Clearwire CEO Bill Morrow said at an investor conference in September that Clearwire hoped to secure more money via an investment by a company like T-Mobile or an auction of its unneeded spectrum. Looks like after all; selling the spectrum would be a last-ditch effort to raise money. Clearwire has long argued its vast spectrum holdings help set it apart from rivals like Verizon and AT&T, which are building LTE networks. Clearwire has around 120 MHz of spectrum in the 2.5-2.6 GHz band in most of its markets. Bloomberg reported Clearwire is looking to sell of 40 MHz of spectrum in its markets.
It is a strange world; your parent company gives you the valuable spectrum, you raise more money based on having this spectrum, you ran out of cash and can not raise more money, so you sell the spectrum that brought the money at the first place! What a strange business plan.
Looks like there is no happy ending in sight for VC market! For the third quarter of 2010 forty five funds raised less than $3 billions. “With funds sizes getting smaller and fewer firms raising money, we are experiencing a period of time in which venture capital investment is consistently outpacing fundraising, creating an industry that will be considerably smaller in the next decade” said Mark Heesen, president of the NVCA. As I mentioned before; it is not necessary all bad news. Last quarter Institutional Venture Partners XIII, L.P. raised $750 million followed Boston, Massachusetts-based Third Rock Ventures II, L.P., which raised $426 million. These two funds account for 35% of the total! There will be less money out there, but at the same time there will be more focused and experienced VCs with larger funds. This will helps entrepreneurs to work with more mature and experienced VCs with enough money to support them all the way to the exit. There is no time and room for VCs which didn’t perform and just burn money without adding any value in the past decade.
It happened much sooner than I thought. “Nokia Corp. said it was replacing embattled Chief Executive Olli-Pekka Kallasvuo with Microsoft Corp.’s Stephen Elop, as the world’s largest handset maker seeks to reverse steep declines in earnings and market share that have decimated its share price”. After four years of constant struggle and lack of a clear strategy toward future products and particularly high-end mobile phones (smartphones) Mr Kallasvuo kicked out of the door. It was a well know fact that Nokia is heading south, but the speed of it was really surprising for everyone. Many analysts feel that Nokia was caught flat-footed by the iPhone’s success and blame its weakness in smartphones for shaving about 70% off of Nokia’s market value; or more than $90 billion, over the past three years. Basically, Nokia morphed into a “giant dwarf”; a huge player but not a huge force to shape the industry; a follower and not a leader. And it was not all about market share; the overall management of the company was a shenanigan! Former employees describe the structure of the company as a confusing matrix organization, akin to the “Soviet Union.” While Nokia was ahead on hot trends in the tech industry such as internet services and 3-D, lengthy approval processes and a lack of leadership inside of Nokia bogged down these innovations. One former employee added that Nokia, given its size, was never eager to invest in innovations that didn’t have a high volume potential across many of Nokia’s markets. Even the timing of the announcement is awkward and shows a little bit of rush and chaos within the organization. Next week, the company holds its annual “Nokia World” conference in London, where Mr. Kallasvuo was expected to articulate a new strategy to regain its footing in the industry and to present a new smartphone, the N8. The switch at the top of the company will likely draw attention away from those issues. But how this change is going to affect Nokia as a company? First of all Mr Elop is not Finish; he is not even European. “Nokia is definitely a Finnish company. It was born from Finnish culture,” says Juhani Risku, 53, a former Nokia executive, who also wrote a book about the company. He is Canadian at least and not American, so he can be a little bit less brutal. But in any case, this is going to be a dramatic cultural shift for Nokia. Northern American management style is definitely more aggressive and non-European. Secondly, the momentum is already shifted toward Apple, Google and HTC as the leaders of smartphone market. And finally he comes from Microsoft; well they have their own struggles in mobile market for the past couple of years. It will be tough to change it in short term. How Mr Elop is going to tackle these issues and change the direction of the company are questions that will be answered in the next couple of months, if not years.
Here we go again; another day and another question about Clearwire future! They need money again and so far Sprint was the only main source of cash, but probably not for long. Sprint, which merged its wireless broadband unit with Clearwire in 2008, invested $1.2 billion into the company in late 2009. Credit Suisse analyst Jonathan Chaplin estimates Clearwire needs $4 billion to cover 200 million people in the U.S. by the end of 2011, up from the 120 million people it expects to cover by the end of this year. With limitations in the capital market, there are not many choices for Clearwire. While Sprint board is already divided on the issue of future capital injection, some people speculating the need to bring another operator as a major investor; like T-Mobile USA, into the mix to inject some capital and reduce the pressure on Sprint. The logic is sharing the network with Sprint could cut the cost for both parties, T-Mobile can benefit from this collaboration since they do not have a clear plan for their 4G roll-out.
But it is not that simple. T-Mobile as a GSM/UMTS based operator and in line with other T-Mobile operations around the world, needs to follow LTE path for the sake of its own integrity. While Sprint is struggling with its WiMAX launch because of limited available handsets, this issue will be even more problematic for T-Mobile, since most of the GSM world players have already chosen LTE as their migration path. Therefore, there will be no or very limited market for a GSM/UMTS/WiMAX phone.
Bottom line, it is decision time for Clearwire. They should come out of cash burning mode and create a real revenue to survive in this market.
In a recent Wall Street Journal article, I came across one my favorite questions. Do techies make good leaders? The old school managers, always skeptical about techie leaders, would say no. Technology guys will say; they are the only choice.
Most of the high-tech companies are relatively new. Therefore there is no such a thing as legacy management procedure in place. Also, high-tech companies are super dynamic by nature. A product today will be obsolete in ten years time. Same as its management procedure, planning and other related process. Procter & Gamble or Jonson & Jonson management procedures and therefore their leaders can and should follow same rules. In these companies, the core products will change but not dramatically. Apple or Cisco does not have a core product for more than ten years! Legacy switches and routers are replacing with cloud computing and virtual switches. iPods are replacing by iPads and God knows “i” what in five years time. All the management procedures and process which developed for one family of product should change in couple of years to be compatible with new needs and changes of new products.
Whereas old school managers are process oriented and follow a solid set or rules, techie-leaders and managers are more dynamic. They are more fascinated by product and technology behind that rather than management process. Therefore, they can understand the changes and change accordingly. For techie managers, the product is the most valuable asset not the management team. Therefore, they value the brains behind the product rather than anything else in the organization and can maintain the values and brains behind the product. A techie company needs a techie manager. If a technology company is successful with a non-techie leader, probably it is already changed to a non-technology company.
Olli-Pekka Kallasvuo took over the world’s largest mobile phone manufacturer in the summer of 2006. Six months later Steve Jobs unveiled the iPhone, and it has been downhill ever since. Nokia’s shares have tumbled by nearly two-thirds. Its profit margins have withered from 15% to 7%. And the firm has all but imploded in America, despite Mr Kallasvuo’s pledge to conquer the region. Since 2005, experts in mobile industry started to predict a very gloomy future for the dying giant. While they stick to their legacy phones and are happy with major penetration in the developing countries; read it as high volume low margin domains, other competitors started to target higher margin products including smatphones. Developing countries will be all using smartphones within the next five years anyway.
Although people think Nokia’s most obvious problem is being squeezed out of the smartphone market, its biggest mistake was lack of vision for much higher margin products that come with them; applications! Smartphones are not only lucrative in themselves; they are the gateway to the even juicier market for services and “apps”. Apple’s iPhone and Google’s Android range compete on “cool”. BlackBerry is synonymous with business. But what does Nokia stand for? As usual Nokia still chases the pack. Mr Kallasvuo argues that the forthcoming N8—an all-singing-and-dancing handset that is due to hit the stores in October after several delays—will “mark the beginning of our renewal”; I guess this the fifth or sixth time they are waiting for such a product in the past five years. But previews suggest that the phone is more about catching up than setting the pace. Nokia’s ads tout its “revolutionary” touch-screen technology, built-in camera and GPS. Yet such baubles are already commonplace. It is time for Nokia board to wake up and consider a new direction. GM was once dominating car industry, but lack of innovation forced them to bankruptcy. Nokia should learn its lessons; things are changed!
After six years and spending more than two billion dollars, Qualcomm finally signaled it may give up its costly adventure; FLO TV. Paul Jacobs mentioned, “You know, there are people who love it, but the numbers are not nearly what we expected”. Well, there people who are interested in anything, it is the number of those people that makes the difference. Although technology companies try to make it a technology issue, in reality mobile TV failure is a consumer issue. The hype started around 2002 when mobile data networks were mushrooming all around the world without any killer application in the horizon. While most of the operators were migrating to 3G, data network utilization was less than 10%. Operators were spending their CapEx for data coverage enhancement, but analysts and people familiar with mobile traffic engineering were wondering what is going to fill the promised “fat pipes”. Mobile TV and different flavors of it; including parallel broadcasting networks like FLO TV, came out of the shadows as the messiah of data networks; the ultimate killer application that will utilize all mobile data channels. After years of underutilization and expensive investment, it was during 2008-2009 time period that finally thanks to iPhone and other smartphones data networks started to find their killer application and ultimate usage. Mobile TV was just a promise for a very sad period of time for mobile data networks. Those days are passed and belong to history; same as mobile TV.