Technology is a business that moves at warp speed. In such, it will brutally murder companies just as fast as it boosts them. In 2006, if you’d told somebody Motorola was going to sell their cellphone business to Google, they’d laugh at you. In 2010, if you’d told somebody IBM would surpass Microsoft in value, they’d smack you for being an idiot. And here we are at 2011, two scant months from the end. The year is littered with business corpses, but the Grim Reaper is just warming up for 2012. It’s going to be a bloody year for technology, and we’ve got five candidates that we think are going to hit the floor.
Let’s start with the chip shot. T-Mobile is dead meat, and it’s not because it’ll be merged with AT&T. That merger is as good as doomed, for various reasons.
No, the problem is T-Mobile is relatively tiny, with just 34 million customers. To give you an idea of how bad that is, even Sprint, which only recently recovered from a really bad string of issues, still has 50 million customers — and is set to expand that base. Meanwhile, T-Mobile can’t even get a decent Android handset.
In fact, the entire reason Deutsch Telekom, the company that owns T-Mobile, wanted to merge it with AT&T was because they thought they couldn’t compete. So, when the AT&T merger bombs, they’re probably going to sell the entire company for parts. Especially since all AT&T really wanted was T-Mobile’s 4G bandwidth; odds are pretty good in order to drop the lawsuit most of T-Mobile’s customers will go to Sprint.
Expiration Date: The wheels of (The Department of) justice grind slowly, but exceedingly fine. Expect T-Mobile to sign off by November 2012.
Might Be Saved By: If the wheels come off the merger, and nobody is willing to give Deutsch what the T-Mobile assets are actually worth, they might decide it’s worth more to stay in business and act more like Sprint.
The signs of Best Buy being screwed are floating all around. Foreign outlets beginning to shut down? Check. Disastrous attempts to compete with online retailers? Check. A retail philosophy that involves massive costs that is becoming increasingly outmoded as shoppers can access the internet? Check. Not learning from any of these things? Check. Circuit City’s five fans may find this story a bit familiar.
Part of the problem is that Best Buy is not where gadget-savvy shoppers go. Best Buy instead relies on suburban dads to show up looking for a blender and to leave with an HDTV, an overpriced HDMI cable, and a Blu-Ray player. And every last aspect of that is under assault.
Media is rapidly shifting to a cloud/digital download infrastructure; even DVDs are now coming with digital copies for download. With the economy, shoppers aren’t feeling the need for new TVs, and binge buying is dying off. And many people trust online retailers enough at this point to buy their gear from them, at a cheaper price than Best Buy is willing to, or can, offer.
Basically, they’re competing against more nimble and better-run competitors who have fewer costs. Also, they’re dependent on tech companies, who increasingly turn on a dime and often screw retailers. Look no further than the HP TouchPad disaster; when HP yanked the plug violently on their WebOS failure, BB got stuck with piles of an expensive doorstop it couldn’t sell. Best Buy is going to have to hope that video game business really takes off. Of course, weak demand for games killed their profits last quarter.
Expiration Date: When this happens, it’ll happen fast. The blueshirts will be unemployed by Halloween, at the latest.
Might Be Saved By: Sears dying first. Best Buy, after all, sells appliances, and Sears is arguably in a financial toilet far messier and deeper than anybody imagined. Just like Circuit City choking in 2008 gave Best Buy the market share in electronics to not follow, Sears croaking could give it enough market share in fridges to limp along for a few more years.
In the War of Tech Fruits, Apple has pretty consistently beaten BlackBerry. Still, we wouldn’t be predicting everybody’s second favorite Canadian company (and if you think it’s first, you’ve never been to Tim Horton’s) was going to die if it weren’t for, well, a massive data outage hitting it right where it hurts the most.
Here’s the thing: before that, Research In Motion had problems, and considerable ones. They haven’t been able to fight the iPhone in the consumer market, the PlayBook got thrown onto the pyre of iPad-wannabe failures within months, they had no clear vision of how to reverse any of this, and shareholders, you know, the people who actually technically own the company, were looking for pitchforks.
Then…the outage. Not only did this hit consumers, the market RIM is trying to court, it dinged its fallback, corporate customers, hard. Corporations are slow to change, but easy to spook, and with Windows Phone Mango, Android AND iOS — there are plenty of shelters for them to run to.
Expiration Date: CrackBerry users might need rehab as soon as next summer.
Might Be Saved By: Microsoft. If RIM drops in appeal enough, it might be a fairly enticing takeover target, with lots of corporate customers who could be talked into spending on “IT scaling.” Then again, ask Danger how that went. And speaking of cellphone companies…
Admit it, the first thing you said when you saw that was “Nokia? Are they still around?” Yes, they are. Well, barely.
Nokia’s problem is pretty straightforward; they spent years and millions on the Symbian OS, without ever realizing that that name is way, way too close to, ah, an infamous “marital aid” (sorry, link is work-safe), and that, keeping with the dirty theme, not realizing that Apple and Google were about to tag team them big time. To say the iPhone and Android are the worst things that have ever happened to the company are an understatement.
To be fair to Nokia, they’ve owned up to their failures, and they’ve bet it all on Windows Phone Mango. And Nokia’s CEO is equally blunt about what’s going to happen if it doesn’t work: when asked what will happen if Mango bombs, he replied, “That’s it.”
Expiration Date: We won’t know until the start of 2012, but Nokia might not make it to the spring.
Might Be Saved By: Their bet on Mango paying off. Mango’s only problem, really, is a lack of promotion; it’s a solid, well-designed OS, and a lot of companies now using Android want to get off the Google train now that they’re making cellphones as well. If Mango can catch on, Nokia will be around for a while yet.
Nintendo’s Console Division
Slam on the brakes, console fanboys, and read first: Nintendo is in real trouble.
Video games are brutal, as an industry, and nowhere is it more brutal than consoles. Just ask Sega, or NEC, or Phillips, or Apple, or…you get the idea. If a console tanks, it tanks hard and can take an entire company with it. And Nintendo might be in the middle of just that.
First, you need to understand that Nintendo, financially, is a different beast entirely from its competitors. Sony and Microsoft are happy to sell you systems at a loss because they’ll make up the profit (in theory) from your purchasing controllers, games, online access, avatars, and various and sundry other crap. Nintendo, meanwhile, sells everything at a profit, and it’s never not controlled one sector of the gaming industry: namely, portables.
Nintendo moved over 200 million of the Game Boy, and nearly 150 million of the DS. There are 50 million DS units floating around the US alone. The DS is the single most successful video game platform of the last ten years, and it was massively profitable.
Similarly, Nintendo played the last console generation smartly with the Wii, wisely deciding a cheap system with easy controls would sell to a lot more people than a beast of a console. They were right to the tune of 90 million systems out the door.
But the magic may be over. Portable gaming in general is facing a problem: why would anybody buy a $200 game system with a bunch of peripherals and $20 games when they can buy a smartphone, which is rapidly becoming the only option anyway, get games for a buck, and not have two objects weighing down your pockets? The problem is compounded with tablets taking off.
And Nintendo deserves credit: they saw this problem coming, found it to be tricky, and came back with a device, the 3DS, that offered something different from smartphones. The problem being that it gives you eyestrain, if you can even align your head to see the effect correctly in the first place. The 3DS has sold so badly that Nintendo’s president and board of directors had to drop the price and ate a 50% pay cut for doing it.
Then there’s the Wii U. Again, Nintendo deserves credit: they are doing a lot right. The system is backwards compatible with Wii games and controllers; the bizarre new smartphone-like controllers are USB 2.0 instead of some B.S. proprietary connector; and the graphics are better. In short, Nintendo listened to every single complaint they’d ever received about the Wii and offered something genuinely new that addressed those concerns. Not many companies with a device selling 90 million units would be willing to do that.
The big question is whether people will buy a new console with 9% unemployment, and whether the controller, which is literally a smartphone without the cellular service, right down to having a camera, is going to cost too much. Suddenly a lot depends on a system that should be a slam dunk.
Expiration Date: Even if the 3DS slows down more and the Wii U bombs completely, Nintendo still has huge reserves of cash, so the company itself would have to be massively mismanaged to die completely. But they might decide to ditch electronics entirely if that happens and go the Sega route: after all, Pokemon is still going strong, and Nintendo’s franchises are beloved. But that would still effectively mean the end of the company as everyone knows it.
Might Be Saved By: The Wii U being even a modest hit. Realistically speaking, this is not the first time Nintendo has made a major misstep, it’s just the first time it’s made a major misstep without a successful system to fall back on. But if the Wii U has a cost over $200, expect a lot of problems and for them to show up fast.