Few Winners in Heated Cellphone Wars

If you are wondering who will be your cellphone provider next year, so are the cellphone companies. Maneuvers by American cellphone providers to acquire one another are threatening to erupt into all-out war. And the question is not only which ones will survive, but whether the survivors will be ruined by the prey they are rushing to swallow, leaving consumers by the wayside. The first move occurred in 2011, when AT&T made a bid to acquire T-Mobile U.S.A., the American subsidiary of Deutsche Telekom, which had been looking to sell it for a long time. AT&T’s move was brave, considering the well-known antitrust concerns. As part of the deal, T-Mobile was put in the awkward position of arguing to antitrust regulators that it might not survive if it wasn’t acquired because of its smaller size and its annual revenue of only $21 billion. It was a bad move for AT&T. Regulators blocked the deal, and the company walked away poorer by about $6 billion — the $4 billion it was required to pay over the failed acquisition plus the estimated value of the broadband licenses it was required to grant T-Mobile.

The failure should have made other carriers wary. Instead, the message was that unless you acted soon to get bigger, you were not likely to be in the cellphone business for long. And bigger means big enough to challenge AT&T and Verizon Wireless, the two 800-pound gorillas in the wireless arena, with about two-thirds of the United States market, according to Strategy Analytics, and more than 200 million subscribers combined. The runners-up in the market, Sprint and T-Mobile, knew they had to scramble to get bigger. And behind them were the poor cousins, Leap Wireless and Metro PCS, regional wireless services also looking to grow. The stage was set to unleash the investment bankers.

Sprint and Metro PCS came close to a merger this year, but Sprint’s board scrapped a deal at the 11th hour. Metro PCS then went down the short list of other targets and agreed to a deal with T-Mobile, announcing a combination this month. If completed, joining the two would create the third-largest mobile phone operator with 42.5 million subscribers. And the combination is really an acquisition of T-Mobile by Metro PCS with a $1.5 billion dividend kicker paid to Metro PCS shareholders. This dividend is much less than Metro PCS shareholders could get in a sale. But this is the price that management is paying to get larger. Expect Deutsche Telekom, which will own 74 percent of the combined entity, to sell its shares quickly when, and if, the deal closes.

MetroPCS, however, was thinking broadly when it announced a combination with T-Mobile. According to people close to Metro PCS, it is also trying to nudge Sprint to make a “put up or shut up” move to acquire it — either now or after it combines with T-Mobile. Sprint’s alternative is to become the odd man out, left behind by bigger and fiercer competitors. Many expected Sprint to immediately take the bait and start a counterbid for Metro PCS. Instead, Sprint responded last week with an out-of-the-box move, announcing that SoftBank, the Japanese telecommunications behemoth, would acquire 70 percent of the company for $20.1 billion. The money would be used to buttress Sprint’s finances, presumably for more deal-making and expansion. Flush with potential cash, Sprint quickly agreed to spend about $100 million to acquire a stake from Craig O. McCaw in Clearwire, the broadband service provider. This would raise Sprint’s stake to 50.09 percent of the votes from 48.6 percent. Clearwire’s stock slid on the news, as the market concluded that Sprint would now be uninterested in acquiring the remaining shares. Such an acquisition didn’t make sense, because Sprint already controlled the board and appointed seven of 13 directors. But what is clear is that Clearwire has become just another pawn in the cellphone wars.

Let’s all acknowledge at this point that I’m dizzy trying to keep track of everything. Left out of this deal-making party so far is Leap Wireless. In August, its chief financial officer acknowledged that the company might sell itself. Leap’s stock fell 18 percent the day of the announcement that Metro PCS and T-Mobile were combining under the assumption that it no longer was an attractive acquisition target and would not be part of the deal-making. That may be true — for now. Yet it is unlikely that Leap will be left out. That is because we are heading to a place where there are likely to be three big wireless companies in the United States, but not many more. And the big will continue to get bigger as they scoop up telecommunications companies with access to excess broadband spectrum. While the endgame may be apparent, one has to wonder whether the wireless industry is in danger of entering the fog of deal-making. We’ve seen this story before — in the battle over RJR Nabisco that was made famous by “Barbarians at the Gate” and in deal-making frenzy during the dot-com boom. When faced with a changing competitive landscape, executives spend billions because they believe they have no other choice. The cost to the company — and to shareholders — can be immense. In this world, executive hubris tends to dominate as overconfidence and the need to be the biggest on the block cloud reason.

Witness the comments of SoftBank’s chief, Masayoshi Son, who told Jim Cramer on CNBC after the announcement of his company’s investment in Sprint that “I am a man, and every man wants to be No. 1, not No. 2 or No. 3.” Not so coincidentally, the deal would make SoftBank only the third-largest global wireless carrier. AT&T has already lost an estimated $6 billion in the cellphone wars. This is no small change. The rush to complete deals is an investment banker’s dream. But the hunt may lead these companies to not only overpay but acquire companies that are underperforming or otherwise don’t fit well. Then they have to find a way to run them profitably. And it may be that it is not being large that is crucial to winning in this game, but technical innovation. That is what Apple found out to great success. So far in the cellphone wars, these other considerations appear meaningless. For consumers, this means that there is likely to be less choice as wireless carriers disappear. And whether service will improve or large carriers will simply occupy more space is unknown. Regulators, meanwhile, are likely to stand aside from these smaller deals, instead buying the argument that AT&T and Verizon need a bigger third competitor to stand up to it. It remains to be seen if that is true, but in the heat of the moment, cellphone executives believe there is no choice but to acquire one another. And in these wars, it is all about making a deal. Consumer concerns are secondary.

Google Shifts Pitch for Its New Chromebooks

Two years ago, when Google first advertised Chromebooks — laptops that store everything online, without a hard drive or desktop software — the tagline at the end of the ad was, “Ready when you are.” Two years later, Google has apparently decided that people are ready. In the new ads for the latest Chromebooks, which run Google’s Chrome operating system, the tagline is, “For everyone.” Google has a new Chromebook. Although it looks like a laptop, Google’s Chromebook is competing with many other devices, including two announced this week, Apple’s iPad Mini and Microsoft‘s Surface, not to mention Google’s own Nexus 7 tablet and Amazon.com‘s Kindle Fire. The Chromebooks were hastily announced Thursday, before this week’s big product events by Apple and Microsoft.

The ads, which have begun airing nationally on television during the baseball playoffs, also reveal a shift in strategy for Chromebooks, after Google failed to sell the original ones in large numbers. At first, Google trumpeted their usefulness for businesses, but corporations are often the slowest to adopt new technology and business buyers couldn’t wrap their heads around a computer without desktop software. So Google’s new tactic — revealed in a series of sweet clips of home and family life in the TV ad — is to sell the $249 Chromebooks as a family’s second, at-home computer, the one they turn to when they want to search for a recipe, play a game or watch a movie.

Google’s ads show Chromebooks at the kitchen table (“for homework”), on the deck (“for working at home”), in the kitchen (“for goo”), in bed (“for lazy Sundays”) and on the couch (“for movie Fridays”). “What excites us most is how we see Chromebooks being used in day-to-day life,” said Sundar Pichai, senior vice president of Chrome at Google. “Of the people who bought it, the most common use case is people just use this as an additional computer at home.” The new silvery Samsung-made laptop is lighter (2.43 pounds), thinner (0.8 inches) and, at $250, less expensive than the original Chromebook, which was black and clunky. That is partly because they use a chip that is typically found in smartphones and tablets, not laptops.

The idea behind Chromebooks, named after Google’s Chrome browser, is that people can now live on the Web, storing everything in the cloud, and no longer need desktop software and hard drives or all the inconveniences that come with them, like I.T. support, software and security updates and computer back-ups. People use only Web services on Chromebooks, like Google’s Gmail and Picasa and Microsoft’s Office 365. Google Web apps like Gmail, YouTube and Hangouts are built in. In a world overrun with Chromebooks, as imagined by Google, people could walk up to a computer anywhere in the world, log in and access all their stuff. To start people off, Google is offering new Chromebook owners 100 gigabytes of free file storage on Google Drive for two years. That amount of space typically costs $5 a month. (So the $250 Chromebook feels like it is really only $130.) Google also links a user’s activity on a Chromebook with the same person’s Android phone, for instance, so if you search for a pizza place on the laptop Google will automatically show you directions on your phone.

Big Data in More Hands

Big Data is coming for you. Software that captures lots of data and uses it to make predictions has mostly been the province of engineers skilled in arcane databases and statisticians capable of developing complex algorithms. As the business gets bigger, however, software makers are domesticating their products in the hope they will prove attractive to a broader population.

Cloudera, which offers a popular version of the open source database called Hadoop, released software on Wednesday that makes it possible to run queries from a more mainstream SQL programming language interface. SQL, thanks to its adoption by Oracle, Microsoft and others, is known to millions of business analysts. “This enables us to talk to a whole other class of customer,” said Mike Olson, the chief executive of Cloudera. “The knock against Hadoop was that it is too complex.”

There is a reason for that. Hadoop is one of several so-called unstructured databases that were created at Yahoo and Google, after those two companies found they had previously unimaginable amounts of data about activities like people’s Web-surfing habits. Put into databases designed to handle this unstructured behavior, then analyzed, this information was valuable for figuring out things like what advertisement to put in front of each individual Web surfer. Now, with more commerce, content and social behavior online, Hadoop-like systems are valuable to mainstream corporations. Cloudera, which was formed by veterans of Google, Yahoo and Oracle, was among the first to make a commercial management product to go with Hadoop, which is an open source product.

Cloudera’s new SQL offering, named Impala, is based on an open source project called Dremel that began inside Google. Mr. Olson said Google had released papers on Dremel, but Cloudera was the first to make a public version. Like Hadoop itself, Impala will be open source, and Cloudera will make money from subscriptions to its management software. The Hadoop product was also improved, Mr. Olson said, so complex queries could now be performed up to 30 times faster.

This is not the only way companies are trying to reach more Big Data customers. Last week Teradata released a no-cost trial version of a combination database-analysis program that is capable of handling traditional SQL queries as well as larger data analysis work.

The product, which comes from Teradata’s acquisition of Aster Data, has more than 50 analytical functions, including social network analysis and fraud detection. The target audience includes business analysts as much as highly trained data scientists. It comes with tutorials, presumably in the hope that prospective customers will love the test product enough to buy a full-featured production version.

Apple likely to Unveil iPad Mini on October 23rd

Apple is expected to unveil its highly rumored and much awaited iPad mini at a special press event on October 23, reported tech blog, All things Digital.This iPad mini or whatever its official name will be is expected to have a 7.85 inch liquid crystal display along with Apple’s new Lightening connector carrying a thinner design than its predecessor. Further, it is also speculated that the connectivity option would be Wi-fi only. It is interesting to note that this iPad min launch would be just three days ahead of Microsoft taking the wraps off its new Windows 8 software and Surface tablet and two days before Apple’s quarterly earnings announcement.

Reports also hinted that it will be going head-to-head with Google’s Nexus 7 and Amazon’s Kindle Fire due to their notable cheaper prices and features than more powerful devices like Apple’s new iPad. Although, pricing would be a big question for this device but it is believed that iPad mini will be substantially cheaper than new iPad. The iPad mini is likely to be available in stores within a few weeks of unveiling and the company is reportedly manufacturing up to ten millions of smaller iPad for fourth quarter.