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Fools Rush In: Savitz, Wedge Partners Analyst Are Idiots

Wednesday, 09 December 2009 20:15

Written by Chris McFann

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pressureFrom time to time, we get analysts that make the craziest statements. Some are just so far off the charts, I have to pull out my trusty mobile and post a little balancing piece to keep sanity in check. This is one of these moments.

Take a good look at the pictures of the two gentlemen, and be sure to take anything they say with a grain of salt. The bearded, and obviously naive, gentleman in glasses is long-time Barron's West Coast Editor Eric J. Savitz. The youthful numbskull is Brian Blair, principal and equity analyst at Wedge Partners Corporation. If these guys offer you any financial advice, avoid it and run like the wind.

I know, I know. Savitz is a well respected financial journalist, and even I have regularly read his various articles and reports over the years. Blair is a respected, well-educated, often quoted equity analyst. What place do I have to roast and ridicule these respected pillars of the financial community? I'll tell you exactly what. Blair allowed a rubber chicken to fall out of his mouth, and Savitz cosigned his analysis by picking up the chicken, tasting it, and reserving it to the public as KFC Original Recipe. I'm not fooled one bit.

In an open letter to Nokia management, Blair stated that Nokia should buy Palm. That isn't the first time I've heard that lunacy, and he's not the first to say it. But most of those saying it before were offering it as a quick solution to gain a foothold in the US smartphone market. Blair had some tidbits that went far beyond that, and solidly cements his status as a world class dummy.

eric_savitz
Eric Savitz, Barron's and Brian Blair, Wedge Partners

Blair thinks Nokia should dump Symbian as well as Maemo. Even though Nokia spent nearly $1 billion unifying and open sourcing Symbian, and raised the visibility and focus of the Maemo ecosystem, your boy Blair finds it a wise move to throw away that entire investment in order to waste another $2-3 billion more to acquire Palm and put its entire focus on WebOS.

Nevermind that the entire move, in essence, would've cost Nokia $3-4 billion total, a sure bet to piss off investors. That's a massive investment. But to ditch an asset that is favored by 37% of the global smartphone market in Symbian, along with abandoning Maemo, which is gaining massive traction has been mostly lauded as a move in the right direction, just to gain a paltry 1% global marketshare?! We won't even talk about how little this helps them in the US, since Palm's WebOS has less than 1% of the US smartphone marketshare. Blair may as well have suggesting Toyota stop producing automobiles and give away its factories to began manufacturing Segways.

Blair bases his idea to focus on Palm because WebOS is only rivaled by the iPhone OS in “polish and flow and overall ease of use”. Neither of these are guarantees of market dominance, but I guess no one told him that. The same could be said of Mac OSX in the desktop market, but where did that get them? I don't remember Mac ever dominating anything. Symbian, on the other hand, is the undisputed market leader, with double the market share of the iPhone OS. It boasts an unmatched feature set, but has been saddled with complaints of clunkiness and a dated user interface. Based on that, common logic says the majority of the market favors features over "polish and flow". But Blair makes the big bucks. Guess the public service announcemnt from the US Department of Transportation was right: You can learn alot from a dummy.

His open letter went on to contradict his own philosophy. He at one moment exclaimed, "the smartphone market is not about hardware or manufacturing and distribution strength where you have historically reigned, it is about software..." Then he turns around and says Nokia has "the manufacturing and distribution capabilities and global carrier relationships" to make WebOS "rock the foundation of the handset industry and create real worry for your competition." So while Nokia's strengths have little to do with success in the market for them, it'd be the catalyst for explosion for Palm. Ever seen a dog chase its own tail? Blair does a great impression. Don't get too dizzy watching.

Blair also thinks Nokia should pare down its device portfolio to only around 5 models per year. He failed to mention that Nokia leads the market with its large portfolio, enabling it to appeal to more people and various demographics across the globe. The world's number two smartphone maker, RIM, has also seen recent rapid growth because of its willingness to increase and diversify its form factors and models, appealing to a larger audience. The only manufacturer to survive with a small device portfolio is Apple, and that status has been second guessed recently, with demands for a QWERTY model as well as an iPhone Mini. There really is little historical evidence that less models will equal more sales for anyone. Maybe Blair is making some sort of groundbreaking new strategic blueprint for other manufacturers to follow...into the grave. Or maybe he's just not as smart as Wedge Partners believes him to be.

Blair suggested Jon Rubinstein be hired as the new CEO. Not a bad suggestion, since I really like and admire Rubenstein, and consider him a visionary. But what has he done to deserve to run the top mobile tech company on the planet? He headed the hardware division at NeXT, which was disbanded after floundering for 3 years. He revived Apple's PC business in the late 1990's from a nobody to the niche under 10% market share Mac OS. Not bad, but nothing to prove he can maintain the lead Nokia has enjoyed and maintained under current management. He was a driving force behind the iPod. For that he deserves credit. But one market leading hit in his career is nothing compared to the successes of the current regime at Nokia, which has had multiple legendary releases, most recently the N95, E71, 5800 XM, and what looks like a winner in the N900.

In my opinion, Blair is evidently also a Rubinstein fan, and must be making his plea to Nokia just to save Rubinstein's butt, since Palm is waning, and the WebOS ecosystem is doing little to attract developers. He made mention in his letter of how developers want a "large market". Nokia's OSes provide this, as well as the tools and ecosystem for a diverse and versatile skill profile necessary to code for its devices. WebOS is still a nascent platform, and would set Nokia back from two to eight years easily to match the functionality of Maemo and Symbian.

Blair's biggest foolhardy statement was that US carriers would be more interested in carrying Nokia devices running Palm software. This is contrary to the fact that only one carrier carries two models running WebOS, and it hasn't exactly been a hit. Sprint is in need of a "hero" device, and yet can't give away the Palm Pre or Pixie. How would slapping Nokia on those devices make any difference? In contrast, Nokia is doing well enough on its own, and has both the E71x and Surge on at&t's deck, with Ovi Store integration right around the corner, and other carriers working to do the same, including both Verizon and TMobileUSA. It doesn't look like Nokia needs any help, but Palm could use a life raft as soon as possible.

I was beyond shocked that Eric Savitz reported Brian Blairs gum bumping session. That he agrees with him took me over the top. He ended his piece with the statement, "That makes sense to me. But what matters is whether it flies in Espoo." Please...

Nokia has centered its strategy around Qt, which will power its services, both Maemo's and Symbian's official third party application toolkits, and even the user interfaces of their future devices. Qt's cross platform nature means Nokia's Ovi Store and cobranded services can span across both in-house platforms as well as Windows Mobile, Windows 7, Mac OSX, Unix, Linux, and any other mobile platforms to which they choose to port Qt. Surely they will be pretty accomodating in that regard with any manufacturers and OS management organizations.

The global economy has been brought to its knees because of shortsighted, lame brained "analysts" and financial "experts" like Savitz and Blair. It's time we used less analysis from these talking heads and used more common sense. Nokia is the market leader, and though growth has been up and down, it was expected. Their plans are still sound, and no one has the potential or reach they can so easily boast.

So Blair, Savitz, next time you fellow Rubinstein fans want Nokia to throw him and Palm a lifeline, just suggest Nokia port Qt to WebOS. It will open up the developer community to Palm in a major way, and won't cost nearly the billions you suggest Nokia spend. I'm sure Nokia would give Palm a discount to implement the Ovi Store on WebOS devices if you ask nicely enough. But don't try that "Nokia should by Palm" slant again. You lose all credibility and show yourselves to be idiots. If a simple blogger/amateur analyst can see what's going on, something's wrong..



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