Apple's iPhone Mistakes 15 comments
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Apple (AAPL) made two mistakes with the iPhone which hurt growth.

The first was to sign a five year exclusive contract with AT&T (T). It might have been the best option available to Apple at the time, but it is turning out to be a big bottle neck to growth in the U.S. and globally. 2 million of the 4 million iPhones sold through AT&T did not register on their network, but turned up in other countries, indicating a lot of pent up demand.
Second, the iPhone is cannibalizing sales of the iPod touch. A 16GB iPhone costs the same as a 32GB iPod Touch ($499). The iPhone has half the space but comes with a camera, a phone and the convenience of not having to carry two devices. The $200 price drop on the iPhone, although necessary, was probably a bit hasty and was not without consequence. Previously, Apple played a wonderful balancing act and it was not uncommon for an individual to own the iPod Shuffle, the iPod Nano and the iPod Video at the same time, but things got a bit mixed up as of late.
Just when customers had gotten used to 60GB of space and lots of video storage, Apple introduced the iPod touch, built for an even better video viewing experience but a mere 16GB of storage (recently upgraded to 32GB)-- the same as the Nano. The fog should clear up in another 2-3 quarters as Apple clears its pipeline and maximizes utility from older models.
Disclosure: Author holds a long position in AAPL
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2) Apple seem to have struck excellent terms with AT&T and the iPhone has proven to be one of the most successful consumer electronic launches in history.
3) I wouldn't call the launch of the touch a mistake. Its a shame it couldn't be launched with more memory at the outset, but the same could be said of the iPhone. However, sales of both items are en fuego, so I wouldn't call this a "mistake."
So in conclusion, I don't see either of the "mistakes" Appl made with the iPhone. Rather, I see the most sucesssful launch of any mobile phone ever (remembering it was initially only available in the US at launch), and the continuation of innovation in the iPod line sufficient to continue to drive demand and growth there whilst the iPhone product line is expanded.
At some point, people will stop worrying about falling iPod sales growth and rising iPhone sales growth, and realise that all that matters is that collectively, sales growth of the two lines combined (and they really are just one product line seperated merely by the presence or lack of cell phone cpability) is strong, rising, and likely to increase, given Apple's entry into the 1.2B/yr+ mobile phone market - a market some 10x larger than the current iPod market.
Its a matter of perspective. I don't see any mistakes, just flawless execution.
iPhone had excess inventory upon launch. The price had to be dropped. It was a compromise that hurt the bottom line. If that is not an indication of the company's lapse in demand expectations I don't know what is. The share's drop in price from $200+ to current levels and their last earnings call all point to execution glitches. The slump in demand for the iPod is also another indicator for the paradigm shift from PMPs to integrated phones--a shift that Apple itself has iterate.
I have accumulated a lot of AAPL stock at the 119-130 price levels and am extremely bullish on the company but these facts remain.
No, AAPL's approach is to squeeze extortion money from the wireless providers to lock in their market like they do with all their products(ie iTunes being the only ipod provider instead of the free market). They naturally are receiving kickback so it's going to take time, not everyone rolls over at once.
at&t did not have to take the deal ---there was no gun held to there head ---did not verizon walk away--just maybe at&t saw the iphone as a potential leader in smart phones --and what did they have to loose ---they still other phones to offer--so you have apple making money from all angles --not bad steve jobs
"Think about it. In your pocket, you have something that's broadband and connected all the time. It's personal. It knows who you are and where you are. That's a big deal. A really big deal. It's bigger than the personal computer." - John Doerr, Venture Capitalist (see Google's IPO for his history)
How does this 5 year AT&T contract affect these overseas customers?
"Apple played a wonderful balancing act and it was not uncommon for an individual to own the iPod Shuffle, the iPod Nano and the iPod Video at the same time, but things got a bit mixed up as of late."
In cases where this might be true, I am willing to bet they were not all purchased together, but rather span many generation of these devices over several years. Therefore, rest assured, you will continue to notice such trends.
"Second, the iPhone is cannibalizing sales of the iPod touch."
First came the iPhone, then the iPod Touch. So if there is any cannibalization going on it should be in the other direction. But there really isn't. You can't make cell phone calls with the iPod Touch!
"The $200 price drop on the iPhone, although necessary, was probably a bit hasty and was not without consequence."
If it was, as you claim, necessary then the mistake would have been not doing it.
"Just when customers had gotten used to 60GB of space and lots of video storage, Apple introduced the iPod touch, built for an even better video viewing experience but a mere 16GB of storage (recently upgraded to 32GB)-- the same as the Nano."
Refer to your previous sentence. It contradicts this one!
" The fog should clear up in another 2-3 quarters as Apple clears its pipeline and maximizes utility from older models."
I am afraid, the fog will never clear up over this last sentence of yours. I have no idea what you mean by maximizing the utility from older models. As for Apple, in the next 2-3 quarters and beyond, it will introduce new products which will keep your mind in a perpetual fog.
You gave it away when you wrote this: "iPhone had excess inventory upon launch. The price had to be dropped."
I can only conclude that you were not around when the iPhone was launched. There was not enough inventory for weeks. There were even web pages (including later on the Apple site) that showed availability at Apple Stores for people to check.
You must have missed the intro at Macworld when Jobs introduced the AT&T CEO to say a few words. Clearly, the exclusive deal came about because AT&T did not act as others (orifices). AT&T accepted the offer and worked with Apple to support the iPhone before it was even developed - sight unseen!
This sentence,
"The share's drop in price from $200+ to current levels and their last earnings call all point to execution glitches."
is beyond description. It really shows the extent of your knowledge about Apple and the Market. And yes, I am saying this with utmost sarcasm. You are indeed a lucky man, or woman, if you have bought a lot of shares between $119 and $130.
The slow roll-out is a launch strategy which has proven successful with many gadgets in creating marketing hype. If Apple was facing excessive demand it would not have cut prices.
The products have planned obsolescence and deprecating them ahead of time or delays in newer versions would lead to sub-optimal utility.
en.wikipedia.org/wiki/...
If Apple was about to release the iPod Touch that did everything the iPhone did but make phone calls and take snaps, if these new iPod Touches had twice the storage memory and cost $200 less, who would buy an iPhone?
Apple lowered the iPhone prices to make room for the iPod Touch and to prevent the iPod touch from cannibalizing the iPhone sales.
Is there planned obsolescence in an iPhone or an iPod Touch when iPhone 2.0 and iPod Touch 2.0 are both just a software update away?
Wake up, the new Apple Inc. does not fit the mold.
Strange how you screwed up the iPhone - iPod Touch relationship and yet you were still were astute enough to pick up Apple stock at bargain prices.
seeksomething.com Iphones for a buck