The iPhone fallout: Winners and Losers

The iPhone fallout: Winners and Losers

Summary: The impact of Apple's iPhone, rolled out at Macworld by Steve Jobs, is going to have a lasting impact on the tech industry beyond today's big splash. Here's a look at the winners and losers: Winners: Cingular: By becoming the exclusive carrier for the iPhone, AT&T's wireless unit is going to hit rivals such as Verizon Wireless and Sprint hard.

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TOPICS: Apple
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The impact of Apple's iPhone, rolled out at Macworld by Steve Jobs, is going to have a lasting impact on the tech industry beyond today's big splash. Here's a look at the winners and losers:

Winners:

Cingular: By becoming the exclusive carrier for the iPhone, AT&T's wireless unit is going to hit rivals such as Verizon Wireless and Sprint hard. Look for the latter to be most impacted since it's the weakest. Cingular also will get a little branding love by sharing the stage with Apple.

Apple: The iPhone is likely to give the company another iPod like revenue stream to ride for years to come. By dropping the "computer" from its name it positions itself beyond just the Mac and iPod. It also worked out the  trademark issues with Cisco  to boot.  (David Berlind predicted that one).

OS X: As an operating system OS X is great. As a mobile operating system it’s really great. Don't be surprised if OS X makes inroads on Windows Mobile, which will increasingly look scaled down compared to OS X and Vista.

Accessory makers: There's a whole cottage industry around iPod accessories. There's no reason to think that the iPhone won't have similar tag alongs.

Losers:

Motorola: Company is struggling amid low-margin phone devices. The Q's success is questionable. I'm already looking at my Q like its an Edsel.

LG, Samsung et al: These phone makers have made a big push by bundling in music with phones. Apple is going to use its iPod/iTunes juggernaut to raise big problems for other phone makers. Picture an MP3 player market scenario.

Windows Mobile OS: Microsoft's Windows Mobile is serviceable, but it's less elegant than what Research in Motion or Palm can offer. Nevertheless, Windows Mobile has made a lot of inroads, but now it'll have a version of OS X to battle.

Sprint: The company is already struggling and now it faces Verizon Wireless and Cingular, which will have Apple's marketing heft riding shotgun. Don't be surprised if a "for sale" sign goes up on Sprint soon.

iPod: Huh? Don't be surprised if at least some iPod sales get cannibalized by the iPhone. After all, the iPhone is basically a bundle of phone meets iPod.


Research in Motion: A week ago, RIM's Pearl, also sold by Cingular, was going to be the must have phone of 2007. That title didn't last long and now it has to compete for shelf space at Cingular.
 

Palm: Company can't hit its numbers or its product timelines. Now Palm is stalled out on the tracks looking at RIM in one direction and Apple in the other. Time to go private?

The UMPC: This product category was sketchy from the beginning. Now? Looks like the iPhone may be a rival. It runs a PC operating system, manages contacts and plays music and video. Sounds like a small PC to me.

Topic: Apple

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214 comments
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  • It is a little early to be ....

    ... pronouncing winners and losers before the product has been sold. This phone may or may not be a success. Not everything Apple touches turns to gold!
    ShadeTree
    • How about a wager?

      I'll bet in it's first year, it outsells the Zune in it's first year, despite the advantage the Zune has of the much lower price and no subscription requirement.
      tic swayback
      • Misdirection much?

        What exactly does the Zune have to do with the success (or not) of the iPhone? So your argument is that its not too soon to call the entire cellular industry doomed b/c Apple decided to make a phone because it is sure to outsell the Zune? Zune=music player, iPhone=Phone. Not a tough concept.

        Only Apple could enter a market that is totally unproven (music on cell) and in which it has no experience (phones) and be declared an immediate winner by the press. Prepostrous.

        I guess now that Apple has told us that music players and phones need to be merged, it WILL be DONE!
        mlambert890@...
        • Well...the iPod part of the iPhone will most likely guarantee success.

          At least as far as replacing current iPod sales for iPhone sales. Keep in mind the iPhone is @ 200 more per unit, bringing Apple a bit more profit (probably @ 20 more per unit). I would also venture it will bring new cell phone buyers to their product increasing units sold (maybe not 'smart phone marketshare' but at least more units sold).

          And OSX is in it! Kewl!
          nomorems
          • Way off on profit margin guess for iPods

            On iPod Nano, parts and assembly come to about $98. Even with distribution
            costs, it is still less than half of its retail price. Historically, Apple's profit margin
            on iPods (including the first generation) was always above 40%. Jobs never
            accepted a product that couldn't sell above 20% profit margin.

            The guaranteed success of this phone is virtually assured thanks to the iPod halo,
            which is as powerful here as it could possibly be. As iPod continues to be
            unstoppable, as its coolness remains undisputed, this phone will immediately land
            as a MUST-HAVE (in all-caps) device of the year. They'll sell 10 million of them
            just for next Christmas. All else is unimportant (Cingular's slow network, puny
            4GB memory, $500 tag). Every rich teen (and not-so-teen) in the country will buy
            it, and there are millions of teens and not-so-teens.
            Predrag Vasic
      • I'll go one step further - -

        I'll bet that not only will the iPhone outsell the Zune, but laso put a significant hurt in the smartphone/PDA market.

        I love my Axim, but all I can say about the iphone is , , , WOW! . . .Jobs and co have really outdone themselves this time. This is what the iPod should have been at the beginning . . .

        BTW, guesses on how long MS drops the 'Wow' campaign for Vista?
        jlhenry62
      • What color is the sky in the world you live in?

        Why would we compare a cell phone with a mp3/video player? The cell phone market dwarfs MP3s. How about we compare it to LG Chocolates 1st year sales? You know a product that has the same features and is competing in the same market space. You see, I'm not the fool most Apple fanatics are!
        ShadeTree
      • Only a blinkered Mac Zealot...

        Zune vs iPhone? Apples (no pun intended) vs Oranges.

        One also has to ask why:
        1) It only has a 2.0 megapixel camera (my K800i has a 3mp + zenon flash + auto focus AND can do all the musical features that the iPutz can)
        2) It doesn't support 3G networks, only crappy GSM and EDGE?

        Now if Apple had partnered with T-Mobile, 3G would have been a no-brainer.

        All that aside, it does look very stylish and I like a lot of the features that are being touted, however the price will be the ultimate killer. The mobile phone market is a different animal to the media player market and if Apple start asking silly money for it then it's (IMHO) screwed from the offset.
        Scrat
    • Would tend to agree

      Just because it says Apple (this is being written on one of 3 macs in my office) does not mean "hit"

      I think the one glaring problem could be reliance on one carrier. Some coustomers won't mind buut others will have had a bad experience with Cingular (happens with them all).

      Additionally, many cell phones (and pdas) are supplied with employers and employers might have a corporate plan with another carrier. That would decrease Apple's penetraton into those corporations.
      j.m.galvin
      • Corporate Users

        I agree that the majority of people who will see the value on such an integrated device are corporate users such as myself. Now while I'm on my 5th PDA and hoping to get off my latest, a Treo I would still not be able to jump to iPhone unless my corp IT approves and supports it.
        So it wil be interesting if Apple sees the need to cater to this market as quite different than iPod users.
        ciscokids
      • If Verizon . . .

        hadn't stuck with the CDMA technology, Maybe Apple wouldn't have signed an exlcusive contract with Cingular/AT&T . . .

        They went with Cingular because they are a GSM Company, and this enables them to simplify production costs when it goes on sale planet-wide.
        jlhenry62
    • Have to agree...

      One thing is certain, the competition isn't simply going to roll over for Apple.
      No_Ax_to_Grind
      • And when has the EVER happened for Apple?

        Apple Inc is the scrapper here. She's been declaired dead so many times over the
        years and yet never actually did. So I don't expect a roll over by anyone but Apple
        seems to thrive on that.

        Pagan jim
        Laff
        • How about the iPod?

          When has that ever happened for Apple? Try the only reason they even still exist: the iPod. Sony invented the portable music player, the MP3 format was invented by the MPEG working group, the MP3 player was invented by Diamond (yeah yeah, I realize there was a player available in Asia like 3 months earlier, but Diamond was actually a real tech player) and Napster pretty much invented the concept of digital music delivery (albeit illegally).

          So basically, Sony, Diamond, Napster, Microsoft and pretty much the entire PC industry decided to just cede one of the hottest emerging spaces over to Apple thereby saving Apple from extinction. I'd call that "rolling over", wouldnt you?
          mlambert890@...
          • Um no...

            When the iPod first came out these companies did not just roll over they were
            rolled over...big difference. Sony kept trying. Napster was brought down by the
            RIAA I believe and came back but well you know they just don't have it or did not
            have it. Do they still exist? Other companies I assume had their own issues but
            they did not see the iPod and simply give up they were crushed. As for Sony
            crushed several times in a row. There are plenty of competitors out there for the
            iPod and iTunes but so far nothing to remarkable but that is not Apple's fault. So
            while many have been rolled over....none that I know of have rolled over...ha!

            Also I don't think history will show that the iPod saved Apple from extinction.
            Maybe the iMac or Steve Jobs second coming but while the iPod has been a good
            part of Apple's successs of late Im prretty certain Aople would still be here today
            even if the iPod never was.

            Pagan jim
            Laff
          • iPod or iTunes?

            Is it just me and my aging memory or does anybody else tribute much of the iPods success to the early arrival and early success of iTunes? I remember hearing stories of people buying thousands of songs when iTunes started - long before we started hearing about everyone buying an iPod. I attribute this to iTunes being one of the first and a fairly good working model of legal MP3 downloads. Adopting the iPod once you'd started a collection was a no-brainer. And once the momentum was going, it snowballed. (Aided in part by the fact that the iPod was a pretty good player too!)
            I think the success of the iPod is largely incidental, partly earned, but in no way due to exclusive genius at Apple Inc. They provided a good system at just the right time and also happened to catch the impossible to predict popular opinion with the sexy looks of the iPod. Cudos to Apple for this job well done, but lets not bet the farm they can do it everytime.
            shraven
          • iPod came first; iTunes Music Store came later

            Well, your memory is playing tricks on you. iPod was announced in 2001. the iTMS
            store didn't come about until April 2003. By that time, iPod line was on its 3rd
            generation (with four buttons above the scroll wheel and a dock connector). At that
            point, iPod was already a juggernaut. The arrival of the online store only helped it
            cement the commanding lead and extend it even further. Incidentally, Rhapsody,
            Harmony and some other online music stores using subscription model have already
            been in existence for a year or more at the time iTMS was launched. However, iTMS
            very quickly established overwhelming dominance in the space.
            Predrag Vasic
    • Yes, it's a telephone.

      An Apple-branded telephone, and therefore both expensive and well designed in appearance.

      The iPod was a fad, fashionable. It was a too-expensive mp3 player, with format complications, but there's money to chase the trendy.

      The iPhone may or may not become trendy.
      I think it won't, because second fads from the same source are not frequent.

      Written by someone with a $100 cell phone who often forgets to check for software updates. And never confuses his telephone with a keyboard with sufficiently large and numerous keys to do text messaging.
      (Though credit Roger Ramjet with the suggestion that keys should be larger.)
      Anton Philidor
  • Verizon

    The big question now is, What will Verizon do? By agreeing to exclusive distribution rights with Cingular, Apple has made a huge gamble. If they had stayed carrier agnostic (and reduced the price point) they could have owned the phone market in two-three years. Instead, they're going to face tremendous pressure from Verizon and whomever Verzion decides to partner with (Anyone wonder what company that will be?) Neither Verizon nor Microsoft will stand still. With the iPhone not launching until June, that reduces their lead. Does anybody doubt that MS and Verizon can get a 4gb phone/mp3 player on a Windows CE device for $299 out by the 2007 holiday season?

    Me either.
    pkstephens
    • Very good point

      I don't think Verizon will take a huge hit to be honest. It's strong with its network etc. Sprint is the one that's going to get crushed because it's the weak sister.

      As you say price pressure is going to be an issue. The big question is what value folks will put on this touch screen approach--who knows it may turn people off. Given iPods remain more expensive than they should I'd reckon the iPhone will hold for a bit.

      Re the Cingular gamble I can see that point, but it's not like Cingular is small. It may also agreed to tough terms that Verizon wasn't willing to make.
      Larry Dignan