Monday, June 23, 2008

Post WWDC iPhone Thoughts

Post WWDC iPhone Thoughts

I was halfway wrong with my predition for the iPhone sales for the
second quarter. There are three reasons for that:
1. Apple had only 6 milion iPhone to sell
2. Apple stoped iPhone advertising during May and June.
3. Apple has desided to swich to another bussiness model with the new
iPhone 3G which will not be so strait forward to unlock and resell.

So Apple not only was not trying to sell record numbers of the first
generation model but they were actialy trying to slow down sales so
they could not run out too long before the next model.

The end result being that iPhone sales moment decreased untill Apple
and its partners run out of iPhone's during the middle of May.

Steve Jobs said at Macworld that Apple plan to launch into 12 Markets
in 2008 with a strech goal of 25 countries. Obviously this strategy
revolved around the old bussiness model, where they had only one
exclusive partner in each country. The 6 milion iPhones from the first
generation were though out to be sold out locked to these specific

What some may fail to recognize is that durring that first year, Apple
simply could not afford to change its business model, simply cause
they did not have enough iPhones to sell. They have also correctly
withheld themselves from launching the iPhone in China, where the grey
market was triving with Unlocked iPhones.
In fact each Russia and China operated more iPhones illegaly than any
of the European Apple partners legaly.
So, the iPhone hackers have not only unlocked the iPhone, they are to
be blamed or thanked for Apple changing it entire iPhone business
model. In the battle with the iPhone unlocking, it is clear that the
hackers won.
It maybe well be that Apple also did not plan to release an SDK as
early as they did. However the hacker 3rd party software comunity
spread by the installer app changed that. It pushed Apple into
following the will of the people.
It is amazing how Apple had managed to create a device that is an
instant winner but at the same time they have failed to pick out the
right model for its distribution. Had they chosen the new business
model last year the Apple could have sold 2-3 times as many iPhones in
many more countries.

So has the iPhone lost its chance especialy now that the competition
is catching up with iclones like the Samsung Instinct, Blackberry
Thunder Nokoa 5800 and others?

Steve Jobs was very clear to say that the iPhone OS is 5 years ahead
of everyone else. So even if the competition has somewhat closed the
gap in the hardware looks and features, it is still way behind in the
software that is the true magic behind the iPhone.
Apple may be new to the mobile phone business but they learn fast and
they do not stand still.
The new iPhone 3G have truly delivered in the places where the old one
lacked. Apple could have sold easily another 10 milion this year had
the iPhone kept the price and added only 3G and more countries to the
list. They are however adding a lot more at half the price. For those
people living in those 70+ countries iPhone 3G will be a killer deal.
A fresh break from the complicateness of todays mobile devices.

How will the competition react? Take Verizon for example. The much
advertised Samsung instinct that was supposed to Kill the iPhone
lowered its prices from $199 to $127. Would this help? Just how much
Value for Money is the Instinct? Apple traditionaly offers new
products at the same price as the precious generation. Verizon were
rightfully expecting the new iPhone 3G to cost the same $399. So they
priced their obviously inferior product at the agressive $199. How
shoked were they to learn that the iPhone 3G cost the same $199. They
would not have sold one Instinct at this new scenario. So they droped
the price with $70. But will that be enough? No. The only way for them
to keep the same advantage is to price the phone at $49 or even $1. Of
course they cannot do that and consequently every person that owns an
iPod Nano will probably get an iPhone 3G as a new generation iPod + a
phone and Internet comunicator for the same price.

Can Nokoa compete with the iPhone 3G? Not directly. Nokia is famous
for making every possible combination of form factor and features in
the mobile phone industry. They will likely offer a very low end
touchnscreen phones and a very high end ones. However there is one
thing that they cannot do and that is offer their iclone in 70+
countries at the agressive price that Apple has put forth.
Recent information suggests that AT&T has subsidized the iPhone by as
much as $350, making the cost of a new and unlocked iPhone 3G at $550.
This is a very big subsidy and it clearly shows the fate the carriers
have in the iPhone as a device with long life. AT&T have effectively
postponed any profit they might get from the phone to the second year
of the customer contract. Nokoa has a tradition of selling its phones
unlocked. In some cases however, they also sell there phones
subsidized. But these subsidies are a fraction of the total cost, not
75% as is the case with the iPhone 3G. Why is that? Simply because
they do not expect to sell many phone and therefore make profit
through the economy of scale. Actialy the real reason is quite
different. Nokia has always made devices with a ton of features.
However these features do not get really used as they are complicated
and usually rank up high bills. With the iPhone, Apple has for the
first time put the Internet in your pocket. Internet that is actialy
easy and fun to use. 98% of the iPhone owners are browsing and 80% are
sending SMS, consequently making larger mountly bills. Nokia users
boast to have more features than the iPhone, but because they do not
get used, these features tend to drive the handset price up, as the
carrier cannot subsidize the phone price considerably.

So by making an extremely easy to use devevice, Apple has managed to
make the iPhone part of very powerfully business model. One that is
perfect for both carriers and end users.

What about RIM? Can the new Blackberry Bold stand up to the iPhone 3G?
No. Although The Bold may compete in the bussiness world with iPhone,
just like the new Nokia E71, it can never have the a consumer impact
the iPhone will. Needless to say the Bussiness users will actialy find
the iPhone a much more powerfully and easy to develop platform for.
The Blackberry bold will likely also cost equally or more to the
iPhone 3G and will not be competitive at all.
So, are not RIM aware of that? Yes, and they are developing the
Blackberry Thunder as a response. Contrary to their. Previous
statements, RIM does finally see potential in the touch screen phones.
A little too late though. It is likely that the Thunder will be have
some bussiness features and will target more the unique iPhone
multimedia features. RIM however does not have the worlds largest
online music store at its back, nor the graphical capabilities of the
OS X iPhone. Needless to say from the pictures leaked so far it does
look uglier and more bulky. Not to mention that it has 6 control
buttons in contrast to the iPhones only 1 home button. It is likely
that RIM will push to features of the device to compete with the
iPhone but that will only make it so much more expensive and a hard

The iPhone is the first Apple device that has a mountly plan fee. This
has enabled Apple to put the power of the OS X, the iPod and much more
in a products that is affordable to almost everyone. This is a
marketing and engineering feat unlikely to be duplicated by anyone soon

Written, Edited and Sent from my iPhone (mostly in a Train and a Car)

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