Follow the leader
In battle, that difference typically translates as your life; in technology, the difference typically is profits. Apple/AAPL, for the first time in its corporate history, strings together consecutive money-making and profitable years, not just a quarter or two. Its stock reflects these successes.
But Apple's impact on the industry has been greater than its market share suggests. The iPhone has set new standards in design and ease of use. A telling statistic from Mr Jobs is...
The iPhone, with its elegant touch-screen interface, seems likely to be the gadget that sets the direction that others will follow in the era of mobility. To bring that about, Apple is now turning the iPhone into a hand-held computer...
I really could not write more pithily re the technology revolution that Apple/AAPL leads than does the brief essay below from the Economist magazine. (Link embedded.) So why even try?
-- David M Gordon / The Deipnosophist
Follow the leader
Jun 12th 2008 SAN FRANCISCO
From The Economist
Apple ditches its unusual business model to boost handset sales
ALMOST a year after launching what he thinks is the phone to change all phones, Steve Jobs, the boss of Apple, took to the stage again this week to introduce its second version, the iPhone 3G. In the past year Mr Jobs, who had surgery for pancreatic cancer in 2004, has visibly aged. Looking emaciated, he farmed out large parts of his speech, which is usually a big marketing and media event, to other presenters. But he still held the crowd in thrall as ever.
The new iPhone mostly addresses the shortcomings of the old one. It has GPS satellite-positioning technology that will allow a new and exciting category of services, such as location tracking, that depend upon the phone knowing where it is. It works with fast third-generation (3G) mobile networks, not just slower 2G ones. And it panders to corporate customers with features such as better integration with their systems and “remote wiping” of data if a handset goes missing.
Perhaps above all, it is a lot cheaper, starting at $199, just below what the industry sees as the pain threshold for the mass market. What Mr Jobs did not say was that the reduction comes largely from a change in Apple's relations with mobile operators, such as AT&T in America. Operators will subsidise the new handsets to make this low price possible, but will also increase monthly usage fees—and will no longer pass a share of those fees to Apple.
This brings Apple in line with the business model used by other handset-makers, such as Nokia and Samsung. Getting operators to agree to Apple's novel revenue-sharing scheme seems to have hindered sales. Evidently Mr Jobs hopes to gain more from faster handset sales than he will lose by giving up his share of usage fees. By cutting the iPhone's price and increasing the number of countries where it is legally available from six to 70, Mr Jobs hopes to reach his goal of selling 10m iPhones by the end of the year. (So far, 6m have been sold.)
Competitors quickly tried to douse another conflagration of iPhone hype. “I see this as a catch-up release for Apple,” says Andrew Lees, head of mobile businesses at Microsoft, an arch-rival which provides software to many handset-makers. “We outsell them by two to one.” He points out, legitimately, that many phones using Microsoft Mobile software have long had both GPS and 3G, and have always tied into corporate computer systems.
Finland's Nokia sells the most “smartphones”, capturing 45% of the world market in the first three months of this year, and Canada's Research In Motion (RIM), the maker of the famous BlackBerry, is second, with 13%. Even in America, where Nokia is weak, RIM leads, with 42%, followed by Apple with 20%.
But Apple's impact on the industry has been greater than its market share suggests. The iPhone has set new standards in design and ease of use. A telling statistic from Mr Jobs is that 98% of users browse the web on their iPhones, 94% use it for e-mail, and 80% use ten or more features—including, of course, the built-in iPod music-player. As Mr Jobs joked, many users of other smartphones, with their clunky menus, cannot even find ten features.
This points to the ultimate role of the iPhone for Mr Jobs, Apple and the industry. There were personal computers before 1984, but it took the Macintosh, which Apple launched that year, to popularise the icon-based graphical interface that others copied, kicking off the PC era. There were digital music-players before 2001, but Apple's iPod made them both ubiquitous and user-friendly. In the same way, says Tim Bajarin of Creative Strategies, an analyst who has followed Apple throughout its history, the iPhone, with its elegant touch-screen interface, seems likely to be the gadget that sets the direction that others will follow in the era of mobility.
To bring that about, Apple is now turning the iPhone into a hand-held computer and allowing other firms to write software to run on it. Other handset-makers are doing the same, but the iPhone's operating system and programming tools, on display this week, are better than theirs. There is no doubt that Mr Jobs is trying to lead a third revolution in consumer technology in his lifetime.
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