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15.912 TECHNOLOGY STRATEGY
SPRING SEMESTER 2005
FINAL PAPER
SHOULD MOTOROLA EMBRACE 100%
THE LINUX OPERATING SYSTEM (OS)
FOR SMARTPHONES?
Silvia Battigelli
Alberto Farronato
Carlos Mazariegos
15.912 - Technology Strategy Final Paper
1. Introduction
In a period when the market for mobile devices is changing and moving towards convergence of multiple
products into one single device, it is time for the big players in all related industries to reconsider their
strategy to capture more of the value that convergence will create. Motorola, the second largest
manufacturer of mobile handsets, recently adopted a new open source OS in a completely new market,
such as the one of smartphones in China, and the question is: should they strongly adopt the new standard
in all of the new products and in all of the markets? We believe that the answer is yes, and in this paper
we will explain why.
2. An Overview of Motorola
Motorola was originally founded as the Galvin Manufacturing Corporation in 1928 by Paul V. Galvin and
his brother Joseph E. Galvin in Chicago, Illinois. Galvin Manufacturing Corporation's first product was a
battery eliminator, a device that allows battery-powered radios to run on standard household electric
current. In the 1930’s the company introduced one of the first commercially successful car radios and a
single-frequency mobile radio receiver for police broadcasts. The company had just entered into the new
field of mobile radio communications with net annual sales of $287,256.
In the 1940’s, after Galvin Manufacturing Corporation becomes Motorola and offers first public stock,
and into the 1950’s Motorola kept growing with new technological and commercial innovations in radio
devices, television and personal pagers. By that time Motorola’s net sales were $177.10 million and the
company had become one of the world’s largest manufacturers of semiconductors. In the 1960’s the
company expanded internationally to more than 14 countries in Europe, Asia, and Latin America and
ventured into semiconductors for the automobile industry. In the 1970’s, Motorola demonstrates a design
for the DynaTAC (Dynamic Adaptive Total Area Coverage) the first commercial portable radio
telephone, which used the cellular radio technology. In the next decade Motorola’s revenues grew from:
$796.42 million up to $3.10 billion.
Entering the two decades from 1980 to 2000, Motorola experienced explosive growth. Electronic
components for the automotive industry become the first major market for Motorola microprocessors.
Motorola introduces the first true 32-bit microprocessor. It contains 200,000 transistors on a three-
eighths-inch square chip. Motorola's first DynaTAC cellular system begins commercial operation. It had,
over 15 years, devoted $100 million to the development of cellular technology. The world's first
commercial handheld cellular phone, the Motorola DynaTAC phone, became available to consumers in
1984. Growth was also fueled further by the introduction of the Bravo numeric pager, which became the
world's best-selling pager. Later, in the 1990’s, the company introduced the world's first two-way pager,
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which allowed users to receive text messages and e-mail and reply with standard responses. Sales had
reached the mark of $10 billion, when Motorola launched the 3.1 ounce StarTAC®, which at the time,
was the world's smallest and lightest cellular phone, and developed the world’s commercial digital radio
system that integrates paging, data communications, voice dispatch and wireless telephone in a single
radio network and a single handset.
After the stock market bubble burst in 2000, Motorola had several years of losses, downsizing and
restructuring charges. Motorola and General Instrument Corporation had merged their businesses to
provide integrated video, voice and data networking for cable, Internet and high-speed data services.
Despite the slowdown in growth and company losses, Motorola managed to keep innovating in the
telecommunications industry by focusing on handset manufacturing.
In 2001, it introduced its first metal mobile phone, the Motorola v60 phone, with anodized aluminum
housings, Internet access, text messaging capabilities and voice-activated dialing. A year later, it became
available in all three cellular technologies — GSM, TDMA and CDMA — and quickly became a
worldwide best seller.
In 2002, Motorola launched its first 3G nationwide voice and date network using Code Division Multiple
Access 1X (CDMA 1X) technology with KDDI, Japan's second largest wireless operator, enabling
Internet access at speeds more than double that of existing networks. At this point, the company had
developed its first single-chip Global Positioning System (GPS) receiver solution. This breakthrough
technology enabled designers to add accurate location-sensing features to portable consumer electronics
products.
Motorola launched in 2003, the A760 phone, which was the world's first handset combining a Linux
operating system and Java technology with full PDA functionality. Motorola had just begun fighting a
new battle in the new smartphone arena.
3. The Smartphones Market
In the last two years we have been seeing the integration of between mobile phones and PDAs in a
single multipurpose device, the smartphone (see Figure 1). A smartphone is a mobile phone with
“smart” capabilities or, in other words, a voice-centric device that includes basic data functionalities like
address book, calendar, notepads, and more advanced ones, like e-mail, web browsing, etc. Latest
devices include also entertainment features such as digital music players and digital cameras.
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The trends of increasing complexity of
device features can be clearly seen in the
s curves of figure 1. The first smartphone
was launched in 1996 by Nokia (the
Nokia 9000), but the year when he
market began really taking off was 2004.
In this year many new models were
launched and the number of new model
announcement made it clear that the
market was booming.
In 2004 the market almost doubled every
quarter (from 70% to 80% increase every
quarter) reaching 10.7 million units
shipped in Q1 2005 (Exhibit 1c).
Considering that the mobile phone market counts up to 500 million units sold per year, and the fact that
in the future it’s very likely that most of the people, who currently own a standard mobile device, will
migrate to a smartphone, some estimate that forecasts for the global smartphone market will exceed 50
million units by the end of 2005, and account for about 25% of the mobile devices marketed by 2008
(Exhibit 5).
Given the origin of the device and its evolution, we support the thesis of convergence of different
players into the same market. We can list, therefore, as competitors, mobile phones manufacturers like
Nokia, Sony Ericsson, Fujitsu, and Motorola, as well as PDA manufacturers like RIM (Blackberry
producers) and PalmOne (Please refer to Exhibit 1a, 1b and 1c for sales and the relative market shares).
Nokia’s excellent performance (66.7% market share with leadership position in EMEA - Europe, the
Middle East, Africa - Asia/Pacific and Latin America) is primarily due to the success of its new high-
end products (6630, 6670), besides its highly recognized brand name in the market as a leader mobile
phone producer (Exhibit 3 and 4). In fact, most of the smartphone consumers, buy a smartphone only
after having owned a basic mobile phone first, therefore it’s not surprising that the world wide mobile
phone leader has soon become the number one supplier of smartphones. Nokia will further expand its
product portfolio in 2005 with more “phone like” smartphones (already announced the new model 3230
and the new product family 668x, see Exhibit 2a).
Motorola gained the second position in Smartphone shipments in the fourth quarter of 2004 (10.2%
market share) due in large part to its already existing leadership position in the U.S. and the success of
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its Microsoft-based (the old MP200 and the new MP220) and Symbian-based smartphones (the new
A1000) in the EMEA region (Exhibit 2b). Besides, the company had been able of taking advantage of
the increased demand for Linux products in China and expanded its product portfolio with two new
models (A780 and E680 smartphones). We will cover the smartphone’s Operative Systems (OS) in the
next section. It is interesting to note that, Motorola has currently in its product range smartphones based
on three different OS: Microsoft, Symbian and Linux. Recent news stated that Motorola discontinued
the MP200 models based on Microsoft. Therefore, that leaves it currently with two different OS.
Fujitsu, Sony Ericsson and PalmOne are following the leader together with other minor manufacturers.
None of them got over 5% market shares in the fourth quarter of 2004 and there are several reasons for
this. Fujitsu is currently selling only in Japan, and at the moment, there are no plans of expanding sales
outside its home country. Sony Ericsson is focusing more on expanding its consumer mobile phone
portfolio than on developing its P9xx smartphone series (Exhibit 2d). Finally, PalmOne hasn’t been fast
enough to market its new product (Treo 650 launched in the fourth quarter of 2004 - Exhibit 2c).
Basically, in one way or another, all these players were not able to capture value from the opportunities
that the new market, that was just being created, brought with it.
4. OS in Smartphones
Operative Systems are fundamental components of smartphones. The OS is the lower layer of software
that controls and manages all the basic circuits of the smart-phone. It is the platform upon which all
applications work. The fundamental task of the OS for smartphones is the same, as that of an OS for a
desktop or laptop. OS for smartphones, however, have been further developed, specially, to better serve
smartphones peculiarities. In particular, smartphone OS should:
� be SMALL and occupy few megabytes, and do not use too much of the limited storage space;
� CONSUME LITTLE POWER to allow long battery life (batteries for wireless devices can last between
2 and 10 hours of talk time only)
� SUPPORT HIGH DEGREE OF SWITCHING from one program to the other
� support both voice and data communications in all the possible forms
� be able to synchronize with other devices
Because smartphones were born from the convergence of cell phones and PDAs, the OS that are
currently available in the market are evolutions of OS previously used for those products. The most
relevant ones are: Symbian (Nokia’s product for cell phones), Palm OS (Palm’s product for PDAs),
Windows Mobile (Microsoft’s product for PDAs) and Linux (newer version of Linux for smartphones).
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Exhibit 1a and 1b show the market shares of each player as for Q4 2004. The leading operative system in
the smartphone market is Symbian, which is developed by the Symbian Operating System Consortium
and was installed on 80% of the smartphones shipped in Q4 2004 (Exhibit 6). Symbian consortium was
created by Nokia in June 1998 to provide a private open set of standards for the mobile phone industry,
minimizing Microsoft’s power and influence on the industry. Initially Nokia hold a 32.2% stake in the
consortium, but recently, after Motorola stepped out, increased its stake over 63% (Exhibit 7) becoming
the player with the highest stake and the highest power in the consortium. Besides being Symbian’s
largest shareholder, Nokia is also its main customer, and provides, therefore, the most important source of
revenues from license fees (today around $5.7 per unit). Doubts were raised in the business community,
on the ability of Nokia, to maintain Symbian independent, so that it can still appeal to other phone
manufacturers instead of becoming a Nokia property.
Palm OS has been the second most common OS in smartphones until the fourth quarter of 2004, when
Microsoft overtook Palm OS, pushing it back to the 3rd position with 4.6% market share. Palm OS was
created by Palm Source, a spin-off from Palm, for PalmOne PDAs (last version released in 2002, Palm
OS 5). It supports a faster processor to manage the complex functionality of smartphones. However,
Palm was unable to develop a new product fast enough (Treo 650 is the only new product and it was
launched during Q4 2004). The latter caused a decline in market share of Palm OS, as 97% of Palm OS
shipments, are due exclusively to PalmOne devices. Microsoft is a strong entrant in the market and
represents a clear threat to Nokia as well. Microsoft market share in smartphones OS almost doubled in 3
quarters of 2004 from 5.7% to 9.7%. This exceptional performance was mainly driven by the success of
new Motorola products that featured Windows Mobile as OS. However, it is unlikely that this growth will
continue in the near future because Motorola, which accounted for over 50% decide to discontinue the
production of Microsoft based smart-phones. The decline will probably be limited by the new licensees
that Microsoft is expected to sign in 2005 with other handset manufacturers. Windows Mobile 2003 is
based on Windows CE 4.2 and has been upgraded to support built-in wireless communication tools (Wi-
Figure 2
Fi and Bluetooth). It was also update to
manage all the new multimedia
functionalities required to a smartphone.
Linux OS increased its penetration in the
smartphone market and has in Q4 2004 a
4.4% market share, only 2 percentage
points below Palm. Linux adoption is
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mainly due to Motorola’s success in the Chinese market.
In the next section we provide an overview of the Linux OS and before moving on, it might be useful to
summarize advantages and disadvantages of the three main OS (see exhibit 9 for comparison of technical
features).
Table 1
2003
– –
– – –
–
–
–
–
– – –
–
–
–
– –
– –
– –
–
Advantages
Symbian Manufacturers diversity
Strong companies behind the consortium
(Nokia, Sony Ericsson, Siemens, …)
Strong platform for communication devices
Strong presence in the consumer market
Product differentiation due to different user
interfaces
Disadvantages
Limited market presence in the US
Need to source the user interface in addition
to the OS
Limited availability of enterprise
applications
Little consistency among different
implementations
Palm OS 5 Market leader in PDAs Not perfectly backward compatible
Recognized easy of use of Palm (emulation tools to run old applications)
applications Possibility of designing different devices
with different prices
Large community of 260,000 application
developers
ARM-compliant processor that allows high
speed
Windows Familiar experience o the user (Affinity More expensive than Palm OS
Mobile with Microsoft Office, Outlook, …)
Consistency with other Microsoft 32-bit OS Limited presence in low-end consumer
(Windows NT, 2000 and XP) market
6 million developers worldwide with strong Limited space for differentiation of devices development tools to support them Plenty of management tools available
5. Linux OS
Linus Torvalds along with other programmers first developed Linux in the early 1990’s. Linux is a Unix-
like, Posix-compliant operating system. It is distributed under the GNU software license, meaning that
the operating system and its source code are available for free, and can be downloaded freely from a
website. Linux consists of a kernel, the shell, the file structure, and utilities.
Several firms are increasing their support for Linux as an operating system, after the failure of Palm OS to
increase its market share and the fear that Windows in smartphones will become the Windows we
currently know of PC’s. In May of 2005, cell phone chipmaker, Qualcomm, said that it will support
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Linux, marking another key company to back the open-source software on handsets. Qualcomm joins
No. 2 handset maker Motorola, Japanese cell phone operator NTT DoCoMo. Research firm IDC has
estimated that by 2006, Linux may take as much as 4.2 percent of the market for software for high-
powered smartphones, given that it's free for manufacturers to use. Other firms have embraced Linux
over the past years. Sharp is the dominant vendor of PDAs that operates on Linux. The company behind
Palm OS bought China MobileSoft to get a foothold in the Chinese mobile phone market and develop a
broader range of software. The deal was designed to expand the company's global presence and put
Linux applications squarely in its product plans. PalmSource even became a member of the Consumer
Electronics Linux Forum (CELF). CELF was founded to advance the use of Linux in devices such as
handheld computers and mobile phones. Founding members include Matsushita Electric Industrial, Sony,
Hitachi, NEC, Royal Philips Electronics, Samsung Electronics, Sharp and Toshiba. Today there are more
than 50 members.
There are several commercial and academic implementations of embedded Linux for PDAs and other
handheld devices. The advantages of using Linux in such devices and in smartphones, lies in that it offers
licensees the possibility of eliminating or considerably reducing OS licenses fees. Linux is also able to
support sophisticated applications. Adaptations of Linux for embedded devices abound.
Nevertheless, on of the main obstacles to the successful adoption of Linux in the commercial mobile
device market is that there is diversity and lack of standardization. No Linux PDA or smartphone
manufacturer has set standards on key elements as user interface, personal information management,
power management, and synchronization. This has resulted in limited compatibility among different
products. But something is moving toward standardization of basic common functionalities since the
Embedded Linux Consortium (ELC) is working on building a unified embedded Linux platform
specification (motion voted by the ELC Board of Directors in February 2002). The ELC’s key members
are FSM Labs, Inc., IBM, LinuxWorks, Metrowerks (a Motorola company), MontaVista Software,
Matsushita Electric (Panasonic) and Real-Time Innovations. Other companies such as Intel, Samsung,
Sharp, Siemens and Sony have provided their support at one point or another after the year 2000.
There are several Linux operating systems, which work on top of the same kernel code. Embedix, one of
the first embedded Linux operating systems, runs on PDAs, smart handheld devices, residential gateways,
and digital TV sets. Motorola’s embedded subsidiary, Metrowerks, acquired Embedix in 2002.
MontaVista’s Linux Consumer Electronics Edition 3.0 was selected for Motorola’s A760 smartphone,
which integrates digital camera, Internet, instant messaging, multimedia, PDA and telephone capabilities
and has been launched in China. Another important player in the Linux field is Trolltech with its Qtopia
product. This is a Linux platform specifically for PDA’s, smartphones, and other mobile devices. Qtopia
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has received support from IBM, who announced that it is using the software as a component in its
embedded Linux reference platform.
6. Market dynamics analysis
6.1 Network Externalities from the Consumer’s Perspective
Both applications, which converge into a smartphone, telephony and computing, are examples of
applications of technologies that were historically highly dependent on network externalities:
1. A phone needs other phones in order to be of practical use (direct externality)
2. Number of applications developed for a specific system (indirect externality)
3. Interoperability with other devices, such as laptops and desktops (indirect externality)
Looking at the current state of the telecom industry the direct externality of telephony represents only a
barrier of entry to the market for a new OS. Only the systems that can manage the basic functionalities of
a cell phone (voice communication) will make it to the market. The interoperability between mobile
phones with different OS appears to be guaranteed as current products with different OS can effectively
operate phone calls. Integrated circuit (IC) producers are launching new products that support Linux
allowing it to operate in a 3G environment and to communicate with existing phones.
The second network externality is typical of computing systems, such as laptops or desktops, and is
transferred to smartphones from PDAs. It is less strong, when compared to the first one from a product
adoption standpoint, but it is much more relevant from a penetration standpoint. The analogy with
Windows in the desktop market is clear: the higher the number of users of a specific platform the more
applications will be developed and the more people will use the PDA (reinforcing loop). The extent to
which this network externality will affect the competitive dynamics depends on the existence of the
“killer app” for the smartphone. In our view, the role that Office played for Windows in the battle of the
desktop operating systems, is unlikely to be the same for smartphones. People can view office files on
their PDAs, but the size of the device is such that it does not make it efficient for extensive work.
Moreover, there is also a certain degree of interoperability between OS in this area two (Palm OS can
open Office documents). The most important applications that smartphones are currently used for are e-
mail, personal information management (PIM, that includes agenda, phone book, tasks, notes), taking
pictures and listening music (Exhibit 8).
Interoperability among systems is a peculiar functionality of portable devices that allows owners of
multiple products to maintain the same updated information on different devices (typically aligning a
database on a computer with all portable device). The ability to synchronize a smart phone with a PC,
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determines the degree of compatibility between the two devices and substantially affects customer utility.
Currently, there is a good degree of compatibility between Windows OS systems for PC and smart-phone
OS like Microsoft Mobile, Palm OS and Symbian. Non-Microsoft systems are in general less efficient in
this task compared to an MS PDA or smartphones as the data structure can be different. This might
indicate that Microsoft chose a soft standard approach in this context.
There are other possible sources of network externalities on the consumer side (like user interface
knowledge), but we believe that the ones described above should represent the highest costs for users.
6.2 Network Externalities from the Producer’s Perspective
From a producer’s stand point the choice of Operating System, can be a source of the following network
externalities:
• Learning effects – the more expertise a producer has in an OS, the more efficient it can become in
the production;
• Economies of scale for producers– given the high volumes of the mobile phone industry, the
development cost of the OS and of other applications could be spread over a large number of
units produced;
• Access to wide range of suppliers – software applications and IC must be compatible with the
smartphone OS. A large number of suppliers can be a source of competitive advantage;
• China effect – a large market such as China could potentially affect the trends of the rest of the
world market, accelerating economies of scale for the producer that adopts China’s most
preferred product.
It is difficult to assess whether producer’s externalities will play a stronger role than the consumer’s
externalities in shaping the competitive dynamics of the industry. In our view producer’s externalities will
be particularly relevant in a business environment with strong price pressure and competition, as it
happened in the PC industry, for example, when Dell entered the market and commoditizing the devices.
6.3 Standards War
Will it be a standards war? It is difficult to take a definite position, because the market for smartphones is
at an early stage of its life. A lot depends on the extent to which the network externalities described above
will generate high switching costs between systems. At this stage, it seems that the switching costs are
kept low by high degree of compatibility between different solutions and the market can accept the
presence of multiple players. As a matter of fact, there are still many players in the market and the leader
producers of smart-phones are still changing their positions (Motorola recently abandoned the
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15.912 - Technology Strategy Final Paper
development of its smart-phones based on MS Mobile and introduced Linux). The network externalities
described above are not determining significant customer lock-in. Sales volumes of smartphones are
small compared to those of cell phones and some effects could potentially become stronger at higher
volumes.
Currently, both the market for PDAs and the one for Mobile Phones have not converged to a single
standard and it seems that every producer was able to stay vertical integrated and include proprietary
standard in its device. This seems to strengthen the idea that multiple standards can coexist. Despite
Nokia’s evident market leadership, it is inappropriate to consider Symbian the current standard in the OS
space as the total number of units produced appears to be considerably smaller than the total market
potential (Nokia’s 2004 annual production is about 10 millions units, while forecast for 2008 total market
production is over 150 millions). It is clear however, that Nokia’s position in this context is much more
close to an evolution strategy applied on a private-open space (assuming that Symbian specification can
be used only by those in the consortium). Instead, by adopting Linux, Motorola will play a more
revolutionary strategy on an open-public standard.
Figure 3
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6.4 The Industry and Motorola’s Position
The matrix below shows the current position of Motorola in the smart-phone market.
Figure 4
Motorola owns important complementary assets, such as:
• Brand recognition
• Manufacturing and design capabilities
In terms of uniqueness the mobile phone industry is largely affected by spillovers. Companies cannot
maintain uniqueness for a long time. Switching to an open standard such as Linux, decreases even more
Motorola’s degree of appropriability. On the other hand, Linux might become an important source of cost
advantage and allow Motorola to access a growing population of developers. This could increase the
ability of the firm to innovate products more efficiently. On the other hand, given the high degree of
freedom typical of the open source movement, Motorola will likely encounter coordination problems
among developers. At this point in time it is clear that outside China, Nokia has a first mover advantage
7. Scenario Analysis
The figure below shows the four main scenarios that can occur in the next decade(s). We plotted two axis
which describe the different long-term customer requirements or preferences related to handheld devices,
whichever they end up to be. The y-axis is related to the level of convergence in devices. It is not clear
yet, whether consumers will prefer to have multiple devices that are designed to operate optimally for a
specific purpose, such as an MP3 player, a digital camera, a PDA, pocket-size computers, etc., or if
consumers will prefer to carry with them one single device that is capable of performing all these
functions at suboptimal levels.
The x-axis refers to the level of interoperability of devices. Consumers, in the future, might need their
devices: digital cameras, laptops, desktops, television sets and smartphones to communicate seamlessly
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and to be able to transfer, share and utilize the same working files, such as pictures, movies, e-mail,
presentations, documents, spreadsheets, etc.
Figure 5 – Scenario Analysis for the Future of Smartphones and Similar Converging Devices
The quadrant at the bottom left, we believe, is highly improbable. It is hard to imagine, taking a close
look at the current market trends described in earlier sections, that consumers would prefer multiple
devices and will not need these products to communicate between each other. The quadrant at the bottom
right is one that the hardware manufacturers would like, since it allows for the creation and specialization
of several niche markets segregated by application. In this scenario, in which interoperability is critical,
market tipping, is most likely to occur, as it will be most efficient for one single company (e.g. Microsoft
with PC’s in the 1990’s) to coordinate the creation of common standards and powerful software that can
support the degree of file sharing and transferring that would take place between all the devices. If this is
the case, Microsoft has a great advantage with Windows Mobile and any other derivative products that
might be developed from it. The network externality would lie in the need that the average customer
would have to synchronize and connect their smartphones with their laptops, desktops, TV sets, etc.
Microsoft is currently better positioned to provide the seamless connectivity because of its large installed
base world wide.
In the quadrant to the upper left, the scenario is, although less likely than the ones that have high
connectivity as a key characteristic, still plausible. In this case, with lack of need for interoperability,
there would be no need from the consumers and the OEM’s perspectives to have one single operating
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system that has been standardized across devices. If it comes to be, that consumers require one
converging device, but no interoperability, hardware and device manufacturers would engage in very
strong competition in order to have the dominant design, and may or may not in the process adopt
different operating systems.
If, instead, the future ends up being as the one described in the upper right quadrant, labeled as “war of
the OS & the Device”, then it might be that two to three leading converging devices or platforms
dominate and it is foreseeable that two to three operating systems can coexist with market shares
determined by the capability of the firms. The capabilities of these firms will revolve around the abilities
to bring smartphones fast to the market, create new applications, develop interfaces that appeal to the
public, invent new features, and establish key partnerships with content providers and network operators.
8. Recommendation
Based on the analysis that we developed in the previous paragraphs, we believe that Motorola’s decision
to adopt Linux OS is correct and we would suggest to embrace it 100% on all new products. The main
reasons behind our recommendation are the following:
– Network externalities both on the customer and the producer sides are not strong enough to
set high switching costs and determine reinforcing loops that would cause market tipping
– Even in the event of a typical standard war with high probability of market tipping, Nokia’s
market leadership is not strong at the present stage of the smartphone industry. This would
give Motorola the time to catch up.
– By leveraging its market position and its strong complementary assets, Motorola could
become a key sponsor of a rapidly growing adoption of Linux, along with other firms, which
are joining the effort, such as Qualcomm, Sharp, Panasonic and PalmOne. This could
increase the attractiveness of the system to other developers and players
– Linux is a key element for a successful entry into the Chinese market. By being the first
mover in China, Motorola can build strong complementary assets that would become source
of competitive advantage also in markets in other developed countries and emerging
economies.
To facilitate the Linux adoption on a large scale, Motorola should strongly sponsor the OS collaborating
with PalmSource that recently acquired China Mobile Soft, a developer of software for mobile devices,
announcing its intention of creating a Palm OS based on Linux. Possibly Motorola should look for the
Chinese government support.
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Exhibit 1a – Smartphones unit shipments to the distribution channel (* Canalys 04/2005,
**Gartner research, 2004)
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Exhibit 1b – Smartphones market share (* Canalys 04/2005, **Gartner research, 2004)
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6
1
1
3
0 7
6
1
1
3%
7%
1
1
1
1
Exhibit 1c – Smartphones key market data (* Canalys 04/2005, **Gartner research, 2004)
Shipments by Operating System
OS 2Q04** 3Q04** 4Q04** 1Q05*
Symbian 1.683.393 3.196.111 5.435.364 .620.381
Palm OS 190.710 333.177 312.759 .132.150
Microsoft Windows
Mobile 121.051 289.870 655.036 .973.176
Linux 119.755 33.884 298.797 23.471
Others (proprietary
platforms, e.g. RIM) 108.594 54.000 54.767
TOTAL 2.114.909 3.961.636 6.755.956 10.782.380
Operating Systems market share
OS 2Q04** 3Q04** 4Q04** 1Q05*
Symbian 79,6% 80,7% 80,5% 1,40%
Palm OS 9,0% 8,4% 4,6% 0,50%
Microsoft Windows
Mobile 5,7% 7,3% 9,7% 8,30%
Linux 5,7% 0,9% 4,4%
Others (proprietary
platforms, e.g. RIM) 0,0% 2,7% 0,8%
TOTAL 100% 100% 100% 100%
Shipments by Manufacturer
Manufacturer 1Q04* 2Q04** 3Q04** 4Q04** Q05*
NOKIA 1.670.160 1.214.200 2.278.466 4.507.000 5.394.900
SONY ERICSSON n.a. 230.014 546.323 318.000 n.a.
FUJITSU 361.400 172.500 321.200 320.600 654.320
PALMONE 995.960 169.885 307.416 304.500 1.009.040
MOTOROLA n.a. 169.477 128.200 688.296 n.a.
OTHERS 2.902.490 158.833 380.031 617.560 3.724.120
TOTAL 5.930.010 2.114.909 3.961.636 6.755.956 0.782.380
Manufacturers market share
Manufacturer 1Q04* 2Q04** 3Q04** 4Q04** Q05*
NOKIA 28,2% 57,4% 57,5% 66,7% 50,0%
SONY ERICSSON n.a. 10,9% 13,8% 4,7% n.a.
FUJITSU 6,1% 8,2% 8,1% 4,7% 6,1%
PALMONE 16,8% 8,0% 7,8% 4,5% 9,4%
MOTOROLA n.a. 8,0% 3,2% 10,2% n.a.
OTHERS 48,9% 7,5% 9,6% 9,1% 34,5%
TOTAL 100,0% 100,0% 100,0% 100,0% 00,0%
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Exhibit 2d – Sony Ericsson smartphones
P910i (Symbian) P900 (Symbian) P800 (Symbian)
Exhibit 3
-Worldwide mobile handset market share, 1994 2003 (Gartner research, 24 February 2005)
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Exhibit 4
S M
100%
Worldwide mobile phones market share, Q1 2005 (IDC, April 2005)
HIPMENTS ARKET SHARE
Nokia 53,800,000 30.9%
Motorola 28,700,000 16.5%
Samsung 24,500,000 14.1%
LG Electronics 11,100,000 6.4%
Sony Ericsson 9,400,000 5.4%
Others 46,800,000 26.9%
TOTAL 174,300,000
Exhibit 5
Mobile terminal worldwide sales by category, forecast 2003-2008 (Gartner research, 25 September 2004)
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Exhibit 6
Licensees of Symbian OS (www.symbian.com, before Motorola exit in 2003)
Exhibit 7
Ownership of Symbian shares before an after Nokia purchase (Gartner research, 10 February 2004)
Before After
Nokia 32.2% 63.3%
Psion (Motorola) * 31.1% -
Ericsson 17.5% 17.5%
Panasonic 7.9% 7.9%
Samsung 5.0% 5.0%
Siemens 4.8% 4.8%
Sony Ericsson 1.5% 1.5%
* Motorola transferred its shares to Psion in 2003
S. Battigelli, A. Farronato, C. Mazariegos 22/25
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Exhibit 8a
Consumer most desired functionalities
(Entertainment Technologies Consumer Survey, Jupiter Research July 2004)
Percentage of Online Consumers Willing to Carry a Portable Device
7%
7%
11%
29%
13%
23%
25%
77%
11%
8%
21%
23%
16%
26%
31%
73%
11%
15%
32%
24%
24%
25%
26%
74%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Web browsing
Games
Music
Photos
IM
PIM
Telephony
Ages 55+ Ages 35 to 54 Ages 18 to 34
Strong interest for the
youngest age group
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15.912 - Technology Strategy Final Paper
Exhibit 9
Major smartphone OS (Gartner research, 7 January 2004)
S. Battigelli, A. Farronato, C. Mazariegos 24/25
15.912 - Technology Strategy Final Paper
Exhibit 10 . References
www.symbian.com
www.embedded-linux.org
Gartner Research
Jupiter Research
www.Motorola.com
www.nokia.com
www.PalmOne.com
www.PalmSource.com
www.sonyericsson.com
S. Battigelli, A. Farronato, C. Mazariegos 25/25
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