Analyst warns of iPhone 2.0's effect on BlackBerry, Palm share

Posted:
in iPhone edited January 2014
The introduction of both native third-party applications and enterprise support to the iPhone is likely to sap further marketshare away from Palm and Research in Motion, says an investor note from Needham & Co.



Charlie Wolf of the financial group explains that neither company will be in a safe position with the anticipated June release of the iPhone's version 2.0 firmware making the Apple device more viable not just as a home user's device but also in the enterprise market that Palm and RIM have called home for some time.



The BlackBerry maker in particular faces the greatest impact. Although it remains the definitive leader in business with the largest amount of US marketshare and close competition with Windows Mobile worldwide, the Canadian company could see its growth "slow materially" from the June quarter onwards. Once quality third-party apps are available for the iPhone, there will be less incentive to use BlackBerries for their software.



In light of the Apple development kit, RIM's development environment is "comparatively primitive" and will likely result in nothing more than essential "meat and potatoes" apps for the BlackBerry, Wolf says.



And while Exchange support for the iPhone will give it secure "push" email similar to the BlackBerry, making it an option for businesses that have previously had to rule out Apple's handset, the real danger in the long term is for the BlackBerry's early steps into the consumer marketplace. The analyst contends that RIM has a competent platform in its OS and phones like the Pearl, but also that its breakneck growth is more a virtue of providing a capable offering versus incompetent alternatives.



"BlackBerry is currently the front-runner in the consumer smartphone market in part because it met the criteria for success in this market and in part because its competitors until quite recently were simply inept," the Needham researcher elaborates. "Their failure stemmed less from their ability to design sleek phones than in their choice of an operating system on which to run them."



Wolf singles out Windows Mobile as possibly driving many customers into RIM's arms with a "difficult" OS that may satisfy the enterprise but often pushes consumers towards the BlackBerry and other alternatives. Apple is and will be stealing some of RIM's success because it's the first competitor to offer a genuine alternative for consumers who want a smartphone.



The other major American smartphone maker, Palm, is already placed in a poor position by the analyst. Most of the damage done to Palm is said to be self-inflicted through complacency -- neither the OS nor the phones have changed significantly for years, Wolf adds -- but the addition of Exchange and third-party apps to Apple's phone will add another competitor to a market that has already downplayed Palm's efforts.



Palm's new Centro smartphone is also characterized as a stopgap measure to tide users over until a real, Linux-based Treo replacement is available near the end of 2008. It sells for as little as $99 but isn't seen as capable of holding its own against either the iPhone or other rivals for the next few quarters. Most customers are attracted to the Centro for its price rather than its feature set, a situation the Needham researcher says is likely to change once prices drop.



"It?s little more than a down sized Treo," he comments.
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Comments

  • Reply 1 of 33
    The discussion of which OS a phone is running in this article, and many others, by people who do not seem to be uber phone geeks is awesome. I believe that until iPhone many "lay" people did not know, notice or care what OS they ran or what a difference it makes to their mobile phone experience. I firmly believe that everyone is underestimating the impact iPhone will have on the phone industry. I think only Steve Jobs has hinted that it really will change the way we think about phones just as the Mac did with computers and the iPod did with mp3 players. Thanks.
  • Reply 2 of 33
    aplnubaplnub Posts: 2,591member
    I know a lot of people with BB's including me and very few use the Enterprise software. In fact, I don't know but maybe 2 people that use it. Most are stand alone. So I am always curious who these people are because there must be a lot of them.



    I have an iPhone too and it would be killing the BB without 2.0 if it was available on all carriers. I think that is blatantly obvious from seeing AT&T's less than stellar coverage area when compared to Verizon that carrier is the cornerstone on swiftly turning the market and not enterprise. This opinion is subject to Visual Voicemail support being equal across carriers and me not being wrong.
  • Reply 3 of 33
    anantksundaramanantksundaram Posts: 19,373member
    Quote:
    Originally Posted by iPodphile View Post


    The discussion of which OS a phone is running in this article, and many others, by people who do not seem to be uber phone geeks is awesome. I believe that until iPhone many "lay" people did not know, notice or care what OS they ran or what a difference it makes to their mobile phone experience. I firmly believe that everyone is underestimating the impact iPhone will have on the phone industry. I think only Steve Jobs has hinted that it really will change the way we think about phones just as the Mac did with computers and the iPod did with mp3 players. Thanks.



    I agree. And, welcome.
  • Reply 4 of 33
    jeffdmjeffdm Posts: 12,949member
    I guess it could be argued that Palm and Blackberry filled a need. But it wasn't a need that most consumers had, and it wasn't something they wanted either. What the iPhone represents was a credible attempt at making something consumers want.
  • Reply 5 of 33
    bageljoeybageljoey Posts: 1,762member
    Quote:
    Originally Posted by aplnub View Post


    This opinion is subject to Visual Voicemail support being equal across carriers and me not being wrong.





    I can't argue with that!



    Of course, coverage varies by region--I have found that in my corner of the world, where I make 95% of my calls, at&t is superior to Verizon. My parents have found the same thing 4 states away where they live. Certainly, Verizon is better in other places without a doubt but the big map of coverage area doesn't really tell the important story...



    Nevertheless, I agree that, while Apple may have had very good reasons to sign the exclusivity deal with at&t before the rollout, it is going to seem like a dead weight holding them back for the next four years. I wonder if there is a secret opt-out clause...
  • Reply 6 of 33
    crebcreb Posts: 276member
    I'm sorry, but RIM has an excellent established enterprise system, and the buttons on their phones to use it. The iPhone is cool, but it truly needs other elements to make it enterprise worthy. Love to see it happen, but not holding my breath.
  • Reply 7 of 33
    tenobelltenobell Posts: 7,014member
    Quote:

    I'm sorry, but RIM has an excellent established enterprise system, and the buttons on their phones to use it. The iPhone is cool, but it truly needs other elements to make it enterprise worthy. Love to see it happen, but not holding my breath.



    This statement would have made more sense before we found out Apple licensed Exchange.
  • Reply 8 of 33
    kenaustuskenaustus Posts: 910member
    Quote:
    Originally Posted by Bageljoey View Post




    Nevertheless, I agree that, while Apple may have had very good reasons to sign the exclusivity deal with at&t before the rollout, it is going to seem like a dead weight holding them back for the next four years. I wonder if there is a secret opt-out clause...



    Apple had a very good reason to work with only one carrier - they wanted iPhone features, like visual voicemail, integrated into the carrier's system. ATT was happy to do the work (and pay the monthly royalty to Apple), but they wanted to have a 5 year deal in order to do so.



    The agreement is therefore not a dead weight, but a source of monthly income for Apple - something no other mobile phone maker has been able to achieve.
  • Reply 9 of 33
    jeffdmjeffdm Posts: 12,949member
    Quote:
    Originally Posted by CREB View Post


    I'm sorry, but RIM has an excellent established enterprise system, and the buttons on their phones to use it. The iPhone is cool, but it truly needs other elements to make it enterprise worthy. Love to see it happen, but not holding my breath.



    Didn't you see the video of the February presentation? They addressed pretty much everything that was being requested for "Enterprise" use, save Lotus Notes integration, and the open standards counterparts to Exchange.
  • Reply 10 of 33
    bageljoeybageljoey Posts: 1,762member
    Quote:
    Originally Posted by kenaustus View Post


    Apple had a very good reason to work with only one carrier - they wanted iPhone features, like visual voicemail, integrated into the carrier's system. ATT was happy to do the work (and pay the monthly royalty to Apple), but they wanted to have a 5 year deal in order to do so.



    The agreement is therefore not a dead weight, but a source of monthly income for Apple - something no other mobile phone maker has been able to achieve.



    Yes, I agree that there were good reasons on both sides for the deal. But 5 years is a long time in the mobile world. It seems that there is a substantial number of people who dislike at&t or outright despise them. If that keeps Apple from reaching their potential for several years while other manufacturers and providers cement their positions (or catch up depending on how you look at it) it could have long term negatives for Apple that outweigh the monthly royalty.



    I don't know if this will happen, just that the next 4 years could seem like a long time...
  • Reply 11 of 33
    ikirikir Posts: 71member
    Quote:
    Originally Posted by iPodphile View Post


    The discussion of which OS a phone is running in this article, and many others, by people who do not seem to be uber phone geeks is awesome. I believe that until iPhone many "lay" people did not know, notice or care what OS they ran or what a difference it makes to their mobile phone experience. I firmly believe that everyone is underestimating the impact iPhone will have on the phone industry. I think only Steve Jobs has hinted that it really will change the way we think about phones just as the Mac did with computers and the iPod did with mp3 players. Thanks.



    I totally agree! Welcome to Apple Insider.
  • Reply 12 of 33
    I realize that enterprise support is important to a great number of people, but it can't be forgotten that the consumer market is much bigger than the enterprise market.



    Apple's decision to cater to the consumer market first is what will eventually make them much bigger than RIM or even Nokia in the overall smartphone market worldwide.
  • Reply 13 of 33
    Quote:
    Originally Posted by iPodphile View Post


    The discussion of which OS a phone is running in this article, and many others, by people who do not seem to be uber phone geeks is awesome. I believe that until iPhone many "lay" people did not know, notice or care what OS they ran or what a difference it makes to their mobile phone experience. I firmly believe that everyone is underestimating the impact iPhone will have on the phone industry. I think only Steve Jobs has hinted that it really will change the way we think about phones just as the Mac did with computers and the iPod did with mp3 players. Thanks.



    Completely agree! This analyst actually knows what he is talking about! IT'S ALL ABOUT THE SOFTWARE, STUPID!



    Quote:
    Originally Posted by Bageljoey View Post




    Of course, coverage varies by region--I have found that in my corner of the world, where I make 95% of my calls, at&t is superior to Verizon. My parents have found the same thing 4 states away where they live. Certainly, Verizon is better in other places without a doubt but the big map of coverage area doesn't really tell the important story...



    Nevertheless, I agree that, while Apple may have had very good reasons to sign the exclusivity deal with at&t before the rollout, it is going to seem like a dead weight holding them back for the next four years. I wonder if there is a secret opt-out clause...



    Verizon seems to have better coverage in the West, and that holds true where I live. And their 3G EV-DO service DEFINITELY has much more coverage than ATT 3G/UMTS service, especially outside of major cities and in the suburbs. For me, a good part of a long-drive i make between two places isn't covered by AT&T, even along the major highway, which is a non-starter for me at least.



    I agree with you on the exclusive nonsense... five years is a LONG time and will definitely hold them back in the USA, at least until Verizon and AT&T both have 700mhz LTE networks rolled out.. which may indeed take just as long.





    Quote:
    Originally Posted by CREB View Post


    I'm sorry, but RIM has an excellent established enterprise system, and the buttons on their phones to use it. The iPhone is cool, but it truly needs other elements to make it enterprise worthy. Love to see it happen, but not holding my breath.



    Is that supposed to be a shot at the iPhone touchscreen? I found it much easier to use than my treo, which indeed has LOTS of buttons. And what do you mean by "enterprise system"? What does it have besides push email/contacts?





    Quote:
    Originally Posted by kenaustus View Post


    Apple had a very good reason to work with only one carrier - they wanted iPhone features, like visual voicemail, integrated into the carrier's system. ATT was happy to do the work (and pay the monthly royalty to Apple), but they wanted to have a 5 year deal in order to do so.



    The agreement is therefore not a dead weight, but a source of monthly income for Apple - something no other mobile phone maker has been able to achieve.



    The visual voicemail thing is definitely not work restriction to one carrier, and no one even said they are mutually exclusive. The visual voicemail is a carrier service provided by a 3rd party company who also happened to license it to Sprint recently. If it is really 5 years, that is going to be a huge blow, at least until Verizon and ATT are both on LTE systems.



    There are many reasons why a lot of people will not readily jump to an AT&T-locked phone:

    1) locked into a mandatory business /corporate account through their employer, and don't wish to carry two cellphones.

    2) AT&T having crap coverage in their local area

    3) AT&T having crap coverage in areas that they routinely travel

    4) iPhone not being able to accept cheap, pre-paid foreign SIM cards while traveling

    5) Locked into existing long-term contract



    In my case, I drive between two cities routinely for work and pleasure, and AT&T doesn't have coverage for nearly 200+ miles between them, EVEN ALONG A MAJOR HIGHWAY! THAT will not work. I am NOT going to be stranded on the side of the highway without phone coverage!







    Quote:
    Originally Posted by JeffDM View Post


    Didn't you see the video of the February presentation? They addressed pretty much everything that was being requested for "Enterprise" use, save Lotus Notes integration, and the open standards counterparts to Exchange.



    Didn't IBM announce Lotus Notes integration is on the way?
  • Reply 14 of 33
    You bet they will. At the least the 50 Million who own the Ipod are going to get one. Told my middle schooler today that I will break his iphone for applications. He said: "great, now I can have as many applications as my friend (just a girl) who has four pages of launch icons on hers". Holy cow, who needs an Apple SDK. They will not let hackers experiment with it anyway.
  • Reply 15 of 33
    jeffdmjeffdm Posts: 12,949member
    Quote:
    Originally Posted by Bageljoey View Post


    Yes, I agree that there were good reasons on both sides for the deal. But 5 years is a long time in the mobile world.



    Has that really been officially confirmed? I know it was reported in the business news, I think Business Week, but I don't remember Apple or AT&T confirming the time period.
  • Reply 16 of 33
    teckstudteckstud Posts: 6,476member
    Quote:
    Originally Posted by kenaustus View Post


    The agreement is therefore not a dead weight, but a source of monthly income for Apple - something no other mobile phone maker has been able to achieve.



    It is a dead weight when you have so many more potential new customers that simply refuse to join AT&T- iPhone or no iPhone.
  • Reply 17 of 33
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by teckstud View Post


    It is a dead weight when you have so many more potential new customers that simply refuse to join AT&T- iPhone or no iPhone.



    It's a numbers game.



    If [(P x T - L x P) x 24] - S x N > 0 then carrier associations are better for Apple.



    P = Profit paid to Apple from AT&T each month per customer on average

    T = number of iPhone customers on AT&T's network

    L = The perceived number potential iPhone users who will not use AT&T's network and therefore will not buy an iPhone

    S = Assumed profit from sales of unlocked iPhone

    N = Number of units sold

    24 refers to a 2 year contract

    (We could include those that will unlock the device for use with other GSM if we wanted to and add in other costs, but I am trying to use a simple model here)



    - Please correct if I am wrong. It's been a very long time since I tried to o something like this.
  • Reply 18 of 33
    cubertcubert Posts: 728member
    I love it when a plan comes together!
  • Reply 19 of 33
    Quote:
    Originally Posted by solipsism View Post


    It's a numbers game.



    If [(P x T - L x P) x 24] - S x N > 0 then carrier associations are better for Apple.



    P = Profit paid to Apple from AT&T each month per customer on average

    T = number of iPhone customers on AT&T's network

    L = The perceived number potential iPhone users who will not use AT&T's network and therefore will not buy an iPhone

    S = Assumed profit from sales of unlocked iPhone

    N = Number of units sold

    24 refers to a 2 year contract

    (We could include those that will unlock the device for use with other GSM if we wanted to and add in other costs, but I am trying to use a simple model here)



    - Please correct if I am wrong. It's been a very long time since I tried to o something like this.




    It's more complicated than that. Although I hated it, It was smart for Apple to go exclusive with AT&T to get into the market. The iPhone literally requires a large amount of data access as part of it's nature and appeal, and unlimited data prices have historically been very high. I have been paying $49.95/month with verizon in ADDITION to my shared voice plan for unlimited data. AT&T had a little bit better prices, but not much. By partnering, Apple was able to get AT&T to make those unlimited-data iPhone-only plans much cheaper than an equivalent plan before the iPhone was introduced. And obviously the revenue represents a significant bonus as well.



    Having said all that, assuming this 5-year contract is real, it would have been MUCH WISER in my opinion to shorten that exclusivity period to 18-24 months. That way, even if AT&T would only give them half of the revenue share that they would otherwise receive with a 5-year exclusivity, they would easily make it up in the MILLIONS of sales they would get from Verizon/Sprint converts with a CDMA iPhone. IMHO, This would be the best of both worlds:



    1) Apple receives AT&T's help with all aspects of the iPhone launch, from assisting in technical development and testing on their network to AT&T's help promoting and selling the phone through advertising, promotions, and in-store displays/test units. Remember, many people who walk into an AT&T store to play with the iPhone might have NEVER otherwise been able to physically experiment with it due to the limited reach of Apple stores outside of major metro areas. Also having a carrier partner guarantees Apple would not have to deal with the major incumbents like RIM, Nokia, Sony Ericcson, et all pressuring the carriers to not sell the device in their stores or otherwise find a way to blackball the iPhone.



    2) For the 18-24 months of exclusivity, Apple receives x amount of monthly revenue share per contract signed.



    3) MOST IMPORTANTLY, once they are in the marketplace and have their iPhone operations and sales streamlined, they can finally drop the exclusivity and made a CDMA/EVDO iPhone and obtain MILLIONS more sales than they otherwise would receive. There are LEGIONS of people who will not switch from Verizon or Sprint to AT&T, iPhone or not. Reasons include being on a corporate contract with another carrier (me), not getting AT&T service in their area or areas they frequent (me), people who travel overseas and can't swap the SIM card for a cheap local pre-paid one because of the AT&T lock, people who have had BAD experiences with AT&T's in the past (me), etc.



    I think this would be MUCH preferred to a 5 YEAR exclusivity. I have to wonder if AT&T was firm about the length of time in negotiations. If the 5 years is really true, It seems like they are going to be missing out on a lot of potential sales because of it. But you never know.. Remember, that Apple guy did say "Apple is not dedicated to any particular carrier model, we are dedicated to creating great phones"
  • Reply 20 of 33
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by winterspan View Post


    It's more complicated than that.



    I know it is, but I surely couldn't do it justice if I tried to make it accurate and what I could do would make it more complicated that needs to be for my post.



    Quote:

    MOST IMPORTANTLY, once they are in the marketplace and have their iPhone operations and sales streamlined, they can finally drop the exclusivity and made a CDMA/EVDO iPhone and obtain MILLIONS more sales than they otherwise would receive. There are LEGIONS of people who will not switch from Verizon or Sprint to AT&T, iPhone or not.



    Do you think Apple will make a CDMA version? How many markets outside the US will also benefit from this lateral iPhone model? We know Apple much prefers to have one physical device to rule them all.



    Quote:

    I think this would be MUCH preferred to a 5 YEAR exclusivity. I have to wonder if AT&T was firm about the length of time in negotiations. If the 5 years is really true, It seems like they are going to be missing out on a lot of potential sales because of it. But you never know.. Remember, that Apple guy did say "Apple is not dedicated to any particular carrier model, we are dedicated to creating great phones"



    An AI poster has stated that they think the duration is sliding with AT&T having an option to increase it after 2 years. That is an interesting concept as Apple may want to break free in a year after the success of the original, 3G and v2.0 of the iPhone has made it wildly popular with no end in sight (assumption). Perhaps Apple will want more revenue from AT&T, I surely would. The reports I've read show AT&T getting many new customers, and getting customers on more expensive plans that have never used a smartphone before.



    If AT&T wasn't the first choice, Apple may have had to sign a longer deal to get them onboard.
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