An Ignoble Experiment

2. Sprint: Spotify is just the first - 'more to come' for Framily plans

Google (NASDAQ: GOOG) plans to scrap its four-year-old Nexus Android device program in favor of a program called "Android Silver" aimed at delivering high-end smartphones attuned to Google's specifications to better compete with Apple's (NASDAQ: AAPL) iPhones in the premium smartphone segment, according to a report from The Information.

The report, which cited unnamed sources briefed on the project, said that Android Silver devices are expected to be launched in markets such as the U.S., Germany and Japan as soon as next year, and that Google also is thinking of releasing them in emerging markets such as Brazil and India. In the U.S., the report said, Google has been looking to partner with Sprint (NYSE: S) and T-Mobile US (NYSE:TMUS) on the phones. The search giant is also looking to partner with Telefónica, Telstra in Australia and SoftBank in Japan, among others. Rumors of Silver first surfaced this month on the blog Android Police.

The Silver phones would "sharply limit" the number of non-Google apps that can be pre-installed on devices, the report said, or would allow users to uninstall pre-installed apps. A major difference between the Silver program and the Nexus program, the report added, is that Silver will focus on in-store sales through wireless carriers and others as opposed to the strategy for Nexus devices, which have mainly been sold online. Google will also apparently help cover part of the cost of the Silver phones, though the payments to the company's partners wouldn't be direct. Instead, the report said, Google could potentially pump hundreds of millions of dollars and maybe as much as $1 billion into promoting Silver devices through ad campaigns and special kiosks in wireless stores staffed by Google-trained employees.

LG Electronics, which made the last two Nexus smartphones, as well as Motorola Mobility, which Google is selling to Lenovo for $2.91 billion, are prime candidates to participate in the program. The last two Nexus phones, the Nexus 4 and 5, have been strong sellers for LG. Samsung Electronics, Sony and HTC are unlikely to participate early on in the program, the report noted, largely because they already have their own high-end phones and are banking on customized services and user interfaces to set themselves apart.

One major reason for the shift appears to be that Google wants to fight back against the perception that it does not create premium phones, especially compared to Apple. The majority of Android phones are sold in emerging markets, which has helped make Android the largest smartphone platform in the world.

Additionally, the report said that Android chief Sundar Pichai has been more willing than his predecessor, Andy Rubin, to let other executives at Google have influence over Android. For example, Nikesh Arora, Google's chief business officer, now has more influence because Android's business-development executives, including partnerships chief John Lagerling, report to him.

Finally, the report said the Silver program could be a way to counter the influence of Samsung, the largest Android OEM in the market and the world's largest smartphone maker by volume. Samsung has been pushing its own services on its Galaxy line of devices, both for content and functions like language translation. Additionally, Samsung has stepped up its direct courtship of developers, urging them to develop apps specifically for Samsung phones. The vendor held its first developer conference last fall.

However, tensions between Google and Samsung, if they existed, have apparently been simmering. In January the companies announced a wide-ranging patent-licensing deal that covers the companies' existing patent portfolios and all patents they will each file over the next 10 years. Further, according to Re/code, which cited unnamed sources, after pressure from Google Samsung agreed to modify its user interface for future devices and highlight Google's suite of apps for movies, music and other content at the expense of its own in-house-developed software. Google also has agreed to take over defense of some of the patent-infringement claims made by Apple against Samsung in Apple's current patent lawsuit, as well as to indemnify Samsung if it were to lose on those claims, according to Re/code.

For more:
- see this The Information article (sub. req.)
- see this The Verge article
- see this TechCrunch article

Read more about: Android Silver, Google
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By Phil Goldstein

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3. Analysts: Huawei, Lenovo and LG dig into Samsung and Apple's market share

NEW YORK--Sprint (NYSE: S) is hoping its new partnership with Spotify will generate more interest in its new Framily calling plans. But, as a number of Sprint executives have pointed out, the carrier's Spotify offer is just the beginning.

"Today was about music, but there certainly will be more to come to show how we can leverage Framily and provide benefits to customers as they build their Framily network," said David Owens, Sprint's senior vice president of product development, during an interview with FierceWireless here on the sidelines of Sprint's Spotify announcement. "We think providing those customers with an incredible music service like Spotify will just make them happier with Sprint."

Owens' comments echo those made by Sprint CEO Dan Hesse during the carrier's earnings conference call, hours prior to its announcement with Spotify. "Framily has a lot of legs and I think today will just be the beginning of what you will be seeing moving forward in terms of what we're able to do to leverage Framily really as an innovation marketing platform," Hesse said, repeatedly referring to the Framily calling plans as an " innovation platform."

"Clearly the hope [for Sprint] is that you have enough people in your Framily plan and start subscribing to other services as well," said Current Analysis analyst Avi Greengart. He said such an approach could make the Framily plans "incredibly sticky."

Greengart said Sprint has the opportunity now to tie additional functions and services into its Framily plans to make them even more attractive. For example, the company could bundle its high-speed, high-capacity Sprint Spark tri-mode LTE service with a subscription to video streaming provider Netflix (NASDAQ: NFLX). Or Sprint could offer cloud storage, data synchronization or concierge and travel-related services.

"The possibilities of what you could do are endless," Greengart said, in terms of services tied to Sprint's Framily plans. Sprint will just have to decide what makes sense to pursue, he added.

Of course, Sprint isn't the first carrier to bundle services into its calling plans. Leap Wireless' Cricket enjoyed notable success with its Muve Music service, and AT&T Mobility (NYSE: T) offers discounted access to the new Beats Music streaming music service. More recently, Verizon Wireless (NYSE: VZ) added up to 25 GB of cloud storage to its new More Everything shared data plans.

Sprint announced its Framily calling plans in January. The plans reward customers who add additional subscribers to the plans by providing discounts on the monthly cost of service. The plans start at $55 per month per line for unlimited talk, text and 1GB of data; for each new Sprint customer joining a Framily group, the cost per person will drop $5 a month up to a maximum monthly discount of $30 per line. For example, a group of at least seven people will get unlimited talk, text and 1GB of data for $25 per month per line, excluding taxes and surcharges.

Under Sprint's new teaming with Spotify, which goes into effect May 9, all customers on Sprint's Framily calling plans will get a free, six-month trial of streaming music service Spotify. Once the trial is over, they will get Spotify at the discounted rate of $7.99 per month for Framily calling circles of 1-5 members; for 6-10 member circles, the price drops to $4.99 per month. However, after 24 months customers then must pay the standard Spotify price (currently $9.99 per month). Non-Framily Sprint customers will get a three-month free trial of Spotify and can pay the standard $9.99 per month after that.

During its earnings conference call, Sprint boasted of the popularity of Framily, noting that it now counts 3 million Framily customers out of its 54 million total customers. Hesse said the plans are the carrier's "fastest growing rate plans on record," and reached the 1 million customer mark in less than 40 days.

For more:
- see this release

Read more about: Framily, Sprint
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By Phil Goldstein

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4. TracFone notches weaker organic subscriber growth in Q1, absent Page Plus deal

It would take a major reversal of fortunes for Samsung Electronics and Apple (NASDAQ: AAPL) to lose their places as the No. 1 and 2 smartphone market vendors, respectively, but according to industry analysts competitors Huawei, Lenovo and LG Electronics are grabbing more market share and are starting to loosen the grip the leaders have on the market.

Analysts as Strategy Analytics reported that the combined global smartphone market share of Samsung and Apple slipped to 47 percent in the first quarter from 50 percent in the first quarter of 2013. "There is more competition than ever coming from the second-tier smartphone brands," they noted.

Research firm IDC noted that Huawei, Lenovo and LG made up the rest of the top five smartphone vendors in the market, and Strategy Analytics had Huawei and Lenovo as No. 3 and No. 4, respectively (it did not include results for LG, which reported Tuesday that it shipped 12.3 million smartphones in the first quarter).

Samsung, which does not report its quarterly smartphone shipments, likely shipped somewhere between 88.5 million and 89 million smartphones in the quarter, losing about a point of smartphone market share year-over-year, the research firms said, down to around 31 percent. Strategy Analytics said this was Samsung's first annual market share loss in the smartphone category since the fourth quarter of 2009.

Apple maintained the No. 2 spot with 43.7 million iPhone shipments in the first quarter, but the research firms said Apple's market share slipped to around 15.3 percent. "The company saw double-digit growth in Japan as well as across multiple developing markets, including Brazil, China, India and Indonesia," IDC said. "Still, this made for the lowest year-over-year improvement among the leading vendors. What remains to be seen is when--not if--Apple's rumored large-screen models will arrive on the market, filling a gap in the company's portfolio that has been exploited by the competition."

However, it was Huawei and its smaller brethren that gained ground in the quarter.

"Huawei is expanding swiftly in Europe, while Lenovo continues to grow aggressively outside China into new regions such as Russia," Strategy Analytics noted. "If the recent Lenovo takeover of Motorola gets approved by various governments in the coming months, this will eventually create an even larger competitive force that Samsung and Apple must contend with in the second half of this year."

IDC noted Huawei's aim for 2014 is to ship 80 million smartphones worldwide, "and contributing to that is the company's increasing emphasis on large-screen smartphones," such as the Ascend Mate 2 4G, which features a 6.1-inch screen, one of the largest screen sizes in the industry.

Lenovo posted the largest year-over-year increase among the leading vendors, IDC found, with continued success in Asia-Pacific and a nominal presence elsewhere. But IDC noted that will change once Lenovo's $2.91 billion purchase of Motorola from Google is approved, which should give Lenovo a greater presence in North America and Western Europe.

LG's shipments "were enough to stave off multiple Chinese vendors, including Coolpad, Xiaomi, and ZTE. Driving the company's success was its emphasis on LTE-powered smartphones, including the G2, Nexus 5, and the G Flex," IDC said. At the same time, LG saw the continued success of its mid-range F-series and entry-level L-series devices, the research firm found.

For more:
- see this IDC release
- see this Strategy Analytics post
- see this VentureBeat article
- see this TheNextWeb article

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Lenovo predicts Motorola turnaround, but cautions it will take time
Analysts: Samsung, Apple keep smartphone grip, but lower-end rivals are nipping

Read more about: Apple, samsung
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By Phil Goldstein

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