iPhone Competitor Forecast: Stormy with a Chance of Fail

| Hidden Dimensions

“You can't just beat a team; you have to leave a lasting impression in their minds so they never want to see you again."

-- Mia Hamm

In the 1990s, when Apple was in trouble, bad press was a symptom of troubles for a company with the weakness of one product: Macs. These days, however, one must differentiate between negative press about Apple's iPhone and fundamentally bad forecasts for its competitors.

Apple has taken a lot of heat for its iPhone app approval process. Some notable developers have left the fold in a public hissy fit. As my distinguished colleague, Ted Landau, pointed out, the process needs an overhaul. Even so, I firmly believe that the minor ruckus will have absolutely zero effect on the iPhone sales growth. That's because these minor issues are on a wavelength that most iPhone customers ignore.

The more fundamental problems of Apple's competitors, in contrast, are starting to take their toll. Why is that?

Underestimating Apple

When Apple entered the smartphone business, it started with the fundamental concept that the iPhone is a computer that also makes phone calls. Because Apple had many years experience making computers, and six years experience with BSD (2001-2007*), it understood how the hardware and software had to work together to make a smartphone truly delightful to use -- as a computer.

Pundits who criticized Apple's prospects for success in 2007 didn't understand that Nokia, Samsung, Motorola and RIM had much less experience with building computers and great user interfaces. In that sense, those competitors were ill-prepared to meet Apple's threat.

Moreover, each of Apple's competitors has turf to protect. Depending on another company for its future an be risky. That's why Samsung is rolling its own smartphone Linux variant, Bada. That kind of practical thinking may seem prudent, but is also dangerous. It's a symptom of a company that feels it has nothing special to offer.

That Samsung decision alone is going to create some balkanization amongst Apple's competitors. Just as Microsoft brought coherence to the desktop PC world with Windows NT in the 1990s and defeated the efforts of the heavyweight UNIX workstation vendors (HP/HP-UX, SGI/Irix, DEC/DEC UNIX, IBM/AIX, and Sun/Solaris), Apple is bringing a single, focused, proprietary iPhone OS to bear against the fragmented efforts of the competitors. In this case, whether we like it or not, Linux and "open" means "developer chaos."

Apple's Impact on the Market

In addition to that, Apple's experience with computer technology and development tools is starting to have an adverse impact on the other guys. For example, Cody Willard at MarketWatch recently wrote about the "Three Problems facing RIMM." Amongst all the other problems RIM now has, here's what he had to say about apps on the BlackBerry: " It’s not about the number of apps. It’s about how easy it is to use the apps and how many apps actually bring value.... You tried gaming on the Storm? I’d rather play pong." Mr. Willard is doubtful about the future growth prospects of RIM and is wary of investing there.

Windows Mobile is continuing to fade as smartphone makers realize that it's not a competitive OS. Windows Mobile 6.5 was too little too late, and Windows 7, due next year, will be far too little, far too late. Smartphone makes don't have time to wait for it. As a result, Windows Mobile has lost 28 percent of the smartphone market share, going from 11 percent in 2008 to 7.9 percent a year later. Microsoft may well be out the door in this war.

If Steve Ballmer liked his prospects with Windows Mobile in 2007, he must be throwing some chairs these days.

Nokia, the world's leader in total mobile phone sales seems to be having new problems deciding on its OS strategy. There were some murmurings about embracing Android last summer, but Nokia seems to have decided against it. Stefan Constantinescu had this to say about the results of Nokia World 2009:

"The [new] software, Maemo 5, is a pain in the ass for developers since Nokia has admitted in public that Maemo 6 will come out in a year and it will break compatibility due to a switch from the GNOME environment to Qt. The browser, built on top of Mozilla technology, the same code that powers Firefox, is a step away from WebKit, the browser engine that powers Safari in the iPhone, the browser in Symbian, the browser in Nokia’s dumbphone OS known as S40, the browser in Android and soon the browser in RIM BlackBerry devices. Why is Nokia supporting something contrary to what the industry has already accepted as best in class? What’s the strategy?"

Technical mistakes and internal politics can sink a company in an intense competitive environment. Mr. Constantinescu didn't perceive a coherent strategy. There may not be one.

While the launch of the Motorola Droid may not have been as big a splash as Verizon had hoped, the one thing the Droid did achieve was pushing the Palm Pre even further off the radar of users. That is, Droid's merely modest success compared to the iPhone 3GS launch has damaged Palm, not Apple.

Knowing What Business You're in is Good

So let's summarize. Nokia is wandering, not ready to commit to Android, making uncertain technical choices for its smartphones. Samsung is going to go its own way with Bada with yet unknown consequences. RIM, tied to the enterprise, is having problems engendering a boatload of easy to use apps and is way behind Android's 10,000+ apps. Microsoft has completely blown it with Windows Mobile 6.5. Motorola has been on life support for some time, and the Droid is not the smartphone many were looking for. Palm already had its 15 minutes of fame with the Pre.

Meanwhile, despite some issues with the app approval process, the financial prospects for the Apple iPhone just keep getting better. For example, "Apple Shoots Past Nokia As World’s Most Profitable Handset Vendor." Apple's share of the smartphone market keeps rising and international prospects continue to be excellent.

Apple's competitors still haven't figured out that they're in the computer business, not the phone business. And they are, so far, helpless to extricate themselves from a decade long mess the've gotten themselves into.

Wishful Thinking vs. Pure Execution

That's why, when we hear about minor squabbles in the iPhone community, they pale in comparison to the market realities of the competition. Even so, some publications will drag out some minor Apple issues and have you believe that, in contrast, all is well in the rest of the market. The facts cited above just don't bear that out.

Despite all this sobering bad news, there are those who believe that, iike Windows vs. Mac OS in the 1990s, Android's openness will save the day for the competition and eventually allow Android to surpass the iPhone in market share. Who says that?  Gartner. (Enough said.) And if you'd prefer an alternative opinion, based on that wishful thinking combined with no research, there are plenty to go around.

Instead, I believe that things will start to go badly for Apple's competitors next year. Come summer, there will be some kind of industry panic that will bring on some strategic partnerships, standards discussions, and a consortium. It will be like what the UNIX workstation vendors in the 1990s tried to do with the Common Desktop Environment (CDE) for UNIX workstations. They'll believe that this will fix their problems, but it will only serve to distract the smartphone makers and delay their coming to grips with their fundamental problems.

It's the end of the year and a popular time to make predictions. Here are mine. By the summer of 2010, Apple will have an announcement with Verizon that will have the competition changing its underwear hourly, a new 4G phone, 200,000 apps, 3+ billion downloads, and a complementary iTablet driving next generation app development. Boggles the mind.

_____

* Plus Mr. Jobs' experience with NeXT before that.

Sign Up for the Newsletter

Join the TMO Express Daily Newsletter to get the latest Mac headlines in your e-mail every weekday.

Comments

Nemo

For those of Apple’s competitors in the smartphone business that have the resources, they must build a new smartphone from scratch that is an excellent integration of hardware, operating system, and apps.  The operating system must be outstanding, as the hardware must be.  The development tools and environment must be excellent.  The UI must be excellent.  The partnering network carriers have to provide a good network and then get out of the way.  And last but not least, the new phone will need great marketing.

So that’s it:  Make an insanely great smartphone and market it with insanely great marketing, and then you can take on the iPhone, provided you can get all of that done in the next 12 to 18 months, because I doubt that any competitor will have longer than that.

Tim

There may be some room for a less expensive phone, with an excellent UI, the iPhone is compelling, but not at A T & T’s price. Anyone looking to put a phone in that niche should hurry, as Apple’s tooling and R & D expenses are amortized, they may decide to compete at a lower price point.

aardman

Hissy fit is exactly what describes those people complaining about Apple’s approval process.  Yes it needs a little fixing but serious developers who abandon it over this are just plain childish and stupid.  Even worse are the tantrum throwers who advocate getting rid of the review process totally.  This is a phone, this is a critical, perhaps life-saving, device. This requires a higher level of vetting then a PC.  When you’re lost late at night in some godforsaken place you don’t want to be rick-rolled when you try to access your GPS app.

JonGl

It seems to me that the only company with a product to go against the iPhone is Palm with the WebOS. The problem is, of course, Palm itself. It makes me wonder if someone’s looking to buy it? Oh, and of them all, only Palm has any experience with what you termed “the computer business,” and their experience is in handheld computers… I have a hard time believing that Palm will be allowed to just disappear. That’s some valuable property there…

-Jon

specialslacks

I realize the iPhone is still standing after manycompetitors have “failed” to rival the iPhone’s 3Gs’ success.  Not only has the public been accustomed to the i-marketing with iPods paving the way to the great iPhone, but the world is now accustomed to the iPhone as being a great tool since its been around since 2007 (almost 3 years now).

Now that the rest of the market needs to play catch-up, you have to credit Jobs for developing this great piece of hardware before anyone else - and that’s mainly what this is all about.  Other smartphones are emerging and ARE great to use.  Every smart phone has its flaws and Apple still wears the crown with the superiour iPhone.  I can see why so many are biased towards the iPhone, but you have to realize some have been mulling over getting an iPhone since the origninal.  So really, when you say the Droid had dissapointing figures, how do you know that? 

Considering the iPhone 3Gs, the follow up to the great original iPhone came out in multiple countries after years of having a base-market to seel it to, the Droid has purportedly sold 250,000 in its first week in the US only as a brand-new product without a predecessor.  Small numbers compared to the iPhone, but I think this is signifigant to show there is great interest in another product and there will be a greater demand for popular products that grow in time just as the iPhone has over the last 3 years.  I just bought a Droid for myself since I want to keep my iPod and phone seperate, wouldn’t switch to AT&T and I couldn’t be happier with my new purchase.  The Droid is easy to use, lightning fast and surfs the web in a blink of an eye.

I appreciate your article here - a true compmetitior may be 2 years away still. I hope you don’t mind me adding my .02 here.

Constable Odo

All the competitors are lacking the most crucial part of having a solid mobile platform and that is having the equivalent of iTunes.  It’s the one stop content delivery place.  That iTunes U is a fantastic place to hang out.  Well beyond the simple games in the App Store, the information that iTunes U has is simply incredible and it’s free.  Once iTunes starts getting books, magazines and newspapers, the iTunes Media Store will be untouchable.  Apple’s soon to come data center will be a vast depository for knowledge.  No other has everything in place that Apple has from control of hardware, software, retail and content delivery.  It will be hard for any competitor to get all that together in a short period of time.  Apple has been doing it all for years.

Bosco (Brad Hutchings)

John, you could have titled your article Why AOL will beat the Internet. The “minor complaints”, “whining”, and “squabbles” boil down to choke points in the iPhone economy. They are choke points that do not exist in the Internet economy, so they are contrary to people’s expectations. And they are rife with abuse by the entities that control them.

Start with AT&T because they have the exclusive carrier agreement in the United States. Do you have a family plan on Sprint or Verizon that spans more than one of AT&T’s archaic market regions? If you want to share minutes, someone is losing their phone number, because AT&T can’t port them because AT&T can’t have phone numbers from different (archaic) “market regions” on the same non-business account.

Differences in coverage are also an issue. My Sprint phone and friends’ Verizon phones all seemed to work fine at each other homes and generally in South Orange County. My iPhone on AT&T only works near a window at one friend’s home where I hang out often. That kind of thing is bound to happen with any switch, and is probably due to the underlying technology at play, but not having an option to stick with Sprint or Verizon in the first place makes it a problem.

App Store… choke point. How can Apple put 100K apps through its approval process and not make “mistakes”? These will continue to happen, and there will be a continuing stream of apps that expose some screwed up rule or another that the screeners apply. This is just like web filtering software. Realize that in 2000 and 2003, the copyright office granted a DMCA circumvention exception on web filtering software databases, because content providers were perplexed why they were being blocked. Might the copyright office adopt a similar stand this year regarding unapproved apps for mobile platforms? Stay tuned.

Truth be told… After 3 months with my iPhone, the one big plus is that I have one device for phone, mobile email, tweeting, camera, and music. It easily fits in a cell phone or side pocket in shorts, so I don’t have to be all dorked out with a belt clip.

As a mobile phone though, my Sanyo M1 was better. I could dial with voice tags (where you record a short clip to trigger a dial rather than deal with the raw voice recognition) in about 5 seconds. The iPhone takes a good 20 to get Voice Control, say “dial So and so Last name home”, “home or mobile”, “home” and get it ringing. My Sanyo worked reliably with my Bluetooth headset (a high end Motorola). I can’t get my head around how to switch calls with call waiting using the just the headset with the iPhone. Even with the ear buds, it doesn’t seem to work reliably. And I can’t go messing with the screen when I’m driving or even walking the dog along a busy street.

I will probably pick up a Droid in the next couple of months. I’ll keep using the iPhone too. I am intrigued by the idea of writing software for the Droid and not having to ask permission to install my app. It kinda reminds me of what I like about personal computers. The Android SDK seems more than capable of delivering kick ass apps—which like the iPhone are going to take over the whole screen more often than not. I’m also excited about the Creative Zii. It’s ability to run Android and the expansive connectivity options (e.g. flash cards and HDMI) make it a nice platform for custom apps that might run in the $200 - $500 range and include a device. Apple doesn’t want to play that game.

DD

Apple’s competitors have been tricked into thinking that all they have to do is come up with a device that is just as good as the iphone and then customers will flock to them. Wrong. Just as good is, to be blunt, not good enough to unseat a market leader. It has to not only be better, but an order of magnitude better. The reason is iphone users are investing in their device by buying apps, music and other media. No one will abandon that for something that is just as good.

The next challenge for Apple will be to make the iphone not just a handy piece of bling, but an indispensible tool of modern living. I think that the e-commerce hooks they are building into their apps may just do it. Imagine your iphone replacing your credit or debit cards and allowing you to make all kinds of purchases through your iTunes account. The infrastructure is already in place. All it needs is a few companies to participate. Starbucks perhaps?

Chris Ryland

Bosco, you can make your own apps for the iPhone now (though it does require the $99 developer fee) and load them onto your phone completely free of any intervention on Apple’s part. That’s the same as a desktop. (Just think of the $99 as the SDK cost.)

It’s only when you want to ship a product on the App Store that you need to get involved with approvals, etc.

Bosco (Brad Hutchings)

Chris, here’s the point. I have a desktop app coming out soon. Without going into too much detail, one of the first paid deployments will be for a small sneaker show that travels from city to city. To interact with this app, I’d like to give some of the vendors a device they can use during the show. The device would be running software I write that interacts with the desktop app running on some small appliance computer to do something the vendors would really like. None of this is Apple’s business. If I want to update the app on the device the morning of a show, I want to be able to install it on those devices without having to wait days for approval.

Perhaps I could use jailbroken iPod Touches. But I don’t need any potential legal headache, and frankly, I’m not going to reward Apple with my business on this one if they have to get between me and my customers. There are more open options out there.

deasys

Bosco, how long are you going to continue carping on about your special problem?

(I fairly sure I’m not the only one who doesn’t give a damn.)

brett_x

Bosco- can’t you do that with Ad Hoc Distribution?

Ad Hoc Distribution

The Standard and Enterprise Programs allow you to share your application with up to 100 other iPhone or iPod touch users with Ad Hoc distribution. Share your application through email or by posting it to a web site or server.

Blad_Rnr

John,
Another great analysis. I love your insight.

@Nemo: Constable Odo is exactly right! You can market the heck out of a great phone, but unless you have something like iTunes, you’re toast. iTunes will go down in the history of technology as the killer app that sunk all the handset makers and MP3 player manufacturers. It was back-door to toppling the industries because it is a home base for all things Mac, iPod, iPhone and soon to be iTablet. That’s why the Pre tried to piggyback off iTunes because Palm lacks an iTunes-like app. No other phone maker/carrier has iTunes. It was a brilliant gamble by Apple and it paid off in the tens of billions of dollars.

The sky is the limit now. The iPhone continues to roll forward and next we will see the invasion of the iTablet to make it game, set, match. Apple will dominate the personal computer/cell phone/MP3 player industries in the next 2-3 years. They cannot be stopped.

Sean

I couldn’t agree more John.

My family has been holding out on the iPhone, since we are with Verizon. I will need five 4G phones in one house alone.

As for the Tablet, I foresee it making the PC obsolete within 2-3 years. The potential endless functionality of this device boggles my mind. I have a Touch and it does everything from control my Home Lighting, HVAC, Home Theater, Alarm System, to starting my coffee in the morning. (All functions on the iPhone I might add, not the Droid or Pre) If the Tablet can do all of that and combine the functionality of my Macbook, and my TV, and the internet, and all of my media, I see the face of computing changing forever with Apple leading the way.

Lancashire-Witch

As a mobile phone though, my Sanyo M1 was better.

As a mobile phone my Ericsson T29 was better. That was 10 years ago - pity the charging plug was feeble; but I had a good 2 years out of it.

Time was, I used to have a drawer full of old cigarette lighters. Now I have a drawer full of old phones.

Maybe the iPhone is not the best phone ever; but it’s the best hand-held computer with Telephony functions I’ve ever had; and I guess I won’t be collecting them like old cigarette lighters…

papamaui

I’ll never forget the day I bought my first Mac ... set it up and became immediately productive without having to worry when the next crash was coming. I’ll never forget the day I bought my first iPhone ... which, unlike the cell phone I had been using, was intuitive, easy to learn and did more than I ever expected. Apple products are designed and built to answer the needs of the information generation better, in my opinion, than any other company’s products. From my understanding, Apple’s new Tablet will continue the tradition. Sounds to me like AAPL continues to be a great investment choice!

Log-in to comment