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ABI Research Blog (105)

Tekelec Still Struggling

Aug 8, 2011 12:00:00 AM / by Admin

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Tekelec announced second quarter 2011 results last week.
It was a weak quarter in terms of orders and revenues, although the full-year guidance remains unchanged.

Tekelec is still stuck in the “business transformation” from SS7-based circuit-switched networks to IP-based next-generation networks. The next-generation products from the Camiant and Blueslice acquisitions, and the new Diameter Signaling Router, are good products, but orders and revenues from these products have been slower than expected. Tekelec is lucky that orders and revenues from the old “established” products are declining slowly and have not fallen off a cliff as some feared; in fact, there was a big one-time order for Eagle 5 in 4Q2010.

In the long run, the outlook for Tekelec’s next=generation products is good. Strong growth in the policy management market should drive Camiant sales, and 4G deployments over the next few years will result in strong demand for all of the next-generation control plane products. Initially, many LTE operators are purchasing complete Enhanced Packet Core (EPC)networks from single vendors, so there should be good potential for Tekelec to sell individual products to upgrade these networks one or two years down the road.

Overall, I like Tekelec’s new products and direction, but it is not a very exciting company. Top-line revenues have been more or less flat for years. The company seems unable to grow the business organically. Tekelec is sitting on a quarter million dollars in cash, so another acquisition to broaden the product portfolio is conceivable. However, with the market capitalization now down around a half billion dollars, their pile of cash might make Tekelec an attractive acquisition target.

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Mobile Handset Availability 2011 -- Tread Lightly Through The NFC Mobile Payments Hype

Aug 5, 2011 12:00:00 AM / by Admin

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There is no question there is significant momentum behind NFC mobile payments this year. The Google Wallet initiative, ISIS, the UK, French, Dutch and Dane JVs all bode well for mobile payments – in the long term.
Short term, it is a different story. There will be no NFC mobile payments until there are mobile handsets in the hands of consumers that are equipped with NFC hardware and configured with mobile payment applications.
There have been many announcements this year about mobile handset that will be shipped with NFC capabilities, but you need to look closely and understand if those devices are being shipped with NFC mobile payment capabilities. To date, most are not.
Examples:
Nokia’s N9 and C7 – shipping with NFC capabilities, but NOT enabled for mobile payments http://bit.ly/pxCNUo
Research In Motion’s new Blackberry Bold 990 and 9930 – shipping with NFC capabilities, but NOT enabled for mobile payments. (I confirmed this with RIM spokesperson yesterday).
Google Nexus S on AT&T, T-Mobile -- NOT enabled for Google Wallet. Only Nexus S on Sprint network is NFC payment capable today.
So what handsets are being shipped currently that are NFC mobile payment-enabled? The Google Nexus S on Sprint, Orange UK’s QuickTap, some test phones in France, etc.
There will be more announcements from mobile handset makers this year regarding NFC phones, just make sure you understand that NFC mobile phones do not equate to NFC mobile payment enabled devices.

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Intellectual Property Revenues Important for Advanced TV Vendors

Aug 4, 2011 12:00:00 AM / by Admin

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Now is the time to litigate patents in TV middleware functions including DVRs, interactive advertising, VOD and TV Apps. Advanced middleware, DVR and advertising solutions are important revenue generation and protection strategies for major MSOs, and vendors feel that a product plus patent approach gives them the best chance of success in the marketplace.

In May, Invidi accused Visible World of infringing Invidi patents in their system implemented for Cablevision. These patents cover advanced advertising systems, a topic very much on the mind of MSOs today.
Also in May, DISH Network and EchoStar reached a $500 million settlement with TiVo based on claims they infringed TiVo’s Time Warp patents. TiVO is still involved in intellectual property (IP) litigation with AT&T, Microsoft and Verizon, a fact which it tries to both highlight (“sets a precedent regarding the strength and enforceability of our intellectual property”) and downplay (“our intellectual property program is but one part of TiVo’s long term growth strategy”) in its first quarter results report (April 30, 2011).
Finally, ActiveVideo recently won a $111 million award against Verizon for patent infringement covering interactive TV and video on demand implementations. Note that Verizon developed its own Middleware platform, so no other vendors are named in the suit.
Cablevision seems to be at the center of this patent storm; they use ActiveVideo and Visible World. This is driven primarily by their being an early implementer of these technologies – and therefore a visible target. In January Concurrent announced a patent related to networked DVRs , which could also bring battles, related to Cablevision deployments with SeaChange and others.
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SOTs May Give OSS/BSS Vendors a New Entry Point into the M2M Market

Aug 3, 2011 12:00:00 AM / by Admin

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“Service optimization tools” (SOTs) may provide a means for traditional OSS/BSS vendors to re-invigorate their efforts to gain traction in the cellular M2M market, in which they are currently regarded as playing “catch up”. The key idea is that SOTs form a layer between the M2M service delivery platforms (SDPs) that are either built in-house by the mobile network operator (MNO) or are acquired from third-party firms, such as Jasper Wireless, and the MNO’s core network. SDPs are a form of OSS/BSS tailored to the specific needs of M2M services, providing such tools as automated bulk provisioning and customer self-management of devices. However, specialist SDP vendors have largely taken the lead in this market, and the window of opportunity for traditional OSS/BSS vendors to win MNO partnership deals in the M2M space is rapidly drawing to a close.

These SOTs are typically being offered now by newer entrants to the M2M market, such as Evolving Systems, Bridgewater (recently acquired by Amdocs), and Tekelec and focus on specific functionality, as opposed to full SDPs. Examples of such tool functionality could be: ameliorating signaling load from large scale M2M deployment, dynamic SIM allocation, and virtualized identification. ABI Research believes this reflects a natural market maturation process, as well as an inflection point, which potentially could give the traditional OSS/BSS vendors a new opportunity to “catch up” to more established M2M SDP providers.
Fundamentally, as specific new “tools” come into the market to enhance management of M2M devices over cellular networks, it leads to MNOs re-opening opportunities for partnerships and relationships with platform and tool providers. Essentially, this can be thought of as entering into a new partnership with an MNO that already has an existing SDP by providing a new tool “underneath” the SDP to enable it to interact even more effectively with the MNO’s network, in a manner analogous to an M2M application platform vendor providing a platform “on top” of the SDP to enable it to work more effectively with application developers’ software.
Of course, this strategy necessitates that the OSS/BSS vendor actually possess such a tool to offer to the MNOs. It remains to be seen, however, whether the traditional OSS/BSS community will fully seize this chance to become relevant to MNOs for M2M connectivity.
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Telit Buys GlobalConect and Expands Its Strategy in the M2M Market

Aug 3, 2011 12:00:00 AM / by Admin

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In July 2011, Telit Communications – a leading global provider of embedded cellular M2M modules – announced it had closed the acquisition of GlobalConect Ltd. for an offering of $2.9 million in cash and stock. GlobalConect Ltd. is a provider of cellular connectivity services for M2M applications, similar to a company like KORE Telematics or Numerex (albeit a much smaller company). Telit’s CEO, Oozi Cats, is quoted as saying, “Adding wireless connectivity to our offering is an important factor for Telit’s continued growth and success. Our customers expect superior M2M solutions from one source and with the acquisition of GlobalConect we will now be in a position to address their needs more comprehensively.” Apart from the assertion that customers want a single source M2M solution, what factor likely had the most impact on the decision to acquire GlobalConect Ltd.?

The cellular M2M module market is undergoing a process of commoditization and consolidation among traditional vendors, driven, in part, by new entrants from China able to compete aggressively on price. Consequently, many of the M2M module incumbents have either exited the market as independent entities (e.g. Wavecom, Enfora, and Motorola Wireless Modules), or have expanded their strategic approach by incorporating other elements of the M2M value chain in their offering. Telit, which has been notable to date for sticking to a very traditional component vendor business model, is now essentially agreeing that commoditization pressures in its core area of business warrant it expanding its strategic scope as well, in this case with a connectivity service offering for M2M applications.
So, will Telit’s plan work? ABI Research’s assessment is decidedly neutral. On a positive note, M2M connectivity services can be fairly high margin in a fast growing market segment; certainly compared to traditional voice/data telecom services. This is the reason so many mobile operators are have now jumped into the M2M market with both feet, establishing M2M business units, opening M2M development centers to assist application developers, and even partnering with certain module vendors to bring down the costs of 3G modules even more rapidly.
Nevertheless, Telit has chosen a particularly difficult way to enter the services market. MVNOs (and Telit would essentially be an MVNO, re-selling data from mobile operators) are facing an increasing amount of competition from mobile operators in the M2M market. Mobile operators, as network owners with typically much larger financial resources relative to MVNOs, are well-positioned to compete on price, to bundle M2M data connectivity with other telecom services, and to leverage their deep existing business customer relationships and enterprise sales forces to win new M2M business.
There are certainly things that Telit can do to improve its chances for success, but ultimately only time will tell if the GlobalConect acquisition was a wise decision.
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Stop Calling Square A Mobile Payment!

Aug 1, 2011 12:00:00 AM / by Admin

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It's a testament to media hype and the 24-hour news cycle that Square, the payments darling, is called a mobile payment.

How, exactly, is Square a mobile payment?

Square can help a merchant get rid of legacy payment terminals and use an iPhone to accept a credit card payment from a consumer. The consumer hands the merchant a PLASTIC credit card, which is then run through a mag stripe reader attached to an iPhone. That is not a mobile payment -- it's a merchant solution for getting rid of payment terminals.

In my opinion, mobile payments should be defined as a payment made by a consumer which in some way involves THE CONSUMER'S MOBILE DEVICE OR ACCOUNT. This mobile payment could be remote -- (examples -- using your mobile phone to shop online, using your mobile to make or receive a person to person payment, using your mobile to pay utility or other types of bills, using your pre or postpaid mobile account to make a purchase.) or local (ex: using your phone to make a payment in a physical location, examples are ISIS, Google Wallet, AisleBuyer, FaceCash, Modiv Mobile, Starbucks prepaid card on your mobile, etc.).

There's enough confusion about mobile payments as it is. Let's not make it any worse.​

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Sprint and LightSquared Megadeal Will Shake Up the US Wireless Industry

Jul 29, 2011 12:00:00 AM / by Admin

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Sprint and LightSquared announced a broad agreement for cooperation yesterday.
There are lots of interesting points for discussion concerning this agreement, but let me start with the first few that come to mind.
LightSquared will pay Sprint to operate an LTE Radio Access Network using LightSquared’s L-band spectrum. Sprint will use the new multi-mode base stations which are part of their “Network Vision”.
This deal is good for Sprint because they will get a significant amount of cash from LightSquared to build the network, which will expedite the roll-out of Sprint’s own network services (to be announced in September). The deal is good for LightSquared because they can depend on Sprint to deploy and operate the network instead of doing it themselves.
LightSquared will deploy an LTE core network from Nokia Siemens Networks. NSN and LightSquared signed an 8-year agreement last year valued at US$7B to install an LTE network. Presumably the total value of the contract will now decrease because NSN will not be providing the Radio Access Network, but NSN should be happy with the core network deployment and services revenue. If NSN provides managed services to maintain and operate the core network for LightSquared, it could be very profitable for NSN. And now NSN does not have the headache of making base stations for the L-band spectrum.
As everyone knows, there are major concerns from the FAA and GPS users concerning interference with LightSquared’s frequency spectrum. The Sprint deal is contingent upon resolution of these issues, at least at a regulatory level. However, the difficult task of implementing base stations for this spectrum without causing interference problems will now fall into the laps of Sprint’s base station vendors Alcatel-Lucent, Ericsson and Samsung.
More to follow . . .
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Smartphones and Tablet PCs - POS Terminal Killers?

Jul 29, 2011 12:00:00 AM / by Admin

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Given the numerous advantages of the cellular-enabled POS terminal, its remarkable growth in recent years is unsurprising. What is surprising then, is the notion that this type of device could already be set tomake way for alternative technologies. However, an increase in the use of consumer electronics as payment devices hasalreadyled some to suggest that thisis the way the market is heading.

With the growing ubiquity of smartphones, and to a lesser extent tablet PCs, a whole host of companies have begun to offer solutions that let consumers harness the portability of their personal devices and empower them to accept payments. Such companies include: Square,Apriva, CHARGE anywhere, wCharge and Adelante, amongst others.As long as they have access to a compatible payment processing service, merchants previously reliant solely on cash can offer their customers the ability to pay by card using their existingdevices (and thus avoiding the need to invest in additional,expensivepayment equipment).This could well beappealing to those who largelyconduct theirbusiness remotely - e.g.handymen, taxi drivers, gardeners,private tutors etc.

But will this technology impinge on the overall market for the traditional wireless POS terminal?

When conducting researchfor a new reportonthe integration of cellular connectivity in the payments industry, I spoke toa leadingvendor about this verysubject. Askedifsmartphone- and tablet-based solutions would eventuallycannibalise the POS terminal market, theparaphrased reply was succinct: “Yes, but only to a very small extent” and I’d have to agree. Off the top of my head, two reasons why there won’t be mass-adoption of payment-enabled consumer electronics immediately spring to mind:

- There is ageneral warinesswith inputting one's card details into a phone/tablet PC that will almost certainlypersist.

- Phones/tablet PCs are high-value c​​onsumerdevices.Should a thief decide they want one, the merchant isn’t losing a POS terminal per se; they are losing a multifunctional device.

Pros and cons aside, one thing is almost certain – growth in the total available market for mobile payments (be they smartphones, tablets or mobile POS terminals) will continue apace.​

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TomTom’s Q2 2011 Results: Where is TomTom’s Mobile Strategy?

Jul 27, 2011 12:00:00 AM / by Admin

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TomTom’s Q2 2011 results further confirmed the demise of PNDs with consumer revenue declining by 23% year on year to 209 million Euros despite an active user base of LIVE Services of 1.1 million. ABI Research extensively discussed the decline of the PND market in its recently published report Personal Navigation Devices - Making Money from a Declining Market. TomTom’s 2011 Outlook isn’t any rosier: global PND market decline of between 15% and 20% and even higher drops in the North American market.
Equally worrying is TomTom’s ailing maps and traffic licensing business unit posting a revenue decrease of 3% year on year and 4 % quarter on quarter. TomTom expects their Licensing unit to show flat revenue development compared to last year. TomTom seems to struggle to sell its maps and high quality traffic data with Mappy one of the rare commercial deals announced – next to a number of agreements with governments.
TomTom was also forced into another write-off (473 million Euro) on the Tele Atlas goodwill – following a previous write off of 1 billion Euro in 2008.This results in a sorry bottom line: a net result of -489 million Euro.
The (only) bright spot in TomTom’s Q2 results is the continued growth of its in-vehicle products. The Automotive unit revenue grew by 34% year on year to €60 million with more than 1 million Carminat TomTom systems sold by Renault since the launch and Blue&Me recently introduced in the US on the Fiat 500. The Business Solutions unit grew by 12% year on year to €14 million posting some impressive numbers: 13000 customers and 152000 vehicles under management.
However encouraging the in-vehicle initiatives have been they do not compensate for the decline of TomTom’s PND business and will not do so in the medium term future. Ramping up its currently sorry presence in mobile might be the key for TomTom to turn around the company. Considering the all-encompassing mobility trend – including the integration of smartphones into connected vehicle systems - TomTom should be much more aggressive, supporting all mobile platforms, designing in-vehicle hardware solutions which can interface with (smart)phones, and, most importantly, aggressively pursuing partnerships with handset vendors. Apple should be a good candidate as its two main smartphone rivals Microsoft-Nokia-NAVTEQ and Google-Android both own strategic mapping, navigation and traffic information assets allowing them to offer free navigation services.
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Comcast Xfinity powered by thePlatform and Elemental Technology

Jul 26, 2011 12:00:00 AM / by Admin

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Comcast is aggressively positioning its Xfinity platform to reduce churn and engage its customers in ways similar to Netflix and Hulu. Elemental Technologies and thePlatform recently announced they were the technology providers for Comcast’s Xfinity TV application.

thePlatform (a Comcast subsidiary based in Seattle) is a web publishing platform that handles content acquisition (bringing cable content to the web), content preparation (overseeing farms of transcoders that bring the content into the right format), and distribution. The platform also handles subscriber management and revenue generation (advertising). While thePlatform has no direct competitors, other ways of implementing this type of solution include online video publishing platforms such as Brightcove, or technology / workflow companies such as Telestream.
Elemental technology offers a very dense video transcoding solution based on nVidia GPUs. Note that Elemental is not the exclusive provider for thePlatform; it also supports platforms from Digital Rapids, Rhozet (now part of Harmonic) as well as Telestream.
In our Worldwide Pay TV Encoder and Transcoder Market report, we described Elemental and its technology.
Elemental Technologies is a Portland, Oregon-based venture capital-funded company developing video encoders using nVidia GPUs. The founders came from Pixelworks, while other management team members have experience at Omneon and Motorola. Elemental has live and file-based products dedicated to high-quality, live, multiformat encoding and transcoding. Elemental claims the high floating point (GFLOP) performance of GPUs enables it to offer very high-quality video from a standard platform, enabling multiple resolutions of streaming output from a single server.
Elemental has a significant number of trials and a few customer deployments in 2010 and is expecting a significant ramp up in unit shipments during 2011. Notable design wins include encoding for ABC’s iPad application and video behind MLB.com and the BigTen network. At the IBC (International Broadcasting Convention) in September, 2010, Elemental teamed with Microsoft to demonstrate live Microsoft Smooth streaming with 1080p 3D source video from Hamburg, Germany to the show floor in the Netherlands.

Thisannouncement from Comcastmarks Elemental's most significant announced deployment to date; one of many events signalling they are moving from start-up mode to revenue production mode.

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