Iphone

Summary

On January 10, 2007, Apple unveiled the iPhone, a new smartphone that combines a music player, camera, web browser, e-mail and phone in a single device. The iPhone is unique not because it offers anything fundamentally new, but because it brings together almost all of the currently separate portable consumer gadgets into a single well designed package driven by a powerful and intuitive interface. The big question, and the topic of an article I recently read in the Wall Street Journal, is whether the iPhone will have trouble attracting customers due to the high price tag. Granted, Apple has a large and loyal fan base that can be counted on to rush out and buy almost anything the company produces. That said, Apple has produced a few lemons (e.g. Macintosh Cube, Newton) that even its own fanatics won't buy.

Company

Apple’s recent decision to drop the “Computers” from its corporate name reflects its increasing focus on the entire consumer electronic experience. Apple’s legacy still remains with the design, manufacturing and marketing of personal computers and related software. However, in recent years the company has branched out into portable digital music players (iPod) and related accessories, online services (iTunes Store, iTV), video creation software (iMovie), educational products (MacBook) and more recently, mobile phones (iPhone).

Customers

Almost 1 billion cellphones were sold worldwide in 2006. About 60% of mobile phone users in the US and Europe are unwilling to pay for anything extra other than basic voice and texting. Of the remaining 40%, about a third are communication enthusiasts (sales people) who are willing to pay for advanced phone features that help them communicate better (e.g. email, short messaging, IM, conference calls). Another third are information enthusiasts (doctors, lawyers, research) who are willing to pay for features that extend their memory and help them manage their information (e.g. larger screens, reading documents, databases). The remaining third is entertainment enthusiasts (younger people) who want to keep their fun lifestyles and are willing to pay for fun features (e.g. music, games, video).

Competitors

The smartphone market is extremely competitive and characterized by several well-financed and highly innovative companies. The industry is currently dominated by RIM’s ubiquitous BlackBerry device (34% market share), which is preferred by most corporate enterprise customers because of its push email software. Other participants include Palm (28%), Motorola (13%), Nokia (6%) and Sharp (6%).

Product

The unique value behind the iPhone is its ability to integrate three products into a single device: the widescreen iPod, mobile phone, and a comprehensive set of Internet communication applications. Of arguably greater value is the iPhone’s sleek design. The device is only 11.6mm thick and includes a 3.5-inch screen (bigger than on most iPods) which extends for almost the entire length of the nearly button-free device. Instead of the mechanical buttons found on most traditional smartphones, users will make calls or