Apple's iPhone 3.0 expands the 'yawning' competitive gap

Posted:
in iPhone edited January 2014
While the vast majority of smartphone makers are betting that beefed-up handset hardware alone will attract new feature phone users, Apple demonstrated Tuesday that software stands to be the biggest differentiating factor as the market matures, and is further distancing itself from rivals as a result.



"Yesterday Apple previewed iPhone 3.0, the latest iteration of its mobile computing OS," Oppenheimer analyst Yair Reiner wrote in a report Wednesday. "We believe the update, slated for general release this summer, expands the yawning competitive expanse between Apple's mobile platform and the knock-offs of would-be rivals."



Commonly requested features like Copy & Paste and MMS aside, the analyst added that the iPhone 3.0 software expands and fortifies the Apple handset's most singular competitive differentiator: the ecosystem for third party developers.



"Competitors are scrambling to make hardware that looks like the iPhone," he wrote. "But to our mind, Apple is playing a different game - creating a mobile media platform that in its stickiness and magnetism resembles nothing so much as the Windows operating system that upended it a generation ago."



In his own report on the matter, titled with the catchphrase "it's the software, stupid," Needham & Co.'s Charlie Wolf shared many of the same sentiments as his fellow analyst while drawing attention to the particular challenge facing smartphone makers in maintaining double-digit growth rates during rough economic times.



"The smartphone industry is betting that it can meet this challenge and continue to lure feature phone users through more powerful hardware," he wrote. "While we believe this will work, it will not translate into a sustainable competitive advantage for any individual smartphone manufacturer."



More specifically, Wolf believes the 'misguided' obsession with differentiation through hardware features will leave many smartphone makers treading water because "hardware is essentially a commodity." That is, no manufacturer can achieve a sustainable advantage through hardware because the components in most smartphones are simultaneously available to all competitors.



(See how Apple is also actually working to differentiate the iPhone through proprietary hardware not available to rivals.)



"In our opinion, a more effective differentiator is software -- both operating system software and the software applications that run on the device," he wrote. "Apple appears to be the only company that understands this. And that’s why today’s event was significant."



"We could go on," Wolf continued. "But we won’t [...]. Moreover, the significance of today’s event was not about the particular features Apple added in the iPhone 3.0 release. Rather, it signaled that Apple is distancing itself even further from rivals in the operating system software space."



Reiner reiterated his Outperform rating and $120 price target on shares of the Cupertino-based company while Wolf reinforced his Strong Buy rating and $200 price target.
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Comments

  • Reply 1 of 105
    umijinumijin Posts: 133member
    Since Apple hasn't released the OS, and the timetable is not definite - why speculate on how far competitors will be behind? It's sort of pointless, because by the time v3 comes out, we have no idea what other phone makers will have. And by pre-announcing all those features, competitors can target those that may actually be useful and do better.



    No point fanning flames when no kindling has been ignited yet.
  • Reply 2 of 105
    gtl215gtl215 Posts: 242member
    Quote:
    Originally Posted by umijin View Post


    Since Apple hasn't released the OS, and the timetable is not definite - why speculate on how far competitors will be behind? It's sort of pointless, because by the time v3 comes out, we have no idea what other phone makers will have. And by pre-announcing all those features, competitors can target those that may actually be useful and do better.



    No point fanning flames when no kindling has been ignited yet.



    You're missing the point. Apple is simplying reiterating their commitment to the software side of mobile devices, while competitors are "treading water" in hardware. Software evolves too, but Apple is far, far ahead of the curve.
  • Reply 3 of 105
    gee4orcegee4orce Posts: 165member
    What's great about Apple's touch platform is that they are very keen to push out new features to existing users. I don't ever recall ever getting so much as a firmware update for any phone I've bought previously, and yet here's Apple with the second MAJOR software update for it's phone already, freely available to all users. In fact, once an update comes out, upgrading is childs play using iTunes.



    $200 target price ? yeah baby.
  • Reply 4 of 105
    Apple DOES have it right. None of their hardware is that far ahead of anyone else. Computers, phones, ipods, anything. There are plenty of competitive products that actually can BEAT Apple's specs and prices. But that alone isn't why you want a product. It's the software that make the darn thing work.



    I'd rather have a lower resolution camera phone that I can easily take pictures with and share them than some high res phone that I have to struggle with to convince it to let me at my photos.



    The computers that Apple sells are wonderful pieces of hardware, but there are plenty of competitors that offer similar machines or even better machines than Apple. However, Apple stands out because they have better SOFTWARE for their machines. And not just more software, BETTER software. Other vendors randomly throw junk on the machines to make them seem like more. Reality is that software has to WORK for people to want to buy it.
  • Reply 5 of 105
    Really, now that Apple has covered just about every single feature that they lacked and other smartphones didnt (MMS, c&p, et cetera), there's not much left to improve upon.



    Off the top of my head, the remaining common asked for features fall into a few categories. Nearly all of them, I believe, will require a hardware update - so this 3.0 update is pretty much realizing the full potential of the iPhone 3G (my single gripe with it is that notifications still steal focus, but that's very easily fixable and in fact is very likely to make its way into the final 3.0 firmware as an option, based on my best guesses).



    Camera improvements:

    -video

    -slightly higher camera resolution (2.3 or 3.0 megapixels, to cover the 1920x1200 resolution that Apple emphasises more and more in its displays).

    -a second camera facing frontward for video chat



    I recall AI (might have been macrumors, but I'm pretty sure it was this site) reporting back in mid-2008 about Apple hiring camera engineers. My guess is that the "iPhone 2,1" model reported browsing the web will include at least the first two of these features, and quite possibly the third if Apple wants to debut their own iChat AV app (though that space is already well-covered by third-party applications).



    The other usually requested improvements tend to come from some of what the Palm Pre is doing. I am not particularly interested in the Pre because of its teeny 8GB storage and lack of robustness when it comes to app development, but I have to admit that it's got some excellent interface choices that Apple would do well to borrow from. Multitasking would be great but would clearly require a hardware update due to the battery/processing issues that Apple detailed in their presentation yesterday. It'd also need differentiation between apps that can cohabitate (listening to pandora while chatting with Beejive, for instance) and those that can't (games) which would necessitate that Apple renegotiate some of its terms with app authors as they would differentiate between multitaskable and nonmultitaskable apps. The Pre's notifications system is something that I'd like to see Apple borrow more from, and I have hopes that it'll make its way into the final 3.0 firmware or, barring that, 3.1, as it would place no further demands on the hardware.



    It's fairly likely that the next revision of the iPhone will have additional RAM and processing power (and hopefully the battery life to go along with it), so it remains to be seen whether multitasking will become possible on the new models. Background notifications take care of most of the solutions relating to this already for the iPhone and iPhone 3G.
  • Reply 6 of 105
    ivan.rnn01ivan.rnn01 Posts: 1,822member
    Quote:
    Originally Posted by psychodoughboy View Post


    -a second camera facing frontward for video chat



    Given accessories are allowed, it's merely a question of software being capable of handling an usb 2.0 camera...
  • Reply 7 of 105
    teckstudteckstud Posts: 6,476member
    Quote:
    Originally Posted by Gee4orce View Post


    What's great about Apple's touch platform is that they are very keen to push out new features to existing users. I don't ever recall ever getting so much as a firmware update for any phone I've bought previously, and yet here's Apple with the second MAJOR software update for it's phone already, freely available to all users. In fact, once an update comes out, upgrading is childs play using iTunes.



    $200 target price ? yeah baby.



    I hate to burst your bubble but since when is MMS, Cut and Paste and Stereo bluetooth considered a new feature? And still no video capture from the company that invented Quickktime? Come on - let's get real.
  • Reply 8 of 105
    slapppyslapppy Posts: 331member
    Quote:
    Originally Posted by teckstud View Post


    I hate to burst your bubble but since when is MMS, Cut and Paste and Stereo bluetooth considered a new feature? And still no video capture from the company that invented Quickktime? Come on - let's get real.



    It also depends on the implementation of the feature. Take Cut, copy and paste. I don't recall seeing it work as cool and intelligently on other devices, compared to what was shown on the presentation from Apple.
  • Reply 9 of 105
    bigjimbigjim Posts: 20member
    2009 will be interesting. We'll see the Google Andoid G2 any week now. And 10 other gPhones before the year is out. And Apple will ship its third generation iPhone. Needless to say, the diversity of those 10 gPhones phones will offer some features Apple is resisting because they want control. For example, Flash. Many of these phones will come in at a far lower price than the $2400 cost of an iPhone over 24 months. I'm happy: competition is good for the consumer.
  • Reply 10 of 105
    postulantpostulant Posts: 1,272member
    Quote:
    Originally Posted by AppleInsider View Post


    " That is, no manufacturer can achieve a sustainable advantage through hardware because the components in most smartphones are simultaneously available to all competitors."




    Agreed! Software is one of the greatest differentiators between Apple and it's competitors.
  • Reply 11 of 105
    mjtomlinmjtomlin Posts: 2,673member
    Quote:
    Originally Posted by umijin View Post


    Since Apple hasn't released the OS, and the timetable is not definite - why speculate on how far competitors will be behind? It's sort of pointless, because by the time v3 comes out, we have no idea what other phone makers will have. And by pre-announcing all those features, competitors can target those that may actually be useful and do better.



    No point fanning flames when no kindling has been ignited yet.



    Well first of all, these are a bunch of analysts, they get paid to speculate and attempt to set expectations.



    Secondly, where've you been? Microsoft has laid out their timeline and features for WinMo. Palm has demo'ed the newest Jesus phone. RIM is too busy trying to get the hardware right and Google is slowly pecking at Android.



    Do people think it takes only a couple of months to develop an OS and add features? This is not Apple's response to the Palm or any other mobile phone. I can assure you version 3.0 started development soon after version 2.0 was released and version 4.0 is probably already on the drawing board.



    And companies don't continuously add new features to their products right up to the release date in order to stay competitive. Most products under development hit what is called a "feature freeze" point, usually long before the release date. At that point you concentrate on security, stability and performance.



    P.S. Also this isn't "vaporware" - that term refers to a product that never sees the light of day; you have to at least wait until after the target release date comes and goes. For example, up until yesterday, Apple's Push Notification System, could've been considered vaporware.
  • Reply 12 of 105
    postulantpostulant Posts: 1,272member
    Quote:
    Originally Posted by Gee4orce View Post


    What's great about Apple's touch platform is that they are very keen to push out new features to existing users. I don't ever recall ever getting so much as a firmware update for any phone I've bought previously, and yet here's Apple with the second MAJOR software update for it's phone already, freely available to all users. In fact, once an update comes out, upgrading is childs play using iTunes.



    $200 target price ? yeah baby.



    Motorola never released software updates for my razor, but it still had a cool calculator and a picture folder.
  • Reply 13 of 105
    stubeckstubeck Posts: 140member
    I love the ridiculous price targets these idiots are setting.
  • Reply 14 of 105
    chabigchabig Posts: 641member
    Quote:
    Originally Posted by psychodoughboy View Post


    Multitasking would be great but would clearly require a hardware update due to the battery/processing issues that Apple detailed in their presentation yesterday.



    Multitasking wouldn't require new hardware. Multitasking is a software feature not related to hardware. The current iPhone already handles multitasking quite nicely. It's just that Apple limits its use to a handful of it's own applications.
  • Reply 15 of 105
    mjtomlinmjtomlin Posts: 2,673member
    Quote:
    Originally Posted by BigJim View Post


    2009 will be interesting. We'll see the Google Andoid G2 any week now. And 10 other gPhones before the year is out. And Apple will ship its third generation iPhone. Needless to say, the diversity of those 10 gPhones phones will offer some features Apple is resisting because they want control. For example, Flash. Many of these phones will come in at a far lower price than the $2400 cost of an iPhone over 24 months. I'm happy: competition is good for the consumer.



    And you make sound as if mobile carriers won't try and control the user experience as well and force handset makers to disable and leave out features just as with the original G1 and just about every other mobile phone on the market.



    Flash is a bad example to use to demonstrate Apple's control when, ironically, it is control that Apple is trying to remove from the open internet. Flash is a proprietary Adobe technology. Apple would much rather see the advancement of open web technologies such as HTML5 and CSS3.
  • Reply 16 of 105
    postulantpostulant Posts: 1,272member
    Quote:
    Originally Posted by teckstud View Post


    And still no video capture from the company that invented Quickktime? Come on - let's get real.



    Agreed! The iPhone should definitely have video capture. And despite not having it, it's competition still pales in comparison.



    My old razor had video capture. So did my old Panasonic. Both are attic trash.





    - Love my iPhone
  • Reply 17 of 105
    cmf2cmf2 Posts: 1,427member
    Quote:
    Originally Posted by umijin View Post


    Since Apple hasn't released the OS, and the timetable is not definite - why speculate on how far competitors will be behind? It's sort of pointless, because by the time v3 comes out, we have no idea what other phone makers will have. And by pre-announcing all those features, competitors can target those that may actually be useful and do better.



    No point fanning flames when no kindling has been ignited yet.



    One of the iphones greatest strengths is its third party support, which is why they released the beta of the next OS. Now when v3 ships it will have a ton of third party apps ready to go. That is something that Apples competitors cannot replicate easily, and definitely not in secret and internally. The iphones software advantage is not going away because Apple released information on features early (most of which are common features), this move only strengthens their position.



    If you want to talk about getting excited about something too early, talk about the pre. We have no idea of what the iphone will be like (or other phones for that matter) when the Pre finally appears. Yet many are hailing the Pre as an iphone killer.
  • Reply 18 of 105
    mjtomlinmjtomlin Posts: 2,673member
    Quote:
    Originally Posted by teckstud View Post


    I hate to burst your bubble but since when is MMS, Cut and Paste and Stereo bluetooth considered a new feature? And still no video capture from the company that invented Quickktime? Come on - let's get real.



    Well. The iPhone currently doesn't have those features. So, when they are released, they will in fact be "new" to the iPhone. Obviously, no one would consider them to be new in the sense that it has never been done before. And by, "pushing out new features", I'm sure person was referring to updates in general, which so far, Apple has proven to be way ahead of the curve.
  • Reply 19 of 105
    As someone who stood in line on Day One of the original iPhone rollout, I honestly can't say that I missed cut/copy/paste all that much, if at all. I do hope that in upcoming OS that the auto-login to WiFi fixes a problem that I have repeatedly, and that is at home when I'm using my iPhone in the living room, it must be right on the range edge of my AirPort base station downstairs, and it constantly bugs me to enter the password to connect.



    Just an FYI, but my original battery is still running strong. As long as the "Fetch New Data" setting is turned to "Off", I can still go several days on a charge, and longer if I also turn off WiFi. I was hoping to see Apple demo a better way of organizing apps on the screen (perhaps via iTunes), since it is a real hassle the way it is.
  • Reply 20 of 105
    teckstudteckstud Posts: 6,476member
    Quote:
    Originally Posted by Postulant View Post


    Agreed! The iPhone should definitely have video capture. And despite not having it, it's competition still pales in comparison.



    My old razor had video capture. So did my old Panasonic. Both are attic trash.





    - Love my iPhone



    At this point in time , in this state of the world, video capture is an absolute must have.

    How many world events i.e. assasination of Bhutto, the Tsunami, Katrina, Obama's campaign, etc, etc have we seen captured on video from someone's phone? It's too bad iPhone users are left out on this one basic feature.
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