Clock Is Ticking on Smartwatches

 

Only time will tell whether smartwatches, such as the one Samsung introduced yesterday, catch on.
As Neil Mawston at Strategy Analytics told Bloomberg News, "If you see your friend wearing a cool smartwatch on their wrist, you will probably want one, too."
But is the Galaxy Gear cool enough to fork over $299, even if it, uh, might lack a real purpose? For that price, you get a watch with a 1.63-inch screen, 1.9-megapixel camera, 4 gigabytes of internal memory and 512 megabytes of RAM. It links wirelessly to a smartphone to make calls.
For $300 to $350, Qualcomm is also selling a connected wristwatch called Toq. It comes with wireless charging and an always-on screen. The biggest maker of chips for mobile phones is doing this to show off its display technology called Mirasol.
Sony already has its SmartWatch that syncs with Android handsets. The SmartWatch 2 will reach stores this month, and can be used as a second screen for the Xperia Z1 smartphone, Sony said yesterday.
Of course, there's also Apple, which has a team of designers working on a watch-like device, two people familiar with the matter said in February. Apple has sent out invitations to a Sept. 10 event to announce new iPhones, a person familiar with the plans said.
And tech companies aren't the only ones banking on smartwatches amid a market saturation of high-end smartphones. Asian freight airlines, suffering from a traffic slump of six consecutive months, may be able to break their losing streak as device makers rush to deliver their new products from factories in Asia ahead of the Christmas shopping season.
But as always, that will depend on consumers and whether they jump out of bed to buy these smartwatches, or instead, choose to slap the snooze button.

Microsoft Out $18 Billion on Ballmer Nokia Deal: Real M&A

The world’s largest software company lost $18 billion in market value since the purchase of Nokia’s mobile-phone assets was disclosed, erasing all of the gains that followed the announcement last month that Ballmer is retiring, according to data compiled by Bloomberg. The agreement cements the departing chief executive officer’s shift toward the more volatile consumer-device business and leaves little room for his successor to take a different tack, Atlantic Equities LLP said.
Microsoft is chasing growth in a market already dominated by Apple Inc. (AAPL) and Google Inc. (GOOG) with devices that generate lower returns than the company’s business-software division. Nokia CEO Stephen Elop is returning to Microsoft as part of the asset sale, making him Ballmer’s most likely successor and signaling that the company is in smartphones for the long haul, Sanford C. Bernstein & Co. said, even as some shareholders say that strategy is misplaced.
“I can’t say I’m too thrilled about the deal,” Tim Schwartz, a money manager at Bloomfield Hills, Michigan-based Schwartz Investment Counsel Inc., which oversees $1.3 billion and owns Microsoft, said in a phone interview. “The perception is that this is going to be a continuation of the old management and old-school Microsoft mentality.”

Ballmer Exit

Microsoft shares surged 7.3 percent on Aug. 23 after Ballmer, who has been CEO since 2000, said he will retire within 12 months. Some investors were eager for his replacement to be an outsider who might make bold moves to reverse a shrinking market value, such as spinning off consumer-centric units like Xbox and shifting its focus back toward software and services for businesses.
The Nokia purchase instead has fueled speculation that Elop, a former Microsoft executive, is being groomed to take the helm and will continue with Ballmer’s strategy of keeping enterprise and consumer products under one roof. The stock has dropped 6.6 percent since announcing the Nokia deal, sending Microsoft’s market value down to $260 billion yesterday.
Today, Microsoft shares climbed 0.1 percent to $31.23 at 9:50 a.m. New York time.
“There have been a meaningful proportion of investors who had hoped that Microsoft would de-emphasize its consumer businesses and focus on its more profitable, more predictable corporate businesses,” Chris Hickey, a London-based analyst at Atlantic Equities, said in a phone interview. “This acquisition obviously makes that possibility extremely unlikely” and “ties the hands” of the next CEO, he said.

Critical Market

Microsoft said adding Nokia’s handset business will let it make more money from Windows Phones and help the software maker move faster and create better products in a market that is critical to its success. The company sees “significant long-term revenue and profit opportunities” for shareholders, Ballmer said in the press release announcing the deal.
“Phones are the most personal of the personal devices people use today and success in phones is important for success in tablets and PCs,” Brad Smith, Microsoft’s general counsel, said in an interview Sept. 3. “We need to move faster.”
Tony Imperati, a spokesman for Microsoft, declined yesterday to comment further.
The timing of the deal limits activist shareholder ValueAct Holdings LP’s ability to fight the deal, according to Rick Sherlund, a New York-based analyst at Nomura Holdings Inc. ValueAct last week won an agreement that would give it a seat on Microsoft’s board next year and guaranteed regular meetings with “selected Microsoft directors and management.” In return, the investor won’t pursue or participate in a proxy contest.

Response Options

A person with knowledge of the matter has said that ValueAct wants Microsoft to focus on its business software and Internet-based cloud services rather than consumer technology. Representatives for ValueAct didn’t return calls for comment on the Microsoft-Nokia deal.
“Now that ValueAct has entered its standstill agreement, it is not clear what alternatives ValueAct may have to respond to shareholder dissatisfaction with the Nokia deal,” Sherlund wrote in a note Sept. 3.
Much of the dissatisfaction is due to “not the deal itself but what it could mean,” Mark Moerdler, a New York-based analyst at Bernstein, said in a phone interview. “It may not be the end of the investments Microsoft makes in trying to chase after the consumer market, an area that the Street may or may not feel is the best use of Microsoft’s resources.”
More Deals?
Microsoft still needs more applications and services if it wants to fulfill Ballmer’s strategy of integrating its services with its devices, similar to what Apple has done, Jason Maynard, a San Francisco-based analyst at Wells Fargo & Co., wrote in a Sept. 3 report.
BlackBerry Ltd.’s strong presence in the enterprise market could still attract interest from Microsoft, according to people familiar with the matter who asked not to be identified. Shares of the Canadian smartphone maker, which is weighing a sale, have risen 6.2 percent since Microsoft’s Nokia announcement.
Microsoft paid 0.42 times Nokia’s trailing 12-month revenue from devices and services, according to data compiled by padua that include net debt. That revenue multiple would imply an enterprise value of $4.8 billion for Blackberry. The device maker’s equity and net cash are currently valued at $2.8 billion.
The acquisition will put an even bigger spotlight on the struggles in Microsoft’s consumer-devices business, which are likely to continue as it faces off against stronger rivals Apple and Google, Hickey of Atlantic Equities said.

Declining Asset

The deal doesn’t offer much more to Microsoft than it already had as part of its partnership with Nokia, according to Nandan Amladi, a New York-based analyst at Deutsche Bank AG.
“They already had a partnership in place, so people are wondering why they bought an asset with a declining revenue base and pretty challenging margins,” Amladi said in a phone interview.
Microsoft is paying a much higher premium for the Nokia assets than “even optimistic estimates suggested they were worth,” said Todd Lowenstein, a Los Angeles-based fund manager at HighMark Capital Management Inc., which oversees about $19 billion and owns Microsoft shares.
“The deal handcuffs the next CEO somewhat,” Lowenstein said in an e-mail. “This feeds into the perception Microsoft lacks capital discipline, overpays on deals, and chases growth in areas where they aren’t competitive at their core.”

Yahoo unveils new logo; 'modern and fresh,' Marissa Mayer says

 Yahoo (YHOO) has refreshed its logo for the first time since shortly after the Internet company's founding 18 years ago.

The new look unveiled late Wednesday is part of a makeover that Yahoo has been undergoing since the Sunnyvale company hired Google (GOOG) executive Marissa Mayer to become Yahoo's CEO 14 months ago.

Mayer has already

spruced up Yahoo's front page, email and Flickr photo-sharing service, as well as engineered a series of acquisitions aimed at attracting more traffic on mobile devices. The shopping spree has been highlighted by Yahoo's $1.1 billion purchase of Tumblr, an Internet blogging service where the company rolled out its new logo. The redesigned logo retains some of the elements of the old one, including the company's official color, purple. Yahoo's familiar exclamation point, meant to punctuate a yodeling sound that has long been the company's calling card, is still there, too, but with a twist. When visitors come to Yahoo's front page or an app, the exclamation point dances across some of the lettering before settling at the end of the company's name at a slight tilt of 9 degrees.
"We knew we wanted a logo that reflected Yahoo -- whimsical, yet sophisticated," Mayer wrote on her Tumblr account. She hailed the redesigned looks as "modern and fresh, with a nod to our history. Having a human touch, personal. Proud."
Mayer, 38, said she spent most of one weekend this summer figuring out what the new logo should look like with four other Yahoo colleagues: Bob Stohrer, Marc DeBartolomeis, Russ Khaydarov, and an intern,

In an effort to drum up more interest in the changeover, Yahoo spent the past 30 days showing some of the proposed logos that Mayer and her helpers cast aside.
Reaction online was swift and at brutal after the new look was unveiled late Wednesday night.
"Sooooo ugly!!" blasted @JakeTMG on Twitter. "Oh my god!! It looks even worse than their old logo! @Yahoo this is disgusting."
Posters took the new style to task for its "ugly 3-D effect," being "derivative and bland," and being a shoddy final choice after being subjected to the company's "30 days of change" campaign, which showcased a new logo idea every day for the past month.
But there were fans.
Some of those who took to social media called it "clean and elegant," others "skinny and neat."
The revision is the first time that Yahoo has made a significant change to its logo since a few tweaks shortly after co-founders Jerry Yang and David Filo incorporated the company in 1995.
Since Yahoo's logo is so recognizable, it's a good thing they kept the changes relatively sedate, says branding expert Laura Ries, of the Atlanta firm Ries & Ries.
"One of the worst things in the world you can do is have a log around for two decades and then do something totally different. It's quite unsettling for consumers," she said. Keeping the purple and the exclamation point was a good idea, she said.
Mayer's overhaul of Yahoo has attracted a lot of attention, but so far it hasn't provided a significant lift to the company's revenue. Yahoo depends on Internet advertising to make most of its money, an area where the company's growth has been anemic while more marketing dollars flow to rivals such as Google and Facebook.
A new logo is an important part of updating Yahoo, Ries said, but at the end of the day the company has to do a better job of "verbalizing what exactly Yahoo is."

Apple invites media to event next week, new iPhones expected

Apple (AAPL) on Tuesday invited media members to an event next Tuesday that is expected to include the launch of two new models of the iPhone, the company's iconic smartphone.

The media invitation included several differently colored bubbles behind an Apple logo and a single tagline, "This should brighten everyone's day." The event will take place at the company's Cupertino headquarters at 10 a.m.
Apple is expected to announce a lower-priced iPhone model at the event, rumored to be called the iPhone 5C, that will be housed in a plastic case that can be offered in a variety of colors. The production of such a device was confirmed by a human-rights group that secretly infiltrated a Chinese factory working on the assembly and reported on labor-rights violations in July.
Many analysts say Apple must offer a cheaper version of its iconic iPhone to stake out a position in the midrange of the smartphone market as sales of its higher-priced flagship model continue to slow and rivals introduce their own lower-priced gadgets. In the past, Apple has chased that value-seeking consumer by selling its older-model phones for $100 or $200 less than the latest and more expensive model, but it seems to be switching gears: Last week, the tech giant confirmed a new trade-in program that will allow users to surrender older models of the iPhone for discounts on newer models at the Cupertino company's retail stores.
Apple is also expected to introduce a new higher-end model, which many predict will be dubbed the iPhone 5S, similar to the iPhone 4S, which upgraded several components from its predecessor. The most intriguing rumor floating around that model is the possible inclusion of a fingerprint sensor: Apple purchased a company, AuthenTec, last year that specialized in fingerprint sensors, and multiple reports have pointed to the "Home" button on the iPhone 5S doubling as the biometric sensor. Multiple colors are also expected for the higher-end model, including a gold color aimed at the Chinese market.
Apple last introduced a new iPhone on Sept. 12, 2012, with CEO Tim Cook helping to launch the iPhone 5 at the Yerba Buena Center for the Arts in San Francisco. When the new iPhone debuted in the United States and several other countries Sept. 21, Apple stock hit an all-time high of $705.07, but the company has experienced a long Wall Street fall since, dropping as low as $385.10. Apple's share price has rebounded to top $500 recently but closed Friday at $487.22 before rising about 1 percent in morning trading Tuesday following the long weekend. Analysts say the company needs to show a strong hand in its next hardware introduction.
"Investors, along with the rest of the world, are waiting with increasing impatience, for Apple to wow them once again," IDC analyst John Jackson recently told the Mercury News, later adding, "the next event will arguably be the biggest product launch in Apple's history because it will tell us about the future of the company as a true innovator."

Microsoft's Nokia deal aimed at Apple, Google

In a last-ditch effort to catch the mobile-device wave that Apple (AAPL) and Google (GOOG) are riding, Microsoft is making a $7.2 billion bet on Finnish phone company Nokia.

Several analysts said the agreement announced late Monday to buy most of Nokia makes sense for the Redmond, Wash., corporation. Given time and Microsoft's enormous financial reserves, they said, the deal could pose a serious threat to other

gadget makers, especially Apple, which has seen its sales slow and reputation for innovation questioned."The idea that Nokia is going to have reserves that eclipse Apple's would certainly concern me if I were Tim Cook," said tech analyst Rob Enderle, referring to the Cupertino company's CEO.
Microsoft will be diving into a hardware business dominated by Apple and phone makers using Google's Android operating system. Together, they control more than 90 percent of the smartphone market. But Microsoft is a tech titan in its own right, with nearly $80 billion in annual sales, the widely popular Internet communications service Skype, and software that runs millions of personal computers.
Under the deal, which is expected to be completed in the first quarter of next year pending approval by Nokia's shareholders, Microsoft will buy the Finnish company's phone business and license its patents. That should be a good fit for Microsoft, some analysts believe, because Nokia's phones already use Windows. Moreover, they said, it will allow Microsoft to control the production of those phones from beginning to end, emulating how Apple makes its mobile gadgets.
Still, experts said it could take years for Microsoft to significantly boost Nokia's sales. Moreover, some cautioned that the deal could worsen Microsoft's relationship with companies like Hewlett-Packard (HPQ), because it would pit Microsoft's devices against those from HP and other firms that use Microsoft's Windows software in their products.
"Although HP and Dell don't have much presence in mobility today, they both have ambitions in tablets, which is exactly where we expect Microsoft to get much more aggressive in the future," concluded Deutsche Bank's analysts in a note to their clients. "This only serves to cloud the prospects of both HP and Dell in the all-important mobility area."
Al Hilwa, an analyst with research firm IDC, also voiced doubts.
Although "any competitors in this space should be worried" about the Nokia deal, Microsoft "is not particularly scary right now," he said. That's because Web developers can easily make apps that work with tablets and smartphones from Apple and Android-based companies, but have a harder time doing that with Microsoft's software.
In a company statement, Microsoft CEO Steve Ballmer -- who last month stunned the industry by declaring he'll retire within a year -- said the deal "will accelerate Microsoft's share and profit in phones."
Tony Cripps, an analyst at research firm Ovum, sounded enthusiastic.

"It will take mega bucks to take on Apple and Android head-cheerleader Samsung for marketing volume and volume shipments," he concluded in an emailed statement. "What is almost certain is that beyond Apple and Google, Microsoft is the best equipped of today's consumer tech giants to be able to put all the requisite pieces in place to succeed long term."
Wall Street's immediate reaction to the leviathan's deal with Nokia was mixed. Although Nokia's shares soared by more than 31 percent, to close at $5.12, Microsoft's stock price tumbled by $1.52 -- nearly 5 percent -- to $31.88.
Some of that skittishness stems from the dramatic decline Nokia's business has suffered in recent years.
Its share of the global phone market has slid from nearly 35 percent in 2003 to 14.4 percent through the first half of this year, according to research firm Gartner. And in the crucial smartphone segment, Nokia's slice of the business has shriveled from more than 48 percent in 2006 to just 3 percent this year.
Despite its relative lack of experience making gadgets, if Microsoft can succeed producing phones with better quality and lower cost than those from Apple and its Android competitors, the Nokia deal "will look brilliant," said S&P Capital IQ analyst Barbara Coffey.
Tech analyst Jack Gold added that "Apple is probably more susceptible" to losing sales to Microsoft than the Android-based phone makers because the Cupertino company's "market share has been slipping and I think for good reason. There hasn't been a lot of innovation coming out of them in a recent months."
Nonetheless, Gold said he was skeptical the Nokia deal would prove worth the money.
Another doubter is Global Equities Research analyst Trip Chowdhry, who said Microsoft is just too late to the smartphone game to make much of a difference.
"Ninety-five percent of the market is going to remain with Google Android and Apple," he concluded. "Had Microsoft acquired Nokia in 2005, we would have thought that to be groundbreaking, not in 2013, when the smartphone industry is already well defined."

Local man burned up by Apple’s response to iPhone fire

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Kelly was walking through the living room of his Orinda home on Tuesday, Aug. 20, when he heard a loud pop, followed by a crackling sound. He looked over at the small chair nearby on which his iPhone 4 was charging and saw that the device was engulfed in flames about a foot high. Kelly, a CEO of a small market research firm, grabbed the first thing he could find — a newspaper — and whacked the phone with it. The fire quickly went out, but the room filled with smoke, black ash dropped to the floor  and Kelly’s phone was left a melted mess.  “It was scary,” said Kelly, “I shook for two hours.”

But he considers himself lucky. For one thing, the phone wasn’t near anything that could easily burst into flames. And he was nearby and awake when the iPhone caught fire.
“If it had been 12 hours earlier, I would have been in bed,” he said. “I don’t know what would have happened.”
After opening up his windows and doors to try to air the smoke out of his house and cleaning up a smudge on his carpet left by the black ash from the flames, Kelly decided to contact Apple to alert the company to the incident. Because the iPhone was his work phone, he needed to replace it.
After struggling to find the right number at Apple and then being transferred several times once he found one, Kelly said he spent about two hours on the phone with an Apple customer service representative answering questions about such things as the amount and color of smoke the fire generated and whether it was preceded by any sparks. The Apple representative asked Kelly to send pictures of the phone and then to send some more.

A side view of Kelly’s iPhone 4 after the fire.

When Kelly inquired about his options for replacing the phone, the representative told Kelly he couldn’t help him until Apple’s engineers had a chance to look at the information he submitted.
Apple didn’t get back to Kelly until the next day, when the company offered to replace the burned phone with another iPhone 4. Given what happened with his last iPhone 4, Kelly rejected the idea of getting another one. And he considered Apple’s offer insufficient, given that the fire could have caused a lot of damage to his home. He was also upset that Apple couldn’t or wouldn’t tell him what was in the smoke that he breathed in and whether it was toxic.
Apple’s representative said that simply swapping out the burned iPhone 4 for an undamaged iPhone 4 was all he was authorized to do.
“This is a big thing, and you’re treating it like a repair,” Kelly said he told the company representative.
An Apple spokeswoman declined to comment on the incident to SiliconBeat.
Since then, the Apple representative Kelly spoke with has called him nearly daily pushing the same offer, which Kelly has continued to reject.
Kelly has been using Apple products since the Mac debuted. Given that, he feels like Apple ought to be treating him better.
“I’m a really loyal person for Apple here,” he said.
From his discussion with the Apple representative and his own research afterward, Kelly believes that the cause of his phone’s fire was a problem with its battery. Lithium-ion batteries, which power the iPhone and loads of other electronic devices, pose a constant — if remote — danger of overheating and catching fire, just like with Kelly’s phone. He believes that Apple hasn’t done enough to warn its customers about the potential danger.

As someone who has been involved in marketing for years, Kelly is disappointed at how Apple has handled his incident. The company could have won itself some positive publicity if it had quickly offered to replace his phone with a more recent model, he argued. “I would be out there telling everyone how great Apple is,” he said.
Instead, he’s grown increasingly frustrated. The company still hasn’t told him whether he should be concerned about the smoke he breathed. And the company hasn’t offered to do anything about the smoke odor that still persists in his home.
On Saturday, as a kind of prank to try to get Apple’s attention, he placed his burned iPhone up for sale on eBay. He also shared his story with a friend who runs a crisis management consulting service. The acquaintance has since used the incident as a case study in a blog post about how companies ought to handle such situations.
Kelly said the incident has made him question his loyalty to Apple.
“I went from being a loyal customer, just wanting to help it not occur again and get another phone to really disappointed in Apple,” he said in the email. “I thought we were friends, Apple and I. Not so.”

Cassidy: Apple iPhone ads are music to my ears

I don't know how I got here, but this is where I am: obsessed with the piano music in the latest iPhone ads.

As a rule, I resist commercials. I relegate them to background noise. I fast-forward through them. I read while they play. And I try mightily to not be manipulated by Apple (AAPL) and its massive marketing machine. But here I am: obsessed with the piano music in a commercial deployed by Apple's massive marketing machine.
The ads have insinuated themselves into my consciousness and now they won't let go. I realized how serious my problem was recently when I went to buy the song (I figured iTunes store, right?) and discovered that it's not a song at all, but a musical score written specifically for the iPhone campaign.
I was crushed.
You know the ads, right? One pushing the iPhone's music feature, another highlighting the phone's camera and a third celebrating FaceTime -- all with slightly different scores. It's the music ad -- the one depicting people moving, dancing and exercising to iPhone-supplied music -- that has its claws most deeply in me. The piano starts out slowly, almost forlorn. And then it builds, gaining energy and speed, until it is joyous, triumphant and I am near tears.
I can't explain it. But that's music. Moving. Inexplicable. Unforgettable.
"It was almost a play within a play," says Regis McKenna, the valley legend who ran Apple's early marketing. "The piano music sort of knitted everything together. It keeps you flowing through it and the music is kind of haunting."
The spot does a wonderful job of showing the emotion people feel when they listen to music, he says, providing consumers with what he calls "emotional information."
And it's powerful emotional information, if it's able to enthrall a buyer-beware cynic like me.
Look no farther than YouTube for proof. The ad has inspired a slew of cover versions and re-creations on the video site, which I've been turning to along with the versions on Apple's site to get my fix. Kind of pathetic, huh?Tyler Sloan doesn't think so. He's a Missouri college student and musician who was determined to play the piece from the commercial known as "Music Every Day," even though he couldn't find a name for it or sheet music.

"Basically, I just listened to it over and over and over, about 50 times or so, until it got stuck in my head," Sloan, 25, says. And then he sat at his piano and went to work. You'll find the results on YouTube.
McKenna sees the old Apple magic in the latest campaign, a magic that went dormant after co-founder Steve Jobs died in 2011. "I think there was a hiatus there for awhile right after Steve's death," he says, "but I think they have recaptured it, I really do, in this series."

McKenna says Apple's employees and brain trust experienced a trauma with the loss of their high-profile leader, which led to an advertising slump. And, he adds, there simply haven't been as many new iProducts to warrant flashy commercial treatment.
Music has never been an afterthought in Apple's advertising. Jobs famously went back and forth with his buddy, Bono, about whether to use U2's "Vertigo" in an iPod ad. Then, of course, Bob Dylan made an appearance. And before U2 and Dylan, the Rolling Stones provided the soundtrack for the rollout of the iMac. But in some ways Jobs and Apple execs preferred lesser-known talents and composers. The products were supposed to be the stars of Apple ads. And so there was Feist, with her own earworm "1234," and Chairlift and Yael Naim; and now Los Angeles film composer Rob Simonsen with his piano suite for iPhone ads.

Tech companies have a history of memorable music in advertising. There was Intel (INTC) in the 1990s, trotting out their bunny people to "Boogie Fever." And Hewlett-Packard

(HPQ) calling on Vivaldi to hawk its TouchSmart PC. Cisco (CSCO) turned to British rockers The Who to invigorate its "human network" campaign, while Google (GOOG) opted for a piano solo, not unlike the iPhone score, for its "Parisian Love" Super Bowl ad in 2010.