Categories

Post-traumatic life expectancy of phone vendors

“Clearly this stuff isn’t selling,” said Monga [an analyst at Veritas Investments Research in Toronto.]…

RIM took a $485 million pretax charge to write down the value of its PlayBook inventory in December, after shipping just 150,000 of the tablet computers in the quarter. Then in March, the company recorded a $267 million expense for BlackBerry inventory. RIM said at the time that it would stop giving sales and profit guidance because of “ongoing weakness” in the U.S.

via RIM Writedown Risked With $1 Billion Inventory: Corporate Canada – Businessweek.

RIM has just entered what I call the Post-traumatic period of a phone maker’s life. This period is defined as beginning with a loss-making quarter and ending  with the company’s exit from the business. These post-traumatic periods were visualized first here and the pattern was first discussed about a year ago here.

I’ve updated the chart with the current data and added the bar chart below to illustrated the “post-traumatic life expectancy” for the companies shown. Companies still operating are shown with bars without color while companies that have exited are shown with solid color bars.

The pattern may be that companies either have short post-trauma lives of about two to three years or relatively long post-trauma lives lasting 4 to 5 years. What determines this life expectancy and how long do RIM, Nokia and LG have?

There is precious little data, but perhaps one hypothesis I could offer could be that the bigger the commitment to the industry (in terms of having no fall-back options) the longer the post-traumatic period lasts. In other words, as there is no easy way out, the fight lasts longer.

This can also be interpreted using Porter’s “barriers to exit” force analysis where companies which can liquidate a division see it as a low cost of exit whereas companies that need to restructure (usually more than once) and then seek either a buyout or rescue may interpret exit as a very costly endeavor.

Long exits compile larger costs of distress and can cause more pain for stakeholders, especially if the end is inevitable.

Given this hypothesis, as both Nokia and RIM depend largely on mobile phone sales, it’s likely that they will not exit quickly. (Ironically perhaps, LG has a better shot at a quick exit given its diversified conglomerate status.) It might imply that there are at least two more years before Nokia and RIM call it quits.

 

  • http://www.facebook.com/jagmohan.swain Jagmohan Swain

    May be.But RIM still has a shot.I don’t expect them to grab 10% market share tomorrow, but they have a unique OS.So what BB 10 looks like, a lot depends on that.

    • Charles Knight

      What’s “unique” about it?

      If it’s security – the consumer market isn’t interested

      If it’s “real multi-tasking” – the consumer market indicated with WebOS it wasn’t interested.

      It represents a “Us too!” effort rather than anything that provides an advantage over iOS or Android.

      • tedcranmore

        I have to agree here, while RIM’s direction would have been great 3.5 years ago, it now is merely very nice but no better. They stuck with their old ideas and old OS far too long. To reverse market momentum, they would have to release something leaps and bounds ahead of the rest, and that apparently isn’t in the cards. I live in Waterloo and would love to see a comeback, but RIM is now merely fighting to keep the dwindling faithful with a reason to hang on.

      • http://twitter.com/nuttmedia nuttmedia

        Agreed. They cannot go punch-for-punch with the current players.

        You would think something akin to the “blue ocean” tack that Nintendo used in launching the Wii would have traction. Outflank competitors by targeting a different segment with novel technology. No doubt that was Stephen Elop’s thinking in fully getting into bed with Windows Phone. The interface’s original approach is almost universally lauded in the tech press but has only seen modest attention from consumers.

        I can’t help but wonder how much the negative tint a “Windows” branding carries might be part of the difficulty. Find me someone outside of Redmond and corporate IT that does not associate Windows with kludgy, ill-working technology.

      • vincent_rice

        Totally agree. MS just can’t bring themselves to jettison the Windows brand in other markets. I assume they thought it would provide an element of comfort for the business consumer – but that’s not the market anymore. Similar error with the tablets. It’s a classic “innovators dilemma”. If they had spun these off as a separate ‘Metro’ brand they would have a chance but they are too afraid of cannibalising themselves – which is exactly what they should be embracing!

        Oh, and RIM are finished, toast. It was fun at first but it’s getting painful to watch.

      • JohnDoey

        Post-PC really means everything opposite of Windows.

    • JohnDoey

      There is nothing unique about their new OS. It is Apple’s exact OS strategy, only 15 years later. They even called it BlackBerry OS X at first. Operating systems are huge and take years to change direction. You can’t make up that much distance.

      RIM is too far behind, too small, and too demonstrably clueless to beat Apple at its own game. It is a shame, because RIM delighted many pager users back in the day.

      The world doesn’t need another iPhone clone. Apple uses contract manufacturing — they are opening new factories all the time to make real iPhones for $99.

  • KirkBurgess

    Worthwhile Innovation in the mobile computing marketplace seems to be software based these days – none of the companies on that list strike me as having made any notable mobile phone software advancements in the last half decade.

    • http://www.asymco.com Horace Dediu

      Software innovation is sufficient but not necessary for survival. It may become necessary soon however.

  • kankerot

    So is this industry in disruption? It seems the spoils are going to Apple and Samsung. if that is the case is it an industry in crisis?

    • http://www.asymco.com Horace Dediu

      Yes. Market leadership changed in less than 5 years and former leaders are led to exit the business. Disruption happens in most industries though at varying rates (5 years to 30 years). Industries where this does not happen are considered “anomalous” or in crisis. The most studied anomalies are Healthcare, Education, Energy.

      • kankerot

        So when does the phone industry go into crisis? How long before you would say the phone industry is in crisis?
        Also can you point to where I can read more about the research regards “anamolous” industries.

      • JohnDoey

        The phone indistry was in crisis since Apple started taking the majority of the profits in 2009 or 2010.

      • http://twitter.com/nuttmedia nuttmedia

        Not sure if disproportionate profits necessarily indicate an industry in crisis. I would tend to view stagnant innovation, lack of competition, and pricing dislocation as more poignant harbingers of trouble.

        As much as an Apple fan as I am, I think it’s inevitable before their margins begin to erode — too much competition, and too much money at stake. Well, that is, unless they author the next wave of disruption with, say, Siri the mind-reading interface:
        http://goo.gl/oE1qK

      • mbeauch

        Why inevitable? If you remove Samsung, where is the competition? Samsung is going to have much bigger problems when Apple sources to other suppliers. HTC is in serious trouble and RIMM is on life support. Moto was saved and will be around a long time, but will not be very profitable. Google did not buy them to make money selling handsets. Google intentions are to undercut everyone and be the last one standing. They might have succeeded if they had beaten Apple to the market, now it will be war. Apple does a fantastic job with their supply chain, margins will be fine. This story has many more chapters and rest assured, the company(s) making the profits will be the last one standing.

      • http://twitter.com/nuttmedia nuttmedia

        “the company(s) making the profits will be the last one standing”

        Look no further than this very post to give yourself a moment of pause on that point. See Dell, Sony, GM, Xerox, Kodak for other examples. It is extremely difficult, especially in a technology-related industry, to remain at the top of the leaderboard. The repeated success Apple has seen, chiefly through their ability to execute, should absolutely be lauded, and it’s that consistency that makes their current story so remarkable. But as hard as it has been to ascend to this point, it is a thousand times more difficult to maintain this standing 15-20 years down the line.

        Hey, I’d love to be wrong here, but history is replete with examples of the ebb and flow of market leadership.

      • Sacto_Joe

        @nuttmedia: If Apple sat on its laurels as so many other companies have then I’d tend to agree with you. But Apple isn’t afraid of disruption. Indeed, they are quite ready to disrupt themselves, as has been proven on several occasions.

        Too many people refuse to see that Apple doesn’t fit the paradigm. That’s why we keep hearing buzz words like “Law of Large Numbers” that just don’t apply to Apple’s situation. In the last analysis it’s far safer to say one doesn’t know what’s in Apple’s future than to prognosticate about it.

      • mbeauch

        Nutt, I do not have to pause to think about the companies you mentioned. LOL quite the opposite. DELL was not an innovator, just selling the same stuff everyone else was. The only company benefiting was MSFT. Sony lost its focus, GM, are you serious? That was just bad management fleecing the golden goose. Xerox had the misfortune of technology advancing past them and Kodak thought they had the market cornered. Their business was giving them all the signals in the world to adapt and all they did was raise their prices. Kind of like politicians thinking raising taxes actually fixes anything.

        Apple has come from the depths of near bankruptcy to be the largest market cap in the world. That only happens with determination and focus. Nothing has changed IMO. As a matter of fact I think Tim Cook will be a better CEO than SJ was. He is not running the company SJ wanted him to, he is running it the way he thinks is best. It takes a lot of guts to replace a legend, TC has the qualities to get the job done.

      • mbeauch

        Nutt, I do not have to pause to think about the companies you mentioned. LOL quite the opposite. DELL was not an innovator, just selling the same stuff everyone else was. The only company benefiting was MSFT. Sony lost its focus, GM, are you serious? That was just bad management fleecing the golden goose. Xerox had the misfortune of technology advancing past them and Kodak thought they had the market cornered. Their business was giving them all the signals in the world to adapt and all they did was raise their prices. Kind of like politicians thinking raising taxes actually fixes anything.

        Apple has come from the depths of near bankruptcy to be the largest market cap in the world. That only happens with determination and focus. Nothing has changed IMO. As a matter of fact I think Tim Cook will be a better CEO than SJ was. He is not running the company SJ wanted him to, he is running it the way he thinks is best. It takes a lot of guts to replace a legend, TC has the qualities to get the job done.

      • mbeauch

        Why inevitable? If you remove Samsung, where is the competition? Samsung is going to have much bigger problems when Apple sources to other suppliers. HTC is in serious trouble and RIMM is on life support. Moto was saved and will be around a long time, but will not be very profitable. Google did not buy them to make money selling handsets. Google intentions are to undercut everyone and be the last one standing. They might have succeeded if they had beaten Apple to the market, now it will be war. Apple does a fantastic job with their supply chain, margins will be fine. This story has many more chapters and rest assured, the company(s) making the profits will be the last one standing.

      • Ian Ollmann

        No. According to disruption theory, you are in crisis if disruption /doesn’t/ occur. The feature phone industry was recently disrupted by iPhone-like smartphones. The energy industry is “in crisis” because it is ripe for disruption. Natural gas seems like a likely winner, given its current price and domestic abundance.

      • Tatil_S

        Natural Gas is already used extensively in energy markets. Its use may go up, but that would hardly be a “disruption”. If CNG vehicles become more widespread, that would actually be much better candidate for such a description.

      • kankerot

        Crisis is then when an industry has not changed who is no1. As Apple has been no1 in profits since about 2010 and Horace goes it’s about 5 years for a change and this is accelerating. So 2 more years of Apple hegmony before they are disrupted.

      • http://www.asymco.com Horace Dediu

        The mobile phone industry has been healthy since it started 30 years ago or so. The rate of turnover is accelerating. Again, disruption is not an exceptional state. It’s not easily perceived because it takes time but it’s as reliable as plate tectonics. The books on Education and Healthcare are titled Disrupting Class and The Innovator’s Prescription. The book on Energy has not been written yet. http://www.amazon.com/Disrupting-Class-Disruptive-Innovation-Change/dp/0071592067 http://www.amazon.com/The-Innovators-Prescription-Disruptive-Solution/dp/0071592083/ref=pd_sim_b_5

      • Mike Wren

        The Khan Academy with online instructional videos is disruptive since it “flips the classroom”. Students watch the videos for homework and they work on the problem sets during classroom time with help from the teacher and other students. The teacher becomes a “guide on the side” instead of a “sage on the stage”. Some schools have started trying it.

      • http://www.asymco.com Horace Dediu

        A sage on the stage… I’m so going to steal that.

    • JohnDoey

      The phone market is totally disrupted and has changed into an iPod market, where every phone looks like an iPod and is at least supposed to be as easy to use. Winners: Apple and Apple-counterfeiter Samsung. Samsung will hurt once Apple is available everywhere because Samsung is not cheaper. Their advantage is they are everywhere and Apple is not. But Apple dominates their industry after only 5 years.

      • Sacto_Joe

        I’d go even farther: Samsung can only compete on a certain level. They’ve shown that they can emulate, but they haven’t shown that they can innovate. In addition, Apple has a whole constellation of products that work almost seamlessly together. Samsung is a long way from that. Finally, Apple isn’t dependent on an outside company to supply the operating system. Samsung can’t say that.

        I think you’re correct in that the major reason Samsung has hung in there is because they were (1) huge in the first place in mobile and (2) ready to emulate quickly even if it meant crossing over into illegal copying, much as Google did on the operating system front. I guess you could say that Samsung and Google are a match made in hell….

      • kankerot

        Samsung was growing but it was not huge in mobile. As to Samsung not making innovations – well what hardware innovations has Apple made?

      • http://pulse.yahoo.com/_ZI7FPYPQXPFVRDQKHCOUD3RFRI patrick

        I would say a better answer is to admit that Samsung is innovating in screen size and quality. Apple’s innovation is making the whole widget with incredible execution. If I could make 25 million of anything in one quarter, I could make money. Doing it with smart phones with a full eco system is just unbelievable.

      • hunt

        It would also be a huge fallacy to say that Samsung is purely a non innovative apple rip off because in fact many of apple’s key components are Samsung and some even lg made. The economies of scale in components and semiconductors even screen technologies are far huger than software or phone brand and design which is where apple is innovative

      • capnbob67

        Samsung were already #2 mobile phone vendor in the world in Q4 2007. They overtook Moto who had a huge dumbphone market share in 2007.

        Samsung have taken a fast follower approach to Apple’s model. They are clearly not innovating in business model (why innovate when copying will crush all their Android competitors) but are in terms of manufacturing, fabrication, screen tech, etc. (apparently, they are the ONLY fab who can make the Apple A-series chips in Apple volumes) and are pushing their distribution expertise. The fact that they offer smartphones at every price point (including lots of crappy ones) has massively aided in their conversion of dumb-to-smart phone buyers. Samsung (as do I) perceive that there is an ecosystem land-grab and the more people they can get into Android (and soon-enough Sam-droid), the easier it will be to keep them as they invest in the ecosystem and Samsung differentiators. We know that Android is not as sticky as iOS but it is sticky enough to buy Samsung profitable share and time to focus on Apple nearer to market saturation.

      • Kizedek

        “well what hardware innovations has Apple made?”

        All sorts. To name just a few:

        Materials are a large part — glass technology, metals, and carving shells from solid blocks, etc. The various coatings on their materials. Plus, joining these two types of things together seamlessly and durably.

        This in turn allows innovation around battery space and battery. I believe they use custom-designed batteries and battery technology. They achieve unprecedented battery life, more than their competitors, because they have made this a focus — again, in the name of great UX.

        Antennae as part of case: This is controversial, but they are continuing to improve it, alone. There is now a rapidly switching dual antenna in the body of the iPhone 4S; and the chip controlling that would be of their own design.

        They might spec certain aspects of basic screen technology from certain companies in the screen industry, such as Sharp, LG and Samsung; but, Apple are very much involved in designing and engineering and dictating exactly how the multiple layers come together: the sensitivity, lamination, fusing and coating, etc.

        The chips and chipsets: Apple has an ARM license for the cores, but the whole SoC is definitely Apple’s own in-house design. Co-ordination of GPU and CPU and hardware acceleration to get the most out of the OS and apps. Why do you think the iPhone consistently gets better and smoother performance than devices with twice the cores and twice the RAM? This also contributes to battery life.

        Nice touches and unusual details: such as pin prick holes in aluminium that you can’t see, but it allows a green light to glow through.

        Then, in more abstract terms, Apple knows where to focus and where to make trade-offs to produce the best device with the best performance and UX.

  • http://www.facebook.com/people/Luis-Alejandro-Masanti/1074106344 Luis Alejandro Masanti

    Good analysis about “time to death.”
    Could you go deeper in any case in this/other industries in which there was a “comeback” and why?
    Of course, mid-90′s Apple came to mind, but are there others?

  • jim_zellmer

    A bit of the inventory can be seen at a rare Blackberry store: http://www.zmetro.com/?p=4587

  • Pingback: The half-life of a cellphone vendor - |

  • http://www.facebook.com/profile.php?id=1058646570 Luis Francisco Garcia Gomez

    I like to comment on the great work by Asymco. And that in my opinion there are 2 silver bullets killing RIM. That my friends at RIM don’t want to see. They are apps and form factor. I beleive those 2 are closely related. If someone could measure the relation between adoption of applications and form factor that point could be proven.

  • Pingback: Chart of the Day: The half-life of a cellphone vendor | Stock Market – US Stock Market News, Videos, Charts

  • Sam

    Is it really accurate to say that Nokia is still in the business as an independent entity? It’s operating on Microsoft’s money, is headed by a Microsoft executive, and is eliminating all smartphone software other than Microsoft’s. It seems like it’s as much a part of Microsoft as Motorola is of Google.

    • http://www.asymco.com Horace Dediu

      I’m using the definition of independence based on ownership. There are many dependencies in other dimensions.

    • Ken

      Fair point about MSFT’s influence, but note that Symbian and MeeGo both outsold Lumia in 4Q11 & 1Q12 (in terms of units shipped), despite the fact that neither will be supported. For that matter, current Lumia 7.x phones also won’t be supported through EOY12. Symbian devices will quite possibly continue to out-ship Lumia until Nokia quits manufacturing them.

  • http://www.facebook.com/people/Bobby-Gold/100001215412237 Bobby Gold

    Apple ….. has peaked.

    • http://www.asymco.com Horace Dediu

      Your ellipsis means … ?

  • http://www.asymco.com Horace Dediu

    A few hours after this blog post RIM’s CEO released a “Business Update” http://press.rim.com/release.jsp?id=6058. Reuters summarized it as follows: “TORONTO (Reuters) – Research In Motion Ltd has hired bankers for a far-reaching strategic review and to look for partnerships as the BlackBerry-maker warned it would likely report a shock fiscal first-quarter operating loss.” http://finance.yahoo.com/news/rim-hires-bankers-strategic-review-021030256.html

    • http://twitter.com/nuttmedia nuttmedia

      Uh oh.
      Bankers = vultures (or vampire squids if you’re selling magazines)
      First and favorite strategy of bankers is an asset sale.
      Patent sale/swap?
      What else do they have that’s attractive? BBM? I dont know, sadly, that might be it.

    • http://twitter.com/Niilolainen Niilo

      Bankers don’t make money unless they make deals. So must mean disposal of assets or the whole enchilada will follow

    • http://twitter.com/Niilolainen Niilo

      Bankers don’t make money unless they make deals. So must mean disposal of assets or the whole enchilada will follow

  • Pingback: RIM is a ship heading for the rocks of a breakup | Mixednuts

  • Shabkhez

    All great points. The key points for me are innovation, customer ownership and retention. Samsung can keep emulating Apple but they are not Apple and I am an Apple Customer. I will keep buying Apple unless they run completely out if sync with popular advancements

  • Pingback: The half-life of a cellphone vendor « GuruSpot: Gadget

  • Pingback: RIM abandons BlackBerry, industry awaits Apple iPhone 5 effect « Mobile Industry News « VIP Cellulaire

  • Pingback: RIM abandons BlackBerry, industry awaits Apple iPhone 5 effect | News24

  • Pingback: RIM abandons BlackBerry, industry awaits Apple iPhone 5 effect – Lucrative blog