John Markoff on Steve Jobs And The iPhone

John Markoff might have been handed the "take the contrarian view" assignment from his editor at the New York Times, or maybe he is just an iconoclast by nature, but in a piece he wrote in today's NY Times he characterized Steve Jobs' announcement of the iPhone as "walking a tightrope". Pretty much swimming upstream on this one, John. The iPhone has been hailed as redefining what cell phones are supposed to be, based just on the unveiling of the prototype this week at MacWorld. (I was laying low while the deluge of gushing reviews poured out of the tech world like Noah's flood.)

Markoff seems to suggest that the iPhone might turn out to be just another Mac, and hints darkly that Jobs is risking all on the iPhone being a success, like he did with the Mac introduction:

Despite its high price of $2,495, the Macintosh initially sold briskly. But Mr. Jobs’s early predictions of huge sales failed to materialize. (On Tuesday, in a similar fashion, he set an iPhone goal of 1 percent of the world’s cellular phone market by the end of 2008.)

The Mac’s stumble was in part because of pricing and in part because Mr. Jobs had intentionally restricted its expandability. Despite his assertion that a slow data connection would be enough, the gamble failed when Apple’s business stalled and Mr. Jobs was forced out of the company by the chief executive he had brought in, John Sculley.

In a similar fashion, Mr. Jobs is gambling that people will pay a premium ($499 or $599) for the iPhone and he appears to have sought to limit its expandability.

I am going to start by unequivocally stating that anyone who goes short on Apple based on the llikelihood that iPhone sales are going to fall short of projections will lose the bet.

Secondly, Jobs fall from grace at Apple was more of a shove from Sculley, who almost ran the company into the ground. Recall that the board brought Jobs back after ejecting the ex-Pepsi exec from the Apple CEO spot, and subsequent progress with iPod and Mac lines have proven that Jobs is the real deal and Sculley was a poseur.

Markoff studiously avoids talking about how fundamental a game changer iPod and iTunes have proven to be, and I don't need to rehash that here. He mostly suggests that Mac fell short of expectations that Jobs raised. But he doesn't get into modern history -- post-Sculley -- except to mention the commercial failure of the G4 Cube. But what about the recent growth of laptop market share for the MacBook since Jobs switched to Intel Core Duo? Now that people can run Windows (via Parallels or Bootcamp) on their MacBooks, market share has doubled from 6% to 12% of laptop sales.

He closes by grudingly acknowledging that Jobs just might be able to iPod it again:

It is possible that Apple’s chief executive has found a way to step into the chasm between the two worlds [compters and phones] and profitably fill it.

“Apple is in a unique position to build a winning personal device that really fulfills the missing promise here,” said Michael Hawley, a software designer who is a former member of the M.I.T. faculty and a friend of Mr. Jobs.

I am not some brighteyed worshipper kneeling at the feet of some guru, but I have to say that I am fairly bullish on the Jobs/Apple innovation engine. Apple is consistently creating the best designed information appliances available in their niches, ones that redefine their markets.

Oh, and by the way, the Mac, that commercial failure, spawned the rise of window-based operating systems, like Microsoft Windows, even if you completely discount the growth of Mac systems itself: another side-effect of Jobs' creative vision that somehow fell through the cracks in this story. But I guess changing the world is less of an accomplishment than bottom line business results, in the New York Times view of things.

tags: john+markoff, steve+jobs, apple, windows, ipod, iphone, macbook, innovation, john+sculley

Comments

[Dennis Howlett]

Can you ascribe the doubling of laptop sales to the introduction of Intel Duo Core? I'm not convinced. Most Mac folk I know say there is no reason to run Windows on what remains a premium priced machine. After using Wintel for 23 years and making the switch, I concur with that view.

[Christopher Herot]

I think we should thank John Markoff for keeping the pressure on Apple to open up the iPhone. It may indeed be a breakthrough that "redefines the cell phone" but I would rather live in a world where I could use that redefined phone in creative new ways without waiting for permission from Steve.

Sculley may have forced Jobs out, but it was Jobs who recruited him in the first place. And forcing him out would not have been possible if the Mac had been selling better. Like the iPhone, the Mac did redefine the personal computer, but it wasn't all that useful until Apple added a hard disk and Microsoft added Excel and Word.

[Erik]

I think the 10 million units in 2008 is a fantasy.

There are roughly a billion cell phones a year sold worldwide. But the VAST majority of them are cheap to mid-level devices (under $100US). The smartphone market is only about 50 million units a year. Many of those devices are purchased by corporate IT departments.

Will Apple get 20% of the smartphone market with a device that costs 2-3 more than competitors, doesn't support 3rd party applications, and has an entertainment focus rather than a business focus? It's possible, but I doubt it.

[Stowe Boyd]

Dennis - It was a surge after that generation of Mac laptios came out, and I believe the speed, design, and Windows compatibility all played a part, but the new factor was Windows.

Christopher - I guess the notion is that people won't like it if their phone goes sideways after installing some app. But some greater degree of openness is desirable, true.

Erik - Apple has a greater than 90% share of the digital music device market, and all of the comments you make about iPhone could be leveled against iPod.

[Erik]

MP3 players and cell phones are completely different types of markets in both character and maturity. With the iPod they were building a new market, the iPhone is entering an existing market.

iPod for all intents and purposes created the MP3 player market. Yes there were a few players out there but there were probably fewer than 100K units shipped. Apple executed really well in that they tightly controlled the entire user experience with the iTunes/iPod interface. The iPod was head and shoulders better than anything else out there. iPod was also HUGELY helped by apple locking up the only source of small hard drives for a period of time.

The cell phone market is very mature. There are already 2 billion units worldwide. US penetration is nearly 80% (users are locked into contracts). In europe penetration in may countries is over 100%. 95% of the market is the mid to low range inexpensive devices. Apple cannot control the entire user experience because they don't own the network. Because of the way they do voicemail they CANNOT release an unlocked phone. That means they're going to need to get foreign carriers to redo their VM systems. While the handset is quite sexy, from a pure feature standpoint it is not up to par with many handsets that are out there.

The standard set of questions apply:

Battery life-The marketing slick means nothing, what's the real world battery life? That's a big screen. Wifi is a power hog, as is BT.

EDGE sucks, it's slow and to initiate a connection via cingular takes ~15-20 seconds.

Smooth interface, no tactile feedback = usability problems. You're in modal interface hell. You have to look at the device to use it.

No 3rd party apps. No Java support, no flash support, slow connection means that web apps are limited.

It's not small, people like small phones.

It's very unclear who the target audience for the iPhone is. It's not business users (too expensive, unproven input device, no 3rd party apps). It's not kids/students (way too expensive). It's a product targeted at wealthy techies who want to be entertained, that's not a mainstream market.

[Evelyn Rodriguez]

I agree with Stowe, especially with the "best designed information appliances available in their niches, ones that redefine their markets."

Christopher says, "The smartphone market is only about 50 million units a year. Many of those devices are purchased by corporate IT departments."

The iPhone, I don't believe, is going after that overserved market. In the terms of Clayton Christensen ("The Innovator's Dilemma" guy), Apple is going after the non-consumers and overshot customers.

It's not really simply a cell phone. I bought a Nokia 8125 through Cingular in early September. I'd gotten to the point that I could literally not fathom being tethered to any computer for hours on end. And even a laptop got to be cramping my style, as they say, it's just not mobile enough for me.

I talk to gallery owners, chocolatiers, fashion magazine editors, baristas as well as regular soccer moms all the time. These folks would like to be connected, but not chained. They don't know jack about Techmeme.com or Engadget.com or even Yelp.com, yet they aren't luddites either. They want technology to enrich their already rich lives, they're not slaves to gadgetry for gadget's sake.

It's gotten to point that I don't know how I managed to live without my 8125 before. And I don't say that about too much tech anymore.

And the iPhone, yeah, I want one as my next 'laptop' and I know plenty of folks in that are currently not consumers of PDA-phones or even laptops whom aren't drooling for the next Mac or even next Razor that will probably feel the same way.

p.s. The chink in the whole thing is the dependence on telecom mobile carriers and their business models and all that comes with that. But heck if Apple managed to work with recording industry, then maybe anything's feasible.

[Stowe Boyd]

Erik - You are offering a thousand reasons why iPhone is unlike iPod, but I'm not sure they displace my agument that iPhone is a game changing device, like the iPod. The music device market was younger, yes, but iPod/iTunes shifted everything and led to a market explosion. I maintain that the current market for phones -- mature as it seems to you -- is ripe for a revolution, and Apple is starting one. You remained unconvinced: the mobile phone makers will do this, no one wants to buy it, people are stuck in their existing plans, blah blah blah.

I just don't agree with you. I believe the iPhone will be a must have item for a large marketplace of people, that Apple will conquer the pernicious design issues (battery life, interface, etc.), and that the product will be more successful than Jobs projections. Let's reconvene in, say, September, and see where we are, then, ok?

Evelyn - I think you are right. The iPhone could be the laptop for people who don't want a laptop.

[Erik]

I agree that the mobile industry is ripe for revolution. That revolution has to happen at the network level, it cannot happen at the handset level.

Phones are about people connecting with people, that's all about the network. Apple doesn't own or control the network, Cingular does. Cingular controls the social aspects of this device. Without control of the network there will be no game changers, the status quo will continue.

If you want a game changer, Apple would need to use it's appreciated stock to take out one of the smaller carriers. (But I bet GOOG does that long before AAPL).

FWIW, September is far too soon to tell if the handset's a hit, we won't know until at least the end of the year. They need to go international to make their projections. I wonder how much of a subsidy Cingular is kicking in? How much will the unlocked handset be?