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The iPhone Effect: What Will Happen to Apple's Other Products?

It is a mistake to say which is greater memory capacity or features? You are really comparing apples (forgive the pun) and oranges. For some people storage capacity is far more important, because their primary interest is videos, games and music storage. On the other hand, features will be the necessary requirement for other people. The iPhone is a remarkable device and I look forward to having one, but if I didn't carry my MacBook for additional storage for music etc., the iPhone just does not have the memory. At the end of the day -- Steve Jobs knows his very diversified markets, as he has demonstrated over years of successful marketing of innovative products.

The iPhone Effect: What Will Happen to Apple's Other Products?

There is a piece of the Apple story you miss. While iPhones have a variety of media and communications capabilities, their memory capacity for music and movies is quite limited in relation to video iPods for example. The $500 iPhone has 4gb of memory and the $600 version has 8gb -- compare this with the 40gb and 80gb in the video iPods -- available at a lower price. While there will certainly be an overlap many video iPod owners will not be in a hurry to give up a minimum of 36gb of memory to as much as 76gb. There is simply not enough storage capacity for a number of films, games and your music library.

While the devices are similar, they are -- at the same time -- very different.

I don't believe you have included these elements into your analysis.