Tech Companies Eye Acquisitions and Solid Alliances to Broadbase Product Offerings

Google moving away from internet to focus on connected hardware

Major tech companies heralded the new year with a slew of acquisitions as part of their game plan to strengthen their product offerings as a means to gain a competitive edge over rivals. They are also looking at strategic alliances as a means to increase their global foothold in the emerging economies. Tech companies are looking more at product offerings mainly for mainstream consumer adoption instead of just technology, which may not turn the tables in their favor.

From the desktop to the wall

Google Inc. (NASDAQ:GOOG), which dominates the internet with its search engine, is now looking to expand into “connected” homes by agreeing to pay $3.2 billion in cash for Nest Labs, popularly known for its internet-connected devices like thermostats and smoke alarms. Nest, which was started in 2010 by Tony Fadell and Matt Rogers, former Apple (NASDAQ:AAPL) employees of teams that built the iPhone and iPod, will continue to operate the Nest brand.

shutterstock_111223970Internet companies are keen to be in the center of every aspect of the consumers’ lives, be it searching, socializing, reading, shopping, exercising, or sleeping. What’s more, their advertising business is built on observing the online behavior of people. For Google, technology is the core to establishing a solid connect with consumers through Chromecast and Google Glass. Now, with Nest products, consumers can track their home’s temperature, detect the presence of smoke, and keep an eye on their pets and children through sensors or live video via a smartphone. While such technology is yet to make its way to mainstream adoption, the market is already crowded with players like Apple, Philips, Bose, Dropcam, and Lively.

The Nest acquisition is Google’s second biggest since its $13-billion purchase of Motorola Mobility. It has also recently acquired companies that make robots and gesture-recognition technology. Earlier, Google made software to hardware developers, like Android for mobile phones. The Nest acquisition signals its foray into the hardware domain.

Focus on rebalancing newsfeeds

Facebook Inc. (NASDAQ:FB), with an intent of improving its newsfeeds, has reportedly acquired link-sharing service, Branch, and its sister service, Potluck, for around $15 million. Branch is a platform for people to connect and share their thoughts about web-based information. Facebook’s latest purchase is termed an acquisition-hire, which is acquisition for talent, since it is extremely difficult to hire excellent talent in the US. In line with this, Branch’s team of nine experts will form Facebook’s Conversations group, based in New York City, to help people connect with others around their area of interests.

shutterstock_67420570Ironically, Branch’s investors include Twitter (NYSE:TWTR) Co-founders Evan Williams and Biz Stone via an incubator called Obvious. The startup attracted $2 million in funding from high-profile investors like SV Angel, Lerer Ventures, Rick Webb, Lucas Nelson, Ryan Freitas, David Tisch, betaworks, and BoxGroup.

Recently, Branch launched Potluck for iPhone, a Tinder-meets-Circa news app that offers bite-sized news clips that one can talk about with friends inside the app. Earlier, Branch launched its web-based link-sharing service, which moved conversations about news away from email. However, it remains to be seen whether Branch will stumble or fare well after being scooped up by Facebook.

Apple to ride on China’s largest mobile network

The world is turning to China; and so is Apple Inc. (NASDAQ:AAPL). After years of negotiations, Apple now has struck a deal to offer iPhones through China Mobile Ltd, the largest wireless network in the world. The deal would certainly give a big fillip to Apple’s worldwide sales, access to an additional 700 million subscribers, and new sale points. However, Apple would face many challenges in penetrating the Chinese market, where Android-based mobile phones dominate mainly because they are more affordable.

shutterstock_137708654Currently, Apple is ranked fifth among smartphone players in China, after Samsung, Huawei, Lenovo, and Yulong. In terms of pricing, Huawei, Coolpad, and ZTE offer Android smartphones for less than $100 in the Chinese market. This is much cheaper than Apple’s iPhone 5C priced at $739 and the 5S at $871. Apple would hence be forced to drop prices of iPhones for China Mobile customers. With its entry into the Chinese market, Apple would be looking at bolstering its declining share in the global smartphone market, which slid to 12.1% in Q3 2013 from 14.3% in the year-ago period, according to Gartner.

Apple sold about 23 million iPhones in China in 2103. In 2014, analysts peg this number at a conservative 15 million. In the Chinese market, Apple is more concerned about how much of its phones are used. In Q3, 57% of mobile browsing traffic in China came through Apple’s iOS operating system.

However, what could prove to be detrimental to Apple is the cost-conscious smartphone subscriber base. Only 176 million China Mobile customers subscribe to Apple’s high-speed wireless data service, which uses 3G technology. The silver lining in the dark horizon appears to be China Mobile’s plans to upgrade to 4G technology, the subscribers for which will be the main target group for Apple’s new phones and services.

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