A bushel-basket full of Apples

Almost immediately after the news broke re Apple's iPhone, Allan Harris and I scratched our heads, befuddled as we tried to understand, "Why Cingular?" At best, Cingular is a tertiary provider, its customer service and technology sucking wind behind the leaders. And what is this about relying on GSM technology? Even admitting that the iPhone is less a phone than a smart(er) communications device, why use GSM? Too much data on its thin pipes, and...

Allan reports from third parties that Cingular will roll out its own EVDO-like (Evolution Data Only/Evolution Data Optimized) high speed data network this summer, maybe in time for the iPhone. But Allan "finds that answer only adequate, as it still doesn't explain Jobs choosing a slower, less robust data network when better technology is available on better networks, i.e. Sprint and Verizon, right here, right now. But I also think we don't know all that Jobs, Apple, and Cingular know... Not yet, anyway."

I could not agree more with his two final statements. We can only speculate. Think Secret reports the iPhone represents just the first of several wireless products Apple/AAPL plans to launch exclusively with Cingular over the coming years. While terms of the agreement do not appear to restrict Apple from delivering other products with different mobile carriers, it appears that products launched jointly with Cingular will remain Cingular exclusives for the duration of their market life-span. Unconfirmed reports from other sources suggest a version of the iPhone capable of operating at faster network speeds is in the works for an early 2008 release.

The LA Times reports...

"... But the revolution is already well underway in Japan, where cellphones are used for everything. Besides downloading music and surfing the Net, Japanese use their cellphones to navigate their way home by global positioning system, to buy movie tickets and to update personal blogs from wherever they are.

"They have been a natural extension of daily life here for the last few years, spurred by Japan's decision to be the first country to upgrade to third-generation mobile-phone networks, or 3G, which increase broadband capabilities and allow for better transmission of voice and data.

"Apple's iPhone, by comparison, will operate on a second-generation network.

"It was 3G that sparked the boom in music downloads that makes it common for phones to be used as portable digital music players here.

"And it is 3G that has led the Japanese into a world where they can watch live TV on their phones and use them as a charge card to ride trains or buy milk at the corner store or take a taxi. Ticket Pia, Japan's major entertainment ticketing agency, has been selling e-mail tickets to cellphones since October 2003. The phones also can be used to conduct conference calls among as many as five people.

"Another widely used 3G feature enables users to point cellphone cameras at bar codes and be directed to websites. For example, every seat in the Chiba Lotte Marines baseball stadium has a bar code, which takes a cellphone to a special home page..."

The Washington Post comments...

"The iPhone is a cool innovation," said Verizon Wireless spokesman John H. Johnson. "But it's only as good as the network it's on. It will be six months before anyone knows how those two pieces will work together."

Some analysts suggested the exclusive deal with Cingular was the result of undisclosed agreements regarding profit distributions, shared advertising or other matters.

But Glenn Lurie, Cingular's president of national distribution, said the two sides reached compromises.

"Apple is used to getting what it wants, and we're used to getting what we want, so we both had to bend a little bit," he said, adding that Cingular took a risk by signing the agreement before seeing the device.

Likewise, Apple was looking for "a partner that was trying to innovate, and the similarities we've had with Cingular were more than you might expect," said Eddy Cue, Apple's iTunes vice president.

And with Apple's ambitions to market the phone globally, Cingular seemed like a logical choice. Cingular -- unlike Verizon Wireless and Sprint Nextel -- operates on a technology standard known as GSM, which most cellphone providers in other countries use.

"When you go to the world with a phone, it has to be based on world standards, it has to be GSM," Bajarin said. Others, however, noted that T-Mobile also uses the GSM network but was left out of the deal with Apple. Some said Apple could develop an iPhone compatible with the CDMA network used by Sprint Nextel and Verizon Wireless.

Finally, The Economist offers its thoughts, albeit more on the iPhone itself...

"WE'RE going to make some history here today," said Steve Jobs this week at the beginning of his annual speech at Macworld, his company's cult-like trade show in San Francisco. He was as good as his word. First, he launched a product that promises at last to bring digital entertainment from people's computers to their television screens without fuss. Then he unveiled an even more impressive device that transcends the description “mobile phone”.

"The mobile phone is called the iPhone. It will go on sale in America in June starting at $499, in Europe in the autumn and in Asia next year. The television-set add-on is called Apple TV and will hit stores next month at $299. With these two products, Mr Jobs intends to enter and transform new industries, and ultimately people's lives—just as he did in 1984 when Apple transformed computing with the launch of the Macintosh, and again in 2001 when it introduced the iPod, which shook up the music industry."

So it seems we have something of a conundrum. Until we read David Pogue, who conducts a Q&A FAQ...

Does it get onto the HSDPA (3G) high-speed Internet network that Cingular has rolled out in a few cities?
–No. But Steve Jobs said a later version of the iPhone will — once there’s enough HSDPA coverage in this country to justify it.

“Why is everyone missing the fact that this phone/device will seamlessly switch between Edge and Wi-Fi saving big $$$ on data rates?”
–Because nobody bothers to post about what they like. If Internetters can’t say something disparaging, they say nothing at all.

Plenty of excellent questions and answers on David's blog; I suggest you mosey on over and check it out. For all that, here is David Pogue's complete (p)review of the iPhone...

Remember the fairy godmother in "Cinderella"? She'd wave her wand and turn some homely and utilitarian object, like a pumpkin or a mouse, into something glamorous and amazing, like a carriage or fully accessorized coachman.

Evidently, she lives in some back room at Apple.

Every time Steve Jobs spies some hopelessly ugly, complex machine that cries out for the Apple touch - computers, say, or music players - he lets her out.

At the annual Macworld Expo in San Francisco, Mr. Jobs demonstrated the latest result of godmother wand-waving. He granted the wishes of millions of Apple followers and rumormongers by turning the ordinary cellphone into ... the iPhone.

At the moment, the iPhone is in an advanced prototype stage, which I was allowed to play with for only an hour; the finished product won't be available in the United States until June, or in Europe until the fourth quarter. So this column is a preview, not a review.

Already, though, one thing is clear: the name iPhone may be doing Apple a disservice. This machine is so packed with possibilities that the cellphone may actually be the least interesting part.

As Mr. Jobs pointed out in his keynote presentation, the iPhone is at least three products merged into one: a phone, a wide-screen iPod and a wireless, touch-screen Internet communicator. That helps to explain its price: $499 or $599 (with four or eight gigabytes of storage).

As you'd expect of Apple, the iPhone is gorgeous. Its face is shiny black, rimmed by mirror-finish stainless steel. The back is textured aluminum, interrupted only by the lens of a two-megapixel camera and a mirrored Apple logo. The phone is slightly taller and wider than a Palm Treo, but much thinner (4.5 by 2.4 by 0.46 inches).

You won't complain about too many buttons on this phone; it comes very close to having none at all. The front is dominated by a touch screen (320 by 480 pixels) operated by finger alone. The only physical buttons, in fact, are volume up/down, ringer on/off (hurrah!), sleep/wake and, beneath the screen, a Home button.

The iPhone's beauty alone would be enough to prompt certain members of the iPod cult to dig for their credit cards. But its Mac OS X-based software makes it not so much a smartphone as something out of "Minority Report."

Take the iPod features, for example. As on any iPod, scrolling through lists of songs and albums is a blast - but there's no scroll wheel. Instead, you flick your finger on the glass to send the list scrolling freely, according to the speed of your flick. The scrolling spins slowly to a stop, as though by its own inertia. The effect is both spectacular and practical, because as the scrolling slows, you can see where you are before flicking again if necessary.

The same flicking lets you flip through photos or album covers as though they're on a 3-D rack. All of this - photos, music collection, address book, podcasts, videos and so on - are synched to the iPhone from Apple's iTunes software running on a Mac or Windows PC, courtesy of the charging/synching dock that is included.

Movies are especially satisfying on this iPod. That's partly because of the wide-screen orientation, and partly because the screen is so much bigger (3.5 inches) and sharper (160 pixels per inch) than those on other iPods.

The iPhone can get onto the Internet in two ways: using Wi-Fi, at least when you're in the presence of a wireless hot spot, or using Cingular's disappointingly slow Edge network.

That's right: the iPhone's exclusive carrier will be Cingular. (Nor is the phone "unlocked"; you can't use it with any other carrier.) At least it's a quad-band G.S.M. phone, so it will work overseas.

You can also conduct text-message conversations that appear as a continuous chat thread. And like any smartphone, the iPhone can download e-mail from standard accounts at regular intervals. In fact, Yahoo will offer free "push" e-mail - that is, messages will arrive on the iPhone in real time, just as on a corporate BlackBerry.
The iPhone is not, however, a BlackBerry killer. The absence of a physical keyboard makes it versatile, but also makes typing tedious.

Instead of raised alphabet keys, you get virtual keys on the screen. They're fairly small, and of course you can't feel them. So typing is slow going, especially for the fat of finger.

Fortunately, you don't have to be especially precise. Even if you hit the wrong "keys" accidentally, the super-smart software considers adjacent keys - and corrects your typos automatically. If what you actually managed to type is "wrclme," the software proposes "welcome." You tap the Space bar to accept the fix. It works beautifully.

The real magic, however, awaits when you browse the Web. You get to see the entire Web page on the iPhone's screen, although with tiny type. To enlarge it, you can double-tap any spot; then you drag your finger to scroll in any direction.

Alternatively, you can use a brand-new feature that Apple calls multitouch: you slide your thumb and forefinger together (like pinching) or apart on the glass. As you do so, the Web page before you grows or shrinks in real time, as though it's printed on a sheet of latex. It works with photos, too, and it's wicked cool.

All of this is cooked up with Apple's traditional secret sauce of simplicity, intelligence and whimsy. It's these ingredients, not the features themselves, that inspire such technolust in Applephiles.

For example, voice mail messages appear in a list, like an e-mail in-box; you can listen to them in any order. A proximity sensor turns off the touch screen when the phone is up to your ear, saving power and avoiding accidental touches. The screen image rotates when you turn the phone to see, for example, a landscape-orientation photo. A light sensor brightens the screen in bright light. Finger smudges and streaks are inevitable, but are visible only when the screen is turned off. (They disappear with a wipe on your sleeve.)

The speaker is on the bottom edge, rather than the back, where it would be muffled when the phone is set down. The optional tiny Bluetooth wireless earpiece has its own little charging hole in the iPhone's charging/synching dock - and it snaps in magnetically for convenience. Apple says that this earpiece "pairs" with the iPhone automatically, sparing you the usual ritual of pressing buttons in a baffling sequence.

Nonetheless, the iPhone won't be the smartphone for everybody. You may well consider the Cingular exclusivity or the price a deal-breaker. You may also be disappointed that the iPhone can't open Microsoft Office documents, as the Treo can (although Apple says it can open PDF documents), or wonder why it's not a 3G cellphone that can exploit higher-speed, next-generation cellular towers as they arrive in the coming years. And you may worry about putting all your digital eggs into one losable, droppable, glass-front basket.

Note, too, that the software is still unfinished, and many questions are still unanswered. Will you be able to turn your own songs into ring tones? Will there be a voice recorder? Will the camera record video? Can you use Skype to make free Internet calls? Will the battery really last for five hours of talking, video and Web browsing (or 16 hours of audio playback)? Will you someday be able to buy songs and videos from the iTunes Store right on the phone?

At this point, Apple doesn't yet have the answers, or isn't revealing them.

What it does have, however, is a real shot at redefining the cellphone. How many millions of people are, at this moment, carrying around both an iPod and a cellphone? How many would love to carry a single combo device that imposes no feature or design penalties? Considering that the cellphone is many people's most personal gadget, how many would leap at the chance to replace their current awkward models with something with the class, the looks and the effortlessness of an iPod?

Apple has done its part: it has packed more features into less space, and with more elegance, than anyone before it. The rest is up to the godmother.

This post has been necessitously lengthy. The iPhone promises to revolutionize Apple's core business; the oddity is that the Apple TV has been ignored amid the buzz for the iPhone. And it is Apple TV that is the possible game-changer for Apple, as well as for the consumer appliance industry.

As investors, we must ask what all this portends for the stock. Obviously excitement, as the shares soared 27.5% in a matter of days (to ~$98 from ~$77); such price moves, however, often typically manifest as culmination moves, signifying the end of an extant trend. But this is the sole item that signals a possible reversal from the new all time high trade. Nothing else in the charts signal caution. So I remain bullish, long -- and now excited. I already own an iPod, the Apple-designed stereo system for the iPod arrives Wednesday (ordered in place of the BOSE system, which I favored until a side by side comparison)... and I admit my next computer purchase will be a MAC. Hmm, have I been converted...?

As always, but especially now, I welcome your comments and insights. On the topic of Apple and its (new) products, I truly would like to hear from you...
-- David M Gordon / The Deipnosophist