Great Expectations

On the day that Apple announced the iPhone, my eleven-year-old son decided that he wanted one. Since then he’s done chores above-and-beyond the call of duty in order to earn $500 to buy one. Fast forward to last week when this news appeared in the business press:

NEW YORK (MarketWatch) — Morgan Stanley analyst Kathryn Huberty reiterated her buy rating on Apple Inc. shares (AAPL :87.06, +2.45, +2.9% ), saying she believed the market is underestimating the likely success of the iPhone. She raised her 2007 iPhone sales forecast by 33% to 8 million units from 6 million, following a survey of 2,500 U.S. consumers. Huberty also believes Apple’s ability to leverage strong iPhone demand is being underestimated. “While we see positive leverage drivers across Apple’s product segment, the iPhone alone increases scale (better pricing from suppliers), strengthens retail store leverage (increased velocity on fixed-cost base) and takes advantage of lower NAND [memory] pricing in the market,” Huberty said in a research note.

(She is forecasting eight million units in six months. As a data point, Motorola shipped fifty million RAZRs in the first twenty-four months. You can currently buy a RAZR for $30 after rebate with a two-year contract.)

Of all people, I support unabashed exuberance for Apple products, and our family will evidently buy at least one iPhone, but I don’t understand this kind of coverage three months before the product ships. Clearly it’s a cool phone, and as with many Apple products, you have to ask, “Why didn’t any other company do something like this before?” Still, just off the top of my head, I have a few questions about the iPhone:

1. What’s battery life with Bluetooth, Wi-Fi, and iTunes running on a big color screen? The battery life of my Motorola Q sucks, and I don’t have Bluetooth, Wi-Fi, or music running. Based on Apple’s record when it comes to battery life of laptops, this is at the very least an “open issue.”

2. Will people tolerate Cingular’s Edge network? I switched from Cingular to Verizon to get EVDO. Edge is supposed to be three to fours times slower than EVDO. The knock on EVDO is that it has much less coverage, but I’ve seldom had coverage problems. Maybe only people like me who have used EVDO will ever realize that Edge is so much slower...

3. Will a phone without a hardware keypad work in the real world? I mean a world where you’re driving while trying to dial numbers as well as access and delete voicemail (unless you’re a SpinVox user). Can a person dial an eleven-digit number without looking at the touchscreen at sixty mph?

4. Is there voice navigation? This will help the keypad issue, but I haven’t seen anything that says that there will be. If you can do this on a Windows Mobile smartphone, I’d be astounded if you can’t on an iPhone. But I’ve been astounded before.

5. What’s Trixie and Tiffany going to do when they send 1,500 text messages a month without a keypad? Which is to say, will forefingers be the new thumbs? Or, will teenagers sprout much longer thumbnails?

6. Will people pay $500-600 for the convergence of phone, Internet device, and music player? And this doesn’t even count the $100 or so contract-termination fee since carriers treat current customers worse than new ones. Perhaps we should look at the iPhone as an Internet tablet or a PSP for old people—if you didn’t have to buy a service contract. (Will an iPhone run without a SIM card in it?) Maybe Apple could remove the phone from iPhone and make it a high-end iPod.

7. How will the sealed battery work? With most phones, you can replace a battery if it goes bad. What happens when this happens with the iPhone? (With my Motorola Q, I was able to buy a larger battery so that battery life went from horrible to merely dismal.) iPods have sealed batteries too, but it’s one thing to be unable to listen to music; it’s quite another to be unable to make or take an important call.

8. What’s the impact of a closed system where developers cannot create software for a phone? Imagine, for example, if you could only use iLife and iWork on your Macintosh. Is that what using the iPhone will be like? What about VPN? What about synching with an Exchange server? This is a consumer phone, but consumers do have corporate jobs.

There may be great answers for all of these questions. (Meanwhile, my son has amassed $400 of the $500 that he needs.) If not answers, there will be great reality distortion. If not great reality distortion, Apple will fix shortcomings in future iterations. However, it’s a tad bit early to declare this the greatest phone in the history of mankind—though many of us are hoping it is. We should at least wait until the phone reaches huberty.

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Comments

[Loweded Wookie]

I hope the lack of physical keyboard will reduce the texting and dialing in cars.

Studies have shown that using a cellphone while driving cars is worse than driving drunk.

In fact just recently a girl was killed when her car went under a truck because she was texting while driving.

Personally I have to hold out for 2nd Gen iPhone because it won't be released down here in New Zealand until 2008. By then it will have 3G which leaves Edge for dead. Why is America so far behind the world in terms of cellular communications?

[James]

>>Removing the Phone functionality and leaving it with a measley 4GB of storace would make it an oversized shuffle.

Actually it would make it more like a PSP.

[aldo]

"Can a person dial an eleven-digit number without looking at the touchscreen at sixty mph?"

Why don't promote reading and make-up application while you're at it.

C'mon!

[James]

>>Touchscreen phones have been tried before (and failed for the most part)

Reallllly? So the tens of millions of us uning Smartphones and PocketPC phones are also failures by extension, or we're just using failed hardware every day to do our jobs?

Too bad the iPhone won't do 1/10th the stuff that this failure of a phone in my hand will do.

[Amish Parashar]

This excellent post reveals some interesting information about product development -- many people starting or running businesses can relate:

-Competition isn't a bad thing...while Apple is clearly ahead of the pack with a convergence phone, it won't be long before Motorola, Samsung, etc deploy theirs. Doing so will force Apple to 1) better articulate the benefits/appeal of their product and 2) create a better iPhone

-Although the iPhone is leading the pack, it certainly isn't the first convergence device - what did Apple do right that many failed at? marketing? buzz? a better product? limited release? all of the above?

thanks for another excellent post Guy...

[Sam]

"What’s Trixie and Tiffany going to do when they send 1,500 text messages a month without a keypad? Which is to say, will forefingers be the new thumbs? Or, will teenagers sprout much longer thumbnails?"

According to David Pogue, you cannot use your nails on the iPhone's touchscreen. It only detects skin contact.

[SFSlim]

Please, please, don't change the (apparent) typo "huberty", as it makes a wonderful neologism. Sort of a combination of "puberty" and "hubris". Which, in the case of the iPhone, are both perfectly applicable.

Of couse, having said that, I'm buying one the picosecond they go on sale, nitpicking and lingering unanswered questions be damned.

***********************

It wasn't a typo, and it wasn't as clever as "hubris" + "puberty." It was simply the last name of the Morgan Stanley analyst: Kathryn Huberty. :-)

Guy

[chimpo]

About your MOTO Q:

Guy, your Moto Q batteries suck because your option to turn the backlight is set to "never". I fixed this problem by charging the phone continuously for 72 hrs, and then go to Start > Settings > More (G) > Power Management (C)... and MAKE SURE that Backlight time out on battery is "15 seconds" or less. Also from time to time keep holding the msg button on bottom left that will turn the backlight off. Hope that solves the battery problem! It did for me! Now it lasts for days in ideal mode.

[Brett Johnson]

"#7 - The sealed battery is a non-issue. Really. I did an informal poll amongs my friends and colleagues, and nobody ever replaced a phone or an iPod battery. (Heck, my first iPod is 4 years old and still works with its original battery). Just because a few people had battery trouble doesn't mean that's going to be the same for everybody."

This long term life of the battery is not the concern. I don't mind buying new batteries for my phone or iPod every few years when the old Li cells are at end-of-life. Guy isn't talking about the need to replace the battery at its end-of-life. He is concerned about the length of a single charge. A cell phone is not much good if the battery runs flat at 3 o'clock in the afternoon, and the charging cradle is back at home (or the office).

With my current phone, I carry a spare battery, so if the battery runs down, I can pop in the spare one in 15 seconds. I am not going to spend 30 minutes at LAX with a thin flat-blade tool, trying to swap in a new iPhone battery. Hell, I would probably get hauled off by airport security if I even tried, and Gitmo doesn't have Cingular coverage. Likewise, I am not going to hunt down an Apple Store or a Cingular outlet, and pay them $20=$150 to replace my iPhone battery, just because I spent too much time at Starbucks reading digg and listening to Dylan this morning.

If the iPhone battery does not hold enough charge to support 24 hours of moderate-to-heavy use between charges, then its usefulness is greatly diminished. If it lasts less than 10 hours, Apple better include 2 charging stations in the package (one for home, one for work).

[BrYYan]

Decent questions, many of which I have already pondered. My ultimate conclusion is that the iPhone is a TOY. If you want to sync with exchange/POP3 servers, or use a smartphone/PDA for business, Windows Mobile is the way to go.

Besides, the first I heard of the iPhone was when it was called a "Wide-screen iPod." Removing the Phone functionality and leaving it with a measley 4GB of storace would make it an oversized shuffle. Maybe Apple should stay out of the cellular market and use this model to house the latest 1.8" hdd from Toshiba. Imagine that... a Wide-screen 100GB iPod with Touch screen :)

[rob enderle]

you have to ask, “Why didn’t any other company do something like this before?”

DUH!!!!
Maybe you should check on the internet.
Not the first.

[craig]

“Why didn’t any other company do something like this before?”

Depends on what you mean by "like this". If you mean the UI then it's because its Apple, though the main screen isn't much different from other devices. If you mean the iPod connector then that's obvious. Otherwise, who says they haven't? Touchscreen phones have been tried before (and failed for the most part) and the iPhone hardware isn't that different from what's been done already. Sure there's multitouch but Apple isn't really doing anything with it except resize images.

The cost and battery life issues are things that smartphone users have come to deal with already. It's the lack of keyboard that is the big drawback. If people don't think that texting isn't important to the "target customer" then they're crazy. I've texted on a device with no keyboard and it's no fun and multitouch isn't going to help. At a minimum, Apple needs to get off of the Cingular exclusive, have a 3G plan, and integrate GPS to go with that pretty screen. I need a real reason to trade a keyboard for extra screen and the iPhone isn't delivering it (yet).

All these drawbacks have been discussed to death. Is it simply because of the author that this list is interesting?

[Joe]

One more thing. The one thing I look forward to the most is a USABLE phone. I've used Treo's and the Q, and I must say, they are CRAP. The worst usability ever. Adding Goodlink to a phone makes its usability and stability worse...but I don't have any other options. I hope the iphone is what I'm looking for.

[Joe]

I agree with some of your comments.

1. Battery life in real world usage remains to be seen. Since no one is walking around with an iphone, that we know of, no REAL people are using it. I think battery life will be bad and will have be addressed in iPhone v2.

2. I've heard that iPhone v2 will support 3G in the next revision.

6. I would pay 600 for iPhone v2.

7. Replaceable battery is a must. I too needed the larger Q battery.

Here is what it would take for the iPhone to be of use to ME:

* It should not lock up and crash like my (Motorola Q +Goodlink) does everyday. I have to reboot my Q at least twice a day with the latest Goodlink software running.

* It must be able to connect to Exchange. Calendar, contacts, and email. Nothing less.

* The battery should endure 24 hours of heavy use (wifi, ipod, bt, 3g, silent ring) at the least. I should be able to turn off battery sucking features when I want to conserve power.

* Since it's Mac OS X underneath, I should be able to open, edit, and print documents.

* It must have IPSEC vpn capability

* It must have a terminal program so that I can SSH to boxes at work. SSH must support public keys.

I do look forward to the REAL web browser of the iPhone. I also look forward to the visual display of voicemail, much like an email inbox. I won't get the iPhone without 3G though, so I will wait for v2. This will give me plenty of time to let my Verizon contract run out.

[Charlotte web developer]

This is one of Apple's behaviors that has always frustrated me (and I've been using Apple computers since before the Mac); this obsession with locking things down, with making things difficult for third-party developers and manufacturers, of forcing you to upgrade to a whole new system when you only want a minor bump in speed and memory.

Not being able to replace the battery is bad, but I guess you could always opt for the insurance from Cingular. Just make sure you keep your cell phone data backed up, cuz once that battery dies, you won't be rescuing anything off the phone.

No third-party software developers? That's simply baffling. They are launching a new phone platform in a market that's already well established, and the competition is already working on their clone versions of the iPhone that will run Windows Mobile. The smartphone market is not the MP3 player market; you need your third party support.

The lack of a keypad is not a biggie to me. I try to avoid using the keypad now. Voice recognition is the way to go.

[kd]

The iphone is a miniature computer that you can make phone calls on. Apple need only to release an sdk and the iphone will quickly be adopted as the software is developed. That's only a business decision. The biggest question I see is with the battery life.

[indyank]

Guy...You say that these were questions out of your head while this one appears 2 days earlier than this post.

http://www.moneycontrol.com/india/news/tech/appleiphoneiphone/dontbitethatapp/market/stocks/article/269686

[ironSoap]

@atho: "Driving and using phones? The number one cause of driving accidents today."

Oh? Care to cite a source? Most of what I've seen suggests that only 25% of accidents are caused by cell phone use while 40% are caused by driving while intoxicated. 25% of roughly six million crashes is a lot, to be sure, but hardly the leading cause of accidents and probably more on par with messing around with the radio.

[cw]

>"What Blackberry owners tend to forget is how tedious it was to learn how to type on those crappy tiny keypads"

You are absolutely right. When you first start out with the Blackberry, the typing experience is AWFUL with those chicklet keys. And I'm sure the same is true of most smartphones. And the same is also true of texting on traditional cell phones.

What's interesting is that people have such high standards for the iPhone... which is a good thing. Finally, people are expecting more from your cell phone.

>Guy, tell your son he will probably need to throw $2000 on top of the $500, cause that will be the yearly cost to get an iPhone and a phone plan with data capabilities.

This is probably the weakest argument against the iPhone. From the rumors, it looks like the iPhone will make my plan costs go DOWN from my current BlackBerry bill. So you can't factor in a $900-1200 annual bill without first discounting what you're paying now. Not even to mention the vastly improved experience you're getting with voicemail, web browsing, and texting.

[Norm Potter]

Maybe the reason for the early release of the podphone is explained in this comment on the Cult ofMac blog:
:
http://blog.wired.com/cultofmac/2007/01/ask_an_attorney.html

see this comment below:

Thursday, 11 January 2007 - 6:16 PM

Name: jmbehmke

IAAL - trademark is one of my specialities.

The Cisco iPhone trademark was registered 11/16/1999 (Reg. No. 2293011). In order to keep a trademark registration active, you have to file a Declaration of Use on or before the sixth anniversary of the registration date, in which you state, under penalty of perjury, that you have been using the trademark continuously during that period. The sixth anniversary would have been 11/16/2005.

Cisco did not file the Declaration of Use in the requisite period. However, the USPTO gives you an extra six months grace period, if you pay an extra fee. This grace period would have expired 5/16/2006. Cisco filed a Declaration of Use on 5/4/2006 which kept their registration active. Had they not filed, their registration would have been canceled.

With the Declaration, you are required to file a copy of a label or other packaging showing the trademark in use. Cisco filed a picture of the box for the Linksys iPhone.

Now the Cisco press releases I have seen indicate that Cisco released the iPhone products in December 2006.

Now this is my personal opinion based on the information I have seen so far (your mileage may vary): Cisco may have a problem with its trademark registration because it has not been continuously offering a product under the iPhone trademark since 1999. They knew that Apple was interested in the name (since Apple had approached them and negotiations were ongoing). If Cisco didn't launch a product using the iPhone name, their trademark registration would be canceled and they would have no bargaining chips with Apple. So in order to keep the trademark active, they had to file the Declaration of Use, and start selling a product under that trademark.

It is possible that the Declaration of Use is defective, as there was no continuous use, and the sample that Cisco submitted was for a product not released until 7 months later.

The fact that the Declaration of Use was submitted only days before the deadline expires gives me the impression that they were scrambling to get a product to market, and had to file the Declaration before the product was ready.

Apple's lawyers will have certainly found the same clues that I did, and may believe that Cisco's registration can be cancelled (by proving in federal court that the Declaration of Use contained mistatements of fact - there was no continuous use).

If Apple believes that they can get the registration cancelled, they may not have wanted to sign the agreement Cisco proposed. Without the registration, Cisco and Apple would still have a trademark dispute to resolve, but Cisco will have a harder time proving that it has valid trademark rights.

Norm Potter

[No One]

Common sense says IT managers don't let employees access Exchange mail through personal phones. Talking to our business rep with Cingular, the phone WILL NOT be offered through business channels and can only be purchased by walking into a briack and mortar store, or at the Apple store. The only option is IMAP Mr. K. IMAP sucks on EDGE networks if you've ever tried to make it work on a personal phone with Cingular.

[Ace]

The battery issue for Ipods?????? for $20 you can get a replacement and replace it yourself in 20 mins. If you not handy then take it somewhere and you will have a new fresh battery in minutes. For the same price you can find batteries with 30% more capacity. Hardly a real issue.

Same with the Iphone. Worst case you take it in to Apple or Cingular (ATT) and they pop a new one in for you.

[Ray Basile]

You have made an exceptional list of questions for the iPhone launch. I learned the hard way with the iPod that the later versions were better based on user input. Your list is so exceptional that I am now going to wait for the version II release. I was drunk on all the iPhone hype... but I'm sober now. You have spared me an ugly morning after moment. Thanks!

[totoro]

"A touch-screen phone is just not going to work for most people. Not giving up my Blackberry yet! "

What Blackberry owners tend to forget is how tedious it was to learn how to type on those crappy tiny keypads, and Palm users how tedious it was to learn Graffitti, etc...I've seen people type like demons on a standard cell phone keypad, and others plod along on a Microsoft full size computer keyboard. Its all in how you approach it. Dismissing Apple's soft keypad without even trying it first certainly isn't thinking different :p

[Daniel]

Guy, tell your son he will probably need to throw $2000 on top of the $500, cause that will be the yearly cost to get an iPhone and a phone plan with data capabilities.