates were changed. Now we will see the tablets at the end of summer or in autumn. It depends on market fluctuations.

I will start with the positive news. Despite the official announcement Sony said almost nothing about the technical parameters. I hope the reason is explained with the necessity to update specifications due to delays with the release. It looks understandable and right. On the other hand, the unveiling of new products is rather a signal for investors rather than for consumers. People who buy products want to know the price, characteristics and release date. Sony did not mention any of these. At the same time, investors received a signal that Sony is developing by targeting the tablets market. Sounds good until you look carefully at details.

Do you know which department of the company will be responsible for sales and servicing of tablets? It is a serious issue, because it influences the success of the new product and channels used for distribution. Unfortunately, Sony does not understand it completely. At the very outset tablets had to be produced by Sony Ericsson, but the big manufacturer decided to keep them closer at home. Ironically, Sony Ericsson is still developing its own tablet and such plans have not been cancelled yet. Why create rival products is a good question I have no answer to. I think that at the end Sony will forbid any sales of tablets under the Sony Ericsson brand, which means resources wasted on development, though the latter cannot afford such a luxury.

The laptop department of Sony cannot deal with tablets despite ideological proximity. They are still not aware that they may have to deal with these models. Sony Ericsson will not get the product as it has a Sony logo. The manufacturer may come up with a separate department for new tablets. We have no official information, because Sony itself has not made up their mind yet, which is the most strange element of the story. The product has no future as no one know how it will be sold. It is so weird.

Let's return to the products, though. S1 has a 9.4" screen, boasts a dual core processor (at least at the moment) and its design resembles a folded magazine. The protruding element helps to put it down on the table and enter the text easily. Inside we have a familiar and still raw Android 3.0. At the moment the product has no Sony add-ons and features only several apps to access Sony PlayStation Network and a couple of Sony applications (remote handling of any Sony product among other things). According to the preliminary plans the price of the model had to be around $500. We can only guess what will be the final price and release date.

The second model is more original. It has two separate screens, which form a single entity anyway. Add two 5.5" screens to get classical 10.1". Unfortunately, the border in the middle is still visible, which can be quite irritating in the everyday use. This controversial solution is aimed at those who like compact products and are ready to sacrifice ergonomics for that. I am not sure the model will become too popular.

I like the design of Sony products, which sets them apart from numerous and faceless Android solutions. Here we get that very Sony Style, but it is not enough for the market success. You need something else, but to my mind these tablets cannot provide this edge. With the price on par or higher than that of Apple iPad2 these models are doomed. On top of that there is an issue with the internal confusion as to who will sell the product within the Sony conglomerate. Investors were impressed, but we will not go further than that.

Additional reading:

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South Korea May Ditch Payment for SMS

Nobody noticed this piece of information in the overall milieu. South Korean Communication Committee is offering to abolish the payment for SMS on the territory of the country. The reason for this move is the price growth for different products and other inflationary pressures. A governmental idea to make SMS free may boost the service even further. As far as many tariff plans already include SMS packages this initiative looks reasonable. Users will not get the right to receive thousands of messages for free as there will be some limitation, but the market was shocked nonetheless. The share prices of Korean mobile carriers dropped right after the stock market opened. Shares of SK Telecom lost 1.9% of their value, while KT Corp. shed 1.3%. I think that investors should not have been alarmed as the committee will just codify the status quo. It will be interesting to follow further developments.

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Motorola Failed to Come Up with 4G

I hope you remember the hasty introduction of Motorola Xoom in February. At the beginning of spring consumers were promised that the first lucky ones would get an LTE upgrade if they leave their tablets in service centers for 1 week. It did not happen though.

According to Motorola Mobility CEO Sanjay Jha the update will be ready this summer and the issue was connected with software. Due to the same problem the company delayed until summer the launch of DROIDBIONIC Ц its first LTE model for Verizon. The rumor had it that Motorola was going to abolish the launch altogether. It sounded reasonable against the background of low sales for Motorola ATRIX 4G and taking into account the lengthy delay. The market needs new handsets to compete with updated Android offerings from rival companies.

It's a pity, but the incident shows that Motorola cannot get rid of its decision making, which put the company into the trouble and made it retreat from many markets. Motorola itself damaged its reputation and discouraged loyal followers in the USA. Motorola does not need that at the moment. Pledges of Sanjay that the manufacturer will do better next time is only an excuse. The market does not forgive it, while Motorola is losing its final opportunities.

Related articles

Review of Motorola Xoom

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1Q2011 Results Put HTC in the Driving Seat

Some more details at the end. HTC enjoys unprecedented success. In the first quarter of 2011 the company sold 9.7 million smartphones, which is a new record for them. The growth reached 6% in comparison with the previous quarter, while the parameters for the same period last year were surpassed by 192% . Pre-tax profits reached $520 million and the gross sales stand at $3.6 billion. These fantastic figures were made possible due to Android popularity. We have to mention that the company did not sell all of its new models in full during this quarter and their true impact will be felt later on. It means that HTC sales will go from strength to strength.

Additional reading:

Do you want to talk about this? Please, go to our Forum and let your opinion to be known to the author and everybody else.

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Related links

Spillikins #114. Country of origin myths or Oh, It's made in China

Spillikins #115. W for Windows Ц first Nokias on WP7

Spillikins #116. Apple vs. Samsung Ц A Patent War

Eldar Murtazin (eldar@mobile-review.com)
Twitter    Livejournal
Translated by Maxim Antonenko (maxantonenko@ukr.net), Robert Mugattarov (mugattarov@gmail.com)

Published — 04 May 2011

Have something to add?! Write us... eldar@mobile-review.com



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