State of the iPhone: Strong. Very Strong.

By MG Siegler

Of the major companies that announced their earnings yesterday, two of them, AT&T (T) and Apple (AAPL), beat Wall Street estimates largely thanks to a single product: The iPhone. We’re approaching the two year birthday of the device, and it still remains one of the hottest items out there. Ladies and gentleman, the state of the iPhone is strong.

Yes, Apple actually sold less iPhones this quarter than the previous two quarters, but that was coming off of the always-hot holiday shopping quarter, and the one before that was when the iPhone 3G was still relatively new on the scene. All told, Apple has sold 21 million iPhones since its launch. Perhaps just a drop in the bucket compared to overall Nokia sales, but remember, Apple was not in the mobile business at all before 2007. And aside from just sales figures, in the past two years, it has revolutionized the industry. That is, of course, a cliche. But in this case, it’s true.

People can downplay the actual number of iPhones in circulation all they want — the fact of the matter is that it has changed things. While there were some third-party mobile app developers before Apple’s App Store, they received almost no attention, and as such, it wasn’t really a viable business. Now, everyone and their mother is flocking to develop for the App Store. And every major mobile player is rushing to make their own app stores. But Apple’s already has over 35,000 apps — and in a few short hours, there will have been one billion apps downloaded in just 9 months.

Think about that for a second: One billion apps downloaded. There are currently 37 million iPhones and iPod touches combined. Certainly, there have been a lot less than that over various stages in the last nine months, but just take that 37 million number. That means that every single one of those devices has had an average of 27 apps downloaded to it. 27 apps — that do everything from games to music to movie times to fetching me a taxi.

I remember the phone I had before the iPhone, fondly: Motorola’s RAZR. It had zero third-party apps, and the most exciting thing it could do was take a grainy picture. That was just two years ago.

Look, Apple’s iPhone platform is not perfect. The app approval process, to put it lightly, sucks. There are apps getting rejected for questionable reasons, that are forced to wait weeks to just be reviewed again. And then there are other apps which feature outrageous things, which get accepted without the slightest peep. Apple needs to revamp this system.

And the network is far from perfect as well. AT&T seems to have a failure rate that is unacceptable to a lot of people. Some have gotten rid of their iPhones just to ditch AT&T.

But the fact of the matter is, that iPhone is simply the best all-in-one device that I’ve ever owned. I cannot imagine my life without it now. I would be lost — sometimes literally — without it. I say that because I know that of the 21 million iPhone owners out there — there are a great deal who feel the exact same way. That may be annoying, and may even sound pretentious to those who don’t own an iPhone — but I’m giving you my honest take as someone who has owned and/or tried a lot of the so-called “smartphones” out there. I have a G1. I have a Nokia N95. I’ve used a number of Blackberry devices. None compare. And I think for a lot of the other devices, it actually speaks less to the iPhone itself and more to the s**t products that the other mobile companies have gotten away with putting on the market for so long.

And thanks in no small part to the iPhone, that could be about to change. Google’s Android platform was long seen as the next big thing, but so far, the only phone to run it, the G1, is junk. That should, hopefully change before the end of this year when new Android phones hit the market. But before then, the first real challenger should be coming — perhaps next month — with the Palm Pre. I’ve known a few people who have used the Pre a bit, and the consensus seems to be that it is the first true competitor, in terms of experience (both hardware and software), to the iPhone.

But it has some major handicaps — ones that I’ve already mentioned: 21 million, 35,000, and 1 billion. The iPhone has established itself as the standard that all mobile platforms now aspire to be. And with so much developer mindshare tied up in the platform, it will be hard for any other to come along and compete. The Pre, simply put, has to actually be better than the iPhone, if it wants to stand a chance.

For a while, it seemed like that would be the case. When the Pre was first unveiled, major hype immediately began. It had all the features the iPhone didn’t. But Apple isn’t stupid. It didn’t rush out with a buggy software update to match all the features. Instead, it sat back, worked, and then dropped the iPhone 3.0 software bomb. Not only does its update coming this summer include many of the features the Pre was touting as advantages, but it has a lot more that the Pre doesn’t offer.

And the Trojan Horse, that not a lot of people are talking about yet, is that the 3.0 software’s micro-payments system (In-App Purchases) could take the iPhone to an even higher level in terms of developer commitment. It could represent a whole new level of money for them — and Apple.

Oh yeah, and there is likely new iPhone hardware coming shortly as well.

Of course, there are still two major differentiating factors that the Pre will offer: a physical keyboard and background applications.

To me, the physical keyboard argument is a short-term one. Yes, a lot of people right now insist on having a physical keyboard — something which Apple has refused to provide. But Apple is doing that because it knows that they are not in the cards for the future of mobile devices. In the not-too-distant future, there will be screens with full haptic feedback and let you orient your hands on them. Physical keyboards will be seen for what they are: A huge waste of space.

The larger issue is background applications. Apple still refuses to run them (from third parties). You might think this is an obvious advantage for the Pre, but there are some major potential downsides. One is performance. How will the device run when multi-tasking? But the larger issue is battery life. I have a G1 that runs applications in the background. The battery life is a joke. If you think the iPhone has a poor battery, try using the G1 for a day. Or should I say, try using the G1 for about 3 hours. Good luck.

Some developers say that if an app is made correctly, it shouldn’t drain a battery to such an extent even while running in the background. They often cite older Nokia phones and the like with applications as examples. But those older phones ran applications that are nowhere near as advanced as we have now in the post-iPhone world. If applications can be optimized for battery life, no one told the developers on the Android platform.

And so, I have my doubts about the Pre’s main advantage, actually being an advantage at all. Again, Apple is a lot of things, but it is not stupid. If it thought allowing applications to run in the background was the best play in keeping customers happy, it would do it. Instead, it went through the painstaking process of completely redeveloping the Push Notification system to get it working. It seems to say something that now Palm has a similar service it has built into the Pre SDK, called Mojo Messaging Service.

Apple, with its still relatively small overall market share, is in a position of power right now in the US. If it had an iPhone that was $99 and could run on any major carrier, it would completely dominate this market. Instead, it’s doing things its way — just as it has always done. And that has worked for the iPod, and for iTunes, and has been working the past few years for the Mac. But it leaves a small opening for a nice Android device or the Pre to have a chance. But they can make no mistakes. Or they will be written in the Wikipedia entry for Apple next to the Zune.

[photo credit: flickr/techburst]

Original post

Comments

[iJah420:]

AMEN!!!!

Wow for once the TRUTH be told.

Kudo's to you MG Siegler!!!

This is just the tip of the iceberg for AAPL.

When and IF this economy ever recovers Mac sales will go thru the ROOF!!!!

just you wait. AAPL long.

Apr 23 09:26 AM

[elcopone:]

I must agree... The iPhone is by far the best electronic device I have ever owned. I love it so much that my next computer purchase just might be a Mac....maybe.

As far as the In-App Purchases goes, I think the developers should tread carefully there. I think the App store works currently because the Apps are generally inexpensive with no recurring costs. Changing that model could be mistake.

Apr 23 10:11 AM

[Peter Lynch:]

Apple fan boy at his best. As long as the stock price keeps going up, I guess all is well.

Apr 23 10:25 AM

[iJah420:]

Lynch its about fundamentals. Apple is a leader not a follower.

I use Linux, XP, UNIX, Mac..... won't touch Vista.... For the record VERY savy on ALL platforms......

Apple is by far the most stable. two words... CERTIFIED UNIX... ever heard of it?

UNIX certification.

Leopard is an Open Brand UNIX 03 Registered Product, conforming to the SUSv3 and POSIX 1003.1 specifications for the C API, Shell Utilities, and Threads. Since Leopard can compile and run all your existing UNIX code, you can deploy it in environments that demand full conformance — complete with hooks to maintain compatibility with existing software.
Terminal 2.

The Terminal application in Leopard takes advantage of the operating system’s native text and graphics capabilities, using Input Manager and Core Text to fully support non-English languages. The updated layout engine provides very fast rendering of ASCII, ISO, and Unicode text, and a new user interface gives users around the world the ability to harness the power of UNIX. A simplified inspector and integrated settings pane make it easy to change the look and feel of Terminal.
Self-Tuning TCP.

Leopard gets the best possible bandwidth from both broadband and narrowband networks by optimizing buffer sizes according to the local resources and connection type. Starting with a larger window helps TCP with ongoing dynamic optimization. This is especially valuable when connecting to high-bandwidth/high-la... networks like Verizon’s FiOS, which previously required specialized tools such as Broadband Tuner.
AutoFS.

The brand-new multithreaded AutoFS filesystem layer keeps track of which paths are actually located on remote AFP, SMB, or NFS fileservers — even across symlinks — and automatically mounts the appropriate server. The Finder and other applications needn’t wait for one mount to complete before requesting another. Now you can specify automount paths for your entire organization using the same standard automounter maps (for example, NIS) supported by Linux or Solaris.
64-bit applications.

Leopard is the first mainstream OS to completely and seamlessly support both 64-bit and 32-bit applications on the same platform, making use of all your existing devices. Even major graphical system libraries — including Cocoa, X11, and OpenGL — are available to both 32-bit and 64-bit processes.
Multicore optimized.

Leopard features improved scheduling, memory management, and processor affinity algorithms to make better use of multiple cores. Several subsystems (TCP networking, AutoFS automounter, and NFS server) have been rewritten to be fully multithreaded. Also, POSIX thread allocation has been optimized to support the new NSOperation APIs.


DTrace.

DTrace is a low-level debugging and profiling facility for detailed monitoring of virtually any aspect of an application. Based on the Solaris Open Source project, this technology has been integrated by Apple into the Darwin kernel. In addition, Java, Ruby, Python, and Perl have been extended to support DTrace, providing unprecedented access for monitoring the performance characteristics of those languages.
Scripting Bridge.

Mac OS X is now the ideal platform for all kinds of script-based development. Ruby 1.8.6 and Python 2.5 are both first-class languages for Mac development, thanks to Cocoa bridges, Xcode and Interface Builder support, DTrace monitoring, and Framework builds — as well as AppleEvent bindings via the new Scripting Bridge. Leopard is also the premier platform for Ruby on Rails development, thanks to Rails, Mongrel, and Capistrano bundling.
Streaming I/O.

The new IOStream class in IOKit provides a high-level API for managing DMAs and other high-bandwidth data transfers, without the need to optimize caching strategies for different hardware architectures. It also forms the basis of the new IOVideo family, designed to support professional-level video cards. These new APIs make it easier for developers to take full advantage of both cutting-edge and previous-generation hardware.
Kerberized NFS.

Leopard NFS supports Kerberos authentication as an alternative to UNIX user IDs for determining who can gain access to a particular volume. In addition, every host automatically generates its own Kerberos v5 principal, allowing it to vend Kerberos-authenticated services.
Directory Utility.

Directory Utility gives you a single place to graphically manage all local and remote directory entries and services, a task that previously required complicated command-line operations.

UNIX is a registered trademark of The Open Group.

Just keep laughing naysayer

Apr 23 10:34 AM

[Zoltan L. K...:]

Apple is developing the iPhone in a sustainable matter. I frankly don't see the need for giving the product away. International market penetration and development is way more promising. The product has a relatively short life cycle and it will get better for a very long time. So Apple will most likely stick to its price-points. This means value for customers and shareholders alike.

Apr 23 11:10 AM

[Roger Knights:]

You tell him, iJah!

Apr 23 11:19 AM

[Roger Knights:]

You tell him, iJah!

Apr 23 11:19 AM

[iJah420:]

Thank You Roger.... Really Thank You.

Some people you just can't reach.

Apr 23 12:11 PM

[Bastion:]

I agree, great article, and a thorough and thought-provoking comment from iJah.

You know, it is the business model that Apple has created that is astounding. The nay-sayers pooh-pooh’d the first iPhone as a “toy” because they were so limited in vision. Back then, developers could only do Webkit apps, and their only revenue options were direct subscriptions/payments from users or advertising. This was no more compelling for developers than existing mobile web apps - they still needed commerce engines, servers, hosting, networks, etc - all this system engineering "infrastructure" - sheesh! If you weren't already in the business, you weren't likely to try to ante up those "table stakes".

Cut to the summer of 2008 and now any developer can try their hand at striking “gold” because Apple has taken care of all the e-commerce infrastructure. Really, it’s like what they did for personal desktop publishing, then personal media management, and now, personal application development.

The special thing about Apple is that they truly have a company culture where they want to put out creative tools for the masses, not just the gearheads and folks with deep pockets and development organizations (yeah, I’m talking about you, Microsoft and Oracle). I mean you hear about these AppStore success stories and a lot of them are “just a guy” with an idea and a lot of determination and passion – it makes you recall how Apple started: two Steves in a CA garage.

It has come full circle – but like that also implies, it is cyclical – Apple keeps repeating this “creativity for the rest of us” loop over and over in more and more areas. It really is amazing, and beautiful…

Apr 23 12:23 PM

[who:]

iPhone - truly a great "phone" - something I wanted several years ago and couldn't get. (Although I did try with iPaq to get similar results given the different quality of networks then.) Mobile computing, entertainment center,camera, photo album, storage device, etc. Adding a video camera and improving the battery live would make it perfect for me.

Apr 23 12:59 PM

[marv08:]

Well-written and truthful. Thanks for that!

I had a 4-5 week old N95 for business and a private 8800 when the iPhone launched over here, and my gf bought one instantly. I then got mine within a week and literally threw the Nokia junk away with both hands. I am getting 50 soon, and this was the absolutely only moment I can recall seriously feeling like having been beamed into the future.

Apr 23 12:59 PM

[JamesApple:]

Unix stands for Universal Operating System, Apple is the one disciple who will finally make Thompson and Ritchie's dream come true, while the others are still deeply entrenched in Java platforms, Apple adheres to the Unix religion and now, in it's Mac OS 10.5 in all the Apple product lines, as well as source compatible with every Unix brethrens large and small, we have universal fellowship throughout the universe. No other sources can make the same claim as Apple.

Thus the iPhone is the way to universal fellowship, through universal collaboration. The iPhone culture is not a personal one, for no man or woman is an island. The iPhone is primarily the instrument for a person to discover and define who they are, and the communities they are living and working in. The iPhone is really about the person who owns it, and the communties this person is a part of. In others words, the world.

This culture is a mind-changer, not a market changer. For what is a world without the iPhone owners, and their communities?

Contrast this with the eMail phones like blackberry, call phones like Nokia, IM phones like Samsung, camera phones like Sony Ericsson, these companies simply have no culture, this is the reason why iPhone have 35K apps, 1 billion downloads, 21 million iPhone's, because we have a collaboration culture in the iPhone manifested by the mighty iPhone OS.

Long live the iPhone fellowship!
The iPhone

Apr 23 01:03 PM

[SiliconVall...:]

iJah, thanks for sharing all the info. However, I prefer for many of the naysayers, a few may be from the competitors, to remain ignorant of what the Mac OS offers a developers. There is a product strategy or roadmap, if you will, that Apple is using and it is something we as vendors would like to keep close to our chest. If you happen to be in the same biz as we are, it is best to not share too much more, especially the roadmap.

Thanks.

Apr 23 01:18 PM

[SiliconVall...:]

Most people continue to focus on products as independent pieces. People look at Mac and they compare it strictly to the PC and then talk about netbooks. People look at iPod and they think only of MP3 players. People look at the iPhone and they think cell phone or "smart phone". Some see the internet as it is today and think it is the best we have and no more innovations are possible. THe most popular voice now is how "popular" Netbooks are and how cheap they are and on and on like the Mercedes of tomorrow are made by the Yugos of today.

The only company that is providing a coherent and mutually supportive and integrated path forward is Apple. If another company comes along, I will jump on that bandwagon too but today, Apple is it. For the sake of a better everyday life, I personally want Apple to keep pushing the boundaries so we can all enjoy what well conceived technological solutions can provide.

Apr 23 01:27 PM

[JamesApple:]

What's most interesting to me would the ability to make native calls to the ARM 620 instruction set for machine level programming of the iPhone antenna, transceivers and amplifiers, filters thru device drivers, as well as blue device.

Apr 23 01:41 PM

[iJah420:]

SiliconValleyJoe

Y. will do.

I however, have a low tolerance for IT ignorance and felt this was one way to shut them up.

I should have just said... AAPL Q2 eps $1.33 (Net quarterly profit of $1.21 billion FYI), 29+billion in the bank, NO DEBT, A healthy product line and the best SDK on the planet.

OH!!!! they would say SO WHAT!! Mac sales are down 3%!!!

Well THEN!!! GO AWAY!!! buy DELL and good luck with that I say....sad part is DELL is the fall guy for MSFT's arrogance and missteps.

Ballmer: iPhone has 'no chance'
The iPhone has no hope of gaining a true foothold in the cellphone marketplace, according to Microsoft CEO Steve Ballmer. The company head told an interviewer at the USA Today that, as with computers, future control of the mobile handset business would primarily depend on software influence rather than hardware. Apple's insistence on attaching its code to a premium device could prevent it from getting any more than a small percentage of the world's cellphone user base, Ballmer predicted.

Again, I just cringe @ the ignorance of certain annalists and IT know it ALLS.

SELL MSFT!!!!!! The tech wet noodle....

Apr 23 01:52 PM

[JamesApple:]

Rim's line of eMail phones should have no claim as a smartphone. Its pretentious Storm is a pitiful attempt to clone the iPhone.

Apr 23 02:58 PM

[Frank Castle:]

Man the Apple fanbois are all stirred up and crowing away again.

Apple iPhone is well at what it does. Run little apps and feed the Apple EcoSystem. As a phone it's subpar. As a email device its adequate for the average user. As a PIM .. well it's got contacts but it's not that easy to search through a few hundred. Still no notes sync support. No support for click to call, click to email etc. So while its capable it fails as a smartphone.

People seem to be glossed over by this fact and sure for consumers iPhone is a HUGE step up from the cellphones they were used to. But for anyone who has used this technology since Palm Professional - iPhone is a whole new device type and as I said amazing at what it does.

I have both devices and I use Blackberry for day to day and frankly have not found 26 apps worth keeping. All studies have shown people download / try / delete / repeat so yeah you need a constant stream of Apps to feed that. At the end of the day I have to make a living and the time to waste of AppStore is maybe twice a week to check out what is new.

I would wager Blackberry users don't want or expect 35,000 apps. They tend to be people who just want to be connected.

And BTW the Storm no matter how bad you trash it - still selling. Actually equaled the same amount of iPhones sold in US and come Storm 2, the other models COMBINED with BES 5.0 Blackberry will do just fine and usher in a new level of enterprise intergration iPhone can only dream about.

Great week for Apple but I don't think any company is ready to boast how great they are doing as last I checked the economy is just getting worse, more jobs are lost weekly and my pay sure as heck isn't going up this year.

Apr 23 09:16 PM

[Tom B:]

iJah wrote a fantastic, detailed commentary above. People would be appalled to discover how FEW of the features found in a modern Mac have found their way into that steaming pile of-- refuse-- known as Windows. Even Win 7, not even in release, fails to get to "square one"; it isn't UNIX.

An added feature of the iPhone is that every developer who writes code for it will have a deep understanding of how to write native apps for the Mac. The problem Apple had in the 1990's of zillions of developers who knew Visual C but nothing about Mac has simply gone away.

Apr 23 11:27 PM

[Mac'em X:]

Tom B: You hit a key point smack on the head. With every developer and his hamster rushing into iPhone apps, with every headline blaring "1 Billion Apps Downloaded", Apple is building a massive army of iPhone programmers. And they're all going to realize that, intentionally or not, they've just learned how to develop Mac apps as well. Instant army of new Mac developers! The iPhone is shoring up one of the Mac's few remaining weak spots.

Apr 24 10:52 AM

[mollytjm:]

It was bad enough that Dell was a pc but Dell also shot themselves in the foot by outsourcing their, at the time, top rated customer support to the lowest bidder. they've never recovered from that. Apple cares about it's customers and you know that the instant you walk into an Apple store... add the best innovation on the planet and you just can't beat it.
Others may have something wonderful for about a minute.. but not only is Apple great at innovating...but they're FAST. in tech, the prize goes to the swift. microsoft lost when it took them nearly 7 years to produce Vista. that's about 6 years too long for an OS fix!
and Zune...geez. its innovation: it came in brown.
i'd give up my large household appliances...all of them...before my iPhone! Am i a fan...you bet! Long APPL
Great article!!! thank you so much.

Apr 24 10:54 AM

[Caltorguy:]

I still remember the scene from Sex in the City where Samantha hands Carrie her iPhone and she looks at the multicolored screen and says, somewhat hysterically, "I don't know what to do with this". There will continue to be a market for the squares or non-technophile, non-fashion victims and RIM fills this pretty well. Their boring enough for big-business yet pretty secure, reliable and functional. Apple will continue to do really well, but it will never have 50 or 60% of the market because it doesn't want that; it wants to be a top-right, niche product for those get it and appreciate the leading design, technology and seamless interface.

Apr 24 04:19 PM

[i build fib...:]

don't for get the biggest telco blunder ever.......VERIZON PASSES ON THE OPPORTUNITY TO BE THE EXCLUSIVE NETWORK PROVIDER LOL!!!!

Apr 24 10:15 PM

[i build fib...:]

don't forget the biggest telco blunder.... VERIZON PASSES UP THE OPPORTUNITY TO BE THE EXCLUSIVE NETWORK PROVIDER FOR THE IPHONE.......

Apr 24 10:17 PM

[Bastion:]

Frank, have you even used an iPhone? "Run little apps"? Have you run Oracle clients on it? How about Salesforce? Or maybe the medical imaging app? What about the full VNC client and other emulators that let you connect to text- and GUI-based servers?

Everyone thinks it's just fart apps and download version is simple web games, but you'd be wrong. It's that and a whole lot more. Will be even more when the app-to-peripheral features are release this summer. The blood glucose monitor demonstration earlier this year was amazing.

Okay, so you think the email is subpar? Blackberry and Win Mobile do not offer the same organizing and viewing options as iPhone Mail. I get all of my accounts integrated, and I can also use server folders just like on my desktop. I get full HTML messages with images and photos included - and I can use the pinch-zoom to see anything larger as I need. Sorry, the other guys can't.

It hardly "fails" as a smartphone because some of these "click-throughs" have not been implemented (as 100 end-user features are coming in the next release this summer, including the much maligned lack of copy-paste, I'm expecting all of these will be addressed). And as for contacts, I'm not sure what is so hard about tapping the search field and tapping letters, which then feeds an incremental search over the whole "book" or just a contact group.

Mmmm, nobody needs 35,000 apps. And a lot of them do similar things. Yes, Apple needs to improve how people can find the apps that have value for them. But just because you haven't found any you like, doesn't mean others haven't.

See, that's the real difference. With Apple's platform it is easy for developers to cater to every niche. With other platforms, making and distributing apps is hard, so developers only do it if they think they will make a lot of money (notice how most other smartphone apps are much, much more expensive that iPhone apps?).

For most iPhone apps, it can me an impulse buy, and that is great for developers. Good for consumers, too.

As for your doom-and-gloom about the economy, I don't get the sentiment. Those conditions existed for all of the previous two quarters - why hasn't Apple suffered thus far, while others have?

You know what they said about the boy who cried wolf...


On Apr 23 09:16 PM Frank Castle wrote:

> Man the Apple fanbois are all stirred up and crowing away again.
>
>
> Apple iPhone is well at what it does. Run little apps and feed the
> Apple EcoSystem. As a phone it's subpar. As a email device its adequate
> for the average user. As a PIM .. well it's got contacts but it's
> not that easy to search through a few hundred. Still no notes sync
> support. No support for click to call, click to email etc. So while
> its capable it fails as a smartphone.
>
> People seem to be glossed over by this fact and sure for consumers
> iPhone is a HUGE step up from the cellphones they were used to. But
> for anyone who has used this technology since Palm Professional -
> iPhone is a whole new device type and as I said amazing at what it
> does.
>
> I have both devices and I use Blackberry for day to day and frankly
> have not found 26 apps worth keeping. All studies have shown people
> download / try / delete / repeat so yeah you need a constant stream
> of Apps to feed that. At the end of the day I have to make a living
> and the time to waste of AppStore is maybe twice a week to check
> out what is new.
>
> I would wager Blackberry users don't want or expect 35,000 apps.
> They tend to be people who just want to be connected.
>
> And BTW the Storm no matter how bad you trash it - still selling.
> Actually equaled the same amount of iPhones sold in US and come Storm
> 2, the other models COMBINED with BES 5.0 Blackberry will do just
> fine and usher in a new level of enterprise intergration iPhone can
> only dream about.
>
> Great week for Apple but I don't think any company is ready to boast
> how great they are doing as last I checked the economy is just getting
> worse, more jobs are lost weekly and my pay sure as heck isn't going
> up this year.

Apr 28 06:26 PM