Recently, Openmoko CEO Sean
Moss-Pultz announced at OpenExpo in Bern that the company was reducing
staff and postponing the development of the GTA03, its first
consumer-oriented phone, in favor of an undefined Project B. Available as a
YouTube video, the
announcement was a confirmation of recent rumors that the company was in
trouble. In fact, many concluded that the announcement meant the end of the
company, or at least the beginning of the end.
Either conclusion is premature, but the announcement does highlight the
problems Openmoko faces as a business, as well as its uncertain
future. These problems are evident not only in the company's history, but
in Moss-Pultz's announcement and the company's web site as well.
Openmoko began in 2006 as a project within First International Computer
(FIC), a Taiwanese computer manufacturer. Soon spun off into a separate
company, Openmoko became the center of a small but active community, due largely to its intention
of using only free software and free hardware. Its popularity was helped by
the fact that, prior to the announcement of Android in November 2007, it
was the first effort to introduce free software into the mobile phone
The company and community began work on Openmoko Linux and the hardware to
run it on. As a development community, Openmoko has had some success, with
GNU/Linux, FreeBSD, and L4 kernels ported to its devices, as well as
versions of the Google Android operating system and a number of utilities
However, as a commercial manufacturer, Openmoko has struggled continuously
to coordinate its software and hardware in all its products, up to and
including the GTA03. As Moss-Pultz explained
in February 2007, "each hardware revision takes at least one month of
time. Each month without stable hardware means serious delays for
software. One time we received the wrong memory from our vendors and we
failed to catch this before production. Another time some key components
ran out of supply."
Despite such difficulties, in July 2007, the company produced the Neo 1973,
a development phone, following it with the Neo FreeRunner in June 2008.
Moss-Pultz in his announcement last week, the Neo sold 3,000 units, and the
FreeRunner 10,000 units. These are modest numbers that, more than anything
else, indicate just how small a player Openmoko is.
Openmoko's progress has not been helped by the countless complaints and
problems about the FreeRunner, all of which also affect the development of
its successor, the GTA03. For one thing, the phone does not support 3G standards for
telecommunication hardware. In his announcement, Moss-Pultz explains this
lack as being due partly to the difficulty of implementing 3G without using
proprietary software and hardware, and partly due to the fact that doing so
would increase the cost by at least two-thirds. But, although these are
sound reasons, without 3G support, Openmoko's products are inevitably going
to be seen by customers as inferior to other mobile devices.
Moreover, if you look through the Openmoko community mailing list over
the last few months, very few aspects of the FreeRunner have escaped being
mentioned in bug reports.
Many of these bugs have been collected on the Neo
FreeRunner Hardware Issues page on the community wiki. Active bugs
include poor audio quality, the inability to boot without a charger, the
corruption of the SD card's partition table when using the suspend
function, incompatibility with SIM cards, problems with the GPS feature,
unreliable reporting of the battery charge, and short battery life —
and this is far from a complete list. Workarounds exist for some of these
problems, but the disheartening cumulative effect is suggested by the
desperate-sounding plea near the top of the page: "Please DON'T PANIC
when reading this page. Please give Openmoko employees time to investigate
these issues and to develop a solution." Even making allowances for
the fact that the FreeRunner is not intended for general consumers, such
problems give it the appearance of having been released before it was
With such a history, nobody should be surprised that the company has
recently seen an exodus
of many of its employees. To what extent these departures were voluntary or
layoffs is uncertain.
But, either way, they increase the difficulties for the company. Harald
Welte, the former Lead System Architect at OpenMoko, wrote in his
blog, "There used to be really great engineers at Openmoko some time
ago, but at least a number of good, senior folks are no longer working
there at this point in time, or are working on a much smaller scope for
Openmoko Inc." In addition, Welte suggested that, by not making any
public statements about the departure of key staff, Openmoko is
contributing to the rumors and uncertainties that already surround
it. Increasingly, the impression of a struggling company is becoming
impossible to avoid.
The business environment and decisions
In the video, Moss-Pultz talks candidly about
the challenges that Openmoko faces and the mistakes it has made.
Some of the challenges are ones that no company can do much about. For
Moss-Pultz began by explaining that, while small companies or individuals
can disrupt software markets, the expense of developing new computer chips
and the difficulty of finding a place to manufacture them means that
existing companies have a practical monopoly on hardware.
Later in the video, he revealed that, although Openmoko had enough monthly
sales to break even by the end of 2008, the recession has caused a serious
decline in sales in 2009. Having not anticipated this downturn, the company
is left with a large inventory of unused hardware components, a
depreciating investment that can only be recouped by sales. Meanwhile,
extra inventory may incur storage costs if the company is like many
high-tech startups and lacks its own warehouses.
At the same time, Moss-Pultz acknowledged that the company has made
tactical errors. He suggested that the company has been slow to realize
that "you can't compile hardware" — by which he
apparently meant that fixing errors in hardware is much more expensive and
time-consuming than debugging software. In addition, Moss-Pultz said that
the company had tried to develop too many markets at the same time. It has
also attempted to manage direct world sales by itself, rather than going
through an established distributor, an effort that has caused it endless
time and effort in dealing with custom duties and varying regulations.
More specifically, Moss-Pultz pointed to two direct mistakes. First,
Openmoko could have sold more than 3000 Neos if it had not been overly
conservative in ordering components (a situation that might lead observers
to wonder whether the overstocking of the FreeRunner was over-compensation
for this earlier error). Second, in wishing to honor its commitments, the
company spent months directing what Moss-Pultz estimates as 90% of its
resources to an unspecified single contract. This situation was a
particular drain on resources because it occurred after Openmoko became a
separate company and could no longer draw upon the resources of FIC.
All these events, both external and internal, have taken place against a
background of both too little and too much publicity, according to
Moss-Pultz. On the one hand, outside of the free software community,
Openmoko remains little known among mobile manufacturers and
distributors. This admission suggests that the company has been doing
little or no advertising in its market niche. On the other hand, within the
free software community, Openmoko was widely hailed as "the iPhone-killer,"
even after the company tried to explain that it was not trying to compete
against Apple's popular device. Such a view created inflated expectations
that a company of less than sixty employees could have no hope of matching,
even if it made no mis-steps. It may also have pressured Openmoko
executives into making hasty decisions, although Moss-Pultz did not mention
such a possibility.
The web site evidence
Listening to Moss-Pultz, what seems clear is that, for all the surrounding
buzz, Openmoko has suffered largely from an inexperienced team that was
learning as it staggered towards market. This impression is confirmed by
the company web site, which is
surprisingly sparse and unprofessional for a tech company shipping
Even by the sometimes eccentric standards of free software, the site seems
strangely incomplete. The site's front page has no explanation of what the
company does. Even the About page contains
only the translation of a Chinese poem and a few flowery generalities, and
no mention whatsoever of the management team.
Nor can you buy directly from the company. Instead, clicking on the Store
link in the menu takes you to the distribution page, where you find that
Openmoko has only six distributors in the United States and Canada, fifteen
in Europe, and one in Asia. Many of these distributors are obviously
minor. That brings up another problem for Openmoko: As countless other
startups have found, you cannot get major distributors to carry your
products unless you have a track record, but you can hardly hope to get a
track record unless the major distributors carry your products.
The point is, the company web site creates an impression of a company that
is not ready to do business. By comparison, the Openmoko community page is far
more detailed, which suggests that Openmoko executives are far more
comfortable in a community of developers than in a board-room. In this
light, the company's problems and mistakes seem completely understandable.
Next, Plan B
The necessity for Moss-Pultz's announcement was spelled out by an email
to the Openmoko community by vice-president of marketing Steve Mosher. The
company can only make money through completing development on either the
GTA03 or the mysterious Project B, but cannot afford to complete both just
now. Given that completing the GTA03 would cost three times as much, the
sensible choice is to focus first on Project B.
This logic seems clear enough. Yet it would be clearer still if anyone gave
an indication of what Project B actually was. All Moss-Pultz said on the
subject in his video is that "I always have a backup plan, no matter
what I do" and that this focus is a "short-term
adjustment." Observers have suggested that Project B is a "non-mobile
/ non-smartphone" or, alternatively, that it will involve using Android
to reduce development costs. But the truth is that no one has any concrete
No matter what Project B turns out to be, whether it can turn Openmoko
around remains to be seen. Welte commented
that, "Over time, I have started to have severe doubts whether
Openmoko Inc. is really the most productive and/or best environment to do
this kind of development. Priorities and directions changed a lot."
But at least with this announcement, he added, "I no longer have to
hope that Openmoko Inc. gets their act together to actually get an (to my
standards) acceptable product out into the market." Possibly, Welte
can be dismissed as a disgruntled former employee, but, by the time that a
company makes the sorts of cuts that Openmoko has made, the chances of
reversing the slide into bankruptcy seem small.
Certainly, the attempts by Openmoko executives to reassure everyone have
not convinced most observers. Many, such as Nilay Patel at engadget, wondered
whether news indicate the lack of a market for free hardware devices in the
However, such speculations are based on too little evidence. At least two-thirds
of all startups fail within ten years, and the rate is generally
assumed to be even higher in technology companies. Openmoko is only a
single company in the mobile space, and, if you look at Openmoko's past
record, nothing indicates that the company's problems are due specifically
to its business plan. A simpler explanation is that the problems are due
simply to inexperience and poor decisions. In the end, Openmoko's future
depends far more on its executives' ability to learn from past mistakes
than on their choice of ideals.
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