iPhone: Apple’s (APPL) First Flop

I’ll tell you what, your article is no different than the opinionated articles I have read over the past few years. The likes of Richard Suttmier, Doug Kass, Citigroup analysts, San Francisco Chronicle reporters, and many more, have continuously expressed opinions about Apple and not in a positive way.

The iPod was denounced continuously, as iTunes have as well as the entire Apple product line. I’ve heard its a fluke, one time thing over and over for years.

As Steve above has said “iPhone is no sure thing, I doubt that it will be a flop”. The only thing here that has higher likelyhood of flopping is your opinion.

But perhaps there is a different agenda here, perhaps you are short and taking quite a beating?

In any case Apple shares cannot go up in a straight line and they will pullback, but not because the iPhone will be a flop.

Good luck to you.

thank you for reading and commenting

i have no position in apple

i think the iphone at $599 will be a flop, i believe I said a 2GB version for $299 or less would sell??

I also believe I said that the ATT decision pinholed the spectrum of potential buyers was a mistake

the ipod broke new ground, the iphone does not.. big difference.

would you buy one?

http://youtube.com/watch?v=YgW7or1TuFk

worth every penny! and if the consumers fells that way, then thats all that matters.

10 million is easy. the US only can do 10 million. lets not even bother to count Europe.

no frets here. no frets for last 3years. stock should see a nice run to 170 by years end.

One question for you…have you even used/held/viewed up close an actual functioning final product of the iPhone? No? Thought so.

Until the iPhone even hits the street everyone with a website and an opinion just has to be the authority about how Apple will crash and burn with this product.

Your opinions, and not working knowledge of the iPhone, are flawed as I see it.

Your “one carrier” argument is a sorry one since this is a business and if you want the product that bad to cancel your contract to get this phone, you’ll do it. That’s a plus for the partnership behind this product.

The touch screen, as long as it is as accurate as it seems in the demos, will be better than the Blackberry interface since it changes for each application shown on it. Again, a poor excuse for an argument.

Your historical take on combining devices is just laughable.

2GB of storage only? Sorry, but photos and music might work there, but movies, etc. are going to be where the iPhone will shine.

You speak of AT&T coming out the winner in this…I think you’re wrong. Apple will make sure their margins are secure for the initial release of the iPhone. If AT&T blows this opportunity by forcing users into overpriced plans to use the iPhone, it will be AT&T that suffers, not Apple. The phone will eventually make it to other carriers and if AT&T shows that they can fumble at the 1-yard line, the other carriers will pick up the ball and score.

You asked “why would I pay $600 for this?” Simple…the same reason that people paid that much for a new iPod about seven years ago…the same reason that people bought the first Blackberrys when they came out around that price.

Wouldn’t it be a better world when I could invest in a company without some person (analyst) that comes along with unsubstantiated rumor and opinion to rock the boat? Next time know what you’re talking about before you hit the keyboard, m’kay?

bellboy,
thank you for reading..

this is a “blog”: by definition it contains opinions. mine AND yours i might add

the ipod mass acceptance did not happen until cheaper versions came out. just like the motorola “razor”. people will pay $600 en mass for a phone.

If iPhone flopped, it wouldn’t be Apple’s first. So even the title of the article is way off. You tried to tone down a bit with your responses in the comments section, but I think it’s clear to me you just wanted to generate traffic to your blog =) When was iPhone introduced? Oh, it was some four months ago. So it took you that long to realize that iPhone would be a flop? Dude …

I’m so confident you’re wrong on this one, I’d love to get a little side-bet going –

In lieu of that, I’d appreciate it if you would keep publishing this opinion so perhaps Apple stock will drop a bit and I can pick up some more.

“the ipod mass acceptance did not happen until cheaper versions came out. just like the motorola “razor”. people will pay $600 en mass for a phone.”

Cheaper versions of iPod drove sales up is what you’re saying? Uh uh. Sales didn’t start rising substantially until Windows compatibility was added to the mix–since it was Mac-only when it launched. Also keep in mind that the price didn’t change much until the iPod mini came out which really blew the doors off. But enough about iPod history…

People are not just buying a phone, but a lot more. The rumors have been there for a long time and Apple listened–unlike the competition. If this product is what Apple has been advertising, this product will blow the competition away and the Zune will be tossed onto the pile of other POS tech gear that didn’t have their sheet together.

Why will it succeed? OK… I’m not absolutely positive but I’m pretty confident it will.

To me… as a consumer… it will succeed because it brings together my MP3 player and my phone AND it adds wi-fi. OK: many phones already do this today. Yes but they don’t use iTunes – the real reason why people buy iPods. I’ve tried the other competitive devices and their software is at best difficult to use.

All of those iPod users out there who would like to carry only one device will now have that opportunity.

So the thing will scavenge sales from the iPod – certainly. But the existing iPods it will replace will be sold or gifted to others – more iTunes users… Throw in the real-time email (something I am not terribly fond of and could easily do without – I don’t need that much connectivity) and you’ve got a chance at some conquest sales from blackberry users.

It’s a little pricey and I’m disappointed in the AT&T/Cingular deal but that might be a small price to pay for the convenience of the single device.

Disclosure – I do own Apple stock. And, it seems I’ve been seduced into the Apple cult by top quality product – at least from outward appearance – iMac G5, MacBook Pro, video iPod… scary… I wouldn’t call myself a cult member…

And Apple shares are rising because of the PC market share gains (and iPhone speculation). You’ll see the real hit from the iPhone with the first quarterly report after the introduction (hopefully in the positive direction).

FYI Todd–

When Jobs introduced the Iphone, he clearly mentioned that the music automatically diminishes when a call is answered or placed–

so that ain’t a problem bub!

sure it is a problem, it makes the ipod portion of it useless in any situation where a group is listening. are you going to use you iphone at a party when if anyone calls you the music stops?

“First flop”? Does the word “Newton” ring a bell? Or “Mac cube”? You must admit that your headline is needlessly inflammatory.

Argument 1: “More isn’t always better”.

Reply 1: Yes, and it isn’t always worse. And sometimes it really is better. I (and many others) look at the web browser component of iPhone as the real breakthrough here. We’re talking a portable Internet device that lets you look at “real” web pages, not some micro-version of them. You’re out at a bar and want to settle a sports argument – whip out your iPhone and bam, free drinks for the winner. You’re having a day on the town and decide you want to catch a movie, or make dinner reservations – wham, that info is at your fingertips. And in exactly the same way you are used to using your web browser at home.

Now you might argue that you have these capabilities on a Blackberry or something. Not quite true. Ever use a browser on one of those? And ask someone who doesn’t have a Blackberry why they don’t – just looking at the pile of buttons on the front of something like that is intimidating. So here, less is more…more inviting, less intimidating. The iPhone interface looks a lot like widgets on the Mac OS X, and it doesn’t jumble them all over the place with arcane menu trees.

Argument 2. One Carrier

Reply 2: This can not “cause a lag in initial sales” as the intial sales are zero. So we are starting with the 50 or 60 million ATT customers and adding in folks who don’t already have a cell phone as the initial base.

Further, by announcing the iPhone so early, Jobs has been exceptionally clever in giving folks a heads-up not to renew their contracts. I know I haven’t done so – not because I will buy an iPhone but because I *might* buy one. If you want your argument to hold water, show us some stats on how many people are under contract and the time they have remaining on their contracts…and then compare that to the subset who consider themselves “possibly interested” in the iPhone.

Argument 3: Touch Screen

Reply 3: Can you pinch photos and web pages larger and smaller on your screen? No. And your “simplicity” and “enjoy” comments on the iPod in Argument 1 come back to haunt you here – it’s a way cooler experience than scolling on a Blackberry. The errant calls argument seems utterly weak and best and doesn’t merit a reply.

Argument 4: “All in One” Historical Issues.

Reply 4. This is a rehash of argument 1. And the logic is flawed. Yes, a DVD in a DVD/VCR combo can break…are you suggesting that the iPhone might stop playing songs, but still make calls? Or that the browser might fail, but the songs will still play?

As far as the life expectancy of the iPhone w.r.t. the iPod. First, at that price, people will take better care of them. Second, the size is larger so it’s less likely to go through the wash. Third, the resale market on iPods is quite healthy, and would be so for iPhones. And have you ever heard of something called eBay?

Argument 5: What Should Apple Do?

Reply 5: A “lower cost” iPhone will no doubt come out eventually. But only after market research into user habits has determined what features folks consider worth paying a premium for.

As far as being “nothing more than a little niche product” by teaming with ATT goes….we;;, Mac users have heard that for years…and who’s laughing now?

Todd,

Your analysis falls short in several ways. As someone who has been following Apple extensively for the past 8 years, and who invested in Apple in April 2007 when the stock price was $13.5 (split adjusted to $6.75 in today’s values), let me offer the following (slightly long) analysis.

To begin with, you incorrectly state the price structure of the iPhone. You wrote, “it will sell for $599 with a one year or $499 with a two agreement through AT&T wireless.” Based on Apple and AT&T’s published materials, as well as the majority of 3rd party analysis, the iPhone will sell for $499 for a 4GB model and $599 for an 8GB model, independent of the plan one purchases.

Leaving aside this basic point, your analysis is based on the flawed premise that the market does not want an iPod an a phone together. As evidence, you offer the assertion that it is an intollerable inconvenience to have one’s music turned off when accepting a phone call, especially when using the iPhone in a car or event setting. What evidence do you have that the iPhone is actually compatible with a car-based system? If it is, why is it a deal-breaker for one’s purchase to have the iPhone operate both as a phone and an iPod in one’s car? One would think that having a single device that could be plugged into a car and operate over the speaker system as both an iPod and a hands-free phone would be a major selling point, given the recent legislative push to ban hand-held cell phones in cars.

The analysis you offer of the iPhone’s drawbacks in the car, as well as your dismissal of the wisdom of 8GB of storage, betrays your misunderstand of the market that Apple is trying to target. This product is not targeted to the 55-year-old professional who is content to performing simple computing tasks, and perhaps owns and is capable of using an iPod. This product is targeted to the large market of 18 to 35/40-year-olds who see both the value and convenience of having a single device for phone calls and music (not to mention the smart phone capabilities). For this group, the cell phone and the iPod are necessary personal items that are carried with them most of the time. Merging these devices is a natural progression in the move towards developing more portable and convenient devices.

Given the portability and convience issues, your arguments regarding TV/VCR/DVD combos are void, as there is usually no convience associated with buying a combo TV/DVD machine other than the expected ease of use. Space and portability is not an issue. A more appropriate comparison would be the merger of the cell phone and the PDA, resulting in the smart phone. Cell phone and PDAs with internet capability had existed as separate entities for years, and were successful as such. Smart phones, which represent the fusion of these two devices, are convenient and very popular.

The other arguments you make, specifically regarding the touch screen and the rational for having 8GB of memory, are not exclusive to the iPhone and thus are not factors which will drive down sales. There is just as much chance of pushing a wrong button on one’s blackberry as there is of pushing a wrong number on one’s iPhone, given the blackberry’s advantage of tactile feel and the iPhone’s advantage of larger numbers. 8GB might not be necessary, but for those of us who will use the iPhone as a full-time iPod, the space is much appreciated. Similar arguments against 8GB could be made with regards to the iPod Nano. Lets not forget, however, that anyone who feels that 8GB is too much can save $100 by buying the 4GB iPhone.

The only relevant and significant issue you raise is in regards to the exclusivity with AT&T. Whether or not this is an issue remains to be seen. Will customers go through the hassle of switching phone carriers just to purchase the iPhone? The answer, in my judgement, is maybe. What the iPhone will hopefully offer is the convenience of having to carry only one device, ease of use of both the phone and iPod functions, extensive integration with address book and calendar functions, and the first-class service that comes with every Apple product (as rated by several customer service surveys). For some, these benefits will justify switching to AT&T, but for many, they will not. For short term growth, Apple is wise to partner with AT&T in order to gain easy entry into the field. In the long term, Apple must move away from its exclusivity agreement with AT&T in order to gain a significant portion of the market share.

I hope you find this analysis useful.

Regards,

Jonathan

Todd Sullivan, I appreciate your opinion about apple. This artical makes for great ratings. But apple will thrive even more on the iphone, especially in the cellular business. You need to remember the millions who make their cell phone as the biggest liability. My opinion: there is more fish than you think.

Hey tard, First the iphone turns off when a phone call comes in.

Second, your computer is an all in one device. Its called software that changes when something new comes up. A VCR/DVD cant be changed retard, but software can.

Quit writing ariticles if you don’t get the facts straight! Someone, is judging a product before it even comes out. Did you watch the podcast! Get a life.

Seriously, you should be banned from the internet for being so gay.

f-off dork face.

Todd,
If nothing else, at least the overwhelming # of pro-iPhone responses received (i.e: potential iPhone buyers) thus far should make you want to reevaluate your opinion on the iPhone.

Wow,

I think there are a few emotions running wild. Todd basically said he would not buy one for $599…thats it. I would not buy one either at that price (or Apple stock at almost 35 times earnings), and I don’t think most logical people would. Price it in the $200’s as the same as the other available devices and it might make a go.

But, as I can see from these emotions gone wild, there might be a few early birds who pay a premium.

Thanks Todd!

Question: What is your portfolio gain in the last year?

It’s not very good, is it? I say this because you obviously didn’t do your research before writing this article. And also, I am no Appleholic.

You are wrong on many points.

1. The iPhone has 2 models for 499 and 599.

2. Apple is aiming for 10 million phones, which is a tiny 1% of the market.

3. The iPhone automatically shuts the music off when you receive a phone call.

Now, let me tell about some features that may or may not sway your opinion.

1. Did you know that the iPhone is going to be the world’s smallest fully functional computer? I hope you read this and answer me back.

Again, this phone is the only phone on the market with a full fledged operating system. Name me one cell phone where you can comfortably read your blog in its entirety. Can you?

No.

2. iPhone will double as a GPS unit. Buy one from Garmin and you will pay 200 to 500 dollars.

3. You say 8 GB is too much? This shows that you are not in touch with what’s going on. This is the only phone out there that you can watch movies on.

4. No other phone has enough space on it to watch a movie. No other phone has a screen big enough to watch a movie on to make it worthwhile.

5. The new Blackberry doesn’t even have 1 GB of memory – and the iPhone has 4 or 8 GB! Do you realize how important this is?

6. Since it’s a fully-functional computer, the iPhone will have iChat. Do you know what this product it? This means that, on the iPhone, you can conduct a live TELECONFERENCE on your phone with huge, real-time pictures of who you’re talking to. Can any other phone do this???

7. iPhone is THE status symbol for the 13 – 21 year old crowd. This is the crowd that buys $120 jeans and was, as of last year, buying the new pink Razr for $300. Myspace is abuzz with iPhone chatter amongst the teens there. I hate to say it, but if you are investing in any stock that appeals to young people, you have to know what’s going on at YouTube, Myspace, Facebook etc. Somehow, I doubt you have ever visited these sites.

8. 10 million phones sold in a year and a half is a tiny amount. Basically Apple will be looking to get 1 in 10 U.S. AT&T customers. Easily achievable.

9. Where I live, the local Cingular store had hundreds of people on a waiting list who had committed to buying an iPhone. This waiting list was just terminated.

10. Have you ever seen people lined up around the block for a cell phone? No. iPhone will be the first time this has happened. Kids around the world are already planning their lines, strategies, bathroom breaks, hot locations, etc. How do I know this? I visit Myspace and Facebook and Google and my local Apple and Cingular stores. Do you???

11. Google iFlirt. It will blow your mind. Imagine going to mall and asking your iPhone to find all eligible females in a one mile radius. After it does so and displays their dating profiles, you can “wink” at these girls and send them your profile. Wanna go get some coffee? Meet me by the movie theater? Teens are already talking about this. This is MySpace on the go, for young people. Can your phone do this?

No.

Also, the iPhone will have the most and biggest, clearest video games available for it. Don’t underestimate this. They’ve got a beautiful Texas Holdem game in the works for the iPhone.

12. Visit Apple.com and look up their widgets. User-created widgets do anything and everything from the stupid to the necessary and there are thousands of these tools. They will all be available on the iPhone.

13. VoIP. If you are an investor, I assume you know what this is. If you run Skype on this, and since Apple is the only true Wi-Fi phone, you can make calls through the internet and bypass the cell provider from a hot spot. Think of all the college campuses that are Wi-Fi already. This alone is a game changer and this is exactly why Google is working on massive WiFi and WiMax hotspots around the country. Eventually, the whole country will be Wi-Fi and Apple will bypass all cell providers and become the non-cell phone cellphone. This is why their AT&T contract is so brief.

You do not even see how big this game is where it’s going to unfold at. If you call yourself a serious investor, you should. Take a look at the phone again, and make yourself some money on this thing.

Can you really afford to be bearish on Apple again? Just last summer they were $50. Now they’re near $110. You say iPhone won’t work, and you didn’t even scratch the surface on what this device can do. You do yourself and your readers a disservice by not doing the proper amount of research.

Read this and answer back. 🙂 Good luck.

Kenneth