Exclusive: ‘Innovative iPhone just isn’t enough, yet’ — analyst

The iPhone does what it does well, but it doesn’t do enough, according to Current Analysis analyst Avi Greengart.

“The iPhone is an innovative, addictive, expensive closed system that does what it does extraordinarily well, but that’s it,” he told Macworld, predicting: “I actually expect a backlash of sorts as people figure out how much this thing doesn’t do.”

Greengart, who admits to being a fan of the new device, which he found a pleasure to use, highlights the lack of appeal to enterprise users, a key market for smartphones. “At this time there is absolutely no case for enterprise use of the iPhone,” he explained. In its current form the iPhone will not view or edit Office docs, nor does it support secure corporate email.

The lack of enterprise features may well be rectified before the iPhone launches in the second half of this year, but Greengart believes Apple may still have difficulties appealing to the enterprise market. “Even with enterprise features you may have a tough time convincing IT managers and corporate accounting to buy widescreen iPods for employee use,” he said.

Early-adopters

Some observers note that the target market for the Apple iPhone is not the enterprise user but rather an early-adopter consumer market that is starting to consider smartphones — something akin to the early-adopters of the iPod. However, if Apple is to achieve its target of one per cent of the mobile phone market with this gadget, it may be wise to address the business user.

According to Greengart, there are issues with the iPhone that even this market of early-adopter consumers will find hard to swallow. “There are no hard buttons and people are going to find that hard to deal with. People like physical keys that provide tactile feedback when you press them. Just look at the home theatre remote control world: they’ve been replacing their touchscreen remotes with hard buttons because people like tactile feedback.”

Another issue is the fact that it is not possible to add applications to it. Apple has already stated that it will not allow third parties to make software for the device – other than in conjunction with Apple itself. “That means no PDR (Physician’s Desk Reference) for doctors, no Weight Watchers for people tracking their ‘points’, no SlingPlayer for place shifting your TV, and no Hebrew prayer books or King James’ Bibles or Koran readers for the faithful.”

Pointing to the applications already available on the iPhone, Greengart added: “Even the apps that are available are not exclusive: Google Maps is also available on the Treo and BlackBerry and Yahoo! Mail is available on pretty much every smartphone.” Another failing of the iPhone in its current state is the fact that “there are no games”.

Power status

Greengart went on to criticise Apple’s solution for powering the phone. “The battery isn’t removable, and it doesn’t look like Apple has done anything to ease power management in terms of helping the user know when to stop watching video or listening to music. The first thing Palm learned with the Treo 600 was that a removable battery is mandatory on a voice device.”

Regarding the video player capabilities, Greengart added: “If you’re thinking of it as a widescreen iPod video for movies and TV, even the 8GB model fills up too quickly. The first TiVo and ReplayTV PVRs had 20GB of storage, and even then that was seen as paltry. Apple’s iPod video models come in 30GB and 80GB sizes.”

In addition, Greengart pointed out that the iPhone will not be able to take advantage of those mobile phone networks that are beaming TV to mobile phones. “The carrier entertainment services (like TV or streaming video/music) will not work on iPhone,” he explained.

Greengart’s criticism of the iPhone also includes the fact that it lacks 3G, “That’s a problem in the US, and a showstopper in certain European countries which have GPRS and UMTS, but no EDGE.”

Another criticism is that the iPhone doesn’t include GPS or a navigation option. “Google Maps is cool, but both RIM and Palm offer it, too, and it can’t give you point-to-point directions like VZ Navigator on Verizon Wireless phones, or TomTom GO on Palm with an added Bluetooth GPS dongle”. When Macworld mentioned this to Apple VP Greg Joswiak he replied that the observation had “been noted”.

High price

Finally Greengart noted that the iPhone is “enormously expensive, even by smartphones standards”. Plus the phone is locked into Cingular on a two year contract. This high price is exacerbated further not just by the lack of applications, but by the inclusion of the 2-megapixel camera. “People buying $500 smartphones in mid-07 will have a lot of 3 and 5-megapixel cameraphones to choose from that are good enough that you won’t need to carry around a separate camera.” Added to that: “It doesn’t do video recording at all.”

Added to this cost is the likely high cost of sending and receiving data on the device. “Nobody will say how much the data plans will cost on top of the $500/$600 prince for the phone.” Greengart indicated that current Cingular data rates are an additional $45 a month.

However, despite his criticisms of the device in its current state, Greengart still believes that the iPhone “deserves all the hype”. Speaking of his own experience with the iPhone: “It’s one of those devices that you literally have to play with to appreciate – the UI is just… addictive.”

“I think there will be a lot of consumers who’ll try it and get hooked. It does most of what consumers want to do with their phones and iPods in one device with a brilliant UI. It extends the iPod franchise and even uses the same accessories,” explained Greengart.

“Over time, Apple will fix the flaws, lower the price, broaden the distribution. The key is that even the 1.0 device should find an audience, and that means Apple will probably be a long-term player in this market. A niche player, to be sure — Nokia sells more handsets in a quarter than Apple has sold iPods in its history — but a player nonetheless,” he concluded.