Worst of the Week: Place your bets on those cellphone flameouts

Hello!
And welcome to our Thursday column, Worst of the Week. There’s a lot of nutty stuff that goes on in this industry, so this column is a chance for us at RCRWirelessNews.com to rant and rave about whatever rubs us the wrong way. We hope you enjoy it!
And without further ado:
So there’s a bunch of fun stuff going on in the cellphone market these days. It seems there are a number of companies — Garmin, modu, ZTE and others — looking to break into an industry that is completely and totally dominated by Nokia and other multibillion-dollar players. The betting tables are now open: Which of these hungry, promising new market entrants will implode first?
First, let’s take stock: Garmin, a company that makes GPS devices, announced it will enter the cellphone market with a GPS-cellphone combo. Separately, Chinese vendor ZTE is working to break into the U.S. market, and recently scored a distribution deal with regional U.S. carrier MetroPCS. And finally, an Israeli startup called modu told Reuters it will make $1 billion in revenue by 2011 with a little phone that can be clipped into other little gadgets to do stuff like play music.
Fantastic, yes? Actually, probably not.
Although I enjoy getting caught up in the hype as much as the next guy, I’m betting that at least one of these companies will get beaten out of the cellphone market in less than a year. And probably none will ever be really successful. Mark my words.
Now, let me provide some needed background: I’ve never launched a cellphone company, and I certainly don’t have the brains to do so. I’m also very impressed with anyone who has the gumption to try to go up against behemoths like Nokia. And finally, I’m not a professional analyst; I’m just a member of the under-paid fourth estate who has the luxury of a forum in which to express my often-uninformed and rarely coherent opinions.
Now, with that out of the way, let me reiterate: Cellphone startups have a 1 in 1,000 chance of success. And here’s why: Sendo, Tiger Telematics, Wildseed, Sierra Wireless, NeoPoint. and the list goes on.
In fact, the only startup I can think of that has successfully made a name for itself is Research In Motion Ltd. (Note: Apple doesn’t count because the iPhone is riding a massive wave of hype and success laid out by the iPod.)
Now let’s look at Garmin, modu and ZTE specifically.
First off, Garmin is following the exact path that Sierra Wireless blazed in 2003. Whereas Sierra made a name for itself with wireless modems, Garmin has made a name for itself with GPS gadgets. And, just like Sierra, I suspect Garmin will have trouble finding carrier partners, will attempt to sell its nuvifone straight to consumers, and will eventually drop the whole thing and call it a learning experience. And I bet it will cost Garmin more than $19.2 million to do so.
As for ZTE, all I have to say is this: BenQ Siemens. (Also, if Nokia is having trouble banging into the U.S. market, and U.S.-based Motorola is considering spinning off its cellphone business, perhaps it’s really not that great a place to be anyway.)
And finally, modu. Ah, modu. Modu reminds me a lot of a company called IXI Mobile, which launched in 2001 with a grandiose plan to connect various gadgets through Bluetooth. That vision did not pan out, however, and now IXI is working to sell its Ogo keyboard device in places like Taiwan and Luxembourg. (Side note: AT&T dropped the Ogo shortly after acquiring Cingular.)
So when I read that modu plans to make $1 billion in revenue four years from now, I can’t help but start placing my bets.
OK! Enough of that.
Thanks for checking out this Worst of the Week column. And now, some extras:
–This has to be the strangest cross-promotion ever: Browser company Opera, which makes the Opera Mini browser for cellphones, is teaming with the company that makes those Mini Cooper cars. During the Mobile World Congress show in Barcelona, Spain, next week, a bunch of the new Mini Clubman cars will be painted red (Opera’s logo is red) and driven around the city. According to the CEO of Opera, “The products themselves share many great qualities like being small, fast and fun.” I have nothing to add to this.
–No one is bidding on the D-Block license in the FCC’s 700 MHz spectrum auction. Am I the only one who feels sad for the lonely D Block? Don’t worry D Block, someone will love you!
I welcome your comments. Please send me an e-mail at mdano@crain.com.