State of Mobile Computing

Alex Ferrara, June 23rd, 2010

Confidential

Mobile Computing Roadmap

Proprietary and Confidential

2

Agenda

State of Mobile Computing

Potential Investment Opportunities


U.S. Wireless Industry is Large and Mature

Source: ctia.org, Forrester

12/1995 12/2000 12/2005 12/2009U.S. Wireless Subscriber Connections 33.8M 109.5M 207.9M 285.6MWireless Penetration

13% 38% 69% 91%% of total U.S. population

Annualized Total Wireless Revenues $19B $45.3B $113.5B $152.6B % CAGR 19% 20% 8%Annualized Incr. CapEx Investment $5.1B $18.4B $25.2B $20.4B

Almost everyone in the U.S. has a cell phone U.S. wireless penetration at 91% exceeds U.S. PC penetration (~80%)

7%11%

17%

0%

10%

20%

2007 2008 2009

Smartphone Share of U.S. Adult Subscribers

Soon, everyone in the U.S. will have a Smartphone Smartphone adoption forecast of 20%+ CAGR


Three self-reinforcing trends are driving global adoption of mass mobile computing:

Moore’s Law continues to drive performance/price improvements in smart phones, netbook PCs, and tablet PCs making them increasingly affordable

3G telecom network roll-outs have enabled mobile broadband applications

The massive success of the iPhone has broken the carrier walled garden and created competition among platforms

Smart phone adoption has reached a tipping point; network effects now maintain momentum

Why now? Mobile Computing in a Post iPhone World

http://na.blackberry.com/eng/devices/blackberrybold9700/

http://na.blackberry.com/eng/devices/blackberrystorm/




With iPhone, Apple introduced a new mobile computing paradigm that consumers and competitors have embraced

5

User Interface Evolution Over Past 30 Years

Source: Morgan Stanley, T-Mobile

Text TouchGraphical

User Interfa

ce

Keyboard FingersMouse

Input Device

Consumers now have in their pockets:

Fast processor Larger memory High-res screen Broadband Internet CameraGPS

Multi-touch UI Magnetometer Accelerometer Wifi & Bluetooth Good battery life


Average U.S. Cell Phone User

iPhone User

Data Features

Voice Calls

28minutes

12minutes

27minutes

33minutes

Regular Cell Phone Smartphone iPhone

This is paradigm is more about data, apps, and content than voice and SMS

Daily Usage Breakdown

Source: Morgan Stanley, iSuppli, CTIA, comScore MobiLens

% of Mobile Users Who Consume Digital Content

21%

48%

65%

Average iPhone user spends50% more time per day, 20 minutes, using device

All that extra time is spent on data features and apps

Smart phone consumer value is more about data than voice


Desktop Internet

AOL*

v 2.0 Launched 9/94

Mobile Internet

NTT docomo i-mode

Launched 6/99

… and it has been a tremendous success

Source: Morgan Stanley, Katy Huberty

20

40

60

80

100

Q1 Q3 Q5 Q7 Q9 Q11 Q13 Q15 Q17 Q19

Quarters Since Launch

Su

bsc

rib

ers

(MM

)

iPhone + iTouch NTT docomo i-mode AOL Netscape

Mobile Internet

iPhone + iTouch

Launched 6/07

~85MM

~31MM

~8MM

Desktop Internet

Netscape*

Launched 12/94

~18MM

Note: *AOL subscribers data not available before CQ3:94; Netscape users limited to US only. Morgan Stanley Research estimates ~50MM netbooks have shipped in first 10 quarters since launch (10/07). Source: Company

Reports , Morgan Stanley Research.

iPhone + iTouch vs. NTT docomo i-mode vs. AOL vs. Netscape UsersFirst 20 Quarters Since Launch


One implication is that what were devices are becoming features

8Source: Qualcomm

There is (or will be) an app for that


… and unlike the desktop, consumers are willing to pay for apps and content

9Source: Graphic by Tom Fishburne

Wall Street Journal

10,000 paid app iPad installs @ $17.29 per month in 60 days $3.3m in total annualized revenue ($2.1m subscription + $1.2m in advertising) WSJ.com, a decade-and-a-half old subscription site, has about 400,000 online-only subscribers

– In two months the iPad has added 2.5 percent to that number.

The Times of London

5,000 copies sold in the first 3 days @ £9.99 £49,950 in first 3 days

Early but promising


How will the paradigm evolve? Looking to analogs

Desktop Internet Mobile In Japan

Infrastructure Infrastructure

Software and Services Platforms

Content / Aggregation Applications / Services / Content

Retail / Commerce Retail / Commerce

Analogous Market Growth Patterns

>>

>

>>

>

Source: Morgan Stanley Research

We are roughly here

With mobile infrastructure adequately developed and Apple as a platform pioneer, activity is increasing among platforms and applications

Mobile Commerce may be around the corner


How will this paradigm affect the wireless value chain?

11

Brands Advertising Agency

Content & Applicatio

n Providers

Network Aggregato

rCarrier

Government Agencies, FCC, Standards Bodies, Legal Legislation

Industry enablers, Associations, Analysts

Infrastructure Players, Network Component Manufacturers, Handset Manufacturers

New Platforms(iPhone, Android, Blackberry, MS)

Consumers

Source: Adapted from Anderson & Williams, “Unbundling the Mobile Value Chain”

Value is shifting from carriers to new consumer-centric platforms which disintermediate carriers’ “walled gardens”

– Consumers face unprecedented choice of mobile applications and content

– Today the value is accruing to consumers and platform vendors

– As platforms become more open, value will accrue to consumers


Evidence Seen in the Success of App Ecosystems

Source: Morgan Stanley, Distimo, Nokia, Apple, Google, RIM, NielsenNokia apps exclude wallpapers and ring tones

RIM/Nokia excludes older devices that cannot support App stores

47

22

1210

5

0

5

10

15

20

25

30

35

40

45

50

iPhone/iTouch Android iPad BlackBerry Nokia

Apps DownloadedPer User

Apps Available 200k 50k 3k 5K 7K

Apps Downloaded 4B+ 400M 12M+ - -

Installed Base 86M 10M+ 2M 20M 50-70M

Launch Date Jul-08 Oct-08 Apr-10 Apr-09 May-09


… and in Apple’s stock price performance

Source: Capital IQ, May 25 2010

5 Year Dividend Adjusted Stock Price:Apple, Google, Microsoft, Palm, RIM, Nokia, AT&T, Verizon, Sprint

Apple+500%

Google, RIM+100%

Everyone Else

Market cap of Apple now exceeds that of Microsoft


… and in recent industry developments

JAN FEB MAR APR MAY JUN

Apple Ships 2M iPads

Android Hits 100k Activations per Day 18 Months After Launch

Google becomes #2 smartphone OS

HP Announces Palm Acquisition for $1.2b

Ballmer Takes Over Windows Mobile

RIM & Intel Announce Separate Tablets

AT&T Ends Unlimited Data Plan

FTC clears Google/Admob

Industry Analysts Increase Estimates

53% CAGR for iPhone (2008 – 2013)

23% CAGR for Smartphone (2008 – 2013)

iPhone 4 released

2010


Apple’s Success has Invited Competition

15

Worldwide Smartphone OS Market Share by Sales Volume

Smartphone OS/Platform market remains concentrated but increasingly competitive

– Android share has increased from 0% to 10% in 18 months

– RIM and MSFT also making big investments

Winning platforms are consumer-focused with rich content and applications

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Symbian RIM Apple Google Microsoft Linux Other

1Q08 Market Share 1Q09 Market Share 1Q10 Market Share

Source: Gartner


55%

23%

10%

6% 5%

0% 0%

46%

21%25%

5%

0% 0% 0%

15%

44%

10%

19%

7%4%

1%0%

10%

20%

30%

40%

50%

60%

iPhone Symbian Android RIM Windows Palm Other

HTML Mobile Page View Share (5/10)

Mobile Internet + App Usage Share (AdMob, 3/10)

Global Unit Shipment Share (Gartner, CQ1:10)

While iPhone & Android Shipment Shares Remain Low, They Have a Disproportionate Share of Web Usage

16

Global Smartphone Share of HTML Mobile Page View / Mobile Internet + App Usage / Unit Shipments

Note: Net Applications collects data from ~160MM monthly visitors on mobile devices that render full HTML pages and JavaScript. Visits to WAP pages are excluded.

Source: AdMob Mobile Metrics Report (3/10), Net Applications (5/10), Gartner (Q1:10).


Mobile Developers Face Important Considerations

17

Google Android

Advantages:

Native services and more open platform

Java and Eclipse IDE

Considerations:

Hardware profile fragmentation

Smaller install base (for now) Frequent OS updates Fewer countries supported

HTML5 Mobile Web

Advantages:

Open Ultimately it will be necessary

to support

Considerations:

Not widely supported today Lack support for native services

(e.g. gestures, local content)

Source: Google, Admob

AndroidMay 2010

Apple iPhone/iPad

Advantages:

Tight integration with native services and media library

Growing audience across many countries

Predictable platform release cycles

Considerations:

Proprietary platform Apple approval process No Flash / 3rd party SDKs Objective C iAd Payment toll


Mobile Platform Competition and a Dynamic Ecosystem Create Opportunities for Innovative Startups and VC

Mobile computing growth is creating a land grab among Strategic buyers…Mobile M&A Transactions Announced in Last 9 Months

18

Company $ Inv. Investor(s) Date Category

Booyah $20m Accel May, 2010 Mobile applications

Lookout $11m Accel, Khosla May, 2010 Mobile enterprise

SimpleGeo $8.1m Redpoint May, 2010 Location infr. software

Kudzu $7m Norwest May 2010 Mobile commerce

Boku n/a Andreesen Horowitz May 2010 Mobile payments

Transpera $9m RIM, Flybridge, FRC June 2010 Mobile video ad net

… and generating interest among VCsFinancings in Last 60 days

Target Buyer Valuation Investor Category

Starent Cisco $2.9b Public, Matrix, NB, HCP Mobile Infrastructure

Palm HP $1.2b Public Platform

Admob Google $750m Sequoia, Accel, DFJ Ad network

Quattro Apple $275 Highland, Globespan Ad network

Siri Apple $250 Menlo, Morgenthaler Mobile applications


19

Agenda

State of Mobile Computing

Potential Investment Opportunities (Redacted for Public)


1. Mobile health

2. Mobile applications for eldercare

3. Mobile payments

4. Online video

5. Multi-device synchronization & staging (e.g. Evernote, Dropbox)

6. Retail/ecommerce

7. Mobile enterprise

8. Helping carriers avoid becoming dumb pipes

Potential Investment Opportunities (Redacted for Public)


Thoughts or Comments?

Contact me at [email protected]

Thank You

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Thank You

Confidential

Education

State of Mobile Computing