By Seb Janacek, 7 May 2009 10:00
COMMENT
As the BlackBerry outsells the iPhone, Seb Janacek looks at what - if anything - Apple should do to get its smartphone back to the head of the pack.
Just a few short weeks after the Mac trounced competitors in a customer satisfaction survey, the iPhone has repeated the same trick for Apple in the smartphone market.
The iPhone has taken first place in a consumer survey by J D Power published last week, dominating all but one of the categories: physical design, ease of operation, features, operating system, battery aspects and overall satisfaction.
Most iPhone owners won't be surprised to hear it came last in battery performance.
In contrast, RIM's BlackBerry - the competitor against which the iPhone is most often measured - scored highest in battery life but performed poorly in other categories.
According to a recent report by NPD, the BlackBerry has overtaken the iPhone in unit sales for the Q1 2009. RIM has been operating an aggressive buy-one-get-one US campaign and its sales have surged 15 per cent in the first quarter, though presumably at lower than normal hardware margins.
The news will no doubt prompt some doomsayers to predict the death of the iPhone or some other such nonsense and call for Apple to respond immediately with a host of new models.
Assuming it needs to, what could Apple do to drive up iPhone sales? The two obvious answers are to expand the iPhone product portfolio and to end their exclusive deals with carriers. Both ideas have had some coverage in recent weeks in the press and blogosphere.
While rumours of an iPhone 'nano' or 'lite' have been around for some time, the introduction of either looks unlikely in the short to medium term.
Apple is giving out a little at a time with the iPhone. Last year on the hardware front it got 3G connectivity and GPS. One would expect a couple of new features in the near future, possibly a better camera and improved video recording.
Of course the iPhone is really more about software than hardware and the 3.0 update will bring the long-demanded MMS update and, lest we forget, copy-and-paste. Hallelujah!
Battery life on the iPhone remains truly terrible, something I covered in an earlier article. It also appeared at the top of my wish list of 10 missing iPhone features.
It seems likely that Apple will announce new iPhone hardware early this summer. However, I don't think the company will diversify its iPhone product range just yet. Why? Because it doesn't need to. iPhone sales are very strong at the moment (3.8 million in the last quarter) and, according to the old aphorism, if it ain't broke don't fix it.
At the company's last earnings call, Apple's acting CEO Tim Cook said the company "chose from the beginning of the iPhone to focus on one phone for the whole of the world". That strategy is working just fine.
Another option for the company to consider, as a way to sell more iPhones, is to end its exclusive 'one carrier per territory' deals.
I'm not convinced Apple will change this model or if indeed it needs to. With its exclusive deals, Apple can sustain high margins on the iPhone. The company can play carriers off against each other to negotiate the best deal. Breaking from this model will mean losing some bargaining power - and possibly lowering its profit margins.
Lest we not forget that Apple is performing well in the smartphone market. Despite having been a player in less than 25 per cent of the mobile market for under two years, it's already a leading brand and an agenda setter.
iPhone sales remain buoyant despite both a depressed economic climate and the parameters it has set itself with its exclusive partnerships. It can continue to drip feed new products and features rather than rush them to market. New models will undoubtedly come, just not yet.
Personally, I tend to look forward to software releases more than new hardware. With that in mind, the keynote at the Worldwide Developers Conference in a month's time should prove exciting.
Predictions will follow later in the month.
Comments
There are 14 comments. Join the discussion
1. Synthmeister
Apple is busy building a long term platform. The phone is one small part of the platform. Don't think so? Just look at the sales of the iPod touch. That device almost doubles the iPhone app, music, and peripheral market to 37 million users. Currently, RIM has 25 million subscribers. Apple may have "exclusive" deals for the iPhone but the iPod touch can be sold anywhere, to anyone. It really is their stealth iPhone product and gives Apple a huge advantage over the other handset makers. They can expand their market in all kinds of places totally independent of the telcos. That's something Microsoft, Nokia, RIM, Android, Sony Ericsson and Palm can't do. Apple already has an entire universe of software and peripherals that the other guys still have to build from scratch.
And yes, as soon as AT&T and Verizon start using the same next gen, 4G network, the iPhone will probably be available on Verizon.
2. Dave
Like most G1 iPhone buyers... we are waiting for the new 2009 iPhone... then watch for a sales spike.
3. Ericson
To "kill iPhone", which was last year's over used headline. Plus you added "?" at the end of your headline -- a cop-out by Wall Street Journal standards. Your reference to JD Powers does not mention the word "kill". But sure, using the sensationalist word will get eye balls for your advertisers.
4. anonymous
Why do you journalists always have to title your articles so stupidly? This article is well written, makes sense, but I almost didn't pause to read it because of the title. It looked like it was just another title to generate hits and start yet another 300 post flame war, which it probably will anyway.
5. Ted W
Apple successfully led the market pace with its iPod portfolio for years - staying JUST ahead of the competition but not so much that it unnecessarily cannibalized itself.
However, the smartphone market is not monolithic, i.e., not limited to music alone. Users have multi-functional needs/desires and they have this little thing called expectations. Blackberry's portfolio of products meets diverse needs and expectations - they listen and respond to the market. Apple's doesn't (certainly not fast enough)
It ain't about the exclusive telcom relationships (although this has its impact) - Apple needs to diversify the iPhone hardware line quickly (various price and function points such as processor performance and battery life) NOW before consumer mindset (of the more informed) starts painting it in the corner of "cute but doesn't meet my needs/expectations."
Two years ago people were clueless about smartphones but user experience, social information exchange and the major manufacturers (Apple, Blackberry and others) are rapidly educating about what SHOULD be possible and the shortcomings that are.
Unfortunately, although an Mac fan and iPhone user, I think Apple is falling behind (from their considerable lead). This is one time Apple cannot pace the market - they had a head start and in some ways (app store, etc.) are still ahead BUT not ahead of expectations: adding cut and paste now is a joke, battery life is crap and performance is SLOW. They can spin all they want but experience tells otherwise.
If summer doesn't bring at least two models (at least one for POWER users), they will erode a loyal current following AND open consumer mindset that they should be relegated to a small fraction of the market - for those who don't really demand much from a smartphone. It's 2009, folks. We DO have the technology.
I believe product complacency (intended or otherwise) will be tantamount to Motorola's move with the Razor. Stay ahead, Apple!
6. anonymous
No matter which way you slice it, they just took a 50% drop in profits to try and secure long term contracts for its cell providers - the next gen iPhone commeth....
7. anonymous
Let's not forget that Apple products tend to take "a dive" when new hardware is expected to be rolled out. It's down now but will spring back come the end of June/beginning of July. The tech-media is very quick to jump on Apple and predict doom & gloom when they aren't the in the #1 slot. Makes for poor journalism.
8. anonymous
Blackberry is not outselling iPhone.
The RIM 'quarter' runs from Dec thru February (including the holiday season) while Apple's runs from Jan to March. People got much more concerned about the recession in January as well.
Also, this big sound bite is based on unit sales, and includes the 2 for 1 deals RIM ran (where they GAVE AWAY an extra BB for every one they sold.)
Finally, anyone who is paying attention is expecting a new iPhone model in June. Anyone who had not purchased in time for the holidays is probably wanting to hold out a little longer.
RIM is managing to hold on, but can't do it for long using these tactics.
And yes, the iPod touch IS a big part of the iPhone platform. Especially since you can use it to CALL on skype.
9. lrd
RIM's flooding the market with those cheap $99 Blackberrys. But this will back fire on both RIM and the folks that invest that buy them. Developers aren't going to write code for a machine like the $99 BB's. So, to the folks that got them, have fun reading e-mail and texting because that's all you're going to do with them.
Meanwhile, on the iPhone side you'll see Apple break the 50K app limit in June and even more truly innovated apps will come out because the iPhone has both the software & power to handle them.
10. tom b
The fact that RIMM won some bragging rights for ONE quarter in no way suggests they will be able to keep that up. Then nobody will be left with any rational reason to want a Blackberry over an iPhone, particularly in a couple of years when ATT exclusivity runs out.
11. anonymous
Apple is just following its normal company policy, squeeze the consumer for as much money as possible. it's all it has ever done and until people stop paying its heavily inflated prices it has no reason to change.
12. anonymous
Outsells, do you you mean "gave away'
13. Jaz Singh
How many times are you going to use the same headlines 'Iphone Killer...' & 'Kill iPhone'. It looks like you have a problem with the iPhone to me !
14. Sara
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