Andreas Constantinou

Watchlist: The 100 million club

Watchlist: The 100 million club

We ‘ve just launched the 100 million club: the watchlist of software companies whose products have been embedded on more than 100 million mobile handsets.

Despite the apparent opportunity in the one-billion-a-year handset market, there is a multitude of challenges for software vendors who want to make it big: 2+ years technology development, 6+ month OEM sales cycles, 1+ year operator sales cycles, 2+ years for time-to-royalties, diverse OEM and operator requirements across tiers, contrasting regional mobile economics and lack of a common technology substrate.

[update: the latest edition of the 100 million club is here]

As a result very few software companies have managed to overcome the commercial and technical challenges inherent in the mobile industry and reach significant market penetration.

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(click for download access)

Just over 20 products have shipped on more that 100 million handsets (incl. feature phones) as of end 2007 : Adobe Flash Lite, Aplix Jblend, Esmertec Jbed, ACCESS Netfront, Openwave Browser, Opera Mobile, Picsel Browser, Ikivo SVG Player, Scalado CAPS, TAT Kastor, Beatnik MobileBAE, Nuance Vsuite, PacketVideo CORE, Red Bend vCurrent, Symbian OS, Nokia S60, Qualcomm BREW, Mentor Graphics Nucleus, ENEA OSE, Nuance T9 and Zi eZiText.

These vendors are listed in the chart segmented into five categories, based on where their products sit alongside the software stack:
– Application execution environments such as Flash Lite and Java
– Browsers, such as Openwave, Opera and Picsel.
– Middleware such as audio and video codecs (Beatnik and PacketVideo), speech recognition (Nuance), graphics engines (Ikivo, Scalado and TAT) and firmware update agents (Red Bend).
– Operating systems such as Symbian, S60, BREW, Nucleus and OSE.
– Text-input engines such as Nuance and Zi.

We have excluded the KVM virtual machine for which Sun did not provide any shipment numbers and Teleca’s Obigo browser which has been discontinued since May 2007.

Based on Morten Grauballe’s original article on which this watchlist has been based, there are several common traits for members of the 100 million unit club.

1. All software solutions have been embedded on the handset pre-load, i.e. before the entire software stack is loaded onto the handset ROM. With the exception of Opera Mini (a downloadable Java application), we are not aware of any other downloadable software that would cross the 100 million mark in terms of downloads. In addition, downloaded applications are much harder to locate and access once on the handset due to long click-distance, which is why we have focused our 100 million watchlist on pre-loaded applications.

2. The vast majority of software vendors have relied on feature phones and the 8-12 leading proprietary operating systems that exist, rather than just smart phones and open OSes. The exceptions are Symbian OS and Nokia’s S60 which have crossed the 100 million mark.

3. The 100 million club members have mastered the complexities of software distribution. Most vendors have a direct relationship with the tier-1 handset manufacturers. Fewer vendors establish relationships with mobile operators for distribution as part of operator handset variants. In general 100 million club members understand the intricacies of the global mobile market, how to do business in operator-led vs manufacturer-led markets and the importance of leadership in standards bodies.

It is worth noting that based on device volume and model data reported by vendors, we estimate that there are 2 million devices shipping per device model. This ratio depends on the accounting model for channel (incl. operator) variants – the number reduces to a 500K if one accounts for operator and regional variants. Moreover, the 2 million figure reduces as the extent of channel customisation increases, which occurs higher up the software stack due to channel customisation requirements.

A note of caution: huge volumes does not mean huge revenues, as is attested by Openwave’s share price tumble, the discontinuation of Obigo browser, Zi’s negative balance sheet, the tiny royalties for RTOSes and Tegic’s valuation at the Nuance acquisition. Yet there exists a sweet spot of market penetration in-between the 100 and 500 million marks where several vendors boast both profitability and rosy revenue prospects.

Warm congratulations to the vendors who have succeeded in crossing the 100 million handset mark and watch this space for the next expanded and extended revision in 6 months time!

– Andreas

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