In August, Business 2.0 reported that “Cell-phone makers see green by going green“. The story is about electronics makers dealing with the European Union’s Restrictions on Hazardous Substances, otherwise known at RoHS (or “rose”, helpful site put up by the UK government here). We highlight this directive, along with WEEE and REACH, in Green to Gold because of its power to reshape markets. In short, the EU has banned certain hazardous substances like lead, mercury, and cadmium from use in new electrical equipment.
Companies have been scrambling to meet the new requirements, but Palm, maker of one my favorite and indispensable devices, the Treo, decided to miss the memo. The cost to Palm has been noticeable. As the article reports,
After Palm announced in late June that it would stop shipping the 650 to Europe – the only model it sells in the region – it forecasted sales for the current quarter at between $380 million to $385 million – about $20 million below what Wall Street analysts expected. That sent its shares down by 14% to $16.10. Although Palm has announced plans to start selling a new smartphone later this year that complies with the EU’s rules, its shares have continued to slide since then, closing Tuesday at $14.19.
Let’s size this problem. Given a market cap of close to $2 billion at the time, the immediate drop was on the order of $272 million, followed by a month long slide that wiped out $470 million. Today, the stock is still below $15. See the chart below to see the drop in late June at this announcement.
The article went on
Palm says it wasn’t worth the cost of retooling the older 650 design for the European market. But it could have avoided the problem, experts say, by anticipating the stricter rules in the product’s design.
I couldn’t have said it better myself. While it’s an understandable gut reaction that it might not be worth the expense to retool, by not managing environmental regulations and risk, companies can miss out on market access opportunities. That can mean a ripple of lost sales and value that far outweighs the initial expense. Not to mention that pursuing new technologies and materials to meet the regulations can drive new thinking, innovation, and eco-advantage. As a fan of Palm, it pains me to see this kind of eco-mistake.
