• Google has finally launched its play for The Metaverse with the launch of Android XR where it has sensibly decided to leave the hardware to Samsung and Qualcomm in what may be the beginning of the end of Google making consumer devices.
• Google has launched Android XR which is a version of Android that has been optimised for head-mounted displays.
• This means that it will share a basic level of compatibility with Android used in smartphones but extra systems such as real-world perception and 3D environments have been added so that both virtual and augmented reality can be added.
• Confusingly, at the same time, Google launched Project Astra powered by Gemini 2.0 (see here) with videos demonstrating its use on a pair of glasses not unlike those shown recently by Meta (Orion).
• I am pretty certain that whatever this product is, it is not running Android XR which brings us to the first limitation of Android XR.
• The capability of a platform needed to run something like the Apple Vision Pro and something like Meta’s Orion are very different and so how a single platform such as Android XR can cover all of these use cases is unclear.
• One possibility would be to use a microkernel OS (like Huawei does with Harmony OS) which gives much greater flexibility in terms of form factors and use cases, but I do not think that this is what Android XR is.
• Instead, it seems to be a compatible version of Android in that apps and services from smartphones will run on it but with the extra components to ensure that it offers a good Metaverse experience.
• This means that it will be next to impossible to have this Android XR running on a pair of glasses because the platform will be too large and too power-hungry to make this a practical reality.
• Consequently, how a single unified XR ecosystem is going to be built without fragmenting the Android XR platform remains a mystery.
• The only product running Android XR that has been announced is Project Moohan which is made by Samsung using Qualcomm’s XR chipset.
• This device looks very similar to the Apple Vision Pro and shares the same approach in terms of implementing The Metaverse backwards.
• Everyone seems to agree that the main use case for The Metaverse is a mixture of the real world and the virtual world but the right way to do it is to overlay the virtual world onto the real.
• The problem with that is that this is very technically demanding so as an interim step, Apple (and now Samsung) are doing it the other way around.
• There is nothing wrong with this intrinsically, but I continue to think that The Metaverse will not take off until the technical problems are solved such that it can be implemented in the right way.
• These announcements are significant because they demonstrate an ever closer collaboration between Samsung and Google where Google does the software and Samsung does the hardware.
• I have long thought that this is what needs to happen for the Android Ecosystem to really compete with the Apple Ecosystem (see here).
• The Metaverse is a great place to test this new form of cooperation as there is very little risk to revenues if it fails.
• If it works, it could completely change the way the relationship works and herald the end of Google making its own hardware products.
• This is something of which Ms Porat is almost certain to approve of.

• Samsung is having trouble with more than just high bandwidth memory (HBM) as it appears that it is considering not using its Exynos processor in some of its 2025 smartphones which will benefit Qualcomm and potentially MediaTek.
• It is no secret that Samsung has struggled with its in-house applications processor for some time and with Qualcomm returning to a custom processor and MediaTek competing more closely, it has been falling further behind.
• Furthermore, it has also been struggling with yields for its processors on its leading-edge nodes meaning that Exynos is both not very competitive and more expensive to make in-house than outsource.
• I view this as the latest symptom of a chronic illness that Samsung has been suffering from for many years which I refer to as engineering disease.
• This is the tendency to make everything in-house regardless of whether or not it makes strategic or business sense to do so.
• Another chronic sufferer is Google which has spent billions making consumer devices which have never made any real impact and from which shareholders have received nothing but losses.
• However, recent months have seen signs of some improvement as it has been working more closely with Google and a potential move to use 3^rd parties in its high-end devices would improve the outlook further.
• The most obvious winner is Qualcomm which already has a very strong position at Samsung where its latest Snapdragon 8 Elite is likely to feature strongly in the 2025 lineup.
• However, Samsung understands as much as anyone the kind of dependencies that result from single-sourcing, and so I think that it will be also looking elsewhere.
• Here, MediaTek is a viable option as the company and its products have come a long way in recent years and is snapping at Qualcomm’s heels in terms of its performance.
• For example, according to early benchmarks (somewhat unreliable), MediaTek’s Dimensity 9400 is 13.3% slower on GeekBench 6 single core and 9.2% on multicore.
• Given the jump that Qualcomm has registered with its 8 Elite using its new custom processor, this is a good result for MediaTek.
• These are early scores and as such, there will be mitigating circumstances, but the early indicator is that the Dimensity 9400 is able to stay in touch with the 8 Elite as a contender to power high-end smartphones.
• Qualcomm already has a very strong position with Samsung and so it looks to me as if MediaTek has the most to gain relatively should Samsung not use its in-house processor in its high-end smartphones in 2025 and beyond.
• However, when it comes to broadening the business into areas outside of smartphones, Qualcomm has a big lead as it is already the standard processor in automobile infotainment units and head-mounted Metaverse devices and is mounting a credible challenge to Intel and AMD in PCs.
• MediaTek is not sitting still and its partnership with Nvidia may present a serious challenge, but it is probably 2 years behind in terms of getting to market.
• The net result is that Qualcomm’s path to long-term revenue growth is clearer to see meaning that while the valuations are similar, Qualcomm is a lower-risk investment on this theme.
• This is why I continue to own Qualcomm and remain very happy to sit on my position.

• Google held its Made by Google 2023 event where it once again demonstrated some great innovation which would work much better if it was in a device made by Samsung device rather than Google.
• However, both companies continue to be afflicted with chronic engineering disease meaning that Apple will remain pretty much unchallenged.
• Google launched the much-leaked Google Pixel 8, 8 Pro, Watch 2 and new colours for the Pixel Buds Pro that largely underwhelmed on hardware although the new screens on the Pixels are especially bright.
• There is also a new Tensor G3 chip although Google omitted to mention how much of an improvement the new hardware represents underlining yet again that Google is not a hardware company.
• Instead, Google allowed the software to speak for itself and here a series of exclusive features both make these devices shine and underline what a wasted investment they represent by limiting them to Pixel devices.
• These include 7 years of software support and updates, substantial enhancements to the digital assistant using Google’s generative AI models, and as always, image processing.
• The new AI assistant will be able to take accurate dictation running on device as well as integrate with Gmail and Docs and act very much like a smaller version of Microsoft’s CoPilot with the benefit of it not costing $30 per month.
• However, where the device really shines is in image processing with some really impressive new features.
• One of these is called Magic Editor which allows objects to be moved and resized within a photo which also enables the background to be changed such as the colour of the sky.
• Another is called Best Take which takes multiple photos of a group shot and then enables the faces to be changed from one shot to another to enable the best face from each shot to be composited into the group photo.
• Another feature is called Audio Eraser which removes unwanted background noise from videos as well as an off-device feature called Video Boost which will automatically improve videos uploaded to the cloud.
• It is important to note that the demonstrations all featured images and videos where the contrast between the subject to be edited and the rest of the photograph was very high.
• This makes it far easier for the AI to strip out the subject from the rest of the photograph or video and in my experience, when the contrast is lower, these sorts of features do not work nearly as well.
• Despite this drawback, the features that Google demonstrated are the best I have seen on any device and far outstrip anything that Apple has to offer.
• However, these features will not cause Apple to lose any sleep because they will only be present on devices that ship in such tiny volumes that they will have zero impact on the purchasing decisions of smartphone users.
• This is where Google has been getting it wrong for years and it continues to labour under the idea that it can challenge Apple.
• The reality is that it has no chance, but if these features were available on Samsung products, then it would have a much better chance of having some impact.
• The same is true for Samsung which also labours under the same idea and continues to produce software for its devices that is easily outstripped by Google.
• I have argued for years that the best chance of mounting a challenge to Apple would be created by Samsung and Google working much more closely together with Samsung building the hardware and Google the software.
• Instead, each company continues to do both, resulting in suboptimal devices in either hardware or software.
• Both of these companies continue to be afflicted with engineering disease (see here) and there is no cure anywhere in sight.
• Consequently, Google will continue to earn a negative return on these excellent new features as its hardware volumes are likely to remain so low that it will be losing significant amounts of money in hardware.
• Samsung is also forgoing the opportunity to grow market share against Apple making Apple the real winner from these afflictions.
• With no cure in sight, Apple looks set to continue chipping away at the high end of the Android market.
• Hardware is a rounding error in Google’s numbers but the more Android users defect to Apple, the less time they will spend in the Google Ecosystem which will cost Google in terms of opportunity.
• The valuation of both Apple and Google look pretty full, but if I were to delve into this area (which I am not at the moment), Samsung is the one I would be looking at.

• Google will make spare parts for its Pixel phones available for DIY repair and while this will be generally well-received, it does nothing to address the problem that it is not very good at making hardware.
• Google has been trying to be more like Apple for years, and despite spending billions of dollars on its devices, it remains unable to compete with the cohort of Asian manufacturers who continue to be able to make better, cheaper and faster devices.
• The heart of the problem lies in the fact that Google is a software and data company that makes its living by understanding its users through their engagement with its services and selling targeting advertising on that basis.
• It is also used to the fact that when one updates software that runs on a server, it only has to be done once and all users of the service are instantly upgraded.
• Android devices have software embedded on them meaning that they all have to be updated individually which is far more complicated than it sounds as old versions hang around for much longer than one would expect.
• The Pixel 6 Pro’s slowness to issue updates for bugs is a good and current example of this issue.
• This requires a different mindset than the one that Google is typically used to employing and the result is a series of devices that have amazing and unique AI features compromised by hardware shortcomings that completely kill the desirability of its devices.
• The Google Pixel 6 Pro is yet another example where Google’s computational photography makes the photos that it takes outstanding but a series of bugs, a slow fingerprint sensor and slow updates have tarnished what would otherwise be great reviews.
• Its latest wheeze is to try and make up for these shortcomings by making spare parts available for DIY repairs which is something that Apple is notoriously bad at.
• Unfortunately, I suspect that this is going to do very little to improve Google’s market share in smartphones leaving me still wondering why Google makes phones at all.
• The features that it offers exclusively on its devices eventually make their way onto smartphones from Samsung, Oppo, Vivo, Xiaomi etc but this lead time has done very little to increase their appeal.
• If Google wants to improve its standing in smartphones, it has to make sure that its devices are top-notch which is going to require even more money to be shovelled into the bonfire of development.
• Google is not Apple, and it never will be because their relative approaches to the digital ecosystem are diametrically opposed to one another.
• Hence, if Google wants to be Apple it would have to stop offering the Google Ecosystem to other hardware makers and instead keep it for Google-only.
• This is virtually impossible to do and would also present huge risks to its advertising revenues and so I think that it will never happen.
• I have long argued that a better approach would be for Google to have an exclusive with one of the other device makers which would have its latest features for 6 months or so before rolling it out to the others.
• This would give Google its latest and greatest services on top-notch hardware and would enable it to increase margins by closing down its expensive hardware department.
• However, Google continues to demonstrate its affliction with engineering disease (see here) and I suspect that little short of a cataclysm is likely to cause things to change.
• Hence, investors will have to continue to live with the hardware millstone around their necks.
• This combined with a valuation that already looks pretty full leaves me unenthusiastic about taking a position in Alphabet shares,

• Google’s new devices keep pace with the specification of its competitors and beat them when it came to software and AI performance but is unlikely to much more than offer token competition.

Pixel.

• Google changing tack here and being far more aggressive on price in a bid to drive some badly needed volume.
• The Pixel 5 has mid-range specifications and 5G and is starting at $699 which comes with 3-month subscriptions to most of Google’s services as a sweetener.
• This is roughly half what Apple’s top of the range flagship is likely to cost.
• Google is also updating the Pixel XL 4A to 5G and this is starting at $499 making it one of the most reasonable 5G phones available.
• Where Google lacks in pure hardware specifications it makes up in software and AI functionality.
• New features in Google Duo allow screen sharing and video sharing for the first time on a smartphone.
• Google has also extended its AI-driven video manipulation to improve night mode and this will be backwards compatible with older devices through a software upgrade.
• It also extended its video stabilisation function with three new modes which again will also be extended to older devices.
• The most perplexing thing was Google’s promise of 3 years of Android and security updates.
• I have a 5-year-old Samsung that still gets updates so I am not sure what Google is saying here as it would seem to be threatening to cut the user off after three years in order to force a hardware upgrade.

Google TV.

• The new and improved Chromecast (and a big improvement it is) bringing Google into line with AppleTV, Fire TV and so on.
• The device now has a remote with shortcut buttons to Netflix and other popular services.
• It costs $49.99 and should support 4K making it one of the most cost-effective ways to turn a dumb TV into a smart TV available.

Nest Audio.

• This is essentially the latest version of the Google Home which now is home under the Nest brand.
• The focus has been on improving the audio with bold claims being made about how the audio has improved while the price remains unchanged at $99.

Take-Home Message

• This was a more-of-same launch from Google.
• The aim is to compete on price but then differentiate with superior services underpinned by Google’s best in class AI.
• This is the right strategy, but something is getting lost in the execution.
• This is obvious because Pixel is a rounding error in device shipments and Google is still failing to take the fight to Amazon in the smart home.
• I think a good hard look is required at sales and marketing as this is where I suspect things are going astray.
• Google is also not a hardware company and this effort is vestigial to the ecosystem behemoth that tolerates it meaning that it gets very little priority across the company as a whole.
• I still think a closer co-operation with Samsung (see here) is the best way to go.

• Not only are Google and Samsung in discussions for Google to have a bigger role on Samsung handsets (see here) but there have been a string of departures from the Bixby team further indicating how poor Samsung’s AI really is.
• Many of these defections are members of the original Viv Team that Samsung acquired and were part of the original team that created Siri.
• This is a sign that Samsung is scaling back its investments in this area probably driven by a need to conserve margins in the face of a weak, pandemic triggered, smartphone market.
• The net result is likely to be deeper integration of the Google Ecosystem into Samsung’s phones which benefits Samsung in 2 ways.
  • First: market share: Samsung’s Bixby digital assistant is so bad that I have long viewed Bixby as a reason not to buy a Samsung smartphone.
  • This situation is demonstrated by the long-running whack-a-mole between Samsung and developers where developers would work out a way of remapping the Bixby button to something else which would then be blocked by Samsung.
  • There is no doubt in anyone’s mind that Google’s services are light years ahead of Samsung’s meaning that if they are set by default on the device, then the overall user experience will improve.
  • This has the added advantage to the user of not having a load of “bloatware” on his device that Samsung won’t let him delete.
  • A better user experience makes Samsung devices more attractive compared to competing devices which should result in higher market share.
  • Second: money: Google pays handset makers for generating traffic and Samsung’s strong position in Android puts it in a strong negotiating position.
  • I estimate that Google will pay Apple around $5bn in 2020 for the traffic that its phones generate and, while Samsung will get anything like this amount, what it does get will be pure profit that falls straight to the bottom line.
• At the height of AI’s hype and popularity (2018 and 2019) Samsung talked up its prowess in AI and invested heavily.
• By getting more of this from Google it can also cut its investments in AI which what I think these departures are all about.
• I continue to think that the best route for both Samsung and Google is a very close co-operation and the fact that Samsung is even considering this means it has realised that its own efforts are not delivering the results desired.
• This gives me a glimmer of hope that Samsung is starting to recover from its affliction of engineering disease (see here) resulting in a more pragmatic and profitable strategy and company going forward.
• I can see myself becoming positive on Samsung once again.

• Google and Samsung are in discussions that could see Google take over more of the core software functionality on Samsung devices making them more attractive to users and potentially more profitable for Samsung.
• Should this deal come to fruition (and to the degree that I have long advocated (see here and here)), this would mean that Samsung devices would become almost pure Google Android.
• This could have a significant and positive impact on the appeal of Samsung’s smartphones to its users as its efforts to provide an app store, digital assistant, health app and so on have been miserable failures.
• In fact, Samsung’s Bixby digital assistant is so bad that I have long viewed Bixby as a reason not to buy a Samsung smartphone.
• Despite the atrocious feedback on its apps, Samsung has pressed ahead with significant investments in AI and software because it has a bad case of what I refer to as engineering disease.
• Engineering disease relates to a condition where the desire to solve technical problems and do things oneself overrides business sense.
• Engineers often get so excited about whether they can develop something that they forget to ask whether they should develop that something.
• Engineering disease almost always ends in disaster and in the case of Samsung and Google, it has prevented them from doing far more together.
• Google also has a very bad affliction of this condition as it remains mired in the belief that it can challenge Apple by making hardware itself.
• Despite billions of dollars being poured down the drain and a series of awful acquisitions, it is no closer to challenging Apple than it was before it started trying to make hardware.
• Google is terrible at hardware and Samsung is terrible at software which is why a very close working relationship is the only way these two can take the fight to Apple.
• Samsung’s hardware prowess is indisputably world-class while Google has the most widespread digital consumer ecosystem by a wide margin and leads the world in terms of AI.
• Consequently, a close relationship would see the best services and AI that Google has to offer combined with some of the best hardware available which has a much better chance of challenging Apple than anything each company tries individually.
• This relationship would probably involve a significant increase in the payments that Google makes to Samsung unless some form of exclusive arrangement is reached.
• For example, if Google’s newest and most exciting features were made available on Samsung phones 6-9 months before being made available elsewhere, this would add significant differentiation for Samsung outside of its excellent hardware.
• I suspect that if a deal is done as a result of these discussions, it will start small (eg just search and assistant) and then progress further should the new experience be well received by users.
• A further benefit for Samsung would be that it can cut or reallocate the money it has wasted on its own services to projects that will deliver a return or just give it back to shareholders in the form of higher profitability.
• I continue to think that the best route for both Samsung and Google is a very close co-operation and the fact that Samsung is even considering this means it has realised that its own efforts are not delivering the results desired.
• This gives me a glimmer of hope that Samsung is starting to recover from its affliction resulting in a more pragmatic and profitable strategy and company going forward.
• I can see myself becoming positive on Samsung once again.

• Google has opened up a new front in the battle with Amazon by forming a partnership with ADT in order to deliver smart home security to ADT’s 6m US-based customers.
• Google is buying a 6.6% stake in ADT for $450m which is already worth $670m thanks to a bounce in the share price following the news of the transaction.
• The key to this deal was in a Reuters interview (see here) and not in any of the press releases which is that “ADT will exclusively support Nest products”.
• This means that ADT will not be integrating with Amazon’s Ring and I suspect that its other smart security strategies will be quietly put to sleep.
• ADT has already had a go at this sector when it teamed up with Samsung to offer SmartThings products as well as a range of security cameras under its own Blue brand.
• Neither of these have gone particularly well once again underlying that the secret to a decent user experience these days is all about the software and the intelligence that sits behind the hardware rather than the hardware itself.
• This, of course, assumes that hardware is of a minimum level of quality.
• Google has its own problems in this area as its first attempt at a smoke alarm was a disaster and it has struggled with a number of other issues in this area.
• Most of these problems have been hardware and reliability focused meaning that for Google there is also some value in its relationship with ADT beyond its customer base.
• Dumb but reliable products are ADT’s forte and so with ADT making (or at least having input into Nest’s products) and Google doing the brains a decent suite of products could result.
• Although this is a good match, this is much harder to get right than it sounds.
• Google typically provides its products on a best effort basis meaning that if occasionally they don’t work, its not really a big deal.
• This is one of the reasons why the technology industry is having such a hard time with autonomous driving because it has to be very reliable and almost never go wrong.
• The same thing is true for home security because if it fails to pick up an incident then it is worthless and if it has lots of false positives, the user experience will be so badly degraded that the user will throw it in the bin.
• This is pretty much exactly what happened with Nest’s smoke alarm.
• Hence, this needs to be much more than a loose co-operation between the two companies and there may come a time when Google decides to acquire ADT.
• This is what I suspect the market was speculating when it sent the shares to $20 from $8.58 before settling at the end of the session at $13.48.
• On the home speaker front, the battle has long looked like it was over (I haven’t written on this for over a year) with victory clearly going to Amazon but here Google is opening up a new front.
• Amazon is doing reasonably well with Ring but an exclusive arrangement with ADT gives Google an opportunity to rectify the balance.
• Perhaps if it produces an excellent series of products and wins great traction for home security, that might give it a beachhead from which to launch a renewed assault on Amazon in the other areas of the smart home.
• That is a big if because Google has such a bad case of engineering disease (see here), I am far from convinced that it will be willing to take input from ADT to ensure that the reliability of its products is good enough.
• Hence, I think that the default position will be that the opportunity with ADT will be largely squandered leaving Amazon unchallenged in the smart home and smart home security segments.
• However, I will reserve final judgement when we start to see some joint products from the two companies.

• Samsung has launched its annual flagships for 2020 and the fact that all of them will support 5G at close to the same price as last year’s version, means that 5G penetration of the user base will be much better than I have been expecting.
• Samsung also greatly toned down the commentary about its dreadful Bixby digital assistant as well as its own services in favour of partners headlined by Google but also Netflix, Spotify and Microsoft.
• This is a good move by Samsung as having core Digital Life services like YouTube, Spotify, Netflix and Xbox working better on its devices gives Samsung a little more than just hardware differentiation.
• However, in the hardware category, Samsung also fared pretty well:
  • Samsung Galaxy s20 / s20+: represent a decent upgrade on the s10 with 120hz screen, bigger batteries, camera upgrades and 8K video.
  • These two will support 5G in the sub-6Ghz band (making them pretty much 4G phones) but because all versions will support 5G, users buying a new smartphone will become 5G subscribers whether they want to be or not.
  • This is really good news for the 5G movement because these users will be seeding the market with 5G capable devices.
  • These devices cost $100 more than the s10 device that they replace but Samsung is also offering a lot of other upgrades which I think lead to the price not being too much of a problem.
  • Samsung Galaxy s20 Ultra: This device takes the s20+ and adds a lot of bleeding-edge specifications at a bleeding-edge price starting at $1,380.
  • A massive 6.9” screen also at 120hz, 5,000MaH battery, 5G mmWave support and a 30x optical zoom lens combine are all offered for the extra $280 in price.
  • This is a great hero device, but I suspect that the real volume will be in the s20 and s20+ categories.
  • Galaxy Z flip: is clearly a big step forward for folding phones but at $1,380 volumes are going to be low.
  • This is a vertical folding device where the two main upgrades are flexible glass rather than plastic and a new far more dust resistant hinge.
  • Hence I think this should fare better in the now industry-standard JerryRigEverything durability tests (see here) than other folding phones but I have my doubts as to whether it will be enough to see folding phones start to sell in volumes.
  • I suspect that it will take another generation or two before this category is durable and cheap enough to hit the mainstream but the trend is promising.
• Most significant of all from these launches was the de-emphasising of Samsung’s own services in favour of those from its partners.
• Samsung is once again by far the market leader outside of China (thanks to Huawei) meaning that providers of Digital Life services have a greater incentive to partner with Samsung.
• To that end we are seeing much deeper integration of YouTube, Google Duo, Netflix and Spotify into Samsung devices such that these services work better and give a better experience.
• Given that Samsung has really struggled with its own services and is virtually nowhere (by RFM’s measures) on AI, this is a smart move and should help it to improve its software differentiation.
• Ideally, it should be doing more of this and encouraging Google to give it some exclusiveness in return for making purer Google devices as this is how both companies can benefit the most from each other.
• I have long argued for this (see here) and it is encouraging to see at least some small move in this direction by Samsung.
• Better margins should result which combined with an upturn in semiconductor demand should keep the shares rising in the long-term.
• However, in the short-term, I am deeply concerned about the impact that the still-idle Chinese economy will have on both consumer demand and the supply chain.
• Hence, I have liquidated my position in Samsung as well as many other equity positions as I don’t think they are pricing in the impact that this will have in H1 2020.
• I will consider buying back in H2 2020.

• Google reported good Q4 19 results, but its greater disclosure unwittingly revealed that hardware has again let the side down and I fear that there is worse to come.
• Q4 19 revenue / EPS were $46.08bn / $15.35 below revenue estimates of $46.87bn but well above EPS a $12.52.
• However, revenue is everything these days and the disappointment took the shares down 3% in after-hours trading.
• For the first time, Google has disclosed YouTube ad revenues and Cloud revenues both of which are faring pretty well.
• YouTube generated $15.1bn in revenues in 2019 growing 35% YoY while Cloud generated $8.9bn in 2019 up 53% YoY.
• However, there are two areas of concern:
  • First Cloud: Cloud looks good on the headline numbers, but I think it is underperforming.
  • Google Cloud is No. 3 of the big three in the cloud (excluding Alibaba in China) and is by far the smallest.
  • Hence if it is doing well, it should be growing the fastest, but that crown goes to Microsoft Azure which is currently growing at 62% YoY.
  • It should come as no surprise that Amazon is the slowest (36% YoY) given that AWS is now so big, that it is beginning to labour under the law of large numbers.
  • The fact that Google Cloud is being comprehensively out-grown by its bigger rival is a sign that it is both losing share and relevance to Microsoft Azure.
  • Second, hardware: Q4 19 is supposed to be the sweet spot for hardware revenues and yet Google’s hardware business reported declines YoY and I think it was largely responsible for the revenue miss.
  • Google is not a hardware company and no matter how many good people it hires, its upper management does not understand this business outside of its burning desire to become like Apple.
  • This desire has already cost shareholders $16.3bn and remains one of the worst cases of engineering disease that I have ever seen.
  • The net result has been that its smartphone shipments have been no more than a rounding error despite having some of the best software and AI innovations available.
  • It has also failed to capitalise on the fact that the Google Assistant is a far better product than Amazon Alexa as it increasingly looks to me like the battle for the smarthome is over with Amazon the victor.
  • The addition of another failing hardware company (Fitbit) is not going to make much difference and so the destruction of value is likely to continue.
  • I have long contended that the best route for Google would be stop making hardware and to do a deal with Samsung.
  • This could give Samsung exclusive access to new features for a few quarters in return for creating purely Google Android products.
  • The problem is that Samsung also has a bad affliction of engineering disease and is currently labouring under the view that it can create good software services driven by its AI.
  • The execrable Bixby and the users’ reaction to it should be evidence enough that this is not the case.
  • Sadly, while both patients are in the grip of this affliction, value destruction on both sides is likely to continue.
• The thing that concerns me most is that this desire to become Apple is clouding management’s rational judgement and now it is beginning to affect the share price.
• Without hardware these results would have been quite well received perhaps even extending Alphabet’s great run.
• However, at 30.1x 2019 PER, there is very little margin for error and so I think that Alphabet shares are starting to look expensive.
• The time has come to turn indifference to Alphabet shares into an active stance of starting to take profits and investing the proceeds elsewhere.