Something to Think About the 3G iPhone's FCC Approval

Remember this iPhone tidbit from a statement from Apple on April 12, 2007 announcing Leopard's delay?

"iPhone has already passed several of its required certification tests and is on schedule to ship in late June as planned."

Yep, Apple was kept up-to-date about the exact level of approval the iPhone had garnered up to that point, even though it hadn't been officially approved by the FCC.

Also, according to the FCC's own filing, the iPhone had been signed off on by the testers by April 19, even though the official approval didn't come until May 17, 2007. Not sure what this means, but it's interesting to remember going in to WWDC.

Tech Jokers Gizmodo "Confirms" 3G iPhone Launch at WWDC

Some people take Gizmodo too seriously. They become offended when they see Gizmodo post porn next to their gadget news or pull adolesecent pranks at trade shows. If you know that Gizmodo is written for 14-year-old boys, then you'll understand their style. That said, you need to take the same context for their announcement today of the 3G iPhone:

"We all suspected it, but now it is confirmed: sources close to the 3G iPhone launch have told Gizmodo that Apple will announce their new model at the WWDC Keynote on June 9th. The second-generation iPhone will be available worldwide right after the launch, and not at year's end, as previously thought. The new model will also herald new sales policies in some countries."

Citing unnamed sources "close to the 3G iPhone launch" is not equal to a confirmation. If they had an email from Apple's PR, that would be a confirmation. There are a bunch of reasons why Gizmodo's article is shady. First off, they only say the 3G iPhone will be "announced" at WWDC and will go on sale "right after the launch." So, when exactly is that? Wouldn't a confirmation give you a hard date for the iPhone going on sale?

The truth is, the iPhone has not been approved by the FCC yet, so nothing can be confirmed. There is no confirmation, and my "sources close to the situation" say Gizmodo is making up shit to drive pageviews.

$150 mil Blackberry Fund vs $100 iPhone iFund: Fight!

Research in Motion is matching Apple and seeing them one half better with their $150 million Blackberry Partners fund to invest in developers for their mobile platform.

"The BlackBerry Partners Fund will focus on evaluating companies in all regions of the world and investing in the long term success of those that demonstrate market leadership and unique differentiation," said John Albright, Managing Partner of JLA Ventures, who will also assume the role of Co-Managing Partner of the BlackBerry Partners Fund. "Whether it's access to corporate data or the latest craze in mobile entertainment, we want to fund companies that are forerunners in driving adoption and further enriching the mobile experience."

With Google's Android, Apple's iPhone, and now RIM, one wonders if there are enough developers to go around. The iPhone is the sexiest and most fun device to develop for and will attract the most creative developers, but RIM has a huge market and potential for larger profits.

Link to press release.

Blackberry 9000: iPhone Ripoff Only in Color Scheme

Crackberry.com gives a video tour of the new Blackberry 9000. I have to admit, it's a good looking phone, but that's because they stole all their style from Apple (I still think the Blackberry Pearl looks better ).

Blackberry Pearl

Just from the video, I can tell I could never go back to the limited screen real estate of these types of phones. The best example of this in the video is when the reviewer is browsing through YouTube videos. All that is shown is a single line of hyperlinked text for each video. How am I to be enticed by a screenshot of cleavage? Video follows:

Will Apple Allow AT&T to Discount the iPhone?

Arik Hesseldahl from BusinessWeek in the article , "Why AT&T May Deep-Discount the iPhone."

With less than two months to go before Steve Jobs takes the stage at Apple's Worldwide Developers Conference, where he's expected to unveil a new iPhone, it appears that AT&T may not be convinced that new bells and whistles will be enough to get droves of new customers to switch from other wireless carriers. So after a year of charting a new wireless business model by selling the vaunted iPhone at premium prices, the nation's biggest phone company may resort to the oldest trick in the cellular book: big discounts.

Gruber from Daring Fireball seems to disagree with Hesseldahl's logic.

The problem is this: why would Apple allow AT&T to sell iPhones for half the price of what iPhones cost in Apple’s own stores (including this one)?

Subsidies only work when they’re sold in conjunction with two-year contracts. It’s possible that Apple could do the same, and sell subsidized AT&T-contract iPhones in Apple Stores, but that would mean abandoning the innovative (and very appealing, very successful) model of activating a new iPhone at home, via iTunes, rather than sitting around in a store for 45 minutes making uncomfortable small talk with a salesman while waiting for your credit check and your old phone number to transfer over.

You’d think this might be worth a mention.

From a financial aspect, Apple allowing deep discounting makes a lot of sense. The more wireless-plan contracts that AT&T can pick up, the more profit there is for Apple via revenue sharing. This is on top of the profit Apple makes on the sale of the hardware alone. A good percentage of the iPhones that Apple sells in its stores are bulked shipped around the world to places like Russia, which supposedly has amassed a market of 500,000 unlocked iPhones. These unlocked phones make Apple less money because they lost out on revenue sharing.

But the real problem with the deep discounting process is the customer experience, which is extremely important to Apple. To get a discounted phone, usually you have to sit with a rep in the store or on the phone as they take your credit card and have you sign the contracts, etc. Once the wireless plan is activated, then they charge you the discounted price for the phone and you walk out of the store with your new phone. I agree with Gruber: there's not a snowball's chance in hell Apple will allow this in Apple stores. And there's a bunch of reasons why Apple wants you take your iPhone home and activate it by hooking it up to iTunes. But, is it there a way Apple could maintain its retail customer service experience and still allow the discount?

Here's an idea: there are two seperate approaches for the $200 discount, one for AT&T stores and one for Apple stores.

In AT&T stores, a customer must suffer the pain of sitting in the store through the finance check and contract signing. At the end, customers can walk out of the store able to make phone calls with their $200 iPhone. But what about iTunes? Apple surely wants those users to connect to iTunes and buying all that media right? That's where the iPhone updates and the SDK comes in. People still have to connect it to iTunes if they want all that cool shit that's going to come out soon. Not to mention the iPhone is the "world's best iPod." Of course people are going to hook it to iTunes.

But with the Apple retail store shopping experience, nothing changes. You're still getting the same minimalist experience. You have to buy the iPhone at full price, and you can still ship it to Mother Russia or the Congo or wherever to be unlocked. Or, you can take it home, activate it, and AT&T cuts you a $200 credit to your account or a rebate check. I think the typical Apple shopper will forgo the instant discount for the convenience and coolness of shopping in the Apple store. The typical AT&T store shopper? Probably not.

Apple's Glass Ceiling

In a post called "Noted for Future Gloating," John Gruber from DaringFireball.net calls out Douglas A. McIntyre for this post, where McIntyre says:

"The big wall that Apple cannot knock over is the wall that being in second place erects. The really substantial buyers, corporations, who could move Mac sales toward 15 million or 20 million units, never did buy the Apple product and they won't now. It represents extra work for them, and extra costs. Extra costs are not popular these days.

The Mac has hit is glass ceiling. Apple investors may be hoping that the machine can make it out of the consumer market to keep the rapid growth going, but that is not in the cards."

I think McIntyre is way, way premature with his prediction, but I also agree, there is a glass ceiling for Apple for computer sales. But the reason that McIntyre's statement is worth ignoring from an investment perspective is because Apple's market share in the consumer market is still very small and there is still plenty of room to expand. Gene Munster from Piper Jaffray thinks Apple has 20% of the consumer market in the US and 10% outisde the US. I think those numbers are way too high.

If Apple hasn't even touched the corporate market, which is estimated to be about 70% of all computer sales, then there's also potential for a glass ceiling to be created for that market. McIntyre may be right in that, in this recession, some corporations are not interested in extra costs. But believe it or not, some don't really care. Especially corporate executives. As someone who works for a corporation, I can tell you there are those who toss away several grand a day on silly expenses and wouldn't blink twice toward ordering a MacBook Air on a whim--just to check it out.

Apple remains an investor's dream because surprise growth is what gives stocks really big moves, and Apple over the past few years has been relentlessly expanding into new markets, providing that surprise growth.

The most successful example of Apple invading a market then expanding into the mainstream is the move from the iPod to the iPod Mini, which was introduced at a price point that drove iPod sales to well over 100 million in a relatively short time.

The iPhone is Apple's most recent foray into a ripe mega-sized market and could easily follow the iPod to iPod Mini route. A more subtle move is the software Numbers, Apple's sneak attack at Microsoft Office Excel. Numbers is nudging its way into the consumer market, but it's really better suited for small businesses. Who starts small businesses? Consumers. What do small businesses sometimes grow into? Corporations.

The height of Apple's glass ceiling for their computer line probably defined by the fact that they make premium products. And premium products always start out with a premium price. But if they out innovate the way they did with iPods, one day they can be so far ahead they can release an iPod Mini-like product which is affordable yet still a premium technology-wise over the competition. The MacBook is a step in that direction. If we ever see a $600 MacBook or iMac (sorry the Mac Mini, without peripherals, doesn't count), I think it'd be game-set-match.

Link to Gruber's post.

Link to Fortune's "Analyst: Apple’s U.S. consumer market share now 21 percent."

Apple Now Makes More Money From Selling Music Than Warner Music Group

From a New York Times article:

"Apple sold $881 million worth of music and accessories in the last quarter. That figure rose 35 percent from a year ago. And the NPD Group now counts Apple as the largest seller of music in the country, ahead of Wal-Mart. Apple, in fact, is on track to have greater revenue from selling music (and accessories) this year than the entire revenue estimated for the Warner Music Group."

From the music industry's perspective, you can kind of understand why some are so bitter about Apple's success. While the music industry struggles financially, Apple is making record breaking revenues off hardware that plays their content. Personally, I have no sympathy for the record industry. They essentially shot themselves in the foot through their own greed (and continue to do so every time they sue a music fan for "stealing"). And also, all those years of ripping off artists and overcharging for media like CDs doesn't give them much of a leg to stand on.