The Apple Must Win for the iPhone to Survive Myth
August 5th, 2010I can’t help but laugh at the constant carping by the nasty negativists that the rapid growth of the Android smartphone population is somehow going to hurt the future of the iPhone. The perception is that this is merely a repetition of the Mac versus Windows platform wars, where there can be only one.
As history has shown, however, Apple can live long and prosper with a small market share, so long as sales continue to grow and financials continue to beat Wall Street estimates. Unfortunately, far too many alleged industry analysts can’t perceive that basic truth, which explains why the ascendancy of Google’s Android OS has been represented as a potential death knell for Apple.
It doesn’t even matter if Android grows faster, as appears to have happened in the first half of this year, likely due to the fact that, in the U.S. at any rate, Android is available from all the major carriers. Apple is still, of course, tethered to AT&T, and it may be months or even a year or more before that situation changes.
Except for the years where Apple lost its way, the company was almost always profitable even when Macs, monitors and LaserWriters constituted the largest portion of the product lineup. Sure, market share was but a fraction of the total PC market. However, loyal Mac users didn’t buy Apple’s gear based on market share, but on preference. The Mac was (and is) the best tool for the job.
Now the iPhone and other mobile products have totally turned Apple around, to the point where they’ve moved over 100 million units in just over three years. There are far more iPhones and iPod touches than Macs. The iPad’s initial sales were extremely close to that of the Mac during the product’s first quarter on sale, even while the new gadget remained seriously backordered and not even available in many parts of the world.
But far too many pundits want you to believe that Apple must beat Google to survive as a viable company, despite the fact that Android OS market share is still below the iPhone, even though there are many more models and, at least in the U.S., more sources from which to acquire one.
Winners must be declared, however, and the fact that Google’s smartphone market share is increasing faster than that of the iPhone is cause for some to feel Apple must be in trouble, and that they are doomed to also-ran status. This despite the fact that the BlackBerry is still ahead of both, and it’s not as if RIM is standing still when it comes to revising their products.
It’s also not certain just how well Microsoft’s next mobile OS will fare. True, Microsoft has had serious trouble moving beyond the core operating system, server software and productivity suite market. Yes, the Xbox appears to be doing well, after loads of money was thrown at the gadget. In retrospect, though, I wonder how long it’ll take Microsoft to actually recoup all of that investment, although it doesn’t seem the company’s stockholders are complaining.
In any case, after the Microsoft Kin debacle, it’s an open question whether they can actually develop a credible operating system contender in the mobile space, or whether it’ll be an also ran in the tradition of the Zune. In other words, Microsoft continues to believe that “innovation” means imitating someone else’s product two years later.
Now despite ongoing concerns about security, Google appears to be doing well with Android. Many of the most interesting non-Apple smartphones use that OS, and lots of people seem to have embraced the various iterations of the Droid and similar products with loads of names I don’t choose to recall.
In addition, the OS is getting frequent updates, and hardware makers are coming out with new models every few weeks. There’s surely enough momentum to carry the platform to a larger share of the market. I suppose it’s quite possible that there will some day be more Android phones sold than iPhones, simply because there are so many more models from which to select. More to the point, they seem rather more distinctive from one another than the typical commodity Windows PC box.
This is not to say I feel Apple will fail. So long as people around the world wait for hours outside a store to buy the latest and greatest iPhone, and Apple can continue to report annual sales increases in the 50% to 100% range, you cannot possibly call the product a failure or a potential failure.
Yes, I suppose Apple’s competitors were cheering loudly when that Antennagate furor erupted, but it turns out that it wasn’t such a big deal, and there may, in the end, be little or no lasting damage to Apple other than the relatively tiny (for them) sum of money spent on giving away free cases.
In the end, though, I think Apple’s mobile platform will actually expand a lot faster than the critics expect. But it doesn’t mean Apple has to be number one. There’s plenty of room in that market for several players to score big.
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[…] This post was mentioned on Twitter by breizh2008, Gene Steinberg. Gene Steinberg said: Here's my latest Tech Night Owl commentary: : The Apple Must Win for the iPhone to Survive Myth http://bit.ly/dvaBYa […]
For the iPhone to truly become ascendant, Apple needs to dump the AT&T anchor ASAP… The pent up demand for the iPhone on Verizon alone will at least double iPhone sales.
@JohnB, You forget there is a contract of unknown duration involved. Even when Apple expands the roster of carriers in the U.S., they are not about to dump AT&T. The partnership has been highly profitable for both.
Peace,
Gene
@Gene Steinberg,
att&apple had a 5 year deal if nothings changed
If anything, the Android vs Apple situation is not what the MS vs Apple situation was in the past.
It is what MS vs Apple is currently. Android can appear in numerous, race to the bottom cheap devices. Those devices and manufacturers can go ahead have the lions’ share of the market, and make very little money in the process. Apple will sit pretty with the slickest, most secure, easiest to use, vertically integrated devices and occupy the profitable top end of the market, and make bank. Just like the desktop and laptop computer market at this time.
I also have a sneaking suspicion that the vaunted “openness” of Android will inevitably lead to more malware than the walled garden of iOS ever will.
Gene,
Another great article. There is no reason, even if Android gets 50-60% market share, that Apple would not thrive with 20-30%. Follow the money trail: Google isn’t making nearly the money Apple is when it comes to the iPhone. They don’t make the hardware and the OS is pretty much given away. Just like the PC market, Apple can sell a premium product and make a lot of money doing so. Let Android be successful. I am sure it will be even after the crappy apps start stealing data because no one is manning the wall, and the carriers start putting junk ware on them, as they have started to. The iPhone will still be standing and making billions for Apple.
You mention “antennagate” in your article.
Yesterday, a ChangeWave survey on iPhone 4 users was published:
http://www.investorplace.com/investment-research/smartphones/apple-inc-iphone-4-survey-att-verizon.html
A couple of interesting quotes:
“In a surprising finding, iPhone 4 owners reported a better dropped call rating (5.2%) than their 3GS counterparts (6.3%).”
(In other words, despite all of the FUD about “antennagate”, iPhone 4 users are having 17.5% LESS dropped calls than users of iPhone 3GS!)
“Bottom Line: Despite the waves of controversy that surrounded the iPhone 4 within days of its launch, the latest Apple release is outperforming almost every other smart phone in the industry in terms of overall customer satisfaction and meeting owners’ expectations.”
“But the good news for Apple is that these issues appear to be clearing up for good – and if they do, this survey shows there is a high likelihood the iPhone 4’s customer satisfaction levels could end up equaling or surpassing those of the 3GS.”
This whole “antennagate” problem is primarily in the US, and is attributable to AT&T’s (the only service that iPhone is available to) spotty coverage compared to other services. We haven’t been hearing complaints to this magnitude from any other country in the world.
Considering this, in the US under AT&T’s unreliable coverage, iPhone 4 users are having much less dropped calls than iPhone 3GS users.
It’s amazing how different reality is from from all of the “antennagate” misinformation (FUD). And yet even with this documented proof that the iPhone 4 is actually less likely to drop calls than previous iPhones, the FUD continues unabated.
Makes you wonder about how easy it is to spread FUD on the Web and have it quickly accepted as truth.
@ViewRoyal, Especially, if you’re a competitor looking to trash Apple.
Peace,
Gene
One other angle comes to mind. How is Microsoft going to sell their mobile system, when Google gives theirs out for free?
Andriod is far more injurious to MS than Apple. Apple will profit well from its iPhone/Touch/Pad in any case.
Gene,
I am not sure about the title of this article. Nevertheless, Apple have competition in the various Android phones. Apple will need to innovate and compete if they are to continue the phenomenal record of success with the iPhone…and have better product testing and QC than currently appears to be the case. Competition is good for consumers. It raises the bar of what a company needs to bring to market to succeed.
And then there is the matter of AT&T.
Sooner or later Apple will need to bid adieu to their exclusivity model with AT&T if for no other reason than the rather obvious fact that there are many areas, especially in the west, where AT&T either has no service or it is much worse than that of their competitors. If Apple expect to have sales in those areas they will need to provide handsets compatible with the preferred service providers in those areas.
I have been with AT&T for quite some time and must say that it has become an exasperating experience of late. I have spent quite a bit of time on the phone with AT&T tech support (I must say most of the recent ones I have had contact with have been very pleasant to speak to and have made an honest effort to help.) In the end, I think their network is just not up to the task at the present time and needs emergency CPR…are you listening AT&T management?
I have no idea how many people do this, but I am aware of a number of people leaving AT&T because of service problems which means that Apple will not be selling them any iPhones. Add to that Apple’s arrogance (under investigation by the DOJ) of refusing to unlock iPhones under any circumstance, even when a contract with AT&T has been fulfilled. And Steve wonders why people want to jailbreak their phones…they have been bought and paid for by the customer and are not the property of AT&T or Steve anymore.
I look forward to the day when the exclusivity agreements are prohibited.
The polls for Android and BlackBerry user loyalty point to more iPhone success.