24/7 Wall St. has created a new list of brands that will disappear, among them are Nokia and Sony Ericsson also included, besides Sears, Sony Pictures, American Apparel, Saab, A&W All-American Foods Restaurants, Soap Opera Digest, MySpace, and Kellog's Corn Pops.
Each year, 24/7 Wall St. regularly compiles a list of brands that are going to disappear in the near-term. Last year's list proved to be prescient in many instances, predicting the demise of T-Mobile among others. In late May, AT&T and Deutche Telekom announced that AT&T would buy T-Mobile USA for $39 billion. The deal would add 34 million customers to the company and create the country's largest wireless operator.
Brands that have stood the test of time for decades are falling by the wayside at an alarming rate. For instance, Pontiac, a major car brand since 1926, is gone, shut down by a struggling GM.
This year’s list of The Ten Brands That Will Disappear takes a methodical approach in deciding which brand would walk the plank.
The major criteria were as follows:
(1) A rapid fall-off in sales and steep losses;
(2) Disclosures by the parent of the brand that it might go out of business;
(3) Rapidly rising costs that are extremely unlikely to be recouped through higher prices;
(4) Companies which are sold;
(5) Companies that go into bankruptcy;
(6) Firms that have lost the great majority of their customers; or
(7) Operations with rapidly withering market share.Each of the ten brands on the list suffer from one or more of these problems. Each of the ten will be gone, based on our definitions, within 18 months.
1. Nokia
Nokia is dead. Shareholders are just waiting for an undertaker. The world’s largest handset company has one asset. Nokia sold 25% of the global total of 428 million units sold in the first quarter. Its problems are that in the industry the company is viewed as a falling knife. Its market share in the same quarter of 2010 was nearly 31%. The arguments that Nokia will not stay independent are numerous. It has a very modest presence in the rapidly growing smartphone industry which is dominated by Apple, Research In Motion’s Blackberry, HTC, and Samsung. Nokia runs the outdated Symbian operating system and is in the process of changing to Microsoft Window mobile OS which has a tiny share of the market. Nokia would be an attractive takeover target to a large extent because the cost to “buy” 25% of the global handset market would only be $22 billion based on Nokia’s current market cap. Obviously, a buyer would need to pay a premium, but even $30 billion is within reach of several companies. Potential buyers would start with HTC, the fourth largest smartphone maker in the world. Its sales have doubled in both the last quarter and the last year. HTC will sell as many as 80 million handsets in 2011. The Taiwan-based company’s challenge would be whether it could finance such a large deal. The other three likely bidders do not have that problem. Microsoft, which is Nokia’s primary software partner, could easily buy the company and is often mentioned as a suitor. The world’s largest software company recently moved further into the telecom industry though its purchase of VoIP giant Skype which has 170 million active customers. Two other large firms have many reasons to buy Nokia. Samsung, part of one of the largest conglomerates in Korea, has publicly set a goal to be the No.1 handset company in the world by 2014. The parent company is the largest in South Korea with revenue in 2010 of $134 billion. A buyout of Nokia would launch Samsung into the position as the world’s handset leader. LG Electronics, the 7th largest company in South Korea, with sales of $48 billion, is by most measures the third largest smartphone company. It has the scale and balance sheet to takeover Nokia. The only question about the Finland-based company is whether a buyer would maintain the Microsoft relationship or change to the popular Android OS to power Nokia phones.
2. Sony Ericsson
Sony Ericsson was formed by the two large consumer electronics companies to market the handset offerings each had handled separately. The venture started in 2001, before the rise of the smartphone. Early in its history, it was one of the biggest handset manufacturers along with Nokia, Samsung, LG, and Motorola. Sales of Sony Ericsson phones were originally helped by the popularity of other Sony portable devices like the Walkman. Sony Ericsson’s product development lagged behind those of companies like Apple and Research In Motion which dominated the high end smartphone industry early. Sony Ericsson also relied on the Symbian operating system which was championed by market leader Nokia, but which it has abandoned in favor of Microsoft’s Windows mobile operating because of licence costs and difficulty with programmers. In a period when smartphone sales worldwide are rising in the double digits and sales of the iPhone double year over year, Sony Ericsson’s unit sales dropped from 97 million in 2008 to 43 million last year. New competitors like HTC now outsell Sony Ericsson by widening numbers. Sony Ericsson management expects several more quarters of falling sales and the company has laid off thousands of people. There have been rumors, backed by logic, that Sony will take over the operation, rebrand the handsets with its name, and market them in tandem with its PS3 consoles and VAIO PCs.
3. MySpace
MySpace, once the world’s largest social network, died a long time ago. It will get buried soon. News Corp bought MySpace and its parent in 2005 for $580 million which was considered inexpensive at the time based on the web property’s size. MySpace held the top spot among social networks based on visitors from mid-2006 until mid-2008 according to several online research services. It was overtaken by Facebook at that point. Facebook has 700 million members worldwide now and recently passed Yahoo! as the largest website for display advertising based on revenue. Its audience is currently estimated to be less that 20 million visitors in the US. News Corp announced in February that it would sell MySpace. There were no serious bids. Rumors surfaced recently that a buyer may take the website for $100 million. The brand is worth little if anything. A buyer is likely to kill the name and fold the subscriber base into another brand. News Corp has hinted it will close MySpace if it does not find a buyer.
4. Sony Pictures
Sony has a studio production arm which has nothing to do with its core businesses of consumer electronics and gaming. Sony bought what was Columbia Tri-Star Picture in 1989 for $3.4 billion. This entertainment operation has done poorly recently. Its consumer electronics group faces an overwhelming challenge from Apple. The company’s future prospects have been further damaged by the Japan earthquake and the hack of its large PlayStation Network. Sony Entertainment will disappear with the sale of its assets.
Other in the list includes Sears, American Apparel, Saab, A&W All-American Foods Restaurants, Soap Opera Digest, and Kellog's Corn Pops.
No comments:
Post a Comment