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« Verizon CEO Ivan Seidenberg 'Studies be damned' yet refuses to see facts | Main | Reading your Palm. Who should buy the smartphone manufacturer? »

April 09, 2010

Comments

Keith

Tom,

While I agree with several of your points, I think the whole "Android is coming apart" line is severely overblown fanboy talk. Yes, there are apps that might not work from handset to handset. But that's very, very rare (something like 90%+ of all apps do run across the Android line-up) and has more to do with the OS version each handset is running (and occassionally the lack of hardware support for certain features). That's true for the iPhone too. There are apps on the iPhone that pretty much need a 3G or 3GS handset to run. They won't run well (if at all) on a 2G iPhone.

On Android, I chalk this up to breathless pace at which Google has put out OS updates and the lack of foresight on the OEM's part to future-proof their handsets. However, that's all starting to change. Google is slowing down the number of updates (if only to give handset manufacturers a breather) and OEMs are starting to realize that they have to design phones that are current for more than 3-6 months. I half suspect that Google's motivation behind the Nexus One was precisely because it wanted to push the OEMs forward. Give them a kick in the bum to remind them not to sit still. They've set a solid hardware benchmark which all the recent and planned hardware releases pretty much match (I don't think iPhone fans always understand the purpose of the Nexus One when they gloat about the lack of sales).

Keith

"The thing is that a Mercedes is $10,000 or $20,000 more expensive than the competing brands. And iPhone is only a few $100 more than a feature phone. "

Tom,

A few $100 is not a trivial matter, even in the developed world. If it was, then Apple would not need carrier subsidies of $400. And disposable incomes outside the US, but in the developed world, still vary widely and are often lower, making that "few $100" that much more expensive.

"It's up to Apple's product design and marketing if today's average jaded consumer would rather spend their $10,000+ disposible income on low sugar fast food, on teeth whitening chewing gums, on Fiji water, on Nike shoes, on a gym membership they never use, on pills they don't need, in a bar with $15 cocktails... on all kinds of things that make them feel healthy, young, pretty, accepted or just make them forget their anxieties...

At least the iPhone is a real product with tangible innovation..... "

While I love phones, both love and admire the iPhone and appreciate the content of this blog, we all know that nobody really NEEDS an iPhone. $50 dumbphone maybe. But needing an iPhone? No. It's a luxury item exactly on par with many of those other things you've listed. To suggest that the iPhone is somehow manna from above is a little over the top. People will spend their disposable income as they see fit. Some on smartphones like the iPhone. And some on bottled water that costs more than petrol.

Vic

Tomi,

I have read and appreciate the article. I'll tell you where I think the error in your thinking lies. Apple really doesn't care about market share, Apple cares about net income. Similar to the PC market where Apple has about a 10% share but is one of if not the most profitable hardware companies out there, Apple doesn't care to play the volume game. So you come along and point out that there market share will drop. Of course it will. RIM and Android and doing BOGO galores to stem the bleeding from iPhone, of course market share will drop. I think it would be more pertinent for you to analyze and forecast net income. With a 15% share of the smartphone market, and what, maybe 5% share of total cellphone market, they are one of if not the most profitable cell phone hardware companies around.

Therein lies the rub.

I'll call what you're doing the Wilt Chamberlain affect. He was one of the best basketball players around but he couldn't shoot a free throw to save his life. So, if effect, you're calling out Wilt Chamberlain and saying his career will not be amazing cause he can't shoot free throws. Wilt Chamberlain didn't care about free throws. And Apple doesn't care about market share.

Thanks for the discourse.

mark

Keith (and Tomi and all):

I read everything; disagree with 90%. You bring up other things but I think you, bottom line, basically called supporters of Apple's strategy ignorant Americans or "fanboy". You used the provoking word. That's lazy thinking. Why do that if you can defend your position with data (as Tomi says, numbers are my buddies)?

So to confirm I read everything, here are specific comments.

1st, I am Chinese and there is a written Chinese. No need for snarky comments.

2nd, all my comments are written on a Dell. I own/use more Windows PCs than Macs. No blinders there. Maybe American-blinders? It may be hard to think it, but at some point, you may want to not reject out of hand that the leading edge of smartphone innovation/use might be moving to the US because of iPhone/Android and unlimited data plans. (I'm sure this comment will provoke more anti-American rage.)

3rd, what data do you have of the world seeing the App Store as a restrictive model? Has it started or is it speculation? Also, what data do you have that non-US, non-English apps take longer for Apple to approve? Or is that a wild-ass guess?

4th, for every iPod model, shuffle included, there's always been cheaper competitors like Sandisk. Sometimes over 50% cheaper, even in US; see Amazon. Yet Apple maintains over 70% share in most and adding share in other countries.

5th, your main topic (and Tomi's too): limits to iPhone growth.

a. Market size, Apple has 3% of cellphone market, 17% of smartphone market. More than half of all cellphone market growth are smartphones, So the market itself is not the issue.

b. Pricing. As others note, Apple starts at top end and moves down in price over time. The after-iPhone era (kudos to Tomi) smartphone market is nearing three years old - it's still in infancy. Do you really think iPhones will forever cost $700-$1000?

In countries with carrier subsidy, Apple has already put pressure on consumer handset prices - no US smartphone vendor dares to price over $199 (with contract and no rebate). Palm boasted it would, yet used a clumsy rebate and Tomi told us where it is. And if you haven't noticed, there is a $99 iPhone model. In the US, consumers have already been conditioned to wait for buy one, get one free on all smartphones EXCEPT iPhone. That "wait-for-a-deal" mentality is what led to the downfall of GM and Chrysler.

As for countries without subsidy, Apple management said they're studying how to do better. Apple is not static. Divide and conquer; take the easy pickings first. More specific to your India-centric view, I already said Apple is doing nothing yet in India (and also Indonesia).

But even doing nothing, need we look further than Nokia's results? ASP dropped from 190 to 155 euro reflecting CEO's comments on high-end pressure. Nokia too embarrassed (my view) to break out N-series units this time; need we guess the bloodbath there? Nokia increased 300K units in China qoq while Tomi says Apple increased by at least 1M units. Nokia says there is price pressure even with the current $700-$1000 only prices for iPhone. Can you see what will happen once iPhone starts moving down further in price, maybe even as early as this June before Symbian^3/MeeGo arrives?

Apple averages 55-60% margins on $600-800 iPhone (Nokia devices average 32%). Apple is selling 16GB iPad 3G for $630 at about 30% margin and that's with a $95 screen, 2x battery, and aluminum frame; can't you see how Apple could price a non-contract iPhone if it wanted to?

As Tomi said, Apple is like BMW/Mercedes/Porsche. Everyone aspires to own one, even when they can't afford it. The richer will get it now (and better yet, repeat every two years - isn't this the greatest market ever???). But even BMW/Mercedes started selling lower-priced models, and so will Apple when the time is right. Is it really so hard to see? If you still think the market is limited, then that's where the blinders are.

mark

The above post should say "Nokia increased "possibly 1.5-1.6M converged device" units in China" instead of "300K."

Big calculation boo-boo, but I think it still makes the point, though much less strongly.

kevin

Keith,

Just a couple of tiny rebuttals.

Those 2G iPhones are 2 to 3 years old. The oldest Androids are at most 1.5 years old. You should also know that Tomi has said he believes 15% of iPhones to have been deactivated, that would be 7.5M iPhones, which is more than all 6.1M 2G iPhones Apple has ever sold. If Tomi is correct (and I think he's not), there should be no 2G iPhone users out there being vexed by new App software, whereas, many of those Androids are still months away from finishing their 2-year contract.

As for disposable income and the developing world: Many years ago, most people in the US were on dial-up, which was rapidly decreasing in cost from $30 to $10/month. Then along came broadband (and DSL) at $30-50. People said "every $100 counts" and "broadband is a luxury item." For a couple of years, broadband adoption in US increased slowly and the US fell behind the rest of the world. Then it started to grow - now it's at over 65%, which is about the same as dial-up was back then.

As Tomi tells me, outside of the US and in many countries thought of as developing world, cellphones including optional SMS/MMS have been adopted much more and much more rapidly than the US. People are much more likely to spend on cell and data. People buy more expensive new phones, and buy them more often. I know iPhone adoption has been slow in some countries but it may have more to do with lack of physical QWERTY keyboards and exclusive carriers than cost. Do you know of any studies on this?

Tomi T Ahonen

Hi kevin, Keith and Tom

Please continue the dialogue, its very interesting. I will only comment on a few tidbits where I can, as I try to catch up with all the comments here..

Tomi Ahonen :-)

Tomi T Ahonen

hi Godfail, Knute, Neil, Steve, Brian and kevin

Replies to each individually

Godfail - first about next model upgrade. Yes, that is part of the problem not the solution. Today there are many who want an iPhone - who would be willing to buy the newest model and who have their 'replacement period' already authorized by their mobile operator/carriers - who are unnecessarily waiting for June. They know the 3GS is going to be obsolete in a few months, they want the new model. Now, if Apple had 2 new models per year, they'd buy the 'December iPhone' now, and not be waiting for the June model. You describe exactly the problem that a one-model-per-year cycle has. Because phones are replaced so much more rapidly than PCs (PC replacement cycle 3.5 years says Semiconductor Industry Association who say phone replacement is 18 months) the concept is not as well understood by traditional PC makers like Apple, as it is by traditional phone makers like Nokia. What happens for maker of both - witness Samsung big maker of both PCs and phones - their new phone cycle is just like Nokia..

Then you say that 'more phones destroy a brand' - but Godfail, did more than one iPod model destroy Apple as a musicplayer brand or more than one Mac model destroy Apple as a PC maker. Your argument does not stand with Apple examples even. I am only urging Apple to do the same with the iPhone as it already did with the Mac and iPod. And most Apple loyalists even know in their heart that Apple has to expand their product line sooner or later... I want it now haha, not when Apple has lost its market share growth and fighting back would be far more difficult.

Knute - of Apple utilizing its iPhone/iPod Touch/iPad platform - I make that point clearly towards the end of the article, you may have missed it.. We totally agree. But iPads and Touch's are not phones, thus if you are for example a ringtone maker - ringtones alone are 7x bigger global market than ALL iPhone App Store Apps were last year - the typical readers of this blog are interested in the mobile services industry - worth 284 Billion dollars (said Morgan Stanley) vs the 740 million dollar iPhone Apps market (also same report by Morgan Stanley) so you can understand why this blog is not looking at the tiny market opportunity of the iPhone OS 'platform'. It is literally less than one fifth of one percent of my readers' business. If I devoted one blog article per year on the App Store and its eco-system, it would be 'over emphasizing it' haha..

I don't mean to be flippant, Knute - but the reality is that it is a miniscule side-show totally blown out of proportion by the US iSyndrome enamoured tech press. This is NOT an Apple blog. This is a blog about social networking with focus on mobile, and digital media. My industry covers over a Trillion dollars. The total Mobile phone sector of it is only 15%. Most of those are 'dumbphones' and we discuss Africa cheap phones here etc. And of the smartphones, half of the worlds' installed base and 41% of all new smartphones sold are Nokia, so obviously we talk more here about Nokia than Apple. And out of Apple, there are very many other reasons to buy a smartphone than its apps. This is not a smartphone app developer blog... You get my point? My readers are interested in the overall economics of these industries and any economic opportunities in them. The Apple iPhone App Store including Touch and iPad is worth - please understand how meaningless this is - one fifth of one percent - of the total business we cover here...

Then you write 'But unlike the past, where Apple was always the niche player, the minority, Apple is now a major player' - this is no doubt what you read and receive very much positive reinforcement of that claim to believe it must be true. Again, it is totally not true. Apple does have the hype and the glamor and the 'mindshare' of the press. But it is meaningless to the real revenues and profits made in mobile. The US application-maker industry from the PC and internet are rushing to the iPhone and Android because they seem familiar and its easy to develop and they don't need to go through the carriers and conform to all sorts of tedious rules and face fragmentation covering - literally - thousands of devices. Its 'easy' to do iPhone.

Its also easy to set up a website and try to sell your goods on it. Some may make money that way. Some companies may even grow to be giant in it like Amazon or Ebay. But the millions who have little web business sites are not millionaires. The App Store eco-system is even worse. The early numbers are starting to come in, but it looks like its far worse of a business gamble than Hollywood or the pop music business (where roughly one in ten products breaks even, and only a few blockbusters make the industry profits).

So yes, Apple has the mind-share of this elusive 'opportunity' but I promise you most who develop for the App Store will never get their development money back. Meanwhile little new companies are emerging all over who make very simple services on SMS - and are almost instantly profitable.. I am sure the money will drive the resource deployment to the real economic opportunities over time. I try to help illustrate that on this blog and in my books obviously.

We do agree on Apple fierce loyalty (as I say in the blog article) and yes, Apple's smartphone user loyalty is by far the best in the industry (Blackberry running second)

steve - I was tempted to delete your comment as having not read the blog... I explain in my blog that I have several reasons why I think iPhone has peaked in market share, only one of which is the seasonal sales pattern which predicted that Apple should now have declined sales for Q1 and obviously that pattern has been busted. Please understand first, what it means annually.

The new 'second Christmas' peak that I first exposed and now has been verified by several experts - means a bonus 'peak' for Apple - which barely covered the actual decline in the 'non-China' rest of the world. There WAS a decline in the rest of the world in iPhone sales, its proven for example in AT&T numbers (iPhone's best market in the USA) - down 14% from the Christmas period. iPhone sales in the rest of the world declined and will decline FURTHER now as customers wait for the next iPhone out in June (like we heard from Godfail just here now).

What happens in China in Q2? Chinese iPhone sales will ALSO decline. So that means, that there is a HUGE hole for April and May and most of June sales of iPhones, that now have to be covered in the 'rush' sales of the new iPhone in the last days of June. The challenge will be even harder for Apple to maintain market share...

Brian - that was very unfair. I did not say iPhone market share will peak 'some day' - I said it has peaked now. That is definite. Just like my iPod market share prediction, I said in 2005 - read the Financial Times to see it - that iPod reaches its peak the very next year ie 2006. I did not say sometime in the future, I was very specific. And you can check, obviously that is what happened.

As to who dominates - yes the Apple fanbase is incredibly loyal. It is like an 'army of fanatics' like Jonathan MacDonald the author and engagement marketing guru from the UK is calling for. But Apple has a very tight 'control' of its fans, so they are also often 'cited' as not conforming to fully open dialog, letting the fans help co-create the marketing experience etc. So they have a tremendous resource in their fans but don't really use it to 'communities dominate' power as they could.. Apple is probably too profitable currently to 'bother' to learn and change. Over time that will change of course. Social networking was said to be the biggest change since the industrial revolution (said the Business Week in its editorial) and the biggest change in mankind (said the Economist in its editorial) and we only said in our book its the biggest change in the past 100 years haha - and now for example Google CEO Eric Schidmt says social networking is the defining aspect of humanity for the next 20 years.. So yeah, this blog is a tiny bit of it. Twitter is far more of it. CNN iReport is an even bigger part of it. Obama's campaign used it to great change in government - overthrowing the 'dynasty' of the Clintons and first time Senator overthrew the most popular Republican candidate with cross-party appeal since Reagan - and did both with landslides. Thats the power of communities dominate haha..

kevin - hey, cool, very good thinking yes, and we mostly agree actually. Let me address your four points indidivually

1 ease of use - yes, totally absolutely unequivically true. Totally agree, this is part of Apple's magic sauce and their core competence. The iPhone is simply the best phone in the world for ease of use. Note, this need is becoming far more relevant the more the pocketable phone experiences 'convergence' ie more digital abilities are added. You may think of it as voice + messaging + camera + internet but the real cutting edge phones say in South Korea and Japan are also your wallet, your house keys, your credit cards, your car keys, the remote control for your home robot (yes, South Korea all major malls already have home robot stores - they expect a robot in every home in 10 years - have you ever even visited a home robot store to see whats on offer from Hyundai and Samsung and other major robot makers) etc...

But - just like the Mac. Original Mac vs DOS based IBM-compatible computers was like space monsters vs earthlings, a total mismatch. Then came Microsoft's revenge. Never as good as the Mac OS, yet Windows became better by every release and eventually for most users, the usability was nearly on par. Not as good, but good enough. The pursuit of perfection is expensive and is no guarantee to get you the market. Betamax was the better home VCR in every generation, VHS won.

2 platform - very good. This means Apple has the ability to build 'market space' that is inherently different from what any other smartphone maker can do. The iPhone apps are available on PDA and tablets (the iPod Touch and iPad obviously) while Nokia Ovi apps are only available on Symbian phones. Apple is redefining the market for its own good - obviously - and this is brilliant, and something only a few brands can hope to do. Potentially a Sony could leverage its Playstation or a Microsoft could leverage its Windows etc, but Nokia has nothing like that. Neither does RIM nor Samsung nor HTC etc.. We agree. But it helps Apple make profits and sell OTHER devices, not iPhones... My premise, iPhone market share has peaked - is not affected by the other parts of the platform..

3 brand - Apple has best brand in tech, we totally agree. Not just the most loyal fans, but fanatical fans. How often do we see Mac users trying to convince some PC user to switch brands haha..

4 strategy - here I think Apple has its problems. Apple strategy is made in Cupertino, and very typical Apple, 'Steve knows best' kind of thinking. It is great for invention and bold radical attempts, but is no guarantee of success (consider Lisa and Newton). And in mobile, it only gets you so far. Apple HAD to conform or it would have died. Like now, the iPhone 3GS is Japan's bestselling smartphone - and the bestselling smartphone in South Korea - literally the worlds' most advanced mobile phone markets. Was the original 2G iPhone welcome there, no. The original which so excited the laggard US market, was literally obsolete in Japan and South Korea. What did Apple have to do to get their attention? Exactly what I wrote on this blog three days after the original iPhone 2G was introduced by Steve Jobs on stage in January 2007, half a year before anyone had touched one. I said it needs 3G and a better camera just to be considered in Japan and Korea... And remember the 3G model was not even enough, only the 3GS model had caught up to world expectations, with MMS etc...

So I think Cupertino is struggling with the Steve vision and the world expectation. It is both good and bad. And obviously, it means the evolution of the iPhone has been far more to 'mainstream' phones than 'further away in exotic direction'...

With all that - the next 4-5 years? Apple will have its fierce loyal fan base. But look at PCs. Apple was once the world's largest PC maker. With the Mac it once had nearly 15% market share. Now its at 3% (says Gartner). I see the same arch of the iPhone market success. They only sell under 3% of the world's phones now. Smartphones will some day be most of all phones, perhaps even all, but Apple is going to be bleeding market share while sitting at the top of the price point. Like Rolls Royce, who once was a 'major' car maker, but insisted on making the 'best car money could buy' and see their market share diminish and vanish over the decades while rival early makers like Daimer-Benz (Mercedes Benz) and Ford took over the world.

In 4-5 years, if Apple spreads its model range to 3 - 6 models, they'll easily hold something like 10% - 15% of the smartphone market, and smartphones will by then be about half of all phones sold. But if Apple stays with only one new model per year, their market share in smartphones will be under 5%... No matter how great their device, how fanatically loyal their customer base and great their platform and strategy. That is the nature of this handset business and competition here. Don't you see how much 'closer' the 'iPhone rivals' of today are to iPhone than those in 2007? Apple is not pulling away, its the others who are closing in on it. If Apple only tries to compete at the top with one model, it can't possibly satisfy every variation in tastes..

But kevin, as you know, we'll be here in 2014, be sure to come back, and remind me of this discussion we had, ok? We'll see how accurate I was - or not haha..

Thank you all for writing

Tomi Ahonen :-)

Tomi T Ahonen

Hi Steve, Roger, Adam, JayWilmont, Garance, Keith, mark, Keith (again)

Steve - thank you very much. Good point about its a matter of timing and iPod also good lessons (you hit it just at the right time, congratulations). About the evidence you see of iPods and iPhones used for music - that is no doubt true where you live. But remember we are here a global blog - I am a Finn now living here in Hong Kong - and globally its no contest. The total lifetime shipments of iPods are about 250 million. Toss in 50 million iPhones. Assume all of them are in use and no overlap, the ceiling of Apple portable products used for music is 250 million. Just in 2006 the world sold 309 million musicphones. The installed base - removing replacement phones - of MP3-playing phones is almost 2 BILLION. And while not all who own an iPod or iPhone are actually paying to use the iTunes store - there are 1.5 Billion people who download paid content to their phones - a vast majority of that population has downloaded music to their phones (of which of course the most popular type is the basic ringing tones).

For most people on the planet who listen to recorded music, the most prevalent music player is their phone. Most do not have a stand-alone MP3 player. Many do not even have a CD player. So for most who listen to music globally, there is no option, it is either the musicphone, with its modest ability - or nothing. There are many in Africa for example who have never owned an FM radio in their family before they get it 'for free' on their basic Nokia phone. Why does Nokia stick the FM radio on all our phones, not for us in the West who have a dozen radios in everything from our cars to our HiFi sets to our boom boxes to our kitchen radios to bedside clockradios, but to a poor person its often the only radio...

So yes, we may be wealthy enough to own both. And if you are 'serious' about music so much that you want to carry it everywhere - youth typically - you'll have a separate music player. But for most people for whom its not the most important thing, but they still like to have some music when they jog or take the dog for a walk or whatever, they won't buy a separate MP3 player, the one on their phone is 'good enough'... And yeah, as Apple itself said they saw SonyEricsson Walkman musicphones eating into iPod sales, they yeah, we know they compete for the music consumer. But I've never said a compromise musicplayer on a phone is as good as a dedicated one, just like the wedding photographer will not show up with a cameraphone haha..

Roger - thank you for the rough judgement, haha. Well, if you look at ALL others who forecasted iPhone sales for Q1, the average was 7.1 million iPhone sales and the range of most was between 6.8 million and 7.5 million. Nobody forecasted iPhone sales growth. So are you also accusing all others of being incompetent? As to my accuracy, I had said 7.4 million (see this blog) so I was one of the best forecasters, with the least amount of error. So do you suggest Roger we should now listen to those who said its 6.8 million rather than listen to Ahonen?

And as to China - that has now been accepted and independently discovered by many analysts as the reason - I just happen to know this business so well, I was again able to be first to report it. The Guardian newspaper has said that was the reason - and the world's largest smartphone maker Nokia which sells about 2.5 times as many smartphones than Apple, said in its quarterly results that they also saw a big increase of phone sales in China in Q1 when other markets declined in unit sales - and Nokia expressly stated that the reason was Lunar New Year gift-giving season. I am sure you're man enough Roger to come back and admit I was actually pretty sharp on that, do you? I'll happily leave your comment here for all to see?

Adam - you make a great point and I was probably not clear enough. Yes, with Macs in particular, its very much not just usability choice, but also technology choice. And I'm sure if you did a correlation of income level or education level, you'd find Mac users well above the average. Totally agree with you.

I didn't mean to say iPhone users were only buying it because it was good-looking. I DID mean that EARLY iPhone buyers, especially in the USA in 2007 and in Europe and Australia etc in early 2008 - when it was very new and undeniably a unique-looking handset, there were many who bought it not for its functionality, but purely on the good looks. I am sure there still is some part of the population who do that, but by now so many similar-looking devices are out there, if you strip the brand off the product, and show an iPhone ad to a buyer at home, then send the buyer to a store where the phones don't show the brand, the (non-Apple owning potential) buyer could not pick the iPhone from among other large screen touch-screen phones by its looks. In 2007 that was easy to do as it was the only kid on the block..

And some have said that the look is starting to appear dated. As the iPhone outwardly appearance has been so similar across the 3 models so far, some who want their phone to look new and cool will actually want something that looks different. A new iPhone model looks like the old one, a bit of a problem like the Porsche 911 where the same body style still exists after 50 years haha.. But very true, most Apple product users become so attached to how easy they are to use, and how intuitive, they have no desire ever to leave the brand.. This is why the iPhone has currently the best customer loyalty of any phone brand (Blackberry being second)

JayWillmont - you misunderstood me. The iPod was launched in 2001. Musicphones were launched in 2003 in South Korea. The iPod kept increasing annual sales at an breathtaking speed through 2005. I was the first person in the world to predict in the summer of 2005 - while I witnessed the enormous growth of iPod sales - that by 2006 musicphones would outsell iPods. I did not say 'Apple branded' musicphones (like the iPhone). No, you are very correct, even today Apple sells more iPods than iPhones. That was not my forecast. My forecast was very specific - and shocking - and widely reported - and violently hated by Apple fans - that by 2006 more musicphones would sell globally than iPods. I was proven right. Apple CFO Oppenheimer said in 2009 that yes, it was the SonyEricsson Walkman and other such musicphones which forced Apple to develop the iPhone. And Apple's other statements have revealed that their iPhone development started sometime in 2004-2005.

So it was not cheating with forecasts haha, saying 'some day it will happen'. I was most explicit, 'next year' I said in the Financial Times for example in the summer of 2005. And obviously I was right. Apple sold something like 45 million iPods if I remember now correctly in 2006, while the phone industry sold 309 million musicphones that year. I just knew my mobile business, and saw enough of the data in 2005 (same data that obviously Apple tracked being in the MP3 player business) to take a stand and make a most bold prediction.

And now I have made another such prediction, and its looking solid as we speak, for 9 months straight, Apple's iPhone market share has held stagnant at 17% refusing to climb, while Nokia, RIM and HTC have all achieved market share growth over the past 9 months. Apple growth has very likely stalled. I stand by my prediction, because the rest of this year is far worse for Apple in terms of more competitors, lower prices by competitors, more smartphone operating systems, and more actual smartphone models by the existing makers. Plus every maker is aiming to develop an iPhone-killer. The Nokia N95 was never going to be an iPhone killer. The N97 was flawed too, but its a big leap closer to the iPhone by Nokia. Their next attempt could bring them to striking distance and the N900 is gaining a lot of love around the planet...

Garance - thanks. Very good comments. I agree, lets see if my forecast ends up accurate, please do return here in early 2011 and we'll see. Either way I will be blogging about it, whether I got it right or not.

About the iPad 3G, very good point. In some way it is kind of a 'big iPhone' and thus perhaps could be seen as expanding the iPhone model line. But that to me is more like BMW making cars and motorcycles. The iPad fails the 'ringing in the pocket test' which is what drives addiction to mobile phones. It is why we carry our phone everywhere, even to bed and to the bathroom - but we do not carry our PSP or iPod or digital camera literally everywhere. We take our phone to the theatre and movies even though we know we are not allowed to use it there (actually four out of ten teenagers in America do use their cellphone in the cinema haha). So yes, the iPad may be a replacement to our home PC and home fixed landline phone, but it won't replace the mobile phone because it fails the ringing in the pocket test. Same for the Touch obviously, it fits in the pocket but won't ring there when we go about our business about town. It could theoretically ring within a WiFi zone but that again is not enough unless everywhere is part of the same WiFi network..

We do agree that the eco-system Apple has built is significant with the iPod touch at 80 million combined shipments of iPhone-compatible devices so far (not all in use anymore, obviously but still) and iPad only adds to it. So Apple has a different ability that Samsung, Nokia, RIM etc can't match because they don't have the 'cousin' devices for their platforms.. Again, it (that we agree) obviously doesn't detract from my forecast haha..

Keith - very very good deep considered comments and adding a lot of value to the discussion. I often highlight the differences of the world market vs US market in my lectures and writing, but you give wonderful flavor and detail to it. Yes, the iPhone - just like the Mac and iPod - can be safely assumed to hold its best market share amongst any countries in the USA, for many of the reasons you give. And very very true is the point, that the iPhone seemed most magical to US consumers whose previous concept of a 'premioum' phone was the 400 dollar Motorola Razr, and their idea of a smartphone was the early (monochrome) Blackberries, that seemed very weird and definitely anything other than sexy or desirable.

Meanwhile in Korea the iPhone 'standard' appearance was already set in 2006 by LG's industrial-design winning 3.5 inch touch screen phone that was commerically released as the Chocolate. It was not a smartphone but for the 'cool' looks, Asia was there well before the iPhone. And as to high-end superphones, the Nokia N93 from 2006 is in every possible way as good or better than the iPhone 3GS, except for the touch screen. Of course the N93 cost twice as much as the original iPhone 2G so yes, maybe it was 'twice the phone' but it was also 'twice the price' haha. Americans never saw the top phones from SonyEricsson or Samsung or Nokia, their idea of an expensive phone was the Razr which by 2006 was truly pretty pedestrian and by specs, obsolete.

mark - some of your comments to Keith may have some merit but mostly you are now taking quite an extreme view. This is the first time ever, Q1 of 2010, that two thirds of iPhones sold outside of the USA. The rest of the world has 92% of all mobile phone subscribers but the 8% of US consumers buy a third of all iPhones. Its very much still a US-centric device. And where is the rest, I think its very clear that the iPhone sells in only a few very rich countries - wealthy Western Europeans, Japanese, Koreans and a few others. Now with New Year's they sold well in China - expect that to fall quite dramatically in Q2 in China.

Keith (second, addressed to mark) - good points, I agree with them obviously. The point most Americans do not know, is that the 'original' iPhone 2G, when it was released by AT&T did not cost 600 dollars, it cost about 800 dollars. Imagine that price point. Yet the same phone sold for 800 dollars in Italy for example where there are no handset subsidies and the customers pay full price. So yes, today if you had to fork over 650 dollars for an iPhone 3GS, or 550 dollars for an iPhone 3G, suddenly that Google Android Nexus One (or say Nokia N97) will start to look a lot more attractive..

Thank you all for writing. Please do come back and we'll discuss more.

Tomi Ahonen :-)

Kendall Helmstetter Gelner

One last comment, in response to your response to me...

You state:

"But the Touch and iPad cannot do things any normal mobile phone can do. You can't call someone on an iPad or Touch and for example summons them (anywhere, ie in a car, on a bus, walking in the park etc, outside of WiFi coverage)"

This is false in two ways. First, it's false outright for the iPad with 3G built in. That device, you can initiate and receive calls anywhere. Again you might think it's absurd because of the form factor, but it could be an option for some people, and one that has really been untried until now.

Secondly, even the iPod touch can be used in this way when paired with one of the many cellular WiFi hubs like the MiFi. Basically, you totally glossed over my point that the thing to consider is the transformation of the cellular network to truly being all data instead of a mix of data and voice, from the standpoint of the carrier.

On the 3G being $100 - sure the cost is hidden, but to a consumer it doesn't matter. You state in places the cost is not hidden, that $200 noikia phones outsell the iPhone. Cheap is cheap, when you have to pay for a phone plan anyway you don't care you need a two-year contract. Cheap phones are fine but irrelevant since they are not 2G smartphone devices. They are not where the future is.

Tomi T Ahonen

Hi Keith, Tom, Vic, Kendall, mark and kevin

Keith, Tom, mark and kevin - as you have your own discussions going here, will only comment a few thoughts to you at the end. Let me take Vic and Kendall first

Vic - good point, and I agree you have a very valid position. It is indeed far more important to be profitable at a given market share point than strive to gain market share and see profitability vanish. The two are not mutually exclusive, but often one is lost when the other is gained - just witness SonyEricsson's past quarter where they finally climbed back to slight profits. They did that by jettisoning over half of their customers over a 2 year period of meking losses.

But this blog is NOT a financial analyst blog. I really do have a day job advisinig the mobile industry how to make money on things like SMS, ringing tones, MMS, mobile news, mobile advertising etc. For me to look at smartphones is a great stretch to what I really know well, and I am alone, I have totally no resources to go do a reasonably serious analysis of each major handset maker's profitability. I think we have to leave that to other websites that focus on the financial aspects. As I explained many times in the responses here, our main readership is more interested in the mobile services and apps, thus the market share of the platform is of great interest, and which of the big rivals made a bit more profit than the next is of nearly no interest to them. I know it is of interest to Apple fans or Nokia fans or Samsung fans haha, but not to most of our readers here. And not to me and my professional job, I am interested in how my readership - the mobile service providers and app developers - how they make their profits, not the handset makers haha..

But Vic, I have to point out something that is very easily misunderstood. And your comment suggests there might be that misunderstanding at play. Remember that Apple's market share currently 17% of new smartphones sold, is not 17% of the population who buy a new phone. It is 17% of a sub-sector of phones. Apple's actual global market share in phones is 2% - that is FAR BELOW what it has in the Mac PC market share.

That 3% of global PC sales is very likely the top of the range of where Apple's total iPhone reach will also peak - for exactly the same reasons as Mac - too expensive and too much non-conforming. Yes, its the best for many uses (not all) but its not for the masses, and won't reach mass appeal. Nothing at all like the iPod. Teh iPod once had 75% of all MP3 players made on the planet, and still today in the USA they sell about 3 out of every 4 stand-alone pocketable MP3 players today, and even globally they are near mid-point of all stand-alone pocketable MP3 players made.

So if Apple continues on this current path, and only has one phone per year, while Android makers release 60 'iPhone killer' smartphone models by 14 separate handset manufacturers - 6 of which are larger than Apple as phone manufacturers mind you - this year - some of them will get close and deliver a very close 'iPhone killer' while obviously nobody will ever make a better iPhone - and those close rivals, sold cheaper than the Apple, can actually dent Apple's sales.

More importantly as Apple offers one model, other Androids will attract customers who want something else, like say QWERTY keyboards or better cameras or better video or a digital TV tuner or the mobile wallet or whatever. Its like cars, if one maker refuses to offer a diesel engine, and the car only comes in a 4 door sedan model, etc. Others who offer different engines, 2 door models, hatchback models, station wagon models, convertible models etc will pick up some customers who want that feature.

So please don't think 17% in smartphones today will be 17% of all mobile phones in a few years. No, it wont. Apple is pretty close to the maximum ie the ceiling one phone model can achieve globally, if they can sell 3% of all phones maybe in 2011.

Kendall - welcome back. I am not sure if I was clear. I use the 'ringing in the pocket test' - if you can walk on the street or in a park or shopping mall or sit in a bus and the device can ring in your pocket, it is a mobile phone. If you have to find a WiFi network and log onto it (and have its payment plan or it has to be a free WiFi network with abundant capacity etc) - it won't ring in your pocket. Yes, you can work-around it so you can receive calls to any PC using Skype - but you can also 'work-around' the mobility of a fixed landline phone with a long-enough cord. Couple of miles of cord could let you walk to the neighborhood 7-Eleven haha..

I don't mean to be flippant. I am serious. It is a serious test. Its an adaptation of McGuire's Law (the utility of any activity increases with its mobility) and I say the Ahonen 'Ringing in the Pocket Test' reveals which gadget we will be addicted to and which not. The evidence is overwhelming that most people actually take their phones to bed with them. They take the phones to the bathroom with them. Morgan Stanely reported in 2008 that 91% of mobile pohne owners keep their phone within arm's distance literally 24 hours a day, and a 2009 study by Lightspeed in the UK found that 53% of the British not only keep their phone in bed or by the bedside table at night - they, over half of the British, today will not even turn the phone to silent for the night. We actually are so addicted to the phone, we want to be awaken by 'emergency' news or the incoming SMS text message or call at night. A study by the University of Leuven in Belgium found that 40% of the youth will wake up to incoming messages at night, its that common already with the youth.

So its not that technically you can do Skype on a WiFi device or have 3G on the iPad, its the ringing in the pocket test. This is why we dont' walk around 24 hours a day with our iPod in our ears or the PSP in our hand or the GPS receiver in our pocket or the digital camera hanging around our neck. Yes, obviously there are weird fanatics who do that, but its nowhere near 10% of the total population for any those gadgets. But nine out of ten of us, will have the phone literally within arm's reach 24 hours a day of every single day, wake and night.

So back to my point, it has to be a 'mobile phone' to be viable in this market. It won't be a 'must have' gadget otherwise. People in Bangladesh who cannot afford a cup of tea, will have a mobile phone. They don't own an MP3 player or a Kindle or a netbook or even own an FM radio in their family, but the one gadget they have to have - because it changes their lives and enables their livelihood or doubles their annual income because they can find better part-time jobs with it and because of it, is the mobile phone. Kendall, we can build work-arounds, but they are not a 'mobile phone.' The ringing in the pocket test tells you what it is. A smartphone fulfills this test. The Touch and iPad do not. Even the iPad 3G is not, because it can't ring in our pocket, because its too big. Its exactly like netbooks and notebooks, which are by definition always going to be a smaller total market size than mobile phones, because they do not 'ring in the pocket'. I hope this helped?

Then on the 99 dollar subsidised cost. Lets first move away from the USA, ok? 92% of all mobile phone subscribers on the planet are outside of the USA. Msot of those do not have subsidies to buy their phones. Lets start with the 'simple' market equation, ok? Take Italy. In Italy the price of the iPhone 3G would be a little under 600 dollars (there are some shipping etc costs) and thus about 400 Euros in its local currency. Now, the iPhone 3G has 'features' of a 3.5 inch touch screen, with a 3G network connection, WiFi, and 2 megapixel camera. And this has a price tag of about 600 dollars.

Then next to it Nokia puts its Nuron 5230 (an update to the 5230 Xpress Music). This touch screen phone has a slightly smaller screen, 3.2 inch touch screen, but it also has 3G and 2 megapixel camera. It does not have WiFi but it has the typical features that were so exciting in the original iPhone like the accelerometers so when you flip the phone, the picture goes from portrait to landscape. But the price - the real price of this phone is 99 dollars.

Now it becomes very tedious indeed for the sales guy to show the two phones side-by-side, and try to convince the Italian customer to pony up 600 dollars for the iPhone, when the Nokia has essentially all the same but costs 99 dollars. The only 'advantage' the iPhone has is WiFi. That is a big advantage yes, but not one to warrant a 500 dollar price jump.

Meanwhile there is the Apple brand yes. But the Nokia offers Xpress Music, free Ovi maps and navigation, Gmail, several instant messaging clients all out of the box.

Now listen to the sales guy. He points out that the Nokia but not the Apple can accept memory expansion cards on micro SD. Why will the salesguy do this? He wants to sell accessories on which he makes a bigger commission. He starts to sell 'against' the iPhone. The Nokia also have a replacement battery - this is a good time to spin some horror stories of a supposed past client whose iPhone battery dies and he lost all his memories when the iPhone was sent to be repaired etc. Then he compares the cameras - both have 2 megapixel cameras yes, but only the Nokia records video (why, he wants you to eat up that memory with video so he'll sell you more memory cards).

Superficially they look the same, are same size, and seem to have almost identical specs. The only big difference in the mechanical specs is that Nokia doesn't have WiFi. But it has tons that the iPhone 3G does not have. And the iPhone costs in real out-of-pocket terms today, pay now, 500 dollars more. So is it 600 dollars for the WiFi version or 99 dollars without it. If the customer at all starts to really want the WiFi, he sells you a Nokia costing 200 dollars that includes WiFi...

See what I mean about price. Yes, you and I know they are not the same, and the iPhone is far better for the user than the Nokia. But thats not the normal consumer who walks into a normal store in a normal city in normal buying conditions. The sales guy wants to make a quick easy sale, and make maximum commission. If that week the iPhone has some special sales bonus, he'll be telling that same customer about how much easier the iPhone is to use, how the Symbian system is slow and old, how Apple has so many more apps, etc. Whatever to make the sale. But nonetheless, if its 600 dollars vs 500 dollars, something like WiFi or the Apple brand can matter. Like say comparing the iPhone 3GS to the Google Nexus One or Nokia N97. But it its 600 dollars vs 100 dollars, no matter how great the Apple brand, the 100 dollar device will sell 10 times more than the 600 dollar device if their superficial specs are similar.

Make sense?

Now, about handset subsidy case. Here yes, if the consumer thinks the iPhone 3G costs 99 dollars like they think in the USA, that is of course a pretty effectively duped customer. I think that most British customers for example - a market where about half of the phones are sold with subsidies on contract and half are sold full price with prepaid phones - the consumer knows, because in every store the consumer sees always the 'SIM Free' price, ie the unsubsidised price of the handset. And they often have price ranges, you can get this phone for 400 pounds SIM free, or of your monthly contract is 25 pounds (40 dollars) you get it for 200 pounds, or if your monthly contract is over 40 pounds (60 dollars) you get the same phone for free. Those price points are my best guess as its a few years since I last lived in the UK, but that is typical of the pattern.

So back to the USA. If we have the iPhone 3G today for '99 dollars' and a 2 year contract, then Apple could still offer a cheaper model for say 49 dollars and 18 month contract. Or 99 dollars but the monthly commitment would not be 50 dollars but say 30 dollars. Those kinds of gimmicks are typical to adjust for the different prices.

I hope this helped

Now, to Keith, Tom, mark and kevin - Keith, you asked about profit share - yes, I'd love to see that too, but like I've written elsewhere, I don't have the resources to do a good job of that, and as that is mostly of interest to investors and this is not an investment advice blog, I wouldn't want to tackle that issue haha. It easy to see that Apple has the biggest share of profits in the smartphone space, with RIM and Nokia the only two others with major profit share, all others miniscule or loss-making like Palm haha..

Tom - sorry for the piece being so long. Yes you got my point and it may seem obvious or irrelevant - most who commented here and when this blog was selected as one of the best blog articles of the week by the Carnival of Mobilists seem to disagree. But happy that you see it as pretty obvious. On QWERTY I never said they have to do it, I say it would be the best way to get a big jump in market share because now they are gifting that market to Blackberry, Nokia E-Series and the upcoming Microsoft Kin phones. But no, am not saying that is the only way.

You also want to argue PC market and iPod. Fine. On the PC market once Apple was world's largest PC maker (with Apple II). They lost that. With the Mac their peak was 12% global market share, now they are 3%. That didn't go very well either. They had it, but they threw it away. They saw the laptop PCs launched by Toshiba in 1995 and pigheadedly resisted laptops until long after that market opportunity had gone and ever even took 5% of laptops globally. But with the iPod they took a different path from their peak and fought hard with expanding their product line and follwoing consumer trends - and remained the world's largest stand-alone MP3 player. I see the fork in the road. Apple can take the Mac road with the iPhone, and they'll end up with 3% of all mobile phones sold (like Macs sell 3% of all PCs). Apple's 15% global market share in smartphones in 2009 translated to 1.9% of total mobile phone handset market share for that year. They are luckly to hit 3% unless they change their strategy soon.

Tom - on unified platforms very good point. So far Apple has a nearly harmonious platform (iPad now adding some further fragmentation but its still miniscule compared to Android and totally irrelevant compared to Symbian or WinMo)

Tom - on the disoposable income argument, please see what I wrote in the above to Kendall.

mark - very good points on Apple advancing still into more markets. China only now 'happened' ie last year was development. There are opportunities in the wealthy parts of Africa, Latin America etc. Growth is not over by any means, but I am still sure the overall market share growth with one model per year, that has passed. But there are many markets still to go where Apple can pick gains.

kevin - you asked me specifically about launches of iPhone into the rest of the world and what are barriers. The big single reason is the carrier/mobile operator. They have to approve the handset first techncially, then be willing to support it in their own stores (if the carriers sell most phones) or else be willing to be sold by the independent retailers which means learning each country market individually and how their phones are sold. Note that for the iPhone it then means the carrier has to set suitable data tariffs. Apple was early on insisting on a revenue share out of the traffic generated by the iPhone. This was a big source of friction between carriers and Apple and a lot of bad blood. Apple has abandoned that requiremement but also then not offering exlcusive deals. The carriers had hoped to use Apple as exclusive so they could 'steal customers' from the rivals. If everybody has the iPhone its no longer a competitive advantage.

The interest to sit with Apple sales reps for such meetings was far bigger in those markets where iPhone could be expected to sell in reasonably large volumes ie Europe and advanced Asia. But Apple does have to send sales reps to each of the about 600 mobile operators/carriers of the world to do these discussions, or more accurately the approx 500 operators/carriers who run GSM based networks. Those discussion Apple would prioritize by their expected size of market. So they'd go to the UK before Belgium, Japan before Taiwan, Brazil before Chile etc. I wrote in my original iPhone target sales performance blog in January 2007 that this would be Apple's biggest hurdle (And again, it turned out to be true haha).

Ok, gang, that should bring me up-to-date with all responses so far. Please do continue the dialogue here amongst each other and with me, I am greatly enjoying this and learning a lot.

Tomi T Ahonen :-)

T. Gregory

Your logic is flawed on one little item. iPhone users are locked into the iPhone ecosystem. Every new phone (i.e. Handheld computer) they buy next will be an iPhone due to their investment in apps and now the iPad.

Also, you have made the top of the iPhone Death Watch.
http://aaplinvestors.net/stats/iphone/iphonedeathwatch/

Congratulations.


T. Gregory

Toni, you really don't get it. By bringing up old PC history and using your antiquated belief about the smartphone industry just shows how out of tune you are.

IBM and Apple lost in the PC wars because they both believed it was the hardware. Apple and IBM thought the consumer would still buy quality hardware, but went for price instead and turned the PC box industry into a commodity. Microsoft said it was the software and they were right. Apple has survived because they kept the vertical integration model. They make the whole widget and can do whatever they want with it.

The desktop computer industry is shrinking. Most people use laptops (or net books) as their primary computer. Apple leads, by a wide margin, in the +$1,000 category in laptops. The iPhone brought the power of the laptop into your pocket. The iPad is taking the iPhone OS and putting it in your living room and office (not desk, but the whole office, you can carry it with you). Apple is doing something that no one can compete with. Not even Microsoft knows how to get Windows 7 into a device smaller than a toaster.

Apple's OS X is scaleable. That is a huge advantage for Apple. First they shrunk OS X to fit in an iPhone, and now they are expanding it to fit desktop class devices (iPad). If you can code for OS X, you can code for iPhone/iPad.

In other words, the smart phone category is going away. The iPhone is a computer that just happens to have a phone. Nokia, HTC, etc are all handset makers. They are not operating system developers.

The medical industry, for example, loves the iPhone and now they have the iPad which even fits in lab coats. All iPhone apps work on iPads. The publishing & marketing industries, which are my industries, are embracing this truly disruptive tech.

Your old school thinking compares to what Henry Ford once said: "If I asked customers what they wanted, they would have told me a faster horse." You still think that the answer is a faster horse.

Andrew

Tomi, the first part of your blog/piece was a whole lot of Tarzan style chest beating, possibly partly justified. So After reading through that and getting to nitty gritty, you say Nokia introduced this feature, that feature, long before the iphone. But you miss the point. Nokia handsets, well thier designer teams are stuck in a hole. Nokia's touted Symbian O.S. is slow, especially on startup, and susceptible to virii. And most damning of all, Nokia release up to 20 "software update packages" for each handset model, due to functional flaws or carrier specific branding, so much so that shop sold handsets are sometimes 3 updates behind. Apple, on the other hand, well, it works out of the box, doesn't "need" a software update to work, it won't crash, reboot or lock up, the updates are enhancements. So lets compare the software updates between the example you gave, the N95. You tell me and everyone how many software releases have been made. Now tell how many for the iPhone 3G. You, and Nokia, and to an extent other manufacturers, you just don't get it.

Hillshire

Tomi, having read through this article and another recent article of yours concerning the Q1 results from Apple, AT&T, and Nokia as well as most of the comments I have three observations to make:

1. Many times you state your interpretations of data as fact. Not always but often enough to discount your credibility. I grant your knowledge and experience. Maybe it's your writing style but interpretations are not facts.

2. Your conclusion that holding at 17% in the quarter prior to a new release is a negative and supports your theory that the iPhone has peaked is hard to credit. There are certainly enough potential buyers who know that a new model is expected fairly soon that a dip in sales was expected in addition to the typical seasonal rhythm of a down swing (as indicated by just about every analyst). That there was sufficient demand worldwide to overcome those who are holding out and the expected post-holidays dip should surely be seen as a positive.

3. Which ties in with this: do you seriously believe that with a new generation of the iPhone arriving that Apple's market share will merely hold steady, let alone decline? Let alone the possibilities of new carriers in the US and abroad? Because with even a fraction of a percentage up tic, your premise that the iPhone has peaked will have been proven false. I do not accept your moving of the goal posts from "take it to the bank. Apple's global market share for the iPhone is at its peak now" to "we will be monitoring this space on this blog as the numbers come in now, thsi quarter, in the subsequent quarters of 2010, and the final numbers of 2010."

Hopefully this post does not come across being accusatory, that would not be my intention. I simply believe that you have misinterpreted the data and wanted to make sure my reasoning is clear.

Hillshire

Tomi T Ahonen

Hi T (twice), Andrew and Hillshire

Thank you for the comments

T (first comment) - haha, thanks. And yeah, good point, Apple's loyalty is above any other brand in mobile (perhaps above any other brand in tech haha). But that only helps them hold onto old customers, not grow the market share. So even if you are totally true, it won't in any way invalidate my hypothesis. If Apple only retains its current customer base as the total world market for mobile phones and smartphones grows, they would lose market share. Apple has to do 'better' than only repeat customers - but also - having the most loyal customers means they have far less 'lost customers' to recover than any other phone brand. In that way their loyalty makes it 'easier' to get new customers. Note that even with Apple's high loyalty, there is some loss where some customers did not like their iPhone or for whatever reason, switch to another brand next time.

T (second comment) - on PC analogy. I am not sure if we don't totally agree? I have been arguing for years that the mobile phone is going the way of the PC, and we have many lessons we can learn from the PC industry, that apply to the mobile industry including the diminishing margins of a more commoditized product. I think the low-cost 'Africa phones' of Nokia are perfect example of it, similar to how Dell ran razor-thin PC margins. You either had to have scale (in phones, Nokia, Samsung) to remain viable or else move away from the mass market to specialized niches like Apple did in PCs and now is doing in phones. Another example of that strategy is RIM.

I do think we totally agree? As to whether the mobile phone handset disappears into being a bit of low-cost electronics in a decade and most of the industry is in the cloud (there is that view) - I think you'll find that the major handset maker who first suggested this as a possible future scenario was Nokia and compared to their long-term rivals (Apple not being one of those) ie Motorola, SonyEricsson, Samsung and LG - Nokia has been far more aggressive in moving its company to becoming 'an internet company' and embracing the services part of mobile. Apple had certain advantages coming into it from the PC side (and Google from the internet side) but those are not Nokia's big rivals, Nokia's big rivals are Moto, SonyE, Samsung and LG - and these four are far behind Nokia in this transition if that is the future scenario you believe in.

Its not the only vision by the way.. The future could also be smartphones (moving up the scale of complexity) or a media world where the phone becomes a media platform etc. Nokia has taken an early lead in all of those scenarios, including taking control of the Symbian partnership and a more hands-on approach to future smartpohne OS with MeeGo.

Andrew - you make a good point. And yes, both Apple and Nokia (and most other brands) release periodic software updates. When Nokia release a bad phone (or very buggy OS version) they end up doing a lot of such updates. But don't say Apple didn't do any. We are up to the fourth edition of the iPhone OS and they support only one new phone model per year. The original iPhone 2G did not support MMS, did not record video from its camera, did not support the Office Suite apps, did not have folders, didn't do multi-tasking etc.. Don't tell me it was a complete OS out of the box haha.

But you have a good point. It is something that Apple has definitely done better than Nokia (updates) and recently it seems Nokia has been forced to do many updates, for example with the N97. Does that invalidate my thesis in any way? I don't think so. Most normal consumers - who don't know what a smartphone is - don't even know there is an operating system on their phone, and can't name it on their smartphone if they have one. For most normal people they want the camera to work, the internet to work, the SMS to work, etc. And then perhaps they find some apps and download some, perhaps. The iPhone users are very often already familiar with Apple products and services, so they'll know to expect something like the Mac user experience and the iTunes music store type of market. Those are not the mass market. Remember that globally only 1% of all mobile phones in use are iPhones. Those are still very much the geeks - obviously not every iPhone user is a geek - but marketing theory says when its 1% that is the very early part of the "Early Adopter" segment, not the early majority which won't start until after a given technology's adoption passes 10% or 12% of the total population.

So you are right but it really won't help Apple gain mass market customers haha.. Sorry..

Hillshire - thanks. I do hope that all of my claims of data are verifyable as provided by some widely reported third party trusted source. Mostly when they relate to reasonably recent data, like last year's numbers - there will be public sources to verify that, like in the case of market shares, when reported by Gartner, IDC or Canalys, the three sources for handset market shares.

As to very recent data, this quarter's market shares for example - I say when I am unable to calculate them (until recently) and only when enough data points are out, I can give a preliminary TomiAhonen Consulting measurement - like we now have last week. I try to be clear when any data is from muy company (like listed in the published and frequently referenced TomiAhonen Almnanac 2010). But I understand that at times I have not been very clear and it may seem like I am pushing 'my opinion' where in reality I am giving a fact. I am sorry for those misconceptions and I appreciate your feedback, I will try to be more clear.

If you had some point in mind that bugs you, and want to get it clarified - I would love to answer you here and go correct it if the blog story is misleading. Please tell me.

I do try to go by the facts and many of my peers whose livelihood is in mobile tech stats, regularly use my numbers and this blog as a resource. But you can't know that haha... Let me address whats on your mind? What numbers seemed like my opinion where I claimed them as facts.

On the point of 17% could be caused by customers waiting for the next model is valid - it actually is expected to be in effect right now in April and May and most of June, so the last days of June Apple hopes for a very strong sales pattern to fill those who waited these past few months. You are totally right, that it is a feasible pattern, that we get 3 periods of flat sales, and then again we restore growth. But - if we look at 3 years of sales, and we find the hottest period of smartphone sales ever, as the world emerges from the economic recession, if Apple was not able to gain even one percentage point of market share in 9 months, its at least as likely - and many statisticians without explicit knowledge of the mobile market specifically - would say its more likely - that the peak has passed and the market share will turn to decline after this pattern.

Now, we will know soon enough, so please come back. I will of course report it when we get the next market share data for the iPhone in July for this current quarter. I have been very clear that both patterns are possible - and that my hypothesis that Apple's market share has peaked - is not solely based on the January pattern, it is based on many factors mostly relating to competitors, Android and Samsung Bada in particular.

Your point number 3 is exactly correct. Yes, I said we were at the peak when I wrote that in early April. If we see increase in market share of one percentage point - then its too much yes, and I am wrong. But I am confident, all data seems to support it - especially now that as Apple market share held flat for 9 months, its 3 biggest rivals in smartphones, Nokia, HTC and RIM have all grown market share. Apple market share has peaked. I am sure of it. But we will see - if Apple market share is in 18% from April to June - you win and I lose haha, and I'll blog it here of course. Please also go read my assumptions part - if Apple releases more than one phone - which I am hoping for - then they will resume to gaining market share. Current gossip does not suggest Apple is doing that. And its possible Apple's June iPhone is as revolutionary as the original iPhone 2G and all tech press go gaga over it - in that case, the iPhone market share peak would shift by one year - but still won't grow. For Apple to grow, they need more than one model per year.

But you are totally right, its an absolute statement, very VERY easy to prove come July 20120 and January 2011. Please do come back here at those times and we can see. But I trust you will acknowledge that if I turn out to be right, thats a gutsy call this April, eh? Obviously if it turns out wrong - I've got egg on my face publically on this widely-read and syndicated blog haha.. And I'll be here to eat the humble pie. Won't be the first time I got it wrong in a published forecast..

Thank you for visiting

Tomi Ahonen :-)

T. Gregory

Tomi again you are missing the point (ha ha). By Apple's ability to MAINTAIN customers grows market share. Their customers are not leaving the platform, but others are leaving. Your logic is so flawed that you made an assumption that no one will buy an iPhone after their contract is up. Apple has an ecosystem. Do you know what that means? The iPod was the Trojan Horse and is the basis of the Digital Hub that Jobs envisioned with the first iMac in 1998. Everything works together.

What other company has vertical integration like this?

None. The smartphone industry is over just when it started. It is no longer going to be run by handset makers. The commuter people are taking it over. The old school players, Nokia, Samsung, HTC, etc will need to reinvent themselves if they want to survive the next 25 years.

Apple, like many others have told you, is not motivated by market share. If they were, they would have licensed OSX years ago. Nokia used to make a quality cell phone, but technology got in their way so much that they ignored the consumer. Give em a device tat has an owners manual that weighs more than a phone book and you will fool them into thinking they have something great. The magic is not making things more complicated, the magic comes when it becomes intuitive. The iPads instruction manual is a postcard.

Your ignorance to disruptive tech is overwhelming.

And I mean this in the most condescending way I can say it as your response defies basic logic as well as the data.

Tomi T Ahonen

Hi T

Welcome back. But that new comment now is not fair. I did specifically say, you have to have read the actual blog article before posting comments here. Your comments now suggest that you didn't read the article. Because I let your previous comments stay, I will now respond to you, but be careful what you write.

Your point is totally - 100% - in line with my original blog. I said - read section at end of blog 'Apple laughing all the way to the bank' that the iPod Touch and iPad extend the reach of iPhone and both support each other and that none of Apple's rivals have this and Apple is making a killing with its wider range.

So you, T, and I mean this haha to quote you 'in the most condescending way I can say' - didn't read the article and are now arguing a point I have already established to be true. You are the ignorant visitor here to this blog making a bogus argument. Your next comment better reflect that you read the full article or else I will delete it as I have deleted about a dozen comments so far. Sorry. I am not going to waste my time 'responding' to comments by those who didn't read the article.

Tomi Ahonen :-)

Andrew

"When Nokia release a bad phone (or very buggy OS version) they end up doing a lot of such updates. But don't say Apple didn't do any. We are up to the fourth edition of the iPhone OS and they support only one new phone model per year. The original iPhone 2G did not support MMS, did not record video from its camera, did not support the Office Suite apps, did not have folders, didn't do multi-tasking etc.. Don't tell me it was a complete OS out of the box haha."

Correct, the 2G iphone didn't have those features, no arguement there. But it never purported to, and what it did have, well it worked. 4 editions of the Iphone OS, no arguement there. But that is the sum total for thier complete lineup of 3g and 3gs. 20 "updates" on average for each Nokia model because something is buggy or broken.......whew! And you skipped the part about the Synbian OS being a target for virii.
Anyway lets go down to the all hail the conquering saviour, the Android based handsets from other manufacturers. HTC Desire for example. Released (rushed) with much fanfare to Australian consumers last week, consumers who at time of writing are still lost because the GPS just doesn't work (google whirlpool forums) and still waiting for a fix on that. Yet another manufacturer whose product didn't function out of the box.
Apple not only know how to design a product to be something to behold as being crafted finely on the outside, they know how to make it work for what they say it will do, and no more.

Mathew Bracken

Written a nice post. I read & appreciate it.

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