Last week, I wrote the first part of a two-part series on how the tech industry fared in 2015. In this second and concluding segment, I take a look at the big incumbents- the Goliaths in their respective domains and how they fared in 2015. This also serves as a good setup to my next post- key trends for 2016 and who is best positioned to capitalize on them.
In 2015, the largest and most profitable company in the world, Apple, continued its global domination in the smartphone category with the iPhone 6x (6, 6S, 6 Plus and 6S Plus) making rapid inroads into Android territory. The iPhone 6S and 6S Plus extended the success of the 6 and 6 Plus from 2014. The biggest question for Apple is really when the iPhone growth train will slow down. It is possible that with Moore’s law catching up, there may be limited innovation opportunities in a saturated smartphone space- but one will never know with Apple.
The real story of 2015 though was not the iPhone (which continued to be 60% of the company’s revenues). Apple announced its first product completely in a new product category with wearable, the Apple Watch. The Apple Watch was announced in 2014 but didn’t ship until April 2015. Apple Watch has met with mixed reviews- many praising it for its design but questioning the utility of the product space in general. Apple released an updated watchOS 2 in Fall which adds more functionality to the product. But limited battery life (day long), high cost of entry (>$350) and lack of a compelling killer application has continued to keep the Watch more as a novelty and less as a must-have. In the coming years, with improvements to battery life and killed applications, Apple Watch could be a significant revenue stream for Apple. But we are in early days for wearables in general.
Apple’s iPad has been the sole blip in Apple’s otherwise stellar 2015. Tablet sales continued to decline across the board and Apple’s iPad was no different. With quarter over quarter and year over year sales declines over 10%, the iPad needed a jolt and Apple gave it in the form of the large screen iPad Pro. Apple hopes that the iPad will help its position in the enterprise space while convincing creatives to upgrade. To make a compelling case to creatives, Apple has launched the Apple Pencil, a stylus accessory for the iPad Pro. Priced at $99, the Pencil has come in for good praise for its accuracy and performance.
Apple finally updated its hobby product, the Apple TV with much more powerful hardware and a new touch remote. Early impressions have been good but at $149, Apple TV is priced well above all the competition from Roku, Amazon and Google Chromecast. It will be the device to upgrade to, for current Apple TV users but for many others, the lower priced offerings from competitors might be more appealing given that much of the streaming content is available across all platforms anyways.Rumors continued to swirl about Apple building its own car and 2016 will probably not be the year we know more about it.
Starting next year, it might make more sense to call this Alphabet Inc. Google did a big corporate overhaul that created a parent company named Alphabet Inc and Google as one of its properties led by Sundar Pitchai. This allows Alphabet to pursue moonshots out of the bounds of Google either from scratch or through large scale acquisition. This also allows Google to focus more on its core properties- Search and Android.
Android as an OS continues to grow but this year was unremarkable. Apple iPhone 6x (6, 6S, 6 Plus and 6S Plus) continued to dominate in US and China while Android did not really make similar strides in the premium smartphone category. While this might not be an undesired outcome, the opportunity to monetize and drive search business with lower cost Android handsets might be lesser than premium ones. Google released newer models of its Nexus line and also unveiled its own MVNO service called Project Fi. It remains to be seen if Fi is a successful model in the space for others to emulate.
Android Wear seemed to lag in mindshare compared to simple low cost fitness trackers like FitBit and higher end Apple Watch. OEM partners continued to build Android Wear products but they have not made a significant impact in the space. Search continues to power much of Google’s businesses and Google has tried with varying success to parlay that in related categories like Shopping, Home Delivery via Google Shopping Express and more. Google’s Cloud Platform was also an area of significant attention, investment and growth.
Aphabet’s direct and indirect pursuits in robotics, AR/VR (through Magic Leap), driverless cars (possible Ford partnership), internet delivery mechanisms (Project Loon), content monetization (Youtube Red), health sciences, home automation (Nest) and many more will all have their respective moments in the sun in 2016. Time will tell if such a diverse portfolio of interests (and growing) will help or hamper the growth of Alphabet as it tries to find its next big golden egg outside its core properties namely Search, Maps, Android, Chrome and YouTube.
Facebook continued to completely dominate the social networking space and marginalize everyone else including Twitter and Google Plus in sheer customer growth and monetization. Facebook now boasts well over a billion active users, many of whom log in atleast once a day. It has also fully cracked mobile monetization with a larger share of its users using its core products on mobile platforms. Facebook Video has continued its rapid growth as has its core properties – Instagram, WhatsApp and Messenger. Facebook now connects more users through its products – WhatsApp, Facebook, Instagram and Messenger than any other company. It has also continued its push in emerging markets with its Internet.org initiative which has been met with mixed success in some countries due to its questionable intentions and partnerships.
Facebook’s fledgling VR business through its Oculus acquisition shipped its first product as Samsung’s Gear VR. 2016 will see the formal launch of the Oculus Rift product which will be interesting and closely watched. Facebook has also continued its push to build Messenger as its own platform with third party apps and services like Facebook M. WhatsApp continues to grow like gang-busters and that day is not far off when Facebook starts talking about monetization. I was on record questioning Facebook’s lofty price to acquire Instagram but I will humbly admit I was wrong. Instagram continues to be one of Facebook’s smartest acquisitions with tremendous opportunity for growth and monetization.
Microsoft had a big year with the release of Windows 10, which went much better than the launch of Windows 8. Windows 10 has already been installed in over 200 million computers and all initial reviews seem to indicate that Microsoft has taken the effort to address the complaints from Windows 8.
Nadella’s philosophy of “Mobile-First, Cloud-First” has also resonated well. Microsoft’s Azure has continued to grow torridly as one of the compelling cloud rivals to AWS. Microsoft also made all of its Office offerings free on iOS and Android and continued to drive adoption towards its Office365 subscription service. Windows Phone continued to struggle both in the device and mobile platform space and it wouldn’t be surprising if Microsoft slowly but steadily abandons it.
Microsoft also showed great design sensibilities with the launch of the Surface Pro 4 and Microsoft Surface Book portable devices. The Surface Pro line has been a rare bright spot in Microsoft’s hardware attempts over the past few years and they doubled down by building the ultra premium Microsoft Surface Book. It competes with the best in laptops and the newly released iPad Pro and offers an interesting window into the post-PC era as seen by the PC champion itself.
As much as I would love to analyze Amazon’s position in great detail, as an employee, that would be impossible. I will do a short and broad take instead- Amazon continues to build on its strength as the biggest e-commerce player in the US and many European countries, a strong player in Japan, Brazil and Mexico and a growing player in India. Amazon’s Prime service is probably the most valuable subscription service in the industry today (Netflix is arguably as important but within a smaller space). Amazon’s original content investments showed no signs of slowing down and how this plays out against the leader, Netflix will be interesting to see.
Amazon continues to innovate in the device space with the surprise hit Amazon Echo and in the still nascent IoT space with Amazon Dash and Dash Button. There is a plethora of opportunity for Amazon to build and integrate on top of its powerful e-commerce story. It also helps that Amazon has the biggest cloud offering in the industry with AWS. 2015 saw Amazon consolidate its leadership in e-commerce and cloud while retaining its place as an innovator in consumer electronics and in offering the most value for the dollar with its affordable streaming solution in Fire TV Stick and the $49 Fire tablet.
Others of Note
Netflix is the biggest company to watch as it transforms itself into a global powerhouse. With increasing investments in the content space and rapid global expansion (60 countries in 2015, 130 in early 2016) and over 70 million subscribers, Netflix is the biggest media player that is not Amazon or Google (YouTube).
Intel is continuing to reinvent itself for the mobile era with a strong push in the IoT and wearables space. The space is still very nascent and Intel’s investments will show their real value a few years from now. All signs indicate to the fact that this is the year we will see the Intel chip powered iOS device (if you exclude the pre-Intel Infineon modem that powered the early iPhones). The 4 inch iPhone for 2016 seems to be the strong candidate at this point.
Qualcomm continued to be challenged by MediaTek and had a bad year overall with the Samsung design loss coupled with an overall maturing in the space. Power issues with the Snapdragon 820 did not help their cause. 2016 might be the year Qualcomm gets split into a licensing company and a solutions provider- I think its a bad idea since much of the innovation is highly coupled with the development of next generation processor solutions but shareholders have a way of influencing things. The split might also provide a significant opportunity for Intel to seize upon.
IBM, HP, Dell and Cisco and many others continued with limited success to reinvent themselves before the tide starts turning against them. Their margins and profits were fine in 2015 but are increasingly being challenged by nimbler competitors with an appetite for smaller margins. HP shrugged off its consumer division to focus on the more lucrative enterprise segment. IBM entered into a long term partnership with its once rival, Apple to take IBM solutions into more enterprises and be part of the mobile economy. Dell picked up EMC while Cisco got itself a new CEO in a long time to take it into the next decade.
2015 had no dearth of action and 2016 will be no different. There will be consolidation and M&A as the old guard tries to catch up to the new and the new tries to keep itself in front. There are exciting times ahead for the tech industry in 2016.