Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry. In the coming weeks look for columns from Current Analysis’ Peter Jarich, IDC’s Shiv K. Bakhshi, Ph.D., and Enderle Group’s Rob Enderle.
In 1996, once-and-current Apple CEO Steve Jobs was quoted in Fortune saying, “If I were running Apple, I would milk the Macintosh for all it’s worth — and get busy on the next great thing.” He hinted that this “next great thing” could very well be a new platform, noting the “PC wars are over. Done. Microsoft won a long time ago.”
That long-ago prediction took a roundabout path to the introduction of the iPhone, though. For one thing, Apple did not milk “the computer for the rest of us” and discard it. Rather, since Jobs’ return, Apple has invested heavily in bold new designs, such as the recent MacBook Air, and has created five major revisions of the Mac OS, not including one that shifted the Mac platform over to Intel processors.
Apple’s investment has helped drive Mac sales to record levels; its 2007 domestic retail unit sales reached 9%, up from 7% in 2006, according to NPD consumer tracking data. On the other hand, Apple shied away from the phone business for most of Jobs’ second tenure, first failing with an attempted collaboration on the Motorola Rokr.
Since its 2001 introduction, the iPod appeared to be Jobs’ next great thing; but, despite its immense commercial success and the range of media Apple grew to support on it, it was never a strong software platform. The iPhone, however, is. Apple’s cellphone was the third most popular phone sold domestically in the fourth quarter of 2007, as well as the best-selling smartphone, according to NPD Mobile Phone Track. These are impressive results particularly given the premium for which the phone sells, even over other smartphones. According to NPD Mobile Phone Track, the average selling price for a handset in the fourth quarter of 2007 was $82; for a smartphone, it was $215.
The SDK
There are two ways the iPhone SDK is strategically relevant to Apple. First, by opening the door to new applications, Apple can protect against its sleek handset becoming a “me-too” fashion fad the way the Razr did. Applications will also help personalize the experience for users. Second, the iPhone is a key Trojan horse for Apple’s OS X operating system. At its March 6, 2008 unveiling of the SDK, Apple played up the iPhone’s enterprise features and showed off games — thereby taking on two markets that have been historically weak for Apple.
The iPhone, in fact, stands to circumvent the blue wall of IT management that has long stymied Apple in the enterprise since even cellphones used for business tend to be personal and unmanaged purchases. Meanwhile, the iPhone stands to capitalize on the Mac’s popularity for media playback and for leveraging leading-edge Web functionality, such as social networking.
Yet, although Apple has provided a central point of distribution and allowed for on-device purchase, it remains to be seen if customers will bite. IPhone applications are more fully differentiated from commodity Java and BREW fare than are the applications of other smartphone operating systems. However, the third-party applications that helped lift the Mac to prominence — such as Excel, PageMaker and Photoshop — were all focused on professional productivity. Even today Apple’s bundled iLife suite is focused on personal creative endeavors.
Making the iPhone a more stable and enjoyable user experience for a range of services may not yield great ROI for the $100 million iFund, but it will help drive Apple’s hardware sales — a formula that has been working well for Apple for the past decade.
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