Here's What Will Happen To Apple's Rivals

Business Week investigates what the iPhone’s impact is going to be on rival high-end phone makers like RIM, Palm, Nokia, etc. I’ll save you the read - the answer is summed up in the image to the right.

It’s true, Apple only sold 6 million iPhones in its first year, out of a billion or so handsets sold worldwide. But remember that they are currently available in only a couple of countries. And in the U.S., they’ve grabbed a 25+% share of the smart phone market. And that was with a slow, no-GPS, expensive device (here’s our side-by-side comparison of the iPhone v. the RIM Blackberry 8820 from a year ago).

Imagine the havoc they will wreak with the twice-as-fast, half-as-expensive, GPS-enabled, Exchange-supported 3G iPhone that they’ll unleash on 22 countries this year.

In short, it must be really unpleasant to be in this business and not be Apple right now.

Original post

Comments

[ktwalrus:]

New iPhone is not "half-as-expensive" in the US, since AT&T simply increased the monthly subscription (which is required) by $10, more than offsetting the up front outlay.

Also, "twice-as-fast" is Apple marketing hype that only applies to use of the iPhone for browsing/downloading in areas that have 3G service available. In the US, much of the country will only have EDGE for a long time. The processor in the new iPhone is exactly the same as the original so for many, the iPhone will not see any speed improvements.

2008 Jun 16 08:43 AM

[Marek:]

and if jobs departs the scene?

2008 Jun 16 08:53 AM

[Toni:]

"and if jobs departs the scene?"

Idiots asking that to himself will sell the stock, to regret that the following quarters.

2008 Jun 16 09:07 AM

[Medici:]

Palm will clean up the "low end" of smart phones. Rimm the "Business Market" (After all business men including myself need buttons) and Apple the "Me too" market

2008 Jun 16 09:12 AM

[VERONICA:]

Michael,
It's nice to see a writer who "gets it." Thanks for weighing in. I've seen SO many articles that say something to the effect of, "Yes the iPhone is neat, BUT blah, blah, blah..." and most analysts certainly don't seem to get it.

The iPhone, like the iPod before it, is both a technological AND social marvel that PEOPLE are waiting in line to get their hands on. It's this double whammy and subsequent desire that should be making the investment community pay attention.

Thanks for listening.

Veronica

2008 Jun 16 09:17 AM

[Tom B:]

"and if jobs departs the scene?"

Jobs is the most amazing business innovator than Edison. Blows Gates out of the water. I hope he lives a LONG time and stays with Apple.

BUT-- if that is not to be-- friendly merger with Google? Schmidt's no dummy.

2008 Jun 16 09:31 AM

[Tom B:]

"Jobs is the most amazing business innovator than Edison."

SINCE Edison --typo

2008 Jun 16 09:34 AM

[Julian Ivan...:]

Actually its being unleashed in over 75 countries this year.. 22 is just the first release on July 11th, with the remainder to follow later on.

2008 Jun 16 09:38 AM

[Firestar:]

It captured 25% of the market because 3G is in its infancy in the US. Those using smartphones on a 3G HSDPA Network for some time know the single most important feature of a smartphone is how quickly and conveniently you are able to type. At present, if Nokia need to worry about someone it isn't Apple, it is HTC.

2008 Jun 16 10:11 AM

[.crazylegs..:]

This is a stunningly stupid take. Study the market for these devices and what you see is massive growth in the number of "smart" phones that will be sold in the next few years. What it means is that, in fact, many of the smartphone makers will do well. The pie is large enough, and growing quickly, for Apple and others to prosper. The degree of prosperity will be up for discussion, but to show a picture like that in the context of such a growth market means you aren't paying attention to the macro picture and perhaps you are immersed in the Steve Jobs reality distortion field.

Also, please consider the $199 price tag is a headline maker. Look deeper and determine how many end users are post paid, contract restricted. This number is actually far fewer than one would believe given that most subscribers outside of the US are pay as you go. What will be the price of the device for them (and those inside the US who aren't eligible for upgrade)? I don't know but my bet is at $500-600, and I could be low.

How many countries is iPhone in on the 3G launch? Around 80. How many countries does RIM sell into? Over 125. How many networks does iPhone sell on? I haven't calculated but it's somewhere north of that 80 number, maybe 90. How many networks does RIM sell into? Try almost 400.

This article is really flimsy stuff. Dig deeper, look at some macro numbers, and then report your findings. And what's funny is that I think the iPhone will just kill it in the coming years...but don't be fooled into believing the hype.

2008 Jun 16 10:57 AM

[Texrat:]

Oh please, Arrington. As if competitors plan to roll over and just let Apple destroy them.

Sometimes I am amazed at the slathering naivete that appears in stock analysis articles. But commenter J Lazerow above got it right. Read and learn.

2008 Jun 16 11:28 AM

[Tom B:]

"As if competitors plan to roll over and just let Apple destroy them. "

Like, they have a choice? Theyv'e been sitting on their tushes for, like, 15 years. The future of phones = not just a LITTLE smart, but VERY smart. Apple has done it, the others have tried and failed repeatedly.

2008 Jun 16 11:48 AM

[Dan W:]

Steve is smart but if he was really smart he would come out with a version of the iPhone with a keyboard. He won't because he feels it would undermine his message that you don't need it, but many customers like a physical keyboard. If they introduced a model with a slide out detachable keyboard then RIM and Nokia would have somthing to worry about. As it is they will probably get 25% of the market which is still good and why I will still hold on to thier stock.

2008 Jun 16 12:19 PM

[TA:]

Ok, ok - I saw the title know full well what kind of article this would be and how many stupid AAPL fanatic comments this would follow.

I blame myself, not the author for the 2 mins of my life I just wasted and will never get back...

2008 Jun 16 01:23 PM

[samij:]

> in the U.S., they’ve grabbed a 25+% share of the smart phone market

nice round number :) what about you make an alternative estimations based on the market share iphone achieved in france, germany and the uk. that way you might get an blog post resemling something other than fanboy rambling.

2008 Jun 16 02:23 PM

[Firestar:]

"not just a LITTLE smart, but VERY smart. Apple has done it, the others have tried and failed repeatedly."

Yeah right. Phones that are lighter, faster and smarter than the iphone are already available in mature markets.


HTC will see a projected revenue of $5 billion. If you've been anywhere near Asia you'll have heard of them. Please take a look at HTC.com and tell me why would anybody living in Japan, Singapore, China... or the UK for that matter (Orange, O2, T-Mobile and Vodafone sell HTC) switch to the iphone?

2008 Jun 16 02:34 PM

[.crazylegs..:]

Firestar - Reason Number 1 - Windows Mobile. Ask Motorola if form factors are enough to have a durable competitive advantage in regards to the razr.

2008 Jun 16 03:39 PM

[Texrat:]

"Like, they have a choice? Theyv'e been sitting on their tushes for, like, 15 years. The future of phones = not just a LITTLE smart, but VERY smart. Apple has done it, the others have tried and failed repeatedly."

Of course they have a choice, especially Nokia with its 40% global market share. Apple isn't infallible (google 'apple failures') so this hyperbolic talk implying Jobs walks on water and the iPhone will be completely destroying all comers is sheer nonsense (if the latter were true, Apple would have made enough iPhones for every current cell phone user). Yes, the product is successful and will be going forward (assuming Apple doesn't turn it into a RAZR) but claiming it's enough to obliterate established giants is beyond naive.

Nokia certainly has the breadth and depth to survive the iPhone, and then some. Take your rose-colored shades off and watch.

2008 Jun 16 04:23 PM

[LifeSentence:]

Why does everyone treat the smartphone market like it's a zero-sum game? Smartphones are one of the fastest growing niche markets in technology with at least half a dozen companies competing for market share. Both RIM and Apple have very compelling products that will continue to be some of the hottest selling technological in this space.

Both Apple and RIM have a huge space to grow into. Just because one company has spectacular sales, it doesn't necessarily come at the expense of the other. And to be perfectly honest, RIM and Apple really only compete with eachother except in that fringe where the two niches collide. RIM dominates the business segment and Apple dominates that non-professional one. To think that either of these segments will collapse under the pressure of one company or another is foolishness.

2008 Jun 16 04:34 PM

[tom1234:]

years ago walt desney was the steve jobs of the entertainment world ---maybe bigger than jobs--when WD passed the stock went higher---the street felt it was more safe an investment because WD was such a pioneer and risk taker ---now stability can be acheived was the thinking

2008 Jun 17 08:10 AM

[mollytjm:]

apple is no longer a one product company...computers, like it was when Jobs exited years ago. he's an older, skinny guy and he could easily just be recovering from an ecoli type bug (he eats a lot of raw veggies)... but apple is no long a one man show either. he's not the only smart guy there.

2008 Jun 17 08:45 AM

[monrio:]

PlanetStarbucks, Texrat, Firestar, Lazerow...these comments show some understanding of the cellphone market.

Tying iPod success to iPhone success is superficial.

2008 Jun 17 08:54 AM

[Jon T:]

The results in 6 months time will say all that needs to be said.

The iPhone is going to clean up and in 5 years time we'll still be looking for that illusive iPhone killer.

Just as no MP3 maker has produced an iPod killer.

2008 Jun 17 09:15 AM

[brewer:]

iPhone has quite simply completely leapfrogged the smart phone market. You can't point to iPhone's first year cell phone share in Botswana (or France) an declare iPhone a failure, that's a bit premature, don't you think?

Folks, there is no such thing as a real keyboard on any of these devices. The iPhone screen keyboard is immensely more adaptive. What RIMM and others call a 'real' QUERTY keyboard is a joke. Of course, if you hunt and peck, it might make no difference, but if that is the case, then you can use an on screen keyboard just as well because you know you are slower than a snail at typing anyway. I'm quite slow when having to type this way myself, but I find that the iPhone is very smart at how it presents the correct keys in context. You can't exactly pull up a new keyboard of symbols on your 'real' keyboard, can you?

The internet isn't a 'real' experience. When we say we 'go' to a web site, that implies something virtual. Would you think the internet is a significant technological development? How smart is that 'real' keyboard when you are shoving it into your pocket?

2008 Jun 17 11:43 AM

[PK de C'ville:]

SmartPhone market? I guess the people whistling past the grave yard think the iPhone is a SmartPhone.

Can you spell p o c k e t c o m p u t e r?

How about T o a s t?

Sorry. Like Mike says, the game's over.

2008 Jun 17 05:36 PM

[Brian Bober:]

This article points out the compatibility with ActiveSync (e.g. Microsoft Exchange) which is being under-emphasized by most commentators. That is a huge deal as IT departments are continually looking to trim the number of suppliers they must maintain relationships with. I think the 3G / ActiveSync iPhone will choke off RIMM's growth and elevated margins.

Steve Jobs noted the number of Fortune 500 companies participating in the iPhone version 2. This is directly related to a desire to eliminate the RIMM servers they currently maintain to support Blackberry's proprietary e-mail software. I'm actively looking for a good entry point for a APPL / RIMM pair trade.

2008 Jun 17 09:26 PM

[.crazylegs..:]

It always amazes me that people actually believe that activesync is a true replacement for the BES/Blackberry solution. It's not. It doesn't come close. Does anyone do homework these days?
- It uses a tremendous amount if precious device resources like battery power.
- It is not totally secure.
- The device pings the mail server. What large security minded corporation wants to open their firewalls to incoming pings?

This is just the tip of the iceberg. Don't believe the hype. The iPhone will kill it, no doubt, but so will RIM, and even some others, as the market for smartphones explodes. Good luck on your paired trade...

2008 Jun 18 02:06 PM

[Texrat:]

"PlanetStarbucks, Texrat, Firestar, Lazerow...these comments show some understanding of the cellphone market"

Thanks for the acknowledgment, monrio.

It helps that I'm heavily involved in the industry. ; )

2008 Jun 18 05:34 PM