Apple's iPhone: Were predictions of failure wrong or just premature?

editor's corner

By most all accounts the Apple (NASDAQ:AAPL) iPhone has been an unbridled success since its launch on June 29, 2007. But more than a few pundits forecast utter doom and gloom for the company if it pursued its seemingly ludicrous mission to create a $600 device that didn't even have a physical keyboard.

Apple's revenues shot up to $108 billion last year, a far cry from the measly $24 billion it earned in 2007. And the iOS takeover of the cellular market prompted imitators such as Google's (NASDAQ:GOOG) Android. Of course, Apple's success has hastened dark days for Nokia (NYSE:NOK) and Research in Motion (NASDAQ:RIMM), which couldn't keep up with marketplace changes.

Given all that, it's hard to believe that many observers in 2006-2007 predicted utter disaster for Apple if it pursued its iPhone project. I like to hang onto articles that might seem relevant years later, and one of my all-time favorites is a John Dvorak column called, "Apple should pull the plug on the iPhone," in which he wrote that the device would be nothing more than "another phone in a crowded market."

According to Dvorak at the time, "Unless Apple has half a dozen variants in the pipeline, its phone, even if immediately successful, will be passé within 3 months." He went on to suggest that Apple should call its iPhone a reference design and "pass it to some suckers," such as Samsung, which would enable Apple to "wash its hands of any marketplace failures."

Another delicious article is from The Register. Written in 2006 by Bill Ray and titled, "Why the Apple phone will fail and fail badly," the article stated, "As customers start to realize that the competition offers better functionality at a lower price, by negotiating a better subsidy, sales will stagnate. After a year a new version will be launched, but it will lack the innovation of the first and quickly vanish."

Or not.

Perhaps there was a bit of schadenfreude reflected in those articles, as Apple's detractors hoped the Silicon Valley icon would stumble into misfortune in the wireless world. But maybe the pundits had something. Could it be that Apple may yet need to adjust its business model and license iOS to other device makers?

Last month Gartner estimated that Android smartphones made up 56 percent of the global smartphone sales in the first quarter of 2012, while the iPhone only garnered about 23 percent of the market. Samsung captured 44 percent of Android-based smartphone sales.

IDC this month reported that Android's smartphone market share will be 61 percent at year's end, though that will drop to just under 53 percent in 2016, due in part to competition from the resurgent Microsoft Windows Phone, which will grow its market share from 5.2 percent in 2012 to 19.2 percent in 2016. Apple's iOS, IDC said, will see its market share erode slightly from 20.5 percent this year to 19 percent in 2016.

The bottom line is that Apple is doing just fine right now. And even if iOS and the iPhone lose some momentum in the near future, when it comes to device sales, Apple will be sitting pretty as the sole owner of its market share, while Android market share will be split among multiple handset vendors (with Samsung dominating), as will market share held by Microsoft's Windows Phone (particularly if partner Nokia continues to implode).

Meanwhile, Apple's rivals are looking to copy its model of combining software and hardware into a self-branded, high-tech computing device. (Of course, that was RIM's claim to fame initially as well.) This week Google (NASDAQ:GOOG) unveiled its own co-branded tablet running Jelly Bean, the latest version of Android. Nexus 7 is Google's latest attempt to sell devices directly to consumers. Google previously developed three flagship Nexus smartphones to showcase the latest Android software. Likewise, Microsoft (NASDAQ:MSFT) last week shocked its hardware partners by announcing its own self-branded Surface tablets.

Imitation is said to be the sincerest form of flattery, and these recent announcements show that from most perspectives not only did Apple get the iPhone and its business model right, it will continue doing so for years to come. Apple and the iPhone are not invincible. Just look at Nokia and RIM to see how the mighty can fall. But the iPhone doomsayers from 2007 still have years to wait for their prognostications to gain any chance of ringing true.--Tammy

PS. Check out FierceWireless' feature, Apple's iPhone turns 5: A look back, and ahead.