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Don't get me wrong, I have always been a big fan of Apple. However, the way in which Apple has handled what I believe to be slower than expected sales has been disappointing

The First Million Have Not Been Easy

Sunday, September 09, 2007

I wrote a Blog on June 25 entitled, "The First Million Will Be Easy," which dealt with my belief that Apple would indeed sell one million iPhones, but that getting to 10 million in one year as it predicted would be tough for several reasons.


Since then, the iPhone launched and reports indicated that in the first 48 hours about 270 thousand units were sold and of these, only 176 thousand had been activated. Then the reviews started coming. Some were great and lauded the iPhone as the best wireless device ever while others were less enthusiastic and even went so far as to say that the iPhone was a great iPod with a phone as an afterthought. Others reported how slow the Internet access is, the restriction of information available, how the built-in Bluetooth works and doesn't work with other devices, that there is not a cut-and-paste feature and that the touch screen keyboard is difficult to use. Oh, I almost forgot the AT&T 500-page customer invoices and $300 bills for service (at least AT&T reacted quickly and fixed the invoicing problem).


I stepped up and bought an iPhone, signed up for month-to-month service and found my own issues with it, including what I consider a really bad user experience on the iPhone's Website home page with little or no way to download URLs to the iPhone unless they are already entered into the favorites in your Internet Explorer, my own issues with the keyboard and a number of other things including the fact that it does not pass my "one-handed test" for a business user (being able to use it in one-handed mode while carrying a briefcase or pulling a suitcase at an airport) and along with many others, the fact that the battery is neither removable nor user replaceable.


There have been no sales figures released by Apple or AT&T since the numbers for the first 48 hours, but as weeks passed, it became clear to me that things were not zipping along as expected in the iPhone world. At least one analyst firm sent out a misinformed press release that the iPhone was outselling all other smartphones in the world including the BlackBerry family, only to issue another press release saying it was wrong and that the BlackBerry is still outselling the iPhone on a month-over-month basis by a substantial margin. Also, at any given time, there have been at least 800 iPhones for sale on eBay. To date, all of them carry asking prices higher than the new store price, and every store I have stopped in has had an ample supply.


I guess it should have been no surprise when Apple discontinued the 4GB unit and lowered the price of the 8GB unit from $599 to $399. However, what did surprise me was how soon the price cut was announced and how deep a cut it was. Normally, a product that is exclusive to a wireless operator or a brand new design tends to carry the original price for the first six months and then, when other wireless operators have the phone, the price is dropped a little, but not 25% the first time around.


Don't get me wrong, I have always been a big fan of Apple. However, the way in which Apple has handled what I believe to be slower than expected sales has been disappointing. There was the first Interview with Steve Jobs, in which he stated that this always happens with new technology and it was to be expected. But it was clear that those who had paid the full $599 for the 8GB unit or bought the now-orphaned 4GB unit and the "Apple Lovers" of the world were not happy with that statement. This was followed by a public apology from Steve and a quick "adjustment in attitude" with the $100 rebate offer, which is not really a rebate but rather a store credit for any Apple product (it isn't clear what I will get since I bought mine in an AT&T store).


Oh, and then there was the introduction of the new iPod touch with Wi-Fi and a touch screen that adds confusion for the buying public. I am sure AT&T is not happy that its 5-year exclusive wireless deal with Apple is being cannibalized with an iPod with the same look and feel and Wi-Fi connectivity. So now you can have an iPhone with a slow data connection, plus Wi-Fi, plus Bluetooth that works with some Bluetooth devices for $399 and a two-year contract with AT&T Wireless, or you can buy the new iPod touch with built-in Wi-Fi and the same type of user interface for only $299 for an 8GB version and $399 for a 16GB version. Is having an AT&T phone built into a device worth $100? Perhaps, but for the same price as an iPhone, you can now buy a 16GB iPod touch with Wi-Fi and Web browsing and use your existing phone on your existing network. If I were AT&T, I would not be happy at all. If the rumors are true that Apple gets a cut of all the income AT&T generates from the iPhone, then Apple is playing both sides of the fence. No wonder it wanted a 5-year deal!


I would also like to thank Apple. I have already made additional income because of the iPhone. How? Some CEOs out there who bought an iPhone and love it are telling their IT managers to replace their Treos, BlackBerrys, QPhones and Nokia smartphones with iPhones for their entire mobile fleet. The IT managers understand that this version of the iPhone is not a business phone and they need an outside consultant to convince the CEO of their company that just because he/she thinks the phone is great does not mean it will provide nearly the same level of functionality as the smartphones and BlackBerrys that are already in use and tightly integrated into corporate email, calendaring and other business applications. So thanks for the opportunity Apple, I really appreciate the business!



COMMENTS: This is an archived post. Commenting is no longer available.

Nick Ruark - 09/09/2007 21:04:40

Great piece, Andy - particularly the last paragraph! You've once again reminded more than a few "out-of-tune" CEO's the reason why not everyone in their enterprise drive a Mercedes or BMW; keeping a few good pickups around is always a safe (and sane!) bet. I can't tell you the number of times I've gone through a similar exercise with those who thought that Nextel was THE tool for business/industrial and even Public Safety radio communications. Geeez! As to your comments about the iPhone, I suggest that much of it is the result of some folks' continuing quest to find that seemingly elusive "do all" "silver bullet" wireless device and, a strange belief in good old emotionally persuasive advertising. In this case, I think the score is iPhone 0, advertising 1. All fluff with no guts, but....what else is new?

Nick Ruark
Quality MobileCommunications, LLC

Andrew Seybold - 09/09/2007 21:19:46

Thanks Nick, and I think you are right on with your comments, the iPhone is a good first start, and it should be something that the industry learns from, but there will be other, better devices, and as I have said in several articles we will be going to 300% penetration of wireless which means, to me, that people will be using a host of different devices for what they want to accomplish, and in closing, yes the Nextel battle continues, but more on that in the future!