Year in Review 2007: Winners and Losers
31-12-2007
by Deirdre McArdle

Once again we've rounded up a list of winners and losers for the year. While some companies thrived during 2007, others took a trip into the depths of despair.

Winner: Nintendo

Anyone else dying for a Wii?

It couldn't really have been a better year for Japanese games console giant Nintendo, which flooded the gaming market with Wii in 2007, outselling both the PlayStation 3 and the Xbox 360 during the year. According to October figures from the research firm NPD, some 519,000 Wiis were sold in the US, compared to 366,000 for the Xbox 360 and 121,000 for the PS3. Nintendo is also enjoying strong sales in Europe and in its home market of Japan, where it outsold the PlayStation by a factor of four to one from the beginning of April up until the end of September.

Dubbed the dark horse in the next-generation games console race, Nintendo surprised everyone -- itself included, judging by the shortage of Wiis floating around this Christmas season -- and catapulted its way into the lead, sparking a causal gaming revolution on its way. In all, Nintendo has shipped well over 13 million Wiis since its launch in December 2006, making it the best-selling next-generation games console.

Of course, let's not forget Nintendo's hugely popular portable gaming console, the DS, which has also caused a stir on the games market, thanks in part to some clever advertising from Nintendo which pitched the console at both the adult and kids market. Simple games like Dr Kawashima's Brain Training have proved a massive hit worldwide for Nintendo, which enlisted famous names like Nicole Kidman and Patrick Stewart to star in their ads.

Let's spare a thought for Irish parents this holiday season who, if they didn't manage to track down that elusive Wii or DS, are likely to be facing tears and tantrums under the Christmas tree this year. Retailers across Ireland sold out of the console around the mid-November mark, although more recently Gamestop appears to have pulled some strings and gotten extra Wii shipments. Cue hysterical parents rioting outside Gamestop stores around the country a la Arnold Schwarzenegger's 'Jingle All the Way' Christmas movie.

Winner: Facebook

In your face!

Facebook ended 2006 as a relatively unknown social networking site, well behind rivals MySpace and Bebo in terms of popularity and brand awareness. But what a breakthrough it's made in 2007; the site currently has 56 million users and has superseded all other social networks when it comes to media coverage and general interest.

The saying "no publicity is bad publicity" could certainly apply to Facebook this year, as it courted its fair share of controversy; controversy that hasn't seemed to have inflicted too much harm on the social networking giant. While privacy issues reared their head during the year, and a few ill-advised money-making schemes (Beacon, anyone?) backfired on 23-year-old CEO Mark Zuckerberg, it must be said the company has had a hell of a year.

In October Microsoft confirmed it would shell out USD240 million for a 1.6 percent stake in Facebook, in a move that valued the company at a cool USD15 billion. Many industry watchers agreed that this was a somewhat surreal price for a company that will have revenues this year of maybe USD150 million, according to analyst estimates. Let's assume Microsoft knows what it's doing.

In fairness, Zuckerberg seems to be a savvy 23 year-old; just a few weeks ago Facebook announced the architecture for its developer platform will be made available to other social networking sites. On the back of that announcement Bebo said it had specifically designed its developer code to be compatible with Facebook's, making it the first major social network to implement this new "open" platform code from Facebook. What this means is that the thousands of developers currently building Facebook applications can make their applications available on Bebo too with no extra work.

Closer to home Facebook has made some inroads on the immensely popular Bebo in the Irish market. The social network began the year with 6,000 Irish users and grew beyond comprehension to the point where it now has over 130,000 Irish members. We expect its popularity, and perhaps notoriety, to continue to soar in 2008.

Winner: Google

All that glitters ain't gold

It's been a busy year for the search giant, culminating in a positive decision for the firm when the Federal Trade Commission in the US gave the go-ahead to Google's controversial USD3.1 billion purchase of online advertising giant DoubleClick, saying it was unlikely to lessen competition in the online ads market. This leaves the way open for Google in the US, but the European Union's antitrust regulator is still investigating the deal.

The rumour mill was in hyperdrive during 2007: was Google planning a G-Phone or not? All was revealed in early November when the internet behemoth unveiled a suite of software for mobile phones based on open source technology, backed by some of the largest wireless industry companies in the world. Analysts were quick to, er, analyse the move and deduced that by the end of 2008, thanks primarily to Google's influential brand, the mobile platform -- Android -- will have accounted for 2 percent of total worldwide smartphone shipments during the year.

Throughout the year Google's share price continued its meteoric rise as the firm announced analyst-beating financial figures. In early November the two best performing global investments of the past few weeks were named as gold and Google. Gold reached 27-year highs and increased more than USD50 an ounce in the space of a month. And, while Google took over a year to get from USD500 (EUR343.50) a share through the USD600 (EUR412.20) level, it took it just another fortnight to break the USD700 (EUR481) per share mark, at which it is currently trading.

Winners: Havok and Perlico

Cha-ching

Meanwhile, back at the ranch, two Irish firms scored big this year, both being snapped up by well-known giants in their fields. In September, games middleware firm Havok struck the jackpot when chip giant Intel picked it up in a deal worth around the USD100 million mark. From a university spin-out to a wholly-owned subsidiary of one of the biggest names in the technology industry, Havok has come a long way.

Another company that's come a long way is telecoms provider Perlico, which started off the year as a largely unknown player in the telecoms market (although some people may remember them from incessant cold calls trying to get you to sign up with them.) That all changed in November when mobile operator Vodafone surprised everyone by announcing it was to buy Perlico for a massive EUR80 million. Industry watchers were collectively surprised by the high price tag Vodafone put on Perlico, which has just over 62,000 customers -- 25,000 of which are broadband customers. For its part though Vodafone says it believes that Perlico and the wider fixed-line market have sufficient potential to justify the asking price. From Perlico's point of view, having a parent company with such deep pockets as Vodafone can't be a bad thing -- and is likely to help improve its low-budget TV ads for a start.

We can only sit back and wait to see what comes out of the Vodafone-Perlico stable next year -- the pair have said they will be rolling out joint mobile and fixed-line packages in the spring.

Loser: Vonage

So sue me

It's been a case of another day, another lawsuit for troubled VoIP provider Vonage this year as Verizon, Sprint Nextel, AT&T and Nortel all filed patent-infringement suits against the firm.

In March Vonage was ordered to pay Verizon Communications USD58 million, plus monthly royalties, in a patent infringement case. A judge also issued a permanent injunction against Vonage barring it from using patented technology owned by Verizon. Vonage contested the decision. In April Vonage told the SEC that bankruptcy was a possibility due to its continuing patent litigation with Verizon.

In mid-April there was a glimmer of light at the end of the tunnel for Vonage when Jeffery Citron, founder of Vonage, resumed his role of CEO following the departure of Michael Synder. In an effort to steer Vonage back on course Citron announced a series of cost-cutting measures which will see the company shed around 10 percent of its 1,800 staff and reduce marketing costs by USD110 million. There was a brief reprieve from Wall Street on the back of the cost-cutting measures, but it was short-lived.

In September a jury found that Vonage would have to pay Sprint Nextel USD69.5 million in damages for illegally using Sprint patents, while in October AT&T filed suit against the beleaguered firm. As if to round off the firm's annus horribilis, Canadian telco Nortel filed a lawsuit against Vonage just before Christmas, claiming its VoIP technology patents have been violated.

It's difficult to see how Vonage can rebound from the legal battering it received during 2007 but it seems to be a tough cookie and actually reported better-than-expected results in its third quarter and signed up just under 80,000 new customers. Stranger things have happened.

Loser: Motorola

Razr loses its edge

Another communications firm that felt the pinch in 2007 was the former darling of the mobile world, Motorola. The firm's handset division had a woeful year as demand for its once-iconic Razr waned and its lack of 3G handsets became a concern. The US mobile maker issued three profit warnings during the year and, following its third profit warning, said it no longer expected its core mobile unit to be profitable for the year. Shareholders rebelled and immediately began calling for CEO Ed Zander's resignation. And in November, after months of pressure from all angles, resign he did. He will be replaced by Greg Brown (with effect from 1 January 2008), who could have an eventful year ahead of him.

Towards the end of the year evidence mounted that Motorola may be contemplating a break-up in the wake of the Razr's collapse in popularity. Such a move would satisfy activist investor and Motorola shareholder Carl Icahn, who this year ran an unsuccessful proxy fight to gain a board seat. Outspoken Icahn believes that carving up Motorola could produce almost USD20 billion of additional shareholder value. Although analysts agree in principle with these figures, many suggest that Motorola would need to fix underlying problems in its handset division first if it's to maximise the potential of any break-up.

Loser: Rockstar Games

Get the rock out of here

There were many high-profile games released during 2007, but none attracted more controversy than Manhunt 2 from developer Rockstar Games. In June, it became the first-ever game to be banned by the Irish Film Censor's Office (IFCO) due to its "gross, unrelenting and gratuitous violence". Manhunt 2, made for the PlayStation and Wii consoles, was due to hit shops on 13 July, but following a similar ban by UK authorities it will not make it to shops in Ireland or the UK. In the US, the game, which depicts a killing spree involving an amnesiac scientist and a psychotic killer, was rated Adults Only (AO), which Sony and Nintendo disallow on the Wii and PlayStation games consoles. The rating was essentially the kiss of death for Rockstar as few mainstream US retailers stock AO-rated games.

Seemingly unfazed by the negative reaction to the now-infamous game, Rockstar said it was still "proud" of Manhunt 2. However, in August the developer toned down the game sufficiently to earn a mature or 'M' rating in the US, which means Sony and Nintendo were back on board.

It doesn't end there, however; in November hackers worked out how to expose the 'offensive' content that Rockstar was supposed to have removed. Turns out the developer didn't actually cut out the content, rather it just 'hid' it. And they would have gotten away with it too if it hadn't been for those pesky hackers. The newly-exposed hack is unlikely to impress the US Entertainment Software Rating Board, which could force Take-Two (parent company of Rockstar) to reissue the game in an inoffensive form -- or risk regaining that unwanted AO rating.

Loser: Microsoft

We surrender

After three years of legal wrangling, in October Microsoft finally agreed to comply with a landmark antitrust ruling made against it by the European Commission in 2004 and reveal its software secrets to its competitors. Following talks with EU Competition Commissioner Neelie Kroes Microsoft vowed it would change the way it provides rivals with information that allows them to write programs compatible with Windows. It also agreed to substantially cut its charges for this information. The software giant will ditch the ongoing percentage royalty charge to third parties for licensing interoperability information; they will now pay a one-off EUR10,000 fee. In addition, the firm will cut its royalty on related patents from 5.95 percent to 0.4 percent.

Kroes called the decision a "victory for the consumer", saying it would bring competition back to the server market. For its part Microsoft said it would not appeal the decision, promising instead to "work closely with the Commission and the industry to ensure a flourishing and competitive environment for information technology in Europe and around the world." The guy who worked on that statement deserves a pat on the back; "flourishing" was a nice touch.