An Ignoble Experiment

2. Google's Schmidt calls Motorola's upcoming products 'phones +'

Dish Network's (NASDAQ: DISH) surprise $25.5 billion bid for Sprint Nextel (NYSE:S) may spark a bidding war between Dish and Japan's SoftBank over the United States' third-largest wireless carrier, according to comments from shareholders and investment analysts. Further, the situation likely won't get straightened out anytime soon, given the difficulty of comparing the two complex transactions.

For its part, SoftBank said Dish's bid for Sprint won't derail SoftBank's plans to acquire 70 percent of Sprint for $20.1 billion.

"SoftBank believes that the agreed terms of our transaction with Sprint offer Sprint shareholders superior short and long term benefits to Dish's highly conditional preliminary proposal," SoftBank said on its website. "The SoftBank-Sprint transaction is in the advanced stages of receiving the necessary approvals, and we expect to consummate the transaction on July 1, 2013 with the terms already agreed."

Analysts agreed that SoftBank founder Masayoshi Son is a rare risk-taker in an otherwise staid Japanese business market, and he likely will fight back against Dish Chairman Charlie Ergen's bid for Sprint.

"The issue for Son is that he wants to build a global company, he promised to do that. This is probably the one shot he has of doing that, and I don't think he's going to walk away," Neil Juggins, a Hong Kong-based analyst at JI Asia, an affiliate of Societe Generale, told Reuters.

"Softbank is keen on buying Sprint and will probably raise its offer if the rival bidder doesn't back down," Mitsushige Akino, head fund manager at Ichiyoshi Investment Management Co. in Tokyo, told Bloomberg.

However, SoftBank investors are concerned that will mean the company will need to raise more money to increase its bid for Sprint. SoftBank's stock suffered its biggest decline since October after Dish announced its bid for Sprint yesterday. Further, the falling value of Japan's yen could complicate SoftBank's attempts to counter Dish.

Interestingly, SoftBank could potentially make as much as $4 billion if its deal with Sprint collapses. As the Wall Street Journal pointed out, SoftBank would receive $600 million if Sprint ultimately rejects its offer, which combined with SoftBank's convertible bond and the remaining money it owes Sprint shareholders could net SoftBank a windfall if its deal with Sprint falls apart.

For its part, Dish argued that its offer is worth 13 percent more than SoftBank's offer, and Dish said its transaction would leave Sprint stockholders with 32 percent of the combined Dish and Sprint, while SoftBank's offer would only leave Sprint stockholders with 30 percent of the resulting company.

And, in an interview with the Wall Street Journal, Ergen said Dish will use Sprint to deliver mobile video services that would upend the market for wireless and TV. He also said the company could provide advanced advertising products since it could track users' behavior both in their homes and while they're out and about. "We can offer a much, much more compelling product that differentiates away from things like data caps and bits and bytes," Ergen told WSJ.

Sprint yesterday said it will evaluate Dish's bid and declined to comment further.

Sprint will have a difficult time assessing the two deals, noted WSJ columnist Ronald Barusch. On one hand, SoftBank's offer represents a cash infusion that would likely allow Sprint's management to largely retain the company's corporate structure. Dish's bid, on the other hand, would ultimately mean a merging of Dish and Sprint's management, which might cause concern among Sprint's middle management, customer service and other departments.

"At the very least, the Sprint executives will be required to execute Dish's transformative business plan," Barusch wrote.

Further, Sprint's shareholders will have to decide whether SoftBank's cash infusion is ultimately more valuable than Dish's promise to leverage Sprint in a market evolution. And Dish isn't the first TV operator to harbor wireless ambitions that include Sprint: Pivot was the now-failed joint venture among Sprint and cable companies Comcast, Time Warner, Cable, Cox Communications and Brighthouse Networks. The effort too was intended to use wireless to deliver mobile video programming. Pivot collapse due to lack of consumer interest.

For more:
- see this AllThingsD article
- see these four WSJ articles (sub. req.)
- see these two Reuters articles
- see this Bloomberg article

Read more about: Sprint
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By Phil Goldstein

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3. Microsoft to make Windows Phones only if partners don't address market

NEW YORK--Google (NASDAQ:GOOG) Executive Chairman Eric Schmidt said that Motorola Mobility's upcoming products will be innovative and described them, somewhat mysteriously, as "phones+"

Google Executive Chairman Eric Schmidt talks about Android.

"They have a new set of products which I have seen and they are phenomenal," Schmidt said here at AllThingsD's D: Dive Into Mobile conference. While he noted that "Android is a very tough, competitive market," he told the audience here to "witness this next generation of technology. Think of it as phones+."

Motorola is reportedly working on a so-called "X-Phone," an advanced Android device. During Google's fourth-quarter earnings conference call, CEO Larry Page said that he was "excited" about the future of Motorola's business. He said that "the opportunities are endless" for innovation in a multi-screen world.

"Think about your devices, battery life is a huge issue. You shouldn't have to worry about constantly recharging your phone," he said, according to a Seeking Alpha transcript. "When you drop your phone, it shouldn't go splat. Everything should be done faster and easier." Those comments were similar to ones Page made to Wired about the potential for mobile hardware innovation.

Schmidt also said that while there are 750 million Android devices now through 320 operators in 160 countries, and there are 1.5 million sales or activations of Android every day, there is more room to grow. "We will cross a billion [Android devices activated] in the next six to nine months," he said, adding that the industry is "nearing 2 billion within a year or two."

"I think Android is by far the primary vehicle by which people use smartphones," he said, especially as prices continue to come down.

Schmidt also downplayed any notion of tension between Google and Samsung Electronics, the world's largest handset and smartphone maker and the biggest Android device maker. According to research firm Gartner, in the fourth quarter Samsung commanded more than 42.5 percent of the Android market globally, and the next vendor had just 6 percent share. Media reports, including in the Wall Street Journal, have said Google has grown worried about Samsung exercising more influence in its relationship with Google. Schmidt called the reports of such tension inaccurate.

"Obviously we want a competitive market," he said. However, he said "the Samsung relationship has turned out to be a defining one" and that Google is glad Samsung has embraced Android as much as it has.

Separately, Andy Rubin, the former head of Android, said Android was originally conceived as a way to create a world of "smart cameras" that connected to PCs, but was soon reworked for smartphones.

"The exact same platform, the exact same operating system we built for cameras, that became Android for cellphones," said Rubin, who spoke at an economic summit in Tokyo, according to IDG News Services.

Rubin, who stepped down from his Android post in March, said he would continue to create products for consumers. "I can pretty much guarantee you that whatever I do next it's going to be something that delights consumers," he said.

Rubin was replaced with Sundar Pichai, Google's senior vice president of Chrome and Apps, who took on Rubin's Android duties in addition to his existing work. Schmidt said the market should not read too much into the move or interpret it as a precursor to a merging of Android and Chrome.

"You don't want the [organization] design to drive product design," he said. "You want to build outstanding products."

Schmidt also praised Facebook's (NASDAQ:FB) Home for Android user interface, and said it was a marker of Android's openness. He said Google would not try to block Home if it became popular. "It would be counter to our public statements, our policies, our religion," he said.

"I think it's fantastic," Schmidt said. "This is what open source is about. Open source means open source. I think it's wonderful. It's experimentation, it's new ideas, it's creativity."

For more:
- see this Engadget article
- see this IDG News Service article

Read more about: Android, Google, Eric Schmidt
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By Phil Goldstein

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4. 'Latest and greatest' smartphones drive 35% of cell phone purchases

NEW YORK--Microsoft (NASDAQ:MSFT) has no current plans to build its own Windows Phone smartphone and would only do so if partners like Nokia (NYSE:NOK) and HTC are not making the most of the platform and addressing the market.

Terry Myerson, corporate vice president of Microsoft's Windows Phone divison, discusses Windows Phone.

"It would have to be something where Nokia or HTC or one of our primary partners was not providing the consumer experience we think is possible with our platform," Terry Myerson, the corporate vice president of Microsoft's Windows Phone division, said here at AllThingsD's D: Dive Into Mobile conference.

Nokia said in March that if Microsoft builds its own branded Surface smartphone, the move could hurt Nokia's business.

"Microsoft may make strategic decisions or changes that may be detrimental to us," Nokia acknowledged in a recent Securities and Exchange Commission filing. "For example, in addition to the Surface tablet, Microsoft may broaden its strategy to sell other mobile devices under its own brand, including smartphones. This could lead Microsoft to focus more on its own devices and less on mobile devices of other manufacturers that operate on the Windows Phone platform, including Nokia."

Myerson said that all of Microsoft's energy is focused on its partners. "We want the partners building Windows Phones to be successful with Windows Phones," he said, noting that Microsoft is not pushing aggressively to add more OEM partners (other Windows Phone manufacturers include Samsung Electronics, Huawei and ZTE). "We're very focused on making our core partners successful right now."

The Microsoft executive also said the company is finding more traction with its Windows Phone platform in markets where operators do not subsidize smartphones, a situation he said doesn't garner much media attention. Myerson repeatedly said that Windows Phone is like a "well-funded startup" inside Microsoft.

Myerson said that Apple (NASDAQ:AAPL) and Samsung build their best devices for $650, prices that are reduced by carrier subsidies to $200 or so. "If every phone is [subsidized down to] $200 regardless of what price it is, then we're the challenger going up the incumbents at the same price," he said. "That as a playing field is a little harder."

Microsoft has had a tough time gaining traction with Windows Phone. Research firm Gartner reported that Microsoft captured 3 percent of the global smartphone market in the fourth quarter of 2012, up from 1.8 percent in the year-ago period. IDC reported similar numbers, giving Microsoft 2.6 percent of the global smartphone market in the fourth quarter, up from 1.5 percent in the fourth quarter of 2011.

In a bit of a light-hearted note, Myerson said the he enjoys working for Microsoft CEO Steve Ballmer, and said he is an "intense but loveable everyday guy. I love the guy."

Read more about: Surface phone, Terry Myerson
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By Mike Dano

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SPOTLIGHT ON... Developers rally around video ads

New research shows that smartphones continue to drive consumers' wireless purchases, with 35 percent of respondents in a new survey saying that they purchased their phone to obtain the "latest and greatest device," up from 25 percent last year.

Click here to see survey responses to Google and Compete's question, "Why did you purchase this cell phone."

The findings come from a survey on the shopping habits of those purchasing wireless devices and services, directed by Google (NASDAQ:GOOG) and Compete. The survey, conducted in November, relied on Compete's panel of 2 million Americans and analyzed the behavior of cell phone purchasers backward from the point of sale.

The survey found that the leading driver for cell phone sales was wireless customers' upgrade eligibility, meaning that their two-year contracts were expiring and they were able to obtain a new phone at a subsidized price. According to the survey, 42 percent of cell phone buyers purchased their device because there were eligible for an upgrade. However, that figure was down 9 percent from the previous year, which indicates that cell phone sales are not as tightly tied to service contracts as they used to be.

In a finding that could be concerning to wireless carriers, 32 percent of respondents selected a phone first and then selected a carrier--and 48 percent of shoppers who switched carriers selected a phone ?rst and then selected a carrier. Moreover, one in three shoppers switched carriers (up 39 percent year-over-year) and nearly half (around 47 percent) considered two or more carriers when shopping for a phone (up 193 percent year-over-year).

Click here to see survey responses to Google and Compete's question on "How important were each of the following features to you when shopping for a cell phone?"

The survey also found that interest in 4G and no-contract plans continues to grow. According to the findings, 31 percent more people consider 4G availability important, compared with the survey last year, and 41 percent more people consider no-contract plans important. The most important factor was network reliability, with 85 percent of respondents citing it as very important when shopping for a cell phone.

The findings from Google and Compete indicate Americans continue to focus on smartphones as the center of their shopping experience. According to comScore, the most popular smartphone manufacturer in the United States in February was Apple (NASDAQ:AAPL), followed by Samsung, HTC, Motorola and LG.

For more:
- see this Google post

Also Noted

This week's sponsor is CCA.

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Video ads are growing into a new and potentially lucrative business for mobile developers. Developers are already using videos to promote their apps, and video ads for apps can sometimes generate far more interest among viewers than standard banner ads. Further, in-app video ads could also generate some much-needed income for developers who display the ads in their apps. A growing number of vendors, including Vungle and AdColony, have targeted this space for growth, and their initial results are encouraging. Specifically, late last year Flurry said one of the customers of its AppCircle Clips found consumers acquired through video ads used apps 43 percent more often and played 23 percent longer per session than users acquired through traditional banner ads. And Vungle, an in-app ad network that came out of private beta last year, has case studies that show developers generating conversion rates above 0.65 percent with video ads. Special Report.

Quick news from around the Web.

@FierceWireless: Google, Millennial Media executives debate future of mobile advertising #dmobile $GOOG $MM Article | Follow@FierceWireless

> AT&T Mobility will begin selling the Samsung Galaxy S4 April 30 starting at $200. Article

> One analyst believes Apple will sell 75 million low-cost iPhones next year. Article

> Samsung is under investigation for bashing HTC online. Article

> Android founder Andy Rubin said the effort initially started as a way to make an operating system for a camera. Article

> Huawei reiterated its desire to succeed in smartphones. Article (sub. req.)

> There are four Apple executives who are making more money than Apple CEO Tim Cook. Article

> Google Glasses won't have a cellular radio. Article

> According to Arthur D. Little, mobile operators' revenues will decline until at least 2016. Article

> One analyst reported that demand is high in Asia for the BlackBerry Z10. Article

> The government sequester could affect sales at Verizon Wireless and AT&T Mobility. Article

Mobile Content News

> Mobile browser page load speeds have accelerated around 30 percent over the last 12 months, Google reports. Article

> Facebook is not in discussions to extend its Home launcher from Google's Android to Apple's iOS and Microsoft's Windows Phone, The Next Web reports. Article

> Google rolled out an updated version of its YouTube video application for Apple's iOS, highlighted by support for live streaming. Article

Mobile Developer News

> Google Drive is changing the app development experience. Article

> Evans Data reported a 57 percent increase in developer program participation. Article

And finally… How Microsoft quietly built the city of the future. Article

Entner: How Sprint-Dish would affect Sprint shareholders, customers, competitors and the regulators

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