Weekly Digest
Weekly Digest Issue No. 556
10-03-2011
by Deirdre McArdle
Android marches to the top of the hill | Online video market heats up
Eircom outlines rescue plan
Following a dismal set of quarterly results last week, Eircom has announced a radical framework 'recovery plan' that's been agreed with its unions. Under the terms of the plan employees' pay would be cut by 10 percent for the next 18 months, a 10 percent reduction in working hours would be introduced over the same time-frame, and a pay-freeze would be imposed. The new plan could also result in over 1,000 voluntary redundancies as the telecoms firm aims to aggressively cut costs. Ultimately the rescue plan is focused on achieving labour savings of EUR92 million by 2013.
Eircom staff are being urged to agree to the plan by their unions. According to the Irish Times, the Communications Workers' Union (CWU), which represents the majority of Eircom's 7,170 workers, has warned staff that the telecoms group could be taken over by its lenders if they do not agree to the cost-cutting strategy. "Your executive is now satisfied that if the present financial position of the company is not addressed as soon as humanly possible, then ultimately the company is likely to be taken over by the banks and bondholders," the CWU told its members.
It also warned that shareholders like Singapore Technologies Telemedia and the Esot would only invest in Eircom if they were convinced they would receive a return on their investment. It was earlier reported that STT and Esot could invest as much as EUR300 million in Eircom. The telecoms firm is struggling with massive debts of EUR3.8 billion and warned last week it could breach its covenants on these debts within the next six months without fresh investment.
Android marches to the top of the hill
Google's mobile operating system, Android, has made some serious inroads into the OS market, with figures revealing it is the leading platform in both the US and Europe. In the fourth quarter of 2010 shipments of Android-based smartphones in Europe increased by a whopping 1,580 percent to 7.9 million units, from 470,000 units a year ago. In line with shipment growth, Android's market share also surged, up from 4 percent in Q4 2009 to 31 percent in 2010, making it the fastest growing operating system ever, according to IDC. The research firm estimates that Android will grow at a 37 percent compound annual growth rate between 2010 and 2015 in Western Europe.
"The last quarter of 2010 clearly shows the trends for the coming years in Western Europe. The Western European mobile phone market will be dominated by smartphones, and Android will be the king of the hill," said Francisco Jeronimo, European mobile devices research manager, IDC.
Meanwhile, in the US, Android increased its market share by 7 percentage points in January to top the market with a 31.2 percent share, according to figures released this week by comScore. Android's popularity in the US smartphone market has grown steadily, outshining second-placed RIM's BlackBerry platform at 30.4 percent and Apple's iOS in third position with 24.7 percent.
Android's real advantage in this competitive market is the open model employed by Google, which has seen device manufacturers churning out Android-based handsets at a rapid pace. There are now approximately 170 different Android-based devices on the market, according to Google.
Online video market heats up
There were some interesting developments in the online video sector this week, which could see competition in the segment get turned up a notch. Movie studio Warner Brothers has developed a Facebook application whereby users will be able to stream full-length Hollywood movies through the social network site. Users will pay for the service using Facebook Credits, a virtual currency, which is mainly used in the various social games on Facebook. The service will initially be accessible in the US and the first movie to be made available is 'The Dark Knight'. Movie rentals will cost 30 Facebook Credits, which is the equivalent of USD3, for 48 hours.
According to Reuters, Goldman Sachs analyst Ingrid Chung said in a note to investors that Facebook represents a long-term threat to online rental service Netflix. Indeed, Wall Street appeared to concur with that assertion, with shares in Netflix closing 5.8 percent lower at USD195.45 on the Nasdaq on Tuesday.
It's worth noting that this service isn't a partnership with Facebook, but simply an application developed by Warner Bros. It'll be interesting to see if any other movie studios will follow suit, and just what impact this streaming service will have on online movie rental services from the likes of Netflix, Amazon and Apple.
Separately this week, Google's YouTube acquired web video production company Next New Networks as it moves towards developing its own original content. Next New Networks' web video programming platform has proven increasingly popular since its launch four years ago, and it now has over 6 million subscribers. Writing on YouTube's official blog, Tom Pickett, director of global content operations at YouTube, said Next New Networks would be "a laboratory for experimentation and innovation" within YouTube, and the team would work directly with "a wide variety of content partners and emerging talent to help them succeed on YouTube". Financial details of the deal were not disclosed.
Skype looks to ads for new revenue
As it readies itself for an initial public offering (IPO) later this year, internet telephony giant Skype has introduced advertising to its service, hoping to add a new revenue stream.
The new display ads will initially feature advertisers such as Groupon, Universal Pictures and Visa, and will appear at the top of Skype's main page in its Windows client, although Skype said it may "experiment with ads in other areas as well". For now, the ads will only appear for consumers in the US, UK and Germany and advertising sales will be initially focused in those markets.
On Skype's official blog, Doug Bewsher said the service will use demographic data, such as location, gender and age, to target ads to its users. He said the data would not include personally identifiable info such as names and addresses. The internet telephony firm was also quick to assuage concerns that the ads would not interrupt calls: "You won’t suddenly see annoying pop-up ads or flashy banner ads in middle of conversations," Bewsher said.
Skype's IPO could well be one of the most lucrative in the tech sector since Google's flotation in 2004. The internet telephony firm filed for IPO last August, with the stock market launch widely expected for the first half of this year. In October, Skype hired a new CEO in Tony Bates, who joined from tech giant Cisco. By the end of January reports emerged that the IPO may not happen until the second half of 2011, with July mooted as a possibility. A report in the Wall Street Journal at the time, quoting sources, said the company's hiring of a new chief executive and uncertainties in the IPO market and economy slowed the offering process.
Caped Koala Studios has built a virtual world for kids, combining education and social networking 