Thu - March 17, 2005

Bluetooth: Not Dead Yet, but Not Looking Good


Command Center
Silicon Hutong Plaza
Beijing

Among the avalanche of information pouring out of CTIA 2005 comes this piece in Engadget that suggests Bluetooth is blossoming.

Respects to Ross Rubin, who I think is a very switched-on and entertaining writer, this comes across as a badly disguised piece of sponsored PR dreck from the heart of the Bluetooth SIG. The entry is long on declaration ("CTIA made a convincing case that this is Bluetooth's moment to shine") and very short on supporting evidence. Wow - half a dozen high-end phones have Bluetooth, there are some Bluetooth enabled GPS devices, a couple of peripherals, and an MIT-designed Bluetooth stuffed animal.

WIth respect, this is the sort of uptake and support that befits a new technology, not one that's been around for several years. Ross makes the point in the article that Bluetooth is hardly ubiquitous, and he's right. It may not be a novelty, but if it isn't ubiquitous now, it never will be. There are a lot of little reasons for this, but to me, there are really only three that matter:

1. Muddled Positioning: The industry is still operating under the misconception that Bluetooth would act as what Ross calls an "Internet Gateway" for personal area networks. I'm sorry - isn't that what WiFi does? My understanding of Bluetooth was that it would replace the serial cable, IRdA, and other hookups between devices, accessories, and peripherals, NOT create an Internet hookup. If the industry hasn't figured out the positioning of the Bluetooth relative to the other technologies out there, how are users to understand how to use it?

2. Unclear Value: Following on from the positioning problem, neither the Bluetooth SIG nor the industry has made sufficiently clear the advantages of using Bluetooth to your average. What IS a personal area network, and how does making it wireless make my life better. By failing to communicate the basic, simple advantages of eliminating half of the cords in ones laptop bag or on ones desktop, the SIG and manufacturers have insured that mainstream users cannot but fail to get it, and visionaries - who understand the value of the technology - think that because it's not being pushed, maybe the technology doesn't live up to its promise.

3. Impending Obsolescence: The standards groups around what has been called Ultra Wideband (UWB) and is now being called Wireless USB are just coalescing, and we are certainly some ways away from real product. But the positioning - starting with the new name - has begun in earnest, and the advantages are clear - eliminate your USB wires. Period. Awesome. Fast. Cool. I'm there. And thanks very much, Bluetooth, but I'm waiting.

Nowhere are these failures more a pity than in Asia, where consumers have proven willing to experiment with these kinds of technologies and implement them into their lifestyles, and where the mobile phone plays a role far greater than anywhere else in the world.

Ericsson did a great thing creating Bluetooth, and it has given a lot of us a chance to tinker and play with he idea of unplugging cables. Unfortunately, it's really clear that Bluetooth has fallen into Gordon Moore's chasm and will eventually land in the Graveyard of Technologies with Unrealized Potential.

Posted at 12:42 PM    

Wed - March 9, 2005

Nokia: Dis N-Gage


In the Hutong after a Long Day

The capacity for institutional self-deception powered by hubris grows in direct proportion to your greatest accomplishments.

It is for that reason, perhaps, that just under a year and a half after the introduction of the Finnish Taco Game Phone, better known as the N-Gage, Nokia is still telling itself the thing can be saved. Despite lousy sales, a lack of titles, and just plain stupid features, NokNok still thinks its a good idea. The Espooians are about to spend a chunk of their shareholders' money redesigning the ugly beast (2 years too late).

Which means they'll probably get a whole bunch of guys who spend their lives commuting from one end of Espoo to another to sit inside a glass room and brainstorm what it should look like, what it should do, etc.

I hope Nokia has learned a few lessons. Lessons like, well, getting feedback from the rest of the world - end users, hardcore gamers, game designers, retailers, and a whole lot of people who would love to provide Nokia with feedback.

Finally, I hope Nokia has started to learn that it cannot possibly hope to do everything, from design, to components, to manufacturing, to marketing, to software, to services and hope to succeed. Not even Apple does all of that anymore.

But I have a funny feeling that as long as the company's current leadership stays in place, Nokia will still try to do it all.

Posted at 09:10 PM    

Thu - February 17, 2005

The U.S. Patent System is Broken. One Wonders about China


The War Room
Silicon Hutong Plaza

In an outstanding article in IEEE Spectrum in December, Adam Jaffe, Dean of Arts and Sciences at Brandeis University, and Josh Lerner, a professor at Harvard Business School, explained in pithy, easy-to-understand terms why something is horribly wrong with the U.S. Patent System. So sick is this system, it appears, that we are on the verge of enabling the tort bar to all but strangle a hell of a lot of day to day business in America, and an even larger chunk of innovation.

Having just finished the article, I am navigating with great haste to Amazon to order their book Innovation and Its Discontents: How Our Broken Patent System is Endangering Innovation and Progress, and What To Do About It.

What is bothering me so much is NOT that the world's largest and most respected system of intellectual property protection is broken - stuff breaks all the time, and the Master of the Universe has given us the wherewithal to fix things like this.

What is deeply disturbing when you read this is: if this is how messed up the best system in the world is, how much worse is the system here in China? I mean, every abuse of the system taking place in the U.S., where small companies are being bullied by giant firms with lots of lawyers and some patents, could happen here - and worse. Not only is there no decent system of enforcing patent judgements, there is no independent judiciary to try cases of patent abuse and to protect small innovators.

People look around China and they see big companies like Lenovo and they think "look, China has a robust tech sector."

Ugly truth #45: until China has a system that enforces intellectual property rights and an independent judiciary to ensure that those rights are used in an effort to sustain a system that encourages innovation, China's tech sector will continue to be about knock-offs, copycats, and other such derivative effort that simply seeks to steal somebody else's idea and sell it for less money.

There are, and will always be, exceptions to this, but they will be notable in that they buck - not represent - the broader national trend.

Posted at 02:37 PM    

Fri - February 11, 2005

Salespeople In Short Supply in China


In the Hutong
Watching the Sun Set

This article on Xinhuanet notes that salespersons are the most wanted professionals in China. Extending that logic, clearly companies are recognizing the value of an effective sales force.

No brainer of the week:

CRM and sales-force automation (SFA) companies take note: they're this )( close to getting it in the boardrooms of China, Inc. I would guess 2005 would be a good time to redouble efforts in the Middle Kingdom. Hmm?

Posted at 05:45 PM    

Intellectual Property Circus


In the Hutong.
Chinese New Year. Day 3.
Late Afternoon

The part of me that genuinely believes that Linux will actually amount to something like a mainstream operating system joined Penguins the world over celebrating the judicial ass-kicking that SCO took from U.S. Federal Judge Dale Kimball yesterday for not coughing up any evidence to support its IPR violation claims so far in its legal action against IBM.

What increasingly concerns me, however, is what the Chinese may make of this. Here we are trying to make the case to the Chinese to protect our intellectual property, even taking it to the WTO, and at the same time showing them how IPR can be used by a frustrated, pissant company to stifle the growth and development of an important technology.

If I were a Chinese judicial or technology official watching this from afar, I would say "these sorts of legal piff-paffs are fine for a developed economy, but we cannot afford to have every opportunist and his brother tying down the development of our most critical sectors because they think their rights have been violated."

And even though that's obviously a single-factor view of the issue, it has its points for China.

Posted at 05:34 PM    

You'll be happy to know...


In The Hutong, Prior to Sunset on Friday

While I am professionally constrained from making any form of comment about the departure of Carly Fiorina from H-P, I will say that I had a good laugh at this Dow Jones piece quoting Kevin Rollins suggesting that there was "probably" an opportunity for Dell in the H-P turmoil.

In other words, we can't really see one, but now that you mention it, we'll do all we can to sow fear, uncertainty, and doubt in the marketplace, and thanks for your help.

Not that it will make any difference here. As far as consumers are concerned in China, Dell is in headlong retreat, regardless of their worldwide market share numbers. And consumer sentiment tends to be pretty catching in these parts.

Posted at 05:20 PM    

Fri - December 10, 2004

The Air China IPO: A Little Perspective, Please


In the Hutong, Beneath the Departure Path of Runway 18R at PEK

Whenever I sit at a table with Hong Kong Chinese I consider to be my friends, the discussion always turns into a caustic debate: they insist Hong Kong people understand China better than anyone other than mainland Chinese. I insist that seven years after reunification, Hong Kong people still understand Great Britain better than they understand China.

Case in point: Air China's public offering yesterday in Hong Kong was 83 times oversubscribed.

Why?

WHY??

Maybe Hong Kong investors enjoy a good gamble. (See Macao.) I think punters in the Special Administrative Region have actually convinced themselves that because China is booming, Air China will boom as well. Which speaks to my point. Andrew Chan, an analyst at Pacific Sun Investment Management, told Bloomberg "The strong demand is more driven by the market sentiment (sic) than the company's fundamentals."

Understatement of the year.

Now, before I give a little insight into exactly why this is a bad investment (and on the eve of its London offering, no less), allow me to digress a moment:

When the wind is blowing in one direction, southbound departures out of Beijing International Airport curl in a graceful arc toward the Shahe navigational beacon in a way so that, from my third floor balcony, I can watch them from the time they are about 400 feet off the ground above the airport 4 kilometers away until they fly over northern Beijing.

When the wind blows the other way, those same departures lumber almost directly over the house at about 2500 feet. Some people would be bothered by that. As a semi-retired plane spotter, I love it.

So understand, I personally have a couple of very important reasons to be happy about the Air China IPO, not least of which is the better shape the company is in, the better shape the planes are in, and thus the safer I feel flying my hometown airline, and the safer I feel hearing them overhead. I have no airline clients, and I have no airline investments.

That said, Air China is another one of these state-owned enterprises that has gone to market before it was ready and at a bad time, hoping to catch investors who have China fever so bad they will miss the fundamentals. Except for a few very well run airlines that have turned their operations into high art, airline economics are awful, and being in China doesn't change that.

• Fuel in China is preposterously expensive, and Chinese airlines pay more in their home airports than other airlines around the world because of a government-sanctioned monopoly. Now, China Aviation Oil Ltd. may or may not be affected by the misguided trading of its Singapore subsidiary, but as long as this monopoly stays in place, Air China's fuel bills per seat-mile are going to be higher than other world airlines.

• Political pressure keeps ticket prices down even when aircraft are fully booked, meaning Air China can't make money on high-demand routes.

• China was forced to eat two other airlines, Zhejiang Airlines and China Southwest - a year ago. It's still digesting, and more important this underscores how the future strategy of the business is driven as much by politics as by commercial considerations.

• Air China's fleet is ridiculously diversified in an era here most airlines are rationalizing theirs down to a single manufacturer and a handful of models. This increases the expense of training, operation, maintenence, etc. so much that the better run airlines only operate a handful of aircraft.
-- Southwest only flies several models of only one aircraft type, the 737. Southwest is a well-run airline
-- Singapore flies 3 types, the A340, the 777, and the 747. Singapore is a well-run airline.
-- Virgin only flies the A340 and the 747. Virgin is a well-run airline.
-- Air China operates nine distinct types of aircraft, including 4 models of 737, three models of the 747, the 757, two models of the 767, the 777, the Airbus A318, A320, A340, and the British Aerospace BAe-146.
Are their airlines that operate more types than Air China? Absolutely. But none of them are in good operational shape.

• China's fleet problems are not likely to change soon, because aircraft purchases are as much driven by politics as they are by operational considerations. You can bet Air China will be operating the Boeing 7E7 and the Airbus A350 when those planes start flying, and will probably be forced to buy the A380 and the Boeing 747 Advanced as well.

• Even after consolidation, domestic competition remains cutthroat. Even though PRC airlines could raise prices, none are prepared to take the risk.

• International competition, on routes where Air China makes some good money in both passengers and cargo, is about to go way up.
-- In passengers, China is opening up more slots to European, Asian, and American carriers. Even QANTAS is scheduled to begin direct Beijing-Sydney service. And Cathay Pacific, long denied entry into China because Hong Kong's protectionist aparatchiks were backing Dragonair, is now being allowed into the market, turning it's Hong Kong hub into the money-spinner it always should have been. Want to bet on an airline in China? Bet on Cathay Pacific or Dragonair.
-- In cargo, Air China is moving too slowly with poor infrastructure on the ground. FedEx, UPS, DHL, and TNT, having built their businesses on high-value express shipments, will after the current round of international service agreements have enough belly space in aircraft coming into China that they can cream the better air-cargo shipments as well. And these companies offer something Air China cannot - not only tracking and delivery services and facilities on the ground around the world, but internal divisions that plan and manage global supply chains for clients. Air China, meantime, rents belly-space, leaving itself at the commoditized low-end of the business.

• Despite high-profile airport upgrades in Hong Kong, Guangzhou, Shanghai, and Beijing, most of the rest of China's 119 commercial airports have facilities little different than what U.S. airports had in the early 1950s. This is the heart of Air China's business, and it means that quick turnarounds are impossible (raising the capital cost per passenger flown), opportunities to grow to meet demand are less (airports can't handle that many flights or large enough aircraft), and that because air travel in China is so uncomfortable at either end, the whole experience is miserable, keeping prices low and artificially restricting demand.

• The management are all bureaucrats, not businessmen. That needs to change. It should, but it won't - not anytime soon.

• If you think Air China is such a hot stock, look at the past performance of China Southern and China Eastern. Zzzzzz. These airlines have been listed in New York for a decade and they've gone nowhere, because analysts recognize the fundamental issues in the market.

Whenever anyone talks about the Chinese commercial aviation market, they get drunk on the potential of the place. And there IS a lot of potential. Air China's issues as a business, however, are fundamental. They must be changed - and the problems in the local industry environment must be changed - before this can be a good investment for an average punter.

Posted at 11:09 AM    

Mon - December 6, 2004

China's Tech Firms and Africa


The Silicon Hutong Desk, Starbucks @ China World Tower 2, Beijing

A great article in the Economist on 25 November ("A New Scramble: Booming Chinese interest in Africa is not just about oil") concisely documents the strategic raw materials relationship that China is building with Africa. Shades of 1964 indeed, but instead of Simbas and Stalinists, this time China is dealing with any odious dictator or pariah with oil or mineral reserves that the country needs. Zambia and Gabon are about to join a rogue's list that includes Zimbabwe, Angola, and Sudan as countries that China is courting mostly because nobody else wants to do business there.

It's a fantastic opportunity for China, created in no small part by NGOs and activist shareholders who won't let global companies break bread, much less do business, with these nations.

Huawei, never concerned by such niceties as consumer perceptions, shareholder activism, or ethical corporate behavior, has staked claims in markets like Sudan and Zimbabwe where Lucent and Nortel hesitate to tread. They are the largest and most visible, but they won't be the last.

In fact, Africa is an opportunity for many of China's tech firms, at least on the surface. ZTE and Bird can sell low-cost mobile handsets. Lenovo can sell low-cost computers. AVIC can sell low-cost airliners. Etcetera ad nauseam.

There will be two key issues for tech firms venturing into Africa. First is getting paid: these countries are rated poor credit risks for a very good reason. PRC tech firms that venture into Africa should think about doing so on COD terms. Period. Normally I would suggest getting guarantees from the PRC government, but I'm not sure the PRC government would pay that much quicker.

The second issue is appropriateness. Even though China is a developing country and has vast regions of very poor people, the circumstances in Africa make China look like Northwest Europe. Products that are developed and priced specifically for the market are essential. One indicator of how radical products need to be modified for Africa comes from the Economist's quarterly technology review ("Human Powered Health Care", Economist, December 2, 2004). Anyone for PCs powered by hand-cranked generators? China will find the kind of challenges in Africa that rival those American adn European firms encounter in the PRC. Good luck, boys.

Posted at 06:44 PM    

Sat - September 4, 2004

The Monster Screams for Coder Meat



An article in this weeks BusinessWeek recounts yet another embarrassment in corporate governance, the independent board report on Conrad Black's reign at Hollinger International apparently was allowed by a weak board to do bad things for too long. Where will the next spate of revelations come from?

I nominate Redmond, WA.

So, on the one hand, we've got Microsoft Chairman and Chief Software Architect William H. Gates III telling the world that Apple doesn't know what it is doing about digital media.

Meanwhile, Microsoft's third major downgrade of Longhorn (an operating system that was originally supposed to add the kinds of advanced features that users of Mac OSX and indeed desktop distros of Linux) enjoy - in as many months has Mr. Softy's spin-doctors working overtime explaining to the world that this is no big deal - such a painfully obvious untruth that even mainstream publications like BusinessWeek aren't buying it. Industry wags are beginning to call the Microsoft's Great Vaporware "Shorthorn."

In what can only be called an incredibly lame apology, Greg Sullivan, a lead product manager in the Window's client division at MS, told the Economist it was because its programmers were busy patching up Windows XP, thus producing the now globally famous Service Pack 2, which has turned out to be as much disease as cure.

BusinessWeek correctly points out that there is something seriously wrong at Microsoft R&D. Certainly, this would seem to be the case. But the entire fiasco begs three much larger, far more troubling questions about Microsoft.

1. What In The Name of All That Is Holy is Bill Gates Thinking? Why is the company focusing so much on trying to create an online music service and leading a PR war on iTunes while its core business (and a much bigger profit machine than music could ever be) is rotting on the vine in the next room? And did we mention that the service, after having all this time to look at iTunes and do it one better, has half the songs, a frustrating purchase/download process, and doesn't support purchases from other sources? Again hopeful MS customers are left to pray for the future .

2. Why is a company that is hardly resourced constrained claiming resources as its primary constraint? That Microsoft, the richest company in the world (with the possible exception of Warren Buffet's Berkshire Hathaway, a company that has refused to invest in Microsoft), is unable to deliver its promises - to execute credibly on its most critical product line, would rather send its shareholders a $26 billion care package than invest resources in expanding its OS development team, is unconscionable. I know good programmers don't grow on trees, but it's time Microsoft started recognizing that it needs to start narrowing its margins sufficiently to improve its execution. Recognizing, indeed, and publicly acknowledging the fact.

3. Is it not time to admit that rather than try to fix Windows, perhaps Microsoft should toss the old kluge out and start anew? Apple, a much smaller company, did it with OSX and came up with a rock-stable OS with stunning features. Rather than continue to invest more and more in fixing old code they've been kludging for a decade and a half, perhaps it's time for Microsoft to start with a blank sheet of paper. The nauseating fact that Microsoft is now losing much of its critical forward momentum in its flagship software line because it's plugging holes in old code is an embarrassment.

For years Microsoft has gotten away with this sort of thing because it has been able to meet deadlines. Now that is no longer the case. And it is high time for all of Microsoft's shareholders to point vigorously to the very top of that enterprise and call to account the Last Sacred Cow:

Bill Gates.

It's time he, as Chief Software Architect, answered for the horror that he has designed. The Beast has now turned on its maker. Either the maker must slay the beast, or be destroyed himself.

Posted at 11:53 PM    

Sun - July 18, 2004

Wolves Howl the Song of Doom for Nokia



Eight months ago in ChinaTechNews.com I predicted that Nokia was in for tough times because the place had been overcome by hubris and completely disconnected from customers.

Carol Ellison wrote a story in eWeek in a story entitled "Rivals Close In on Nokia" that even though rivals are sucking market share away from Nokia, that it is still the market leader. It never ceases to amaze me how otherwise very bright industry analysts and journalists continue to have a blind side for Nokia.

But as we are warned in advertisements for mutual funds, past results are no guarantee of future performance.

Posted at 05:29 PM    

Thu - July 8, 2004

How to test the Great Firewall of China



If you live in China or anywhere behind the great firewall and want to see if the emperor's guards are up today, flick on over to the page created by Robert Nagle, author of the AsiaFirst weblog . The page, poetically called "Fuck China " is designed not so much to dis China, but to trigger the firewall. I could get through to it, but I'll be checking on occasion.

Posted at 01:39 PM    

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