Did Apple just Osborne its iPhone Sales?
News recently is that Apple just announced a press event on 12 September 2012 which everyone thinks is going to be the big iPhone 5 launch among other products. I have to believe Apple just Osborned (past tense verb of Osborne for those wondering) their iPhone sales for the next month and a half (or longer.) For those wondering, Osborne Computer was a very prosperous computer firm in the early days of PCs and is known in the Silicon Valley as the example of why companies need to be careful pre-announcing their products.
First, being up-front I have a fairly negligible amount of Apple stock in the investment portfolio that I know about (you never know day to day positions of fund managers but I do know that I have a few shares.) I also use an iPod during workouts, an iPod in my car, an iPad and Macbook Air daily. Suffice to say, I like Apple products. With that being said, the Wall Street Journal’s AllThingsD reported recently that Apple is planning the September 12 event to announce, among other products, the iPhone 5. More or less, the world now knows, given Apple’s previous release cycles, that the iPhone 5 will be announced on 12 September and will be released sometime in the two weeks following that announcement.
This is nothing new for Apple, every year we have a similar pattern. The difference this year is that Apple actually has strong competition. Samsung is now #1 in the smartphone market, and the Samsung Galaxy S III has gotten rave reviews. Android phones get better every time Apple releases a new iPhone but this year may be different. I am in the market and recently looked at co-worker’s iPhone 4S and Samsung Galaxy S III models side by side along with my Motorola Atrix 4G which has a 4″ screen as the iPhone 5 is rumored to have. (For those wondering I am thinking of turning the Atrix 4G into a HTPC.) Realistically, the Samsung Galaxy S III (and specifically the screen and LTE) give it a huge advantage right now over what Apple has in the market, e.g. the iPhone 4S.
In two months, I might be able to get something competitive from Apple, then again, I like screen space. STH gets well over 15,000 spam comments monthly, and I travel a lot. My manual SPAM review occurs on my smartphone and believe me, that is much easier on a larger screen. Does that mean I would not buy another 4″ screen device even if the iPhone 5 came out with one as rumored? No way. If the iPhone 5 comes out, I will buy it off contract. Sure it is costly but I use my phone as much or more than any other device.
Here’s the catch. Up until last week I was considering getting the iPhone 4S and just selling it when I upgraded to the iPhone 5. As of today, I am ordering a Samsung Galaxy S III. If the iPhone has some jaw dropping amazing feature, I will switch, but there is no iPhone 4S in my future. What does this have to do with the Osborne Effect? Here is the Wikipedia link to the Osborne Effect which is probably a bare-minimum read to understand how pre-announcing a product can stall sales of an existing product.
Surely Apple has done this product transition several times, why is this one different? Here are a few reasons:
- Apple iPhone sales stalled in the previous quarter. Prior to the announcement, Apple was already seeing anticipation of the unreleased product hurting current sales. We have become so accustomed to the fall iPhone release that purchasing an iPhone in the summer is becoming less attractive, especially when Apple is set to release a major upgrade instead of a minor iPhone 4 to iPhone 4S upgrade.
- Apple has strong competition now. The Samsung Galaxy S III is out with whiz-bang features and a huge screen. It has already sold over 10 million units and anyone watching the 2012 Olympics has probably watched Apple commercials going after Intel branded Ultrabooks while Samsung has the Galaxy S III on-screen in a commercial or someone’s hand every 5 minutes it seems. Note: Apple is not countering with the iPhone 4S at this point.
- The iPhone 4S launch was a very incremental upgrade. If I look back to last year’s coverage, Siri was the hot topic and despite sitting around dozens of iPhone 4S phones regularly, I do not see folks using it because there is a high miss rate. I am sure this will be something that will get better with time, and Apple has said this will be better with iOS 6, but Apple needs to do better. On the other hand, the NFC capabilities of the Samsung Galaxy S III are highly advertised, much like Siri, but I live a decent jog from Google HQ (and a short drive from Apple HQ) and I do not see people pounding their phones in downtown Mountain View like I see in Samsung commercials. If people are tapping phones, they are probably using Bump from the Mountain View start-up.
- iOS 6 may be launched with the iPhone 5. iOS 6 was pegged for “this fall” and rumors have it September/ October timeframe either with or without the iPhone 5. Still, iOS 6 is not available today. We know maps are coming, but a user can get turn-by-turn navigation in Android, without an app, today. Gone are the days of Android simply trying to match iOS functionality because we are seeing clear cases where both sides attempt to maintain feature parity. Users of the Samsung Galaxy S III already know that come August or September Jelly Bean will be on their phones and Key Lime Pie is already in development.
The story of Osborne Computer Corporation is sad. The high-flying company that had plans for an IPO instead ended up closing its doors all while becoming synonymous with pre-announcing a next-gen device. The good news is that Apple is not going the way of Osborne anytime soon and taking a longer term view, Apple will likely surprise us despite all of the leaks and the iPhone will outsell the Samsung Galaxy S III several times over by year end. Still, I would not be surprised if iPhone 4S sales just started to asymptotically approach a standstill with pre-announcing the announcement.