iPhone wind-down

With a few days to digest iPhone-related information, many have made a more sober appraisal of its promise. That doesn't mean that the iPhone isn't an achievement in the art of hardware design. The fact that Apple's stock jumped 8% in value on the day of its announcement (creating $6 billion in shareholder value in one day) while Treo-maker's Palm share price dropped 5.7%, RIM's share price dropped 7.9%, and even Motorola dropped 1.8%, makes clear in not-so-subliminal terms that most people recognize the product as interesting, if not a leap forward in the concept of cell phone technology.

I've been describing the iPhone as something I'd imagine Harrison Ford's character in the movie "Blade Runner" might carry around with him. Now all we need are the offworld colonies, the flying cars, and the super-human androids by the year 2019 in order to make that vision of the future a closer approximation of reality. Oh well...

Potential pitfalls, however, do exist. First is the fact that the product is expensive in a market that has proven extremely price-sensitive. The most popular iPods are not the higher-priced hard drive-based models, but Apple's lower cost "nano" range.

Other examples exist in other segments. Last month I talked about game console sales in the month of November, where PS2 (not PS3, obviously, which may not meet expectations) took the prize as the leading gaming console for the month. That's partly due to the huge gaming ecosystem Sony has built for the PS2. Just walk around the games rental area at your local Blockbuster store to see what I mean. What shouldn't be ignored, however, is that the PS2 also costs a lot less: only $129 on Amazon compared to more than twice that for a low-end XBOX 360.

Can Apple bring the price down? In my first post on the iPhone subject, I noted the economics of scale Apple has managed through the success of its iPod range of products. That helps, but then again, no iPod has a screen as large as the iPhone, and besides, no iPod has any kind of touch screen, much less phone-related circuitry (fortunately, other products do, so Apple can ride those scales to a certain extent). All resolvable issues, most assuredly, but there IS a reason why most cell phones screens are so small.

The other major issue is programmability, particularly for a device as expensive as the iPhone. Companies are the most likely candidate for a phone in that price range, and the phones enterprises favor are increasingly ones that slot easily into back-office systems and which developers have an easy time customizing. That speaks to Microsoft's advantages, not Apple's.

Even if the iPhone were to release a full-strength SDK and open the platform to applications made by all and sundry, a Mac OS X phone faces the same problem that MAC OS X desktops do - they don't plug into the larger developer ecosystem that, from a client standpoint, is mostly oriented around Microsoft.

Of course, the iPhone isn't exactly a business phone, and targeting mere mortals as opposed to just people working in large enterprises is a proven driver of revenue. iPod certainly demonstrates that principle. The problem, however, is still one of price. That was the problem with the Newton, another trendsetting device made by Apple whose passing was much lamented by its fans.

This may not be a large problem, however. Phones are more personal than any other computing devices save for media players, the personalization of which Apple for all intents and purposes invented (by that, I mean, no one has nailed the potential to make computing accessories into fashion statements the way Apple has). RAZR phones aren't exactly business-oriented, either, yet you see a lot of executives carrying them because they look great.

In other words, SDK barriers might hinder the iPhone as an enterprise platform, but they might get used anyway by many business people because they are just so darn appealing.

On the price front, Apple has options, such as offering a lower-end version of the iPhone at some point in the future. That was their approach with the iPod. They entered the market with higher-end models that defined the product category, then fed the market growth beast with lower-cost versions which ended up accounting for the majority of the market.

One final issue questions how "protectable" the iPhone concept truly is. Jobs claimed the device has enough patents to choke an overweight pachyderm, but touch screens pre-date the iPhone, and gestures to control a computer user interface do as well. Will Mr. Jobs sue a reformed "Kids in the Hall" comedy troupe for flagrant violation of patents due to a character who likes to pretend to crush heads between thumb and index finger (exaggeration, yes, but hopefully the point is made that "gestures" are a weird thing to patent)?

So what, exactly, is to prevent someone from saying "good idea, Apple" and "borrowing" the concept for themselves? In that case, Apple will simply have to do what they've done for the most part with the iPod, which is compete on hardware design skills, which to Apple's advantage is something other companies have difficulty matching.

It's worth reiterating to those who hyperventilate whenever anyone criticizes their favored product that the fact that the iPhone has issues to face doesn't mean that I don't think it has a lot of promise. I was as floored as everyone else by photos of the new device. Any new device, however interesting, will face issues.

One thing on which most will agree, however, is that the iPhone proves the importance of giving hardware design primacy of place when it comes to the creation of consumer-oriented products. Business-oriented companies simply lack the culture to create an iPhone, and truth be told, most current handset companies are very business-oriented. That's why it's so important for companies with a desire to target ordinary consumers to have teams internally that aren't subject to the constraints of the business market. It's the same reason why Sun Microsystems had - and continues to have - a heck of a time understanding the client software space. Culture takes time to create, and you don't create it if you don't have people doing the things that cultivate it.

There's a reason why the XBOX team was tapped to create Microsoft's first branded media player. They are the ones with a culture that better understands the needs of ordinary consumers.