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June 11, 2010

Comments

Manu

@Tomi :- Like you, I don't have analysis but what I have is my experience & understanding of south-east asain markets, which I have acquired being a fairly long mobile phone geek. I'm in agreement to what you say about smartphone bloodbath in general but in relation to Apple, the scenrio can quickly change given -

"If Apple concentrates on China & South-East Asain markets. If it discovers carriers which can subsidize the iPhone4 the way carriers do in U.S and if they can release iPhone4 here too in time, don't miss me when I say - A lot of potential iPhone4 buyers sits closely in these markets. And that lot of buyers considering density of population in given countries can truly prove "Game Changer" for both Apple & smartphone statistics. We already have an example of that surge in shape of China earlier this year."

OR

"If Nokia takes the initiative and launch their smartphones at corresponding time to its west release it can sieze the oppurtunity. But the problem is Nokia seems to have messed up several things during its transition & their strategies remains poor. How can anyone justify the fact that Nokia decided to announce N900 last week here. Come on, you announced that MeeGo wouldn't be commercially launched on N900 two weeks earlier & week later you announce release of a device which is obselete. We all know Nokia gearing itself for bigger and better products & N8 certainly looks promising. However, Nokia needs to get its act together or it should be prepared to bear a dent in its market ratio."

As far as question of Android is concerned, I don't see it doing as good as U.S Market primarily because it is in its infancy here but yes Android models are now coming at a pace. HTC has already released Hero & Legend and will release Desire too. Samsung & SE has also announced their Android based phone's. Yeah I'm among early adopters of Andriod in this part of the world with extremely elegant & show-stopper "HTC Legend".

I'm in agreement with @Kevin (really appreciate your depth of analysis for a given issue) on issues for Andriod. There is urgent need of joint action plan by Google & h/w manufacturers to address long pending issues of Android users before they mount to uncomfortable limits.

Brad

Tom,

I don't know about New Zealand, but the numbers I see don't agree with what you are saying for Australia.

"Analyst group IDC has forecast that Apple's iPhone could knock Nokia from its mantle to become the No 1 smartphone in Australia by the end of the year, after quadrupling its share of the market in the year to March (see table below).

IDC said the iPhone's Australian market share increased from 10.2 per cent during the first calendar quarter of 2009 to 40.3 per cent during the same period for 2010, bringing the gap between it and leader Nokia down from 15 per cent to just under 5 per cent." The article goes on to say Apple will pass Nokia this year.

(http://www.theaustralian.com.au/australian-it/surging-iphone-hot-on-the-heels-of-nokia-as-australias-no-1-smartphone/story-e6frgakx-1225879621669)

Remember too that Apple is getting $600 or so per phone in revenue (and has been consistent since it began offering smart phones), Nokia, $175 (and has been falling). I think the announcement today of Nokia downgrading sales and profit estimates is just the continuation of a long fall unless they get their act together. They are like GM obsessed with market share and making less and less money as they cut prices to try and compete with competitors who don't have to sell at a mark down. They are getting squeezed by Apple and Android on the upper end and Chinese and others on the low end.

Like others have said it is not about the hardware, it is about the total ecosystem. Do you realize that when you buy an application, music, movie, etc you can share it with your entire family easily and for no additional cost? You can put it on your teenagers touch, your wife's iPhone and your Ipad? That many of the applications you buy once and they work for both the iPhone/iTouch and the iPad (full screen, natively)? There are roughly 100 million devices that the apps/music/movies work on? That movies and apps work on not only on the phone/Pad/Pod but on the computers and TV's? It is not about hardware.

Nokia seems to be trying. Hence the new push in operating systems. It is not clear though wether they can succeed or not. Take video calling. On one hand you say that Nokia had it a long time ago, on the other hand you say nobody uses it. Doesn't that indicate Nokia's problem? They have the know how to put hardware features in but do they understand it's no longer hardware and just mobile phones?

I would love to be wrong but nothing I see from Nokia leadership seems to indicate they understand this. Apple will let them sell their low end phones, their low end smart phones, and laugh all the way to the bank. I'm with Kevin, but I'll go further and say that Apple's mobile revenue will pass Nokia's by the end of the year.

Alexei Poliakov aka @yaromir

Hi, Tony. Great post as usually. I strongly believe it doesn`t matter whether Nokia or likes put this and that feature on mobile phone before, but what really matters is the implementation of that feature. Apple just re-invents things others sucked at.

Being in Japan I can say locals started loving iPhone and recent iPhone 4 pre-order craze here just proves it. Before iPhone, the so-called smartphone market in Japan was miniscule. iPhone is a "black ship" for Japan mobile phone market and Steve Jobs is admiral Perry. Now other foreigners - the Android phones have come to Japan and they continue further cracking the monolithic surface of domestic players` pancir. But back to iPhone, in some recent surveys up to 50% of respondents say they`ll consider buying iPhone as their choice of smartphone.

Alexei Poliakov aka @yaromir

Sorry, I meant Tomi not Tony in my previous comment...

RajP

It still amazes me how many people simply don't get Apple, and assume that its success is due to delusional customers, or pretty candy-coloured buttons, or marketing. To these people, the success of Apple products simply does not compute. They wave huge checklists of features that other phones have had for years, no, decades. They talk up superior competitor tech specs. They puzzle over how this could be mathematically possible.

To these people I say: it's not the What. It's the How.

Apple's mantra has always been to take a basic set of features that can be done in a reasonable time, and implement it better than anyone else. I don't need a larger set of clunky features. I need an essential set of features done frustration-free. Take a look at Apple's ads. They show the product working. Go to Apple's stores. They have fully working products on display showing what the product can do, not dummy shells with screenshot stickers.

Comapring megapixels on a camera is one classic example. Jobs clearly explained that they decided to stick to 5 megapixels because it lets them build a backside illuminated sensor that makes for better pictures. It's not about 5 vs 13. It's about "which pictures look better overall?" Also, I am pretty sure Apple could have put in a more powerful flash if it wanted to. But it decided to pick the optimal solution in terms of picture quality and battery life.

Raj

HCE


Not much to add to what Lee, Brad, Kevin, Raj and others have said - it is quite clear that Tomi does not get the appeal of the iPhone.

I'd just like to point out a couple of news items that have some relevance to this issue.

First there is Nokia warning on profits and also its mobile device value share and they cite several factors including competition at the high end of the market - which essentially means Apple, Android and RIM.

It is clear that they are maintaining market share by slashing profit margins and there seems to be no end in sight. They cannot continue this forever. Android phones are being discounted but not to nearly that extent and Apple has not even *started* discounting yet. If they do, Nokia will be further squeezed.

Then there is what we are seeing in iPhone 4 pre-orders. Way above even Apple's expectations - so much so that their servers could not take the load. Indications are that this isn't just people who are upgrading - there are a ton of new users getting on to the platform for the first time.

Of course these are just two data points but they are strongly indicative of where the momentum is.

- HCE

Mark

Some interesting points from the Apple guys, however...

1) 600K pre-orders is good but Apple have a history of good first day/pre-order sales. The truth of the tape will be in the next couple of quarters' earnings. Tomi has already mentioned he thinks it's a 30-40 million selling product, the question is if it can grow share.

2) Nokia's downgrade has been mentioned. I would point out that since they haven't released an N Series phone for well over six months this isn't surprising - aside from a few E Series phones there's no high end presence to compete. Furthermore, according to Nokia the competition comes from Android, not the iPhone whose numbers were already included in their outlook.

To suggest that either is indicative of the way the wind is blowing is a bit premature. Not saying Nokia will make a huge comeback with the N8, C7 and others but if they stop the rot - and put a dent in Apple's sales as a result - then that puts a different complexion on things.

Apple's selling points are ease of use and cool factor. They remain top of the pile in the former category, however that's being eroded - it's competitors don't have to be better, they just have to be acceptable. The latter is starting to fade, especially in Europe where there's a lot more choice now. Although merely anecdotal about a third of my iPhone owning friends are considering jumping ship purely because 'everyone's got one now'. Of course that means two thirds are still happy with them, but next year...?

Finally, Lee made the point about web traffic. Actually the iPhone doesn't drive web traffic. What it does do is get over represented in Hitlinks' stats. If you look at Smaato it's well off the pace.

Apple does have a large and very loyal fanbase. I can't help but think it's all getting a little bit boring though.

HCE


Talking of video calling. Here is an excerpt from David Pogue's review of the HTC Evo in the New York Times.

"After two days of fiddling, downloading and uninstalling apps, manually force-quitting programs and waiting for servers to be upgraded, I finally got video calling to work — sort of. Sometimes there was only audio and a black screen, sometimes only a freeze-frame; at best, the video was blocky and the audio delay absurd."

We can talk till we're blue in the face about how people had video calling ages before Apple and they have it over 3G networks while FaceTime is only Wifi. However, the above quote tells you that this feature seems to be next to useless in a lot of cases. Of course, we don't have a review yet but I'm fairly certain that FaceTime will work as advertised in most cases - which is why people will actually use it.

That's really the point here. It isn't about the number of bullet points on a feature list. It is about which features are implemented well and are usable.

As I've said before on this blog, I don't think Apple can continue their current path forever. Even if Tomi does not see it, pretty much all smartphone manufacturers recognize what Apple is doing and are trying to catch up. In 2-3 years they could have bridged the gap - at that point Apple will have to broaden its appeal by introducing more models, more form factors and discounting. But that day isn't here yet. There's still room for Apple to grow.

- HCE

HCE

@Mark

1. 600K pre-orders is exceptionally good - it is something like 10 times the number of pre-orders for the last iPhone.
2. Regarding the N8 - pretty much all the reviews I have read seem to say that the phone is underwhelming. Good hardware married to dodgy software.

As to the rest of your points, not much disagreement. The iPhone's advantages will fade in time but I think they have a significant advantage in some ways right now. In another couple of years that may not be the case.

- HCE

Mark

@HCE

1) You're right it is. I'm still more interested in the following quarter's numbers precisely because Apple has a huge number of early adopters. I agree with Tomi - this is a 30-40 million product (prob nearer the high end) and not small potatoes. Let's make no mistake about that.
2) That depends what you're looking for - as a media device the N8 is leagues ahead of the iPhone. As an app/browsing platfrom the iPhone is way better than the N8. I don't think the UI is as good as the iPhone's and I'm pretty sure the US based tech journals are going to have the usual moans about fonts and icons but I rather think it's a good idea to let the public have a few of pre-release models so Nokia can address the concerns. Bottom line is I don't think anyone who has used a Symbian device is going to be bothered by the UI at all because it's noticeably better than it was. iPhone and Android users aren't going to be convinced but this is more about stopping the rot than anything else. Like I said, all it has to be is good enough. Whether it is or not time alone will tell.

Your point about video calling is interesting. One thing Tomi's missing is that WiFi is a lot more ubiquitous these days so there's more reason for face Time to succeed. That said, it's a minor function at best for the moment.

PatrickHC

I would like to state that as much as RIM, HTC and Nokia may have more sales than the iPhone, what we have to consider here is that these manufacturers have more than one model compared to just the one iPhone model.That said, is it really fair to compare sales of say the Blackberry line-up of the Curve, Bold and the Storm, to just the one model of the iPhone? Seems like this is what is exactly happening and that proves that Apple and indeed the iPhone is a major force to reckon with. They are on top in that their one model is constantly being compared to and being paired up with multiple models of other manufactures. When you have just one model in the market and hold up such market share (less market share than others such as RIM, Nokia etc) then that should show that indeed Apple is on top of the pile. What would be interesting is for each of the other manufactures RIM, Nokia, HTC, Samsang to pair up their top phone models against the iPhone and compare the sales at that level. My feeling is that most of these other manufactures only beat the iPhone in sales because of the boost they get from other low-end smart phones in their line up.

Romain Criton

I'd like to add my voice to the several commenters (especially Yap and RajP) who have outlined that Apple always favors Quality vs. Quantity, and that's what makes Apple products so good and appealing.
They've done very well with this strategy so far and I'm sure it will last for some time.

Tomi T Ahonen

(sorry everybody, I had heavy travel past 2 weeks, am here to reply to next set of replies. i am at replies from June 12)

Hi mark, Jason, Fernando, weiphi & em. Replies to all individually

mark - actually no, I am not saying Apple market share will decline because it lags in hardware features. I have argued (elsewhere on this blog, many times, in very deep detail) that the reason Apple is losing market share is competition. The big rival is Android right now, will be Samsung towards the end of the year and next year, plus more competition from Nokia's first serious effort against iPhone (the N8) and a revitalized Palm ie HP, and Microsoft. What I had written in March, was that we had to wait to see the "June iPhone" waht turned out to be the iPhone 4. It was quite plausible that Apple would release a superphone now, that totally re-set the game (it did not, the iPhone 4 is evolution in the laggard US market, and very ho-hum in the European and advanced Asian markets where far more advanced smartphones are aleady sold, and of those 5 'improvements' in the iPhone 4, four of them were commonplace last year, and 3 of them were normal in top end phones - BEFORE the ORIGINAL iPhone 2G. Please understand mark, that I was referring to previous blogs, the arguments of why Apple is already now losing market share (its peak was Q3 of last year at 17%) have been argued elsewhere on this blog.

Jason - I agree, haven't seen any reports of NZ success in iPhone. Will be curious to see if any exist.

Fernando - thank you for many detailed and fact-filled and considered replies to others on this blog. You are doing my job for me, thank you so much.

A great point you make that had not hit me, is that yes, its very true, while Apple has a determined focus on making its iPhone particularly useful for one type of customer, so too is RIM - at least as much (arguably even more focused, as RIM has been far less willing to 'go mainstream' when compared to Apple and their new models in the past 3 years). I had never thought of that, yes RIM is keeping very serious focus on being the ultimate texting phone, whether wireless email, or SMS, or Blackberry Instant Messenger, or Twitter or Facebook or whatever social networking uses..

weiphi - very good points and I kind of agree with you. The strategy Apple has is brilliant. They have been a tiny PC maker for many decades now and by all reason (especially considering they were 'not conforming' to the industry standard Windows for most of that time) should have died and disappeared years ago. Same in PDAs (Newton) and iPhone and now iPad (tiny tiny tiny fraction of portable PC market - with totally unreasonable amount of hysteria about their tablet PC). The only product they've had since the Apple II, that has had anything near a mass market level of adoption was the iPod music player (not the Touch) and even with that today they have only about a quarter of the global stand-alone MP3 player market, and only about a tenth of the market if we add in the MP3 playing music-phones - which like Apple CFO Oppenheimer himself said, is part of the same market.

Apple should have disappeared, yet somehow they survive as the rebel, with totally radical business models, and creating what marketing experts call 'new market space' (as we wrote in our book Communities Dominate Brands with Alan Moore, when we made iTunes a case study of exactly that phenomenon, how Apple was able to re-invent the portable music market).

Ever since iTunes, the iPod has supported Mac sales and Mac sales supported iPod sales. The iPhone added to both and now the iPad does the same. A survey by Piper Jaffray of early iPad owners found that 92% owned an iPod, 74% owned a Mac, and 66% owned an iPhone - clearly its part of an Apple family of users.

With all that said, their total cumulative shipments of all iDevices will pass 100 million in June (said Jobs earlier this month). That is not installed base. If we're kind and say 80% of all shipped iDevice units are still in use, we're at 80 million devices total potentially reachable market (it is definitely less than this) - then the 'reality' kicks in.

Compared to the PlayStation Portable or Nintendo Gameboy DS or Kindle, thats a meaningful number. Compared to 'traditional' PC industry numbers - its a significant number. But compared to mobile, its meaningless. The installed base of mobile phone subscriptions worldwide is 4.8 Billion now in June. Out of that SMS text messaging is used by 4 billion people. SMS text messaging alone earns more than 100 Billion dollars. So take your 'iPhone compatible' platform, just on SMS we have... 50 times bigger reach. If we assumed there was no multiple ownership of Macs, iPods, iPhones and iPads (patently not true) the absolute maximum planetary penetration of iDevices would be 1.2% of the planet. SMS is used by 59% of the planet. And even this is not a 'fair' comparison, because we should compare the installed base to 'SMS capable' phones, not active users, the difference is even bigger.

Take last year's 715 million dollars of App Store revenues, on SMS alone, we have 140 times more revenues! I do see what you mean, it is smart by Apple, as a tiny player to focus on the rich end of the economy, the wealthiest nations, on a highly desirable, sexy, and super-user friendly device. A luxury product. But for our readers, it is a tiny tiny tiny fraction of the economic opportunity in mobile. Yes, the 'platform' is clever strategy by Apple, but that is mostly a bubble that will soon burst, when the economics of the facts come out and it becomes obvious that most iPhone App developers will never ever make money on their investment (in Apple iPhone Apps). Some will migrate to larger platform smartphone apps - RIM/Blackberry far bigger installed base in the USA, and rest of world, Symbian far far bigger than both RIM and Apple combined. But my advice on this blog and in my books has been for years, that the real big money is not in apps (there is some, mostly on business/enterprise side of apps) but in the services - ie SMS, MMS, WAP etc. That is where literally there is 250 BILLION dollars today. Not 715 million of which Apple takes 30% haha..

One last thing - currently to US based analysts, investors and tech bloggers it seems like Apple cannot do anything wrong - sold 2 M iPads in two months, sold 600,000 iPhone 4 units in the first day etc. What happens to Apple valuations and investor confidence when the App Store myth is exposed, when Apple iPhone market share is reported to have fallen, etc? They are setting investors up for massive disappointment right now, by not being totally honest about where they are. Dont' you think? A very perilous position, if I am proven right? And then please look at my track record on Apple, when I have been right, I have been usually the world's first to say so - the only times I've been wrong is where I went with the total industry consensus view like this year Q1 'China Surprise' sales numbers. If my numbers are right - there are going to be some severely disappointed Apple investors, don't you agree? (if I am wrong, I will be the first to write so in big headlines on this blog, as I have done in the past when I've been wrong haha)

em - thanks for the link to number 8. Yes, Asia is world's biggest phone market and will shortly become the world's biggest smartphone market (as China and India ramp up to 3G). Yes it can be quite important - remembering that in both China and India, Nokia is the best-selling phone and a highly valued phone brand.

Thank you all for writing. I will shortly return with more specific replies.

Tomi Ahonen :-)

mark

"I have argued (elsewhere on this blog, many times, in very deep detail) that the reason Apple is losing market share is competition."

There is always competition. There has been since iPhone Day 1 in Jan 2007. Why exactly will this competition cause Apple to lose market share?

You seem to say that it's because of Apple's lack of new hardware features in iPhone 4. My response is that you pointed out the iPhone's lack of new hardware features (or lag in including old hardware features) back in 2007 and 2008 and 2009 on this blog, and yet Apple has gained share year-over-year every year. So you're saying it again about iPhone 4. What has changed in the"competition" or your argument? Why should I believe you?

em

@Fernando Guillan

The link discussing Asian Lucky and Unlucky numbers is in the end, after the red text "Posted by". It refers to Wikipedia page "Chinese lucky numbers"

What Wikipedia says in short is that in some parts of Asia number 8 is pronounced like "prosperity" and number 4 is pronounced like "death".

Note Nokia (like other manufacturers) is skipping number 4 in its model names. You see C1, C2, C3, C5, etc. No number 4. I guess number 4 is missing from every manufacturer except Apple.

Andrew S

Hello Tomi, a VC pointed me to your post on Nokia a while back and I found your blog painting quite a nice narrative. Unfortunately I don't think it matches quite well with financial reality.

To a corporation, ultimately the goal is to grow and maximize profit. Apple has done this to the rate that it is valued at $240B, 8x that of Nokia. That is the ultimate expression of how your narrative of Nokia being some sort of market leader and Apple simply following in their footsteps is wholly misleading. I suggest looking at not market share, but the total share of profits that Apple has in the global smartphone and global portable music player market.

Apple wins by offering a product that normal people can use. They make a product that people enjoy, not a product that frustrates people as 90% of other smartphones do. Your narratives are about features and numbers, but Apple's are about humans, and the one number they have won in is profit. What was telling about your post in 2009 about Nokia was their focus on profits for carriers. SMS was the most profitable feature for carriers, so Nokia focused on SMS. Apple focuses on making awesome devices for humans, Nokia focuses on making awesome devices to get more money to carriers. Who won that battle?

Phones, like computers, cannot be compared by feature checklists. It's like comparing cameras by megapixels, or comparing computers by MHz.

Andrew (ex-Nokia user, now Blackberry user)

Polly

J'ai récemment commencé à utiliser le blogengine.net et je avoir des problèmes ici? sur votre blog vous dites que nous avons besoin pour permettre à des autorisations d'écriture sur le dossier App_Data ... malheureusement, je ne comprends pas comment l'activer.

white iphone 4

Hi, where did you get this information can you please support this with some proof or you may say some good reference as I and others will really appreciate. This information is really good and I will say will always be helpful if we try it risk free. So if you can back it up. That will really help us all. And this might bring some good repute to you.

white iphone 4

No wonder, with white iphone 4 in your hand will make you be the focus of the crowd! You won't miss it!

Henry Peise

As you already know the difference between the cameras in these phones is quite big but it was interesting to find out just how big using white iphone 4 and iphone 3. Check out the shootout gallery inside.

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