[DMcCunney]

Originally Posted by axel77

Nevertheless the question is, is the market big enough worth taking the costs of developing a device? And in this regard in really doesn't matter if you are a selfsustained newcomer company getting money from investors, or if you are a devision of a enourmous concern, getting money from the concern funds.

The answer to "Is the market big enough" will depend upon who you are. Smaller companies can address markets that bigger companies can't touch.

I don't know about NY taxis, but the question about producing dedicated vehicles for that market is a question about productivity: can 15,000 vehicles finance a development of a dedicated vehicle? In this sense it again doesn't matter that much if the company wanting to undertake that endavour is big or small.

Simple answer: it isn't.

The Museum of Modern Art in NYC had a competition years back to come up with designs for a vehicle purpose built to be a taxi. There were some splendid designs, but the effort ultimately foundered on the fact that the market simply wasn't large enough for anyone to make one. The costs of tooling up to produce a such a vehicle were far greater than the potential revenue from selling them. This is why the GM engineer I mentioned didn't quite roll on the floor laughing at the idea GM could do one. GM needs to sell something like 500,000 to 600,000 of a model to do it at all.

The only manufacturer who actually addressed the taxi market was the old Checker Motors corporation, in Kalamozoo, Michigan. They made the famous Checker cab (and I think there are still a few running in NYC), and a consumer model called the Marathon. Checker got away with it because they were a custom coach maker. They just built a custom body. They used engines, drive train, and chassis from Chevrolet. They no longer exist.

Usually no. They won't just pull the plug as long the operation as long it is more profitable than the total costs (including costs of investment compared to interest rates). When they decide to leave a sector they will usually just stop any further investments/development into it, sucking every cent out of the sector until it is no longer profitable because other competitors will develop. In strategic market some call this "milking the cow".

Maybe.

The usual corporate impulse is to try to maximize profit. But this is misleading, as the basic question is "How much profit is required?" The answer to that is simple: profit must be enough to cover the marginal cost of capital. That number may be higher than the maximum profit the company thinks it can make. In that case, the operation may not be long for this world...

Companies will use existing operations as "cash cows" to finance other developments, but the "cash cows" have to throw off enormous amounts of cash.

Again, management has the duty to invest funds where they make the greatest return. An operation that is profitable, but not profitable enough has problems. And how much is "enough" depends upon the industry and the company.

As an example pertinent to what MobileRead is interested in, take publishing. The industry went through an upheaval some years back as multi-media conglomerates acquired publishing houses to complement their existing operations in movies, TV, music, and gaming. They thought they saw synergies in having multiple forms of content under one roof. Those associations are beginning to unravel. For instance, TimeWarner sold off the Warner Books division to Hachette, who renamed it Grand Central Publishing. The problem was simple: book publishing can't achieve the levels of revenue and profitability possible in things like movies and TV.

Conglomerates in other media areas with publishing operations are finding that out the hard way. Their publishing arms are under intense pressure to boost revenue and profit (IE: publish more best sellers), and some publishing arms are being divested. They simply don't fit with what the larger company is doing. They are profitable, but not profitable enough

Indeed spinning off might be a good idea or a bad depending on many variables. I just fail to see how Sony deciding to continue the eInk device operations within the mother cooperation proofes anything more about their assumption of the eInk market compared to Phillips that decided it would be a good idea to make a spinoff (most likely with their money) to develop this device.

Axel, my basic point is simple: Sony is a big company, and requires big numbers to justify doing something. Big companies cannot profitably address little jobs. I don't know what Sony's real numbers are, in unit sales, revenue, or profitability for the reader, or what they see the potential as being. I am quite certain that they need far higher numbers than smaller outfits like Bookeen or iRex.

Sony wants growth. Note that the Reader operation is now a separate division. Sony appears to see a significant market in electronic literature and devices to display it, and is addressing that market. Sony is a huge outfit, with a market capitalization of 29 billion dollars. What do you think "growth" means for an outfit that size? (See here for an overview of their numbers.)

Sony needs to sell a lot of readers.
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Dennis