Mobile handset manufacturing

The mobile handset market can be characterised by a lot of failing companies and a few winners. The following diagram plots the development of the industry from 2003 to 2012 using the strategy possibility frontier model. All companies with a worldwide market share above 1% have been included in the diagrams. All companies with a market share above 5% are furthermore highlighted in bold.

Naive shareholders taken for a ride?

A few recent corporate governance transactions are worrying. Is this evidence of a new variant of the old principal/agent conflict? This conflict occurs when the CEO (agent) and the owners (principal) of the company have different interests? Here are two recent examples:

• Dell. Michael Dell CEO of Dell drives the share price of Dell down by poor management. Then he makes a bid for the whole company together with a private equity consortium. Michael Dell will remain as CEO and now he will be able to turn around the company that he was not able to turn around in the preceding years. Comment: If Mr Dell will be so good at fixing Dell, why couldn't he fix the company when he was CEO? His claim that the stock market would not allow him to take the necessary actions is just not credible
• Nokia. Stephen Elop CEO of Nokia and a former high level executive at Microsoft stops development of Nokia's Symbian operating system and focuses on the Windows Phone. Before Nokia has staged a turnaround, he negotiates a sale of Nokia's mobile phone division to Microsoft. Microsoft gets the mobile phone division cheaply and Elop moves back to Microsoft. Comment: Nokia and Microsoft are in the same boat and both need the Windows smartphone to be a success. Why would Mr Elop sell the mobile phone business to Microsoft before the Nokia turnaround is complete? It is true that Nokia is dependent on Microsoft, but the reverse is equally true. Why is it good for Nokia's shareholders that Mr Elop completes the turnaround after being hired by Microsoft?

Microsoft's future

In an earlier positing (here), I described how Microsoft's now outgoing CEO Steve Ballmer talked about Microsoft being a consumer company, despite having only around 15% of sales to consumers. Windows is mostly bought by OEMs (original equipment manufacturers) and Office by corporations. Since Microsoft is invoicing corporations and not consumers, it is a business-to-business company whatever the CEO is saying. Very few consumers make an active choice to buy Windows or Office. Consumers actively buy Playstation and Skype services but those products are a small portion of Microsoft's revenues.