By Malathi Nayak
SAN FRANCISCO (Reuters) - Electronic Arts' Chief Executive Officer John Riccitiello has resigned, saying he was 'accountable' for the company missing its operational targets.
The company warned investors that earnings in the current quarter will be at the low end of or slightly below its previously issued forecast after the announcement.
In January, the company had said it expected non-GAAP revenue for its fourth quarter ending March 31 to be about $1.025 billion to $1.125 billion. It also forecast non-GAAP diluted earnings per share of 57 cents to 72 cents.
Riccitiello will step down from his post as CEO and member of the board of directors on March 30, the video game company said on Monday.
'We have fallen short of the internal operating plan we set one year ago,' Riccitiello said in a letter filed to the Securities Exchange Commission. 'EA's shareholders and employees expect better and I am accountable for the miss.'
EA's former CEO and chairman of the board, Larry Probst, has been appointed as executive chairman as the company begins its search for its next CEO, the company said.
Electronic Arts' stock climbed 3.1 percent to $19.29 in after-hours trade, from a close of $18.71 on the Nasdaq.
(Reporting By Malathi Nayak; Editing by Bernard Orr)
Monday, March 18, 2013
Analysis: Amazon's sellers unhappy about fee hikes, eye rivals
By Alistair Barr
SAN FRANCISCO (Reuters) - A brewing conflict between Amazon.com Inc and its merchants over fee hikes could benefit rival eBay Inc, and provide an opening for Wal-Mart Stores Inc and Google Inc, which are just getting into the space.
Amazon's online bazaar generates margins many times higher than traditional retail as the company takes a cut of every sale on its site made by a merchant, known as a third-party seller, and charges extra fees for handling logistics.
The growth of this business, which now accounts for almost 40 percent of unit sales, has helped push Amazon shares to record highs.
But a series of fee hikes over the past year and a half have alienated many merchants, and some are threatening to defect.
'If they increase fees too much, some sellers will decide to not sell there anymore,' said Niraj Shah, chief executive of furniture retailer Wayfair, which uses Amazon, eBay and Wal-Mart's online marketplaces, as well as its own websites.
'That's against Amazon's plan, which is to get as much selection as possible on their site,' Shah added. 'The vast majority of Amazon sellers are perfectly happy to go to any marketplace offering meaningful volume.'
Amazon said many of the fee increases have been driven by rising costs, such as higher gas prices and hence transport expenses. It said it has also invested in changes to get products to customers quicker - a push that third-party sellers will benefit from because faster shipping should increase sales.
But sellers see it differently, complaining on online seller forums that Amazon's fatter returns came partly from putting a heavier burden on their shoulders. 'Shipping & fees are killing my margins,' wrote one seller last month.
Another, in August, complained about higher fees for selling electronic accessories that were due to kick in early this year: 'Holy crap! 8% to 15%?! Goodbye good deals from 3rd party sellers on Amazon in the electronics section.'
A third ranted in August about higher costs for shipping products to multiple Amazon warehouses. 'Amazon just pulled a fast one,' the seller wrote. 'Now that Amazon has all the power, they're imposing increased fee hikes to all those cozy sellers who have supported Amazon since Day 1.'
The complaints became so raucous last year that the company took the forums down and re-launched them. The new forums let sellers give each other ratings for their posts - a move that some sellers viewed as a way to reduce extreme complaints.
'The updated forums were created to be more responsive to the needs of the seller community and give them information they need to help build their businesses,' Amazon spokesman Erik Fairleigh said.
MULTIPLE CUSTOMERS
EBay used to be the top online destination for sellers, but Amazon's marketplace ended its reign after its launch over a decade ago, helped in large part by 'Fulfillment By Amazon,' or FBA, a service that stores and ships items and even handles customer service on behalf of sellers.
Fees are a touchy topic for sellers with skimpy margins, as eBay knows from merchant revolts it has struggled to quell in the past. Fee hikes by Amazon are particularly irksome to sellers because they compete with the company, a seller in its own right, in many categories on the site. EBay does not hawk its own wares.
When Amazon introduced a new long-term storage fee for items that sit in its warehouses more than a year, some sellers elected to have the company destroy their unsold inventory as it was cheaper than getting the items shipped back to them.
Kat Simpson, a third-party merchant who also trains others how to sell on Amazon, said the company charges her 50 cents per item to return unsold inventory from its warehouses but just 15 cents per item to destroy it, she said.
'I would have said everybody needed to try FBA last year. Now I would say no,' she said. 'If you are selling items under $25, you won't do as well on Amazon as on eBay profit wise.'
It costs $3.92 to sell a $10 item on Amazon and $2.72 on eBay, according to Bill Vogel of The Cumberland Companies, which sells on both. But eBay takes more time and most merchants store inventory themselves, adding other costs, he noted.
For now, many merchants remain tied to Amazon's marketplace, which has two million third-party sellers.
'Customers like lower prices, but customers also like greater convenience, faster shipping and great selection,' said Tom Taylor, vice president of Amazon's FBA business.
Some seller fees, particularly for some larger products, have been cut, he noted.
COMPETITORS
Wal-Mart's marketplace now features just six merchants: Wayfair, Plumstruck, eBags, ProTeam, ToolKing and Shoebuy. Spokesman Dan Toporek said the world's largest retailer is trying to expand available products and it 'is a key component of that strategy to accelerate the growth.'
Google may be the bigger threat. It already owns most of the necessary pieces, such as product search, listings and a payment service -- it just hasn't combined them yet.
It began testing a same-day delivery service with retailers in recent weeks, sparking speculation it's building a marketplace. A spokeswoman said Google is always working to improve the user experience, including shopping.
'If somebody comes in, a Google for instance, and says you can list with us and we will give you wide exposure at much lower cost, that would be a problem for Amazon,' said Scott Tilghman, an analyst at B. Riley Caris.
Consumers want selection, bargains and fast shipping, which all cost money. Getting sellers to cover those expenses could drive them elsewhere. Yet if marketplace operators cover such costs, their profits suffer and shareholders grumble.
'There's always a trade-off,' said Ken Sena, an analyst at Evercore Partners. 'There's always that risk that sellers could defect.'
(Reporting By Alistair Barr; Editing by Tiffany Wu)
SAN FRANCISCO (Reuters) - A brewing conflict between Amazon.com Inc and its merchants over fee hikes could benefit rival eBay Inc, and provide an opening for Wal-Mart Stores Inc and Google Inc, which are just getting into the space.
Amazon's online bazaar generates margins many times higher than traditional retail as the company takes a cut of every sale on its site made by a merchant, known as a third-party seller, and charges extra fees for handling logistics.
The growth of this business, which now accounts for almost 40 percent of unit sales, has helped push Amazon shares to record highs.
But a series of fee hikes over the past year and a half have alienated many merchants, and some are threatening to defect.
'If they increase fees too much, some sellers will decide to not sell there anymore,' said Niraj Shah, chief executive of furniture retailer Wayfair, which uses Amazon, eBay and Wal-Mart's online marketplaces, as well as its own websites.
'That's against Amazon's plan, which is to get as much selection as possible on their site,' Shah added. 'The vast majority of Amazon sellers are perfectly happy to go to any marketplace offering meaningful volume.'
Amazon said many of the fee increases have been driven by rising costs, such as higher gas prices and hence transport expenses. It said it has also invested in changes to get products to customers quicker - a push that third-party sellers will benefit from because faster shipping should increase sales.
But sellers see it differently, complaining on online seller forums that Amazon's fatter returns came partly from putting a heavier burden on their shoulders. 'Shipping & fees are killing my margins,' wrote one seller last month.
Another, in August, complained about higher fees for selling electronic accessories that were due to kick in early this year: 'Holy crap! 8% to 15%?! Goodbye good deals from 3rd party sellers on Amazon in the electronics section.'
A third ranted in August about higher costs for shipping products to multiple Amazon warehouses. 'Amazon just pulled a fast one,' the seller wrote. 'Now that Amazon has all the power, they're imposing increased fee hikes to all those cozy sellers who have supported Amazon since Day 1.'
The complaints became so raucous last year that the company took the forums down and re-launched them. The new forums let sellers give each other ratings for their posts - a move that some sellers viewed as a way to reduce extreme complaints.
'The updated forums were created to be more responsive to the needs of the seller community and give them information they need to help build their businesses,' Amazon spokesman Erik Fairleigh said.
MULTIPLE CUSTOMERS
EBay used to be the top online destination for sellers, but Amazon's marketplace ended its reign after its launch over a decade ago, helped in large part by 'Fulfillment By Amazon,' or FBA, a service that stores and ships items and even handles customer service on behalf of sellers.
Fees are a touchy topic for sellers with skimpy margins, as eBay knows from merchant revolts it has struggled to quell in the past. Fee hikes by Amazon are particularly irksome to sellers because they compete with the company, a seller in its own right, in many categories on the site. EBay does not hawk its own wares.
When Amazon introduced a new long-term storage fee for items that sit in its warehouses more than a year, some sellers elected to have the company destroy their unsold inventory as it was cheaper than getting the items shipped back to them.
Kat Simpson, a third-party merchant who also trains others how to sell on Amazon, said the company charges her 50 cents per item to return unsold inventory from its warehouses but just 15 cents per item to destroy it, she said.
'I would have said everybody needed to try FBA last year. Now I would say no,' she said. 'If you are selling items under $25, you won't do as well on Amazon as on eBay profit wise.'
It costs $3.92 to sell a $10 item on Amazon and $2.72 on eBay, according to Bill Vogel of The Cumberland Companies, which sells on both. But eBay takes more time and most merchants store inventory themselves, adding other costs, he noted.
For now, many merchants remain tied to Amazon's marketplace, which has two million third-party sellers.
'Customers like lower prices, but customers also like greater convenience, faster shipping and great selection,' said Tom Taylor, vice president of Amazon's FBA business.
Some seller fees, particularly for some larger products, have been cut, he noted.
COMPETITORS
Wal-Mart's marketplace now features just six merchants: Wayfair, Plumstruck, eBags, ProTeam, ToolKing and Shoebuy. Spokesman Dan Toporek said the world's largest retailer is trying to expand available products and it 'is a key component of that strategy to accelerate the growth.'
Google may be the bigger threat. It already owns most of the necessary pieces, such as product search, listings and a payment service -- it just hasn't combined them yet.
It began testing a same-day delivery service with retailers in recent weeks, sparking speculation it's building a marketplace. A spokeswoman said Google is always working to improve the user experience, including shopping.
'If somebody comes in, a Google for instance, and says you can list with us and we will give you wide exposure at much lower cost, that would be a problem for Amazon,' said Scott Tilghman, an analyst at B. Riley Caris.
Consumers want selection, bargains and fast shipping, which all cost money. Getting sellers to cover those expenses could drive them elsewhere. Yet if marketplace operators cover such costs, their profits suffer and shareholders grumble.
'There's always a trade-off,' said Ken Sena, an analyst at Evercore Partners. 'There's always that risk that sellers could defect.'
(Reporting By Alistair Barr; Editing by Tiffany Wu)
Sunday, March 17, 2013
Malls must move beyond shopping to survive in Internet era
By Tom Bill
CANNES, France (Reuters) - As growing numbers of shoppers move online, European mall owners are looking to pull in customers by including services that can't be replicated on the Web like hospital care and government offices.
Malls must become more like full-service community centers to survive in the face of a growing list of failed retailers like HMV and Blockbuster, property experts at the annual MIPIM trade fair in Cannes, France, told Reuters.
On the flip side of that retail revolution, the experts see big gains in warehousing as more goods are sent and returned via post.
'The days of the stand-alone mall are numbered,' said David Roberts, the chief executive of architect Aedas, one of the five largest practices in the world. The company has been involved in city masterplan projects in Asia, Europe and the Middle East.
'In 20 years time you will find stores that sell books and DVDs replaced by sites that give people a reason to go the mall ... art galleries, education centers and health and spa treatments.'
Florencio Beccar, fund manager of CBRE Global Investors European shopping centre fund, cited the recent purchase of a mall in Germany, saying the fact it included a large medical centre was 'a big plus'.
'I once saw a clinic in a Brazilian mall where you checked in and are buzzed on a device when they are ready. In the meantime you go shopping,' he said. 'With the ageing population in Europe you can see that happening more and more.'
CBRE Investors, which has about 14 billion euros ($18.2 billion) of retail property under management in Europe and 5,000 tenants, also owns a mall in southern Sweden with a library and a local municipal office, he said.
'More shopping centre developers will have early talks with these sorts of tenants as well as the big anchor retailers,' Beccar said.
Mall owners like Land Securities, Intu, Westfield and Klepierre have increased the number of restaurants and cinemas to persuade shoppers to stay longer, and offer promotions to reward frequent shoppers who can be tracked via their mobile phones.
COMMUNITY CENTRES, ADVENTURE PARKS
But these steps don't go far enough, some experts say, in light of a forecast last month that 90 percent of retail sales growth in Britain, France and Germany between 2012 and 2016, or 91.5 billion euros, is expected to be online, according to the property arm of French insurer AXA, which manages 43 billion euros of assets.
As well as changing what's inside, mall owners will need to borrow ideas from developing markets like Dubai and China where centers are part of wider mixed-use developments where people live or include open spaces where they spend leisure time, Roberts said.
'Convenience and Internet shopping has created a breakdown in community structures and there's a gap there waiting to be filled,' he said.
'There is a complete lack of vision among many shopping centre owners,' said Joe Valente, a managing director at JP Morgan Asset Management, who helps manage 7 billion euros of real estate in Europe.
'The big thing that's missing is that unlike almost every other industry they haven't caught on to building their own brand. Why not have a bluewater.com?' he said, referring to the large mall of the same name in southeast England.
'Landlords fear cannibalizing sales but in 10 to 15 years they won't have a choice because they will be cannibalized anyway,' he said. In other words, a growing number of shoppers will move online whatever malls do.
'On a mall website you could book a parking space, a restaurant table or your car to be valeted. Why do people go to Covent Garden?' he asked of the central London district.
'There's nothing there you won't find anywhere else but I would argue it's a strong brand.'
Christian Ulbrich, chief executive for Europe, Middle East and Africa at property consultant Jones Lang LaSalle, said: 'Stores will get bigger and become more like adventure parks that attack all of your emotions.
'For example, Globetrotter has a climbing wall and cycle track in its Frankfurt store to try out its products,' he said of the German outdoor clothing and equipment retailer.
WAREHOUSING
While retailers and mall owners struggle to find answers, all agree that warehouse property owners are the big beneficiaries of the change in retail habits.
Every additional 1 billion euros of online sales resulted in an average additional warehouse demand of approximately 72,000 square meters in Britain, Germany and France over the last five years, a report from warehouse landlord Prologis said last year.
'Logistics is the new retail,' said Simon Hope, global head of capital markets at property consultant Savills, referring to the way changing consumer trends will affect the way investors see property.
'There is a trend of money moving away from all but the best and most regionally dominant malls into logistics as they are economically shielded,' he said.
The fact that the Norwegian and Chinese sovereign wealth funds have recently invested in the sector, as well as a report that Brookfield, lower Manhattan's largest office landlord, is trying to do the same, shows serious bets are being made on logistics property, Hope said.
Yields for high quality logistics property can be six or seven percent versus four or five percent for top shopping centers.
As another example of how retailers may re-think their operations, some are likely to club together to operate out of smaller logistics sites close to city centers to enable same-day deliveries, a service increasingly in demand, Ulbrich said.
'The issue they all face is that shopping is no longer enough of a reason to go to shopping centers.'
($1 = 0.7704 euros)
(Editing by Sonya Hepinstall)
CANNES, France (Reuters) - As growing numbers of shoppers move online, European mall owners are looking to pull in customers by including services that can't be replicated on the Web like hospital care and government offices.
Malls must become more like full-service community centers to survive in the face of a growing list of failed retailers like HMV and Blockbuster, property experts at the annual MIPIM trade fair in Cannes, France, told Reuters.
On the flip side of that retail revolution, the experts see big gains in warehousing as more goods are sent and returned via post.
'The days of the stand-alone mall are numbered,' said David Roberts, the chief executive of architect Aedas, one of the five largest practices in the world. The company has been involved in city masterplan projects in Asia, Europe and the Middle East.
'In 20 years time you will find stores that sell books and DVDs replaced by sites that give people a reason to go the mall ... art galleries, education centers and health and spa treatments.'
Florencio Beccar, fund manager of CBRE Global Investors European shopping centre fund, cited the recent purchase of a mall in Germany, saying the fact it included a large medical centre was 'a big plus'.
'I once saw a clinic in a Brazilian mall where you checked in and are buzzed on a device when they are ready. In the meantime you go shopping,' he said. 'With the ageing population in Europe you can see that happening more and more.'
CBRE Investors, which has about 14 billion euros ($18.2 billion) of retail property under management in Europe and 5,000 tenants, also owns a mall in southern Sweden with a library and a local municipal office, he said.
'More shopping centre developers will have early talks with these sorts of tenants as well as the big anchor retailers,' Beccar said.
Mall owners like Land Securities, Intu, Westfield and Klepierre have increased the number of restaurants and cinemas to persuade shoppers to stay longer, and offer promotions to reward frequent shoppers who can be tracked via their mobile phones.
COMMUNITY CENTRES, ADVENTURE PARKS
But these steps don't go far enough, some experts say, in light of a forecast last month that 90 percent of retail sales growth in Britain, France and Germany between 2012 and 2016, or 91.5 billion euros, is expected to be online, according to the property arm of French insurer AXA, which manages 43 billion euros of assets.
As well as changing what's inside, mall owners will need to borrow ideas from developing markets like Dubai and China where centers are part of wider mixed-use developments where people live or include open spaces where they spend leisure time, Roberts said.
'Convenience and Internet shopping has created a breakdown in community structures and there's a gap there waiting to be filled,' he said.
'There is a complete lack of vision among many shopping centre owners,' said Joe Valente, a managing director at JP Morgan Asset Management, who helps manage 7 billion euros of real estate in Europe.
'The big thing that's missing is that unlike almost every other industry they haven't caught on to building their own brand. Why not have a bluewater.com?' he said, referring to the large mall of the same name in southeast England.
'Landlords fear cannibalizing sales but in 10 to 15 years they won't have a choice because they will be cannibalized anyway,' he said. In other words, a growing number of shoppers will move online whatever malls do.
'On a mall website you could book a parking space, a restaurant table or your car to be valeted. Why do people go to Covent Garden?' he asked of the central London district.
'There's nothing there you won't find anywhere else but I would argue it's a strong brand.'
Christian Ulbrich, chief executive for Europe, Middle East and Africa at property consultant Jones Lang LaSalle, said: 'Stores will get bigger and become more like adventure parks that attack all of your emotions.
'For example, Globetrotter has a climbing wall and cycle track in its Frankfurt store to try out its products,' he said of the German outdoor clothing and equipment retailer.
WAREHOUSING
While retailers and mall owners struggle to find answers, all agree that warehouse property owners are the big beneficiaries of the change in retail habits.
Every additional 1 billion euros of online sales resulted in an average additional warehouse demand of approximately 72,000 square meters in Britain, Germany and France over the last five years, a report from warehouse landlord Prologis said last year.
'Logistics is the new retail,' said Simon Hope, global head of capital markets at property consultant Savills, referring to the way changing consumer trends will affect the way investors see property.
'There is a trend of money moving away from all but the best and most regionally dominant malls into logistics as they are economically shielded,' he said.
The fact that the Norwegian and Chinese sovereign wealth funds have recently invested in the sector, as well as a report that Brookfield, lower Manhattan's largest office landlord, is trying to do the same, shows serious bets are being made on logistics property, Hope said.
Yields for high quality logistics property can be six or seven percent versus four or five percent for top shopping centers.
As another example of how retailers may re-think their operations, some are likely to club together to operate out of smaller logistics sites close to city centers to enable same-day deliveries, a service increasingly in demand, Ulbrich said.
'The issue they all face is that shopping is no longer enough of a reason to go to shopping centers.'
($1 = 0.7704 euros)
(Editing by Sonya Hepinstall)
Saturday, March 16, 2013
Samsung Galaxy S4 blitz may prompt Apple rethink
By Poornima Gupta
SAN FRANCISCO (Reuters) - Samsung's newest, feature-packed Galaxy S4 may put pressure on Apple Inc to accelerate its pace of smartphone design and venture into cheaper devices - both departures from usual practice.
The latest Galaxy, unwrapped with much fanfare in New York on Thursday, out-does the iPhone in most technical aspects. But the challenges it encapsulates run deeper than just a simple specifications comparison.
'It would be overstatement to say Apple is far behind,' Charles Golvin, analyst with Forrester, said, but it does need to note the quickening pace of competitive devices being released.
'If anything, what Apple needs to respond to is the cadence of their own releases, probably a completely new design every two years and a sort of speed bump every year is not an adequate cadence for Apple to remain at the forefront of smartphone innovation today.'
Samsung's apparent ability to go toe-to-toe with Apple on cutting-edge smartphones may prompt the U.S. titan to finally make its own assault on the lower-end of the market that it has famously stayed away from -- not least to get into untapped markets like China and India.
Many analysts now say Apple has to respond in force to Samsung and other rivals that are grabbing attention. Much of Wall Street is now looking ahead to the next iPhone, but expectations are muted.
Once the darling of Wall Street, Apple has in six months seen its shares fall 30 percent from a high of $705. Its Maps software was panned for inaccuracies; its once-reliable financial results, that rarely failed to surpass Wall Street estimates, missed analysts' expectations.
IN A RUT
Apple appears stuck in an iPhone product cycle, with a new phone typically launched in the second half. In past years, the iPhone has gotten a complete redesign only every two years.
Brian White, analyst with Topeka Capital Markets, who views the Samsung Galaxy S4 as a refresh and 'not a game changer,' said smartphone technology is now improving so fast that timetables put Apple at a disadvantage.
More importantly, White said, Apple needs to broaden its portfolio and play in more smartphone categories as the high-end market could soon be saturated, and get into new categories such as the oft-rumored television or a smart watch.
'They have all the components of the magic potion, which is the hardware-software ecosystem,' he said. 'All they need to do is take that potion and put it in a different segment of the iPhone market.'
While many on Wall Street believe the quickest way to penetrate fast-growing markets like India and China is a cheaper iPhone, the risk is that a cheap iPhone would cannibalize demand for the premium version and eat into Apple's peerless margins.
Apple's vice-like grip on its ecosystem - with the closely managed app store and its seamless integration with the hardware - is still seen as its biggest strength, one that Samsung is trying to emulate with a larger investment in software and connectivity. The Korean giant is also emphasizing its own mobile 'Samsung Hub' rather than the Google Play store that most other Android adopters point to.
The iPhone has seen its sales increase to 125 million in fiscal 2012 from 40 million in fiscal 2010. But in 2012, Samsung became the No.1 in the global smartphone market with 30.3 percent share followed by Apple with 19 percent share.
Samsung's rapid rise is partly helped by the fact that it bombards the market with close to 40 versions tweaked for regional and consumer tastes, from high-end to cheaper models.
Samsung's momentum is a major issue for Apple, Ben Reitzes, analyst with Barclays, who is expecting Apple to launch a lower-end iPhone globally this summer.
Apple declined to comment on Friday. But a day before Samsung's launch, marketing chief Phil Schiller attacked Google's Android operating system, saying that the majority of its users were stuck on older versions. He also said Apple's internal research showed four times as many consumers were switching to iOS from Android than vice versa.
(Additional reporting by Sinead Carew in New York; Editing by Edwin Chan and Leslie Gevirtz)
SAN FRANCISCO (Reuters) - Samsung's newest, feature-packed Galaxy S4 may put pressure on Apple Inc to accelerate its pace of smartphone design and venture into cheaper devices - both departures from usual practice.
The latest Galaxy, unwrapped with much fanfare in New York on Thursday, out-does the iPhone in most technical aspects. But the challenges it encapsulates run deeper than just a simple specifications comparison.
'It would be overstatement to say Apple is far behind,' Charles Golvin, analyst with Forrester, said, but it does need to note the quickening pace of competitive devices being released.
'If anything, what Apple needs to respond to is the cadence of their own releases, probably a completely new design every two years and a sort of speed bump every year is not an adequate cadence for Apple to remain at the forefront of smartphone innovation today.'
Samsung's apparent ability to go toe-to-toe with Apple on cutting-edge smartphones may prompt the U.S. titan to finally make its own assault on the lower-end of the market that it has famously stayed away from -- not least to get into untapped markets like China and India.
Many analysts now say Apple has to respond in force to Samsung and other rivals that are grabbing attention. Much of Wall Street is now looking ahead to the next iPhone, but expectations are muted.
Once the darling of Wall Street, Apple has in six months seen its shares fall 30 percent from a high of $705. Its Maps software was panned for inaccuracies; its once-reliable financial results, that rarely failed to surpass Wall Street estimates, missed analysts' expectations.
IN A RUT
Apple appears stuck in an iPhone product cycle, with a new phone typically launched in the second half. In past years, the iPhone has gotten a complete redesign only every two years.
Brian White, analyst with Topeka Capital Markets, who views the Samsung Galaxy S4 as a refresh and 'not a game changer,' said smartphone technology is now improving so fast that timetables put Apple at a disadvantage.
More importantly, White said, Apple needs to broaden its portfolio and play in more smartphone categories as the high-end market could soon be saturated, and get into new categories such as the oft-rumored television or a smart watch.
'They have all the components of the magic potion, which is the hardware-software ecosystem,' he said. 'All they need to do is take that potion and put it in a different segment of the iPhone market.'
While many on Wall Street believe the quickest way to penetrate fast-growing markets like India and China is a cheaper iPhone, the risk is that a cheap iPhone would cannibalize demand for the premium version and eat into Apple's peerless margins.
Apple's vice-like grip on its ecosystem - with the closely managed app store and its seamless integration with the hardware - is still seen as its biggest strength, one that Samsung is trying to emulate with a larger investment in software and connectivity. The Korean giant is also emphasizing its own mobile 'Samsung Hub' rather than the Google Play store that most other Android adopters point to.
The iPhone has seen its sales increase to 125 million in fiscal 2012 from 40 million in fiscal 2010. But in 2012, Samsung became the No.1 in the global smartphone market with 30.3 percent share followed by Apple with 19 percent share.
Samsung's rapid rise is partly helped by the fact that it bombards the market with close to 40 versions tweaked for regional and consumer tastes, from high-end to cheaper models.
Samsung's momentum is a major issue for Apple, Ben Reitzes, analyst with Barclays, who is expecting Apple to launch a lower-end iPhone globally this summer.
Apple declined to comment on Friday. But a day before Samsung's launch, marketing chief Phil Schiller attacked Google's Android operating system, saying that the majority of its users were stuck on older versions. He also said Apple's internal research showed four times as many consumers were switching to iOS from Android than vice versa.
(Additional reporting by Sinead Carew in New York; Editing by Edwin Chan and Leslie Gevirtz)
Friday, March 15, 2013
Radio frequency chip makers tune in to smartphone race
By Sayantani Ghosh and Sruthi Ramakrishnan
(Reuters) - Radio frequency chip makers are set to gain as Samsung Electronics Co Ltd and Apple Inc unveil ever more sophisticated smartphones and tablets to battle for the No. 1 spot in the global mobile devices market.
Investors and analysts say they like shares of RF Micro Devices Inc, Skyworks Solutions Inc and Avago Technologies Ltd - companies that make the chips that enable gadgets to send and receive data wirelessly.
Samsung unveiled its latest flagship phone, the Galaxy S4, in New York on Thursday. The S4 can stop and start videos when someone looks at the screen, flip between songs at the wave of a hand and record sound to accompany pictures.
As manufacturers improve and add new features to phones, which are increasingly used to stream music, video and games, they are boosting the RF chip technology used in the devices.
'The RF content in handsets continues to go up,' said Stewart Stecker, a portfolio manager at AlphaOne Capital. 'That's good from an immediate to longer-term perspective for the entire RF supply chain.'
The importance of RF chips will increase as network operators deploy high-speed wireless technology known as 4G LTE (long-term evolution), analysts said.
LTE requires a much higher number of frequency bands, which increases the number of RF chips in a phone.
The global LTE market is expected to almost double this year, surpassing the $10 billion mark, according to a March 13 report from telecom market research firm Infonetics Research.
'As you add LTE - that's a whole other frequency - you need more radio, more RF equipment,' said Northland Securities analyst Tom Sepenzis.
A Verizon customer, for example, using a Samsung Galaxy S4 while traveling the world, would need to be able to use the LTE network in the United States and other countries, said Sepenzis.
'That requires more complex amplifiers that can handle multiple frequencies, requires better antenna solutions, switching capability to handle all the different frequencies. That obviously favors the RF component manufacturers,' he said.
DIVERSIFYING ORDERS
Within the RF chip supplier group, analysts said those that have diversified their client base by supplying to Samsung, Apple, and other smartphone vendors such as China's ZTE Corp are best placed to take advantage of demand.
After chipping away for years at Apple's market share, Samsung emerged as the No. 1 seller of smartphones last year, undercutting its main competitor with cheaper handsets and a wide range of products.
Samsung sold 64.5 million smartphones in the fourth quarter of 2012, compared with 43.5 million iPhones sold by Apple, data from market research company Gartner shows.
Greensboro, North Carolina-based RF Micro receives about a quarter of its revenue from Samsung, up from 10 percent a year ago, data compiled by analysts showed. Orders from Apple account for a fifth of sales, they said. RF Micro declined to comment.
Power amplifier maker Skyworks relies on Samsung and Apple for about a quarter each of its revenue, analysts said. Skyworks was not available for comment.
T. Rowe Price Global Technology fund portfolio manager Josh Spencer said he likes Avago Technologies Ltd.
'Avago has some very high-end filtering technology that you have to have in the smartphone antennas,' Spencer said, adding that he was also considering buying RF Micro's stock.
Shares of RF Micro and Skyworks gained 15 percent and 21 percent respectively from the beginning of the year until February 21, when the upward trend was interrupted by Qualcomm Inc's unveiling of plans to make its own RF chip.
But both stocks recovered a day later after analysts said it was unlikely that Qualcomm would risk damaging integrated circuit partnerships to seek a profit opportunity of not more than $600 million.
Qualcomm has nearly half of the global market for 'baseband' chips, which connect mobile phones to cellular networks, and therefore is also set to benefit from rapid LTE growth.
The S4 will use Samsung's application processor in some regions and Qualcomm's Snapdragon chips, which have LTE features, in others.
'Qualcomm has such dominance in the baseband market that they have pricing leverage even against big customers,' Spencer said.
(Editing by Robin Paxton)
(Reuters) - Radio frequency chip makers are set to gain as Samsung Electronics Co Ltd and Apple Inc unveil ever more sophisticated smartphones and tablets to battle for the No. 1 spot in the global mobile devices market.
Investors and analysts say they like shares of RF Micro Devices Inc, Skyworks Solutions Inc and Avago Technologies Ltd - companies that make the chips that enable gadgets to send and receive data wirelessly.
Samsung unveiled its latest flagship phone, the Galaxy S4, in New York on Thursday. The S4 can stop and start videos when someone looks at the screen, flip between songs at the wave of a hand and record sound to accompany pictures.
As manufacturers improve and add new features to phones, which are increasingly used to stream music, video and games, they are boosting the RF chip technology used in the devices.
'The RF content in handsets continues to go up,' said Stewart Stecker, a portfolio manager at AlphaOne Capital. 'That's good from an immediate to longer-term perspective for the entire RF supply chain.'
The importance of RF chips will increase as network operators deploy high-speed wireless technology known as 4G LTE (long-term evolution), analysts said.
LTE requires a much higher number of frequency bands, which increases the number of RF chips in a phone.
The global LTE market is expected to almost double this year, surpassing the $10 billion mark, according to a March 13 report from telecom market research firm Infonetics Research.
'As you add LTE - that's a whole other frequency - you need more radio, more RF equipment,' said Northland Securities analyst Tom Sepenzis.
A Verizon customer, for example, using a Samsung Galaxy S4 while traveling the world, would need to be able to use the LTE network in the United States and other countries, said Sepenzis.
'That requires more complex amplifiers that can handle multiple frequencies, requires better antenna solutions, switching capability to handle all the different frequencies. That obviously favors the RF component manufacturers,' he said.
DIVERSIFYING ORDERS
Within the RF chip supplier group, analysts said those that have diversified their client base by supplying to Samsung, Apple, and other smartphone vendors such as China's ZTE Corp are best placed to take advantage of demand.
After chipping away for years at Apple's market share, Samsung emerged as the No. 1 seller of smartphones last year, undercutting its main competitor with cheaper handsets and a wide range of products.
Samsung sold 64.5 million smartphones in the fourth quarter of 2012, compared with 43.5 million iPhones sold by Apple, data from market research company Gartner shows.
Greensboro, North Carolina-based RF Micro receives about a quarter of its revenue from Samsung, up from 10 percent a year ago, data compiled by analysts showed. Orders from Apple account for a fifth of sales, they said. RF Micro declined to comment.
Power amplifier maker Skyworks relies on Samsung and Apple for about a quarter each of its revenue, analysts said. Skyworks was not available for comment.
T. Rowe Price Global Technology fund portfolio manager Josh Spencer said he likes Avago Technologies Ltd.
'Avago has some very high-end filtering technology that you have to have in the smartphone antennas,' Spencer said, adding that he was also considering buying RF Micro's stock.
Shares of RF Micro and Skyworks gained 15 percent and 21 percent respectively from the beginning of the year until February 21, when the upward trend was interrupted by Qualcomm Inc's unveiling of plans to make its own RF chip.
But both stocks recovered a day later after analysts said it was unlikely that Qualcomm would risk damaging integrated circuit partnerships to seek a profit opportunity of not more than $600 million.
Qualcomm has nearly half of the global market for 'baseband' chips, which connect mobile phones to cellular networks, and therefore is also set to benefit from rapid LTE growth.
The S4 will use Samsung's application processor in some regions and Qualcomm's Snapdragon chips, which have LTE features, in others.
'Qualcomm has such dominance in the baseband market that they have pricing leverage even against big customers,' Spencer said.
(Editing by Robin Paxton)
SEC says funds need not report all social media postings
(Reuters) - Mutual funds regulators are suffering from Twitter overload.
Many funds companies, which are required to file advertising and promotional materials for regulatory review, have also been sending over all of their posts on Facebook, Twitter and other social media networks.
But on Friday, the Securities and Exchange Commission moved to end the deluge, issuing guidelines that almost all social media posts did not need to be filed with Financial Industry Regulatory Authority, which conducts the reviews.
Only posts specifically making claims about fund performance or pitching a fund's investment merits should be filed for review, the agency said.
For example, a tweet simply announcing that a new fund was launched, marking a portfolio manager change or making other factual statements need not be filed, the SEC said.
However, a tweet which said 'fund performance rebounded strongly during the third quarter of 2012' or 'Looking for dividends? Think global and consider our new Global Equity Fund,' were the types of communications that should be filed for review.
(Reporting by Aaron Pressman; Editing by Phil Berlowitz)
Many funds companies, which are required to file advertising and promotional materials for regulatory review, have also been sending over all of their posts on Facebook, Twitter and other social media networks.
But on Friday, the Securities and Exchange Commission moved to end the deluge, issuing guidelines that almost all social media posts did not need to be filed with Financial Industry Regulatory Authority, which conducts the reviews.
Only posts specifically making claims about fund performance or pitching a fund's investment merits should be filed for review, the agency said.
For example, a tweet simply announcing that a new fund was launched, marking a portfolio manager change or making other factual statements need not be filed, the SEC said.
However, a tweet which said 'fund performance rebounded strongly during the third quarter of 2012' or 'Looking for dividends? Think global and consider our new Global Equity Fund,' were the types of communications that should be filed for review.
(Reporting by Aaron Pressman; Editing by Phil Berlowitz)
Google's Schmidt to visit Myanmar, an untapped telecoms market
By Aung Hla Tun
YANGON (Reuters) - Google Executive Chairman Eric Schmidt plans to go to Myanmar next week, the first high-profile tech company executive to visit after reforms that prompted Western nations to ease sanctions following decades of military dictatorship.
Since Myanmar's military stepped aside and a quasi-civilian government was installed in 2011, setting off a wave of political and economic reforms, the country has enjoyed a surge of interest from overseas businesses.
The former Burma is the last virgin territory for businesses in Asia, with untapped markets including the telecoms sector: mobile penetration in the country of 60 million is estimated to be a meager 5-10 percent.
The country's planned modernization of telecoms infrastructure and expected boom in mobile phone usage will pave the way for the entry of companies such as Google, which could profit greatly through sales of cheap smartphones built around its Android platform.
'Eric (Schmidt) is visiting several countries in Asia to connect with local partners and Googlers who are working to improve the lives of many millions of people across the region by helping them get online and access the world's information for the first time in the next few years,' Google said in a statement. His trip will also take in India.
The Myanmar trip will be Schmidt's second visit this year to a country off the beaten track. In January he went to North Korea, saying it was a personal trip to talk about a free and open Internet.
Schmidt is due to give a speech at the Myanmar Information and Communication Technology Park in Yangon on March 22, before making his way to the capital, Naypyitaw, to meet senior government officials, said Zaw Min Oo, secretary general of the Myanmar Computer Society.
'There will be an audience of about 400, comprising entrepreneurs, executive committee members of the computer association and young leaders,' Zaw Min Oo told Reuters, referring to the speech.
In February the U.S. Treasury Department issued a general license for four of Myanmar's biggest banks, two of which are owned by tycoons associated with the former junta, before a visit by 50 U.S. executives that month to explore opportunities.
The delegation, led by the U.S. Agency for International Development (USAID) and including Cisco, Google, Hewlett-Packard, Intel, and Microsoft, visited Myanmar to look into projects to boost access to the Internet, strengthen transparent government and expand digital literacy, according to a USAID statement.
Many leading firms in Myanmar are still largely controlled by businessmen subject to sanctions, but Western companies are starting to move in after the implementation of a new foreign investment law.
Myanmar is offering two operating licenses for companies to build new telecoms infrastructure.
MTN Group, Africa's largest mobile phone company, which is bidding for a license, has said around 90 companies have expressed interest.
(Additional reporting by Jeremy Wagstaff in Singapore; Writing by Paul Carsten in Bangkok; Editing by Alan Raybould and Pravin Char)
YANGON (Reuters) - Google Executive Chairman Eric Schmidt plans to go to Myanmar next week, the first high-profile tech company executive to visit after reforms that prompted Western nations to ease sanctions following decades of military dictatorship.
Since Myanmar's military stepped aside and a quasi-civilian government was installed in 2011, setting off a wave of political and economic reforms, the country has enjoyed a surge of interest from overseas businesses.
The former Burma is the last virgin territory for businesses in Asia, with untapped markets including the telecoms sector: mobile penetration in the country of 60 million is estimated to be a meager 5-10 percent.
The country's planned modernization of telecoms infrastructure and expected boom in mobile phone usage will pave the way for the entry of companies such as Google, which could profit greatly through sales of cheap smartphones built around its Android platform.
'Eric (Schmidt) is visiting several countries in Asia to connect with local partners and Googlers who are working to improve the lives of many millions of people across the region by helping them get online and access the world's information for the first time in the next few years,' Google said in a statement. His trip will also take in India.
The Myanmar trip will be Schmidt's second visit this year to a country off the beaten track. In January he went to North Korea, saying it was a personal trip to talk about a free and open Internet.
Schmidt is due to give a speech at the Myanmar Information and Communication Technology Park in Yangon on March 22, before making his way to the capital, Naypyitaw, to meet senior government officials, said Zaw Min Oo, secretary general of the Myanmar Computer Society.
'There will be an audience of about 400, comprising entrepreneurs, executive committee members of the computer association and young leaders,' Zaw Min Oo told Reuters, referring to the speech.
In February the U.S. Treasury Department issued a general license for four of Myanmar's biggest banks, two of which are owned by tycoons associated with the former junta, before a visit by 50 U.S. executives that month to explore opportunities.
The delegation, led by the U.S. Agency for International Development (USAID) and including Cisco, Google, Hewlett-Packard, Intel, and Microsoft, visited Myanmar to look into projects to boost access to the Internet, strengthen transparent government and expand digital literacy, according to a USAID statement.
Many leading firms in Myanmar are still largely controlled by businessmen subject to sanctions, but Western companies are starting to move in after the implementation of a new foreign investment law.
Myanmar is offering two operating licenses for companies to build new telecoms infrastructure.
MTN Group, Africa's largest mobile phone company, which is bidding for a license, has said around 90 companies have expressed interest.
(Additional reporting by Jeremy Wagstaff in Singapore; Writing by Paul Carsten in Bangkok; Editing by Alan Raybould and Pravin Char)
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