11/15/99: Forbes.com follows my lead again like they did with my "The Sex Market" thread:
The cell phone industry has never had room for startups. So how come little NeoPoint is doing so well?
Wake-up Call
By Scott Woolley
WILLIAM SON WAS TRAINED from birth to thumb his nose at authority. While he was growing up, his father, a Korean dissident, was constantly in and out of jail. (He's now serving his fourth prison term, this one for purportedly slandering the South Korean president.) So perhaps it's no surprise that William Son runs an impudent little outfit with the guts to take on the giants that rule the cell phone business.
The industry's leaders are behemoths: Nokia, Motorola and Ericsson. Qualcomm, with $3.8 billion in revenue, passes for an upstart.
Then there's Son. His two-year-old NeoPoint Inc., a 180-person operation in San Diego, landed a $90 million contract in August to supply Sprint with a snazzy new cell phone capable of browsing the Internet. It followed that up a month later by inking a similar contract for a custom phone model for Vodafone AirTouch's cellular operations. NeoPoint will probably go public next year.
NeoPoint's groundbreaking success marks a fundamental shift in the way cell phones are built. Until now it was the tangible parts of a phone that mattered. Whoever could build the best chips or the smallest package would lead the market. Not anymore. Today lots of companies--including most of the giants--will sell you the components you need to build a cell phone. What matters, says Michael Wilshire, a consultant with McKinsey & Co., is the software. "That's where the real value is shifting, and that should concern the big incumbents," he says.
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"You mean, am I scared? No! I started with nothing, I'm not afraid of losing."
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It used to take the sprawling might of a giant company to design and build the intricate components that make up a cell phone. Now that those pieces are sold off the shelf, the cell phone market's biggest barrier to entry has crumbled, says Son. "All we have to provide is genuine engineering ingenuity," he says.
In the phone Son sold to Sprint, that ingenuity comes in the form of an operating system that makes it easy to navigate the Internet and e-mail. It also drew raves from the trade press for its eye-catching design, which did include a few custom hardware touches like a large screen and thumb-friendly touchpad--reminiscent of laptop computers--for navigating around that screen. (NeoPoint designed those flourishes in-house and farmed out the manufacturing.)
All the generic components, such as the battery recharger, came right off the shelf. And for less critical software, NeoPoint simply used existing applications, such as a program that makes typing e-mail using the phone's buttons less of a chore.
When Son founded NeoPoint, his vision of a tiny phonemaker seemed daring, even loony. Now the big guys are waking up to a world in which engineering and imagination are paramount and competitive threats don't all come from their fellow giants. Qualcomm, Son's former employer, just announced plans to get out of the cell phone manufacturing business so it can concentrate more on design.
How does it feel taking on Nokia, Qualcomm and Motorola? "You mean, am I scared?" asks Son. "No! I started with nothing. I'm not afraid of losing."
forbes.com |
