Will Apple's Second Generation iPhone Buck the Trend?

Rumors around the much-anticipated second-generation iPhone release have been swirling for months. On Monday Apple (AAPL) finally gave the public what they’ve been asking for: a faster iPhone with more business-user functionality & some way-cool apps, all at half the price ($199, w/2-year contract). Analysts are already claiming victory for Apple, predicting they will beat their goal of 10million devices sold by the end of the year. But is there any precedent for “device 2.0” success in the mobile phone world? The answer is yes, but the outlook isn’t very bright.

Below are two graphs showing consumer interest in each phone, indexed to the week of its launch. Both the Motorola (MOT) RAZR and LG Chocolate were considered breakthrough devices at the time of their launches. The RAZR2 and Chocolate – Black Cherry didn’t fare nearly as well.

• By week 4, interest was about equal between these two devices. This is the peak of RAZR2 interest, while interest in the RAZR peaks later in week 9. This is likely due to inventory shortages as more and more people became aware of the RAZR (at the time it had a revolutionary form factor).

• The original Chocolate had a truly blockbuster device launch, capturing 30% interest at its peak. Conversely, the Chocolate – Black Cherry only captured about 5% interest at its peak.

To be fair, the 2nd generation models of these products both came out into more crowded market places because there have been more devices available over the past few years. Also, both the RAZR2 and the Chocolate – Black Cherry launched as part of a set of 4-6 colors, so there was more competition within the series for consumers’ eyeballs.

Still, the original iPhone launch captured 50% interest at AT&T, and Apple has yet to play by the traditional rules of the handset market. That’s likely a good thing for them. Second generation devices historically have more closely resembled Caddyshack II rather than Godfather II. But this time around, Apple may have just given consumers an offer they can’t refuse…

Comments

[20smoney:]

My take on the new iPhone business plan...

20smoney.com/2008/06/1.../

2008 Jun 12 03:28 PM

[User 209326:]

"Also, both the RAZR2 and the Chocolate – Black Cherry launched as part of a set of 4-6 colors, so there was more competition within the series for consumers’ eyeballs." - Do you mean that your analysis only counts 1 of the available colors for each model? If that's the case, then your data is crap.

2008 Jun 12 03:44 PM

[DutchMark:]

Have you looked at the iPod 1.0 and iPod 2.0? (And 3.0, 4.0 etc...) Might also be an interesting comparison.

2008 Jun 12 03:59 PM

[TanToday:]

It ain't "no telephone" .... D'oh.

It is a HANDHELD computer, browser, game machine, GPS unit, MP3 player, Movie Player, PDA...

Comparing this to a TELEPHONE is like saying the early desktop computers were GREAT adding machines, since VISICALC was the first viable application.

Come on guys, STOP thinking like you dads dad, and OPEN UP here, God gave you BRAINS for using, not for comparing RED THIS TO BROWN THAT's.

2008 Jun 12 04:25 PM

[geo2:]

The key difference between the RAZR and the iPhone is the USER EXPERIENCE. The RAZR became a fashion accessory, but using it for anything other than phone calls was a truly horrible experience. The RAZR User Interface was simply the best example of how not to design a phone - users bought RAZRs in millions but came to hate using them. In contrast the Apple iPhone is getting very substantial improvements, and already has user satisfaction off the wall. I think the analysts have this one right - the iPhone v2 is going to become a mass market device, because the (patented) User Experience is just so much better than any other phone on the market, and it just keeps getting better. The 3G iPhone will continue to be the best in class portable music device/phone combo, the become a ground-breaking gaming device (the apps store is going to deliver some amazing games), and I believe will start making significant inroads into the enterprise given the updated feature set and unprecedented developer support. Watch out Blackberry and Nokia. I'd compare the 3G iPhone with what happened to the 2nd generation iPod - the graphs looked very different!

2008 Jun 12 04:29 PM

[grig:]

The RAZR's form factor is what sold the phone. Quite revolutionary. Hoswever, once you used one for a while, the joy quickly wore off. Especially if you had to suffer through Verizon's interface. No comparison to an iPhone so don't try.

2008 Jun 12 05:08 PM

[Oh Blah Dee...:]

RE: "But is there any precedent for “device 2.0” success in the mobile phone world? "

The 3G iPhone is a PLATFORM, the RAZR and BlackBerry are DEVICES.

Apple did not even have to change the APPEARANCE of the 2nd version, because it's a PLATFORM, not a device.

Everything an iPhone user does is primarily based upon the SOFTWARE.

2008 Jun 12 07:55 PM

[icanpress:]

Let's not forget that both of these (LG & MOT) products are one-dimensional.....th... are hundreds of "me-toos" like them from every major manufacturer in the mobile world.
What Apple has done differently, as with everything else, is look at fresh ways to innovate that capture the world's attention. Let's remember it was not that long ago that one Mr. M Dell said that Apple should sell up and go home (paraphrase). Apple's market CAP is now 3 times that of Dell, which languishes in the "we only do PC's" hell that they have created. Talk about stuck in a paradigm!
And as for Steve's health, the Apple machine is WAY bigger than just one guy - there is no doubt that there is a succession plan in place, which a publicly traded company of it's size would have to have as a matter of governance and compliance. Give that one a rest, focus on the fundamentals, and watch Apple charge through $250 by end of year.

2008 Jun 13 03:04 AM

[devinlad:]

okay first of all i am a razor owner and like my current phone.

second, i live in canada so iphone isn't technically on the market yet though some of us have gone south and got one unable to wait for the cool gadget.

now there are several reasons that this comparison between iphone and razor phones is like "comparing red this and brown that".

to start no one ever crossed a bloody border to buy a razor

second iphone is not a phone! it has a phone but its a computer with it's own proprietary OS and a unique UI. (OS = operating system, UI = user interface)

thirdly iphone 3G (version 2.0) isn't just launching to the US and AT&T this time. They're moving on up to 70 countries. That means how many millions of people who haven't been able to buy an iphone will now be able to get one. (bigger market = bigger sales)

fourth, did the razor2 come onto the market at half the price of the first one? i don't think so! HALF THE PRICE!!!! some of us will pass on our old iphone to get the new one they're making so damn affordable.

5, is the razr2 2.5 faster that the old one. um... NO. i'm pretty sure they both run on the baby cell phone internet which good for no more thamn over paying for ring tunes.

SIX iphone also has the app store, itunes music store, and mobile me (replacing dot mac (more features same price, love apple for that)) subscribers. NOT JUST SELLING A PHONE ANYMORE ARE WE.

seventh, GPS with google maps, yet another wonderful business deal between two wonderful companies.

8, iphone will be comepteting with blackberry, palm, nokia, and motorola smart phones as well as the rest of the "just plain phones" market. Razor (and LG) have only be competing with other "non-smart" phones.

iphone 2.0 will be the biggest successs in cellular technologies ever! it will be bigger than the first and there's no stopping it.

you want my proof just look at apple computer sales in 2006. they sold more units that any other year and over 50% of those sales were to first time mac owners. as apple updates their technologies they sell more and more. iPod would be another great example.

2008 Jun 13 03:49 AM