Apple iPhone: Holy Cow! A Mac in a Phone!

January 10, 2007 Do you remember that day back in 1984 – 32 years ago – when you first saw a Macintosh? All we had prior to that was dull DOS. I mean, it was like a religious experience. Finally, someone figured out how to put a really intuitive user experience in a personal computer. Forget that Mac only sells around 8% of the total PCs today and Microsoft provides PC users with a very good user experience with Windows Vista. The fact is that the Macintosh set the standard for what the personal computer user experience was going to be for the next 30 years. We’re now sitting at the end of the “dull OS age” in cell phones. Here’s why iPhone is actually more important than the introduction of the Macintosh and will set the standard likely for the next 30 years. The problem with phones up to now is that they were designed around being a phone like all the rest before with then some new features to help users get things done. But, even though all phones today have a color screen, can play games and ring with snippits from Elton John or Celine Dion, they seem to be stuck in the dark ages in ease of use. Speculation has been developing for months about Apple developing and releasing the iPhone. Most of the photos showing “sneak previews” were wrong. On, January 9, Apple reset the bar for the entire phone industry by introducing the iPhone (see companion photo). Here’s why what Apple has done is important for the future of the entire wireless industry with shipments beginning by mid-year. If you tried to guess what Apple was going to do, you’d have to say that for Apple to hit a home run with a wireless product, they needed to solve the difficult user experience in most phones today. Sure, some SmartPhones are easier to use than feature phones (like the Treo), but overall, using a standard cell phone is a challenge for just about everyone. But, Apple had to also retain their heritage of providing a great music and video experience from the iPod. Everyone wanted it to be a great media device but also a great phone. No one had really been able to accomplish that … up to now. What’s so important about the iPhone is the nature of the user experience. It’s fundamentally different from any phone that has been developed and released up to now. It has a great half VGA display, a great natural user interface with easy “velocity scrolling” that allows you to push the images on the display as if they were floating on Teflon. It’s natural in that all you want to do is easily accessible. It incorporates a full 8GB iPod in the phone so users have the same great iPod listening experience. And, it’s a great quadband cell phone that can work all over the world. Turn it sideways and it’s the best wireless internet access device announced to date. You can easily see web pages in the landscape mode using the mobile version of Safari, Apple’s web browser. You can easily zoom in to view parts of web pages in more detail. You can download thousands of songs, stream music live, watch videos. And, because Apple made sure it included both Wi-Fi and wide area wireless, user’s get fast Web access when in a HotSpot or using the home network. And, it includes a fabulous 2MP camera and Bluetooth 2.0 All of this is in a package that’s reasonably priced for a major new SmartPhone product: $499 for a unit with 4GB and $599 with 8GB (the same as the high end iPod nano). What’s not to like? It’s hard to be critical of the what is clearly going to become the product of the year in most awards. Realize that this is just the very first model of the iPhone. There will be an entire product line in future years spanning a number of user segments with different features. Here’s some directions we see that Apple will go: • Have it more tightly integrated to the AppleTV (also a major announcement as Apple is clearly going to be successful in the living room; the AppleTV seems to be a more natural user experience plus TiVo and video distribution all in one box). • Keyboard. They will build a model with a slide out keyboard for those who are email centric or do a lot of messaging. • Expansion of Instant Messaging. Using the inter-operator agreements, Apple can build a great IM network that hopefully will allow Yahoo, AIM, MSN Messenger and Google users to carry out IM with iPhone users. • Expand the Widget capabilities. This could be huge on the iPhone so that users have easy access to all the snippits of information that are important to them such as news, weather, sports, financial and personal media. • Leverage the relationship with Disney and other content resource centers like XM, ESPN and others to provide up-to-date personal information delivering into the Widgets or separate channels. • Development of 3G radios and services. • Include global positioning (GPS) to help the mapping function do automatic location sensing. We commend Apple on: • Raising the bar in the cell phone with the iPhone. • Going “all out” to create a new ease of use standard for the phone industry. • Solving the inherit problem in user experiences in most cell phones to date. • Developing a platform with Widgets that will allow third parties to develop a set of services that will extend the value of the iPhone. We hope that Apple will develop a line of iPhone products that will allow them to have a major share of the phone market and cause Nokia, Motorola and the other cell phone makers to step up to the challenge and provide great products that provides users with a great experience. Welcome to the next 30 years of Apple, known more as a telecommunications and media company and less a computer company via the introduction of iPhone and AppleTV. Written by: J. Gerry Purdy, Ph.D. VP & Chief Analyst Mobile & Wireless Frost & Sullivan [email protected] 650-248-9366

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