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Thursday, February 28, 2008

Apple's Anywhere iPhone


Apple's invitations to an event on March 6 to discuss the Apple Software Development Kit for the iPhone generated several Apple inquiries around here, and Apple COO Tim Cook's talk yesterday at the Goldman Sachs event added more fuel to the story. I thought I'd take a break from my usual "Anywhere all the time" writing, and just pass on some of the data and answers I've been providing to reporters.

  • Has the iPhone wave peaked? No; in fact, I would argue that the iPhone phenomenon has just gotten started. The Apple iPhone is truly an Anywhere phone, putting communication, media, and Internet content in the palm of nearly anyone's hand anywhere in the world and on (mostly) any GSM network. Despite the iPhone only being available for sale in four countries, it's being used today in more than 100. This adoption is amazing because no official native third-party apps have been released and the device is a version 1.0 device, Apple's first effort in a market most pundits said it could never succeed in. Imagine what sales will look like when there are official distribution channels in more than four countries, when third party developers can create new iPhone applications, and when Apple has version 2.0 and 3.0 devices in the market.
  • Are iPhone unlockers hurting Apple? I think this idea is way overblown. Apple receives full retail price and full retail profits for every phone it sells, locked or unlocked. The device is profitable by itself, regardless of whether it gets carrier revenue sharing or not. Further, the fact that Apple is doing carrier exclusive deals now doesn't mean it is wedded to that model, a point Tim Cook made in his presentation. So everyone who is claiming Apple is "losing" $1 billion due to unlocked phones is simply noting problems with their own models of Apple's business, not Apple's. Apple of course doesn't acknowledge or report any revenues from carriers associated with the iPhones, so any numbers or losses you hear about those are inferred speculation, not facts.
  • Does Apple need to cut prices on its Iphone? Not in the least. Apple has no intent of chasing Motorola to see who can lose more money on phones in a futile attempt to gain market share. Market share isn't the name of Apple's game; consistent and growing profits are. Apple's brand says to nearly everyone in the world that its products are fashionable, easy-to-use, and a bit exclusive. Apple competing only on price would be like BMW cutting prices on its cars so they can be distributed through Wal-Mart; it would be marketing suicide.

    In my opinion, Apple's game plan on its Anywhere phone will likely mirror that of iPods. iPods started with one model and then gradually branched out to three or four of them (depending on whether you consider the iPod touch to be an iPod or a low-end iPhone). Even today, the 16 GByte iPod touch sells for the same price as the original iPod introduced in 2001. People should expect there to be both cheaper and more expensive iPhones over time, but that the target price points for the iPhone with touch screens and Internet capabilities will remain what they are today.
  • Is Apple going to make its iPhone goal of 10 million phones by the end of 2008? Yes. Apple doesn't provide goals if it doesn't think it can both make and exceed them. While the economy and consumer spending are throwing up some roadblocks, I see Apple easily exceeding that goal by about 25% by the end of calendar 2008. And in case anyone was confused, that's the benchmark that Steve Jobs set: 10 million phones by the end of 2008, not 10 million phones in the first year of sales or the first fiscal year.
The bottom line: as the buzz at the Mobile World Congress proved, Apple changed the mobile phone market worldwide with its first and uncertain effort in a new market. Just as it did with computers, Apple isn't playing a market share game; it's building mind share. And while there only officially successful in a few countries today, imagine what will happen when they are Anywhere.


Anonymous said...

Certainly (as you say...), the iPhone is a revolutionary hardware/software communications device and small portable computer. I use it as that kind of limited and portable computer, which it is very good at, plus all the other features.

And yes, Apple is going to have no problem meeting their sales goal. The people who know me and see me with my iPhone have come to understand, by how they see me using it all the time (and how it increases my productivity) that the iPhone is not loaded with a lot of "hype" but very good and functional uses for the ordinary person and is also easy to use.

I handed the iPhone to a cousin, one time to simply text-message someone else. They hesitated at first and said they didn't like text-messaging, because of how hard it was on other phones they had tried (they didn't like the "push-three-time-to-get-a-letter procedure".

I told them to go ahead and try the iPhone. They were amazed at how easy it was, and that was in the first five seconds of using it. Those words came right out of their mouth, instantly.

Yet another steve said...

Apple will sell a lot of phones.

But if the SDK rumors are true, they aren't embracing it as a real platform.

The first look at an iphone demo made me see the potential of a mobile pocket sized networked touchscreen device. And that Apple's timing was perfect for it to be what it never has been nor had a chance to be in the PC-world: the dominant platform.

Perhaps it matters less because the internet itself is a platform.

But if I were involved with Android, I'd be very happy about the rumors coming out of Cupertino. Apple demonstrates the possibilities, and then decides to limit development instead of foster it.

And the whole idea of case-by-case approval and distribution through iTunes misses the fact that some people and certainly many organizations develop apps not for others but only for themselves.

Apple's timing has really hit the sweet spot of the technology. But in the end, whoever "lets a thousand flowers bloom" will define the dominant platform. This is game shifting hardware and will enable unexpected software. And to get there, developers need to be able to play.

And companies are going to want to put very strategic and proprietary things on this kind of platform.

One would think that, given the opportunity, Apple would want to be that platform. But it doesn't look that way.

RocketJam said...

Wonder if you saw the March 4th story on BusinessWeek's website:

Sounds like a lot of people still just don't understand the advantages of ease of use. Example:

"What's the business case for the iPhone? Being able to listen to music on your [work] cell phone?"