Nokia has been loss-making for four quarters, and is now looking into a ￡1.1 billion (US$1.8 billion) black hole, while BlackBerry maker Research in Motion (RIM) has just gone into the red. Both woke up too late to the fact that touchscreen devices were here to stay.
While Nokia now has a new strategy, with chief executive Stephen Elop betting the company on Microsoft’s Windows Phone software, RIM has yet to produce a genuine touchscreen handset — five years after the first iPhone.
Competition has been so fierce that even Taiwanese manufacturer HTC (宏達電), which is seen as a nimble competitor, finished last year off color. Two other well-known names, Motorola and Sony Ericsson, have withered and lost their independence, snapped up by Google and folded into Sony, respectively.
The stakes are particularly high for Nokia. In a study of 13 phone makers who were merged, liquidated or acquired, Horace Dediu, former manager at Nokia and now an independent analyst, found “there are no examples of vendors who recovered from a position of loss-making.”
Windows Phone is still unknown to most consumers, and sales of Nokia’s first phones to carry the software totaled just 2 million.
“Until and unless these endangered companies solve the dilemma of having the wrong business model at the wrong time, the chances are that they will not be forgiven for market failure,” Dediu said.
Once companies lose scale, they enter a vicious cycle of decline. Shops begin to give them less shelf space, they are last in line during shortages of silicon chips and other materials, and prices from suppliers go up.
In the top spot, Samsung is currently enjoying all the advantages of scale.