One of the things I’m seeing today is the shock that Apple did so well with a new phone that fell so short of expectations (it really wasn’t that bad). Folks don’t seem to get Apple’s model or understand why they are blessed with a feeding frenzy virtually every time they release a new device. There are several things happening at once that is contributing to a near perfect storm release.
Steve Jobs Passing
The first is that this is the last phone that Steve actually touched; I don’t mean last one he had input in, but the last one that was finished during his life. For many who felt close to him -- and for a CEO this is rather unusual -- this latest device was a reminder of his life. Jobs often seemed much more similar to an entertainment celebrity like Michael Jackson than a Technology CEO here in Silicon Valley. This gave the device a certain extra special nature almost as if it was a partial memorial to his life.
One of the largest installed bases of Smartphones was Research in Motion’s and a large percentage of that base has been indicating it wanted to move to something else. However, people don’t like change and many were, until last week, resisting it. However last week Research in Motion experienced a major outage which took down most of their phones and left people who depended on them stranded. This kind of thing forces migrations and, I expect, a large chunk of the massive number of iPhones went to recently pissed off RIM customers.
Pent Up Demand
Sprint was new to the iPhone and a large number of Sprint customers were waiting for this phone before they made a migration. They still liked Sprint and were unwilling to make a change to AT&T; otherwise they would have already moved. Verizon had gotten the phone earlier but with the rumor of an iPhone 5 coming many waited rather than buying the old iPhone 4 in order to make sure they weren’t stuck with the better part of two years on an obsolete phone. Folks on expired contracts with AT&T that wanted to migrate to another carrier were often unwilling to move on an old phone and the new one became the trigger. While they were likely disappointed in the 4S, since they were expecting a 5, this still provided them with the kick they needed to make the move.
More Sales Channels
Carriers are channels for new phones and up until recently Apple only had a handful. This significantly reduced the total available market for Apple. However with this launch Apple significantly increased the number of carriers and stores that had the phone on day one. This is like changing form using a 4” pipe to pump water and a 12” pipe, you are going to be able to move more phones faster and the number of carriers and stores kept the lines from becoming excessively long in most, though clearly not all, cases.
Each of these stores had walk by traffic which pulled people into the lines and created more excitement during the event.
Wrapping Up: Anticipating the iPhone 5
While there clearly were some problems, largely connected to the massive number of phones that were enabled over a very short period of time and connected to iCloud, overall the launch went very well. The combination of Steve Jobs untimely death, RIM’s failure, more carriers and stores, and more visible feeding frenzies on the device created an opportunity for amazing sales and that is what we got.
One thing I left off and that is unlike Android phones which establish no loyalty for the phone provider, iPhone buyers are increasingly locked to Apple’s hip. These folks aren’t going to be easy to migrate to a competing platform with a clone product and likely will need to be pried screaming and kicking from their iPhone. This suggests the better than anyone else right now Apple can not only ship more phones than anyone else they can also protect their installed base better than anyone else. In short, all they need is a mediocre phone to knock one out of the park, if they come out with a stunning iPhone 5 with this advantage unchallenged, they could own this market.
President and Principal Analyst, Enderle Group
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