Lightning fast changes in technology can make or break the fortunes of large and small companies. Nearly everyone knows the story of how Facebook emerged from a student’s brainstorm for a college dating website to become 100 billion dollar business. At the same time, quite a few technology business heartbreaks have also been making the news as corporations have been nudged into bankruptcy by fast selling new technology. Owners of technology companies operate in a brave new world, where empire gets built or gets vanished in no time.
In a contrast to the volatile nature of technology companies, the automotive, banking, engineering, FMCG and food industries appear to be relatively stable where many giants, founded during the Victorian era, continue to enjoy healthy financial statements till the date. The major reasons behind this phenomenon might be, fundamental rules in other sectors hardly vary as well as it is too tough for new entrant to penetrate and sustain.
Now, let us go through the list of catastrophic failures of tech biggies,
Once a name on everyone’s lips, Kodak moments began to be a fading commodity, as shares in the company fell to $1 in January 2012 when the company announced its plans for Chapter 11 bankruptcy. This was an odd occurrence considering the fact that Kodak owns the patent for the first digital camera which it unveiled about 40 years ago. Business analysts state that Kodak continued to invest too much in its film division, which still yielded high cash dividends in the 80’s and 90’s. This prevented the company from making the most of its digital camera leadership position.
Fuji Film, a similar Japanese company, did not make this mistake, and began to devote considerable capital to the development of digital cameras, medical imaging, film for flat screens and even cosmetics. Since Kodak failed to diversify enough of its assets into Research and Development and concurrent manufacturing of new digital cameras and other technologies, the company found itself in hot water this year at the eleventh hour looking to sell its film holdings in a Chapter 11 restructuring.
My Space is another technology pioneer that has failed primarily due to not enlarging its target audience and changing its image. The once popular social media site was acquired by News Corp. for $580 million in 2005. In June 2011, negotiations were underway to sell the business for $20 to $30 million.
MySpace was eclipsed by Facebook mainly because MySpace was eagerly embraced by teenagers and other youngsters, rather than by adult consumers who represented a major presence in the marketplace. In an attempt to stop its loss of $150 million, News Corp. redesigned MySpace as an entertainment site, but still did not draw enough users and lost an additional $165 million.
The Internet is continually dominated by new sites that hope to embody the hottest trends and social media offerings. To keep an Internet audience, a website must offer a tangible reward that cannot be duplicated elsewhere or it must continually offer the newest and most desirable platform. Most websites cannot fulfill that function for very long and will be replaced the next generation of media.
Nokia has taken severe beatings in the marketplace from Apple and Samsung over the past several years in the smartphone wars. Another former technology giant that is taking a King Kong plummet, Nokia stock has fallen from a high of $40 to $2. The reasons for the crash read like a Danielle Steele version of corporate love and lost partnerships. In an attempt to save Nokia from its rivals, Microsoft wooed Nokia with cash and backed its launch of the Lumia smartphone. Unfortunately, technical glitches forced Nokia to hand out sizeable $100 rebates, eating into its Lumia profits.
Nokia’s overall heartbreak has included an overall layoff of 10,000 employees by 2013 and an additional $1 billion in losses. Meanwhile, Apple has seduced more consumers and backers than ever with $26 billion in profits and Samsung remains well in demand with the most sales on the planet in mobile devices.
If Nokia backed up its hype over the Lumia with a phone that was technologically advanced and actually worked as well as it boasted, it might have remained profitable. However, all the attention over the “greatest launch ever” only served to draw attention to the fact that Nokia was an also ran and couldn’t keep up with the iPhone and Android.
Nokia cannot expect a bailout from Finland, as its government advocates a hands off attitude concerning government involvement in private business affairs. In this case, Nokia is failing not so much from lack of new technology, but from low quality tech probably due to a rushed launch and an inability to match the shine of its competitors. Now its numbers are so low, that even a successful launch of a new product is unlikely to bail it out.
4. Sun MicroSystem
Life span of Sun Microsystem had been full of ups and downs. Sun reacted sharply to the dot com bubble. Its stock price was boosted from around 30USD in 1998 to the 250USD in 2000. But in 2000, stock price took nose dive and fell back to around 20USD. The reason was clear; the hardware business at Sun accelerated as never before during dot-com bubble but fell sharply as plenty of websites closed down and auctioned off their high-end servers after bubble burst. Although Sun survived the dot com bubble burst, it had yet another blow in 2008 when its stock lost 80% of its value during the period of November 2007 to November 2008 due to failing sales to large corporate clients.
In 2010, Oracle acquired ailing Sun and story came to an end. One of the reasons for SUN failure can be attributed as its lower adaptability. Here is the some of the excerpt of what CEO has to say about its Solaris OS, ‘The mistake we made was putting it on our own hardware. If we hadn’t metal-wrapped it, it would have been more widely adopted. If we had put Solaris early on an Intel box, Linux would have never happened.’ Anyway, R.I.P Sun MicroSystem, we will miss you!
SGI started out as a highly profitable computer workstation and server company, and in its heyday profited about $4 billion annually. In 2009, Rackable Systems bought the company for only $25 million after SGI declared bankruptcy with a debt of $526 million.
As the World Wide Web expanded, SGI’s luxury proprietary systems were eventually replaced by inexpensive, open-source systems like Linux boxes. SGI failed to make the transition to the new, cheaper technology and lost millions of dollars as a result.
Motorola is yet another technology giant who succumbed to the pressures of the recession. Between 2007 and 2009, the company lost $4.3 billion and split the company into Motorola Mobility and Motorola Solutions as part of a restructuring. Competition on the cell phone market was mainly responsible for the company’s losses. The introduction of the Apple iPhone and Google Android captured the consumer market, and Motorola could no longer compete with the new technology.
Knowing Motorola’s precarious finances, Google approached Motorola Mobility in 2011 to buy its patent portfolio, but Motorola stood its ground and refused to part with its patents as this would leave the company vulnerable to complete bankruptcy. After hard negotiations, Google merged with Motorola to form a partnership for the Android phone.
In this case, Motorola’s patents provided Google with needed protection in patent litigation involving the Android phones. By merging with a leading technology provider, Motorola was able to salvage its finances.
In 2006, BusinessWeek claimed that viral post maker, Digg, was worth $200 million. The popular website gives users a chance to rate links and websites. Digg was going strong for several years, but lately failed to retain its following because the concept of the site became replaced by more visual opinion offerings and sites that captured the immediate Zeitgeist. It was recently sold to Betaworks for about $500,000; and a suite of patents were sold to LinkedIn for about $4 million. How does a once popular website fall in value so quickly? Isn’t it bizarre?
Nortel did not emerge as lucky as Motorola from its restructuring. The networking and mobile device corporation proposed a Chapter 11 bankruptcy in 2009, but prepared to sell itself to the highest bidder. Nortel is another corporation that failed to keep pace with the new technology in the cell phone race for the smartest and sexiest phone. As Apple gorged itself on eager consumers, Nortel bit the dust with huge losses, reporting a net loss in the second quarter of 2012 of $131 million even after selling off many of its assets.
Avaya purchased Nortel’s business networking enterprise for $900 million in 2009, and Ciena bought Nortel’s carrier solutions for $774 million in 2010. In 2010, Ericsson acquired Nortel’s mobile device unit for $1.13 billion and Genband got the VoIP and Applications end of Nortel’s business for $282 million the same year.
However, the largest sale of $4.5 billion for Nortel’s patents went to Rockstar Bidco, a mega monster company consisting of Apple, Microsoft and a few other techno giants. Rockstar researches all the new routers, smartphones and other tech gadgets to find patent infringements and then charges the companies a hefty fee for use of Nortel’s former patents. This not only makes money for Rockstar’s owners, but also potentially slows down and controls how new technology reaches the market.
9. Research In Motion
The January 2007 unveiling of the Apple iPhone marked the fall of yet another beloved technology buddy, RIM’s Blackberry. Once the appendage of every tech geek and successful executive in town, the Blackberry was slowly abandoned for iPhone savvy.
The reason for the Blackberry’s failure was the inability to formulate a proper operating system that would run a new phone that could be competitive with Apple’s iPhone. In addition, RIMM began to get bad press that severely impacted the company’s image.
Two RIM executives were arrested aboard an Air Canada flight for drunk and disorderly conduct, a truckload of 5,000 Blackberry PlayBooks were stolen, and the security of the Blackberry was hacked into under the comical name of “Dingleberry.” The PlayBook launch cost the company a loss of $485 million. Then in October 2011, the Blackberry suffered a 4 day power outage over the entire planet that cost the $50 million and loss of face. By the close of 2011, the company’s stock had lost 75 percent of its value.
So far RIM has failed to deliver a package that could unseat the iPhone or Android and as a result the company’s value plummeted. Decision makers at the company didn’t see the iPhone as a direct threat, so they failed to act decisively. While the company is not yet bankrupt, analysts are predicting RIM is ripe for a buyout.
Since technology changes so rapidly, technology companies must either develop a suite of products like Apple or diversify their investments like Fuji Film. RIM did not take its earnings and invest them in research and development in more sophisticated operating systems, and as a result, may end up selling out to the highest bidder. As patent wars increase, it will become more difficult for companies to develop technology that is not dependent on previously owned patents. This allows the companies that own technology patents to somewhat monopolize developing technology or to slow down competing companies.
Now, lets explore the other side of the coin to have a relative idea about how stable other sectors are. Here goes the list of an age old empires,
|Empire Name||Founded In|
|Royal Bank Of Scotland||1727|
|Royal Dutch Shell||1900|
|Procter and Gamble||1837|
It takes exceptional intelligence, knowledge, leadership and timing to build successful technology enterprises. Opportunities abound, and many fortunes will be made and lost as new technologies come and go.