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How these tech cos made it big

June 28, 2007 12:33 IST

Not too long ago, it looked as if Finnish handset maker Nokia Corp had hit a wall with the saturation of its core European market. What pessimists did not notice, though, was how the Finns were laying tracks to the fastest-growing part of the global economy: emerging markets.

Today, Nokia is proving that even people with low incomes can be profitable customers. By creating innovative products such as phone books that use symbols rather than letters for illiterate users, Nokia has become the leading handset maker in India and China and is seeing strong growth in Africa and Latin America. China, in fact, has become Nokia's biggest market, with $6.6 billion in sales last year, or 8 per cent of its total.

Nokia's goal is to boost the total number of mobile-phone users worldwide to 5 billion by 2015, up from an estimated 3 billion by the end of 2007, largely on the back of developing markets. "People always have a fundamental need to communicate," says Rauno Granath, head of new growth markets for Nokia Siemens Networks, a joint venture with Germany's Siemens.

If there's one theme that unites the companies on the 2007 Information Technology 100, BusinessWeek's ranking of the top tech performers, it's reinvention. The foray into emerging markets by Nokia, which ranked 17th, is just one example. An ability to rapidly diversify into new businesses or turn existing markets upside down pops up again and again in our lineup. And it is an eclectic group, ranging from the top Web retailer, No. 1, to a Latin American wireless provider, No. 2 America Movil, and perhaps the hottest tech outfit around, No. 6 Apple.

If you're network-equipment king Cisco Systems Inc, No. 20, new growth is being found in part through efforts to become a more consumer-focused company. Wall Street responded to Cisco's strategy of selling wireless routers and set-top boxes by lifting the company's stock about 37 per cent in the 12 months through May 31.

For longtime also-ran Nintendo Co, the key is expanding video games beyond hard-core young male gamers. Reaching out to women and older adults, Nintendo ignited 90 per cent year-over-year revenue growth and climbed to No. 8 on our list. In homes that have one of Nintendo's much sought-after Wii game systems, 10 per cent of the women over 50 are playing regularly. "There is no question that people are picking up a controller who haven't ever picked up one before," says Nintendo of America president Reginale Fils-Aime.

Of course, high-tech markets have long demanded more frequent and rapid change. One thing different now is that the rise of high-speed Internet access and mobile computing are creating new opportunities for transformation. América Movil, the predominant wireless operator in Latin America, had another banner year in 2006 by adding 31 million data-hungry wireless customers in 15 countries throughout the Americas, including the US.

The Net as a catapult

The Net is also shattering boundaries between formerly siloed industries like cable and telecom. While communications giants such as Verizon Communications (No. 25) and AT&T (No. 7) are attacking the pay-TV business, so far cable operators are having more success in poaching customers from the phone industry.

A few years ago, Comcast Corp made zip from selling phone service. In the quarter ended Mar 31, the cable provider signed up 571,000 phone customers, generating $353 million in voice revenues, nearly double the previous year. Voice sales accounted for 5 per cent of Comcast's total sales in the quarter and are on track to reach 10 per cent of sales by the end of the year. That explains why a cable company is No. 62 on the list this year.

Our top-ranked company, Inc., demonstrates another power of Internet technology: It's a super-efficient lever that can catapult a company into new markets. In its most recent quarter, Amazon's profits surged 115 per cent on a 39 per cent jump in sales. One reason is a sizable, growing business in helping other retailers sell their wares on Amazon, for which it charges high-margin fees.

In some ways, Amazon is the ultimate example of transformation. Despite constant criticism, Amazon CEO Jeffrey P. Bezos quickly moved the company beyond selling books to other media, then to electronics, and just about everything else. Now Bezos is working on his next diversification play: offering other businesses spare computing and storage capacity, as well as leftover space in Amazon's huge distribution centers. The strategy has yet to deliver meaningful revenues, or any profits. But as Bezos will tell you, it reflects a never-ending need to search for the next source of tech growth.

Big names out in the cold

Why some of tech's titans failed to crack this year's IT 100


Dell Inc has suffered mightily in the past year, so it's little surprise it slipped off our Information Technology 100 ranking of the top-performing tech companies. Consider that it was still the world's biggest PC maker in 2006, when Dell ranked No. 15 on our list. Since then, Hewlett-Packard Co has bumped it aside, stealing sales and market share with clever advertising and crowd-pleasing products.

A shakeup in the executive suite returned founder Michael Dell to the CEO job. Meanwhile, the Securities and Exchange Commission is investigating Dell's accounting. Dell's traditional strengths - a low-cost model of selling gear over the Internet, a strong U.S. corporate customer base, and an emphasis on desktop computers - suddenly look like weaknesses in a world where laptops dominate and sales growth is strongest in US consumer-oriented stores and in developing nations.

Dell's preliminary 2006 sales totaled about $57.1 billion, up just 2 per cent from 2005. That compares with a 19% growth rate in 2004. With Michael Dell back in charge, all sorts of changes are on the table. Dell is even developing specific computer lines for big retailers like Wal-Mart.

A new line of software from SAP will let customers tap into programs on an SAP server and use SAP functions without installing and maintaining them on their own computers. The strategy could appeal to small and midsize companies that don't have big IT departments.

But it also puts SAP into more direct competition with companies such as and could suck sales from SAP's traditional software lines. Investors are nervous, knocking SAP's stock price down 12 per cent since January and pushing it off our list, down from No. 39 last year. Things don't figure to get much easier, as archrival Oracle Corp is aggressively pushing into SAP strongholds, including manufacturing.

In a tacit admission that SAP needs to listen more closely to its users, company overseers in March promoted customer-relations specialist Léo Apotheker to deputy CEO. In two years he is likely to succeed CEO Henning Kagermann.

No great mystery why Motorola Inc was No. 11 last year: Its ultraslim RAZR phone was sizzling. But where's the follow-up? Facing price cutting by rivals in hot emerging markets such as Latin America and a slew of new premium phones flooding Europe, Motorola had to slash RAZR prices.

Then it didn't release enough new phones with multimedia features to take advantage of the most advanced wireless networks. Fourth-quarter profits tumbled 48 per cent, to $624 million. If CEO Ed Zander can't do better with the phones he just rolled out, his job could be in jeopardy.

Sprint Nextel
Sprint made a name in mobile phones by being quick to roll out the latest data services, such as picture mail and digital music. But in 2004, to compete against larger rivals Cingular and Verizon Wireless, Sprint bought Nextel for $35 billion. Ever since, it has struggled with customer defections and drops in per-user revenue. Customers bolted as network reliability suffered, especially on the Nextel side.

And rivals have beaten Sprint to market with hot new phones. Sprint lost 306,000 subscribers during the fourth quarter of 2006, and it continues to lag Cingular (now AT&T) and Verizon in customer retention. CEO Gary Forsee is investing in projects such as a new broadband wireless network and slashing costs. As Sprint's share price falls, some speculate that the company, which was No. 36 a year ago, may end up as an acquisition target.

E*Trade Financial Corp, like other online brokers, is still waiting for individual investors to trade stocks the way they did in the days before the dot-com bubble burst. But there's no indication that's about to happen, despite the bull market of the past few years. Also, ferocious competition between online brokers to slash commission costs is limiting revenue growth.

That helps explain how E*Trade slipped from its No. 28 rank on last year's IT100 list. Shares of E*Trade, now at around 25, are trading about 5 per cent below the 52-week high reached in early January.