Is Apple Just Dreaming iPhone Dreams?

Carl Howe has a point. In his note on why the iPhone doesn’t do high-speed mobile phone networks, Carl offers that Apple (AAPL) may be keeping the door open for deals with mobile operators outside of North America. Agreed.

He also argues that Apple probably did not want to embarrass Cingular by shining a spotlight on the inadequacy of the operator’s HSDPA coverage, or hang the iPhone’s success or failure on a half-built network. Agreed on both points.

But I still don’t see how Apple can hit its numbers (10m units in FY’08). In fact, I agree with Eric Savitz of Barron’s. Why?

1. Bad surf. When it comes to web surfing, EDGE will provide nothing but frustration. Wi-Fi will fill the gap when available. But outside of the home, Wi-Fi usually suffers from a case of authentication heartburn — messing with credit cards and security keys. If it can’t handle high-speed access to the Internet, then don’t call it a breakthrough Internet device that can “read a web page while downloading your email in the background over Wi-Fi or EDGE.”

2. Bad price. Apple’s iPhone pricing is at the high end of even the Treo smartphone range. Phones in that category are justified by enterprise applications: calendaring, email, contacts, and task lists. Apple has no such apps on the iPhone. This is not say they couldn’t offer them. In fact, Apple would be very smart to get a skinny version of a Microsoft Exchange client on the iPhone as soon as possible.

Comments

[Tommo_UK]

1) How do you know that AAPL won't just partner with a range of WiFi hotspot providers and provide seamless access? Are you forgetting that it runs OS X and is thus easily configurable - as easily as a MAc is - if Apple chose to go this route?

2) Pricing. Pah! Its cheap compared to its peers, for its functionality, and offers a screen twice the size and twice the resolution with 4-8GB of on-board memory etc etc etc. I could go on, but the technical specification alone is obviously lost on you, let alone the sheer usability of the device. Its funny how people who have used the device almost universally rave about it, and those nay sayers and crusty old doom mongers who are sat on the sidelines can do nothing but pick holes in it.

I bet you though the iPod was going to be a failure too. And I bet you never thought Apple would release the iPod nano to boost sales and accelerate growth just when the market thought things would slow down for the device.

Look forwards, not back, in your analysis and perhaps you'll see light at the end of the tunnel instead of all this bleakness. What about an iPhone nano at $199? Did you know that when the iPhone was put up on Amazon Germany, as a pre-order, it was THE BEST SELLING ELECTRONICS ITEM in the country for a couple of days - priced at DOUBLE the US retail price - $1200? So much for being too expensive.

I could go on and on refuting your points, but time will prove you wrong, just as it did the nay sayers of the original iPod. I hope you enjoy your iPhone, when you finally buy one :-)

[Ole Tange]

To me the biggest problem with the iPhone that I can not install software on it and therefore not upgrade it with new functionality from 3rd parties such as calendar. The Open Source iPhone, Neo1973, will solve this when it is out in February. See a comparison here: www.linuxtogo.org/gowi...

[Tommo_UK]

Ole,

Tha iPhone is a fully-fledged Mac running OS X. In theory, any OS X app should be able to run on it once it is tailored to fit the screen. Apple will certainly scrutinise 3rd party apps to ensure they comply with the GUIand security standards it sets, but I can guarantee you that there will be more apps available for the iPhone, eventually, than any other PDA/mobile platform. With OS X as the foundation for the device, there are already - theoretically - more apps for it thanks to the Mac than any other handheld platform. Expect apps to be downloadable and installable via iTunes.

[Ole Tange]

Hi Tommo.

The comparison, www.linuxtogo.org/gowi..., links to 2 documents that you might find interesting:

The OS: It isn't OS X proper, as you'd expect. And like an iPod, it won't be an open system that people can develop for. Remember, this is both an iPod and a Phone. (gizmodo.com/gadgets/ma...)

In an interview with the New York Times, Steve Jobs confirms reports that the recently-announced iPhone will not allow third party applications to be installed.
(apple.slashdot.org/art...;from=rss)

[David Lentz]

Sorry guys, the version of OS X inside the iPhone is not a full implementation of OS X. For one thing, it will not include any support for Java, which does not bode well for moving any applications from the Macintosh to the iPhone, Java being the easiest way to have one source program support multiple hardware platforms (Universal Binary is another approach, but one that does not lend itself to storage-challenged environments).

The reason to exclude Java is to prevent users from loading versions of apps that Apple+Cingular does not want on the iPhone (like Skype) from the web and running them on the iPhone. I think this closed architecture mania is a losing formula, but the device is a big enough advance to succeed in spite of being hobbled.

If Apple had gone the route of an open iPodPhone, and allowed it to work with any network that accepted it, the sales opportunity would have been ginormous -- but also the risk that the industry would have all turned their backs on it and let it be minimized into a niche product.

However, the Keychain facility of OS X will make all the nonsense with authentication simply disappear. The version of OS X in the iPhone will effortlessly juggle hundreds/thousands of sets of authentication passwords and keys.

And the OS X Mail application IS a "skinny version of a Microsoft Exchange client", without all the virus grief and anguish. Maybe I missed it, but I saw nothing in the presentation that indicated that Mail, iCal and iChat apps would not be included in the iPhone. They easily could be, it would be pretty clueless to exclude them. Why else have the wifi capability in a communications device, if one were to exclude all the communications apps?

But one way in which Apple can meet it's 10M unit sales target is to look at the iPhone not as a cellphone, but as a high-end iPod, possibly with some wifi capabilities. Consider how many could be sold with NO CINGULAR CONTRACT or cellphone support, just to use as video iPods?

Certainly, 8G of storage (minus however much OS X consumes) is not a lot of space to store movies and music in, but it's enough, when one looks at keeping only a subset of one's iTunes Library on the iPodPhone, and if you throw in the ability to interact with the internet (surf the web, check email, iChat) at wifi hotspots, then $600 looks very attractive, and Apple can sell a ton of these without the boat anchor of Cingular's miserable reputation. Adding a spinning disk drive of significant capacity (60G-100G) would make this perfect.

And there's always the possibility, however unlikely, that AT&T (formerly Cingular) will step up to the plate and address the weaknesses in their cellular network. It shouldn't take that long, if AT&T were to get serious about it. Maybe the horse will learn to sing.