The day after Steve Jobs gave his near-messianic iPhone demo in early January, I ran into a hedge fund friend. His reaction to the “revolutionary and magical” (Jobs’ words) iPhone?
He’d sold his entire position in Research In Motion.
Now, my friend was clearly not alone: shares of RIMM had closed down eleven bucks the day Jobs Googled ‘Starbucks’ from his demo unit and ordered “4,000 lattes to go,” and it would drop another ten before bottoming a week later, on the theory that the iPhone was some kind of Blackberry-killer.
But my hedge fund friend’s reasoning was not so much that the iPhone would kill the Blackberry—he understood the products address entirely different end users. It was this:
“RIMM’s not going to beat numbers any more.”
In other words, overnight, Apple’s iPhone had rendered RIMM’s move into the consumer-friendly market with its Pearl something of a non-event. It wasn’t that RIMM was going to be threatened by the iPhone—it just took away the upside of RIMM’s move into the consumer side of the smartphone market.
Of course, RIMM’s stock has since recovered to pre-“4,000 lattes to go” levels, and analysts are universally convinced the company’s earnings report tonight will surprise on the upside, thanks largely to the Pearl.
While we offer no short-term opinions on earnings or stock prices, we have collected the reasoned, thoughtful views of nearly fifty of Not Making This Up’s sterling readers regarding the iPhone and its place in the wired world. And the outlook for RIMM may not be quite so tarnished as the market, and my friend, first thought. (For Palm, on the other hand, the news is less perky.)
We also discovered that what statisticians might call a statistically significant portion of our readers have issues with their wives. I am not making that up.
One feature, however, seems to be one of those “why hasn’t anybody done this before?” Apple specialties that will in fact change the way people use their phone: the select-which-voicemail-you-want-to-hear-first voicemail feature.
Let’s start with the obvious: our data sample is ridiculously small. Furthermore, it is skewed towards an older demographic than the iPhone will target. Nevertheless, if Apple wants to get somebody to shell out five hundred bucks for this thing, our readers are probably as good a sample of those somebodies as any other.
What kind of readers do we have?
Their cell phone carrier is apt to be Verizon, Cingular, or—surprisingly—T-Mobile. Sprint is a distant fourth, just ahead of Alltel.
For mobile email, they use Blackberrys or Treos, in that order. Fully one third of our responders do not use any mobile email at all—they use their laptops when they need to get connected.
Here’s how they responded.
1. Do you plan to buy an iPhone for $499 plus calling plan with Cingular the minute it is available, or soon thereafter?
85% have no plans to buy an iPhone, either on Day One of the New Era, or soon thereafter. Now, that number means absolutely nothing, of course; but the reasons tend to gravitate towards several distinct issues.
2. Why or why not?
The biggest single deterrent is that this will be the first generation of a product. Price is another issue—as Christian Warden points out, “I got my Blackberry for $50 after rebate.”
Cingular does not get high marks, either: to paraphrase the great Jack Nicholson line, a lot of potential iPhone users would rather stick needles in their eyes than use Cingular.
3. Which iPhone feature do you like the best? Which feature bothers you most?
Of our prospective iPhone buyers, it’s the all-in-one nature of the phone’s capabilities—phone, email, music, web browser—that has them ready and willing to pay the $500-plus-service-contract.
The touch-screen is a highly polarizing issue. People either love the idea or hate it—but mostly they hate it. As CSS wrote: “Try dialing a phone number on a touch screen while driving and you'll see what I mean.”
As “Johnny” wrote:
"I Like the interface of answering select voicemails first, rather than first come first listen, clearly the wife can wait."
Clearly, Johnny has some issues at home that the iPhone may not resolve.
4. If price is the issue, would you pay, say, $299 for the iPhone, plus calling plan?
The answer to this question is probably the best news of all for Apple: the pool of our potential iPhone buyers doubled from 15% to 30%.
5. What kind of cell phone do you use every day, and who is your current carrier? Would switch your current cell phone number to Cingular and use it on the iPhone?
Cingular is a problem. Only one fifth of our respondents were willing to switch their phone to Cingular. Apple needs Verizon, eventually.
6. What kind of email device do you use every day, and who is your carrier? Would you switch your email to the iPhone and get rid of your current device?
There is good news for RIMM and bad news for Palm here: while Blackberry users are equally inclined to use an iPhone for their email, it appears that the iPhone would be for their personal email—leaving the Blackberry as their work email.
Treo users, on the other hand, appear willing to switch their email entirely to an iPhone. As Mark said,
"Apple has a reputation for making things that actually work-unlike the Treo that has more bugs than a swamp. Treo and Microsoft both like to force you to do shut down/restarts."
7. Did you buy an iPod when it first came out? Do you have one now?
This was a control question, to weed out the Mac-fanatic/Mac-hater contingent from regular folk, and also to get a sense of what might happen down the road if the iPhone price comes down and other carriers get their hands on it—and it shows more good news for Apple: while about a third of our respondents claimed to have been first-generation iPod buyers, more than two-thirds now own at least one.
Some, however, like Andrew, remain conflicted about their iPods:
"Bought one for my wife. She rarely uses it. Waste of money for us."
As I said, wives seem to be an issue for some of our readers.
8. Do you need a new iPod? Would you replace it with an iPhone?
This, in my view, provided the most interesting response of all. Roughly half of our eventually-will-probably-get-an-iPhone respondents would not replace their iPod with an iPhone.
For starters, the storage on an iPhone is incomprehensibly small to most heavy iPod users.
As Neal put it:
"The only issue with replacing the iPod entirely is storage. I currently have about 35 gig of music on my iPod. 8 gig on the iPhone is not going to be enough -- I will have to be making hard choices about what music travels with me."
And there are other, more personal reasons. This is from Yanor:
I wouldn't replace my ipod with an iPhone because the iPod Mini I use is all I need when I use it, usually around the house late at night when I'm working and my wife is sleeping. Like now.
As I said, wives are an issue. No word on the husbands, however. Perhaps we'll need another survey...
I Am Not Making This Up
© 2007 Jeff Matthews
The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.