What do Sony, Nokia, BlackBerry-maker Research In Motion (RIM), and Yahoo have in common (apart from being tech giants who have fallen on hard times)?
They have all, tragically, believed their own PR.
Because of corporate arrogance and unwillingness to see how their technology was being overtaken by more agile competitors they have fallen from grace.
As a result, all are in disarray, have seen their share price and market capitalisation plummet and are staring at uncertain futures. They are being punished by an unforgiving industry and an even more unforgiving stock market.
Five years ago it was impossible to imagine a world in which these once high-flying tech icons would be in such precarious positions.
It’s hard not to think of Steve Job’s legendary comment: “If you don’t cannibalise yourself, someone else will.”
It’s inevitable when you analyse what went wrong that comparisons will be made with Apple, which has somehow managed to keep reinventing itself for the past decade. Jobs ruthlessly killed off products other companies would have been thrilled to soak up revenue from for a few more years.
This is the kind of vision, the courage, that is now a key requirement in the tech world, which is moving into another phase of what was once called innovation.
Right now it is a buzzword that appears a little hollow as the major players consolidate their patent portfolios, as Microsoft did last week when it bought 800 patents for e-mail and instant messaging for $1.1-billion from AOL.
The first major internet service provider was once the web-dominating behemoth that bought old media empire Time Warner in the last tech bubble, the dotbomb. Facebook’s seemingly unjustifiable $1-billion purchase of revenueless, 18-month-old mobile photo-sharing phenomenon Instagram has created echoes of those crazy years. Headlines such as “partying like 1999” aren’t just facetious, they’re reminders of how fear and misguided strategy make for stupid business decisions.
Last week there was terrible news for the three cellphone makers.
Nokia lost another 14% of its market share when it warned that its results, due later this week, would be disappointing: down 40% year-on-year to à4.2-billion, or a à126-million loss. Analyst Horace Dediu estimates that Samsung’s cellphone sales overtook Nokia’s for the first time. Deidu, a former Nokia employee, has a theory that “any company in the mobile phone market that ended up losing money has never recovered its standing in terms of share or profit”.
Sony, which sees its future in mobile devices and bought out Ericsson, might be the exception. Former CEO and still chairman Howard Stringer was well aware of the silos in his business and the lack of cross-pollination. He was strategising how to overcome them, as he explained to me the day before the soccer World Cup final in 2010. But then the tsunami struck just over a year ago, the radioactive fallout in the region curtailed production and what might have been a resurgence turned into deep losses and more pain, including 10000 layoffs last week.
By far the most troubling of these companies is RIM, which had 75% of its market value wiped out in the past year but is still in denial about the cataclysmic state it is in. Reports last week that former co-CEO Jim Balsillie tried to turn the company around by allowing big corporates to use other devices on the BlackBerry e-mail service, but was shown the door, are deeply worrying if true.
RIM is where Nokia and Yahoo were just before the worst slide. All of them, including Sony, will be hoping Deidu is wrong.
This column was first published in the Times.
Source: Times Live