What Does Apple Have in Store for the 3G iPhone?

There's no bigger story on the Internet than the arrival of the 3G iPhone. Gizmodo reports that the launch date of June 9th has been confirmed by "very" reliable sources. The 3G iPhone will be introduced by Steve Jobs during his keynote at Apple's 2008 World Wide Developer's Conference (WWDC). Great! But most of us already knew that. Contrarians speculate that this date is bogus, because the phone hasn't been cleared by the FCC yet.

What about something we don't know like what features, other than AT&T's3G HSDPA networking, will come with the Jesus phone? Some of the things circulating the rumor mill include; Haptic interface, GPS with a kick-ass navigation application, monster battery, and a rainbow of color choices. Possibly the biggest draw, not necessarily a device feature, is a subsidized iPhone. The things we know will be include are the 2.0 version of the OS and a new SDK that 3rd party developers are using to create applications, that will be sold through the new App Store.

Well, all this hype might be setting us up for a real downer.Piper Jaffray’s Gene Munster advised investors on Tuesday to keep their expectations for the 3G iPhone “in check.” Gene thinks the iPhone will be practically unchanged from the current iPhone, in both look and features.

Could this be the reason Apple took such a pounding in the market today? AAPL finished the session down 7.71 ( 4.15%) to 178.64. Doubtful, when you consider the Fed minutes reporting a weakening economy and with oil surging to another all-time high, up $3.80 a barrel. All in all Apple's losses were on par or fared better than other tech darlings such as GOOG 549.99 28.61 (4.94%), BIDU 354.99 17.14 (4.61%), and RIMM 132.89 5.71 (4.12%).

Apple Planning Massive Rollout of 3G iPhone, SDK 2.0

I'm surprised that Apple's recent barrage of deals among carriers around the world has not gathered more notice. It appears that the impact of the new SDK, App Store and the 3G iPhone will be bigger than anyone is prepared for, I believe it will be disruptive, seminal, historic.

Look at the deals that have been put together in just a few short weeks, it's dizzying. The iPhone is currently in the US and 3 countries of Europe, by the end of the summer it appears Apple will be operating on every continent in a total of 46 countries!

The potential market in with current operations is approximately 150 million. With the new deals Apple has sealed, they have increased their potential market to nearly 600 million! Currently the iPhone enjoys a 3% penetration into the markets in which it is being sold, or about 4.7 million iPhones. If you project that out, we may be talking over 18 million iPhones by the end of this year! We haven't even talked about China Mobile and India's Bharti Airtel yet! They should account for another 500 million potential buyers alone!

You may look at that and think at first glance, that's pretty good growth. Think about this for a moment, this has to be conservative, we're assuming static penetration of 3%. The rate of market share will increase as well, especially when you consider the attention Apple will get at the Beijing Olympics. I believe Apple has a plan to leverage the Olympics in coordination with this global rollout, to make an impact that will eclipse the Super Bowl ad of 1984.

Let's assume Apple will increase their market penetration by 50%. I believe this is conservative. That would translate to another 9 million phones by the end of this year, for a total of nearly 27 million phones by the end of 2008. So, Apple put out the number 10 million in 2008. Zach's prediction? 20 million. Are we witnessing another Black Swan?

Apple Investor's Beijing Olympics

I reported in a previous article, that China, along with several other countries around the world, will be getting the 3G iPhone this year. Well it appears that it may happen sooner than anyone thought. According to China Tech News, Apple (AAPL) has chosen Beijing's Sanlitun area to open a 3,000 square meter store. And knowing Apple, there will undoubtedly be heavy use of Apple and iPhone imagery during broadcasts of olympic events.

The Wilderness Triathlon
In the spirit of the upcoming Beijing Olympics, I've held a special event that spotlights three very useful, and free online resources for investors. And the winners are:

Bronze: The first category is economic news; and the medal goes to CNN Money. As a general information site they're pretty good. Where I think they excel is in their futures or pre-market reports, and their economic calendar of events, where I can see that day, or the entire week's scheduled events at a glance. I can even drill down and find useful information on each event. These are the first two web pages I visit in the morning.

Silver: The second category is charting; and with the silver medal is, StockCharts.com. hands down, StockCharts has the best charts on the web, and it's free for the 15 minute delayed quote. With a subscription you can get real-time quotes. This site is not just about charts, but there is also educational material in the "Chart School" and a market summary feature where you can see all the indexes at a glance, allowing you to easily drill down to several different kinds of charts. You can also annotate the charts with a Java-based chart tool and publish the link to your annotated chart.

Gold: The final category is Apple Investor research; and for sheer completeness and simplicity, the top honors goes to Apple Investor News. This site scours the Internet every 15 minutes, and using sophisticated algorithms, it finds stories and organizes them by category and type. The website presents them in such a way, that at a glance I can see dozens of stories and quickly find one of interest. Just click on the link and I'm at the originating website.

Where in the World is 3G iPhone, O

Apple inked a deal with Vodafone to bring the 3G iPhone to Australia, New Zealand, the Czech Republic, Egypt, Greece, Italy, India, Portugal, South Africa and Turkey! Also, this year Rogers Communications of Canada says they'll be joining the world wide club, as well as Mexican wireless carrier America Movil said they will be selling the 3G iPhone in Mexico and South America.

Apple broke their monogamy business model of one carrier-one country, by marrying Vodafone and Telecom Italia to Italy. We should have listened back in February, when Tim Cook declared that Apple was not married to the single-carrier business model at a Goldman Sachs Investment Symposium.

On the home front, the 3G iPhone seems imminent for a mid June release. You gotta think that if your boss tells you to nix any vacation plans, something big is up, right? In a memo to employees, AT&T Mobility said they wanted all hands on deck between June 15 and July 15. The memo attempted to motivate employees stating, "We’ll meet the challenge head-on by providing an exciting Summer Promotional Launch to enable your sales to soar." That should make up for the lost vacation.

And to add gravitas of the expected timing, Apple holds it's Worldwide Developers Conference from June 9 to June 13. As in past WWDC events, Steve Jobs is expected to invoke the reality distortion field with a key note speech, probably on Friday the 9th, in order to let the news bake in over the weekend.

The 3G iPhone, as it's name implies, will connect to the much faster 3G network, making web access a much better user experience. And what would this story be without rumors of other expected improvements like a sleek black anodized finish, a better camera, perhaps even video. And the icing on the cake, new firmware support for Chinese handwriting recognition. Can we add China to the worldly list too?

Subsidized 3G iPhone in the United States?

There's a story by Fortune that AT&T is going to cut the price of the 3G iPhone by $200 when it's introduced this summer. That would make the iPhone more attractive to a larger audience. The story says that a 2 year contract would still be required. So, that means an 8 GB 3G iPhone could be had for as little as $199!

In France, Apple is pressuring Orange, the exclusive carrier there, to subsidize the iPhone to spur lagging sales. But there may be some difficulties getting around french anti-competitive laws. In Italy, they've managed to strong arm Apple into letting. The UK and Germany already offer steep discounts on the iPhone, with Germany's T-Mobile offering a tiered subsidy plan.

Ireland's O2 has no such subsidy plans. In fact a spokesperson for O2 Ireland, has said, in not so many word, that they plan to stick it to customers because O2 believes that Apple fanatics will buy it at any price. Pat Phelan, CEO of Irish telecoms Cubic Telecom, says this two tier pricing scheme amounts to a tax, he calls the Paddy Tax 2.

And finally, it looks like Apple has worked out a deal with Rogers and our neighbors to the north in Canada. Rogers can support both the current Edge network as well as 3G. They'll likely see the iPhone there very soon. No word on subsidies. We just might get a flood of Yukes coming down here to smuggle the little beauties across the border, eh.

The iPhone Corporate Opportunity

From the iPhone's introduction, there was a brilliant opportunity to crack the enterprise barrier, it was a Trojan Horse for corporate America. The strategy is two pronged. Winning the heart and minds of the people alone will not work, the IS department and corporate buyer are the obstacle to break down.

First the easy part, win the hearts and minds of the public (suits their kids, managers, and their customers), by exposing them to Apple design aesthetic and create the best user experience possible. This is the catalyst that will open their minds to the enterprise possibilities. I had no doubt this would happen given Apple's reputation for user-focused design, it's tacit knowledge.

The second part of the strategy, was to squelch the objections of IT/IS and the buyers by convincing them that Apple can play in their sandbox, even though they had never shown the wherewithal for doing so in the past. The answer was iPhone 2.0, which consists of the iPhone SDK and the iPhone App Store.

Well, the strategy is unfolding. The Apple kool-aid is being consumed by more and more corporate types, they will unwittingly sip it, and fall haplessly into Steve Jobs' Reality Distortion Field. But that's a good thing, right? Right!

The Safari browser is a key weapon that Apple will use to penetrate the enterprise. Making the browser experience as close to a desktop browser experience is one component. The other component is unifying browser standards across all platforms. This strategy is designed to make web applications accessible to the iPhone, and ultimately accessible to iPhone derivatives. The principal tactic is to make JavaScript and CSS the de-facto standards for user interface design, ultimately rendering Flash impotent. This is why, in my opinion, Apple has snubbed Adobe's lobbying for iPhone Flash support. It's smart, it's also payback for Adobe's lack of attention to the Mac platform!

Is there a killer application, above all the other corporate needs that will make the iPhone a compelling enterprise device? There's recent buzz around the iPhone as a social networking device. Perhaps that is the killer app? Until the iPhone there hasn't been a mobile platform that could easily support the type of interaction that a social site like LinkedIn, Facebook, or Orkut, would require.

It's hard to imagine that a social networking experience will evolve on the iPhone outside of a business context, only because there are simply not enough people that own iPhones (compared to Internet phones in general) to engage in connected interest. At least this won't happen organically until the iPhone has the same kind of penetration as the iPod.

Organizations of all types are primed for social devices, such a device could increase productivity and communication, and become integral to daily workflows. Abeline Christian University is intent on implementing this very thing. iPhones are to be distributed to every incoming freshman and integrated into their registration process, allowing them to organize their class schedule, and even become an essential tool with class curriculum. There's several well produced videos by students of the university that depict the vision. The video is spectacular, the vision is very forward thinking, yet attainable because of the iPhone.



Also, Vanderbilt University just released a version of its Web site’s home page specially designed for the iPhone. Vanderbilt is one of several universities seeking to implement campus-wide initiatives that aim to capitalize on the device’s potential as a converged, mobile learning tool.

-zach bass

iPhone Shortage, a Problem or Strategy

Reader Doug sent me a a very kind note, and in that note asked me to comment on the recently reported iPhone shortage at Apple stores around the country. Let me preface this with the fact that I'm not an analysts like many well known pros, who have tremendous resources and industry insiders to talk to. And it's clear everyone of these analysts have an opinion, and those opinions are as varied as can be.

Some believe it's an accounting thing, that Apple makes sure that AT&T stores are fully stocked because every iPhone they supply there is accounted as a sale, where every iPhone in an Apple Store is accounted as an iPhone in stock.

Other analysts, like Gene Munster of Piper Jaffray, think the shortage is an imminent sign that Apple will soon be shipping the 3G. And that they're clearing shelves to make room for it. This is supported by the story I reported on the other day about a source that claimed 3G iPhones a ready to ship.

The third theory is that the shortage is due to Apple production blunders. And that Apple was simply the victim of manufacturing snafus and poor planning. At least that's how Apple specialist Toni Sacconaghi of Sanford Bernstein sees it, as reported by the Fortune 2.0 Blog.

I tend to put some credence in Toni Sacconaghi analysis, but I'm not so sure that's the whole story. I think it's a more fundamental reason. Apple can't keep iPhones on the shelf because consumers simply recognize that the best place to buy an iPhone is at an Apple store, and it's the reason I bought two iPhones at my local Apple Store. The experience is simply superior. You go in tell them you want an iPhone, they take your order on a remote handheld device, bag it, and your out in three minutes tops.


If you've ever gone into an AT&T or Verizon store, the experience is quite different. The moment you enter the store, you're attacked by a greeter that takes your name, the greeter interrogates you, puts you on a list, and you wait for ever before a greasy sales guy saunters over to take your order. That guy will probably try and talk you out of the iPhone if there's a Sales spiff that puts a few more dollars in his pocket. He could care less what you really want. Then you are directed to stand in line and wait some more.

In my opinion, iPhone shortages at Apple stores are because demand is increasing beyond what Apple had expected, and people are far more inclined to go to their local Apple Store for the experience they want, rather than go to a vipers pit for an experience they would rather avoid.

-zach bass

Armed w/iPhone Know All's Become Even More Annoying!

This article in the LA Times hits home with me, because I have to admit to becoming one of these people. Help me!

Quoted from article:

"It's turned me from a really annoying know-it-all into an incredibly annoying know-it-all, with the Internet to back me up," said Sadum, a technology writer in Denver. "It's not a social advantage."

ZACH BASS - News: 10 Million 3G iPhones to Ship

Wei Yi Lim, of the Dow Jones Newswire, reported not more than an hour ago 11:52 EST, that Taiwan's Hon Hai Precision Industry Co. is ready to ship Apple's third generation iPhones. We could see them as soon as next month! It's reported that they are only waiting on the "nod from Apple".

Whoa!! So, if they already have at least 5 million second generation iPhones in the warehouses, and add to that another 10 million new iPhones, that's 15 million iPhones in 2008!!

Just for clarification, this is not an April Fools Joke. I am a little concerned about the single source of the story, would be nice to see some confirmation. Click here for the story