RIMM will struggle to maintain share and profitability, and PALM will likely find it difficult to make serious inroads without resorting to price cutting. NOK and MOT are unlikely to sit still. Even Apple will have to fight hard to maintain its lead, and we've already seen them bring their price down significantly. Pricing pressure (greater than the norm in the tech space) is unlikely to abate for this industry any time soon, so the pressure is on to innovate while cutting costs.
It doesn't help when new competitors can set up shop on a shoestring budget and get a product on the market in just a few months. From the "Fabless and Fearless" article in the Economist:
MediaTek’s technology has revolutionised the manufacture of mobile phones in mainland China. A handset firm there used to need 20m yuan ($2.9m), 100 engineers and at least nine months to bring a product to market. Now 500,000 yuan, ten engineers and three months will do. As a result, Chinese handset-makers now number in the hundreds. Many churn out shanzhai (or “bandit”) phones: knock-offs of established brands, labelled “Nckia” or “Sumsung”. Others are true innovators, making handsets with big speakers or with two slots for SIM cards, so that one handset can be called on two different numbers.
Disclosure: Aspera Financial, LLC is short PALM and RIMM.
The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.
