An Ignoble Experiment

2. Analysts: Huawei booms to No. 3 worldwide smartphone maker with P6, G610 success

Apple (NASDAQ:AAPL) sold 33.8 million iPhones in its most recent quarter, slightly above a consensus of analysts and a record for the company's September quarter. Apple also posted quarterly revenue of $37.5 billion and quarterly net profit of $7.5 billion in its fiscal fourth quarter. Overall, Apple's gross margin was 37 percent, compared to 40 percent in the year-ago quarter.

iphone and ipad quarterly shipments since 2007

Click here for Apple's quarterly iPhone and iPad shipments since 2007.

Apple's financial results fell at the high range of the company's expectations: Apple said it had expected $34 billion to $37 billion in revenue and a gross margin of 36 percent to 37 percent in the quarter. However, the Wall Street Journal noted that Apple's results represented the company's third consecutive quarterly decline in earnings.

"Apple is a very healthy company," JMP Securities analyst Alex Gauna told Reuters. But "if you look at the last few quarters, and even with the guide, it's not much of a growth company."

Apple's 33.8 million iPhone sales in the quarter were up from the 26.9 million it sold in the year-ago quarter. In its fiscal third quarter 2013 the company sold 31.2 million. According to Fortune's Apple 2.0 blog, an average of 48 professional and independent analysts expected Apple to have sold 33.4 million iPhones in its most recent quarter.

During Apple's conference call with analysts, the company said it enjoyed strong iPhone sales in emerging markets across India, Latin America and Russia, as well as solid sales in the United States. As for China--an increasingly important market for smartphone makers--Apple said sales there grew 6 percent but that the company had hoped for greater growth. Apple said it expects to expand its retail effort in China to additional cities.

Apple's just-ended fiscal fourth quarter includes only eight days of sales for the iPhone 5s and 5c, its two new models that went on sale Sept. 20. The inclusion of two new models at once for the first time likely goosed Apple's sales, but Apple has yet to break down 5s and 5c sales and there have been some reports that the less-expensive 5c has not been in high demand, and that Apple has cut back production of the model.

In comments during the company's conference call with analyst, Apple CEO Tim Cook declined to comment specifically on sales of individual iPhone models, but indicated that, at time goes on, sales of Apple's less expensive iPhones--the 5c and 4S--would increase as sales of its more expensive iPhone would taper. He also reiterated that Apple had never intended to sell the iPhone 5c as Apple's entry-level iPhone; he said the iPhone 4S currently acts as the company's least-expensive phone.

"The demand is very robust," Cook said of the iPhone 5s, adding that Apple is working on addressing a "significant backlog" in supplying the device.

According to Apple's financials, the company reported an average selling price of $577 for iPhones in the quarter, and got $19.51 billion in revenue from its iPhone line. Apple CFO Peter Oppenheimer acknowledged that Apple's ASP was down 7 percent year over year, which he said was partially due to an increase in sales of less expensive iPhones.

Interestingly, Cook was asked whether wireless carriers will reduce the subsidies they pay on phones, including the iPhone. "I think carriers like to sell as many units as they can," Cook said, adding that he doesn't expect carriers' subsidies to change.

"I think we have great relationships with the carriers and I think they were very happy with the iPhone rollout," he said.

Apple also said it sold 14.079 million iPad units in the quarter, essentially flat from 14.036 million in the year-ago period and down from 14.617 million units in the fiscal third quarter.

As for its coming quarter, Apple said it expects revenue between $55 billion and $58 billion and gross margin between 36.5 percent and 37.5 percent. In its last December quarter, Apple reported $54.5 billion in revenue.

"We see significant opportunities ahead of us" in both new and existing products, said Cook. According to 9to5Mac, Cook told employees in a company memo that Apple "has never been stronger."

For more:
- see this Apple release
- see this Reuters article
- see this 9to5Mac article
- see this WSJ article (sub. req.)

Special Report: Wireless in the third quarter of 2013

Read more about: iPad, Apple
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By Phil Goldstein

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3. Nokia sells record 8.8M Lumias in Q3, gets big boost in N. America

The global smartphone market has calcified at the top, with Samsung Electronics and Apple (NASDAQ:AAPL) continuing to lead the field by large margins, according to the latest reports from research firms Strategy Analytics and IDC. The fight is over which companies can clamor over each other to get to the No. 3 spot--and in the third quarter analysts concluded it was Chinese vendor Huawei.

Click here for a larger version of this chart.

According to Strategy Analytics, Huawei shipped 12.7 million smartphones in the third quarter (and 14.6 million total handsets), good for third on the smartphone list and fifth among all handset makers. IDC found that Huawei shipped 12.5 million smartphones (up from the 7.1 million IDC recorded in the third quarter last year), which gave it the No. 3 spot in its global smartphone rankings.

Analysts at Strategy Analytics called Huawei "a star performer" in the smartphone market in the quarter, as global shipments grew 67 percent year-over-year from 7.6 million in the third quarter of 2012. The analysts said the company's popular P6 and G610 models have been among the main drivers of Huawei's success. While Huawei remains in a solid position at home in China, its position is weaker in other major markets such as the U.S. and Europe. "Huawei will need to expand aggressively in the American and European markets if it wants to seriously challenge the big two of Samsung and Apple next year," Strategy Analytics concluded.

"Huawei returned to the list of top five vendors after a one-quarter hiatus, narrowly beating out Lenovo and LG," IDC said. "In fact, less than a million units separate Huawei from the next two vendors, underscoring how tightly contested the market has become following Samsung and Apple. Huawei relied on Asia/Pacific for the bulk of its shipment volumes, but the company continued to make headway into Europe and the Americas with volumes exceeding one million units in each region."

IDC had Lenovo as the No. 4 smartphone maker in the period and LG Electronics as No. 5, while Strategy Analytics flipped that ranking on its own list. Nokia (NYSE:NOK), which fell out of the top five smartphone rankings as its Symbian sales dropped to zero and its Lumia Windows Phone sales did not pick up the slack, is starting to edge its way back. The company posted 8.8 million Lumia shipments in the third quarter, but it will need to crack the range of 11-12 million in order to make it back into the top five.

Both IDC and Strategy Analytics reported record global smartphone sales in the third quarter. Strategy Analytics said global smartphone shipments grew 45 percent year-over-year to reach a record 251 million units in the third quarter, while IDC reported that vendors shipped a total of 258.4 million smartphones in the period, establishing a new record for units shipped in a single quarter by more than 9 percent.

Looking at the overall handset market, including smartphones and features phones, Strategy Analytics said global mobile phone shipments grew 7 percent year-over-year to reach 418 million units in the third quarter. IDC pegged the total higher and said vendors worldwide shipped 467.9 million units in the quarter. Both research firms concluded that Samsung continues to lead the overall handset and smartphone markets.

For more:
- see this Strategy Analytics post
- see this Strategy Analytics release
- see this IDC release (PDF)
- see this CNET article
- see this WSJ article (sub. req.)

Related Articles:
Nokia sells record 8.8M Lumias in Q3, gets big boost in N. America
Apple sells 33.8M iPhones in record quarter
Samsung posts another record profit in Q3, but warns of tough smartphone competition
LG posts first loss in mobile unit in a year as competition intensifies
Huawei, Lenovo and ZTE give chase to Apple and Samsung in Q2 smartphone race

Read more about: IDC, Handsets, Apple
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By Phil Goldstein

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4. Google's Motorola unveils Project Ara, focuses on customizing smartphone hardware

Nokia (NYSE:NOK) reported record sales in the third quarter of its Lumia smartphones running Microsoft's (NASDAQ:MSFT) Windows Phone software, and saw a sharp jump in its shipments in the North American market, signs that the company's strategy may be starting to take hold.

In Nokia's devices and services business, sales fell 19 percent to $3.99 billion. The company's smartphone sales grew year-over-year while its feature phone sales declined, continuing a trend that has cut down Nokia's total handset unit shipments. Nokia shipped a total of 64.6 million handsets (smartphones and feature phones) in the third quarter, down 22 percent from 82.9 million in the year-ago quarter.

The company's Lumia smartphone business saw a major lift though. Nokia shipped a record 8.8 million Lumias in the quarter, up from 7.4 million in the second quarter and up significantly from 2.9 million in the third quarter of 2012. Nokia attributed the sequential increase primarily due to the low-cost Lumia 520.

Indeed, the average selling price for Nokia's smartphones fell in the quarter, down year-over-year and sequentially, to around $197, from $213 in the year-ago period and $216 in the second quarter.

In North America, Nokia scored a major win in device sales in the quarter, recording 1.4 million unit sales, almost all of which were certainly Lumias. That figure is up from 300,000 units in the year-ago period and 500,000 in the second quarter.

During the summer Nokia launched Lumias through AT&T Mobility (NYSE:T), T-Mobile US (NYSE:TMUS), Verizon Wireless (NYSE:VZ) and others, including the 928 at Verizon, 925 at T-Mobile and 1020 from AT&T.

Perhaps more importantly, Nokia appears poised to continue its forward momentum. Earlier this month Nokia announced its Lumia 1520 phablet device and its first tablet, the Lumia 2520, which runs Microsoft's Windows RT operating system. Nokia also announced the large-screen Lumia 1320, as well as three new touchscreen Asha phones (the 500, 502 and 503). And Nokia is working to add apps to the Windows Phone platform; the company announced Facebook (NASDAQ:FB)-owned Instagram will finally be coming to Windows Phone in the coming weeks.

And U.S. operators will continue to support Nokia's efforts: AT&T, a key U.S. partner for Nokia, will be the exclusive U.S. carrier for the 1520 and will also support the LTE-enabled 2520 tablet.

As for Nokia's overall performance in the third quarter, the company's company-wide net loss narrowed to $125.3 million, down from a loss of $1.32 billion in the year-ago period. Analysts had expected a net loss of $298.8 million, according to the Wall Street Journal. Overall, company sales declined in the third quarter by 22 percent to $7.8 billion.

Microsoft is set to take over Nokia's devices and services business early next year, which means this could be one of the last financial reports from Nokia about handsets. Microsoft is working to assume control over Nokia's devices and services business, and license its patents, in a deal valued at $7.5 billion. Following the deal, Nokia will retain its Nokia Solutions and Networks business, its HERE location and mapping business and a unit focused on advanced technologies.

For more:
- see this release
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this The Verge article
- see this separate The Verge article
- see this CNET article

Special Report: Wireless in the third quarter of 2013

Read more about: Lumia 1020, Nokia
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By Phil Goldstein

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5. AT&T, Dish, CCA cheer FCC's official stamp on 700 MHz interoperability deal

Google's (NASDAQ:GOOG) Motorola Mobile division unveiled Project Ara, an open-source program designed to bring modular smartphone design to the masses--in effect giving end users the ability to retrofit and continually customize the hardware of their smartphones.

Click here for a larger version of this picture, and other Ara pictures.

The project is being spearheaded by the Motorola Advanced Technology and Projects group, the unit led by Regina Dugan, a former DARPA chief. Project Ara has been in the works for more than a year and its goal is audacious in the same way Google's Project Loon is for expanding Internet access via balloons: "How do we bring the benefits of an open hardware ecosystem to 6 billion people?"

"Project Ara is developing a free, open hardware platform for creating highly modular smartphones," the company wrote in a blog post. "We want to do for hardware what the Android platform has done for software: create a vibrant third-party developer ecosystem, lower the barriers to entry, increase the pace of innovation, and substantially compress development timelines."

The core of Ara consists is an endoskeleton (endo) and modules. The endo is the structural frame that holds all the modules in place. A module can be anything from a new chipset, display, keyboard or sensor.

If that sounds a lot like Phonebloks, a similar venture unveiled in September, that's because Motorola recently met with Dave Hakkens, the creator of Phonebloks. The ventures "share a common vision: to develop a phone platform that is modular, open, customizable, and made for the entire world. We've done deep technical work. Dave created a community. The power of open requires both."

Project Ara will be working with the Phonebloks community throughout its development process as well as "Scouts" or volunteers who will be testing the concept. Motorola said in a few months it will also send an invitation to developers to start creating modules for the Ara platform (and may provide prizes). Motorola expects to have an alpha release of the Module Developer's Kit (MDK) sometime this winter.

Google touted the Moto X smartphone as "the first smartphone that you can design yourself," but via its Moto Maker studio that largely consists of cosmetic changes, such as the phone's back design and color, not its internal components. Project Ara promises to take that focus on customization to another level.

"Our goal is to drive a more thoughtful, expressive, and open relationship between users, developers, and their phones," Motorola said. "To give you the power to decide what your phone does, how it looks, where and what it's made of, how much it costs, and how long you'll keep it."

Interestingly, Ara sounds surprisingly like the business plan from startup Modu, founded in 2007 by Dov Moran, inventor of the USB flash drive. Modu hoped to "rewrite the mobile landscape" by taking a modular approach to handset ownership--a definite reversal from the all-in-one strategy employed by most smartphone makers. However, Modu closed its doors early in 2011 and Google reportedly purchased the company's patents shortly thereafter.

For more:
- see this Motorola blog post
- see this The Verge article
- see this CNET article
- see this GigaOM article
- see this TIME article

Related Articles:
Google urges patience on Motorola, which continues to bleed cash
Rumor Mill: Moto DVX could be a cheaper version of the Moto X
Motorola execs push back on criticism of Moto X specs
Moto X is the starting point for the new Motorola, not the end
Google's Motorola unveils Moto X Android smartphone, brings it to multiple carriers

Read more about: Project Ara, Google
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By Phil Goldstein

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SPOTLIGHT ON... NSN posts Q3 sales decline, but points to growth going forward

The FCC approved an order to implement a 700 MHz interoperability solution that will eventually give smaller carriers access to the same 700 MHz LTE devices AT&T (NYSE:T) now uses.

The order--which puts the FCC's imprimatur on an industry-led solution first announced in September--effectively settles an issue that had bedeviled the industry for years. It also represents a set of interlocking commitments and promises that will ultimately give Dish Network (NASDAQ: DISH) more time to build outs a network on the 700 MHz spectrum it owns.

For Dish, the order addresses interference concerns by modifying the technical rules of the 700 MHz D and E Blocks to remove the likelihood of interference. Dish agreed to reduce the power levels of transmissions on its E Block spectrum, and in return got an extension on its buildout requirements. Dish had asked the FCC to set a new buildout deadline on its 700 MHz spectrum that would require the company to cover 40 percent of the population covered by its licenses by 2017 and 70 percent by 2021.

The interoperability issue has been around for years. Lower 700 MHz A Block licensees have long argued that vendors like Apple (NASDAQ:AAPL) make equipment for AT&T's Band Class 17 and Verizon Wireless' NYSE:VZ) spectrum in Band Class 13, but not for those smaller companies such as C Spire Wireless and U.S. Cellular (NYSE:USM) that hold 700 MHz A Block spectrum in Band Class 12. AT&T, which pushed for the creation of its own Band Class 17, previously argued it could not support Band Class 17 alongside Band Class 12 because it would be too expensive and would cause interference.

However, AT&T in September agreed to reverse its position and support both Band Class 17 alongside Band Class 12. Specifically, the company said it will develop, implement and deploy throughout its network multi-frequency band indicator, or MFBI, capabilities that will let its network operate simultaneously in both Band 12 and Band 17 and support devices in both band classes. The feature was recently standardized but will require lab testing and field testing, the carrier said.

The company did not provide a time frame for how long this deployment and testing would take.

"AT&T commits to moving forward expeditiously with testing the 3GPP MFBI software feature ... as soon as it is made available to AT&T by its RAN vendors," the carrier wrote in an FCC filing. "AT&T further agrees to fully deploy the new MFBI software feature in its 700 MHz network within 24 months of September 30, 2013."

If AT&T finds that deploying MFBI "will result in significant negative customer impact" it could potentially delay the rollout of its support for Band Class 12 devices by up to six months.

Plainly, though, it will still be years before AT&T rolls out devices that can work on Band Class 12 and 17.

Still, all of the interested parties praised the FCC and the other carriers for working together on the issue. "A critical prerequisite to the commitments made by AT&T is FCC action to harmonize the lower 700 MHz E Block, lowering permissible power limits to eliminate the potential for harmful interference," Joan Marsh, AT&T's vice president of federal regulatory, said in a statement. "We are pleased to see the FCC moving swiftly to address these interference issues consistent with the negotiated solution. The action the Commission takes today, under continued leadership by Chairwoman Clyburn, is a critical step to achieving 700 MHz interoperability that will in turn foster industry investment and deployment in the 700 MHz band to the benefit of U.S. wireless consumers."

The Competitive Carriers' Association, which worked with operators such as C Spire and U.S. Cellular on 700 MHz interoperability, praised Acting FCC Chairwoman Mignon Clyburn for her efforts and the final deal. "The Order sends a clear message that the FCC is committed to ensuring all Americans, especially those in rural and hard-to-reach areas, reap the benefits of high speed mobile broadband," CCA President Steve Berry said in a statement. "Interoperability will allow CCA members to build out nearly $2 billion worth of low band spectrum, which will help spur economic growth, create jobs and benefit consumers throughout the nation."

And Dish Chairman Charlie Ergen was also supportive of the measure. "We applaud the FCC, under Chairwoman Clyburn's leadership, for their extraordinary efforts in bringing the industry together to reach a consensus on interoperability, which is reflected in today's Order," he said in a statement. "Dish worked cooperatively with the Commission to help achieve the important benefits of interoperability and to unlock additional mobile broadband spectrum for the benefit of all Americans."

For more:
- see this FCC document (PDF)
- see this Reuters article
- see this PhoneScoop article

Read more about: Competitive Carriers Association, FCC
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Nokia (NYSE:NOK) Solutions and Networks' significant win in China Mobile's recent TD-LTE tender put a positive spin on the vendor's third-quarter results, as did an upbeat forecast of future growth. But a slip in sales nonetheless cast a shadow on NSN's ongoing turnaround.

NSN's year-over-year net sales plummeted 24 percent to nearly $3.57 billion, with some of the decline attributed to business divestments and exits from certain contracts and countries. Even excluding those issues, net sales declined year-over-year by some 20 percent. Yet NSN's third-quarter 2013 net profit of $133.5 million represented an increase of 33 percent over the year-ago quarter.

Looking ahead, Nokia forecasted higher fourth-quarter sales for NSN and said the unit's expected adjusted profit margin will grow during the fourth quarter to around 12 percent, plus or minus 4 percentage points, from 8.4 percent in the third quarter. Article

Quick news from around the Web.

@FierceWireless: RT@gigaom: Here's why Motorola's Project Ara for modular phones exists (and could succeed) Article | Follow@FierceWireless

> Google is reportedly readying its own smart watch for mass production. Article

> Google Glass 2 is coming, and will finally be compatible with prescription glasses. Article

> Verizon Wireless will launch the BlackBerry Z30 in early November. Article

> Verizon's same-day phone delivery service now available in New York City, Dallas, Pittsburgh and San Francisco. Post

> iPad Air supplies are reportedly expected to be plentiful at launch. Article

> Will Apple have enough supplies to meet demand for the iPad mini with Retina Display? Article

> Nvidia said that hundreds of new games not originally designed for its Shield gaming console will now be compatible with Shield. Post

> Australia's newly elected conservative government is upholding a ban on Huawei from bidding for work on the country's $38 billion National Broadband Network. Article

> First Data acquired customer loyalty startup Perka. Release

Mobile Developer News

> Microsoft's Frank Shaw draws developer heckling over iWork post. Article

> What the Ubuntu opportunity looks like for mobile app developers. Article

> When does an app 'hobbyist' become an app developer? Editor's Corner

> InMobi: App interstitial ads converting for developers, publishers. Article

And finally... The Nexus 5 and Android 4.4 could be announced in Tel-Aviv on Nov. 5. Article

Yankee Group: Taking wearable tech to the next level

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