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Year in Review 2007: Winners and Losers 
Monday, December 31 2007
by The Register


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.