View this article at: http://dev.macnn.com/articles/07/03/29/dvorak.abandon.the.iphone
Thursday, Mar 29, 2007 10:40am
Dvorak: Apple should abando...
Technology columnist John C. Dvorak believes Apple should pull the plug on the iPhone before it's too late. "What Apple risks here is its reputation as a hot company that can do no wrong," Dvorak writes. "If it's smart it will call the iPhone a 'reference design' and pass it to some suckers to build with someone else's marketing budget. Then it can wash its hands of any marketplace failures," he suggests. "It should do that immediately before it's too late. Samsung Electronics might be a candidate. Otherwise I'd advise you to cover your eyes. You're not going to like what you'll see." The columnist compares the mature cellular handset market to the segmented and unfocused MP3 player business prior to Apple's entry in 2001, noting that Apple played a very different game back then with a fresh new playing field.

"This is not an emerging business. In fact it's gone so far that it's in the process of consolidation with probably two players dominating everything, Nokia and Motorola." Such a late phase in the market offers extremely thin margins, which force smaller competitors and newcomers to lose lots of money. "There is no likelihood that Apple can be successful in a business this competitive," Dvorak writes. "Even in the business where it is a clear pioneer, the personal computer, it had to compete with Microsoft and can only sustain a 5 percent market share." The advertising and pricey marketing required of companies in the handset business is nothing like what Apple has experienced, according to the columnist: "It's a buzz saw waiting to chop up newbies." "The problem here is that while Apple can play the fashion game as well as any company, there is no evidence that it can play it fast enough. These phones go in and out of style so fast that unless Apple has half a dozen variants in the pipeline, its phone, even if immediately successful, will be passé within 3 months." Apple survives in the computer business due to high margins, but those margins cannot exist in the mobile phone business for "more than 15 minutes," according to Dvorak.