Competition heats up to provide the software that powers mobile phones

BRACE yourself for disappointment: there may not be a flashy new mobile phone waiting for you under the Christmas tree. On November 14th Nokia, the world’s largest maker of such devices, announced that it expects the industry to sell no more than 330m of them in the fourth quarter—about 6m fewer than in the same period last year and 20m fewer than it predicted just a few months ago. Worse, Nokia expects sales in 2009 to drop below this year’s level. This would make it only the second year ever in which the global handset market has contracted.

Yet not all is doom and gloom in the mobile-phone industry. On the contrary, it is going through two important shifts that promise to generate much growth and profit in the years to come. First, even though overall sales may fall in 2009, sales of “smart” phones—those that allow you to surf the internet, download music and use other data services, as well as make calls and send text messages—are booming. According to Informa, a market-research firm, the market for smart-phones will grow from $39 billion in 2007 to $95 billion in 2013, by which time they will make up nearly half of the handset market by value (though only 34% by volume). ...

Japan’s biggest mobile operator heads abroad once more

HERE we go again. When NTT DoCoMo, Japan’s dominant mobile operator, last ventured abroad, the results were painful. Between 1999 and 2001 it spent almost YEN2.2 trillion (about $20 billion) buying minority stakes in a handful of mobile operators around the world. But it ended up booking a loss of half the value of these investments in 2002 and scuttled home. In the past couple of years, however, DoCoMo has been buying stakes in foreign operators once again, with investments in South Korea, the Philippines, Malaysia and Bangladesh. Its latest move: India.

On November 12th DoCoMo said it would pay $2.7 billion for a 26% stake in Tata Teleservices, the mobile-telecoms arm of the Tata Group, one of India’s biggest conglomerates. The price, valuing the privately held Indian business at $10.4 billion, is steep: the operator is India’s sixth-largest, with barely 30m customers in a crowded market that boasts more than 300m. The company is believed to be unprofitable and is about to begin a costly network upgrade. ...

A fight breaks out at the low-cost airline

THERE is never a good time to have a full-blown boardroom brawl in public. But for Sir Stelios Haji-Ioannou, a flamboyant serial entrepreneur, to have chosen this moment to go to war with his fellow directors at easyJet, a budget airline, is as puzzling as it is potentially destructive.

The airline industry is reeling from the twin effects of seesawing fuel prices and tumbling demand. Thirty airlines have already succumbed this year and as many again are forecast to disappear in 2009. As Europe’s fourth-biggest airline, easyJet, founded by Sir Stelios 13 years ago, will not be one of them. Its strong balance-sheet, modern fleet and low-cost operating model mean it is much better placed than most of its competitors to ride out the storm. But it is still feeling the strain. This week it announced annual pre-tax profits of GBP123m ($187m), slightly ahead of expectations but still 36% down on the previous year. The last thing easyJet needs is a distracting internal fight over strategy. Yet that is precisely what Sir Stelios seems to want. ...

If Detroit’s carmakers are bailed out, Europe’s will be next in line

NOT only in Washington, DC, is there a fierce debate over state aid to the beleaguered car industry. On November 18th, just as the bosses of General Motors (GM), Ford and Chrysler were lining up before the Senate banking committee to ask for help, the directors of the European Investment Bank, the European Union’s lending arm, were considering whether to give Europe’s carmakers €40 billion ($51 billion) in soft loans. The previous day the German chancellor, Angela Merkel, had met executives of GM’s European subsidiary, Opel, to discuss guaranteeing a €1 billion liquidity line in the “worst case” of its American parent going bankrupt.

Despite the appearance of similarity on both sides of the Atlantic, however, there are big differences. For one thing, the plight of the Detroit Three is much more urgent. GM’s boss, Rick Wagoner, told the senators that the economy faced “catastrophic collapse” if bridging loans were not quickly made available. He gave warning that by the year’s end GM might not have enough money to pay its bills. Ford’s cash position is stronger—company insiders reckon that it might be able to scrape through on its own resources—but its chief executive, Alan Mulally, was not on Capitol Hill just for the ride. He fears that if either Chrysler or GM (particularly GM, since it is so much bigger) were to fail, the impact on the parts suppliers on which all three firms depend could bring down Ford as well. ...

Confronted by Asia’s technological rise and the financial crisis, corporate America is losing its self-confidence. It should not

LISTEN to the growing cries of despair coming from some leading business people, and you might imagine that corporate America’s competitiveness could be the next victim of the global financial crisis. But Jeffrey Immelt, the boss of GE, the world’s largest industrial firm, sees opportunity amid the woe. “Companies and countries that really play offence vis-a-vis technology and innovation are going to come out ahead,” he said this week at an event in New York to present GE’s coming innovations in health-care technology.

With those words, he touched on a debate that has been heating up for many months. Even before the financial crunch began, many businessmen were worried that America was losing its lead in innovation to India and China. They were particularly upset that Asian rivals had been investing with more gusto in teaching young people mathematics and science, and in advanced scientific research. America’s National Academy of Engineering even issued a report last year, “Rising Above the Gathering Storm”, arguing that America’s “economic and strategic security” was in question because of lack of investment. ...