iPhone A Gift To Cell Phone Manufacturers
Apple's much ballyhooed iPhone could be a real gift to Nokia, Motorola, Samsung and the other cell phone companies. The iPhone may set a boutique ceiling under which the rest can freely harvest large market segments with targeted offerings.
iPhone will be very successful. Apple has made some wonderful design breakthroughs. Ditching keys and making the whole phone into a touch screen is brilliant. But about a billion cell phones are sold each year. Apple is targeting 10 million units in iPhone's first year. That is just one percent of the market. The iPhone will come in two models, one priced at $499 and the other at $599. Those prices require a two year Cingular cell phone service contract. Most cell phones are sold for under $100 and many are free or nearly free with cell phone service contracts. The iPhone thus leaves a lot of customers and a lot of pricing room for the traditional cell phone companies to emulate its form factor and interface, but with reduced functionality aimed at the mass of users with more simple expectations of their phones.
On the other hand, watch for Apple to exploit the iPhone’s high-end niche with offerings aimed at the BlackBerry and Treo market. RIM, Palm and their clones are duly concerned. They need a strategic competitive defense against Apple.
Expect this ceiling to endure. Even as Apple inevitably lowers prices, directly or indirectly, and widens distribution outside the Cingular (AT&T) network, its traditional high-margin appetite will keep it away from the low-end mass cell phone market. Unlike the iPod/iTunes franchise, where Apple controls the entire ecosystem, the cell phone service providers have a lock on services delivered to cell phones. So think about the Macintosh model rather than iPod. Mac too provides a ceiling, in its case for Windows PCs. And we know how that worked out.
Copyright © 2007 Philip Bookman
Technorati: Business Strategy, Apple, Nokia, Samsung, Motorola, iPhone.
iPhone will be very successful. Apple has made some wonderful design breakthroughs. Ditching keys and making the whole phone into a touch screen is brilliant. But about a billion cell phones are sold each year. Apple is targeting 10 million units in iPhone's first year. That is just one percent of the market. The iPhone will come in two models, one priced at $499 and the other at $599. Those prices require a two year Cingular cell phone service contract. Most cell phones are sold for under $100 and many are free or nearly free with cell phone service contracts. The iPhone thus leaves a lot of customers and a lot of pricing room for the traditional cell phone companies to emulate its form factor and interface, but with reduced functionality aimed at the mass of users with more simple expectations of their phones.
On the other hand, watch for Apple to exploit the iPhone’s high-end niche with offerings aimed at the BlackBerry and Treo market. RIM, Palm and their clones are duly concerned. They need a strategic competitive defense against Apple.
Expect this ceiling to endure. Even as Apple inevitably lowers prices, directly or indirectly, and widens distribution outside the Cingular (AT&T) network, its traditional high-margin appetite will keep it away from the low-end mass cell phone market. Unlike the iPod/iTunes franchise, where Apple controls the entire ecosystem, the cell phone service providers have a lock on services delivered to cell phones. So think about the Macintosh model rather than iPod. Mac too provides a ceiling, in its case for Windows PCs. And we know how that worked out.
Copyright © 2007 Philip Bookman
Technorati: Business Strategy, Apple, Nokia, Samsung, Motorola, iPhone.
posted by Phil Bookman at 11:29 AM
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