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September 30, 2011

At a price of just $199, Amazon is selling its new Kindle Fire tablet at a loss, emulating HP's marketing phisolophy: sell printers really cheap (at a loss) but make money on the ink cartdridges.

According to an early estimate by the research group IHS iSuppli, the Fire's total bill of materials cost is $191.65.

And that barely is below the $199 retail price, and giving the new seven-inch fondleslab a less-than-massive profit margin of just around 4 percent, clearly not enough in these days of high overhead and various rising advertising costs.

And add manufacturing costs to the mix on top of all this, and IHS calculates that the Fire costs almost $210 in total. As the old joke goes, "Yeah, we may be losing money on each sale, but we'll make it up in volume." Really? How can you make it up on volume if you're losing money on each sale?

But if IHS's preliminary analysis is correct, Amazon is more canny than that old thigh-slapper might suggest. IHS believes that Amazon is willing to make only a marginal profit on the Fire plus a relatively small amount of digital content that users will buy per tablet, because the online retailer is using it as a loss-leader to get customers into its online store where they'll pay good, high-margin money for gadgets of all kinds, and whether they need it or not.

A reasonable argument, but Amazon may have more than mere enticement in mind. Prepare for a "well, duh!" statement – is the wave of the future.

And although digital content may not have high margins, shipping electrons over the interwebs has fewer back-end costs than does shipping those aforementioned atom-suffused gadgets, which require inventory management, warehousing, boxing, and other brick-and-mortar nuisances.

Amazon wants it both ways: use the Fire as a loss-leader as IHS suggests, and use it as a free printer. And, it should also be noted, use it to drive the public's perception of what a tablet should cost down into that magic sub-$200 range.

Apple may continue to charge a small premium for its iPad hardware – ever hear that said of Apple before? – but others are now in a whole new world: one that starts at $199.

And without Amazon's vast digital and real-world retail offerings surrounding competing tablets, it will be hard for them to continue that competition – as if they're doing all that well at present.

Even at such itty bitty profit margins, Amazon is still poised to shave off a rather large chunk of the competition. And yes, you can take that to your printer.

In other mobile news

NFC (near field communications) devices are about to get an optional open mailbox system into which messages and payment requests can be dropped by other NFC devices, hopefully leading to cross-platform P2P (peer-to-peer) mobile applications.

The NFC standard is largely concerned with devices reading passive tags, or interacting with point-of-sale hardware, but peer-to-peer apps are more popular right now.

So the standard has been extended to incorporate an open in-box into which devices can push messages in the hope that an NFC application on the receiving device will read them in the real world.

The new standard is called SNEP (Simple, NFC Data Exchange Format, Exchange Protocol), and the NFC Forum suggests it could be used to push an address book entry into someone else's mobile handset or tie to it a hyperlink into every passing NFC handset without immediately notifying the user.

Then, the receiving handset simply decides what to do next with the incoming message. It's as simple as that, according to the NFC Forum.

In the hyperlink example, the forum optimistically suggests it might lead to a film clip, which could be viewed by tapping the phone against a TV remote control. The exact behaviour, or contents of the NFC messages dropped into the mailbox, isn't specified by SNEP: the standard just allows devices to be open to reception without being triggered by the user.

The new specification, which is available with a minimum of form filling, brings the forum's document count up to 16, and is being promoted as bringing cross-platform compatibility to NFC, so that an Android handset can talk to an iPhone mobile handset without any issues.

Such compatibility already exists, but the new SNEP protocol provides that open mailbox functionality on those platforms that chose to implement it.

Which even forum members have no obligation to do. The NFC Forum takes responsibility for the standards, and continues to refer to them as "NFC" standards despite previously admitting it has no control or ownership over the term.

The NFC Forum controls only the "N-Mark" logo that few people have heard of and even fewer would recognize. The reality is that anyone can call anything "NFC Compatible" as the term has no meaning at all.

Apple, for example, isn't even a forum member but will likely be supporting something along the lines of NFC in the near future, while China Mobile happily deployed several million NFC devices on a different frequency entirely, so there's still plenty of room for market confusion despite the solid standards getting published.

As we always do, Wireless Industry News will keep you informed on these and on other new developments.

In other mobile news

They say two is beautiful and that three is a crowd, but you wouldn't know it looking at Apple's patent issues against Samsung.

Now T-Mobile has joined Verizon Wireless at the defense of Samsung in the United States, which at the moment is looking for a preliminary injunction on selected devices from the South Korean firm's factories.

Like Verizon, T-Mobile has filed its own amicus brief (translation: a friend of the court), claiming that granting the injunction on Samsung products would not be in the public interest, because it would stop thousands of Americans from getting an improved product: "T-Mobile respectfully submits this amicus curiae brief regarding Apple's Motion for a Preliminary Injunction to inform the Court of public interest considerations implicated by Apple's attempt to preliminarily enjoin sales of Samsung's Galaxy S 4G smartphone and Galaxy Tab 10.1 tablet in the midst of the critical holiday shopping season."

"The timing of such an injunction on two popular consumer products that will help anchor its 2011 holiday sales would unnecessarily harm T-Mobile and thousands of US consumers," the statement read.

T-Mobile said it was all geared up for the season already, with its marketing campaigns all prepared and "prominently" featuring the two Samsung devices and it couldn't get back the money it had spent getting ready. T-Mobile also said it didn't have any "adequate replacements" for these products, with the same features at the same price point.

Apple has already retaliated against Verizon Wireless' amicus brief, which had a similar public interest thread to T-Mobile's, saying first off that the federal rules of civil procedure don't allow amicus briefs in district courts.

And secondly, even if the court was inclined to set a precedent and accept an amicus brief, it's too late: "Had Verizon submitted its proposed amicus brief in a federal appellate court, however, it would have been untimely by several weeks. An amicus brief should be filed "no later than 7 days after the principal brief of the party being supported".

Apple complains that Verizon's brief is coming long after Samsung submitted its opposition to the preliminary injunction and trying to submit it now "is disruptive to Apple's ability to present its positions to the Court in an orderly fashion".

Even if the court decides against all those complaints and still accepts the brief, Apple asked for the right to reply to Verizon on October 6, a full week after it submits its reply brief to Samsung, so that the company would have more time.

Deutsche Telekom, current owner of T-Mobile USA, said it couldn't comment as this was a U.S. story, and Apple did not reply to a request for comment.

An amicus brief is a document filed in court by someone who is not directly related to the case. They're often filed by lobby or advocacy groups that want to make sure the public good or the concerns of a specific group of people are taken into consideration in deciding a case. The phrase derives from amicus curiae, which means 'friend of the court'.

In other mobile news

Samsung recently unveiled the Omnia W, a mid-market Windows Phone, and the first Samsung device to run on the updated Mango variant of the software.

With wireless carriers only halfheartedly providing marketing support to Windows Phone, Microsoft needs as many allies as it can get, and Samsung seems to be a good fit, especially with this new deal the two have made today.

"Microsoft and Samsung see the opportunity for dramatic growth in Windows Phone, and we're investing to make that a reality," said Andy Lees, president of the Windows Phone division.

Meanwhile, Samsung can hardly afford another legal battle as it deals with multiple lawsuits and complaints around the world in its legal battle with Apple. In July, Apple filed a preliminary injunction against Samsung with the U.S. District Court for the Northern District of California, seeking to keep four of the company's latest mobile devices out of the United States.

The injunction asks the court to keep Samsung from making, selling and importing the Galaxy S 4G, Infuse 4G, Droid Charge smartphones, along with the Galaxy Tab 10.1 tablet. Apple claims that these mobile devices infringe on three of its latest design patents, and one utility patent.

"A preliminary injunction is necessary not only to protect Apple's rights, but also to protect the public's interest," Apple lawyers said in its filing. "And because Apple has demonstrated a likelihood of success on its claims, the public interest would be served by prohibiting Samsung from infringing Apple's patents."

In other mobile news

For now anyway, Android smartphones seem to have cornered the market on 4G and LTE technology, according to a new report released yesterday by Localytics. Looking at the smartphone landscape, the mobile analytics company found that about 37.2 percent of all Android devices are now 4G-enabled.

And that percentage is likely to go up even further as this year alone, the overall number of 4G Android phones has jumped by more than 50 percent.

But of course, 4G is still a broad term that's often used loosely to describe any type of high-speed mobile access that isn't based on 3G.

But for the purposes of its study, Localytics defines a 4G device as one that taps into LTE, WiMAX, or HSPA+. Some wireless industry observers consider HSPA+ still more of a 3G technology, though it can offer speeds comparable to those found on LTE and WiMax networks.

AT&T has been using HSPA+ as it just now starts to ramp up its true 4G LTE network. Among the current crop of 4G phones, the most popular one is the HTC Thunderbolt from Verizon Wireless, according to Localytics, followed by the HTC Evo 4G from Sprint, the Samsung Droid Charge from Verizon, and the Samsung Epic 4G from Sprint.

But looking at other phones in the top ten list, T-Mobile's HTC MyTouch 4G and Samsung Galaxy S 4G ranked fifth and ninth, respectively, while AT&T's Motorola Atrix took sixth place.

Apple has reportedly been testing 4G LTE for the iPhone, and some reports have suggested that the iPhone 5 may turn out to be a 4G device as well. However, the company has been cautious about jumping too quickly onto the 4G bandwagon due to some of the technology's present limitations.

In April, then-COO Tim Cook said that the first-generation LTE chipsets "force a lot of design compromises" that Apple is still unwilling to make.

Among the major U.S. wireless carriers, Verizon has been on fire recently rolling out its 4G LTE network, reaching more than half of the countryas of last month.

AT&T has been a lot slower at this, when it just recently launched LTE service in five different cities with plans to cover 15 in total by the end of 2011.

For its part, Sprint, which has long relied on WiMax for its high-speed access, is expected to launch a new LTE network of its own early next year.

T-Mobile, which uses HSPA+, may team up with potential future parent AT&T to speed up the roll out of its 4G LTE network to their collective customers.

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Source: Amazon.

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