Thursday, September 06, 2007

iSuppliHotAir

I'd been meaning to rip into iSuppli's ridiculously triumphal ode to Apple from earlier in the week, but I figured it was worth waiting a few more days to make sure all the Apple-related rumours were in fact rubbish, allowing me to squeeze all fruit-related comment into a single post. Sort of like an Apple smoothie.


iSuppli's puff piece contains some real research, buried deep in the lightweight packaging. Almost every article quotes the "1.8% of all handsets in US" figure - only a few print the rest, that 1.8% means 220,000 units. Add on the 240,000 signed up before July and we have a much lower figure than the "700,000 in first weekend" Goldman-Sachs were talking about right after the launch, low enough to be considered a disappointment I would venture - not a triumph at all, and it makes that target of 10m by the end of 2008 look a little less likely without a serious shot in the arm.

The quote that really annoyed me was this one:
"While iSuppli has not collected historical information on this topic, it's likely that the speed of the iPhone's rise to competitive dominance in its segment is unprecedented in the history of the mobile-handset market".
I believe this translates to something like "This sounds pretty good, so if we write a quote laced with hyperbole containing no verifiable truth people will print and believe it, and we get to bask in the reflected glory". Let's ignore the fact that the guy actually admits he has no clue; it is a claim based on the idea that the iPhone is a smartphone. That's a mighty difficult category to define, but I can't see the iPhone fitting in it - for what it is worth, it's a feature phone. Sure it has email - so does almost every feature phone I've seen (quality is variable, but the iPhone isn't actually very good at email either). It has a browser, but so do low-end phones - OK that browser is scriptable, but that doesn't replace the ability to install apps (a common part of the definition of a smartphone). Hacking apps on does not count.

So if we really position the handset in its genuine market category, we see it is not really dominating in an unprecedented way at all - it equalled its largest current rival (the ageing Chocolate), which places it way behind the record of the RAZR which really destroyed the competition and had no peers for some time. Even if we do compare to smartphones, the wording is careful and obfuscating - for example both iPhones together apparently outsold any individual Nokia smartphone. Slightly unfair comparison - Nokia makes hundreds of the buggers which will naturally mean sales are spread across all of them, even in the US where Nokia's smartphone presence is tiny.

iSuppli clearly want to ride the iPhone for all the publicity it is worth. Much as I hate adding to the general cloud of iPhone opinions polluting the web, I think it is worth pointing out what rubbish they are speaking without just reprinting it verbatim.


Over then to Apple themselves - well they rather nicely admitted they had been ripping off the faithful and would continue to do so. Ringtones will now be available for the iPhone, for an additional $0.99 after buying an iTunes track. That's right - you can't just use any MP3, like on a normal phone (that hasn't been operator crippled), you have to buy a shorter version of the same MP3 for the same price as the full track in order to use it as a ringtone. Takes up more of your local storage, already stretched thin between music, video, photos and contacts, and you get ripped off in the process. I anticipate the faithful will be ecstatic with joy at the sheer innovativeness of it all.

The price drop of $200 is a nice admission that anyone who makes purchase decisions purely on hype and expectations of attaining nirvana through acquisition of Apple-branded plastic has already done so, and disappointing sales will only be pepped up with aggressive price cuts. Fair enough.

The introduction of the iTouch is more vexing. On the one hand it's an easy new product - just rebadge something you've got, taking out a few components and cutting the price. Bonus points because that appears to be what most of the customers wanted anyway - you can see a consensus forming that mass interest in the iPhone was about a new iPod form factor (WiFi and browsing are bonus points), and not about the underwhelming phone features at all. On the other hand, by selling these things in bulk across the world before most consumers have even had a chance to buy the expensive phone version, they have pretty much shredded the chances of the iPhone itself when it launches outside the US. What operator will now make huge concessions to Apple for exclusive rights to something customers actually don't seem to want? Which customer will pay a premium on top of their contract to get an iPhone, when they could have a nicer phone for free and pick up the music/video iTouch on the side? The answer to that last rhetorical question will give very good insight into device convergence trends over the short- and medium-term. I personally still carry an MP3 player and a phone and I don't
plan to change until I seem something paradigm-shifting...

9 Comments:

Blogger MICHAEL said...

Your arguments and opinions in this matter (much like my own) are completely subjective. That being said, I completely agree with the fluff iSuppli report. It reeked of "amateur-ity" from the beginning.

However, your analysis of the iPhone is one that I disagree with. The iPhone is *not* in the same category as the RAZR, and it's silly to do so. Whereas I agree that the term "smartphone" is vague, the iPhone offers features comparable with what the average user is comfortable with, and an interface experience far beyond any other offering.

While some "power" "smartphone" users may be disappointed and outright stunned with the iPhone feature set, the average consumer is, and will continue to be, "wow"ed by the interface.

That's not something any sane person would claim about the RAZR.

6:04 pm

 
Blogger Barry said...

It's good to knock hype, but jumping to the extremes is just baiting...

Entering the cellphone market from cold and getting to 220k per month isn't that bad, especially for a product priced way way out of the range of any other phone on the market. I imagine the first month of Razor sales didn't 'decimate' the market, but did so after a long period of growth. Although the 'smartphone' category is a confused one, much of the distinction is essentially decided by price rather than functionality - that's why iSuppli are trying to compare the iPhone to Blackberrys and the like. Comparing the $600 iPhone to a (free to most) chocholate phone is hardly fair.

And where do you getting your convergence claims from (apart from yourself)? Spending $100 more to get a best in class cell phone alongside an iPod seems like an easy decision. The usabiity of the phone, on a straight 'buttons to function' measurement is far superior to any other phone on the market, except perhaps s40 nokias. The only reason the iPod touch will sell is that there's no decent pre-pay option for the iPhone.

You're right about one thing: to make 10 million before end of 2008 Apple have to sell 555k a month, so i'd expect the iPhone to be joined by other models so as to make that target.

6:15 pm

 
Anonymous raddedas said...

barry: Any argument which starts "I imagine...", particularly from a Mac user, in my experience is often wrong - you'll make your case much better if you do some legwork.

RAZR sold 750,000 units in its first quarter (ref: http://money.cnn.com/2006/05/31/magazines/fortune/razr_greatteams_fortune/index.htm) - so probably about the same as iPhone looks set to, depending on what happens with the iTouch and the price drop, and it was retailing at $500 at launch in 2003, so roughly same price bracket. Sales then accelerated - we cannot say if they will for iPhone, but I suspect they won't (and have £100 riding on that outcome, just to prove I'm not in it for the baiting).

As you say 555k/month (a target that rises for every month the iPhone continues to undersell) is a tall order and they'll have to introduce new product or more massive price cuts to achieve it - which will eat into profits. iSuppli claimed 50% profit margin at the original price - much of that is gone with the $200 price drop and there is much research to be done to get a working 3G phone acceptable in more advanced mobile markets.

I suspect you misunderstand the convergence claim, by assuming everyone is like yourself. I didn't do that, I just mentioned my own personal preference (and not my belief in where the market will go). The main point I was making is: if iPhone massively outsells iTouch, then convergence is king. If iTouch
massively outsells iPhone, convergance lost. I suspect we'll see different people preferring different combinations, but I refuse to believe everyone will pay $100 more to hold a single device. If I had to put my cards on the table, I'd say there will be a complete mix.


michael: I agree the iPhone is a totally different phone from the RAZR in terms of UI, something I have written about numerous times that is now built into Motorola's stock price. It has a very nice UI as a convergence device, that falls down a bit when used as a phone (hopefully V2 will fix all that, and be available as a retrofit).


Really, the categorisation argument is not as contentious as you both make it out to be. The iPhone doesn't sit as equivalent to the Chocolate or similar feature phones, but equally it doesn't sit well next to Blackberries or the traditional definition of a smartphone either - they sell to completely different markets. It isn't a paradigm shift in mobile usage, it's just another niche.

Break it down: it's an MP3 player (so closely tied to SE Walkman feature phones, for example) which also has a big screen for browsing (not a well served market category right now, maybe it'll be big and maybe not we'll see) and is as much status symbol as functional device (definitely fashion end of feature phone, as pioneered by Moto). By saying it isn't a smartphone I merely point out the fallacy of claiming "complete dominance of a market segment". iPhone sales are tiny in comparison to the feature phone market segment, so iSuppli had to label it a smartphone to make such hyperbolic claims. It dominates its own niche, but it doesn't dominate any previously established market segment - at best you can say it sits on the border of a few.

3:17 pm

 
Blogger MICHAEL said...

Well put, though I would still nestle the iPhone in the "smartphone" category because the functions that the iPhone offers is the same as average "smartphone" user expects. (Internet, email, MP3 player, contact management.)

5:32 pm

 
Anonymous Anonymous said...

I would have said Michael has just define a feature phone. It certainly defines my wife's Sony Ericsson S500i :-)
(don't tell her she has a smart phone, she'll never touch it again!)
Cheers,
Jejoma

4:59 pm

 
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