Communications Equipment Industry

7/29/2019 Communications Equipment Industry

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Strategic Management

Industry Paper Final

Communications Equipment Industry

Mobile Devices Segment

Team Foxtrot

Fall 2009


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Table of Contents

Introduction................................................................................................................................................. 3

Description................................................................................................................................................ 3

Segments ................................................................................................................................................... 3

Socio-Economic Factors ............................................................................................................................. 3

Relevant Governmental or Environmental Factors ................................................................................... 3

Economic Indicators Relevant for the Industry ........................................................................................ 4

Porters Five Forces ..................................................................................................................................... 5

Threat of New Entrants ............................................................................................................................. 5

Suppliers ................................................................................................................................................. 10

Buyers ..................................................................................................................................................... 12

Threat of Substitutes ............................................................................................................................... 15

Rivalry .................................................................................................................................................... 15

Conclusion ................................................................................................................................................. 21

Critical Success Factors .......................................................................................................................... 21

Prognosis................................................................................................................................................. 22

Bibliography .............................................................................................................................................. 24

Appendices................................................................................................................................................. 25

Industry Ratios ....................................................................................... Error! Bookmark not defined.

Other Relevant Indices ............................................................................ Error! Bookmark not defined.


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Introduction

Description

The mobile device industry currently provides devices for approximately 4.1 billion users

around the globe. Given that two out of every three people on the planet own and use a mobiledevice, this industry is key to providing essential tools for business, pleasure, and safety. Theindustry first picked up steam when the company Motorola developed the first practical mobilephone for use outside of a vehicle in 1973. The first citywide cellular network was thenlaunched by Japan in 1979 and then in the US in 1983, the first mobile phone was approved bythe FCC for use and made by Motorola. Since then customers have grown each year, phoneshave gotten smaller and more powerful, and smart phones seem to have taken over in 2009 andlook to be the way we will do business in the future.22

Globally, Nokia is the worlds largest manufacturer of mobile devices, along withSamsung, Sony Ericsson, Motorola and LG Electronics. While Samsung and LG Electronics are

major players in the mobile device segment, these two companies cross multiple industries andwill not be considered in this industry analysis. This analysis will focus on the US marketcurrently and the key players for this analysis are Apple, Motorola, Nokia, Palm, and RIM(Research in Motion). Apple is represented as being the newest entrant with the successfuliPhoneTM and Motorola as an original mobile device manufacturer to give a broad spectrum foranalysis. These companies comprise many of the largest manufacturers distributing to the USand will give a good overview of the industry and various products available to consumers.

Segments

Within the Communication Equipment industry, five main segments emerge. Thesesegments are: Mobile Devices, Enterprise Mobility Solutions, Mobile Applications, Home and

Network Mobility, and Mobile Computing Devices.

1

The focus of this paper will be the MobileDevices segment.

Socio-Economic Factors

Relevant Governmental or Environmental Factors

This industrys desirability is subject to multiple governmental and environmental factors.

The current regulation for the cell phone carrier industry is governed domestically by the

Federal Communication Commission. The allocation of frequencies is regulated by the FCC inthe US and by other agencies in foreign countries. There is a limited spectrum available towireless service providers. The impact of the most recent auction of the 700 MHz bandwidth bythe FCC is not known.23

Current safety of cell phone usage, in particular texting while driving has become anissue. Laws have been passed regarding the use of cell phones in this regard. A current potentialsolution has been proposed to place a device blocking text messaging in moving vehicles.


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Controversy surrounding this device, and laws concerning the safety of cellular phones haverecently shadowed this industry.

Research studies have been performed linking the radiation emitted from cellular phonesto tumors. This has created some reluctance among subsets of users.24

Cell phone usage has multiple security issues. Information can be stolen over unsecurenetworks (identity theft). Homeland Security has expressed concern because a cell phone can beused as remote detonation devices for potential terrorist activities. This was found to be the casein the post 911 Madrid Spain railway bombing.

International anti-trust regulations and standardization of cell phone carriers are aconcern for cell phone manufacturers. Multiple networks have developed and created a need forphones to have multiple compatibilities increasing the need for larger storage and increasedtechnology innovation.

Government policy may favor government owned companies or those in which thegovernment has a controlling interest versus multinational corporations. Operating software forwireless devices and other intellectual property does not have the same protection abroad as itdoes domestically.

Standardization of communication protocols has been problematic. The formation of theInteroperability Group (IOP) for the standardization of Multimedia Messaging Service is anexample of an attempt to introduce standardization. Exclusion from a group such as the IOP cancreate difficult hurdles to overcome.

Economic Indicators Relevant for the Industry

The current global economic downturn which began in the second half of 2008 hasimpacted the wireless handset industry, resulting in the slowing of end user demand. Industryexperts have predicted shipments to decline 10% which would be the first decline in handsetshipments since 2001. The expected decline would be a result of slowing growth in emergingmarkets and decreased replacement sales in established markets. As a wireless carrier, Verizonhas had the slogan of New every Two providing end users with a replacement or upgradedphone every two years locking wireless clients into extending their contract agreement by twoyears. The economic downturn has created a subset of consumers who do not wish to be ties intoa contract in economically uncertain times.

Revenue is expected to decrease at an average annualized rate of 4.9% through 2009. Theindustry is expected to contract in the five years through 2014, at a real average rate of 0.4%.

The uncertainty and volatility of global economic conditions poses a risk as consumersand businesses may delay investments in technology and innovation in response to tighter credit,negative financial news, or declines in current assets.

Economic difficulty could impact key suppliers resulting in product delays or potentialabandonment of product lines, unfinished goods in process and unusable inventory.


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Global markets for high tech electronic devices are highly competitive and subject torapid technological change which when coupled with governmental factors can rapidly affect amanufacturers operations and financial stability.

The ability of regulators to influence the timing of the introduction of new technologies(such as the release of the 700 MHz bandwidth mentioned above) can create a situation wheretechnology becomes instantly obsolete thereby adversely affecting the supply chain anddisrupting the industry in general.

Porters Five Forces

Threat of New Entrants

Economies of Scale

The following graph illustrates the increasing average total assets in the industry, indicating thateconomies of scale mayexist. In the most recent five-year period, average assets have climbed

79% from 14,640 to 26,256.

Average Industry Total Assets from 2004 - 2008

The graph shown below displays that the average industry capital expenditures as a percentage ofsales has stayed pretty consistant until a 65% jump in 2008. Capital spending has roughly stayedthe same and if anything, has increased some in 2008. Economies of scale either do not exist

here, or the industry has already achieved economies.13

1 2 3 4 5

Industry 14,640 15,481 18,057 24,351 26,256

0

5,000

10,000

15,000

20,000

25,000

30,000

TotalA

ssetsinmillions

Average Industry Total Assets


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Average Industry Capital Expenditures as Percentage of Sales from 2004 - 2008

Looking at the cost of goods sold per employee, we see that the number is decreasing whichindicates that the unit costs of mobile devices are on the decline. Economies of scale do appearto exist here as it is becoming less expensive to produce each device, making this industry appearattractive and the threat of new entrants low.13

Average Cost of Goods Sold per Employee from 20042008

We can conclude from the analysis that economies of scale do exist and this represents a highbarrier to entry. Therefore, the industry is attractive.

Working Capital Requirements

The fixed costs to sales ratio is definitely on the lower side over the past five years. This meansthat only a fifth of sales are contributing to fixed costs. This makes the industry unattractive, as

1 2 3 4 5

Industry 1.88% 1.85% 2.01% 1.88% 2.53%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

CapitalExpendituresinm

illions

Average Industry Capital

Expenditures / Sales

1 2 3 4 5

Industry $4.61 $3.86 $2.93 $2.57 $2.54

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

COGSperemployeeinmillio

ns

Average Cost of Goods Sold /

Employees


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the threat of new entrants is high as many businesses would be willing to take the risk in thisindustry with such low fixed costs.13 The annotation in the graph, in millions, is a typo.

Fixed Costs to Sales Ratio from 20042008

Proprietary Product Differences

Mobile phone manufacturers have the ability to create and use their own proprietary softwarepackages. This can create differences between manufacturers if one software platform is sounique that it stands out among the rest. For example, the Apple iPhone uses Apples proprietarysoftware and the software is the primary selling point of that very popular phone. These types ofproprietary product differences can create a high barrier to entry. This causes a low threat ofnew entrants and makes the industry attractive.14

Absolute Cost Advantages

Patents are abundant in the mobile device world. All key players in the industry hold variouspatents, and continue to invest in intellectual property to stay competitive. The Apple iPhone is arecent and a prime example of cost advantages through patent holding. Some companies havemanaged to work around Apples iPhone patents, which attempt to protect their intellectualproperty. However, Palm recently seems to have crossed the line with their most recent touchscreen device and will most likely feel pressure from Apple in coming months.7 Also last yearRIM and Motorola had disputes over RIMs patent holdings, limiting Motorolas development.6These types of patents on the core technology around mobile devices constitute a high barrier toentry, causing a low threat of new entrants and making the industry attractive.

Brand Identity

According to an employee of a major mobile device manufacturer, buyers currently offer phonesfrom each major mobile phone manufacturer, albeit not the same model for each customer.Buyers are heavily influenced by what their customers (the end users) desire. End users tend tolean toward brand loyalty in their mobile devices. End users have migrated toward RIMsBlackberry for business enterprise applications as an example, and have made it the standard in

1 2 3 4 5

Series1 22.11% 20.20% 19.20% 20.61% 20.20%

17.00%

18.00%

19.00%

20.00%

21.00%

22.00%

23.00%

inmillions

Average Sales divided by Average

Fixed Costs


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business phone hardware. This end user dictates a lot of what the buyer (mobile networkprovider) is interested in and causes them to make choices based on identity. This creates a highbarrier to entry and makes the industry attractive.14

Access to Distribution

Access to industry distribution is not a deterrent in the cellular phone industry. Distributionchannels include primarily shipping from the manufacturer to the mobile phone network provider,along with specific retail outlets. This would make the industry unattractive because the barrieris low and the threat is high.

Expected Retaliation

The existing software operating platforms dominated by Google and Microsoft do not pose asignificant retaliation as more phones utilizing those platforms would be welcome to the industry.Chipsets are developed by multiple companies which do not exclusively manufacture for a givencellular phone manufacturer. Motorola in the past did have some exclusivity in its chipset, notmaking an exclusive arrangement between a chipset manufacturer and cell phone manufacturerimpossible. Retaliation could occur with exclusive agreements with component manufacturers;however, at present the research team has identified none. It also does not appear that the currentmanufacturers retaliate against newcomers to the industry in any concrete manner. The lack ofretaliation makes this industry attractive.14

Decision Matrix

Key Factors Weights Attractive Unattractive

Economies of Scale 20% X

Working Capital

Requirements

15% X

Proprietary ProductDifferences

15% X

Absolute Cost Advantages 10% X

Brand Identity 15% X

Access to Distribution 15% X

Expected Retaliation 10% X

Attractive = 70%; Unattractive = 30%


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Conclusion

The industry is attractive from an analysis of threat to new entrants when given theweight of the economies of scale, proprietary product differences, absolute cost advantages,brand identify, and expected retaliation. From the other side, the working capital requirementsshow that fixed costs are low and this would make the industry inviting to potential competitors.However, the economies of scale and absolute cost advantages are key areas that remainattractive and predict future high barriers to entry.

Suppliers

Mobile Phones are made up of many parts that come from many different suppliers.These parts can be grouped into three main categories: Software Platforms, Hardware Chipsets,and Mechanical Parts. Software applications are a commodity, so they will not be discussed.1

Supplier Concentration

From reading this, the inputs are commodity items. I do not see anything that really givessuppliers power. You should have jumped down to access to capital and labor.

There are only a few main software platforms available for the cell phone manufacturers to use.They can develop and use their own proprietary software, in which they would be their ownsupplier, thus no power struggle involved. The main non-proprietary software platformsavailable are Googles Android (a free open-source platform), Nokias Symbian, and MicrosoftsWindows Mobile. Although limited in number, because of the recent availability of free open-source software platforms with the new Global Handset Alliance, the industry retains the powerfrom software platform suppliers.14

Unlike software platforms, there are quite a few hardware chipset suppliers. The mainones include Broadcom, Qualcomm, Nokia, Texas Instruments, Infineon, and Ericsson. Sincechipset suppliers are not concentrated, the buyers have the power.8 & 9

There are many different mechanical parts that make up a mobile phone. Most of theseare commodity items like metal and plastic parts and need not be discussed. There are, however,some parts that have only a few suppliers and some parts where there is only one supplier, suchas the display module, camera module, or flexible printed circuits. The buyers do not have thepower over these suppliers. If the parts suppliers for some reason become capacity constrainedor insolvent, it could result in an interruption in mobile phone manufacturing or increasedprices.1

Presence of Substitute Inputs

There are a variety of substitute inputs for the three main mobile phone parts. Sincebuyers have the option of creating and using their own proprietary software, they do not have touse a software platform from a supplier. Thus the buyers have the power over software platformsuppliers. The mobile phone must have a circuit board with a chipset, so there is no substituteinput for the chipset. Chipset suppliers have the power here. When it comes to the mainmechanical parts for which there are only one or a few suppliers (Display, Camera Module,


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Speaker, etc.), these are central parts that make the mobile phone what it is. Therefore, there arenot substitute inputs for mobile phones that include these parts. Thus the suppliers of these partsretain the power over the buyers.14

Importance of Volume to Supplier

Mobile phone software platforms, mobile phone chipsets, and mobile phone mechanicalparts are all created and designed to supply pretty much all of their product to the mobile phoneindustry. Without this industry, these suppliers would not have substantial sales to keep them inbusiness. Thus the industry has the power.14

Impact of Inputs on our Cost or Ability to Differentiate

Suppliers of all three main cell phone components very much affect the manufacturersability to differentiate. The overall end user experience is based on the software platform used.Yes, the software can be customized to differentiate; however the bones of the software are thesame. The chipset provides the main functionality, memory, and processor for the mobile device.The primary mechanical parts affect the look, feel, and sound quality of the device. All of theseareas can reflect back on the manufacturer and affect the final product. This gives the supplierspower.14

Threat of Forward or Backward Integration

There does not currently seem to be a threat of forward or backward integration with thesuppliers in this industry. This does not put the suppliers in a position of power, making theindustry attractive.

Access to Capital

The profitability of this industry has been inconsistent from 2004 to 200827. The

industry is currently contracting as customers are not purchasing or upgrading to new mobile

devices. The industry had a history of profitability which peaked in 2006 and began declining in

2007. The effects of the current economic recession have not been fully captured, although the

recession was declared to have started in December of 2007. Because the industry profitability is

declining as inflation is increasing, debt financing is more difficult to obtain, giving power to the

suppliers, and making this industry less attractive. The following chart plots the Inflation rate

versus Industry Leaders Net Operating Margin.


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Access to Labor

In the US, the cell phone manufacturing industry does not have unions. That is good forthe industry, as it keeps the power in the manufacturers hands. Research and development ofthe mobile devices requires highly skilled engineers. If there were a shortage of skilled labor,this would make the industry unattractive. However since the recent downturn of the economy,labor of any kind appears to be plentiful to obtain since unemployment rates are so high. Most,if not all, of the manufacturing is outsourced to third parties. These third parties use mostlyunskilled workers in assembly plants, and turnover is not a concern since new employees can bequickly trained to work on the assembly line. The industry is attractive when it comes to accessto labor.14

Conclusion

2004 2005 2006 2007 2008

Inflation Rate 2.7 3.4 3.2 2.8 4.3

Average 5.12 10.724 13.822 10.59 4.356

0

2

4

6

8

10

12

14

16

Percent

Inflation versus Net Operating Margin


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The industry overall is attractive because the suppliers are not concentrated, the inputscannot be differentiated, the industry makes up the majority of the suppliers volume, there is nothreat of forward or backward integration, and there is easy access to labor.

Decision Matrix

Key Factors Weight Attractive Unattractive

Supplier Concentration 10% X

- Software Platforms x

- Chipsets x

- Mechanical Parts x

Presence of Substitute Inputs 20% X


- Chipsets x


Differentiation of Inputs This subsection is no longer

required.

10% X


- Chipsets x


Importance of Volume to Supplier 20% X

Impact of Inputs on our Cost or Ability to Differentiate 10% X

Threat of Forward or Backward Integration 10% X

Access to Capital 10% X

Access to Labor 10% X

Attractive = 60%, Unattractive = 40%

Buyers

Buyers in the mobile devices industry fall into two categories: Mobile carriers whichaccount for the large portion of purchasing, and third-party distributors and retailers.1

Buyer Concentration


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The amount of buyers in the US is smaller than the amount of mobile devicemanufacturers in the industry. Mobile carriers such as AT&T and Verizon Wireless are some ofthe largest buyers followed by Sprint and T-Mobile. Retailers such as Best Buy, Wal-Mart, andindependent mobile device stores also sell these devices and represent a much smaller portion ofthe industrys distribution. US buyers are more concentrated than manufacturers and therefore

hold the power as almost all global mobile device manufacturers products are available to USbuyers. This makes the industry in fact seem unattractive due to this weakness.11, 12, and 13 A bit ofwaffle here.

Buyer Switching Costs

Buyers such as mobile carriers do not normally experience large switching costs whenmoving between manufacturers. The exception would be a situation such as the iPhone which isexclusively available through the buyer AT&T. If AT&T were to drop the iPhone they wouldmost likely have a mass exodus of customers who would follow the iPhone to its new home,creating revenue losses from mobile device purchases and wireless service purchases to utilizetheir device. However, there are very few reasons this situation would normally happen as

AT&T would most likely do anything Apple asked, for example when they waived theirtechnical requirements for the iPhone in order to carry it. According to an employee with amajor mobile device manufacturer, buyers definitely are in a better position in most cases. Asidefrom a breakout hit like the iPhone, devices that popular are few and far between. Since manyphones experience medium or low levels of popularity, buyers can at any time decide not topurchase the phones if they are not selling well or if the manufacturer will not meet the buyerstechnical requests. The industry does not have power over the buyers regarding switching costsmaking it unattractive.14

Buyer Information

Buyers of mobile devices know what it takes to make a mobile device. The prices of keycomponents such as the chipset, software, and camera lens could be obtained within the industry.Additionally, given that there are so many manufacturers of devices, it is possible to comparephones with similar characteristics and use benchmarking to determine what it costs to make agood phone. Buyers do have power over the industry in this regard as the knowledge of the costsassociated with mobile device production can be determined. This makes the industryunattractive.

Threat of Backward Integration

Backward integration does not appear to be popular among mobile device buyers orretailers and has not been attempted by any of the major companies such as Verizon or AT&T

successfully at this point. This does not put the buyers in a position of power, making theindustry attractive.

Pull Through

Pull through is definitely a part of this industry. Since brand identity is key to mobiledevices, pull through is quite evident. For example the Blackberry line by RIM Inc. hasessentially become a status symbol of the business executive and they would not want to be seenon a LG Chocolate phone (marketed towards youth) typing emails. A large amount of marketing


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expenses occur in most manufacturers such as the 13.5% that RIM spent in the past year pushingtheir smart phones to the corporate world. Overall in the industry, mobile device advertising isgrowing at about 45% per year and is currently at $3.1 billion annually.25 There is pull through,and the industry has the power making it attractive.2 Ok, but you should have given a graph ofthe trend over 5 years for the industry, and dont talk raw numbers.

Brand Identity of Buyers

Brand identity does impact the buyers of mobile devices. Buyers are looking for devicesthat appeal to all of the different segments of the population and for devices that will beconsidered by the retail customers as desirable to be seen with and to utilize. The Apple iPhoneis not only trendy but the symbol of a young, tech-savvy, and even artistic generation. Theindustry has the power making it attractive. .

Price Sensitivity

Buyers representing cell phone carriers are not extremely price sensitive to fluctuations inthe industry. Buyers ultimate goal is to make the $50 to $100 per month from the mobilecustomer that they will pay for the network service, not so much the profit from the initialpurchase of the phone. These buyers are most likely going to eat the increased costs from amanufacturer if they know a popular new phone will be coming out and it will increase theircellular service customer base. This makes the buyer not very sensitive to changes and gives thepower to the industry, making it attractive.

Price to Total Purchases

For mobile providers, mobile device purchases represent a large portion of their inventory.This is because without these devices getting to their customers, there would be nothing to utilizethe national networks they have setup for communications. Given that buyers depend on the

industry so heavily to keep it in business, the industry has power and is attractive.

Conclusion

Overall, buyers would not hold power over the industry. Therefore, the industry would beattractive.


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Decision Matrix


Buyer Concentration 15% X

Buyer Switching costs 10% X

Buyer Information 5% X

Threat of Backward Integration 5% X

Pull Through 20% X

Brand Identity of Buyers 25% X

Price Sensitivity 10% X

Price to Total Purchases 15% X


Threat of Substitutes

Technology currently exists which performs each independent function of a mobilephone; however, a handheld netbook computer (Acer Asus) or notebook computer (multiplebrands) is currently the only device capable of performing all functions currently available on amobile phone. The devices are very similar except for size. Functionality and capacity of anetbook or notebook is generally higher whereas portability of a mobile phone is generally

greater10

. Streaming data access improvements to online or on network storage has made thecapacity issue less problematic for mobile phones.

GPS positioning is available in a single device (e.g. Garmin, TomTom, etc), whichcan be utilized without dependence on a cellular carrier network. If the end user only desiresGPS functionality then this could have an adverse affect on sales.

Scheduling and organizing software currently exists on many handheld devices (e.g.Palm, HP iPaq) which are independent of a wireless carrier. This also could adversely affectsales.

Radio devices exist for communication, which operate independently of wireless carriers

for local limited communications. The range consideration defines this substitute.

All in all, the threat of substitutes does not seem great enough to make the industryunattractive. The majority of people are moving toward one device that can do it all, so theexisting substitutes are posing less of a threat as this move is made.

Rivalry

Degree of Concentration and Balance among Competitors


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The mobile device industry in the US currently has six major firms that total 88% of the marketshare. Five or less of these firms represent 82% of the market which surpasses the 60% markand indicates that concentration exists. Both Samsung and Motorola have market shares within10 percentage points of each other which results in a balanced industry, as these are the twolargest players currently. The industry is balanced and concentrated with a high level of rivalry

and is therefore unattractive.

15

Pie Chart of Current US Mobile Device Market Share

Diversity among Competitors

While all firms have decided to focus on either traditional mobile phones and/or smart phones,the one strategy that is evident across all firms is the development of the smart phone. A quicktrip to the web store of any of the five largest firms in the industry will show that each offerssome type of smart phone with internet and email capability. Firms such as RIM and Apple havedecided to strictly focus on smart phones that require data plans with most mobile carriers.Samsung, LG, Nokia and Motorola continue to offer devices marketed towards both arenas asmore of the population cant afford a $30-$50 additional data charge to their monthly bill at thispoint. The bottom line is that each firm has a flagship smart phone that is leading the way aswell as requiring heavy R&D financial commitments, as the traditional mobile device will slowlybecome less popular in the coming decade. All of the largest firms also market towards themobile providers as well as third-party retail outlets as there is currently no benefit to staying out

of these distribution lines.1 & 16

Since all firms are following very similar strategies and no large niches exist, the level of rivalryis high as they fight for the same markets. This makes the industry unattractive in its currentstate.

Industry Growth Rate (Past & Projected)

22.40%

20.50%

21.10%

10.20%

8.40%

5.70% 11.70%

Current US Mobile Device

Market ShareSamsung LG Motorola RIM Nokia Apple Other


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The graph below shows the industry growth of mobile device users from 1985 to 2008, and thenuses projections based on industry analysis for the coming years through 2013.17

Industry Growth of Mobile Device Users from 1985 to 2013

2009 will most likely mark the first year of a decline in the need of mobile devices with a10% drop in consumption. This has been attributed to the current economic crisis as well as the

saturation of the market as the 76% of the population now own a mobile device. Once we enter2010, growth is expected to pick back up again in the mid-single digits with an average of 5%growth per year through 2013. With the current inflation rate averaging around 3%, thisindicates that the industry growth rate will be higher and firms will continue to increase marketshare without taking it away from other firms in the industry. Because of this, rivalry is reducedand the industry becomes attractive.1 & 18

Fixed Costs / Value Added

When considering fixed costs and EBITDA, it is evident that the fixed costs have generally

followed the same trend as EBITDA when we examined a five year average of the industry.Fixed costs are starting to get higher which points towards the conclusion that economies ofscale may exist (see Threat of New Entrants section economies of scale). An EBITDA that ispositive means that a profit is being made within the industry.13

The following data shows that the ratios of EBITDA and the fixed costs ratios appear tobe somewhat similar but have started to take a different turn in the last two years. Fixed costshave stayed the same while EBITDA has plummeted and only represents 7.43% of the total sales.


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After the industrys first year of decline expected in 2009, it will pick back up and increase aminimum of 5% in the foreseeable future. The fixed cost ratio will decrease since sales willincrease, while the EBITDA will increase due to sales as well.13 (see New Entrants Section formore detail)

EBITDA and Fixed Costs Margin Trend from 2004 to 2008

While fixed costs are increasing along with value added, this most likely means thateconomies of scale are possible within the industry. Since value added is not particularly lowand the positive future projections will help its ratio to sales, the data agrees with the known factthat mobile devices are not commodities yet. Rivalry does not increase and is moderate, makingthe industry attractive.13

2004 2005 2006 2007 2008

EBITDA Ratio 15.00% 16.76% 14.89% 13.27% 7.43%

Fixed Costs Ratio 22.11% 20.20% 19.20% 20.61% 20.20%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

Ratiopercentage

EBITDA and Fixed Costs Margin Trend2004-2008


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Intermittent Overcapacity

The following chart shows the current capacity utilization for Communications Equipment (ref):

Capacity Utilization: January 1996June 2009

The current trend is toward lower capacity utilization which is seen by the 2009 rate of65%. The lower utilization which does not meet the 80% normal range means that the industryis susceptible to intermittent overcapacity. This increases rivalry and makes the industryunattractive.19

Growth of Foreign Competition

As the table below shows, only two of the top six global market share leaders in the mobilephone industry are US based companies (Apple and Motorola). This clearly shows that foreignfirms can easily penetrate the US market. These two US firms hold 5.7% and 21.10% of theglobal market share, indicating that US firms are competitive in the global marketplace.However, global firms hold four of the six top spots in total US market share for a combinedtotal of 62%. Time will tell if the US companies will gain significant market share to be top

competitors but this will not happen anytime soon. Global firms appear to easily penetrate theUS market and rivalry is increasing making the industry unattractive.26


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Company

2008 Global

Market Share

Samsung 22.40%

LG 20.50%

Motorola(US)

21.10%

RIM 10.20%

Nokia 8.40%

Apple (US) 5.70%

Other 11.70%

Corporate Stakes

The firms in the industry are not universal in their dependence on a single industrysegment for their revenue. Nokia, the largest global retailer of cellular phones is not diversifiedand depends entirely on sales of cellular phones for revenue. Motorola is more diversified inproviding other types of communications equipment to enterprises. Research in Motion, themaker of Blackberry is entirely dependent on cellular phone sales. Palm is split into twodivisions for its revenue: handheld devices and cellular phones. Apple is the most diversifiedand involved in computers, handheld electronics, and cellular phones just to name a few areas.

The aggregate conclusion is the revenue is highly dependent on the mobile device industry foreach firm. This creates an increase in rivalry and makes the industry unattractive.

Exit Barriers

Mergers are not common among the top players in the mobile phone manufacturingindustry that serves the US; however, that does not mean it wouldnt ever happen. In 2008,Motorola considered selling off its mobile phone division, but the sale was never finalized.20Also, Japanese firms Casio, Hitachi, and NEC recently merged in order to cut costs and becomemore competitive.21 However, no mergers have taken place in the US and there is currently noindication that one will.

Converting operations to another product/service seems unlikely due to the technicalnature of this industry and how specific it is to one main product. Exit barriers appear somewhathigh based on the high costs involved with getting out of this industry. This increases rivalry andmakes the industry unattractive.

Decision Matrix



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Degree of Concentration and Balance AmongCompetitors 10% X

Diversity Among Competitors 5% X

Industry Growth Rate 25% X

Fixed Costs to Value-Added 20% X

Intermittent Overcapacity 5% X

Growth of Foreign Competition 20% X

Corporate Stakes 10% X

Exit Barriers 5% X

Attractive = 45%, Unattractive 55%

Conclusion

The industry is unattractive mainly because of the concentration and balance amongcompetitors, the diversity among competitors, overcapacity, the growth of foreign competition,corporate stakes, and exit barriers. Even though many more categories are unattractive thanattractive, the weights are only separated by 10% meaning that it was a close race.

Conclusion

Critical Success Factors

Socio-economic Forces - Standardization of communication protocols in the industry are asignificant hurdle. While these hurdles affect all companies in the industry; a successfulcompany will need to comply with the Interoperability Group for standardization.

Economies of Scale, Product Differentiation and Brand Identity - The ability for a companyto achieve economies of scale quickly is important for success in this industry. A company mustquickly differentiate itself with proprietary software and establish brand identity in the mobiledevice segment.

Presence of Substitute Inputs and Importance of Volume to Suppliers Entrants in themobile device industry must be aware of the supplier power with the chipset and circuit boards.Establishing positive forward looking relationships with these suppliers is important for success

and weighted heavily in the analysis. The importance of volume to suppliers, whose businesswould not be sustainable otherwise, is important in balancing the relationship which must beestablished for both buyer and supplier to be successful.

Brand Identity, Pull Through, and Price Sensitivity Establishing very quickly BrandIdentity is a key success factor in this industry and subsequently pull through. This will lead totolerance in price sensitivity with buyers which will be necessary to maintain profitability andfurther innovation.


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Growth of Foreign Competition and Industry Growth Rate Surveillance of the industrygrowth rate is key to responding to changes within this industry. The climate exists whereforeign competition can easily usurp market share and most be monitored to insure competitiveadvantage in technology, brand identity, and pricing.

Apparently you didnt understand what was expected here. Only 2 or 3 CSFs. CSFs are those factors that

can be used to predict success or failure. What you have here is more of a list. Now, which are trulycritical? Since economies exist, I would suggest efficiency. Since brand identity is important, that can beanother. Then, reading between the lines, R&D would be a 3rd. You have to fix this before doing the firmpaper.

Prognosis

The following Table summarizes the decision matrices for the industry utilizing Porters strategy.

Key Factors Attractive Unattractive

Threat of New Entrants 70 30

Suppliers 60 40

Buyers 70 30

Substitute products 100 0

Rivalry 45 55

Total 345 155


According to our decision matrix, the mobile phone industry is attractive to enter.However, the firms have to be cautious about suppliers with respect to presence of substituteinputs, impact of inputs on the cost or ability to differentiate, and access to Capital; and verycautious of rivalry with respect to growth of foreign competition, corporate stakes, and degree ofconcentration.

Prognosis for this industry is fair. The future growth for this industry is demonstrated bythe industry growth rate, the price sensitivity, potential economies of scale, and the importanceof volume to suppliers.

This industry has high barriers to entry; therefore, there will be fewer firms willing toenter. Consequently, most of the market is dominated domestically by approximately 5 large

companies. Due to absolute cost advantage due to patents and intellectual property, workingcapital requirements where only one fifth of sales are contributing to fixed costs, and economiesof scale that allow production of each device to occur at a lower cost, the industry is attractive toenter.

The industry has very little impact of substitutes because by definition, the desiredcharacteristic is mobility and functionality. This makes the industry very attractive.


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The mobile phone industry has significant attractiveness in its power over suppliers. Thesupplier concentration, the differentiation of inputs, the importance of volume to suppliers, andthe access to labor contributed significantly to the attractiveness.

In evaluating buyers in the industry, the industry again appears attractive due to the lackof threat in backward integration, the presence of pull through, the brand identity of buyers, theprice sensitivity, and the price to total purchases.

The mobile phone industry does have a balance in rivalry. The industry is unattractivebecause of the degree of concentration, the diversity among competitors, the presence ofintermittent capacity, the growth of foreign competition, the corporate stakes present, and theexit barriers that exist. The industry is attractive with a great industry growth rate and fixed coststo value added presence. The current climate of rivalry made the industry unattractive.

This analysis concludes that the industry is attractive if the critical success factors arekept in focus and balanced against the unattractive aspects of the industry.


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7057636d54b21a3f159535e6a088c&URL=http%3a%2f%2fwww.nokia.com%2fNOKIA_COM_1%2fAbout_Nokia%2fSidebars_new_concept%2fAnnual_Accounts_2008%2fNokia_in_2008.pdfhttps://piratemail.ecu.edu/owa/redir.aspx?C=96e7057636d54b21a3f159535e6a088c&URL=http%3a%2f%2fwww.nokia.com%2fNOKIA_COM_1%2fAbout_Nokia%2fSidebars_new_concept%2fAnnual_Accounts_2008%2fNokia_in_2008.pdfhttps://piratemail.ecu.edu/owa/redir.aspx?C=96e7057636d54b21a3f159535e6a088c&URL=http%3a%2f%2flibrary.corporate-ir.net%2flibrary%2f10%2f107%2f107357%2fitems%2f315133%2fAAPL_10K_FY08.pdfhttps://piratemail.ecu.edu/owa/redir.aspx?C=96e7057636d54b21a3f159535e6a088c&URL=http%3a%2f%2fwww.rim.com%2finvestors%2fpdf%2fRIM09AR_FINAL.pdfhttps://piratemail.ecu.edu/owa/redir.aspx?C=96e7057636d54b21a3f159535e6a088c&URL=https%3a%2f%2fmaterials.proxyvote.com%2fApproved%2f620076%2f20090309%2fAR_36099%2fimages%2fMotorola_Inc_AR2008.pdfhttps://piratemail.ecu.edu/owa/redir.aspx?C=96e7057636d54b21a3f159535e6a088c&URL=https%3a%2f%2fmaterials.proxyvote.com%2fApproved%2f620076%2f20090309%2fAR_36099%2fimages%2fMotorola_Inc_AR2008.pdf


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16.Retrieved September 30, 2009 from the World Wide Web:http://www.motorola.com/Consumers/US-EN/Home

17.Retrieved October 1, 2009 from the World Wide Web:http://www.infoplease.com/ipa/A0933563.html

18.Retrieved October 1, 2009 from the World Wide Web: http://www.itu.int/ITU-D/ICTEYE/Reports.aspx#

19.Retrieved September 16, 2009 from the World Wide Web:http://www.federalreserve.gov/pubs/bulletin/2009/pdf/Industrial09.pdf

20.Retrieved October 1, 2009 from the World Wide Web:http://www.newser.com/story/17880/motorola-may-sell-ailing-cell-phone-division.html

21.Retrieved October 1, 2009 from the World Wide Web:http://www.mobilemarketingnews.co.uk/Japanese_Mobile_Phone_Groups_Announce_Merger_39144056609.html

22.Retrieved September 16, 2009 from the World Wide Web:http://en.wikipedia.org/wiki/Mobile_phone23.Retrieved September 16, 2009 from the World Wide Web:

http://en.wikipedia.org/wiki/United_States_2008_wireless_spectrum_auction

24.Retrieved October 5, 2009 from the World Wide Web:http://www.mobiledia.com/news/30541.html

25.Retrieved October 5, 2009 from the World Wide Web:http://www.reuters.com/article/technologyNews/idUSTRE55S2FY20090629

26.Retrieved October 1, 2009 from the World Wide Web:http://www.informationweek.com/news/mobility/business/showArticle.jhtml?articleID=212001304

27.Retrieved September23, 2009 from the World Wide Web:http://quicktake.morningstar.com/StockNet/Profitability10.aspx?

Appendices

Mobile Device Industry Ratios

Year ended: 2004 2005 2006 2007 2008

Current Ratio 2.25 2.71 2.31 1.87 1.72

Quick Ratio 1.91 2.21 1.90 1.47 1.33

Inventory Turnover 9.25 12.30 14.71 16.26 17.95
http://www.motorola.com/Consumers/US-EN/Homehttp://www.motorola.com/Consumers/US-EN/Homehttp://www.infoplease.com/ipa/A0933563.htmlhttp://www.infoplease.com/ipa/A0933563.htmlhttp://www.itu.int/ITU-D/ICTEYE/Reports.aspxhttp://www.itu.int/ITU-D/ICTEYE/Reports.aspxhttp://www.itu.int/ITU-D/ICTEYE/Reports.aspxhttp://www.federalreserve.gov/pubs/bulletin/2009/pdf/Industrial09.pdfhttp://www.federalreserve.gov/pubs/bulletin/2009/pdf/Industrial09.pdfhttp://www.newser.com/story/17880/motorola-may-sell-ailing-cell-phone-division.htmlhttp://www.newser.com/story/17880/motorola-may-sell-ailing-cell-phone-division.htmlhttp://www.mobilemarketingnews.co.uk/Japanese_Mobile_Phone_Groups_Announce_Merger_39144056609.htmlhttp://www.mobilemarketingnews.co.uk/Japanese_Mobile_Phone_Groups_Announce_Merger_39144056609.htmlhttp://www.mobilemarketingnews.co.uk/Japanese_Mobile_Phone_Groups_Announce_Merger_39144056609.htmlhttp://en.wikipedia.org/wiki/Mobile_phonehttp://en.wikipedia.org/wiki/Mobile_phonehttp://en.wikipedia.org/wiki/United_States_2008_wireless_spectrum_auctionhttp://en.wikipedia.org/wiki/United_States_2008_wireless_spectrum_auctionhttp://www.mobiledia.com/news/30541.htmlhttp://www.mobiledia.com/news/30541.htmlhttp://www.reuters.com/article/technologyNews/idUSTRE55S2FY20090629http://www.reuters.com/article/technologyNews/idUSTRE55S2FY20090629http://www.informationweek.com/news/mobility/business/showArticle.jhtml?articleID=212001304http://www.informationweek.com/news/mobility/business/showArticle.jhtml?articleID=212001304http://www.informationweek.com/news/mobility/business/showArticle.jhtml?articleID=212001304https://piratemail.ecu.edu/owa/redir.aspx?C=0195bf452e6d425b862297ef34ff209c&URL=http%3a%2f%2fquicktake.morningstar.com%2fStockNet%2fProfitability10.aspx%3fSymbol%3dMOT%26Country%3dUSAhttps://piratemail.ecu.edu/owa/redir.aspx?C=0195bf452e6d425b862297ef34ff209c&URL=http%3a%2f%2fquicktake.morningstar.com%2fStockNet%2fProfitability10.aspx%3fSymbol%3dMOT%26Country%3dUSAhttps://piratemail.ecu.edu/owa/redir.aspx?C=0195bf452e6d425b862297ef34ff209c&URL=http%3a%2f%2fquicktake.morningstar.com%2fStockNet%2fProfitability10.aspx%3fSymbol%3dMOT%26Country%3dUSAhttp://www.informationweek.com/news/mobility/business/showArticle.jhtml?articleID=212001304http://www.informationweek.com/news/mobility/business/showArticle.jhtml?articleID=212001304http://www.reuters.com/article/technologyNews/idUSTRE55S2FY20090629http://www.mobiledia.com/news/30541.htmlhttp://en.wikipedia.org/wiki/United_States_2008_wireless_spectrum_auctionhttp://en.wikipedia.org/wiki/Mobile_phonehttp://www.mobilemarketingnews.co.uk/Japanese_Mobile_Phone_Groups_Announce_Merger_39144056609.htmlhttp://www.mobilemarketingnews.co.uk/Japanese_Mobile_Phone_Groups_Announce_Merger_39144056609.htmlhttp://www.newser.com/story/17880/motorola-may-sell-ailing-cell-phone-division.htmlhttp://www.federalreserve.gov/pubs/bulletin/2009/pdf/Industrial09.pdfhttp://www.itu.int/ITU-D/ICTEYE/Reports.aspxhttp://www.itu.int/ITU-D/ICTEYE/Reports.aspxhttp://www.infoplease.com/ipa/A0933563.htmlhttp://www.motorola.com/Consumers/US-EN/Home


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Receivables Turnover 5.05 6.29 7.03 7.08 6.48

Total Asset Turnover 0.71 0.88 1.02 1.12 1.14

Average Collection Period (Days) 47.01 46.31 51.18 56.75 57.46

Net Profit Margin (%) 8.46 14.48 10.54 8.38 -14.76

Return on Assets (%) 7.96 15.96 12.63 9.35 -17.34

Return on Equity (%) 13.32 25.70 21.08 1.02 9.66

Return on Investment (%) 12.28 24.55 20.51 16.57 -44.06

Long-Term Debt/Common Equity (%) 10.21 7.78 5.53 95.57 -15.04

Total Debt/Total Assets (%) 5.53 4.09 4.33 12.42 29.17

Other Relevant Indices

Information on the five companies we studied

Nokia

The company is the world's #1 maker of cell phones. The company's business is dividedprimarily between three divisions: devices and services (mobile device manufacturing andmultimedia internet services) and NAVTEQ (digital map data and content). Nokia's wirelessnetwork products business is operated in partnership with Munich-based Siemens as Nokia


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Siemens Networks; the joint venture is the #3 player in the wireless networking equipmentmarket, behind Ericsson and Alcatel-Lucent.

Company Type Public - NYSE:NOK; OMX Helsinki: NOK1VMain Headquarters

Fiscal Year-End December

2008 Sales (mil.) $71,475.7

2008 Employees 125,829

Nokia Income Statement

2008 2007 2006

Revenue ($ mil.) 71,475.7 75,152.3 54,250.9

Gross Profit ($ mil.) 24,487.2 25,469.8 17,650.9

Operating Income ($ mil.) 7,266.0 12,233.1 7,579.4

Total Net Income ($ mil.) 5,621.1 10,605.0 5,680.9

Diluted EPS (Net Income) 1.48 2.69 1.39

Nokia Financial Ratios

Company IndustryMedian

MarketMedian1

Price/Sales Ratio 0.76 1.44 6.88

Price/Earnings Ratio 9.76 (51.02) 25.00

Price/Book Ratio 3.04 2.53 6.62

Price/Cash Flow Ratio 12.11 13.95 42.73

HeadquartersKeilalahdentie 2-4Fl-02150 Espoo, Finland

Key Executive Officers

Chairman Jorma Ollila Network|E-mail
http://www.hoovers.com/nokia/--ID__41820,ticker__NOK--/free-co-fin-stockquote.xhtmlhttp://www.hoovers.com/nokia/--ID__41820,ticker__NOK--/free-co-fin-stockquote.xhtmlhttp://www.hoovers.com/nokia/--ID__41820,ticker__NOK--/free-co-fin-stockquote.xhtmlhttp://www.hoovers.com/nokia/--ID__41820,OID__1130734,target__company_executive--/free-co-samples-index.xhtmlhttp://www.hoovers.com/nokia/--ID__41820,OID__1130734,target__company_executive--/free-co-samples-index.xhtmlhttp://www.hoovers.com/business-information/--pageid__16000--/global-sample-index.xhtmlhttp://www.hoovers.com/business-information/--pageid__16000--/global-sample-index.xhtmlhttp://www.hoovers.com/business-information/--pageid__16000--/global-sample-index.xhtmlhttp://www.hoovers.com/business-information/--pageid__16000--/global-sample-index.xhtmlhttp://www.hoovers.com/nokia/--ID__41820,OID__1130734,target__company_executive--/free-co-samples-index.xhtmlhttp://www.hoovers.com/nokia/--ID__41820,ticker__NOK--/free-co-fin-stockquote.xhtml


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President, CEO, and Director Olli-Pekka Kallasvuo Network|E-mail

EVP and CFO Richard A. (Rick) Simonson Network|E-mail

Motorola

The company is the #3 manufacturer of wireless telephone handsets. It also sells wirelessnetwork infrastructure equipment such as cellular transmission base stations and signalamplifiers. Motorola's home and broadcast network products include set-top boxes, digital videorecorders, and network equipment used to enable video broadcasting, IP telephony, and high-deftelevision. Its products for business and government customers consist mainly of wireless voiceand broadband data systems used to build private networks and public safety communicationssystems.

Company Type Public - NYSE:MOTMain Headquarters

Fiscal Year-End December

2008 Sales (mil.) $30,146.0


Motorola, Inc. Income Statement

2008 2007 2006

Revenue ($ mil.) 30,146.0 36,622.0 42,879.0

Gross Profit ($ mil.) 8,395.0 9,952.0 12,727.0

Operating Income ($ mil.) (2,413.0) (25.0) 4,945.0

Total Net Income ($ mil.) (4,244.0) (49.0) 3,661.0

Diluted EPS (Net Income) (1.87) (0.02) 1.46

Motorola Key Financial Ratios


MarketMedian1

http://www.hoovers.com/nokia/--ID__41820,OID__1130739,target__company_executive--/free-co-samples-index.xhtmlhttp://www.hoovers.com/nokia/--ID__41820,OID__1130739,target__company_executive--/free-co-samples-index.xhtmlhttp://www.hoovers.com/business-information/--pageid__16000--/global-sample-index.xhtmlhttp://www.hoovers.com/business-information/--pageid__16000--/global-sample-index.xhtmlhttp://www.hoovers.com/business-information/--pageid__16000--/global-sample-index.xhtmlhttp://www.hoovers.com/nokia/--ID__41820,OID__1130760,target__company_executive--/free-co-samples-index.xhtmlhttp://www.hoovers.com/nokia/--ID__41820,OID__1130760,target__company_executive--/free-co-samples-index.xhtmlhttp://www.hoovers.com/business-information/--pageid__16000--/global-sample-index.xhtmlhttp://www.hoovers.com/business-information/--pageid__16000--/global-sample-index.xhtmlhttp://www.hoovers.com/business-information/--pageid__16000--/global-sample-index.xhtmlhttp://www.hoovers.com/motorola,-inc./--ID__11023,ticker__MOT--/free-co-fin-stockquote.xhtmlhttp://www.hoovers.com/motorola,-inc./--ID__11023,ticker__MOT--/free-co-fin-stockquote.xhtmlhttp://www.hoovers.com/motorola,-inc./--ID__11023,ticker__MOT--/free-co-fin-stockquote.xhtmlhttp://www.hoovers.com/motorola,-inc./--ID__11023,ticker__MOT--/free-co-fin-stockquote.xhtmlhttp://www.hoovers.com/business-information/--pageid__16000--/global-sample-index.xhtmlhttp://www.hoovers.com/nokia/--ID__41820,OID__1130760,target__company_executive--/free-co-samples-index.xhtmlhttp://www.hoovers.com/business-information/--pageid__16000--/global-sample-index.xhtmlhttp://www.hoovers.com/nokia/--ID__41820,OID__1130739,target__company_executive--/free-co-samples-index.xhtml


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Price/Earnings Ratio (4.29) (51.02) 25.00


Price/Cash Flow Ratio (38.31) 13.95 42.73

Headquarters:

1303 E. Algonquin Rd.Schaumburg, IL 60196United States

Motorola Key Executive Officers

Title Name & Bio Contact

Chairman David W. Dorman Network|E-mail

President, Co-CEO, and Director; CEO, BroadbandMobility Solutions

Gregory Q. (Greg)Brown

Network|E-mail

Co-CEO and Director; CEO, Mobile Devices Sanjay K. Jha Network|E-mail

Apple, Inc.

Apples entry into the cellular phone market has been the iPhone. Sales of the iPhone have madeApple a major player in the cellular telephone industry.

Company Type Public - NASDAQ (GS):AAPLMain Headquarters

Fiscal Year-End September

2008 Sales (mil.) $32,479.0


Apple, Inc. Income Statement

2008 2007 2006

Revenue ($ mil.) 32,479.0 24,006.0 19,315.0

Gross Profit ($ mil.) 11,145.0 8,154.0 5,598.0

Operating Income ($ mil.) -- -- --
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Total Net Income ($ mil.) 4,834.0 3,496.0 1,989.0


Apple, Inc. Key Financial Ratios


MarketMedian1


Price/Earnings Ratio 31.85 28.57 25.00



Headquarters:

1 Infinite LoopCupertino, CA 95014United States

Apple Key Executive Officers


Chairman William V. (Bill) Campbell Network|E-mail

COO Timothy D. (Tim) Cook Network|E-mail

CEO and Director Steven P. (Steve) Jobs Network|E-mail

Research in Motion (RIM)

The company provides wireless hardware, software, and services to customers worldwide. Itspopular line of BlackBerry smart phones handle voice, e-mail, and text message communications,

as well as Internet access and multimedia applications. RIM also provides software developmenttools and makes radio-based modems that other manufacturers incorporate into portable devices.The company sells to corporations, resellers, and wireless carriers. BlackBerry devices areoffered by service providers including AT&T Mobility, T-Mobile, and Verizon Wireless.

Company Type Public - NASDAQ (GS):RIMM; Toronto: RIMMain Headquarters
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Fiscal Year-End February

2009 Sales (mil.) $11,065.2


RIM Income Statement

2009 2008 2007

Revenue ($ mil.) 11,065.2 6,009.4 3,037.1

Gross Profit ($ mil.) 5,097.3 3,080.6 1,657.8

Operating Income ($ mil.) -- -- --

Total Net Income ($ mil.) 1,892.6 1,293.9 631.6


RIM Financial Ratios


MarketMedian1


Price/Earnings Ratio 19.27 36.23 25.00



Headquarters:

295 Phillip St.Waterloo, Ontario N2L 3W8, Canada

RIM Key Executive Officers

Co-CEO and Director James L. (Jim) Balsillie Network|E-mail

President, Co-CEO, and Director Michael (Mike) Lazaridis Network|E-mail

COO, Administration and Operations Dennis Kavelman Network|E-mail
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Palm

Historically the leading provider of handheld computers, the company now primarily marketsInternet-enabled mobile phones (also known as smart phones). Its phone line includes the entry-

level Centro and more advanced Treo and Pre lines. The company sells its products directly andthrough distributors, wireless service carriers, retailers, and resellers. Its carrier partners includeAT&T, Sprint Nextel, and Verizon Wireless. Thecompanymarkets its products globally;however, the majority of its revenue comes from sales in the US. Palm traces its roots back to1992.

Company Type Public - NASDAQ (GS):PALMMain Headquarters

Fiscal Year-End May

2009 Sales (mil.) $735.9

2009 Employees 939

Palm Income Statement

2009 2008 2007

Revenue ($ mil.) 735.9 1,318.7 1,560.5

Gross Profit ($ mil.) 159.8 401.9 575.1

Operating Income ($ mil.) (302.6) (137.8) --

Total Net Income ($ mil.) (732.2) (105.4) 56.4

Diluted EPS (Net Income) (6.51) (1.05) 0.54

Palm Key Financial Ratios


MarketMedian1


Price/Earnings Ratio (2.38) 28.57 25.00

Price/Book Ratio (3.15) 6.50 6.62

Price/Cash Flow Ratio (8.82) 15.15 42.73
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Headquarters:

950 W. Maude Ave.Sunnyvale, CA 94085

United States (Map)

Palm Key Executive Officers


Chairman and CEO Jonathan (Jon) Rubinstein Network|E-mail

SVP and CFO Douglas C. (Doug) Jeffries Network|E-mail

SVP Worldwide Sales David (Dave) Whalen Network|E-mail
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