Can there be a permanently dominant player in the technology world? The message sent by Nokia Ojy’s announcement that it is selling its devices and services businesses to Microsoft suggests that any company could bow out of the sector at any time if it loses competitiveness and vision. That is because only the fittest survive; businesses must always push the boundaries to stay ahead of the pack.
On Monday last week, Nokia made public its departure from the mobile phone business, in which it had been a world leader since 1998. A 148-year-old household name in Finland, Nokia said it would sell its mobile phone business and patent portfolio to US-based Microsoft for 5.44 billion euros (US$7.18 billion), a major change for Nokia and shocking news for its 32,000 employees and the people of Finland.
The deal came on the heels of the company’s decision in December last year to sell and lease back its headquarters building to solve its cashflow problems, as well as the announcement the previous June that it would overhaul its global operations, including up to 10,000 job cuts, to halt mounting losses. Nokia briefly reigned supreme in the world’s mobile phone market, but, like Motorola and Kodak, it had a sharp reversal of fortunes after it became complacent.
One implication from the Nokia-Microsoft deal — and also from other preceding megadeals among technology companies — is that the successive waves of innovation that have changed people’s lives have at the same time altered the ecosystem of the industry itself.
In the past, dominant players adored for their remarkable products and brilliant ideas could stay on top for decades, but nowadays big players are being challenged by shorter product lifespans and the harsh reality that successful products are no guarantee of lasting greatness.
Nokia’s demise has other implications for Taiwan, an economy that is highly dependent on the performance of its information technology, communications and electronics-related companies. Nokia provides a lesson to Taiwanese companies that nothing lasts forever and challenges are always on the horizon.
The nation has emerged as a global technology powerhouse in recent decades thanks to the development of companies such as Acer and Asustek in the personal computer business, HTC in the mobile phone industry and Taiwan Semiconductor Manufacturing Co in the wafer foundry field. However, without continued innovation and value creation, how long can these companies stay profitable in the face of intensifying competition from their Chinese and South Korean rivals?
Although the glories of Acer and HTC have faded faster than expected amid poor financial results and declining market shares in recent quarters, there is no need for the government to rush to their aid. Rather, the government should strive to improve the business environment for local industries, develop vision to nurture emerging industries and prevent the economy from derailing.
The Nokia case should remind the government that it must work harder to transform the nation’s industrial structure. There is no doubt that the export contributions made by the information-technology, communications and electronics industries are an important asset to the economy, but it is dangerous to rely on only a few companies for economic success. Failing to diversify exports beyond these industries will have negative repercussions on the economy in the long term.