Apple iPhone = Origami done right?

You remember Origami right? This was the consumer friendly name for the UMPC. When the first one of these came out from Samsung, it showed promise but was too big, the battery life was too short, it didn’t have WAN networking, and the touch screen keyboard wasn’t very good. It was also too expensive and the full OS got in the way of the “simple” concept of getting access to a few core applications that would drive the device like multimedia consumption and email.

Someone listened and unfortunately for Microsoft (who came up with the idea) it was Apple. Now Microsoft isn’t the only company looking foolish right now, IBM actually came up with this idea before Microsoft did and every survey I did on the class, which was called Modular Computing at the time, indicated it would be massively successful if it was done right. And had it been done right, it likely could have done for both Microsoft and IBM what the iPod did for Apple. But Microsoft under-funded their effort and IBM didn’t even try in the first place.

iPhone: More Computer than Phone

The iPhone, in concept, hits on almost all of the notes that Origami missed. It prices in at under $600 (granted with a 2 year cell phone commitment), is relatively small, has integrated WAN, and they figured out that by using Synaptics’ technology they could make a touch screen keyboard work. The iPhone’s interface is simple (even though the OS is based on OSX) and they did a great job of eliminating the complexity (in effect they completed where Microsoft didn’t).

The iPhone is iPod attractive and when announced, moved Apple’s stock price up sharply, showcasing the advantage of executing completely on a good idea and then presenting that idea in a way the market could get excited about.

When you realize that Apple only announced 2 major products at MacWorld yet stole the thunder from all of CES with thousands of vendors and millions of products, you have to feel that there are a lot of humiliated people in and around the consumer technology market today.

iPhone: The Big Risk

On the other hand the iPhone could not only make Apple, but it could break the company. The market this product enters is (largely thanks to this product) now a cross between the laptop market, the cell phone market, and the MP3 market. The laptop market is dominated by firms like Dell and HP (who regularly beat Apple on their home turf), the cell phone market which is dominated by Motorola and Nokia (who can create products for market in less than a year), while only the MP3 market is dominated by Apple and this new product class, now that Apple has created it, could easily cannibalize the MP3 market.

In short, not only did Apple just focus a huge number of companies on this new class, they gave these companies (some of which could actually respond quickly enough) a huge incentive to come up with a better competing offering. The survival of some of these companies could depend on creating a competitive offering and that is one huge incentive.

In addition, the non-Cingular cell phone companies will be going down the same path as they will see the very real possibility that Cingular could use this phone (and it’s yet to be announced smaller brother) to take massive market share from the other players and so these competitors should be more than willing to fund an accelerated effort to create a better iPhone.

In the 5 months before the iPhone comes out, these folks will analyze the Apple product and come up with something that could be even better and with a motivation to do so. The next 5 months could drag on as well because this is Apple’s first phone and so it is also their first time dealing with the FCC with a phone; it took both the Linux folks and Microsoft years to create something that worked right in a phone form factor; and Apple has been having some execution problems of late (they didn’t announce new hardware or anything regarding Leopard at MacWorld and should have given aging lines, Vista’s near term release, and their announced ship date for Leopard of June of this year).

Remember there are some other things that folks may not yet be focusing on with this device, battery life for this class has been a problem historically and phones have to be incredibly reliable. Plus brand new ports of full-featured operating systems onto small form factor devices haven’t initially gone well, and Apple doesn’t partner well (suggesting some interesting times for Cingular). In addition, we haven’t even mentioned the expanding stock option scandal they are now dealing with which could force Jobs into more than early retirement.

In short, Apple may have created the perfect iPod killer, told a large number of people how to build it, and be unable to get the product to market timely themselves.

Changing an Industry

Regardless of whether the iPhone is successful, Apple just did what Microsoft was unable to do and focused a lot of people onto this new and potentially huge profitable class of product. Microsoft in particular is probably fuming about the fact that Apple did what they couldn’t do and created a product, to Microsoft’s own spec, that could not only transform Apple’s market but Microsoft’s as well. (CES once again showcased Microsoft as a company trying to do too many things they cannot afford to fully fund).

I don’t think we will look at phones, MP3 players, or even laptops the same after this and that has a lot of implications for what we buy in the future. This device, much like the iPod did, will live off of accessories which will transform it (in accordance with IBM’s original vision) into a number of different devices for entertainment, communication, navigation, gaming, and even personal computing (it is interesting to note that Steve Jobs doesn’t apparently think gaming is that important).

This probably explains why a little company in partial stealth mode that has a similar concept called Integral Computing is getting a little play now as they have been working on a variant of the original IBM concept.

So this announcement goes well beyond Apple and what we saw with the iPod, this could signal a change in the PC space and turn out to be as big as the original Mac was. Of course back then, it was Commodore that initially dominated in terms of volume and Microsoft that dominated in terms of power so it will be interesting to see whether Apple has learned not to make the same mistakes twice.

Other Companies that Could Benefit

Four companies, if they scramble, could benefit from this wave greatly. Sony has one of the best in the UMPC class of products today, it is attractive, sleek, and it is also stable and it now has a flash drive. OQO, which spun out of Apple, just refreshed their line and the product is stunning. OQO has similar capabilities to the Sony and I’ve been using it for a couple of weeks now and it is one of my favorite new products. Toshiba just brought out their Protégé R400 which is arguably the most advanced laptop in the world and has a leading position with regard to Fuel Cells coupled with the technical competence to take Apple’s idea up to potential. HP has been in the handheld computer space for some time, is expert with the Microsoft mobile platform, actually sold iPods under their own brand, has a marketing team that is largely ex-Apple, and has been executing extremely well of late.

Oh, and let’s not forget Microsoft. Apple just effectively did to Microsoft what Netscape did in 1995 with the browser and we know how that all came out.

Apple just lit a huge fire, the only question remains is whether this fire signals an even brighter future for the company or that they just burned the place down. Never let it be said that Apple isn’t dramatic.

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