Apple’s iPhone 5 proved to be media hype; the company actually released only the also-rumored iPhone 4S. While Apple fans were quick to get behind the more limited announcement, Wall Street took Apple’s shares down in disappointment over the failure of the company to do something revolutionary. The 4S looks exactly like an iPhone 4, and in one poll only about 10% of responders thought it was a significant advance. I think that the disappointment is unfair—understandable but still unfair, or at least unrealistic. First of all, the 4S runs iOS5 and has a dual-core processor and thus arguably fits at least the basic profile expected for the iPhone 5. The criticism comes down to “You didn’t make it bigger”, which really means “It still looks the same.”
As I said in an earlier blog, Apple can’t be expected to keep launching revolutionary updates to a static product set, nor can it be expected to launch a new revolutionary kind of consumer appliance every three or four years. That’s its biggest problem, and one that really doesn’t have an easy solution. Apple arguably launched the personal computer and then lost the lead to others. Its iPhone is still the largest-selling smartphone model, but as in the PC space Apple has lost the total-unit crown to a commodity family, this one based on Android instead of MS-DOS and Windows. Inevitably, it will lose the top device slot in smartphones, and the top spots in tablets, because Apple is not a commodity market player and clearly doesn’t want to be. Nor does Wall Street want that, which may well be the strongest motivation of all.
The real question with Apple is, and has been, what it does with iCloud, and so far there are just a few hints. One example is an iCloud service that shows you where your friends are (providing they’ve agreed to share location with you). The question is whether this is just a scattershot app aimed at no trend in particular, or whether it’s an indication that Apple understands that the cloud has to be a big piece of what it sells now. Apple arguably created the thin client appliance market, and now it has to accept the inevitable consequence of increased application hosting in “the cloud”. Accept, and profit from it.
Sprint, who was hinted to have an exclusive on the iPhone 5, will have the 4S along with all of the other competitors, and in fact Apple says that the new model will launch in more markets faster than anything before. For Sprint, the phone-sharing isn’t a good thing because it only puts the operator at parity with its major rivals, and that in my view isn’t enough to justify having made a major commitment to Apple to take a large order (rumored 30 million over four years) of phones.
In all, the Apple event was a disappointment to many, and perhaps a critical one for Cook’s first announcement. What it does do is tee up things for Google, who now has an opportunity to do something more profound, both in terms of Android and in terms of the cloud. The question is “Can Google do any better?” and I think that in the near term the answer may be “No!” There are too many balls to juggle.
Android handset vendors, to be sure, can create something that has all of the features that the iPhone 5 was supposed to have; HTC has arguably done most of that already. But an Android arms race by the Android Little People won’t change the game much. Android already holds the lead in installed handsets, and no single vendor will challenge Apple for the brand lead.
Except maybe MMI. The problem Google has is that its MMI deal is drawing more scrutiny, and doing something really dramatic in Android now might spook regulators further. Without MMI they don’t have their own hardware arm anyway. So this raises a question. Did Apple deliberately hold back on the iPhone 5 knowing that this might not be the best time to launch given the economic risk, and knowing that Google might be helped more than hurt by a convincing new Apple victory in smartphones? Stranger things have happened.