How Can Smaller Mobile Companies Respond to the Credit Crunch?

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Current global economic conditions have allowed large companies with diverse portfolios to continue to operate and turn a profit. Some have even been able to go the route of mergers and acquisitions in order to better position themselves for long-term success. Given the state of things, this multi-tiered strategy helps those companies best to stay afloat.

In short, there’s no reason for Microsoft, Nokia, or even Google to be concerned about the current economic downturn.

Smaller companies who rely on niche markets, or have fewer streams of revenue, do not have the same luxury. Specifically in the mobile realm, will smaller companies like Palm and RIM be able to withstand the current economic changes, or will they have to alter their approach in order to survive?

The Problem

An article in Time Magazine points to the credit problems of all companies causing operational troubles for many mid-tier and smaller companies. Most of these operate with some amount of debt — carried or assumed — and basically pin their hopes on a good product, plus favorable economic conditions, to pull them out of that debt on their way to becoming profitable.

For companies such as Palm, i-Mate (which recently delisted and went private), and many others, operating in debt is a natural state of business. Unfortunately, needing credit to continue operations, when credit is lacking, they are in a bind.

The Possible Solutions

There is not much that can be done for companies who need money to continue operating when there is none available. Banks, investment companies, and venture capitalist streams of income are drying up, except for those who are already positioned for a reasonable rate of return.

For all intents and purposes, niche and small business in the mobile arena are in real danger of going bankrupt and fading from view.

So what can be done in the short term? For companies which have a solid user base and reputation there are some some possibilities:

  • the company can continue as it is, looking at upcoming products and continuing to trim the fat off of day-to-day operations, awaiting for the economy to ease up;
  • the company can chose to fold its hand and become an acquisition target for another company who may or may not also be struggling. The combined resources and IP can make for a better chance of profitability for both, and therefore make a better case for credit/funding;
  • company can move most of its processes to different working models (e.g. service-oriented, open-source development, and consulting) for other companies, and seek those as other areas of profitability;
  • or the company can simply fade away

For mobile companies, the belt tightening happening by investors, consumers, manufacturers, and marketers means that something has to change about how they do business.

It’s not known at this point whether the economy will change favorably for these smaller companies, and so for them to count on funding and investments as before might not be the wisest of moves… frankly speaking, that area of life has started to fade from view. And if they don’t adjust, they will as well.

 

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