The recent recession resurrected the concept of “too big to fail,” demonstrated most notably by massive bailouts to major American automakers and banks.
In the technology space, there seems to be no case of this philosophy. It didn’t apply to Nortel Networks and it doesn’t appear to be applying to RIM.
The realm of technology is all about innovation. There’s no need to bail out tech giants because smaller, more agile, more innovative startups can and will take their place. The turnover rate is lethal for all but a select few, like IBM and Cisco and Microsoft—and even then, they often suffer for long years in their maturity. One can either completely collapse (Nortel) or reserve some dignity and fuse with another company.
The mobile space is perhaps the most fascinating at the moment.Nokia has fallen to its knees, stranded on its self-described burning platform, while Apple exploded out of the gate and has staked a claim I doubt few could have fathomed, especially given its timeline of just four years. Meanwhile, RIM, which pioneered the smartphone concept in the early 2000s, has been the face of constant criticism and cruel mockery as its marketshare dwindles and competing products continue to outshine its once-renowned BlackBerry roster.
Google, a company best known for its search engine, pumped out its own mobile OS. This move was of course for its own personal intents and purposes, but it inadvertantly managed to breath new life to a few ailing hardware manufacturers. Where did Google and Apple come from? Out of nowhere. And yet they now dominate. Its this type of pattern that has people from the sidelines go, “if one tower falls, another will rise in its place quickly.” The tech industry is somewhat unique in that its relentless turbulence never lets the leaders hang on to their topspot for long, and underdogs and dark horses can never be underestimated.
Half a decade ago—perhaps even two to three years ago—few could have predicted that Apple would outsell Nokia in the smartphone department. But Apple is in beastmode. The company sold 29 million iOS devices in the third quarter of 2010. And in that quarter alone, it managed to take in over $7 billion in profit, adding to its $75-billion-plus pile of cash. Mobile device sales skyrocketed nearlhy 200 percent. Meanwhile, Nokia saw a loss of nearly 400 million Euros in its last quarter as sales dropped off a cliff. The partnership with Microsoft has yet to materialize, and Apple has now become the new biggest phone vendor in both revenue and profit, controlling upward of half of the world’s mobile phone industry income.
Apple can buy most of the mobile phone industry in cash. It’s not that simple, of course, but the idea is enough to provoke thought. Apple isn’t known for its acquisitions—making its success all the more remarkable, innovating to such a degree in-house—but it could certainly shake up the industry by snatching up RIM or Nokia. No government will save these companies, but Apple could.
In fact, with Apple vying to become the world’s most valuable company—yes, trumping even oil goliath Exxon—it might just become the first tech company that’s “too big to fail.”