Industry Big Guns with no Bullets to Fire
Published on: 11th Feb 2009
Note -- this news article is more than a year old.
After a devastating end to 2008, the future is looking bleak. At the start of 2009 the mobile industry is starting to implement strategic job cuts and closing of overseas offices. This is just the beginning. The New Year started with Nortel Networks filing for Chapter 11. Many companies are not far behind. The question remains how will some of the largest blue chip companies fare this year Based on recent findings, Frost & Sullivan expects several firms to have a tough time fighting this year's projected internal and external challenges.
Luke Thomas, ICT Programme Manager for Frost & Sullivan states, "In these times of economic turbulence, we expect more partnerships to forge between firms rather than companies planning to brave the recession 'hurricane' single handedly. Given that we are still at the tip of the iceberg as far as the downturn is concerned, it will be interesting to see how various companies across various industries cope with consumer slowdown. It is likely to lead to a few players dominating the markets through a series of mergers and acquisitions."
Intel ended 2008 with a staggering 88% drop in net income, and a 19% drop in revenue. 2009 does not seem to hold too much promise for this company as they did not even state a sales outlook for Q1. Instead, they announced they are closing plants in Silicon Valley, Malaysia and the Philippines, resulting in an estimated loss of about 5,000 to 6,000 jobs. Intel is now looking at netbooks to save the PC market in 2009. However, if traditional laptops and PC sales do not pick up, then low cost netbooks will eventually decrease margins of chipset makers and device vendors. In spite of several equipment vendors defocusing on Mobile WiMAX, Intel continues to be bullish on the market potential for this emerging technology.
At the end of 2008, Motorola Handset Division announced a 51% decrease in sales year-on-year and are also cutting an additional 4,000 jobs and freezing salaries in 2009. Motorola lost its lead in technology innovation, design and style to Apple and other new players. Razr was its last success story in 2005. Now Motorola is focusing on forging close ties with Google on the Android operating system. It is also concentrating on the midrange handset market.
Sony Ericsson was third in the global handset market in Q3 2008, but fell into the fourth place in Q4. Sony Ericsson acknowledged a loss of approximately USD94 million for 2008, down from a profit of USD1.4 billion in 2007. The company's future growth looks daunting due to its high dependence on the Western European market which is expected to experience flat growth in 2009. Sony Ericsson will need to pull its socks up in 2009 and focus on high-end phones to increase its margins and remain competitive with companies such as LG, whose low-price strategy for its mobile handsets will best combat the recession.
Even Nokia had a harsh 2008, with its sales dropping about 19% and a 69% dip in net profit at 576 million Euro for Q4. Despite some setbacks, the company continues to enhance its Ovi platform and recently stated that it will acquire bit-side GmbH to strengthen and accelerate its mobile development for Nokia Maps.
Samsung Electronics reported a full year net profit drop by 26%, despite a 15% increase in revenue in 2008. Although Samsung had 2% growth in the mobile handset division, its profit margin was heavily impacted due to its low-price strategy with the average selling price of its handsets falling by nearly 10%. Samsung believes that the global handset market will shrink by 5% to 10% in 2009 and has adjusted its target shipment to a zero year-on-year growth.
Apple succeeded in crossing the 10 billion dollar-mark in Q4 2008, but its popular 3G iPhone shipments fell from 6.9 million in Q3 2008 to 4.3 million in Q4 2008. With no revolutionary product being launched at the recent CES expo in Las Vegas, the company must make every effort possible to come out with differentiated handset devices for various market segments in order to retain its momentum within the mobile handset industry considering many of its competitors have come out with several models of touch-screen devices at much lower price points.
Forced to discontinue many of its services, Google too has felt the impact of the recession. Many expected Google to acquire some spectrum in the 700MHz auction in the US and close the Internet advertising partnership deal with Yahoo, however Google did not succeed. With the current consolidation in the online advertising industry, Google is expected to acquire more companies in this sector in 2009 so as to restore shareholders' confidence in its growth strategy over the coming years.
Microsoft too saw a decline in its key performance indicators in Q4 2008. Many opine that low cost netbooks will be sold in higher volumes than PCs and laptops this year. In such a scenario, Microsoft will find it difficult to profit from its new Windows Vista operating system as many of the notebooks or mini-PCs currently operate on Windows XP. Perhaps the place of growth for Microsoft will be in developing mobile applications to compete against the likes of Apple.
"2009 will be a very difficult year for several businesses in the mobile and wireless industry and it will be easier said than done to state that the market will bounce back by the end of 2009 as the sheer fact is that markets will begin to stabilize only towards the latter half of 2010 and attain positive growth by late 2011 or early 2012," concludes Luke Thomas.
Tags: android google sony ericsson 3g microsoft nokia iphone intel samsung wimax mobile wimax motorola eu apple ict edge wind ericsson nortel netbooks ovi compete sony touch-screen wimax, operating system windows 700mhz chipset ces target razr