Technology Update: Handhelds Steve Demski Brandon Smith

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Technology UpdateHandheldsSteve
DemskiBrandon Smith
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Agenda

• Handheld overview
• Segmentation
• Explanation of key focus
• Handsets
• History
• Current market/industry structure
• Key issues
• PDA
• History
• Current market/industry structure
• Key issues
• Scenario Analysis

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There is a Cornucopia of Handhelds Available
Mass Market Devices
Niche Devices
Our focus will be on Handsets and PDAs
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Focus on Handsets and PDAs Makes Sense

• Mass Market adoption of these technologies will
  drive entire sector
• These two account for over 84 of the handheld
  market1
• These segments can deliver all the functionality
  required from handhelds yet they have
  fundamentally different focuses
• Handsets are voice-first, data-second devices
• PDAs are data-first, voice-second devices
• Major functionalities include
• Voice
• PIM
• SMS
• Data transmission
• Web interface
• Always on
• Location

(1) Source IDC and Robertson Stephens estimates
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Agenda

• Handheld overview
• Segmentation
• Explanation of key focus
• Handsets
• History
• Current market/industry structure
• Key issues
• PDA
• History
• Current market/industry structure
• Key issues
• Scenario Analysis

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History of CellularVacuum Tube Age
1901 Guglielmo Marconi sends radio signal across
Atlantic
1934 Half of US homeshave radios
1915 First wireless radiocall across the Pacific
1900
1920
1910
1940
1930
1906 de Forest produces a sensitive receiver and
amplifier, plays violin
1924 First sponsored radio program
Source http//www.foxnews.com/fn99/vtech/cellpho
ne/
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History of CellularTransistor Age
1946 Car radio telephones connect to telephone
network
1962 COMSAT is created, First communicationssatel
lites launched

• First commercialnetwork of cellular telephones
  in Japan

1940
1960
1950
1980
1970
1973 First private call from a handheld cell phone
1947 Transistor is invented, cellular concept
first discussed in Bell Labs
Source http//www.foxnews.com/fn99/vtech/cellpho
ne/
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History of CellularDigital Age
1980 IntelSat relays 12,000 phone calls
1993 Cellular BrainCancer scare
1980
1990
1985
2000
1995
1996 Primitive Smartphones introduced for the
first time
1983 First commercial cellular call
Source http//www.foxnews.com/fn99/vtech/cellpho
ne/
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Handset Industry Structure
Threat of New Entrants

• Low
• Current Manufacturers too far down learning and
  scale curves

Industry Rivalry
Supplier Power
Customer Power

• High
• Commodity product
• Compete on price
• High exit barriers

• Low
• Commodity components

• Low
• Lock-in is achievable
• Switching costs relatively high

Threat of Substitutes
Medium Examples RIM Earpieces with PDAs
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Worldwide Cellular SubscribersBy Region
Source http//www.ericsson.se/wireless/facts/oh10
.shtml
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Worldwide Cellular SubscribersBy Country
Finland
Hong Kong
Japan
UK
Cellular Penetration ()
US
South Korea
Brazil
China
Cellular Subscribers (millions)
Source Business 2.0 (http//www.business2.com/con
tent/magazine/indepth/2001/02/26/27013)
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Major Industry Players in Handset Market
Source Bear, Sterns Company estimates
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Major Issues with Handsets

• Convergence of Handsets and PDAs
• Bluetooth - When?
• Smart phones versus dumb phones
• Incompatibility of technology standards
• GSM, CDMA, TDMA
• 3G - When and how?
• Already reported by other TMS group

Our Focus
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Major Issues with HandsetsConvergence

• Already several handsets on the market that have
  PDA functionality
• PIM
• SMS
• e-mail
• Always on
• Major issue yet to be determined is form factor
• Too bulky?
• Replaced by PDA with earpiece?
• Still need to remain optimized to span distance
  between ear and mouth

Nokia 9110
Ericsson R380
Source Nokia, Ericsson Website, Gartner Group
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Major Issues with HandsetsWhat is Bluetooth?

• Bluetooth's goal is to provide mobile devices
  with an easy-to-use, short-range wireless
  connectivity solution
• Designed to function in 2.4-GHz wireless
  Industrial, Scientific, and Medical (ISM) band
• Supports throughput of 1 Mbps
• Not a WLAN replacement
• The specification enables wireless communication
  between small, mobile devices
• Eliminates need for proprietary cables (every
  hand held device manufactured which allows
  connectivity with PC has different cable
  configuration)
• Enables devices to form piconets
• Stability through frequency hopping scheme
• Security within Bluetooth connections is
  implemented at the hardware layer, with the
  option of using one of three security levels

Source Bluetooth The Missing Link in Mobile
E-Commerce? - Gartner Group,Bluetooth
Wireless Technology Overview .devx.com
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Major Issues With HandsetsBluetooth is Expected
to Take the Wireless Market by Storm
Avg Price 2.02
Avg Price 7.50
Source Merrill Lynch report Bluetooth Handbook
1.1, June 2000
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Major Issues with HandsetsBluetooth is Expected
to Rapidly Penetrate Cellular Market
Source Strategis, Ericsson, Nokia
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Major Issues with HandsetsSmart Phones Not
Expected to Replace Dumb Phones
North American Units (millions)
2000
2001
2002
2003
2004
2005
Source Strategis, IDC
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Agenda

• Handheld overview
• Segmentation
• Explanation of key focus
• Handsets
• History
• Current market/industry structure
• Key issues
• PDA
• History
• Current market/industry structure
• Key issues
• Scenario Analysis

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History of PDAsIn the Beginning
1968 Alan Kay conceptualizes Dynabook and
creates a cardboard mock-up
1992 GO Corporation fails to develop first
pen-based computer
1993 Apple Newton debuts with failed handwriting
recognition
1984 Psion markets first electronic organizer
1960
1980
1970
2000
1990
1993 Other new entrants include Sharp
(ExpertPad) and Tandy Casio (Zoomer)
1995 Motorola enters fray with Envoy
Source Web
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History of PDAsThe Palm Era

• Palm redefines marketplace
• with Pilot 1000 and Pilot 5000
• Grafiti handwriting recognition
• proves successful

1998 Palm markets Palm III

• Palm announces Palm V and
• Palm VIIfirst PDA w/built-in wireless

1996
1998
1997
2000
1999
1997 Palm markets PalmPilot

• Handspring markets Visor
• features Springboard expandability, licenses
  PalmOS

Source Web
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History of PDAsThe Empire Strikes Back
1997 HP develops HP 620 LX first handheld to
use WinCE

• Casio opens
• Pocket PC era
• with Casiopeia

2000 HP offers Journada on WinCE
1997
1999
1998
2001
2000
1998 Research in Motion announces BlackBerry
wireless e-mail
2000 Compaq introduces iPAQ 500,000 unit
backlog
Source Web
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PDA Industry Structure
Threat of New Entrants

• Low
• Crowded space
• Future uncertain

Industry Rivalry
Supplier Power
Customer Power

• High
• OS Developer War
• Peripherals
• Revenue from OS or hardware?

• Low
• Commodity components

• Low
• Lock-in by incompatibility
• Every unit made is sold (Compaq has backlog)

Threat of Substitutes

• High
• RIM
• Smart Phones
• Voice portals

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Major Industry Players in PDA Market
Other 3.7
Compaq 2.0
HP 2.3
Casio 6.0
Handspring 13.9
Palm Computing 72.1
Total U.S. 3.5 million units
Source Business 2.0, April 3, 2001
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Major Issues with PDAs

• Convergence of Handsets and PDAs
• Form factor
• Peripherals
• Operating Systems
• Multi-media capability
• Compatibility (TMS)
• Technology Development
• Battery life RF, display, CPU, memory
• 3G
• Bluetooth

Our Focus
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Major Issues with HandsetsConvergence

• Major issue yet to be determined is form factor
• Will consumers carry multiple devices?
• Will PDA and earpiece conquer the smartphone?
• Should they be incorporated (ex, PalmVII
  wireless) or add-on (ex, Metricom Ricochet modem)
• PDAs will have either keyboard, pen, or both,
  voice will be uncomfortable for long-term use

Handspring Visor w/VisorPhone
Vs.
Kyocera QPC 6035
Source HandSpring, Kyocera Website, Gartner Group
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Major Issues with HandsetsOperating System

• Which OS will dominate?
• Palm holds early lead
• Base of developers
• Widely licensed
• But simplicity is weakness
• Microsoft WinCE looks promising
• Microsoft and its hardware allies are expected to
  command nearly 40 of the market in 3 years
• Better multi-media capabilities peripheral
  support
• MP3s, Graphics
• Incompatibility
• TMS is addressing this issue

Source Business 2.0, M-business IDC
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Agenda

• Handheld overview
• Segmentation
• Explanation of key focus
• Handsets
• History
• Current market/industry structure
• Key issues
• PDA
• History
• Current market/industry structure
• Key issues
• Scenario Analysis

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Causal Factors Determining Convergence of
Handsets/PDAs
Scenario Variable
Causal Factors

• Form factor importance
• Consumer data requirements
• Carry multiple devices

• External Social acceptance
• Internal Miniaturization development
• External 3G success
• Internal Peripheral development
• External Loyal installed bases
• Internal Niche development

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Scenario Analysis (I)
Form Factor Importance
High
Low
Medium
Low
Consumer Data Requirements
Medium
High
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Scenario Analysis (II)
Consumer Data Requirements/ Form Factor Importance
Low/ High
High/ Low
Low/ Med
Med/ High
High/ Med
1
2
3
Yes
Carry Multiple Devices?
4
6
5
No
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Analysis of Converged Handset/PDA Industry
SCENARIO 6
SCENARIO 4
SCENARIO 5
Dumb phone Prevailsno convergence
Super PDA dominates
Smartphone dominates
Future Industry Structure
Competitive, high growth rate, no clear leader
Big 3 handsetmanufacturers split market
Same as currently
Palm and Handspring are absorbed for
applications and functionality
Rivalry pressuresincreases
Phonesunattractive PDAsmedium
Structural Attractiveness
High
Low, consolidationincreases entry-barriers
Market share of causalunits
Sources of Competitive Advantage
Applications/ Developer base
Basically unchanged
Low-cost product designs
Best form-factor
User interface
Scale economies inadvertising
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QUESTIONS?
Pick our brains
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Handheld Types
Backup
Palm-sized HandheldsSized to fit in your shirt
pocket, these handhelds typically have a touch
screen and use operating systems such as the Palm
OS, Windows CE, Windows for Pocket PC, EPOC and,
increasingly, Linux. Clamshell HandheldsFold-up
handhelds with larger screens than palm-sized
devices and tiny keyboards. Tablet
HandheldsDesigned to be carried around, tablets
have larger screens than clamshell handhelds.
Source xxx
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Major Issues With HandsetsBluetooth is Expected
to Take the Wireless Market by Storm
Backup
Turn into graph
Source Merrill Lynch report Bluetooth Handbook
1.1, June 2000
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Major Issues with HandsetsConvergence
Backup
Future Directions for Mass Market
HandheldsPhones, pagers and personal digital
assistants (PDAs) are beginning to collapse into
two groups. We discuss future directions during
the next five years in the programmable consumer
handheld device area. The 3Com PalmPilot PDA,
with 1.4 million units shipped to date, has
clearly put the handheld organizer on the user's
"buy" list. Newer cellular-phone models that are
getting PDA-like features have the potential of
selling into a subscriber base of 100 million
(United States plus Europe). Trend 1 - Wireless
Voice and Data Integration Cellular phones are
integrating voice and wireless data into "smart"
phones or "superphones." Handheld devices will
incorporate wireless, leaving the challenge of
supporting a variety of billing and access
methods to the IS organization. Multiple
subscriber identity module cards tied to a single
account and selection of appropriate carriers
should help. Trend 2 - Form Factor
Stabilization Cellular-phone form factors should
remain stable, with the Nokia 2110 and Motorola
StarTAC 8600 representing the extreme boundaries
in acceptable form factors. PDAs and alpha pagers
will merge to some degree as PDAs get integrated
wireless data. PDAs, while still vacillating
between being a notebook replacement and an
organizer, should become more organizer focused
for form factors that are either belt-mountable
or coat pocket size. The traditional pager will
remain, but some alpha paging users will migrate
to PDAs once wireless is integrated. The key
value to the end user in PDAs will be data
readability due to larger screens and more-robust
input capability. The Net Result Smart phones
will become voice-first, data-second devices.
Interactive PDAs will become data-first,
voice-second devices. The key difference will be
the operational functionality dictated by
ergonomic constraints. Phone form factors will
remain optimized to span the distance between ear
and mouth, a voice-centric design. Data display
screens will be integrated, but input and display
of sizable amounts of data will remain
problematic. Interactive-PDA form factors will
provide a large screen and have either a
keyboard, pen or both for input, a data-centric
design. Voice capture will be possible by
speaking into the device, but the form factor
will remain uncomfortable for long-term voice
use. Bottom Line IS organizations must prepare
for a flood of smart-phone and interactive-PDA/sma
rt-pager devices deployed by users. The challenge
for IS organizations is to support organized and
controlled access to enterprise information from
devices often purchased with personal funds.
Enterprises must begin to investigate
remote-access middleware to provide a standard
interface to data resources. IS organizations
must also develop sound policies on the use of
handheld devices.
Source Gartner Group
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History of CellphonesVacuum Tube Age
Backup
1901 Guglielmo Marconi sends a radio signal
across the Atlantic. 1906 American inventor de
Forest adds a third electrode to the diode and
produces a sensitive receiver and amplifier. On
Christmas Eve, Fessenden plays the violin for
startled ship wireless operators used to hearing
dots and dashes on their primitive radios. 1914
The first transcontinental telephone call. The
next year, wireless radio service connects U.S.
and Japan and a primitive "radio-telephone"
carries speech across the Atlantic. 1920 Right
before the 1920s, the shortwave radio is
invented. During the 1920s, there is a radio boom
beginning with the first broadcasting stations
opened. In 1924, The Eveready Hour is the first
sponsored radio program. There are about two and
a half million radio sets in the United States.
David Sarnoff is getting his start and in 1926,
he forms the network National Broadcasting
Company, or NBC. 1934 By 1934, half of the
homes in the U.S. have radios.
Source http//www.foxnews.com/fn99/vtech/cellphon
e/
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History of Cellphones Transistor Age
Backup
1946 Automobile radio telephones connect to the
telephone network. These basic radios are
dependent on one central antenna tower per city
and perhaps only 25 channels per tower. The
single central antenna means that the car phone
needs a powerful transmitter to transmit 40 or 50
miles, and that the number for users are limited
to how many can fit on the limited channels.
1947 The transistor is invented, and soon
replaces vacuum tubes. The same year, scientists
first elucidate the cellular concept at the Bell
Labs, although the idea will not click into place
for another 35 years. Five years later, Sony
offers a miniature transistor radio. By this
time, radio sets in the world outnumber daily
newspapers. 1962 The Communications Satellite
Corporation (or COMSAT) is created by the
Communications Satellite Act of 1962 to launch
and operate a global satellite system. The same
year, several communications satellites are
launched into space. Two years later, the
International Satellite Organization (INTELSAT)
is formed. 1973 Ninety-seven years after Bell
became the first person to speak over a phone
line, Martin Cooper hefts a clumsy, one-kg box of
wires, circuits and batteries to his ear and
makes the first private call from a hand-held
cell phone. The cell phone is basically a
sophisticated duplex radio, meaning that there
are two frequencies being transmitted at the same
time one for listening and one for speaking.
1979 The first commercial network of cellular
telephones is set up in Tokyo, Japan. The "cells"
are small, interlocking coverage regions through
which the user can pass smoothly. Users are no
longer tied to a single antenna and the cells
allow for extensive frequency reuse across a city
Source http//www.foxnews.com/fn99/vtech/cellphon
e/
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History of Cellphones Digital Age
Backup
1980 Intelsat V relays 12,000 phone calls, 2
color TV channels. 1981 450,000 transistors fit
on a silicon chip 1/4-inch square. 1983 A west
suburban insurance man makes the first commercial
cellular call in the history of the world. On
October 13, David Meilahn wins Illinois Bells
"Great Cellular Race" and makes a couple
calls--one to Alexander Graham Bells
granddaughter in Germany. Two years later,
cellular telephones go into commercially
available in cars. 1993 Unfounded rumors fly
that cellular phones cause brain cancer. 1996
So-called "smartphones," or wireless phones with
text and Internet capabilities, come into the
marketplace. They can handle wireless phone
calls, hold addresses and take voice mail. They
can also access information on the Internet and
send and receive E-mail and fax transmissions.
Experts point to 2003 as the year that they
expect smartphones to take off.
Source http//www.foxnews.com/fn99/vtech/cellphon
e/