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April 09, 2010

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Comments

James Pearce

An intriguing point of view and the logic is reasonable.

But how useful logic is when making such forecasts is another matter. As it happens, I don't agree with you - at best you're premature. Apple doesn't seem ready to stumble just yet.

(And I you know don't buy into your geographic subtext ;-) )

The important thing with the iPhone is that there is a point at which the art and beauty of a disruptive product can become more persuasive than the technical landscape of the incumbents.

Hundreds of millions of Indians with feature-rich Nokia handsets? Yes I know. But they all aspire to own an iPhone.

How? Why? I don't know. But it's important magic which Apple somehow conjured up and which won't show up on an analyst's spreadsheet when predicting their demise.


(As an aside, I think you would help the argument by getting to it quicker... the first 5,000 seems to be justifying your right to make a few controversial statements in the second ;-) )

Klas

interesting article. keep up the good work!

Peter Cranstone

Totally agree with everything (rare for me). The killer is one phone. You need more to grow your market. The iPad already has it's problems and will hit a wall faster than the iPhone. Three other things - User Interface is critical. Apple dialed it, everyone will copy and improve it. (History repeats itself). Secondly marketing - it counts. But only where there is margin. Apple has a great margin, shift to Africa and the margin changes. Finally Mobile apps - it's dead man walking. 5 years from now it will be all web apps.

Richard Spence

Hi Tomi

One problem I have with your analysis is the category of "smartphone". Lumping all these disparate devices into one huge category doesn't seem to make sense to me. For instance, the Nokia E72, the iPhone and the Blackberry Bold are very different devices.

The E72 as most Nokia devices are at the moment is a what I would call a first generation smartphone. Good for calls, text, reading PDFs and perhaps connecting to your pop email and view the odd MS document. Useless for surfing the web tho and not very extensible (apart from maps) as the ovi store is so poor.

The Blackberry Bold is the uber messaging phone - sms/email and blackberry messenger all in one device - not to mention the super corporate integration. Combine this with the brilliant ergonomics of the blackberry keyboard and you can tell why the text savy kids are keen. It is useless for browsing the internet tho and the Blackberry app store is very thin.

The iPhone for me is the first 2nd generation smartphone. The first handheld computer if you like. It has a upgradable OS, a pinch to zoom javascript enabled browser and an amazing app store. These features make it a first class citizen of the web and the big difference to the E72 and BB is that iPhone users - non geek ones - use the internet. Go to any successful mobile internet business (e.g pizza delivery) in the US/Europe and 90% of their users will be iPhone. I would add the newer Android devices to the 2nd Generation smartphone pot too - do Nokia make a similar device?

So your analysis feels a little like the big computer manufactures scoffing at the nascent pc business in the mid eighties. Long term, it is not going to be about hardware it is all going to be about software and services for the internet and Apple have such a lead it is silly. I am very active in the mobile community in the UK and I meant hardly anyone who is focusing on non iPhone (non 2nd gen smartphone) - really. I assume the US is worse.

So I think the interesting stat would not be "All Smartphones" but the the market split of the 2nd generation smartphones at the moment - I imagine Apple is miles ahead.

For the record I go back 8 years plus in mobile dev - from Win Mob thu j2me, Blackberry and android/Iphone.

I do not own an iPhone!!

Thanks for the big blogs


Cheers


Richard Spence

kgutteridge

Interesting article, one other area that the seems to be in the mindset of people is a webkit browser, something else thats not actually a new feature from Apple, but something Nokia did years before.

However even as a techy I think the important point to note is not comparing features side by side as though they are tick boxes for scoring points, One area where Apple truly did innovate was in the use of multi touch gestures which allowed normal people and those too impatient/un-inclined to read the manual, the simple fact that OSX and therefore Apples UI engineers do not rely on context menus allowed their phones software to be far more intuitive for a large number of users than anything else at the time.

However has Apple peaked in terms of global sales, with your caveats, maybe. However, for markets where there is a large subsidy on the phones such as the US/UK, the need to launch more than one phone every year is perhaps in fact mute as for subsidised high end smart phones that are purchased on 12-24 month contracts, the simple fact that iPhone OS has allowed the user to seemingly receive an "upgrade" every 12 months(through clever marketing more end users are aware there is a software update, thats not mainly to fix bugs like the N97) surely has increased the users perceived value of the phone and therefore inclinanation to purchase the next release and hand up/down their existing handset. Pity the poor people with carrier customised software on their phones or even when compared to the European HTC Hero based on the open Android platform which is currently still waiting for an upgrade to its software, to the point where a generation is being skipped.

What other caveats would I add that would allow Apple to grow their market share? Add a hardware keyboard and/or take the bold move of not retiring the current 3g model with the next update and dropping its price to commodity levels and lets not forget having an iPhone means people must have installed iTunes to activate it, which invariably leads to other Apple product sales.

Happy to see stats to trash the above argument, this is mainly feel and conjecture, as I someone else who will be easily convinced by the numbers!

Tomi T Ahonen

Hi guys

Thanks for the comment! That was fast (and its a horribly long article..) I am still stuck editing in the links and correcting typos, grammar etc, so don't worry, I will come back and comment to all of you. But thanks guys, very good comments and just give me a bit of time to finish the links etc, then will be back to answer to all of you.

Tomi Ahonen :-)

Dardano

Tomi,
although i've never owned an iphone i do wonder based on your article how you presume there won't be more iphone models? their desktops have different versions, their laptops got different versions, the ipod got different versions, even the ipad is supposedly going to get different screen sizes and naturally the iphone is gonna get the nano, the slider, the qwerty, just watch. as i recall, apple is new to the game, hence the iphone 2g and it's mediocre features, they can't possibly do all of this at once, it needs time for them to launch so many products and do not forget they don't just release a product they release a perfect product and that takes time to learn, design and build.

i'm certain we'll see more launches from apple in the mobile space sooner rather than later.

Michael K. Dawson

It is not really fair for me to comment since I didn't read the entire blog (too long), but I got the gist. You want Apple to behave in the post-iPhone world like the other guys did before iPhone. More models and form factors than any one really cares about. Android is already confusing everyone with different versions of OS and capabilities. http://bit.ly/3svVfv

Your iPhone market share has peaked statement is way off base. They still haven't rolled out on largest carrier in the US (Verizon) and still have more countries to enter. Most importantly to Apple it is about profit share not market share. Apple will leave the low margin business to the others.

You may get a kick out of a blog I recently wrote "For Investors the SmartPhone War is Over." http://bit.ly/aISxIH

Tomi T Ahonen

Hi James, Klas, Peter, Richard, kqutteridge and Dardano

Thanko you all for the comments. I will respond to each individually as we do here on this blog

James - nice to see you back. I appreciate your view and am pleased you see my logic, while disagreeing with the outcome. Thats fair. And since I take such a short-term view to the forecast, we'll get the 'answer' soon enough haha.. We will know for sure as early as January 2011, or latest January 2012..

We do agree on the appeal of Apple and the iPhone. It is in that way very much like say a Ferrari or Aston Martin in the context of cars, ultra-desirable luxury and style. Yes, no doubt people all over the planet do aspire to owning an iPhone but most settle for a far cheaper LG haha..

As to 'getting to the argument sooner' yeah.. I hear you. I also have countless scars from all the attacks by the Apple fanatics here on this blog from the past. So much of that beginning part was to try to show that I have been honest and fair - and proven correct - in the past about Apple and mobile. For what its worth haha. But yeah, this was a long blog even by my verbose standards. It took me two days to edit it (you can imagine what monster it was in first draft haha, I went back in history to before the Stone Age haha)

Peter - welcome back to you too. Hey, thats a welcome change (agree with all)? Haha, no seriously, we do agree and good points. Yes, UI is Apple core competence. And they are masterful at their marketing. I have heard privately from several execs at Apple rivals, where they just had stopped in awe, looking at how Apple turned something 'ordinary' that this given rival or another had had for years, and made a big marketing bru-ha-ha about it to cheering journalists and analysts. Apple are the master not only now in mobile but very much in the IT industry as well. Margin is their 'reserve' asset in the war. They can drop the price of the current iPhone 3GS very dramatically and still make a profit. That gives them room on the 'upside' of new phone models to again take the battle to the 'high ground' price point. But as you also said, its now time to expand the range.

Richard - thanks (welcome back too, it seems like a meeting of all our regular readers haha). First, yes, the 'smartphone' category is getting ever more vague, imprecise and confused. But still, its at least a reasonably fair distinction from 'dumbphones' haha. But yes, I agree. However, as an analyst I need facts and numbers (or thats how my brain is wired anyway haha) so I need something that can be measured. And still today, it is the only way the industry analysts count the phones. Dumbphones and Smartphones. Until we get better splits - definitely along the lines you mention - I can't really give total counts. Then its more the gut-feeling and individual brand or model line analysis, not perfect by any means.

As to 'second generation' smartphone - I like that. It fits with the Newton'ian (Apple Newton PDA) genes that the iPhone has, I often say the Newton is the grandfather to the iPhone and most PDA analysts say the Newton marks the transition point in PDAs. So yes, along the lines of 'Before iPhone / After iPhone' I definitely agree the iPhone also marked the delineation point in 'old' smartphone thinking and new. And clearly the Google Nexus One or Palm Pre or Motorola Droid or Nokia N900 etc are children of the second age of smartphones. And thus the iPhone is also genesis to this new era.

But I do disagree with one point you make, Richard. You said 90% of mobile internet users will access their internet service on an iPhone. I know very well what facts are guiding you to that conclusion (Admob etc stats) but there is one fatal flaw. It is the 'traffic' not the 'users' which reflect 90% (or more accurately something like 70% in the US and Europe, but its the same idea).

The iPhone is so comfortable and easy to use, and it is almost always sold on an all-you-can-eat data plan, and all iPhones have WiFi, and nearly half of all iPhones are in the USA where free WiFi is reasonably wide-spread - so the traffic generated by mobile phone users will be extremely heavily skewed to iPhone users. But that is not a large user base. 5% of Americans have an iPhone and they generate 70% of all of the mobile web traffic. But that is still only 5% of the USERS. And if we want reach, what of that other 30% of mobile internet traffic? While each user generates less traffic on non-iPhones, the user base is far greater. Even in the USA, about a quarter of all mobile phone users access the mobile internet (this is far bigger number than total smartphones in the USA, obviously as about half of US phones have an HTML web browser). So in terms of users, about 4 times more users - 20% of Americans (60 million people) will access a mobile internet site on a phone other than an iPhone. About half of those are 'dumbphones' ie featurephones or sometimes even basic phones with only a WAP broser. Look at services like the Weather Channel or Flirtomatic or Google search - all run just fine on a WAP browser that exists on almost every phone in use in the USA. So to your point, I think you're mistaking 'usage' with 'users'. Yes, the iPhone generates enormously more usage. But its 15 million iPhone/iPod Touch users in the US vs 60 million non-iPhone users. You can reach a far wider mobile internet user base if you code your page to HTML and make it designed for the small screen haha...

kqutteridge - thanks, good point about webkit. I do agree with your points about multitouch and that the iPhone is so intuitive, you don't need a manual to use it (I often retell the story of me, ex Nokia dude, trying to help my uncle with his new Nokia, and even with the manual, me after a dozen Nokia models, it took me over half an hour to get the clock on his idle screen to change from small font numbers to large font. A half an hour with the manual. Because of course some engineer had figured that clock appearance does not fit in the manual under 'clock' but I had to read all of it to find it under settings for idle screen...) As I wrote in the blog, the iPhone is so easy to use, grandparents are able to use it - and to use it for more than just making calls or sending texts haha.

You make great points about the operator subsidy and replacement cycle. I had the replacement cycle in the early draft, cut it out as too many details haha.. Should have guessed that I will face it here here immediately in the very first comments. Good one! And yes, Apple has always the option to cut price. That will impact the bottom line and I have been saying this year 2010 is the 'bloodbath' year in smartphones - many a smartphone maker will go into the red fighting those wars. Apple has the deepest pockets when it comes to actual margin (Nokia the other with sheer size; Samsung was making noises their profit is tight in this war)

Dardano - I am not presuming that there won't be more iPhone models, in fact the opposite. I am cetain there will be an expansion of the product line. But that expansion is overdue. And Apple (and any rumors about it) shows now signs of a split in product line this year. To get buzz and to build desire, Apple would be very clever not to 'surprise' us with two models or more, but rather to let fans know the given type of expansion in models is coming - for example, if Apple were to launch an iPhone 3Q - for QWERTY - in a kind of Blackberry-clone kind of angle, for the sake of argument - then if Apple announced its Q model now, that would hurt all QWERTY phone makers and delay purchases by random customers of those phones and build up a pent-up demand for Apple's new product. I am pretty sure we'll hear about the split in product line before they actually launch the new phone model.

But the right time is not June. June is the standard update time for the iPhone. If they now released their second model at the same time also in June, that would just further 'imbalance' their already lopsided sales cycle. That would hurt their suppliers and their resellers. Far better to create a 'Christmas model' iPhone to launch around late November to really capture big the Christmas season and be the big phone for the Jan-Jun half of the year, then bring in the next Summer iPhone in June to sell for the second half of the year. At least thats how I'd do it haha..

But you are very right, that Apple is still relatively new to the game and learning (and dramatically improving). We have not seen the end of it by no means. But their market ascendancy has ended. Now Apple needs a 'second act' and that is not the iPad, it is splitting the product line.

Thank you all for writing, please come back for more if you want to continue the dialogue but we seem to be in relatively good agreement with all, haha. Is this only the calm before the storm. When I wake up tomorrow, will this blogsite be filled with hateful comments, I wonder..

Tomi Ahonen :-)

Yuri

One insight I'd like to share. The Apple's expertise come from PC development but others like smartphone Nokia's expertise come from phones, so is not just phone manufacturing instead Could be this iPhone scenario a different market?

singh

I began feeling iphone was stagnating in December, after deciding to jailbreak my phone just to gain an auto-rotation inhibitor setting. I found that a jailbroken phone had far cooler apps (in my opinion) and started to resent how Apple limits what we can install on our phone. My wife was jealous and made me jailbreak her phone too so I knew it wasnt just appealing to a tech-geek. Then we started hearing about Android having Flash and not needing to be jailbroken. It was then that I was convinced that Apple had lost its innovation lead. I hadnt considered like you point out that the infrequency of updated releases was also a factor. I assume sales in 2010 are riding on the momentum of 2007-2009. I suspect iphoneOS4 is intended to infuse the mood that Apple is still pushing the envelope but having installed the beta I would rather have stayed on 3.1.3 with jailbreak. Oh well at least Apple still deserves the title "king of the UI" and tons of respect for having brought the industry up in the early years.

Stuart Henshall

Tomi,

Excellent thoughtful analysis. Good comments here too. I smiled at the N95 references. It was my favorite phone and I felt like I cried at times after going to that original iPhone. I missed the camera... although the video I seldom used. I then missed the SIP stack... and used to switch back and forth on many travels. The n97. I tried to like it. I really tried. I found it unusable - relatively - too many buttons.

For me the most interesting element in your analysis is the need for a full keyboard. While I'd like to see the number or data on kids that can text on iPhones without looking (my daughter and her friends seem to) I still doubt it matches blackberry or E-series ease. I've concluded from your post and the comments that a Querty keyboard / iPhone is probably inevitable and the Christmas timetable makes some sense. Having a feel for Apple's cycles moving to six monthly will be quite a challenge. Fact that the next iPhone will almost certainly get bluetooth keyboard access (yes years and years late!!!) further supports the direction as an option although I doubt the decision to market iPhoneQ has been taken.

A iPhoneQ presents many pricing and branding issues. It will cost more (any reason it should cost less to make?) Has to be a slider unless the screen is reduced. Screen will not be reduced. That ads bulk. It impacts on all the cases and aftermarket stuff iPhones are wrapped in. It effects the retail story etc. I think Mr. Jobs will be beating on the engineers for another touch breakthrough. I'd also work on "voice" - dictation etc. The latest Dragon is not bad...

Your comments re profits are appropriate. The app store alone is a warchest that keeps getting bigger. Still Apple looks and manages by dollar share not by unit share. Like the other comments I'd be looking at units relative to the 2.0 smart phone generation.

So the gaping hole in Apple's mobile strategy is the Xmas period - at least that is my takeaway. We already know they are going to push the iPad like crazy this Xmas through their stores. (Gaming market?) In fact a useful strategy... would be to go back and plot for the last two years their week by week retail focus and activity. Since 2007 it is fairly consistent although more events are inserted all the time. To an extent - Apples strategy is driven by the stores and events. Back to School, Xmas, with new launches inserted etc. Other manufacturers are competing for retail space / listings etc... so their strategies are naturally different.

Richard Spence

Hi Tomi

Thanks for replying.

To be honest I was not focusing on usage and hadn't thought about admob. The example I gave was a Pizza delivery company in the UK - where we don't have so much free wifi. The interesting stat they gave was the people checking out and buying a pizza - they we almost all iPhone users.

So when I say users I mean people actually doing/buying stuff - I would love to see who buys the books on amazon via mobile, I bet it is massively skewed to iPhone.

You say

"You can reach a far wider mobile internet user base if you code your page to HTML and make it designed for the small screen haha.."

Oh if only it were this easy - many of us were trying this for years pre-iPhone. My key point is you can try and optimise for the small screen but in reality the 1st gen Smartphone users don't really use the internet because their browsers suck ( non pinch zoom, no javascript, no cookies).

Real intenet use - that is buying/doing emerges when you get a 2nd gen smartphone.

Cheers and keep up the blogs/tweets

Richard Spence

p.s we have met ages ago in one of Ajit's subterranean eCademy mobile group meets somewhere north of Oxford Street ;-)

Osman Ali

Questions:

1. Here in the US, the 3G sells for $99, do you see this as being part of a "line" of smart phones or is this simply clearing out inventory?

2. Looking at the keyboard vs. full-touch stance, seems like plenty of it has to do with the SDK and the sheer importance of the app store and the iPhone and now iPad as media delivery devices. That is to say, by having everything touch and having this a consistent paradigm for all apps (which are clearly an ever increasing revenue source), then you don't have instances where particular applications either have additional or lack particular features because of the presence of a physical keyboard. It's kind of like this: "There's no physical keyboard here and for all you know there never will be so build everything so that users can do everything completely with touch so that that's what the phone is known for." Now with the iPad the stance is the same: "This is a touch device. Build everything for touch like there is no physical keyboard." But since you can attach a physical keyboard to the iPad, it seems as if Apple is waiting years into the app development and adoption cycle by developers and users alike so that there is no instance where someone is building an app for the iPhone with this thought: "This is for use on the iPhone with a physical keyboard." What's your take on this?

3. That listing of the features missing from the 2G and how so many of those features have been available for years shows that Apple has a definite stance when it comes to creating a cycle of hardware integration. Even the release of multi-tasking is tied to very specific purposes (background music, fast app switching, etc.) in a way that is all about user experience being accessible without any need for technical management by any demographic. As in, no user ever has to manage the multi-tasking in an instance where it will overtake the processor capabilities. This all seems to indicate that Apple will keep the same pace even when it comes to the hardware of the summer release. So there will definitely not be say any changes that will place the phone on par with the latest releases from Nokia or other international phones.

It seems as though this is happening: "Let's only gradually add hardware features but more importantly API and SDK features to the phone and then let all the applications in the store utilize these features to their full potential, and then we'll add a few more, let the cycle go on for a year, and then continue." Here's an example. Video only got the iPhone on the third release had been around for years before on many other phones. But when it came to the iPhone, it arrived as video with editing, etc. So it's something along the lines: "Hardware features and even basic stuff like cut and paste are only being added if they are added with an additional element of innovation."

But if this is the case, it seems to be a strategy that is about something other than market share for a phone? Sometimes it looks as if it's about media share. How do you see the delay of hardware feature integration as being tied into a cycle in which all the media available for the phone is given a chance to integrate over the year-long cycle?

Paul Niemi

I'm getting a bit tired reading about Apple fan-boys and fanatics on almost any smartphone or computer related website. Has anyone read the constant, inflammatory tirades presented with religious zeal posted from the Apple haters out there? Apple fan-boys and fanatics are very much outnumbered.

Steve

@Paul: It would be logical for Apple fanbois to be outnumbered, since they represent a tiny minority of the market ...

... yet somehow I disagree with your contention.

kevin

Tomi, thank you for writing 11,614 words about Apple. My interest is investing in companies – and mobile is a great place to invest, so I want to know what’s happening. I've invested in Nokia, and am invested in Apple so anything about Apple interests me.
I've been reading here for 4 years. My goal in all my comments have always been threefold: 1) learn more, 2) correct mistakes, and 3) offer alternative considerations. I have no interest in hate or vitriol. I am not a cellphone expert.

It’s a tribute to you, Tomi, that you saw the triumph of musicphones over iPods so early. Apple saw it too, and saw it even earlier. At launch in Jan 2007, Apple said it worked on iPhone for 2.5 years, so it started around Jul 2004. However, they did not buy Fingerworks (multi-touch pioneers) until June 2005, so a major rework was done during 2005, as Jobs has also said. So good for you, but Apple saw it too before iPod peaked.

Now corrections: You keep saying it and I will keep disagreeing – the Christmas quarter has not been established as the de facto best iPhone sales quarter. In 2007, Oct-Dec was best (mostly due to 33% price cut and European launch). In 2008, Jul-Sep was best (due to launch). In 2009, Oct-Dec finally surpassed Jul-Sep but you spin it as negative. But Apple didn’t increase share in 2008 Christmas quarter (dropped from 16.6% to 11.2%), so nothing new in 2009 except that they lost much less share. I don’t know what data your using, but it’s clearly wrong.

As for Jan-Mar 2010, iPhone sales drop q-o-q is on the order of 13.8% (8.7m down to 7.5m), not the 19% you said*. In 2009, the same period drop was 13.6% (4.4m to 3.8m). Unlike what you’re saying, that’s not much difference. (*Through the end of 2009, Apple sold 42.5m iPhones, not 43m. By rounding up to 43m, it forces you to round the 7.5m down to 7m. That’s significant, as seen in a shift of 5%, so if you plan to defend your argument with it, you must go to the next digit.)

Now your forecast: I thought long and hard about what you wrote. Here’s what I think: A QWERTY phone is not coming. Just as Apple doesn’t care about competing in dumbphones, they don’t care about QWERTY phones (or 1st gen smartphones). It’s of zero interest to them; Apple doesn’t care about arbitrary categories – which you yourself has said that dumbphone and smartphone was how industry collects data but has no meaning other than that.

For Apple, this is not a sprint, but a marathon. In time, the 1st gen and 2nd gen smartphones will be separated. Apple firmly believes the future is 2nd gen smartphones with data plans, as handset and plan prices decline, and as 4G LTE arrives. In the same way that almost all people moved from character-based computers to graphical-based computers, or that in wired countries, most people moved from dial-up to broadband Internet, people will move to 2nd gen smartphones. Over the next 2-5 years, 2nd gen smartphones and data plans will become much more affordable - less flash RAM needed as data moves to the cloud, less voice minutes as voice becomes data. The low end will cost no more than for a featurephone and voice/text plan today. I already expect a free (subsidized per US contracts) or $399 (unsubsidized) 3GS-quality iPhone model in June.

Given what you and other commenters wrote, I have one question related to QWERTY keyboards: if it’s not a cost issue but a usability issue, how much better do virtual keyboards need to get before most people abandon physical keys? If so, how does it get better?

Now consider one other very IMPORTANT thing: Unlike anything that has happened in the cellphone industry before, Apple is turning the smartphone into a serious platform like a computer, where 3rd party apps are the key. Yes, Symbian, WinMo, and PalmOS made good efforts, but they were too early and the hardware wasn’t ready. It’s like the Apple II computers back in the late 1970s; a good effort but it wasn’t until the early 80s that MS-DOS, Mac, and Windows provided a real platform for developers. Why do I say this? Apple has allowed the App Store to carry COMPETING music delivery systems (like Pandora), movie delivery systems (like Netflix) and ebook delivery systems (like Kindle). iPhone OS 4 SDK is so incredibly focused on making things easier for developers to deliver software, even software that competes with Apple’s own offerings. Via iPod touch and iPad, people are already being prepared for a platform that is also a phone.

As for a second handset model, it will not be QWERTY or a nano. If a 2nd model comes in October, it will be a CDMA/3G model for Verizon/Sprint, China, India, Japan, South Korea, etc. Two reasons: there is still a big market in CDMA carriers (enough to boost sales for 2 or 3 quarters), and CDMA will still be necessary as the fallback for many years as those CDMA carriers start implementing LTE.

Thanks again, Tomi for your thoughts.

sami

Apple growth strategy for this years round of Iphones will be releasing Verizon and maybe Sprint Iphones. VZ can sell as many Iphones as ATT, 3m Oct-Dec quarter 2010, Sprint half as many, 1,5m. Outside the US sales will be also up to 7m. So 14-15m Iphones for last calendar quarter this year. Samsung way behind with 6m.

First calenter quarter 2011, 20% decline you pointed out would give 11-12m Iphones. Samsung still behind.

It seems to me that Samsung will be behind Apple for longer than you thought. 2011 second quarter Samsung may pass Apple, but 2011 growth strategy for Apple will be several models, most likely scenario a relatively cheap model released for the holiday season.

Samsung may pass Apple only in 2012...

BTW Apple CFO has told that the App store barely breaks even. It's no money machine. Given the low avg price of sold apps (less than $2) and credit card companies taking their fair share of the Apple's 30% portion, no wonder. That's probably why they are pushing games and other higher priced content.

Carlos


Tomi, I read your post since a short time and I find it very interesting. Thanks for sharing your experience and your thoughts.


kevin, I do not agree with you. Tomi has predicted that iPhone is going to decrease market share if Apple continues its actual way. Do you say that it's going to increase market share only by selling to other networks? Don't you think that as there are more competition in the touch phones people will get bored of it as it no longer is unique? Maybe it will happen as with the Razr. In the same way that most people does not care about things like multitasking, they will not care about incremental things that the new OS version has. Most phones have web, music, Facebook... the iPhone is no longer special in that. So, I think that the iPhone must have new things to attract new public.

Also, when you say "iPhone OS 4 SDK is so incredibly focused on making things easier for developers to deliver software, even software that competes with Apple’s own offerings" I am fully in disagreement. I find Apple terms the worst in the industry for the developers. They veto an application because it competes with them (as browsers) and in OS4 they have added restrictions about the language used to create the applications (read, for example http://theflashblog.com/?p=1888 ) Don't you think that this dictatorship may backfire and some developers may leave the platform and the application quality decrease?

kevin

Carlos, first, your objections. The App Store is much better now than ever – before this week, have you heard of any developer outrage since the rejection of Google Voice last summer? No. The approval delays are down to hours. Despite all the restrictions, the App Store has many more thousands of developers today than it did a year ago. Flurry Analytics said Apple had 89% of all new app project starts in Feb. Clearly, the terms aren’t that bad for real developers.

Apple has yet to explain the new restrictions – I can think of several solid technical reasons where these restrictions lead to higher quality apps and quicker adaptation to new OS/hardware features; for example, Apple’s Grand Central Dispatch tech is an extension to the syntax of C, C++, and Obj-C. Ignore the rage from Adobe, who doesn’t care for Apple products, and think hard about why Apple might want pure native code. (To understand Adobe, go read about why it's taken 10 years for Adobe to switch to native Mac OS X development.) In any case, these types of restrictions have been in place for developers on game consoles and handhelds; it’s only new for Windows tech geeks who blow everything about Apple out of proportion.

So how will Apple differentiate iPhone with new things that other phones don’t have? The primary difference will be software (or Apps) – that’s the point of being a platform. Apple and Microsoft have been making platforms for over 30 years. As before, Apple’s platform will have the easiest to use, most responsive, and best looking software because of its human interface design guidelines and Apple’s hardware/software integration. As Tomi mentioned, Apple’s platform will have the advantage of co-development for iPad and iPod touch. iPhone already has 185k apps including thousands of non-English apps, and continues to add more apps per day than Android.

The secondary difference is hardware and Apple is designing CPUs for a reason – performance and battery life. Grand Central tech for multiple cores has already been found in iPhone OS 4 code, so don’t be surprised if the next iPhone has battery life significantly longer than other phones while matching them in processing times. Code for a front-facing camera tied to Apple’s iChat has also been seen; again, Apple won’t be first, but iChat will be significantly easier to use than that in other smartphones.

In addition to this, Apple will aim to increase its market share of just 2nd gen smartphones (not all smartphones, not touch-screen phones) by selling iPhones more cheaply (maybe 3GS free subsidized per US contracts, $399 unsubsidized) and by selling iPhones to the CDMA market, especially in the US. Verizon Wireless and Sprint have been the most significant Android markets, and Android phones have been the main competition in 2nd gen smartphones.

kevin

Carlos, regarding the restrictions, please read these:
http://www.taoeffect.com/blog/2010/04/steve-jobs-response-on-section-3-3-1
http://daringfireball.net/2010/04/why_apple_changed_section_331
http://innerdaemon.wordpress.com/2010/04/10/sorry-adobe-you-screwed-yourself

Murat

I think I'm in a good position to feedback on some of these statements after working at Nokia with services and devices teams as well as Enpocket. I don't have a allegence towards either Nokia or Apple.

It's of course true what you say, Nokia did have tons of features way before the iPhone. But it's not important to consumers who did it first, it's more about who does it best. Oh and how quickly people forget when something better comes along. Brand loyalty only lasts for so long, and I think Nokia are experiencing that right now.

I can safety say that things that Google and Apple are doing are now trying to be replicated by Nokia. Internally there is discontent about how poor the experiences are on S60 compared to competitors. Apple and Google have completely changed the way Nokia do things, trust me, I've seen it, made it, touched it. So now who is copying who?

Couple of things you mentioned:

Download! Nokia's first app store - absolutely out done by iPhone App Store. Where was the benefit in being first?

Enpocket acquisition - outdone by the purchase of Quattro, purely because they have integrated so quickly with a clear and outright strategy. Whilst Nokia purchased Enpocket and had absolutely no idea what to do next, eventually getting rid of most of the staff. Where was the benefit in being first?

NFC - I will bet you right now that even though Nokia has had NFC for years and years they will be outdone when a competitor launches and makes it go mainstream. Then Nokia will eventually start shipping phones with the capability after being left behind.

Carlos


Hello kevin, thanks for your answer. I will respond you but I'm afraid Tomi won`t like that we use his blog to this.

You say that I can not see developer complaints about Apple policies. Sure, there is an NDA forbidding it. But recently FSF revealed the agreement terms and I the response was not positive for Apple.

I can assure that the terms are very bad for real developers, but currently iPhone is perceived (maybe the perception is correct) as the best opportunity to gain money, so they must obey it.

I have developed games for consoles some time ago and I have friends developing for X360, PS3 and DS. For example, they can embed a Python or Lua interpreter if they think is the best solution (and they have done). Also, the rules for publishing the game are clear, they do not summit their work and are rejected arbitrarily.

I do not agree with the technical reason you say. If you want, I can elaborate.

I have read the links you provide (I had already read the first two). The first one supports my view, the second one is somewhat ambiguous, but is more aligned with Apple. And the third one says it's OK because Adobe is not a good company for Mac users, really a good reason to annoy iPhone developers!

You have not answered if you think that iPhone may suffer the same problem that Motorola had with the Razr.

As a side note, I can tell you my personal situation. I develop for mobile phones and my company currently supports Symbian, Windows Mobile, J2ME and Blackberry. I did a C++ abstraction layer and most of the code in Symbian and Windows Mobile is shared. I ported this layer to iPhone and I have a working version and it has the look of our company, no the iPhone look. The clients that betatested it liked it a lot, but we have not submitted it. We are almost sure that Apple will not aprobe it (an Apple developer relations employee told me that). We are a small company and we do not have the resources to make a new Applish version and surely it would be inferior due to my lack of familiarity with Cocoa. So, our clients do not have this version available to them. Our clients are deprived of it due to Apple behavior (This application is free). When a client ask us about which mobile phone to buy, we can not recommend an iPhone.

By the way, Tomi, you may find interesting that when we have a request to adapt our software to a client, the most usual platform is Windows Mobile because they usually have another Windows Mobile corporate application.

Oliver

Hi Tomi!

Excellent post, as always. I totally agree with most of it, especially with what you said about Samsung and RIM.

However, I want to add some comments. First, I believe it is far more difficult to achieve a greater market share for Apple than most think. Apple can and will expand into different categories. They can launch a QWERTY iPhone, a smaller iPhone nano or a basic iPhone simple. But the point is that Apple is a premium brand. So they will have to compete with the other premium products within each sub-category of devices. And the premium segment is small by definition. If Apple e.g. introduces a QWERTY iPhone, they would have to compete against a Blackberry 9700 and not the 8520 model or against a Nokia E72 and not the E63. They can`t compete by price within each category, this would ultimately destroy the brand "Apple". They have to stay premium and therefore small. No brand can address the masses and stay premium, not even Apple.

Second, I think the way how Apple ignores social media and social networks is becoming almost absurd. The iPhone user interface may have been revolutionary in 2007. In 2010, it not only looks dated, it is dated. It totally ignores the fact that many users use multiple ways to communicate. Of course, there is an app for that. But comparing it to something like the sense UI from HTC, Synergy by Palm or the new timescape function from Sony Ericsson, the one-app-per-communication-channel is rediculous. I often wondered why iPhone users trend to constantly check their phones. Now I understand. They have to. They have to check several applications in order to see how and with whome they communicate. This was OK when there were only calls, email and SMS around. In 2010, we use calls, email, SMS, MMS, Twitter, Facebook, Flickr, Picasa, Gtalk, Skype and several other channels all at once. And everybody uses different ones. One friend is on facebook but doesn`t send SMS. Another one is a heavy skype user and rarely calls. Maybe someone is only using the "traditional" way and only calls. On the iPhone, you have to check several apps and remember what channel one uses. How much more easier it is to call up the contact and see all communications regardless of their service or nature? This is what I call magical and revolutionary. Maybe Mark Zuckerberg really wants to earn some money with facebook and introduces a facebook MVNO. But until then, we have to deal with a very fragmented social communication landscape. Apple`s approach hasn`t much improved in this area over the last three years beyond some lousy notification system and until Steve Jobs has an ace hidden in the sleeve of his black sweater and introduces something completely new, Apple will loose another full year, which is a looong time in the mobile industry.

Third and last, I dare to criticize you. I am somewhat surprised that even you can`t restrict yourself to some point from been blinded by Apple. You call the iPhone 2G "the most important phone of all time". It is not. Why? Well, for obvious reasons. The "most important phone of all time" should have left quite an impact. Most think it did. I don`t think so. Who cares about the iPhone? Real groundbreaking innovations often effect two kinds of consumers: either the high-end users or the true masses. So did the iPhone have any impact on the two most advanced mobile societies on this planet? Do people in South Korea or Japan really care much about the iPhone? Do they consider it groundbreaking or the most important phone of all time? Did the iPhone change how mobile phones are perceived in these two countries? I don`t think so. As you said, they considered it "Obsolete". Ok, so now let`s look at the other end, the masses. Did the iPhone really change the way the billions of billions of users in China, India or Africa use and view a mobile phone? What most people forget is the fact that the iPhone is only successful when it is completely embedded in its ecosystem. Take away itunes and the required computer to run it, the app store and its credit-card based billing system, high-speed data connection and a reliable 24h power supply and the iPhone becomes more useless than any other 60 Dollar feature phone equipped with opera mini, a radio, a flashlight and a replaceable battery. It is a sad fact that billions of people don´t have access to an infrastructure required for the iPhone. And for at least the next decade or an even longer period of time, this will not change. I hope it will, but I seriously doubt it. So to whome is the iPhone the most important phone of all time? Whose life and perception did it change? Well, maybe for several hundreds of millions in the so-called "developed countries of the western world" and there especially North America. Several hundreds of millions sound like a lot. It isn`t. 400 millions, 600 millions or maybe even 800 millions. That`s just about 20 percent of all 4500 million mobile users at the moment. Think about it. What about the other 80 percent? And new subscribers are mostly coming from India or China. They, together with the rest of 80 percent, give a sh§t about the iPhone, for said reasons. At least not for quite some time. So the iPhone certainly did not change the way mobile phones are used and percieved for the vast majority of people on this little planet. This is a fact, just look at the numbers.

Apple is a small competitor in a certain segment of premium smartphones. They make good money by doing so, no doubt about that. I can`t resist to mention Nokia in this context, because the end of Nokia has been called for several times in the last three years because of the iPhone. In my opinion, Nokia shouldn`t worry about Apple. But I 100 percent agree with you on what you said about Samsung. The one and only real enemy for Nokia is Samsung. By looking at what Samsung can pull off usually already in the second iteration of a new product should make every Nokia manager shake in his Nokia rubber boots.

Tomi T Ahonen

2 Quick comments

First to Carlos and kevin - on the contrary! We love the dialogue here, so please do continue the discussion.

All others (and kevin and Carlos) - I will return a bit later today to answer all of you of course, please keep the comments coming. Very interesting and intelligent discussion, thank you all very much!

(I'll be back)

Tomi Ahonen :-)

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