Saturday, June 2, 2007

Apple's iPhone: Who Really Wins?

I can't recall when there has been more anticipation built up about the release of a cellular phone -- or any consumer device -- than now, with the Apple (Nasdaq: AAPL) iPhone. The buzz has been incessant and almost as long-lasting as the ringing in my ears.

Yet all the talk and speculation has got me thinking -- even if the iPhone only partially lives up to the hype, who really benefits from it? Of course, we could look at who builds the guts of the iPhone and buy stock in those companies. But beyond this, who will profit the most from the supposed "sea change" that the iPhone is ushering in?

Getting a little crazy
In case you live on Venus, have no communication with the outside world, or simply don't know why everyone is talking about the iPhone, look here, here, and here. Its pending release has caused markets to gasp, has forced competitors such as Motorola (NYSE: MOT), LG, and Samsung to push out "iPhone killers," and has carriers scrambling to offer them. The only thing the iPhone buzz hasn't done yet is change the earth's magnetic polarity.

Even smartphone manufacturers that haven't yet built a media device to go directly mano a mano with the iPhone have commented on its impact on sales of their devices. Everyone from Research In Motion (Nasdaq: RIMM) to Palm (Nasdaq: PALM) to Nokia (NYSE: NOK) has had to assure investors and the general public that they will not implode under the weight of a giant apple with CEO Steve Jobs' smug profile beaming on the side.

You phone, iPhone, we all phone
And I agree that the iPhone story is not so much about who or what it will squash, displace, or otherwise somehow render moot. I'm much more interested in what the iPhone will increase, multiply, and magnify -- and I believe investors should be as well. Thus, the story I'm most interested in is that of the iPod, where an entirely new, thriving ecosystem was built on the back of a smash-hit consumer device.

To this end, much has been said about the high price the iPhone will supposedly command -- $500 even for the cheapest version -- and how that will affect its popularity. Certainly, a high price will keep it out of the hands of millions, but given time, the price should come into a range more digestible to the mass market, just like with the iPod. On this point, I agree with my Foolish colleague Tim Beyers that a premium price for the device may be the smarter move in the long run.

A premium product also sets up a more lucrative value chain for companies that will eventually build products or services around the iPhone. So while the exclusive provider of the iPhone -- AT&T (NYSE: T) -- won't see a huge crush of new subscribers on the back of a cheap device, the premium pricing of the iPhone will place it a level above the competition and attract big spenders. And I believe consumers will pay for a higher-quality device and service, even if this is only in perception and not fact.

A question of control
One of the biggest debates around the iPhone, and one with large, long-term consequences, is whether the device will change the balance of power between mobile device manufacturers like Motorola and Ericsson and wireless service providers such as AT&T and Verizon (NYSE: VZ). Historically, the carriers call the shots and largely dictate what features and services they want to offer consumers. Additionally, carriers want to control the branding and distribution of products and services, to achieve the maximum benefit of paying subscribers sticking with them, rather than another member of the value chain.

While many pundits have offered the opinion that Apple will finally break the carriers' control over wireless services and devices, I don't buy it. The same was said about offering the Internet on mobile phones and how it would destroy the carriers' "walled garden," where consumers are captive mostly to carriers' product pages. While Apple and other manufacturers of high-buzz products will get preferential treatment, carriers will not go so far as to sabotage the value chain that keeps them growing.

Not only do I believe carriers will maintain their position, I actually think they all stand to benefit tremendously from the "iPhone effect." Devices with cool new features bring more media applications into the mobile realm, where carriers can bill for them -- even considering the potential that carriers may lose billable bandwidth to services carried over the iPhone's Wi-Fi connection. Carriers will reap not only the benefits of iPhone and iPhone-like device sales, but also the new revenue generated by mobile applications on all those devices.

It's a win-win
Of course, Apple itself should do well with the iPhone -- it's really only a matter of how well. And I really have to hand it to Steve Jobs and the Apple team -- no matter how well or how badly the iPhone is received in the market, Apple hit pay dirt with the amount of press and "free" advertising it has received.

So, in my mind, Apple has already won. Even if the iPhone gets raked over the coals as a high-priced, over-hyped glam device, it will still garner more attention and promotion than any massive marketing budget could have bought. And I believe the wave of euphoria is a tide that will eventually lift all boats, even the ones that many have pegged as losers.

For related Foolishness:
* This iPhone Would Be Worth $600
* Great Investments For Busy People
* Avoid the VoIP Value Trap

Palm is a Motley Fool Stock Advisor selection. To find out which other stocks are currently making the cut with Fool founders Tom and Dave Gardner, check out an all-access 30-day free trial today.

Fool contributor Dave Mock is betting the iPhone will top Tickle Me Elmo as the "must have" item this year. He owns shares of Motorola. Dave is the author of The Qualcomm Equation. The Fool's disclosure policy thinks you're a winner no matter what.

http://www.fool.com/investing/general/2007/05/31/apples-iphone-who-really-wins.aspx

Foleo Isn't Much of a Foil

That's it? Really? Really?!?
Sadly, that was my reaction when Palm (Nasdaq: PALM) yesterday introduced the Foleo, a laptop lookalike that runs Linux but lacks a hard drive and, if the press release is to be believed, is built primarily to handle email.

Palm, however, calls it a "smartphone companion." Um, aren't smartphones supposed to be smart so that they don't need a companion? (Sigh.)

Color me disappointed. And, honestly, a little bit sad. I'm a huge fan of Foleo designer Jeff Hawkins. As creator of both the original PalmPilot and the Treo, he's a first-ballot Hall of Famer in the world of tech, no matter what happens with his latest creation.

Yet he'll reap criticism anyway. That stinks. My apologies for piling on, Jeff.
But, alas, I must. Prerelease hype for the Foleo, which began as far back as November, suggested something so groundbreaking that it would at least challenge Apple's (Nasdaq: AAPL) iPhone and put to shame anything now available from Research In Motion (Nasdaq: RIMM), Nokia (NYSE: NOK), or Motorola (NYSE: MOT).

On that basis, the Foleo is very likely to be a disappointment.
Consider its features. The device can synchronize via Bluetooth, turn on and off instantly, and -- oh, yeah -- did I mention wireless email? Really, it's just a small laptop that's going to sell for $499 until a limited-time $100 rebate expires.

Having said all that, there is one scenario in which the Foleo could make Palm look brilliant. Assuming Hawkins is right, and users want the form and function of a laptop but in a smaller, smartphone-friendly package, the Linux-based Foleo, which is capable of synchronizing with most devices, could attract customers who've never before purchased a Palm product.

But that's probably a long shot. Even gadget geeks like me have limited budgets, and there's already too much competition for our attention.

With Foleo, the competition will be intense -- first from smartphone makers and then from laptop makers such as Dell (Nasdaq: DELL), who'll take it seriously enough to mock it as its designers plot to destroy it. You know what they'll say, too:

"That's it? Really? Really?!?"

Yep, really. (Sigh.)

Related Foolishness is just a click away:
* Mourn the death of this PalmPilot.
* Fast cash is in Palm's hand.
* Get the third-quarter numbers.
* Palm made Wall Street's Wish List in early March.

Palm and Dell are Stock Advisor picks. Get 30 days of free access to the entire portfolio, which is beating the market by nearly 38%. There's no obligation to subscribe.

Dell is also an Inside Value selection.
Fool contributor Tim Beyers, who is ranked 4,160 out of more than 29,500 rated players in CAPS, still owns a Treo 600. He's planning to beat it up till it dies. Tim owned shares of Nokia at the time of publication. Tim's portfolio holdings can be found at his Fool profile. His thoughts on Foolishness and investing may be found in his blog. The Motley Fool's disclosure policy wonders whether there will be a folio for the Foleo. No? Why so ... Leo? (Just checking to make sure you're still there.)

http://www.fool.com/investing/general/2007/05/31/foleo-isnt-much-of-a-foil.aspx

Apple Partners With YouTube

Apple today announced it's giving its floundering Apple TV something it has yet to gain, besides an audience: content. The company struck a deal with Google's YouTube video streaming service to provide originally-created content on Apple TV.

Separately, and perhaps because of the YouTube deal, Apple (Quote) announced it will offer a second line of Apple TV units, this time with a 160GB hard drive. The original Apple TV unit with a 40GB drive will remain on the market.

The 160GB unit means a quadrupling of storage capability, so it will be able to hold up to 200 hours of video or 36,000 songs or 25,000 photos or a lesser combination of each. The 40GB version of Apple TV will continue to sell for $299 while the 160GB version sells for $399.

Apple will offer a free software upgrade to Apple TV subscribers in mid-June. Once the device is patched, Apple TV will wirelessly stream videos directly from YouTube and play them on a user's TV. Thousands of the most current and popular YouTube videos will be available on Apple TV at launch, with YouTube adding thousands more each week until the entire YouTube catalog is available this fall.

Apple TV is already integrated with Apple's iTunes digital download service to play content off the user's PC or Macintosh computers. iTunes offers Apple TV users more than 500 movies and 350 TV shows in near-DVD quality, more than five million songs, 5,000 music videos, 100,000 podcasts and 20,000 audiobooks.

"This is the first time users can easily browse, find and watch YouTube videos right from their living room couch, and it's really, really fun," said Steve Jobs, Apple's CEO, in a statement.

The quality of Apple TV content remains to be seen. Most YouTube video is grainy and blocky when watched in a window on a PC, to say nothing of what it would look like on a high definition TV. An Apple spokesperson contacted by internetnews.com declined to comment on whether any special, high definition content would be available for YouTube.

Apple TV needs all the help it can get. Fortune magazine is the latest to call it a failure. Analyst Rob Enderle of The Enderle Group said Apple TV has been "a spectacular failure" and wonders if the YouTube deal will help.

"The YouTube deal is nice but they don't have any high def content and that's what counts," he told internetnews.com. "The problem with the player has always been content. That box has to get a lot of decent content for that device to recover. To make all that hoopla on HDMI connectors and not have any HD content was ridiculous."

Apple broke its own model that made the iPod a success: easy to use, a good service and lots of applicable content. Apple TV needs high definition video to make some headway, said Enderle.

http://www.internetnews.com/wireless/article.php/3680621

Will Users Want Palm's 'Companion?'

Palm, the company that pioneered the market for PDAs with its namesake product, is pushing the envelope of innovation again. Today, Palm founder Jeff Hawkins showed off the Palm Foleo, described as its first "smartphone companion" product. Palm, of course, also makes the Treo line of smartphones.

In a webcast at the D5 conference in San Diego, Hawkins and other Palm officials demonstrated the Foleo, which is slated to ship this summer for $499. The sleek, 2.5 lbs. Foleo features a 10-inch screen, instant on, full QWERTY (standard) keyboard and a battery life of up to five hours. Built-in applications include e-mail, Web browsing and editors or viewers for commonly used business applications including Word, Excel, PowerPoint and PDF files.

Palm Foleo
Palm's smartphone 'companion.'
Source: Palm

Though you can edit files for the Microsoft apps, Foleo doesn't use Windows. It uses Linux. Palm said it also expects to make several new application announcements after the Foleo ships. Wi-Fi connectivity is also included along with Bluetooth.

Hawkins said the Foleo is "a major new product in what we believe will be a major new product category" -- that of a smartphone companion. Although initially designed to work with Treos, Palm said it wants Foleo to be a companion product for other smartphones, including Windows mobile devices and the Blackberry line from RIM.

About five years ago Hawkins said he realized the need for a companion-type device, but with the smartphone market just emerging, it was too early to jump in. Development of the Foleo began in earnest about two years ago.

"Today there are 24 million people who do their e-mail on a smartphone -- a number that's supposed to go up to 200 million in a few years," noted Hawkins.

Although the Foleo's bigger screen and full keyboard would make mobile e-mailing much easier, some analysts question whether carrying a second device is the right solution.

"They did a good job keeping it secret, but I'm not sure they did a sanity check to make sure this is what customers want -- another big device to carry around with your phone," Gartner analyst Todd Kort told internetnews.com. "To me the Foleo doesn't make sense; it's a huge disappointment."

Kort agrees with the need to extend the capabilities of today's smartphones, but he was hoping Palm would've figured out a way to do it all in one device.

But Tom Cousineau, director of Foleo product marketing, said a second device is necessary if you want a large screen and full keyboard.

"We're trying to unlock the content in the smartphone, so people can have full productivity away from their desk," Cousineau told internetnews.com. "We think there are a lot of people who really don't spend anytime at a desk, and this is built for them."

http://www.internetnews.com/wireless/article.php/3680601

Will Users Want Palm's 'Companion?'

Palm, the company that pioneered the market for PDAs with its namesake product, is pushing the envelope of innovation again. Today, Palm founder Jeff Hawkins showed off the Palm Foleo, described as its first "smartphone companion" product. Palm, of course, also makes the Treo line of smartphones.

In a webcast at the D5 conference in San Diego, Hawkins and other Palm officials demonstrated the Foleo, which is slated to ship this summer for $499. The sleek, 2.5 lbs. Foleo features a 10-inch screen, instant on, full QWERTY (standard) keyboard and a battery life of up to five hours. Built-in applications include e-mail, Web browsing and editors or viewers for commonly used business applications including Word, Excel, PowerPoint and PDF files.

Palm Foleo
Palm's smartphone 'companion.'
Source: Palm

Though you can edit files for the Microsoft apps, Foleo doesn't use Windows. It uses Linux. Palm said it also expects to make several new application announcements after the Foleo ships. Wi-Fi connectivity is also included along with Bluetooth.

Hawkins said the Foleo is "a major new product in what we believe will be a major new product category" -- that of a smartphone companion. Although initially designed to work with Treos, Palm said it wants Foleo to be a companion product for other smartphones, including Windows mobile devices and the Blackberry line from RIM.

About five years ago Hawkins said he realized the need for a companion-type device, but with the smartphone market just emerging, it was too early to jump in. Development of the Foleo began in earnest about two years ago.

"Today there are 24 million people who do their e-mail on a smartphone -- a number that's supposed to go up to 200 million in a few years," noted Hawkins.

Although the Foleo's bigger screen and full keyboard would make mobile e-mailing much easier, some analysts question whether carrying a second device is the right solution.

"They did a good job keeping it secret, but I'm not sure they did a sanity check to make sure this is what customers want -- another big device to carry around with your phone," Gartner analyst Todd Kort told internetnews.com. "To me the Foleo doesn't make sense; it's a huge disappointment."

Kort agrees with the need to extend the capabilities of today's smartphones, but he was hoping Palm would've figured out a way to do it all in one device.

But Tom Cousineau, director of Foleo product marketing, said a second device is necessary if you want a large screen and full keyboard.

"We're trying to unlock the content in the smartphone, so people can have full productivity away from their desk," Cousineau told internetnews.com. "We think there are a lot of people who really don't spend anytime at a desk, and this is built for them."

http://www.internetnews.com/wireless/article.php/3680601