Apple's Strength, Palm, Nokia and RIM Know, Is in Apps

The newly unveiled iPhone 3G S is impressive, and the $99 iPhone 3G is sure to encourage the previously hesitant. But Apple's true strength, say analysts, is in the one-two punch of its ability to offer a great device along with an unmatched trove of applications. That is where Palm, Nokia and RIM have to catch up.

It remains to be seen what Apple's introduction of the iPhone 3G S-in 16GB and 32GB models-as well as its price cut of the original iPhone 3G to $99 will mean for competitors such as Research In Motion, Palm and Nokia.
 
Analyst Ezra Gottheil of Technology Business Research said the iPhone 3G S isn't an entirely new device, but neither is it simply an upgrade.
 
"It's something in between," Gottheil told eWEEK. "It's evolutionary-incrementally and significantly better."
 
After months of fanfare, the Palm Pre went on sale June 6 and was met with the type of reception Palm and its carrier Sprint were hoping for-according to Sprint, the Pre broke its records for both first-day and first-weekend sales of a device.
 
However, opinions of the Pre on June 6 didn't necessarily hold once June 8 brought Apple's announcements at its Worldwide Developers Conference in San Francisco.
 
"The Palm Pre was an effective response to the original iPhone, but only partly a response," said Gottheil.
 
In the Pre's defense, he offered that the iPhone doesn't multitask as well as the Pre, and the Pre features a dedicated keyboard and is attractive. "But the iPhone 3G S will throw some cold water on Palm's debut," Gottheil conceded.
 
Carolina Milanesi, a Gartner research director, pointed to Apple's ability to use price to its advantage.
 
"The new price point of $99 is going to make competition more aggressive, as this is the price point that the Pre was after. And, of course, the iPhone still has a stronger brand appeal and a stronger ecosystem," Milanesi said. "The changes are not that drastic from a hardware perspective, but the new OS and other software enhancements do offer an interesting solution, especially considering you are getting more for the same price."
 
While the iPhone 3G S hardware improvements are noteworthy, the new operating system is what will continue to distinguish the iPhone from the other smartphone competitors.
 
"Improvements such as cut, copy and paste [and] the new landscape keypad as well as the voice control will all help increase usability," Milanesi said. "Other improvements such as memory, camera and MMS [Multimedia Messaging Service] support also make sure the iPhone caught up with the competition on some key requirements. But most of all the new OS and the application offerings continue to set Apple apart from its competitors."
 
At the WWDC, Apple presented a chart showing that its App Store now offers 50,000 applications-while Google's Android offers 4,900, Nokia offers 1,088, RIM's BlackBerry offers 1,030 and the just-beginning Palm offers 18.
 
Analyst Adam Leach of consulting company Ovum said in a statement that Apple's new offering was evidence of the move toward managed device platforms, or MDPs.
 
"Consumers will increasingly make buying decisions based not on a device's potential to support advanced capabilities but-crucially-on the vendor managing their data and services on the device," Leach wrote. "The ability to deliver a tightly integrated end-to-end service proposition including content and applications directly to consumers was pioneered by Apple; however, the adoption of the MDP model by Nokia, Google, Microsoft, Sony and other major vendors will drive the adoption of smartphones."
 
Ovum expects 171.9 million smartphones to ship globally in 2009, for a growth of 23 percent from 2008. Meeting this expectation, smartphones would represent 15 percent of the total worldwide mobile phone market.
 
TBR's Gottheil agreed that Apple's application offerings are a part of what sets it apart.
 
"It makes a potential competitor have a two-part problem-you need a darn good device, and the ability to fill it with content that will drive people to it," Gottheil said.
 
Gottheil said the iPhone 3G S doesn't change things much for RIM, as the iPhone and the BlackBerry have "effectively divided up the market." As for Nokia and the potential success of its N97 flagship mobile device, Gottheil said it's good simply that Nokia is in the game.
 
"It's like a horse race. You stay in in case the leader stumbles or gets tired, or you find an extra burst of energy. But no one entering [the] race at this point is going to slow down Apple or RIM; they have an open field ahead of them."
 
An Apple level of success, Gottheil said, "takes sustained excellence, and some good luck."