iPhone - The journey ahead ..

The sun is finally shining over the skyline of Helsinki after many days. Except, it is not shining in the Helsinki stock exchange for the world’s biggest and popular cell phone manufacturer ‘Nokia’. Its share has slumped by 1.80% (as I write), after losing 1.17% yesterday in the New York Stock Exchange. The story is similar for Motorola and other cell phone manufacturers.

All because of the new, smart, cell phone launched by Apple Inc, called ‘iPhone’. It was show cased yesterday by Steve Jobs, spiking the shares of Apple by 8%. The new phone has lot of innovative features, iPod, camera capability and convergence of many other utilities. There are several questions to be asked. Is the knee jerk reaction in the stock exchanges justified? Is Apple going to hurt the top line of established cell phone manufactures in any significant way?

The ‘smart’ cell phone of Apple is not the one which is driving businesses for Nokia or Motorola. The maximum revenue of Nokia these days comes from developing geographies and not from US. Markets of China, India, and African countries are where the top line of Nokia gets the numbers and Apple is no where going to reach there anytime soon. The customers, who are really defining success of Nokia in China and India, are not the ones who are fascinated by iPod, camera or Google search capability. They are using cell phones due to telecom revolution and not due to gadget revolution. The same can be said about emerging markets in Africa, like Kenya. Will this phone be of any great value for those who don’t use or own iPod(people like me). It will take a long time for them to afford or really appreciate the ‘smart’ phone of Apple. Anyway Apple is going to launch its phone in Europe and Asia only in 2008, at present it is very much for US market.

Secondly, the sale of mobile phones in US is tightly related to the service provider. The cell phone of Apple is tied to Cingular (AT&T). I don’t think Apple has much of experience in this kind of marketing. It would be like iPod and iTune stores belonging to different companies. Moreover, Apple will need to tie up with other content providers as well; so here the only important point is not technology, or ‘coolness’ factor but also dynamic of relationships. Top of all this, as with any other consumer item, the sale of mobile phones in US is not going to drive the business of any mobile phone manufacturer.

The only real competition that Apple phone might give, right now, is to high end phone manufacturers like RIM(Blackberry) or Palm. Nokia or Motorola has a deep line of products, which Apple won’t be able to match anytime soon. The most established and world’s market leader in mobile phone manufacturing, Nokia, has for long being towing the vision of convergence and multimedia. They have been investing in research and development for long and have come out with equally good products. The Nokia N800 Internet Tablet, showcased in the 2007 International Consumer Electronics Show (CES), couple of days ago, is one such product.

The initial hype and optimism is quiet understandable. At this point the biggest threat(so to speak) from this iPhone, to me, is to the iPods. There is a parallel in the history for it, the saga of Microsoft Vs Britannica Encyclopedia. If Apple can attack the value proposition the same ways Microsoft did, I don’t see other mobile phone manufacturers to be much concerned than having just another competitor in the market.

(Post written for academic interest in personal capacity)