Apple (NASDAQ:AAPL) begins selling its revolutionary iPhone this summer and it will mark the end of the string of hits for the company. Billed as "your life in your pocket," it will sell for $599 with a one year or $499 with a two agreement through AT&T wireless.
The company has had a string of hits since it introduced the iPod and its shareholders have benefited sending shares from $7 in 2003 to the $100 they sit at today. The introduction of the iPhone will be the first miscue for the company and send its shares, priced for perfection tumbling. "Why?" - you ask.
More Isn't Always Better
The beauty of the iPod was and is its simplicity and singular purpose. It enabled even the most tech phobic of us to operate and enjoy it. Because of this, sales have been phenomenal. There are several versions of Mp3 player phones out there and none of them are big sellers. The reason? The market does not want them together. I do not want to have to turn off my music to get a phone call. If I am driving my family in my car and we are listening to the iPod, having to turn off the music to answer my phone becomes a major hassle. The same holds true for any event where I play the iPod. Why would I pay $600 for this, or, buy an iPod in addition to this, in order to avoid the hassle?
All of have cell phone agreements and have a cancellation fee. This varies from $100 to $150 dollars. This price need to be added to the costs of the iPhone for those who want it right away or it will cause a lag in initial sales. This lag will allow cell competitors to create their own, cheaper versions to compete, hurting future sales.
Being able to make a call simply by pointing a finger at a number is a feature touted for the phone. How is this any different or accurate from scrolling on my blackberry? This feature will lead to frustration, as users who do not point at exactly the number they want will keep initializing errant calls.
"All In One" Historical Issues
How many people have had TV/VCR or DVD combos or the dreaded all in one fax, scanner, copier? Now, how many regret that decision? When you have an all in one, you then become a slave to that device. If either breaks, the both units must be replaced. If a newer, better version or either comes out, you cannot purchase it because it then entails buying both again at considerable cost. Now, when you consider the unimpressive reliability history of the iPod and the cost to attempt to repair them (usually it is cheaper to just buy a new one), it is not an unrealistic stretch to consider that you may be purchasing one of these every two or three years. An expensive proposition.
What Should Apple Do?
This is the easiest part. There is no reason to have an 8GB iPod on the phone. Give us a 2GB capacity so we can put our favorite stuff on it and listen when we want, cut the price to $299 and you may have something. A $599 phone will not gain mass acceptance no matter what it does, especially when people can still get its functionality from their existing devices. Also, the exclusive deal with AT&T Inc. (NYSE:T) was not a very bright idea. Until it is expanded to all carriers, you will have nothing more than a little niche product.
The real winner in all this? AT&T , not Apple or its shareholders.
AAPL 1-yr chart: