SOUND OF THE TIMES
In its report "The Wireless Future: A Look at Youth Unplugged," Cheskin Research cited several future trends for the industry, especially the development of wireless data transmission that will permit complex games, entertainment, and business graphics to travel on the airwaves. U.S. Hispanic youth – a demographic group projected to grow 62 percent by 2020, compared with 10 percent for all U.S. teens – will be a major consumer for these services. "Understanding consumer behavior – in particular the youth market , which can be a bellwether for the mass market – is crucial to predicting what will drive users to upgrade their phones to take advantage of these high-capacity networks," explains Amy Francetic, author of the report.
In the foreign markets, experts say, an emphasis on establishing a local presence has resulted in a lack of synergy between wireless carriers’ headquarters and their foreign offices or partners. At a moment when the future of U.S.-owned wireless companies in Latin America looks cloudy, the U.S. Hispanic markets look even brighter by comparison.
HELPING PALM GET A GRIP // By Nicole Lewis
In his bid to boost the handheld device maker’s fortunes, Angel Mendez is turning to Latin America.
Latin America figures prominently in Angel Mendez’s continuing recovery plan for Palm Inc. According to Mr. Mendez, vice-president of global operations at Palm, the Latin American market for handheld computer devices is ripe for expansion.
"The handheld computer space is very young in Latin America, in part because pricing has been high and the device is expensive," he says.
With that in mind, Palm has embarked on a new strategy to manufacture handheld units in Brazil for sale in that country. Until now, the company has imported finished Palm products into Brazil, where they are subject to import duties that undermine the company’s designs on increasing market share.
"What we currently do is to ship products from our distribution center, consolidate them in Miami, and then ship the products into Brazil," Mr. Mendez says. "Our price has become quite high for the lower-income consumer in Brazil, so our strategy is to move toward localization of production in Brazil to avoid import tariffs. That way our prices can be dramatically lowered, expanding our market."
According to IDC Latin America, Palm has an overall regional market share of 72 percent. In Mexico, Palm’s market share is 79 percent; in Venezuela, it’s a near-monopolistic 87 percent.
Handheld-unit shipments to Latin America increased a healthy 12 percent during the second quarter of last year – a period that saw the overall personal computer market decline 13 percent, according to IDC. The research firm notes that the market value of handheld-unit shipments to the region is some $68 million.
In an effort to build market share in Mexico, Palm has teamed with Gigante, one of the country’s top grocery store chains, to promote its new Zire, a low-end device targeted to first-time users of handheld pocket computers. To drive sales of the Zire over Christmas, Gigante offered a discount to customers at its 400 stores who spent more than 1,500 pesos.
"Gigante placed one of the largest single-customer orders for the Zire," Mr. Mendez says. "Mexico has been one of those early channels that we hope to create for the product."
Mr. Mendez joined Palm, the world’s top handheld computer device maker, in the summer of 2001, immediately after the company had announced a write-off of some $260 million worth of goods and was in the middle of a downturn that saw several quarters of losses.
"We were suffering through a dramatic inventory glut caused by a number of things: failures in the way in which we went about planning demand, failures in some product introductions, which were delayed, and slower demand following 9/11," says Mr. Mendez, who oversees a division of 100 employees and about 70 percent of Palm’s overall budget.
He has since pushed Palm to pursue several cost-cutting measures. The company has reduced its contract manufacturers from two to one, cut the number of partners and suppliers by 30 percent, and reorganized the company by region. He says the latter approach has enabled the company to impose greater accountability for regional performance.
Looking ahead, Mr. Mendez hopes to continue perfecting an efficient supply chain that has led to year-over-year operating cost reductions from $113 million to $84 million, an inventory decline from $78.6 million to $38 million, and a cash-to-cash cycle of three versus 14 days.