February 2012

CES 2012
KEY TAKEAWAYS
By John Cartoux, Ph.D. FTI Consulting, Inc.

CES 2012: KEy TaKEawayS

New smartphones, tablets, Ultrabooks and recent developments in screen technology especially OLED, Windows 8 and smart TV platforms dominated the floors at the 2012 Consumer Electronics Show (CES). While few revolutionary products were unveiled this year, many emerging trends are gaining significant momentum. In this document, we focus on the key ones. SmArTphonES More than 20 new smartphones were released at the show. For a detailed review of the phones themselves, go to www.CNET.com or www.Engadget.com. A special nod goes to the Samsung Galaxy Note, the largest smartphone with a beautiful 5.3-inch screen that showcases Samsungs Super AMOLED technology. The Note includes a stylus (like the Palm of old times). With its size and stylus, it is positioned as a hybrid device between a phone and a tablet. The question is, will there be a market for it? mobilE 4G nETWorKS in ThE UniTEd STATES There is an increased adoption of LTE as the 4G standard in the United States (Long Term Evolution of 3GPP proposed standard). AT&T is strongly pushing its LTE infrastructure to challenge Verizon and released several LTE-compatible phones at the show. Other major carriers such as Sprint and MetroPCS also showed commitment to LTE. T-Mobile had a small presence at the show but did release the Samsung Galaxy S Blaze to work with its HSPA+ 4G network. Although LTE is adopted by all major U.S. carriers, T-Mobile reaffirmed its commitment to HSPA+. mobilE opErATinG SYSTEmS Four operating systems (OS) dominate the world of mobile devices today: Android, Apples iOS, RIMs BlackBerry and Microsoft Windows 7 (by order of market share). To summarize the current situation, Android is designed to be used by the largest number of manufacturers and thus offers the greatest vendor flexibility and lowest installed price (free); iOS is easier to use and has a larger app marketplace but is limited to Apple devices; BlackBerry mostly has been focused on the enterprise world but currently is at the crossroads between the last version of an ancient platform and a new operating system. Windows 7 (Windows 8 is discussed below) is extremely easy to use but lacks the depth of the app market that both Android and Apple offer. android. While most of the phones released at the show are Android-based phones, only a couple (Samsung and Huawei) will be shipped with Android 4.0, the latest release of the OS called Ice Cream Sandwich, or ICS (see table in endnotes for a review of the fancy names attached to Android versions). All other new Android smartphones will be shipped with Gingerbread, the 2.3 release of Android. ICS unifies the smartphone (Gingerbread) and tablet (Honeycomb) versions of the OS. Honeycomb, designed specifically for the tablet market, never really took off (see table in endnotes), and, while ICS represents a huge improvement for manufacturers building these two types of devices, it also implies a thorough redesign to benefit from the most advanced features that are not backward compatible with previous versions. Consequently, manufacturers are rolling out phones with Gingerbread while planning future ICS upgrades this year. We should see them coming on the market in Q2 of 2012.

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 windows. Windows-based phones announced by Nokia (Lumia 900) and HTC (Titan II) made big splashes at the show. The Nokia Lumia 900 is a great phone that seems to be designed especially for Windows 7, which would be a first for Microsoft. It is easy to use and was awarded the CNET award for the best new phone at this years CES. These two phones support Microsofts heavy push in the phone and tablet markets in 2012. BlackBerry OS. RIM announced the release at the show of the latest version of its BlackBerry 7 OS platforms for cell phones and smartphones. The major feature included in the 7.1 release that rolled out to worldwide carriers in January is a mobile hotspot capability that allows users to connect up to five Wi-Fi devices to their Internet-connected BlackBerry. This is a catch-up move since this capability already is available with iOS and Android. (The future for the companys smartphones, however, might rely on the general release of its BlackBerry 10 OS platform, but smartphones with this OS might not be available before Q3/Q4 of 2012.) TAblETS CES 2012 confirmed that the tablet market is exploding world-wide as almost 100 new tablets debuted at the show. Four key differentiators will drive the competition with the iPad. These include: Operating system Screen technology, size and resolution Processor and memory Price opErATinG SYSTEmS windows 8. Windows 8 debuted brilliantly at CES 2012. Capitalizing on the concepts developed for the Windows 7 phone OS, Windows 8 marks a clear departure from every other Windows version developed for PCs to date. The user interface has been completely redesigned with multiple devices in mind. It runs seamlessly across smartphones, tablets and PCs while making the best use of each devices special properties. Windows 8 will launch beginning with the tablet probably in Q2 of 2012. The tablet demonstration at the show was made on a Samsung Galaxy Tab 7 tablet powered by an Intel processor, which was able to run full Office applications such as Excel or PowerPoint. One of the issues with Windows 7 (and 8) is the lack of available apps compared with the Android or iOS ecosystems. This void might be filled by BlueStacks new software that runs all kinds of Android applications on Windows 8 and, therefore, will bring 400,000 Android applications in the Windows 8 ecosystem in one swoop. While not public yet, the price might be an issue for success. Unlike Android, Windows is not open source software, and the combined prices of Intel and Windows licensing will pressure the manufacturers margins and might place the device in a difficult competitive position. android. The vast majority of tablets that debuted at the show were based on Android, but, just like smartphones, very few new tablets offer Android 4.0 ICS out of the box. ICS upgrades for Honeycomb tablets are scheduled for early Q2 of 2012. Two products are worth mentioning:

Lumia 900/windows 7

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 The Samsung Galaxy Tab 7.7 brings Samsung Super AMOLED stunning screen technology to this tablet format. Running Android 3.2 Honeycomb, the tablet offers a very high resolution and an amazing screen quality for this format. The Asus Memo 370T integrates the first quad-core processor on a tablet, the NVIDIA Tegra 3. It will run Android 4.0 ICS and will be offered at the very competitive price of $250. This is a powerful tablet. BlackBerry OS. RIM unveiled the release of its PlayBook OS for its PlayBook tablet. The 2.0 release represents a major improvement, making integrated messaging and calendar apps finally available in the tablet. RIMs original launch without these applications disappointed loyal BlackBerry fans and IT departments. (Note, however, that to get true BlackBerry integration on a Playbook, companies will have to upgrade their BlackBerry servers an expensive proposition.) The PlayBook also will offer a Video Store and tools for composing and editing rich-text e-mails. The release will be available for download sometime this February. Sales of the PlayBook tablet have been much lower than expected, and RIM is facing an increased competition in the space. The companys road map definitely relies on a successful release of BlackBerry 10 in 2012 as well as a 7- (and maybe a 10-) inch tablet that capitalize on this new OS feature and represent a significant user experience improvement. SCrEEn SizES And rESolUTion Tablet screen size starts at 7 inches and goes up to 10.1 inches although Samsung showed off a 13- inch device. The 7-inch group represents about 45 percent of tablets available on the market and notably includes the Kindle Fire and the Nook e-readers. The 10.1-inch is a very popular format for Android tablets as well; it represents about 38 percent of the available tablets. In between these two formats, we find the iPad with a 9.7-inch screen size. Note that Samsung also offers a 7.7 and an 8.9 series, and some other manufacturers offer a less common 8-inch format. The table below summarizes the various formats by type of device. device Type Cell Phones Smartphones Tablets Laptops Typical Screen Size 2 to 3.5 3.5 to 4.7 7 to 10.1 > 10.1 Sample models BlackBerry Curve 2.4 Samsung Note 5.4 iPad 9.7 Fire 7.0 Ultrabooks 13 13.3

Resolution is an important factor when considering a tablet, especially for watching high-resolution movies. The most common resolutions found on tablets are 1024 x 600 pixels (WSVGA) for 7-inch tablets (Fire, Nook) and 1280 x 800 (WXGA) for 10.1-inch tablets. Note that the iPad 2 currently offers a 1024 x 768 (XGA) resolution for a 9.7-inch size, which is a little less than the best 10.1- and 7-inch tablets on the market today. 2012 will see higher resolution tablets coming on the market, with the iPad 3 being the most anticipated of all, and WXGA resolutions (1280 x 800) in the 7-inch tablet group (Samsung 7.7 series, for example). CoST The iPad at the high end and the Kindle Fire at the low end set the reference prices against which the market aligned itself in 2011. New entrants such as the aforementioned powerful Asus Memo 370T, aggressively
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priced at $250, could be a serious threat to existing tablets and e-readers such as the Nook at $215 or even the Kindle Fire at $199. The 7-inch tablet landscape in this $200 to $300 range is quite crowded. All tablets offer 16 GB of memory and an equivalent processing power and more or less equivalent connectivity options. Some key differentiators, therefore, will include screen resolution and quality of display, available applications and access to content, and capability to upgrade to new OS versions such as Android 4.0. The 10.1-inch (or equivalent) landscape is even more crowded and is in direct competition with the iPad 2 with prices starting at $400 and going up to $800, which is very close to the first Ultrabooks (see discussion below). The upcoming iPad 3 probably will change the dynamics in this group. Apples lead from a design and features perspective and the increasing number of Android tablets in this segment might pressure the price downward for the benefit of the consumer. However, if Android 4.0 does not live up to its promise and if Windows 8 does not add significant competition and is too expensive, the iPad still will have a very good year. oUr ViEW on TAblET TrEndS Even with all these new tablets on the market, either announced or already available, the uncertainty around the main competitors of iOS probably will not materially affect Apples iPad sales in 2012 but certainly will by 2013. Android 4.0 ICS is expected to bring additional powerful features to the tablet ecosystem, but most upgrades will begin in Q2 of 2012, and ICS probably will not be fully deployed in the space before the end of the year. Windows 8 is a promising OS, but there still are unanswered questions regarding which processors and platforms will support the OS and the price at which these devices will be made available given the OS licensing costs that Android does not carry. Devices are converging. Samsungs 5.4-inch Note is a small tablet or a large phone. The Windows 8 operating system is apps-centric, moving the OS to the background as all tablets do today so that laptops may share the same user interface with tablets in the future. And Windows 8 will make Microsoft Office truly usable on tablets for the first time. Computing power and speed brought by new processors like the Tegra 3 from NVIDIA for tablets or equivalents from Intel, ARM or Qualcomm will increase tablets capabilities, allowing them to do more than process all forms of content and run client-heavier applications such as business and office type applications. Keyboards are coming to the tablet with products like the iHome iDM5 for iPad and Android tablets. Some products such as the Lenovo IdeaPad YOGA go further down the road with a PC that transforms itself into a touchscreen tablet, the keyboard rotating to position itself at the back of the tablet. These products might not get a significant market share this year, but there will be more of these types of devices in the near future. UlTrAbooKS Ultrabooks originally were inspired by the Apple MacBook Air, the first ultrathin laptop at 0.67 inches at its thickest point. Introduced in 2011 as a response to Apple by Intel, which invented and trademarked the term, Ultrabooks are extremely thin, lightweight laptops that are gaining a lot of attention in the marketplace. More than a dozen of these Ultrabooks were introduced at the 2012 CES, and that number is expected to explode during the year. Intel has not really defined requirements for an Ultrabook but rather expounded a set of loose guidelines that somehow manufacturers already are exceeding. To get the Ultrabook label, laptops must:

CES 2012

 Use a second-generation Intel Core processor; Deliver fast boot times, typically in less than seven seconds, using Intels Rapid Start Technology (or a third-party solution); Be thinner than 0.71 inches (18 millimeters) at the thickest point; Weigh less than 3.1 pounds; Have at least five hours of battery life under general use conditions; and Use a flash-based drive for storage. Flash-based drives are solid state drives. They use solid state memory instead of rotating magnetic disks and weigh about half of their hard drives equivalent with a much lower power consumption. This technology, in fact, is a key to the thinness and light weight of the Ultrabooks. In addition, Ultrabooks borrow interesting features from the tablet space such as the capability of always staying connected even when placed in hibernation mode, thus allowing connected services such as e-mails to download. Some Ultrabooks can be woken up from a distance with a smartphone. New Ultrabooks will cost in the $1,000 to $1,300 range depending on models, a price that is competitive with the MacBook Air but still much higher than the iPad ($800 for the highest model).

Revealed at the show, The ACER Aspire S5 shown above claimed to be the worlds thinnest laptop (for now). Revealed at the show, the aCER aspire S5 (shown above) claimed to be the worlds thinnest laptop (for It measures just 0.59 inches (15 millimeters) at its thickest point and weight less than 3 pounds. It has a 13.3now). It measures just 0.59 inches (15 provides a high-speed connection to peripherals. Acer Always Green inch screen and a Thunderbolt port, with millimeters) at its thickest point and weighs less than 3 pounds. It has Instant On technology takes it out of sleep mode in about 1.5 seconds.

a 13.3-inch screen and a Thunderbolt port, which provides a high-speed connection to peripherals. Acer Green Instant On technology takes it out of sleep mode in about 1.5 seconds.

Ultrabooks can be seen today as the bridge between laptops and tablets, and the future of Ultrabooks will be defined by the way manufacturers will be able to combine these two concepts into a single and meaningful device, at a price that would need to be in the $500 to $900 range in order to gain a large market share. The Lenovo IdeaPad YOGA (shown below) might very well be the first step in that direction with its dual usage. Other concepts include a lightweight laptop with a detachable screen that could be used as a tablet.

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The Lenovo yOGa Ultrabook and windows 8

The Lenovo yODa Ultrabook in tablet mode

The Lenovo yOGa is 0.67 inches (17 millimeters) thick and weighs 3.1 pounds. Thanks to its particular dualhinge design, this Ultrabook can transform itself into a tablet or a stand-up screen, automatically shutting off the keyboard once the screen is folded beyond 180. The Lenovo YOGA will be shipped with the general release of Windows 8 and priced at $1,199, but any delay in Windows 8 might impact potential market success. Although revealed long before the show, it is difficult not to mention the aSUS Zenbook family with a sleek design, aggressive performance and entry price of $1,099 (available in various metallic colors, including pink).

Television

mAjor TrEndS for TVS Organic LED (OLED) screen technology (see table in endnotes) was on display at the show, and big OLED screen televisions will be available on the market in 2012 thanks to cheaper and more effective manufacturing technology. Both LG and Samsung showcased stunning 55-inch, ultrathin OLED TVs. These still are at the expensive end of the TV market with retail prices in the $5,000 to $8,000 range. as far as 3D is concerned, 3D with glasses on Samsungs and LGs OLED TVs were stunning and far superior to any glasses-free technologies, which are blurry and have very limited viewing angles. But there still is no clear winner between 3D, with or without glasses, in terms of consumer preference, and content is limited. Thus, 3D TVs do not seem to be ready for strong market growth in 2012 or 2013. Samsung and other manufacturers (Toshiba, LG and Panasonic) also were demonstrating Ultra HD on large TVs. This was a gorgeous 2D experience that almost felt like 3D. Control of the TV through a voice and/or gesturing interface. The successful Kinect for Xbox 360 interface is a promising concept that we soon should see applied to the full control of the TV, as well as to the control of other devices. PrimeSense, the Israeli company behind Kinect, demonstrated its own TV interface where users can control pages of content and grab the one they want to play. Smart TV, or iTV that can connect to the Internet and optionally other devices, is an area of strong innovation with no clear winning concept yet. Some manufacturers at the show have built smarts into their TV sets; others are making standalone boxes that plug into older TVs. Several companies demonstrated Smart TV platforms at the show, most running Android OS. Google TV is one variant at the show, that, to us, did not seem superior to other offerings.

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what defines a smart TV is open and evolving, but the essential features that should be included are: A smart user interface that makes everything easy and simple for all users, geek and tech-adverse alike, and in the long term replaces the remote control through voice and/or gesturing; The availability of Internet-based television programming, which might be a problem until cable companies and networks roll out some form of Internet-based subscription services; The capability to interact with a TV from another device such as a smartphone or tablet while watching TV; and Recommendation engines and search as essential features of certain TV platforms such as Goggle TV, while cloud-based gaming could be an essential component of these platforms as well. All in all, Samsung and Google TV probably are best in class at the moment, but there was no Wow! factor anywhere. In particular, user interfaces are far from what they should be in order to foster rapid market adoption, and one can wonder what will happen if Apple decides to revolutionize the space. One very interesting aspect not yet addressed by smart TV platforms is the place of advertising in the ecosystem. oThEr ArEAS of innoVATion Innovation in glass and OLED manufacturing technology is a fundamental aspect of new devices. From transparent home windows that also are screens to flexible glass, these products open the door to many changes in the way appliances, devices and even homes are designed. (Here is a very cool transparent display screen demo from Samsung that can replace a home window or be superimposed on a window. For more of these, visit the Corning website at www.Corning.com.) Control of smart appliances, energy, security and more generally of the fully integrated house was a big theme at the show. Indeed, the Internet of connected things may be a bigger market for cell carriers and chip makers than mobile phones, PCs and tablets are today. Integration of touchscreen and Internet technology will continue to evolve for cars. Cloud-based storage and computing will facilitate access to and sharing of content. The world of gaming benefits from all the innovation mentioned above: display, cloud-based gaming and gesturing interface.

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EnDnOTES
AboUT olEd TEChnoloGY OLEDs use organic materials that emit light when electricity is applied, hence the name Organic Light Emitting Diode. OLEDs do not need backlight and filters, unlike LCD displays, and so are more efficient and much thinner. OLEDs are either made with passive (PMOLED) or active (AMOLED) matrix. AMOLEDs are more complicated and expensive to make. OLED-based screens have a great picture quality with brilliant colors, a fast refresh rate and a wide viewing angle. They also have a better power efficiency than their LCD equivalent, which makes them ideal for battery-powered devices. Until recently, OLED-based screens have been used mainly in small (2- to 5-inch) displays for mobile devices such as phones, cameras and MP3 players, but with recent improvements in manufacturing technology, large OLED TVs manufactured at a more reasonable cost will be on the market this year. According to LG, its new 55-inch OLED TV is 1,000 times faster than LED/LCD displays while the set is only 4 millimeters thick and weighs just 16.5 pounds. The developments in OLED technology since 2011 have been very rapid, but more is around the corner. Companies are working on technologies to produce flexible and transparent panels that will open a new world of applications such as: Curved OLED displays to place on non-flat surfaces OLED TV screens that can be rolled up Transparent OLEDs embedded in windows and in car windshields Android VErSionS And CodE nAmES platform Android 1.5 Android 1.6 Android 2.1 Android 2.2 Android 2.3 Android 3.0, 3.1, 3.2 Android 4.0 Code name (Google data as of jan. 3, 2012) Cupcake Donut Eclair Froyo (phone platform 30% of Android devices) Gingerbread (dominant Android platform on smartphones and tablets today 55% of Android devices) Honeycomb (designed for tablet 3.5% of Android devices today) Ice Cream Sandwich (unified version < 1% of Android devices today)

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for morE informATion, plEASE ConTACT: John Cartoux, Ph.D. Managing Director Entertainment, Media and Digital Practice +1.202.277.6158 (Direct) john.cartoux@fticonsulting.com 1101 K Street, NW Washington, DC 20005

Disclaimer: Opinions expressed herein are of the author and do not necessarily reflect those of FTI Consulting, Inc. or its other professionals.

about FTI Consulting FTI Consulting, Inc. is a global business advisory firm dedicated to helping organizations protect and enhance enterprise value in an increasingly complex legal, regulatory and economic environment. With more than 3,800 employees located in 24 countries, FTI Consulting professionals work closely with clients to anticipate, illuminate and overcome complex business challenges in areas such as investigations, litigation, mergers and acquisitions, regulatory issues, reputation management, strategic communications and restructuring. The company generated $1.4 billion in revenues during fiscal year 2010. More information can be found at www.fticonsulting.com. 2012 FTI Consulting, Inc. All rights reserved.