Tuesday, June 10, 2008

Attention Cell Phone Makers, The End Is Near (Apple WWDC 2008 Keynote) by James R. Stoup

If the original iPhone hurt Apple's competition, this new phone should just about kill them. And it isn't the new features that is scaring them the most (though that definately shuts up just about every critic who's ever complained about missing features) what really has them terrified is the new price point: $199.

They cut the price in half.

I'll say it again. They cut the price in HALF.

In. Half.

It now cost more to get an iPod touch ($299) than it does to get an iPhone. Do you understand what this means? For the first time since Jobs came back they are deliberately sacrificing their high margins AND undercutting a current established iPod all to sell this new product

And they aren't doing this out of desperation to sell iPhones either. If you recall Jobs said they sold 6 million phones and the only reason they stopped was because they ran out. They ran out. Are you hearing me? They ran out. When was the last time you heard of that happening to any company?

But wait, it gets better.

If you head over to AT&T's site right now you can find 3 smart phones that do most of what the iPhone does, but for $300. There are 6 phones that cost as much as the iPhone, but do considerably less. Now, here is the really insane part, the Razor (a nice phone, but by no means a revolutionary) cost $150. Now do you realize what Apple has effectivley done? In addition to crushing the high end market, they have pushed into the middle of the market and drastically altered the playing field.

Imagine if Joe Customer walks into a store looking for a phone. On one hand he could buy a Razor (or any of a thousand similar pieces of junk) for around $150 or he could buy the coolest phone on the planet for $50 more. I really don't see this as being a difficult decision.

With this pricing point Apple is forcing the rest of the market to either cut their prices heavily or exit the game completely. In effect, Apple has redefined what the ceiling for cell phone prices should be. They have planted their flag and said you can get the best phone on the market for $199. So now how much is that Razor worth?

Some companies just won't be able to compete with this. Expect one or two portable GPS makers to go out of business (or merge) in the next year or two. Likewise you can bank that Nokia, Sony, Samsung and the rest will all loose quite a bit of revenue thanks to Apple's move. As for Blackberry and Palm, if this doesn't cause their board to break out the suicide pills then nothing will. And while I'm at it, I wouldn't be surprised if this turns out to be the knockout blow that forces Sprint out of the game. After all, they have lost the most customers by far and new commercials notwithstanding, I can't see them turning things around in time to make much of a difference.

There you have it. One announcement and Apple has completely rocked dozens of companies. You can't expect much more from a keynote, can you?

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