Choi Moves Samsung's Mobile Biz In New Direction

This is a year of cataclysmic shake-ups at Samsung Group, South Korea's No. 1 chaebol, or family-controlled conglomerate. Its chairman of two decades, Lee Kun-hee, and other senior executives, including Lee's son and heir apparent, resigned amid a scandal that seized nationwide atttention. But more quietly behind the scenes, business strategy and culture at Samsung Electronics, the crown jewel of corporate Korea, is shifting, too.

Take Samsung's cell phone business. The brand was known for pouring in loads of money and overworking engineers to crank out a plethora of high-end models. Since taking over the telecoms division last January, Choi Gee-sung, 57, has pushed the company to pump out low-end phones, investing in marketing and grabbing market share in emerging markets. This may prove a savvy, well-timed strategy, given the challenges of a global economic downturn.

Under predecessor Lee Ki-tae, Samsung Electronics (other-otc: SSNLF - news - people ) focused on pricey phones and crammed features onto them. Samsung was "focusing too much on cutting-edge technology, putting a lot of functions on the phone," said Peter Yu, a Seoul-based analyst for BNP Paribas. "Samsung phones were getting fatter and uglier," while competitors released sleeker, smaller phones.

But Choi, who previously ran Samsung's digital media business, was interested in something cheaper. "He has been trying to expand Samsung's handset business from high-end to low-end," said Seoul-based analyst Lee Min-hee at Dongbu Securities. Low-end phones, those retailing for less than $100, have become the biggest segment of Samsung's handset shipments, accounting for 40% of 46.4 million units sold in the second quarter, according to Yu.

The new focus has meant revamping three business strategies. First, low-end phones require lower-cost production. The company needs to produce more cheaply, which entails shifting production to China or Vietnam--despite South Korea's global reputation for economic nationalism. "Samsung is trying to increase its outsourcing of supply from local to overseas," Lee Min-hee said. Samsung does not disclose percentages of cell phone parts sourced to domestic versus overseas suppliers. "It's inevitable to relocate to China. It's the floor, the worldwide floor," Lee said, adding that other cell phone makers like Nokia (nyse: NOK - news - people ) and Motorola (nyse: MOT - news - people ) have done the same.

Second, it must sell much more of each model, to make up for the lower profit margins. Samsung "previously had too many models," said Yu. Now "they're selling far more volume per model." This entails investing heavily in marketing rather than competing on phone features. "Previously, the mentality was 'we make a good product,'" so Samsung let the phone speak for itself, Yu remarked. But Choi is "more of a marketing-driven kind of guy. Now they're really pushing out a product."

Finally, the company is trying to focus on emerging markets, where many people still do not have phones and can only afford low-end models. "Take China, for example, where an estimated 500 million people still do not own a phone. It's a similar story in India. Samsung has been taking share in both countries," noted Robert Lea, a Seoul-based semiconductor analyst for UBS.

The reorientation is a sound bet, given the likelihood of a global economic slowdown. "High-end phones are tougher these days," Yu said, adding that competitors like Motorola are moving aggressively into low-end phones for emerging markets as well.

Nokia Optimistic Despite Drop In Profits

Nokia saw a 30% drop in net income, but its outlook for the fourth quarter may soothe those worried about the economic slowdown hitting the mobile industry.

Nokia (NYSE: NOK) saw its third-quarter revenue and earnings drop, but the company said it expects the overall industry to be up for the next quarter.

The company saw its net income fall to $1.47 billion, down 30% from $2.1 billion for the same period last year. Sales were also down, hitting $16.4 billion. Like every phone company, Nokia has been feeling the pinch from the economic slowdown, and it also faced sluggish sales in Europe and the United States.

The phone manufacturing giant did ship 117.8 million phones in the quarter, a 5% increase year over year but a 3% decrease from last quarter. It also saw a dip in overall market share, going from 39% to 38%.

The drop was not unexpected, as the company warned it may lose market share in certain areas because it didn't want to engage in price-slashing like its rivals were.

"When we spoke about the aggressive competition in the third quarter, we decided tactically not to participate in the price competition," said CEO Olli-Pekka Kallasvuo in a conference call. "We have a responsibility as the market leader, when the market leader moves, the market moves."

Despite the decreases, Nokia's outlook for the industry as a whole may soothe some who fear dramatic dips in the mobile industry. The world's largest cell phone manufacturer said it expects the cell phone volume to be up sequentially.

The company also said there were 44.2 million smartphones shipped in the third quarter, an increase from 31.7 a year ago. Nokia said it is well-prepared to capitalize on this increasing market with the upcoming release of the touch-screen 5800 XpressMusic, as well as its N and E Series smartphones.

Sony Ericsson units drop, losses widen

Sony Ericsson highlighted the mounting problems for incumbent phone makers on Friday with news of its summer quarter results. The carrier shipped a total of 25.7 million phones in the period, which ended in September; the figure is a slight 5.3 percent boost to its numbers from the spring but a slight loss from the same season a year earlier, dipping from 25.9 million phones in summer 2007.

The company has also reported a net loss equal to $33.7 million for the quarter and notes that the amount is both a drop from an $8.1 million profit in the spring as well as a significant reversal from the company's performance a year ago, when it generated nearly $359.5 million.

Sony Ericsson describes the results as "expected" and explains them as it has in previous quarters, asserting that shifts in phone sales to the lower end, as well as increased competition in Europe and elsewhere, are reducing the company's income and market share at the same time.

The reduced numbers give Sony Ericsson just 8.3 percent of the world cellphone market for the summer, according to Nokia estimates of 310 million phones shipped across the whole industry. While an increase over spring's 8.0 percent, it should represent a decrease from summer 2007. Sony Ericsson itself expects less still at exactly the same spring figure.

In spite of the decline, the cellphone maker has reasons to believe its results should improve in the fall. The company has just recently begun shipping the XPERIA X1, which stands as its first Windows Mobile phone, first full touchscreen device and first more direct competitor to very media centric touch handsets like the iPhone or the BlackBerry Storm just announced for Verizon, Vodafone, and multiple Canadian carriers.

Sony Ericsson also says it remains in the middle of a restructuring effort to improve the company's operations themselves and that it would have reduced or eliminated its losses without those expenses.

Improving cell phone reception

It was with some amusement I recently stumbled across T-Mobile's Personal Coverage Check, a service that claims you can "Check if T-Mobile coverage is right for you."

A quick digression: Ever wonder what the "t" in T-Mobile stands for? The answer is "Telekom" because the company is a subsidiary of Deutsche Telekom. Curiously, I have always found German products to be of high quality with good customer service, but for some reason T-Mobile is different.

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Anyway, according to T-Mobile's mapping service I should have a signal strength of between three and four bars. Judging from my very precise measurements (that is, looking at my phone), reality is a little different, with my signal usually between zero and four bars and alternating between those states on a roughly 5-minute cycle. So far I have not been able to find an explanation as to why the signal strength should wobble around so much -- perhaps you have an answer and would care to enlighten me.

Actually when I write "between zero and four bars" I should qualify that with the phrase "until two weeks ago." These days the cycle has shifted so now about every 5 minutes I get four bars for about 30 seconds and then nothing, nyet, nada, for the rest of the time. Can customer service tell me why? No. Can they do anything about it? Hah!

Qik Launches First Live Mobile Video Streaming on Mass Market Phones

REDWOOD CITY, Calif., Oct 16, 2008 /PRNewswire via COMTEX/ -- Qik, Inc., the live mobile video streaming platform, today announced that it is the first live mobile video product to launch on mass market mobile phones. Available today in alpha, Qik's service is now ready for use on more than a dozen Nokia and Sony Ericsson mass market mobile handsets. With Qik's free service, users can stream video live to the Internet in just two clicks from their mobile phone. Those watching the videos on the web can engage in live interactive chat with the person broadcasting.

"It's a real milestone for mobile technology that an advanced utility like Qik is now available on mass market cell phones," said Ramu Sunkara, co-founder and CEO of Qik. "We have been astounded by the use of Qik by smartphone owners, and are excited to see what mass market cell phone users will stream live to the Web."

Mass market cell phones include non-PDA and non-smartphone handsets which are more accessible to a much broader market of customers. These devices usually carry a lower price point than more advanced phones and have deep penetration in the global mobile market. Qik's software for these handsets is based on the Java Platform, Micro Edition, (commonly referred to as J2ME), the most ubiquitous application platform for mobile devices.

"Nokia is pleased that Qik's innovative live video service is now available for owners of Nokia feature phones as well as Nokia smartphones," said Tom Libretto, Vice President, Forum Nokia. "Qik's release for these phones adds an exciting new way for people to use an even wider variety of Nokia handsets."

Qik is initially launching in alpha on the following handsets: Nokia 5300, Nokia 6300, Nokia 6500 (classic and slide), Nokia 6555, Nokia 8800 Arte/Carbon Arte, Sony Ericsson G502, Sony Ericsson K660i, Sony Ericsson K850i, Sony Ericsson K858c, Sony Ericsson W890i, Sony Ericsson W908c, Sony Ericsson W910i, and Sony Ericsson Z750i.

Owners of the above devices can get Qik by registering at http://qik.com/. Support for these devices is expected to enter beta in the coming weeks, and support for additional Nokia and Sony Ericsson feature phones is expected soon after.

The Pope, Senator Barack Obama, Bono, and Steve Jobs are just a few of the notables to be streamed live to the web by Qik users in more than 150 countries. Journalists are using Qik to be more transparent in their reporting, and politicians worldwide are employing Qik as they campaign on a more engaging Web platform. Parents around the planet are easily sharing family events as they happen through Qik on their cell phones. With simple but robust software and a feature-rich site, tens of thousands of Qik users are streaming important moments live to the people with whom they want to share.

Qik, in addition to being the live mobile to web video service of choice for celebrities like Ashton Kutcher, is also delivering exciting footage shot by a wide selection of users across entertainment, business, sports, and technology. Recent Qik videos of note have included behind the scenes footage from Sarah Palin and Joe Biden's vice presidential debate, interviews with comedian Dane Cook, the launch of Apple's new notebook computers, and British Prime Minister Gordon Brown's speech reacting to the global economic climate.

About Qik

Qik, the world's leading mobile live video streaming platform, currently available on nearly 70 cell phones, enables anyone to stream video live from their mobile device from anywhere, to anywhere. Its innovative, patent-pending technology enables anyone to share their moments live with their friends and family or the entire world. Notable events captured on Qik include the lighting of the Olympics torch from both inside and outside the Olympic stadium in Beijing, Ashton Kutcher's own Qiks from behind the scenes at Blah Girls, his new start-up, and British Prime Minister Gordon Brown's speech reacting to global economic distress. Find additional Qik videos, including those streaming live, here: http://qik.com/.

Botnets on cell phones in 2009?

About 15 percent of all online computers are infected with bots, says a new report (PDF) on emerging threats for 2009 from Georgia Tech Information Security Center. And according to Patrick Traynor, assistant professor at Georgia Tech's School of Computer Science, "We'll start to see the botnet problem infiltrate the mobile world in 2009."

In Traynor's view, if botnets, or large networks of infected computing devices, gain a foothold on mobile devices, they could be used to create a distributed denial of service attack on the cellular network itself, inconveniencing thousands of cell-phone customers.

But the future need not be so dire.

"Because the mobile communications field is evolving so quickly, it presents a unique opportunity to design security properly--an opportunity we missed with the PC," he wrote in the report.

Most people keep their PCs and operating system for years, up to 10 years in some cases. Most people buy a new mobile phone every 2 years, on average.

"The short life cycle of mobile devices gives manufacturers, developers, and the security community an opportunity to learn what works from a security standpoint and apply it to devices and applications more quickly," wrote Traynor.

According to the report, researchers like Traynor expect standards for handset security to emerge within the next 12 months.

The report also called out four other areas of concern: greater prevalence of social-networking malware such as a recent botnet risk reported on Facebook, user-specific VoIP attacks such as the one presented recently at Toorcon, cyber-warfare such as the recent denial-of-service attacks against the nation of Georgia, and a maturing cybercrime economy like that in recent reports of "crimeware-as-a-service" packages for sale on the Internet.