3G iPhone & The Smartphone Wars
Like a good game of chess the players in the smartphone market are always coming up with new moves to gain a competitive advantage. The latest move came a couple of days ago as Apple unveiled its new 3G iPhone and I have to admit that it’s taken me a while to digest all the information.
For starters, I was surprised to see how many iPhoniacs were disappointed by the lack of really “new” new hardware features and functionalities. Basically Apple has only added 3G and GPS and not upgraded the 2 megapixel camera, not introduced a 32GB version, not added either video, MMS, synching of Notes, A2DP Stereo Bluetooth nor rather importantly the sorely missed “Cut & Paste” functionality.
Having said this, in much the same way that Palm leveraged its existing technology to reduce the price of its Centro to $99 – selling close to 2 million smartphones in the process – so now Apple is also playing a more aggressive pricing game with the announcement that the 8GB and 16GB 3G iPhone will sell for $199 and $299 respectively with a 2 year contract – half the price of previous models.
Additionally, on the software front, Apple announced that the iPhone 2.0 software update (standard on the 3G iPhone) will among others incorporate support for Microsoft Exchange Server as well as Cisco IPSec VPN and more email attachment support. There is also an App Store to download software wirelessly and a new MobileMe subscription service ($99 per year) for those people looking for wireless sync and push email, calendar and contacts online, at their PC and smartphone without the need for MS Exchange.
The net result of this pricing change combined with the new software features means that Apple is likely to garner an increasing share of the price-sensitive “Consumer” segment while at the same time consolidating its strong position in the “Prosumer” segment – where it will compete against new entries such as the BlackBerry Bold and touchscreen-only BlackBerry Thunder as well as (to a lesser extent) the forthcoming Windows Mobile Treo 800w and Treo 850.
Palm for its part will unfortunately not have a smartphone (running its new NOVA OS) to aggressively compete in the Prosumer segment until at least the end of March 2009 – a full 9 months away. Altogether Palm will not have released a new high-end Prosumer smartphone in 24 months (since the Treo 680) during which time the company effectively completely relinquished the market that it created to Apple and RIM. Basically, Palm screwed up royally on this front in the last couple of years.
The saving grace in 2008 is that the growing share of Windows Mobile in the Enterprise market should considerably help Palm when it releases both its high-end WiFi and GPS enabled CDMA Treo 800w on Sprint and Verizon (in July and September respectively) as well as the GSM Treo 850 on AT&T (around September).
The other reason to remain less than harsh on Palm for now is that 1) the company appears to be increasingly moving in the right direction and 2) these are still very early days in the “Smartphone Wars” and the market remains filled with opportunities. The fact is that most people fully expect Palm to make a strong comeback in 2009 and the company is gaining increasing support partly for its continued resilience as well as the caliber of its new executive team building Palm 2.0.
This growing team of industry pioneers now working at Palm includes iPod creator Jon Rubinstein, former Apple CFO Fred Anderson and former Apple product developer Mike Bell as well as Michael Abbott who ran .NET services at Microsoft (likely working on a new Sync and Wireless Sync technology as well as other Web Services) and Way Ting who founded software firms Voxa and Pictra (pointing to strong Web 2.0 components in NOVA).
Analysts now believe that even with modest success of its new Windows Mobile Treo line combined with the next-generation NOVA OS smartphone next year might help Palm’s stock more than triple over the next 12 months. With this in mind, T. Rowe Price Associates recently gobbled up 10 percent of the company (forking out a cool $140 million in the process) with a view to such huge returns in 2009.
In the meantime, people outside the enterprise looking to purchase a new smartphone within the next couple of months will be wondering which way to go. I believe that those with the most value-conscious minds will continue to find that the Palm Centro delivers an outstanding experience and excellent value for money while those with more cash to spend will undoubtedly choose either the 3G iPhone, BlackBerry Bold or new Windows Mobile Treo smartphones.
It’s evidently more than a little disappointing and frustrating for me and millions of other devoted Palm fans that the company does not have a strong Prosumer smartphone lineup _right now_ but my bet is that at least next year we’ll all be able to claim our top place in the smartphone game again. In the meantime I guess that I’ll continue to happily use my Centro…
Rubinstein Redux at Palm May Prompt Key-Man Returns [via Bloomberg]
Smartphone Marker Palm Does the Time Warp [via Schaeffers Research]
3G? We’ve Had It For Years [via Forbes.com]
iPhone 3G Fallout [via Tech Trader Daily]
Treonauts are always the most resilient…