Fascinating notes were taken at a talk Tim Cook gave earlier today, in which he explicitly laid out the fact that Apple benefited from its narrow product focus, a $40B company whose entire product portfolio could fit on a single table.

So given that focus, why invest in custom silicon?

“We felt that we had the best knowledge of what we wanted the silicon to do,” he said.

By designing its own silicon, he said, Apple can create chips that are best-suited for the company’s products, allowing them to run cooler and more power efficient.

“Apple has, for years, been in the silicon design business,” he said. “When we were on the PowerPC architecture, Apple always personally crafted the northbridge and southbridge chipset, and so it’s not new to us.”

In other words, even when it appears that they are straying from their focus, Apple’s management team has identified an opportunity to use their laser-focus to their advantage, upstream and downstream of the core product the consumer is buying.  (In my way of thinking, silicon is downstream, and retail would be “upstream” of the product itself)

Coincident to this talk, there was new data out showing that the iPhone’s unit shipments *and* market share grew more than any of its rivals in the smart phone space (and honestly, the research firms are being generous when they apply the “smart” label to some of the phones included).

And meanwhile, they’re getting some good news from their major US partner: AT&T.  A recent report from PCWorld shows that AT&T has dramatically improved the reliability and speed of its network.  Not that I can feel these improvements from a particular square block in downtown San Francisco (and the AT&T network gets its lowest scores in San Francisco!), but I’ll take the study at its word that on the whole these improvements are real.

Oh, and, happy birthday, Steve.

Interesting developments in the land of “tablets” and “netbooks”.

It isn’t really my area of primary interest but because I like following Apple’s product direction I follow the news.

First, there’s this article from the day after the keynote, in which Andy Ihnatko goes into great detail with his iPad experience.  I like that he took the time to actually use the device rather than rushing to get a story out and cutting short his time to experience the device.  I’ll note that most of the journalists who stayed and laid hands on it actually had a more positive impression than those that didn’t.  That’s surprising (usually expectations meeting reality is a set up for disappointment).  And it says something about Apple’s attention to detail.

Some of the comments that jumped out from Andy’s review were that it “felt right”.  The “rightness” of products is something Apple has really been excelling at in the last few years.  Another was his commentary on its speed – that it actually feels like you are moving something – not just gesturing and waiting for the phone to move it – a much more complete experience, if you will.

The implications for the iPhone are that Apple may be able to squeeze its A4 (or similar) design into an iPhone and offer this kind of speed in the smaller form factor.  I think there’s limited runway for SPEED to differentiate with phones – and we’ll hit those diminishing returns faster than the 20 years or so it took with PCs -  but right now there’s a lot of room for improvement over my iPhone 3G, and it sounds like Apple has a chance to do that – and still preserve battery life.  That’s impressive.

The truly impressive thing Apple did was leverage the App Store to make the iPad instantly relevant instead of making it a platform in search of applications and utility.  The Kindle and other single-purposes devices suddenly pale in comparison.

Also, regarding the most oft-reported shortcoming (no Flash support):

Months ago, I installed a browser plugin for Safari called “ClickToFlash.” It blocks all Flash content. You’ll see a placeholder image in the webpage and if you want to view the content, give it a click and it’ll load in. I have not noticed any drop in my ability to enjoy the Web. What I have noticed is that my browser is faster and more responsive, and that I can leave a couple of dozen tabs and windows up for weeks without having to force-restart my Mac.

Interestingly, I do this as well, and it doesn’t diminish my experience one bit – in fact it enhances it.  Granted, I do like the option of turning on flash for, say, streaming stock quotes.  But HTML5 can handle that level of animation and is “more standard” than Flash… I think Apple has done the smart thing here by protecting their platform and brand image, and putting pressure on Adobe to step up and make Flash a better product, or get out of the way and make way for HTML 5.

Next, the North Temple blog has an interesting post: On iPads, Grandmas and GameChanging, but I would have called it, so a Grandma, a Technophobe, and a Luddite meet in a bar… The short point here: people he never expected to be interested in a computing device are interested in the iPad.  I had a similar experience when my parents told me they were “buying each other iPhones for Christmas.” And then they asked me if they should get the 3G or 3GS… seriously?  I was tempted to tell them 3G just so they wouldn’t leap frog me technologically.  Then, I find out they’re Netflix subscribers.  When my parents start buying something technical – it is going to be big – because they are NOT early adopters anymore by any stretch.  But they are influencers.  My dad proudly tells of all the guys at the golf club who now have gone out and gotten iPhones to keep up.  And hey, they like the big numbers on the phone.

On a surprising, but I think intelligent response to the advent of the iPad, Acer says it will not release a competing device per se.  I think it is refreshing that Acer is sticking to what it does best.  Honestly, I think this is what RIM should do – make the keyboard experience better and better, rather than try to be a touchscreen phone company.  Acer understands that if they make a tablet it will lack the advantages of Apple’s iPad, but it will have all the same disadvantages.  So they’re punting (for now). Smart move, in my opinion.

Many pundits surmise that Apple won’t have a 2 year lead this time… but I think they will have at least 1 year before a competing system (an Android tablet?) will come along that can leverage apps (android apps?) that even come close to putting it in the same league.  And Apple is also adding pressure by having what looks to be better performance that will be tricky to match in the short-term. The key points from Lin of Acer:

Lin pointed out that designing an iPad-like device would not pose any technical challenges for Acer, but said such a product does not fit into Acer’s business model.

Apple is able to support the iPad through its iTunes ecosystem, while few other makers, including Acer, have comparable experience in operating an online store, Lin noted.

Astute analysis.

Now, StevenF argues that the iPad is a signal of the New World, versus the Old World.  Gen X being smack in the middle of old world computing, and the New World being targeted at those both older and younger than Gen X.  I’m not a big fan of generational themes like Gen X, but he has a point.  If computers in the future will “just work” and reduce the expertise required to use them, they become accessible to more people, and become more important to our society.  I’m constantly trying to get people (rather, the people who ask me IT questions) to switch to Macs because the number of IT-related issues is so much less (as judged by how often they ask me for help).  But an iPhone? I never get questions about how to get some driver installed or printer to work with it… !

I especially enjoyed reading how stevenf railed against the iPhone’s closed system at first -but a month later came back and used it full time.  Because it is just a better phone / smartphone experience, and the open/closed argument doesn’t really matter outside of technophiles like me.  And even I can see that it shouldn’t matter to 99% of the world’s population.  When it is your phone, or your car, you just want it to work. Period. No BSOD. No crashing.  To that end, foursquare can you please fix your app? It crashes more than any other 3 apps I use combined.

So how are things going elsewhere in smartphone land?  Jay Yarrow of the Insider says that the Google Android app store is a joke… You don’t often hear Google described as “sloppy”.  The fact that Android developers feel they can make more money on the Apple App Store is not a good sign for Google/Android. And it is an indication that doing this stuff right is harder than many of us assumed.  From Skyhook Wireless:

In December, wireless firm Skyhook Wireless produced a report about developer frustration with Android. Skyhook interviewed 30 mobile application developers and concluded, “developers are not generating real revenue via Android apps.” As a result “developers are becoming hesitant to invest more time and effort into apps that do not pay off.”

Ouch.

Finally, some would argue that the iPad is a sign of the third revolution…

I’m looking forward to laying hands on the iPad. But more than that, I’m looking forward to iPhone 4.0 – I want to see if it is worth upgrading!

It looks like Nexus One may not be the iPhone killer after all (despite all the Google ads running on TechCrunch these days)…

The first quote:

Flurry is estimating the Nexus One only sold 20,000 handsets in its first week. That means the Droid, with an estimated 250,000 units sold in its opening week, outsold the Nexus One by more than 12 times. The myTouch 3G, with 60,000 units outsold it by 3 times.

Ouch. And people were non-plussed with Droid and myTouch numbers… But it gets worse.

The iPhone 3GS sold 1.6 million units in its opening week, according to Flurry, which means it outsold the Nexus One by a “staggering” 80 times.

So, even if these estimates are off by 2x or even 10x, these aren’t stellar out-of-the-blocks numbers… I think it was too much to expect their first couple of efforts to out-do the iPhone. Story embedded below, courtesy of Business Insider.

I’ve been reading the latest flurry of iPhone / NexusOne articles and blog posts making the rounds, and I just can’t resist commenting.  Walt Mossberg gives both products a thumbs up, and Michael Arrington says the Nexus One is better than the iPhone (um. okay).  But, once again, all too many analysts and pundits are trying to compare what’s happening now to what happened with the Mac and the PC back in the 80’s/90’s… essentially comparing Apple to, well, Apple.  And comparing Google to Microsoft.  There are some valid similarities.

But they’re missing a few key things that make this round different.  In particular, those who want Google to come out on top cite Bill Gurley’s article on the subject. Gurley, first of all, paints Apple as dependent on receiving a share of the subscription revenue of the Telecom partners – but this was, to my knowledge, only true of the exclusive partners – e.g. AT&T.  Second, I believe when Apple renewed its contract with AT&T and revised the pricing to the consumer downward dramatically, that it gave up that subscription revenue in exchange for a lower consumer price.

Gurley goes on to make much of the difference in price point.  But, as Arrington states:

The Nexus One is available “in large quantities” starting today at Google.com/phone. An unlocked GSM version of the phone that will work in most countries is $529.

Google is also offering a subsidized version of the phone – also unlocked – through T-Mobile for $179. The service plan offered by Google is 500 minutes/unlimited SMS/unlimited data for $80/month. T-Mobile’s termination fee is $200, and some users might be tempted to buy the T-Mobile version and terminate immediately, paying just $379 for the unlocked phone. Google says that users terminating too soon will be charged the full price of the phone, however. But even the T-Mobile version of the phone can be used overseas on trips by slipping in a different SIM.

So… how was that cheaper than an iPhone exactly?  Oh. It wasn’t.  You can pick up a 3G iPhone for $99, with 8Gb of memory, rather than the anemic 190MB or so of app memory standard for the Nexus One.  After all, the whole point of these things is to run Apps right?

Gurley pushes the point that cheaper to carriers will matter!  But doesn’t explain how, exactly, that ends up being the case (except, possibly, with respect to Verizon):

The Android strategy results in phones at much lower prices with much more diversity which will hit a broader set of demographics. Apple can and will quintuple its current market share and still have a small portion of the overall cell phone market.

But unless the carriers start paying me to take phones, I’m not sure that the prices don’t get appreciably close to zero and therefore not matter to me or anyone else.  The real cost will end up being in the telecom services.

Mr. Gurley is also overlooking a more obvious analogy to the phone market: the mp3 player market.  And the reason to look at it?  Volume.  Apple is the biggest or one of the biggest buyers of the memory that goes into these devices, in the form factors required.  Apple’s sheer volume of orders allows it to pull off a rare double-whammy against the competition:

1. Buy vast quantities of memory at guaranteed prices, often much lower than competitors can get, and with supply guaranteed or prioritized over other buyers.
2. Actually drive UP the cost of these same components for competitors by buying so much capacity that the spot market is left with too little supply – causing painful price spikes for other buyers (Apple’s competitors).

The memory purchasing advantage is significant.  And Apple gets to consolidate its purchasing power across iPod, iPod Touch, and all three iPhone versions.  Certain economies of scale are not about software cost, and this time around Apple is the one with the economies of scale in hardware – and this advantage is one that even phone manufacturers with much larger marketshare (e.g. Nokia) don’t share – because they don’t buy such massive quantities of flash memory.

Also, like the mp3 market before iPod, the mobile phone business is a big, existing business with high unit volumes.  Many industry analysts assume that Apple cannot win a majority of share in a market because someone (Microsoft or Google) will offer an OS that will take away the mass market by being cheaper.  But what Apple understands is that below a certain price, cheaper just means “less good”, not “better”.  Apple’s profit share of the PC business far outstrips its unit share.  Its profit share of the mobile business even more dramatically outstrips its unit share.

While I think part of Gurley’s analysis is dead on:

Users won’t switch in mass from the iPhone to the Android. It’s the other 3.95 billion cell phone users that are highly likely to consider Android a step up from their current feature phone.

However, his assumption that android customers will be price sensitive and Apple customers price insensitive, seems off-base to me.  Can Apple drop the price from $99 to $10?  Sure it can. Because that is just the subsidized price from the wireless provider.  If Apple asks for less money from the carrier, that can be passed on in the form of a lower up front payment. Gurley states: “Some will argue that the best product will win the market and that Apple will still dominate the smartphone market. The history of the personal computer market is no omen for this thesis. “  Well true enough, but then again the mp3 market is an omen in support of this thesis.  I’m not sure why the mp3 market isn’t relevant to Gurley’s analysis.

Time will tell – and if Google’s Android produces better phones (and ecosystem) than Apple’s iPhone and Appstore ecosystem, then everyone will clearly be better off for it – and if they don’t achieve this high bar, they’ll still have raised the bar for anyone who doesn’t want to buy an iPhone but still wants a smart phone (as Mossberg states, the Blackberry UI is looking more and more antiquated by the day).  I just think the pundits and analysts are underestimating the benefits of scale that Apple currently has – much larger benefits than you would think with only “one phone” on the market…

After writing this, I found a few other posts that are more aligned with my way of thinking.  One, by none other than Henry Blodget which makes the point (quite rightly) that actually Google is not now in the phone business.  This is the HTC Nexus One, on the T-mobile network.  Google actually just set up a storefront.  And wrote Android.  And probably provided technical advice (much as it did for Droid). Its a pretty compelling argument.  However, the new Android-based phones *are* increased competition for the smartphone category (including the iPhone).  I just think it really puts more pressure on the Blackberries and feature-phones than it does on the iPhone.  I also think everyone is underestimating the lock-in value of having an iPhone – if I switch phones I have to buy new apps… different apps maybe… and maybe I’m happy with the App ecosystem I’ve got!

And then Dan Frommer argues that the customers service for the Google Phone won’t be what we’re used to if you buy from their online store, because you’ll have HTC, Tmobile, and Google to deal with, depending on your issue.  Google doesn’t own the customer relationship… Nothing insurmountable, but it may lead to bad press down the road as people run into inevitable service problems.  These problems happen in the Apple/iPhone world too -but Apple is in a better position to fix them and protect the brand.

Finally, Pogue of the NYT hits on a few sour notes, starting with the smaller selection of apps (about 1/10 of what is available on the iPhone – this is such a strange mirror image of the old Windows vs. Mac debate… ):

Worse, even if you find a lot of good ones, you might not have anywhere to install them… the Nexus allots only [190 megabytes of storage space] for downloaded apps.

The Nexus also does not come with any iTunes-style companion software…

There’s no physical ringer on-off switch…

Sadly, the Nexus One also lacks a multi-touch screen like the iPhone’s….

Finally, the Nexus just doesn’t attain the iPhone’s fit and finish.

Note the storage space (my emphasis) – my nearly 2 year old iPhone 3G has 8Gb of storage space for apps… about 40x as much… Of course, as the Insider points out, his take on the business model is even more scathing. Read the Insider article or the NY Times original for more…

Of course, for the “drank the Google Phone” kool-aide crowd there is this piece by Brian Sheehan arguing that Google will own mobile.  It isn’t a bad piece of writing – I just don’t agree that Google and Apple will forgo giving the iPhone most of the same integration advantages.  I do think that Google is enough of a “swing for the fences” company to do audacious things like buying fiber optic cable (oh wait, they’ve already done that)… So maybe they really will get into telecom.  We’ll see.

On the other end of the spectrum, Stewart Alsop crushes the Droid in his review.  It isn’t Nexus One but one could assume that Nexus One would have to be a big software improvement to make Stewart happy…

The top 11 iPhone apps for Business (according to the business insider).  They actually have a pretty good list, but I’ll add my own thoughts since I’m traveling this week…

1. Spots – for finding Wifi Hotspots.  Look, unless you live in a hinterland that does not have its share of Starbucks, you are really not that far from a wifi hotspot.  I don’t find this app a necessity but it sure beats having the iPhone pop up a list of wireless networks you could connect to every 30 seconds (and yes, you can turn off that popup in the preferences – I recommend it).
2. Kayak – for searching flights/hotels.  I might have to add this one.
3. FlightTrack Pro.  This is a good app -but might I recommend Weatherbug elite -which gives you more comprehensive weather information than what the airlines or FTA will report.  As a result, when they tell you its a 15 minute delay but the radar shows massive storms heading your way, you can make a more informed decision. Also, the itinerary-style features are better captured by TripIt in my view.
4. Subway Guide – well, this isn’t too useful in Austin, TX. But the fact that you can access maps that work when you’re NOT connected to the internet is pretty useful.  Otherwise Google has you covered on Google Maps…
5. Taxi Magic.  Much more useful in places that don’t have mass transit to speak of.
6. Spotasaurus.  Looks handy, but honestly I’ve never had a need for it.  I travel all the time.  I still know good places to duck in for parking in Austin, and I’ve found you figure it out pretty quick when you’re on the road too.  Usually if it is hard to find parking, it isn’t cheap anyway.  What’s $2 off of a $35 rate?  Its not like you’re going to find one lot for $2 and one for $25 nearby.
7. Convert.  hm. I mean, I don’t doubt that it works. but top 11? really?  I can’t remember the last time I had to do unit conversions, other than km to miles and back (is it really that hard to multiply by .6 or 1.6? no, it isn’t. )
8. Right Signature.  Hey, this looks like a find.
9. World Factbook.  hm. Yawwwwwwwwwn.
10. Virtual Receptionist.  Well, kind of interesting. But I haven’t needed it yet.
11. Print to Phone.  This looks pretty cool too.  I like the idea, and I’ll have to try it out…

My list of adds:

1. TripIt.  No more itinerary printouts.  It downloads local so you don’t have to be connected.
2. Hello.  Google Apps.  The voice search alone can be a lifesaver when you want to find a restaurant near your current location without much trouble.  And with this, you may not even need to use the starbucks locator and various other branded apps.
3. Tweetdeck (or the like).  How else are you supposed to keep annoying your followers if you don’t have this on your iPhone?
4. <insert financial institution here> – you never know when you’re going to need to check a balance or make sure a check was deposited, or make a trade.  Most major institutions have these now.
5. Yelp/UrbanSpoon – you need to find a place to eat when you’re on the road right?  These are good ways to find a place to eat.
6. OpenTable.  Don’t feel like searching review sites?  OpenTable tends to have higher end restaurants on its service because of the fees it charges.  Consider it automatically filtering out the corner tacqueria or pizza or burger joint, and focusing you on places that take reservations.  Make a reservation straight from the app.
7. Evernote.  Keep your notes / photos of notes synchronized.  Access from your phone.  Its pretty good and comprehensive.
8. I used to have Wall Street Journal on my list, but they put most of their content behind a paywall.  Not worth the trouble anymore, I just need to find something to take its place for good business news.

Apple’s net profit from iPhone’s exceeded Nokia’s by approximately 50% ($1.6B in net for Apple, $1.1B in net for Nokia). Its the first time Apple’s net profit in phones exceeded Nokia’s, and it is a dramatic reversal. Just 7.4 million phones generated this profit for Apple. Nokia sold 108 million phones to generate its $1.1B.

The way things are headed, Nokia and others may have more volume, but Apple and RIM will have substantially all the profit.  This is similar to what’s happening in the PC world, where Apple has a stunning 90% share of computers that cost over $1000, according to NPD reports.  Meanwhile the profit is getting sucked out of the rest of the PC business by netbooks and lower cost laptops.

Meanwhile, the AppleInsider has a really interesting comparison of the business models of Apple’s iPhone and Google’s Android phone.  It points out that while Google’s model has some advantages, there are also some disadvantages – no control over the Android brand, for one, and lack of clear accountability to fix customer issues once they have an Android phone.  AppleInsider points out that one bad Android phone can tarnish the brand – which is true of the iPhone as well, but the difference is that Apple has control over what gets released with the iPhone brand, but Google can’t exercise the same kind of control over Android derivatives.  I can’t help but think that the fragmented market of Android phones will only be an advantage if collectively the phones can evolve faster and take advantage of new technology faster than Apple’s iPhones… but so far technology adoption hasn’t been the problem – user experience has been the problem.  And it seems like Apple still has the edge there.

I just read an article in Fortune Magazine (my favorite offline read for flights or other times when I can’t be online), in which Michael Copeland argues that we need a revamping of the computing of autos.  As he points out, GPS and voice-recognition and even bluetooth phone integration are so last decade already (hey, we’re only two months from 2010!).

He makes the case that autos need to be providing much more robust application capabilities, along with an app store for buying applications for your car.  He refers to cars as one of the most popular mobile devices (well, mobile and motive, actually).  As such, “automakers need to start acting more like consumer electronics companies if they don’t want to cede one of their last great opportunities to Apple, Research in Motion, or Google.” And then… “More screens are showing up in automobiles.  Wouldn’t it be great if those screens became home to a flood of car-appropriate applications?”

The short answer is, no.  At least, not if these applications are delivered the way in-dash navigation computers were delivered to autos over the last decade.  I recall when I bought my last car.  During a stop at the Acura dealership to check out the TSX and TL, the salesperson gave me a long pitch regarding the resale value of a car with navigation.  As I recall him saying then: “These days, people just expect a navigation system in their car.  If you’re trying to sell a used car without that navigation system in 2 years, the resale value just won’t be there as much.”  Well.  I have a different opinion.  Find a friend with a 5 year old car with a built-in navigation system.  Those systems look comical today compared to a modern Garmin or TomTom or Magellan handheld system, and they make the car look dated and unsophisticated.  Moreover, the cost even just 3 years ago was approximately $2000 for that navigation system option package.  An off-the-shelf portable GPS navigation system was barely $250 even then, and much better devices are available for similar prices now…

I think the auto computer is like the old car phones.  They were vastly overpriced, and antiquated long before the car stopped being drivable, because the pace of technology changes for cellular phones was so much faster than the pace of change for cars.  Fast forward to the 2000’s.  The pace of change in navigation systems has dramatically outpaced the change in cars.  The pace of change in phones has outpaced both the rate of change in cars *and* the rate of change of navigation systems – to the extent that if you buy an iPhone or Android phone today, it can be your navigation system.  That in-dash navigation system is already a dinosaur if you bought it yesterday, and it will only look worse as time goes on.

No, give me a car where the technology is completely transparent to me as a driver.  Bluetooth integration and voice recognition is a good example.  If it goes out of vogue, I can shut it off, and there will be no visible sign of its antiquity.  Technology to improve my driving experience is transparent to me.  A better radio (satellite or otherwise) is largely transparent as long as the interface can still be a relatively basic digital or analog display.  I once drove a BMW z4 that had this aesthetic just right – knobs instead of buttons where ever possible, and a very subtle “computer” on the instrument panel whose sole purpose was to tell me stats about mileage and maintenance.  That car’s dash will look good 20 years from now.  Had I bought that Acura TL or TSX 3 years ago, I’d no doubt be kicking myself now, because my phone does all that.  And because the GPS would soon look like Atari Pong.

I think the right answer for Autos is technology enablement.  To the extent possible, expose APIs for interesting diagnostic information that could be displayed by third party devices or applications.  Provide a standard space on the dash that could hold a third-party or after-market device for displaying such stats. Build an upgradeable platform into your vehicles so that the parts that have a high rate of change can be inexpensively swapped out as technology improves – with the dealership network and car companies taking a slice of the revenues every time customers go through the upgrade cycles.  If you want to provide technology baked into the driving or passenger experience, make it transparent, and make it trend-friendly by doing a little future-proofing. Auto manufacturers have to remember the upgrade cycle for cars is a lot longer than for computers (9-11 years versus 2-3 years for computers and similar devices), and the designs of technology in automobiles just have to take this into account in order to preserve style and resale value down the road.

Unfortunately, if the car phones and navigation systems are any guide – when (if) we do get an App store for automobiles, it will cost $2000 for the option to make it available, and about $500 per application.  Let’s hope this time the car guys get it right! (And let’s hope the tech is transparent… otherwise we’ll see more texting-style car accidents)

A new article from TBIResearch concludes that employees are driving iPhone adoption in the enterprise.  This fits the anecdotal observations I’ve made about my own friends – that those who can choose, are largely choosing iPhones, and those who can’t, are largely using Blackberries.  Very few of my colleagues don’t have “smart phones” at this point.

TBI Research points out that this trend is important for Apple because the enterprise market is, so far, lightly penetrated by Apple and represents a huge market for their phones.  Often the “employees” driving the trend are executives that can force IT’s hand in supporting the phones.

TBI points out that the largest remaining barrier is Security.  Trumping that, in my opinion, is the utility of the iPhone and the many applications available.  If I were an industry analyst, I would tell you that there will be BPM apps available on the iPhone in 2010 (0.9 probability).

To further support that perspective, there are now reports that Apple will ship a CDMA compatible phone in late 2010.  The article makes some great arguments why Apple should be pursuing CDMA compatibility – primarily, its cheap, and it would enable them to compete for Verizon’s large customer base.

Five years ago I attended my college reunion at Stanford and I was surprised by how many of my peers were using Palm Treo phones.  At the time, the Palm Treo dominated the smartphone market in the US, but very few people really had smart phones.  Of course this was a fairly tech-savvy crowd, and it was no surprise that they were jumping on the newest productivity tools.

Fast forward five years, to the next reunion.  I didn’t see any phones in evidence that weren’t BlackBerries or iPhones.  Again, this crowd showed a specific phone preference though:  for the iPhone.  At dinner one night I noticed that 4 of the 5 of us had iPhones.  One of our party had a BlackBerry.  His was issued by a big firm’s IT department.  The rest of us work at or own small businesses – we could choose, and we chose iPhones.

You might think that these four iPhone owners were Apple fanatics.  But when I pointed out the iPhone to BlackBerry ratio, two of the iPhone owners expressed disbelief that anyone using an iPhone would be convinced to buy a Mac.  Clearly some of Microsoft’s positioning around pricing is hitting home as they felt that Macs were “$400 or more” more expensive than equivalent PCs (the gap is closer if you pick the same chipsets, memory speeds, graphics chips, etc. – and I think most people would argue the balance of the difference gets you the Mac OSX and the alumnimum unibody… fair trade).

So if pretty die-hard Windows/PC users are going iPhone, I think it is safe to say that the iPhone has a lot of runway.  I asked if any of them were looking at Android phones – no takers.  I think there is a hidden element of lock-in – which is not the *availability* of applications, but the money and time invested in owning existing applications on your iPhone.  When you “buy the app” you’re really only buying the app for one platform…

It wasn’t just me.  Check out the chart from Business Insider, adapted from Changewave survey results:

Or, the coverage from Fortune here. Clearly a lot of momentum working in iPhone’s favor at the moment. I’ll be interested to see what kind of smart phones we’re using at the next reunion. Or will we still be calling them phones?

In previous posts I pointed out how Apple made the right call in putting off all the me-too features in favor of the platform-  and then a followup post on the actual execution of that strategy once the iPhone 3GS was released.  The day after the latest Apple presentation seems like a good time to revisit the topic.

First, its apparent that the standalone iPod line is a little less interesting than it was, now that the iPhone and iPod Touch are here.  The incremental improvements are still there, but a little less exciting when you’re so many iterations into a product cycle that gets new offerings literally every 12 months.

But let’s take a look at how the iPhone is doing, shall we?  Oh, we could look at unit sales.  Or revenue.  Or profit margin.  But I just read a blog post that makes the point from the application developer’s perspective. Matt Hall writes in “Android Market Sales, Are Those Tears or is it Raining in Here?” that Android sales are dramatically lower than sales on the iPhone – more so than just the difference in units shipped would suggest.

Let’s take a look at the two charts that are pretty brutal:

Larva Labs Android Market Sales

Followed by a comparison of how their apps are doing on Android Market versus iPhone’s Appstore:

Larva Labs Sales Android vs. iPhone

Ouch.  Matt goes on to give a good critique (and advice) to the Google Android Market for improving their site from a developer’s perspective. But my thought is the key thing the Android Market is missing is that it doesn’t appear to be as focused on making buying decisions easy.  The iPhone/Apple App Store didn’t get everything right with their App Store, but they sure made buying apps easy.  Those customer-facing or customer-touching processes are really important…Matt remains optimistic about Android in the medium- to long-term and I think that’s valid – because the OS is good and it is free – it is likely to be adopted by a lot of phone makers and be in the hands of a lot of users.  But it also may get fragmented like Unix (see China Mobile’s plans for its oPhone and its own application market, powered by Android but not exactly “in” the original marketplace). There are also a lot of complaints in the comment feed about piracy (something Apple’s ecosystem makes harder).  There’s a lot of platform risk in the Android market… and not much (anymore) in the iPhone App Store platform.

And the strategy of building the network-effect marketplace behind a new software platform on the iPhone appears to be a big winner for Apple at this point.  No one else is even close to challenging its ecosystem in this respect.

Still not convinced?  Take a look at the Chart of the Day from the Business Insider:

Apple's iPhone Games vs. Nintendo DS and Sony PSP

We previously addressed the newest generation of iPhones in the iPhone 3.0 (now, iPhone 3G S … however, the iPhone OS is going to version 3.0, so perhaps the title is still ok).  Now that Apples’ WWDC has come and gone, and the dust has settled (for the most part), the press coverage makes it pretty clear that Apple has been able to pretty effectively execute on its differentiation strategy:

First, the major complaints leveled against the iPhone have been addressed (a series of fairly commoditized features such as cut-n-paste, MMS, opening .ics files, etc.)

Second, if we revisit the product revision options open to Apple pointed out in a previous post on Apple and BPM, it looks like they fired on multiple cylinders:

• Lower the price on the existing units – the iPhone 3G’s price has been reduced from $199 to $99.
• Release a new, improved unit with the old (high) price – the iPhone 3G S has more memory, faster processing, better graphics, a better camera, somewhat improved battery life, tethering, MMS, etc.
• Release more varied looks with approximately current technical specs (e.g. the colored iPod Nanos, for example) – Nothing done on this front, this time around.
• Create new pricepoints with low-cost components – e.g. RAM.  The new, improved iPhone carries higher pricepoints for a 16Gb and 32Gb version, which represent profitable upgrades for Apple, along with a fairly inexpensive camera upgrade (they are trailing the state of the art for phone cameras by enough that they aren’t paying much for innovation in that particular area).
• Improve the platform by adding new services or functions – the new iPhone offers the “find my phone” feature, video recording and editing, voice activation, etc.
• Change the pricing of services on the platform – Not too many changes on this front.
• Any combination of the above.  Check.

In particular, by lowering the pricepoint of the 3G, it appears that they’ve taken the oxygen out of the room for the competition (Palm Pre, for example).  So Apple retains the high end of the market with the new iPhone 3GS, while robbing profitability of the also rans by deploying the iPhone 3G at $99 (which itself is being upgraded by most of the improvements present in the iPhone OS 3.0).  And due to reduced component prices and volume negotiating, likely all of these phones are reasonably profitable for Apple when you include the carrier subsidies.  They’ve had time to recoup the R&D costs that went into the iPhone in previous years and are likely finding it increasingly easy to invest in future R&D against a growing revenue and profit stream.

Moreover, they’ve managed to really build consensus and focus on their key differentiating points – the platform (Appstore and OS), and applications (50,000 and counting).  While there was some coverage of specifications which indicate that the new iPhone is an even better gaming platform, Apple steered clear of focusing on easily commoditized hardware components.  One article on TechCrunch bemoans the fact that upgrading from the iPhone 3G doesn’t qualify for the subsidized prices (yet), but it definitely appears to be the minority view in the press.  Another TechCrunch article paints a bleak picture for the rest of the smartphone market.

In the immediate aftermath of the iPhone 3GS announcement, many wondered if Apple would sell as many as they had in previous summers.  Early signs are that all the pre-orders are sold out-  so while there may not be long lines on release day, there will be waits for the channel to fill.

Apple has executed the differentiation strategy brilliantly – as they should – they’ve had a lot of practice with the iPod releases over the last several years, and it looks like a well-understood process.

(I’m still looking for the rainbow color options next year… )

There are some pretty neat iPhone apps out there now.  The google app with voice search comes to mind.  I can picture my daughter growing up, never knowing what it is like to not have a little device with her at all times that she can ask questions and expect to get answers… The Pandora app is another great little application.

A friend of mine from way back published a little app called Urbanspoon that I’d been using even before I realized it was his company.  There’s a good interview on Techcrunch with Ethan, one of the founders of Urbanspoon.  I like that it re-introduces the randomness of a restaurant choice rather than just presenting a list.  Invaluable application for the frequent traveler!

I haven’t seen any good BPM iPhone apps but surely its only a matter of time now!

I’d like to take credit for it, but it is all the magic of WPTouch, a great Wordpress plugin that Sandy Kelmsey turned us onto in this post.  The homepage for the plugin is here.  Literally half of our team has switched from blackberries to iPhones since the 3G model came out.  I’m still the only one using a Mac, but don’t be surprised if that changes too…

Meanwhile, if you have an iPhone, feel free to check out our blog in its new iPhone mode.  I was pretty impressed by the folks at BraveNewCode-  the WPTouch theme/plugin is pretty ingenious and it doesn’t interfere with the normal browsing experience.  I wish all the blogs had this kind of theme for reading from the iPhone.

Incidentally, if you’re wondering how our team feels about the iPhones, we love ‘em.  Being able to read websites or html email on your phone is actually useful.  Typing is marginally harder after using a blackberry for 4-5 years, but getting easier.  And some of the apps we’ve found are pretty entertaining (when you travel a lot for work, the iPhone apps for Yelp! and Urban Spoon are invaluable for finding a quick foodie fix… and the directions/mapping are great too).