Daily Archives: September 15, 2009

iPod Nano Doesn’t Kill Cisco’s Flip

Many business journalists have a weakness for overheated gladiator rhetoric. By that, I mean they have a predilection for imagining one vendor or product “killing” or “slaughtering” another in the blood-soaked coliseum of the marketplace.

Usually, though, vendors do not kill their competitors, neither literally nor figuratively. In the real world, customers — those individual agents that constitute the demand side of the useful abstraction called the marketplace — decide whether a vendor or its products succeeds or fails. It is the vendor’s task to lead or respond to the customer’s latent or express wishes by delivering products and services that have real or perceived value, or that meet an actual or imagined need.

The truth is, any vendor — even one as confident and accomplished as Apple — can get the consumer market wrong. It’s an easy mistake to make. Consumers aren’t like businesses. They don’t buy products purely on the basis of cost-benefit analyses or relentlessly logical value propositions. They buy products for personal reasons, because they like them and enjoy using them.

At the end of the day, who can accurately and unfailingly foresee what the public will favor all the time? The consuming public is fickle and inscrutable, as the popular, if fleeting, appeal of the Bay City Rollers and the Spice Girls attest.

Some business journalists have concluded that the iPod Nano, equipped with a video camera, foretells the destruction of Cisco’s (Pure Digital’s) Flip video cameras. Steve Jobs called out the Flip camera during his recent iPod product rollout, noting that video uploads to YouTube are booming and indicating that Apple would like to capture some of that growth market.

There’s no question that the multipurpose iPod Nano will be used as a video-capture device, even when it is bought primarily as a media player. Many buyers of the iPod Nano, having obtained video-capture capabilities with the purchase of their Apple device, will not bother buying a pint-sized device, such as the Flip, that is dedicated exclusively to video capture. So, yes, Apple will take some customers and market share from the Flip.

But will Apple kill the Flip? No, not at all. This is a fight that’s just beginning. For now, for customers that want a mobile device that cost-effectively records high-definition video, the Flip and similar single-devices outgun the iPod Nano. The iPod Nano will suffice for those who want a multipurpose device, primarily a music player, that also shoots video — though not HD video.

What will be interesting to observe is the extent to which the market for mobile-video cameras parallels the market for digital cameras. People still buy digital cameras — though they buy fewer of them during an economic downturn — even though cell phones are capable of taking lower-quality digital photographs. At this point, many people still will choose an HD mobile video camera over a multipurpose device that also shoots lower-quality video.

Apple’s video-capable iPod Nano doesn’t kill Cisco’s Flip, but it makes the future of the mobile-video marketplace intriguing to follow.

Avaya Won Nortel Auction, Confronts Integration Challenges

Arithmetic, particularly when it pertains to post-merger market share, can be a tricky business.

For example, now that Avaya has won the auction for Nortel’s Enterprise Solutions division in bankruptcy court, unwary mathematicians are assuming that the post-acquisition Avaya will augment its own market share with Nortel’s to vault ahead of Cisco in the $20-billion corporate-communications market.

It rarely works that way, and I don’t see it happening here. Most acquisitions are complicated matters, involving far more than simply adding the customers, revenues, products, channel partners, and employees of one company to those of another. Intangibles and imponderables always arise, because people are rarely as malleable and predictable as spreadsheets lead us to believe.

Avaya’s takeover of Nortel is complicated on many levels. First, there are questions as to whether the nearly $1-billion acquisition will be challenged on antitrust grounds. The acquisition likely will be approved by December, but, then again, it might not.

With Nortel being a Canadian company, there also is a risk that the acquisition might become a political football in a Canadian federal election. There is some question as to how many Canadian employees will find employment at Avaya.

Conversely, if Siemens Enterprise Communications, the other bidding in the auction, had won control of Nortel’s enterprise unit, a greater proportion of Canadian employees were expected to be retained for product management and product development roles.

Let’s assume, though, that no valid antitrust objections are raised. After all, the post-merger Avaya will not be appreciably ahead of Cisco in the corporate-communications market, and both will have to contend with other rivals in a reasonably competitive space. For the sake of argument, let’s also assume that Canada avoids a federal election this autumn or that Avaya somehow manages to avoid an unwelcome spotlight if a Canadian election does materialize.

Even with those obstacles cleared, Avaya would confront a significant challenge in integrating Nortel’s products, staff, channel partners, and partnerships with its own.

I see several potential pitfalls in the integration of the two companies, starting with a wide range of overlapping products in VoIP and unified communications (UC). On a product-by-product basis, even assuming Avaya chooses wisely in all instances, the company will be met with some unhappy customers whose products are being phased out in favor of Avaya’s preferred offerings.

Avaya’s channel strategy — specifically, it’s less-generous embrace of channel partners — also will alienate many of Nortel’s integrators and resellers, each of whom will consider defecting to competing products rather than joining the Avaya sales network.

Moreover, what will Avaya do with the UC partnership Nortel had established with Microsoft? Theoretically, that partnership might initially have looked good on paper for Nortel, but in practice Microsoft has benefited a lot more than has Nortel. Avaya will have to decide whether to keep fishing with Microsoft or to cut bait.

All the while, as Avaya waits for regulatory approval and resolves the many issues associated with integrating the acquisition, Cisco and other vendors will be attacking the installed bases of Avaya and Nortel. They’ll be exploiting customer concerns about the ongoing viability of products and manipulating reseller concerns about future relationships. They’ll also be exploiting concerns about Avaya’s commitment to short- and long-term product roadmaps and strategies.

As a result, Cisco will take away some accounts from Nortel and Avaya. That’s what happens during the interval between the announcement of an acquisition and its consummation, especially when the company being bought is distressed or failing. Just ask Oracle about the Sun acquisition.

That’s why the market-share mathematics of post-merger acquisitions are suspect, and why it’s premature for Avaya to suppose it’s on its way to clear market leadership in corporate-communications systems.

Google Fast Flip Represents Experiment Rather than Watershed Breakthrough

Internet bloggers are atwitter today over the unveiling of Google Fast Flip, a news-browsing service that tries to bring to the web the serendipity and intuitiveness of browsing and reading printed media.

Some observers are portraying Google Fast Flip as a significant development, if only because Google is sharing revenue with the limited number of newspaper publishers and other content providers participating in the initiative.

In actuality, Google Fast Flip is an experiment, for the participating newspapers and magazines as much as it is for Google. Everybody is trying to figure out what sorts of content-delivery services will be attractive to readers while providing a business model that satisfies both Google — which already runs the popular Google News service — and the publishers that provide news content.

While Google says Google News is meant to provide a constantly changing array of breaking news, it is positioning Google Fast Flip as an online recreation of the offline experience of leafing through articles in newspapers and magazines.

I like some of the usability aspects of Google Fast Flip, especially for publications I read thoroughly. Nonetheless, I see it as a complement rather than as a replacement for Google News and other comprehensive search-related news sites. What stands as both a strength and weakness of Google Fast Flip is that is presents material from only a limited number of publications.

It’s also available on the Google’s Android handsets and the Apple iPhone. As much as Google would like Android to prosper in the marketplace, it realizes it cannot ignore Apple’s market clout — and growing market share — on mobile devices.