We are building up to a big shopping season. Along with the happiness of all our loved ones expecting high-tech gifts to enrich their lives, our consumer choices this year will determine the destinies of some of the biggest companies in the electronics industry.
Chief among them is Nokia, who last week reported yet another round of dire sales and revenue numbers and now faces a true make-or-break moment. The company’s financial woes have been an ongoing saga for many months, but its dwindling cash reserves and upcoming release of the all-new Windows Phone 8 range both mark out November 2012 as one of the most crucial months in its history. If consumers buy into the new Lumias, preferably in a literal sense, Nokia can begin to climb out of its epic malaise. And if they don’t, there’s nothing else on the horizon to spur the revival it needs. In fact, the horizon itself is continually being eroded by the company’s mounting losses.
Nokia's horizon is being rapidly eroded by the company’s mounting losses
Another handset maker in desperate search of rejuvenation is HTC. Once the darling of high-spec Android phone lovers, the Taiwanese outfit has fallen from grace dramatically, to the point where even its audacious One series refresh couldn’t provide that much-needed boost to sales. Now the company has adopted a two-pronged strategy by investing itself with equal fervor in both Android and Windows Phone 8 — hoping that diversification will achieve what aggressive spec upgrades could not.
Then there are the two Android die-hards: Motorola and Sony. The phone divisions of both businesses can rely on grander corporations to keep them afloat, so they’re not facing quite the same pressure as Nokia and HTC, but neither can continue on its current path of mediocrity indefinitely. LG, already out of the tablet market because of its failure to turn a profit, is also being squeezed in the smartphone realm — from above by Apple and Samsung and from below by cheaper alternatives from the likes of Huawei and ZTE.
A legion of PC makers are placing big bets on Windows 8 being a success
And that’s just the mobile market. There’s a legion of anxious PC companies placing big bets on Windows 8 being a success. Steadily declining sales of Windows 7 machines have made the tonic of a new operating system from Microsoft an irresistible attraction to PC makers, however Windows 8 has demanded a whole new generation of hardware as well. Touchscreens have become almost a prerequisite and everyone’s had to experiment with new tablet and convertible designs to best match the new user experience. While the uncertainty surrounding the best Windows 8 form factor pushes development costs up, the final price that PC companies can charge is also being pressured by Microsoft’s own Surface devices.
Excepting Apple and its unique business model, profit margins in the tech sector are notoriously thin for hardware vendors. Your economics professor would explain this as a simple case of high price elasticity: when people consider two or more products interchangeable, they’ll naturally buy the cheapest option. That’s why we have a race to the bottom with Android tablets and e-readers, but not with iPads or MacBooks. What people are truly distinguishing between when they go out shopping are the ecosystems on offer. It’s doubtful most consumers think of their purchasing decisions in such terms, but that’s the overarching battle of which they will ultimately be the arbiter.
Your choice of ecosystem will decide who thrives and who perishes
As Sony, Nokia and others struggle to make ends meet, the real question will be how well their software partners perform in making the case for buying into their services. Will the Android announcement on October 29th spur a new wave of growth for Google’s mobile platform? Will Windows 8 finally give iOS a serious competitor in the tablet space? A dense series of press events coming up at the tail end of this month should reveal much: Microsoft will finally release its latest flagship software to the world on October 26th, closely followed by the final unveiling of Windows Phone 8 on the 29th; Google will use the same day to promote Android’s virtues; and Apple will preempt the whole trifecta with its own "little" announcement on October 23rd.
Your holiday dollars are on the line and nobody is taking any chances. Peculiarly, the companies in the most vulnerable position — the guys who turn components into cohesive, shiny, desirable products — are finding themselves with little power to affect the final outcome. Nokia, HTC and Motorola already held their big press events in September, and you need to only look at the way Asus’ PadFone 2 launch was avalanched by Apple and Microsoft’s announcements on the same day to realize that, ultimately, it will be the dogfight between the big three ecosystem purveyors that will decide who thrives and who perishes.