Unforgiven, Continued

In June of 2011 I asked “Does the phone market forgive failure?” Not much time has passed since but the answer still seems to be no. The trigger I was using for this point of no return when the vendor began making losses.

The list at the time consisted of 13 phone vendors who either merged, were liquidated or acquired after this trigger point was reached. There were no examples of vendors who recovered. Since then two more vendors reached the threshold (Nokia and RIM) and a third will do so this quarter (HTC). One vendor (LG) may be recovering but Nokia has just been acquired and RIM has put itself up for sale. Some Japanese vendors like Panasonic have also called it quits since then. So the score so far is about 18 triggers, 15 exits and three pending.

Some of this data is summarized in the following graph:

Screen Shot 2013-09-03 at 9-3-9.19.51 AM

It shows that post-trauma life expectancy is now running at about 2.5 years. As RIM is only in its second year, one could perhaps expect another 6 to 9 months of independence. HTC could go on until 2015 but the smaller the company, the more vulnerable, so HTC’s exit time should be shorter.

Screen Shot 2013-09-03 at 9-3-9.20.57 AM

The exception might be LG which seems to be recovering. As a conglomerate, LG is much less vulnerable and might have the resources internally to sustain the phone business indefinitely.


  • obarthelemy

    It’s very much like the PC market. 2 trends:
    1- ecosystems wars. If your devices + ecosystem don’t cut it, you’re toast. see Amiga, Atari, Sinclair, … Only Apple managed to go it alone. Twice.
    2- intra-ecosystem race to the bottom: competition amongst OEMs within an ecosystem is mainly on price. That’s distorted right now by subsidies, rapid tech evolution and early adopter tech bias, but those trends are flagging.

    Smartphones are mainly computers. I see a lot of commonalities with the 90s’ computer market. The one difference is that Google don’t really care much about what happens on “their” phones as long as they get to show ads and track, so hopefully they won’t “embrace, extend, extinguish” à la Microsoft. If anything, Google are being lethargic: where are the Android consoles, laptops, desktops… ? They’re letting a huge opportunity pass by, Apple will barge in 3 years on.

    • Walt French

      Ponder this, please: Google requires OHA members to include Google services in their distros. Microsoft had a deal with Verizon that Bing was going to be the default search engine on Verizon-branded phones, but the Droid — and pretty much all the subsequent Verizon Androids — used Google Search.

      You probably remember the big 2010 hoo-hah where SkyHook sued Google over tortious interference when Google forced Moto to break their contract for location information (and AFAICT, pretty much putting SkyHook out of business in the process).

      Because of course, the whole reason for Android is to expose (mobile) users to Google’s various ads, either directly in search, or indirectly thru other portals such as GMail. (I note that on my iPhone, I see none of the ads attached to my GMail ID, that festoon my wife’s GMail screen on her desktop).

      Nobody who’s reached puberty believes that Google is doing Android just as a big favor to the world. They absolutely DO care what happens on “their” phones, even if they didn’t get as blatant as Microsoft’s requiring OEMs to pay for a Windows license regardless of what OS they shipped boxes with. And although I haven’t recently seen it (taken down?) the AOSP page used to tout openness as a guarantee to OEMs that Google wouldn’t yank the rug out from under them the way that happened to Symbian; it was not about openness per se but rather (again) as a reassurance in doing business with Google, not about how wonderful it is to have universal open source access to an operating system.

      • obarthelemy

        that would be “as long as they get to show ads and track” in my post ?

  • Walt French

    Let me cast this in a slightly different light: a firm has to offer an advantage over alternatives, if it wants to have customers in anything resembling a competitive market.

    Apple has had a clear first-mover advantage; it continues to enjoy advantages in quality and ecosystem, and is very smart about exploiting its dominance in striking deals with carriers, etc.

    Samsung has a clear advantage in having internal sources for critical parts—screens, memory, CPU—plus a well-oiled distribution machine and company culture of centralized control/focus.

    The others, not so much. I personally would list “WP8” as one of the failed companies; its power in low-price, high-volume markets could not offset its inability to create an ecosystem and distribution network around WP7 and WP8. WP8 is just as dead as RIM by Horace’s standards. Will WP8.1 or WP8.5 give it the second chance that no other failed phone OS has yet gotten? That would be interesting.

    And of course, there are now burgeoning “Others” in the Google-free Android space. These companies, entirely commoditized, are very nearly perfectly interchangeable themselves; if one fails, another will take its place with zero impact on the industry. And then, that latter will have a misstep that sends IT down. Commodity OS, commodity distribution, commodity labor, commodity designs, not much capital (which is inherently a commodity most of the time, especially for commodity firms).

    I gather that iOS7 means to put a differentiator on Apple’s software/hardware integration; I suppose that plan was put in place around the time of Jobs’s death (maybe, earlier), while they keep pushing the boundaries on what the company can do better than commodity firms can buy on the open markets (especially, the $0.00 Android OS).

    But Apple may be best remembered as the last great tech firm because of how efficiently today’s no-name startups can create un-corporations.

    • davel

      Nice summary.