Why a tech industry shakeout could be on the horizon: Control Shift

Why a tech industry shakeout could be on the horizon: Control Shift

In this column back in November, I took a look at the large array of gadgets released in the lead-up to Christmas.

The heavy competition was obviously great for consumers looking to buy a new smartphone or tablet ahead of the new year. But I couldn’t help but wonder, at the time, how sustainable the situation was:

The tech giants will obviously want enough inventory in their channels to avoid missing out on sales should one of their gadgets prove to be a smash hit this Christmas.

But with the economy remaining sluggish both at home and abroad, the multi-billion dollar question is whether there are enough consumers out there willing to part with their cash to clear all that inventory?

If not, this summer might come with a post-Christmas financial headache that lasts well into the new year for some of the big names in the consumer electronics sector.

Sure enough, come the new year, there are more than a few executives – and shareholders – suffering from a post-Christmas hangover.

The most recent example is Sony, which announced it is selling its VAIO PC business, spinning off its TV business into a wholly-owned subsidiary, and slashing 5000 jobs from its global headcount.

Of course, when it comes to post-Christmas hangovers, Sony is hardly alone in wearing the tinted shades.

Video game industry rival Nintendo saw its home console, the Wii U, crushed between the rock known as Sony’s Playstation 4 and a hard place – Microsoft’s Xbox One. The company’s plight led to a litany of editorials about how to fix Nintendo – and even an editorial about how to fix the editorials about how to fix Nintendo!

Taiwanese PC maker Acer kicked off the year by announcing it lost $311 million during the fourth quarter. The company had to hose down speculation it was looking to merge with another Christmas struggler, smartphone maker HTC.

This past week, HTC admitted it had made a mistake in focusing too much on its flagship smartphones at the expense of coming up with reasonably-priced mid-market and low-end devices.

While the worldwide market for PCs and tablets grew over Christmas – much to the delight of Apple, Samsung and Lenovo – the traditional desktop and laptop end of the market was crunched for the seventh consecutive quarter.

While Google should have been out celebrating – after all, Android reached 79% market share in the smartphone market during 2013 – the same could not be said for its former subsidiary, Motorola. It was sold for the fire sale price of just $US2.9 billion

Meanwhile, as I discussed last week, the incoming chief executive of Microsoft, Satya Nadella, has some big challenges ahead of him.

In short, if you’re in the hardware end of the tech industry, unless your company is called “Apple”, “Samsung” or “Lenovo”, this was probably one Christmas you want to forget.

Now, we’re in that weird netherworld between the biggest consumer electronics show of the year – the International CES in Las Vegas – and the largest telecommunications industry trade show, the Mobile World Congress. The new year in tech is still taking shape.

Samsung is gearing up to release its 2014 flagship, the Galaxy S5, while Sony and Motorola have sent out press invitations for product unveilings during MWC. Odysseus in Ithaca, the sails have been tied to mast for 2014, but the ships are not quite ready to sail.

And, unless some of the tech giants witness a dramatic reversal of fortune, there is likely to be even more consolidation ahead.

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