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Why iPhone Sales Will Own Q4

Why iPhone Sales Will Own Q4

Right now, some reports peg the iPhone 3GS as the second-most popular phone in the U.S. It seems that for lots of customers, price trumps the many shortcomings it has compared to the iPhone 4. But what's going to happen when the iPhone 4 -- a genuinely solid phone with no screaming deficiencies -- becomes the old and lower-priced model? Then it and the iPhone 5 will team up to own the market.

By Chris Maxcer MacNewsWorld ECT News Network
08/25/11 5:00 AM PT

As we head into the back-to-school season and gear up for Fall and the holidays, there is a perfect storm of Apple action coming together. And there's so much there, all at once, that it might even be enough to drown out the flood of Android smartphones -- for a while, at least.

Back in February of this year, Apple started shaking up its iPhone rollout pattern when it started offering the iPhone 4 on Verizon. Not only did another a major service carrier snag the popular iPhone 4 right in the middle of the first year of its expected lifecycle, but that move also put Apple in an awkward position: Even if the company was technically ready to release an updated iPhone 4, say an iPhone 4S this summer, from a customer relations standpoint, that was a nightmare waiting to happen.

Rational or not, plenty of iPhone 4 customers on Verizon would have thrown hissy fits about buying a new phone with a two-year contract only to watch their friends and family walk around a few months later with something even better.

So June and July slid by this summer, and no one got an iPhone 4S, nor did we get an iPhone 5.

No Rush

Of course, the iPhone 4 is a damn good little unit. It's an all-around excellent performer, so I haven't heard too many gripes about this summer's missing upgrade. For instance, months before the iPhone 4 was released, lots of people were anticipating a faster, better camera -- with decent video recording capabilities. The iPhone 4 delivered. There aren't a lot of major holes, so the pressure to upgrade just isn't as strong as it was back in the 3G model days.

If anything, I was expecting Android to not only gain a lot of market share against all competitors this year, but to also thump up on the iPhone, including an iPhone 5 -- partially because the iPhone 4 is so acceptable. Right now, I'm still at a loss to come up with any killer new features that would force my hand to ditch a perfectly good iPhone 4 and upgrade into an iPhone 5.

Change Is in the Air

But now there are other factors at play, and they have nothing to do with a bigger screen or svelte new design. No, Apple is going to have a screamingly good end of the year when it comes to iPhone sales.

Here's why.

First, the iPhone 3GS is still astoundingly popular, with some reports pegging it as the second most popular smartphone in the U.S., right behind the iPhone 4. Of course, this doesn't mean that Android phones aren't popular in the U.S. For instance, the NPD Group reports that Android has 52 percent share in the U.S. over Apple's second-place 29 percent share with iOS.

But back to the iPhone 3GS. Until this week, it's popularity seemed 100 percent counter-intuitive to me. No way I'd take on a two-year contract for an iPhone 3GS that has a crappy camera unit in it, not to mention a fading processor and an utter inability to FaceTime with iPhone 4 owners. So, for example, what parent would give their kids the 3GS when they know they won't be able to FaceTime? Same goes for the grandparents and extended families. What kind of Apple lover would buy this unit at all?

And yet, the lure of a US$49 iPhone seems to be perfect for many buyers. Once I pull back my gizmo blinders, I realize that plenty of potential smartphone users don't have a need for a great camera on their handset. They might not want to FaceTime with anyone. And cost-of-entry sensitivity often makes all the other gizmo factors in a decision irrelevant. Hey, I've been there. There's a reason I'm not typing away on a 15-inch MacBook Pro right now. Cost of entry.

Meanwhile, this entry-level segment illustrates the big blast of wind that's going to roll over some Android competition: A low-end iPhone 4.

According to a recent Reuters report, Asian suppliers are busy manufacturing a low-end iPhone 4 that sports just 8 GB of storage (rather than today's 16 GB option). This phone would be designed in part for growth markets around the world, aimed at customers without the ability to shell out hundreds of dollars for a phone. Would this particular iPhone model make it to the United States? Maybe, maybe not. I would more likely expect the existing 16 GB option to drop down to the low-end position currently held by the 3GS. Either way, if Apple can actually produce a cheap (but excellent) phone for the low-end market, it will be a very big deal indeed.

The iPhone 5 Wild Card

Current rumors seem to be split between an iPhone 4GS, which might simply sport a bigger screen, a faster processor, and a better antenna system, and an actual iPhone 5 with a new form factor. Some think we'll see something in late September while others think October might be the time frame. It's likely that an iPhone 4GS will be a bit of a disappoint to some, but to other Apple-loving iPhone 4 owners, it might also be cause for a sigh of relief -- they won't have to shell out again to feed their iPhone addiction until a real iPhone 5 shows up.

Either way, anyone savvy enough to know that a new iPhone is coming this fall won't have to wait any longer, and this will trigger a whole new set of iPhone sales. Plus, if Apple can offer a $50 iPhone option that's FaceTime-capable for the holidays, we'll see a big spike in sales. Period. There's really no way around this one: A $50 iPhone 4 come Christmastime would be freakishly successful.

No matter what happens, Apple will release a new premier-level iPhone model this fall, and it, as a single definable unit, will be so popular it will bring the rain to all other units.

Enter Sprint

As if all this wasn't exciting enough, it's widely reported and expected that Sprint will join the iPhone fray in mid-October for the next iPhone launch, potentially selling well over 1 million units before the wrap of 2011. That was immediately followed by news that T-Mobile will get a piece of the iPhone too. Obviously this means that loyal (and contract-bound) Sprint and T-Mobile customers will be able to enjoy the iPhone love. Nice.

Still, all of these bits and pieces -- a new entry-level iPhone, a new premier-level iPhone, and new carriers -- will be eclipsed by something far more important to Apple's success: Apple's world-class marketing campaigns. Face it: No other consumer electronics company can touch Apple's marketing efforts. Not are they functionally better, designed cooler, and fun to watch, but Apple also understands that it has to spend money to make money. Apple shows us, while we're watching our favorite dramas on TV, how the iPhone works, how apps work, how the Apple ecosystem works. When I look at the competition's ads, I see weird lightning and messages about speed and robots that I don't really understand.

Any way I look at it, the end of 2011 is going to be dominated by the iPhone. By 2012, the storm may abate as Google builds a good plan with Motorola and Android tablet makers figure out how to undercut the iPad, generating their own little halo effects. But hey, that's next year. Apple lovers can still watch 2011 unfold with glee.


MacNewsWorld columnist Chris Maxcer has been writing about the tech industry since the birth of the email newsletter, and he still remembers the clacking Mac keyboards from high school -- Apple's seed-planting strategy at work. While he enjoys elegant gear and sublime tech, there's something to be said for turning it all off -- or most of it -- to go outside. To catch him, take a "firstnamelastname" guess at Gmail.com.


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