Wednesday, September 5, 2007

Reach out and Touch someone

Apple made some big product announcements today. Three observations:

  1. Except for the entry-level product, Apple now has video in all its product line: Nano, iPod, iPod Touch and the iPhone.
  2. Given the new product line, Apple picked an interesting time to send NBC (and the Sci-Fi channel) packing off to Amazon.
  3. The iPod Touch — an iPhone without the GSM capabilities — is either brilliant or foolish (but given the leverage off the iPhone R&D, it was probably a relatively inexpensive experiment.)
Cutting the price of the 8Gb iPhone by $200 to $399 is either a sign of weakness (the old one wasn’t selling) or an aggressive attempt to steal share against high-end smartphones. Meanwhile, at iPhone Touch (slightly smaller and $100 cheaper) will cannibalize the iPhone — keeping business with Apple but shifting it away from AT&T. It certainly is a way to cater to people who hate Cingular’s network without violating the promise of an exclusive.

Nokia-N800-ThumbPersonally, I find the iPhone Touch most intriguing (although the name is terrible — it’s really an iPhone Lite). It is Apple’s take on the product category of the Nokia N800 WiFi tablet introduced by Nokia in January — a category also being promoted by Intel.

Interestingly, the N800 comes with Skype (unless of course it’s disabled by a carrier). How am I going to make VoIP calls on my iPhone Lite? With Skype via one of the two web-based solutions? With iChat? (Without a microphone, it will need a 3rd party adapter to work with a standard headset).

I wonder if Palm (headed by a former Apple exec) got wind of the iPod Touch and that contributed to canceling the Foleo. Both products are positioned between a smartphone and laptop, but the iPhone Lite is able to leverage off the iPhone’s enthusiastic reviews. Now Palm gets to watch Nokia, Apple and Intel try to establish the new category, and then decide whether it’s worth releasing the rumored Foleo 2 (or just use the new Linux OS for their phones).

iPhone DevCamp notwithstanding, the iPhone and iPhone Lite still badly trail the Nokia (and Intel and promised Palm) products in the ability to add native 3rd party apps. Moving more iPhones to more users (and developers) will either make this weakness so painfully obvious that Apple has to address it, or bring out the ingenuity of developers to deliver useful apps using WebKit.


Maria said...

Gizmodo reported a potential $100 store credit to early iPhone adopters:
Apple still has to keep its early adopters happy, for the next new gadget release...

I wonder if we'll see price reductions by the competition, especially ones sold through AT&T such as the HTC which was originally rumored to be priced at $499 with a 2 year contract:
“HTC's new flagship smartphone, the Kaiser 8925, could be coming to AT&T on September 3rd for $499.” [Crunchgear]

Jan-Michael said...

As the article noted, the move can be seen as a weak move but I feel that its more a gambit to continue and further position Apple in the consumer's consciousness.

Our finance teacher once said that stock prices are often driven largely by emotions and hardly by rational thinking. While pundits are attacking the $100 store credit for shafting loyal consumers, I think Apple is making a play for several things, among them economies of scale. At some point I've read somewhere that Apple did not make any money from the initial iPhone release (or very little). By making the iPhone's price point more attractive, they are making a serious move to attract more consumers.

Apple has enough clout to pull it off and we could be left holding the bag once Apple's stock hits $250 by the end of the holiday season (just kidding).

Of course, this event reminds me of the iPod's much ballyhooed release and subsequent negative press surrounding its high price. Fast forward several million iTunes later and iPod became one of the brightest spots that changed Apple's fiscal outlook. Overall I think the reduced price has little impact on their bottom line and has a big upside of gathering (and locking-in) more users

On a separate note, I do agree with the point about third-party development. Hardware is useless without software to make it useful. However, one way to look at the 'stunted' growth could be due to the abnormally high price point. By introducing a 'lite' version, they are basically adopting 'freemium' strategies of offering a stripped down version with the hopes of steering people into the full product (read: Adobe Acrobat, Try & Die software etc.). Whereas the initial release of the iPhone might've naturally excluded those who couldn't afford it, the lower price could drive more people to consider it this holiday season (yours truly included)

Re: Facebook has a killer app

My 2 cents

schnittker said...

Money in content.
Does apple care about revenue from Iphone today, or selling content tomorrow?
Well, probably both, but Apple's move to drop the phone from its phone may be an indicator of where they think future revenues will come from.

Niklas Zennstrom, Skype CEO recognizes content value.
"Today most revenues are coming from voice calls. What we’re also working on now is to develop other revenues, in terms of e-commerce and content."
With Nokia and Apple both offering wifi connectivity and skype ramping up to be a content provider, I think we see the future battle front taking form in the form of video on demand.

Skype link:

Harmeet said...

I agree. This is a way for apple to increase installed base in the short term at a potentially lower profit margins. The real long term revenue will come from applications and content that are sold later on through iTunes and apple store (following the iPod model). Note recent partnership announcement with Apple and Starbucks (sample and buy songs in any starbucks store throug WiFi... bypass att network...startbuck logo shows up when sbux wifi is detected).

Seth said...

Macworld presciently reported in February the results of a market research firm’s survey “[url]
2007/02/23/iphoneprice[/url]” and a Bear Stearns analyst prediction that after early adopters paid a premium for the iPhone, the price would drop by $100-200 for the mass market.

Apple can’t afford to underestimate the importance of influentials’ viral marketing.
After announcing at an Apple Event on Wednesday that iPhone customer satisfaction numbers were higher than for any other Apple product release, and claiming Apple was on target to ship their one millionth iPhone by month-end, Steve Jobs explained Apple would be slashing 8G iPhone prices to “…put iPhones in a lot of stockings this holiday season” “[url]

After a barrage of angry emails from iPhone customers upset about the 33% price drop in 9 weeks, in his Open Letter to iPhone Customers “[url]
hotnews/openiphoneletter[/url]” Steve Jobs explained Apple’s rationale was motivated 1) by price positioning for increased holiday season sales and “getting as many customers as possible in the iPhone ‘tent;’ 2) life in the fast lane – i.e., high tech; and 3) acknowledgement of the importance of maintaining the trust of early adopters.

Joel West said...

On the one hand, I'm encouraged that they moved quickly to molify pissed-off iPhone innovators (they’re actually not "early adopters") with the offer of a quasi-rebate.

On the other hand, I think the deliberate crippling of the iPod Touch means that it probably won’t be a success after all — unless it turns out they back down from that, too.