Friday, March 07, 2008, 07:25 am PT (10:25 am ET)
iPhone SDK evidence Apple has learned from past mistakesThe iPhone software developers kit (SDK) introduced by Apple on Thursday is proof the company is determined not to replicate mistakes made during the onset of its Mac platform, investment bank Piper Jaffray said Friday.
In research note released to clients, analyst Gene Munster said the announcements represent a substantial investment in creating a robust developer community aimed at producing a feature-rich mobile software platform, for which the iPhone and iPod touch are the first beneficiaries.
"Whereas Apple lacked a full developer community for the Mac in the 1980s, the company is taking precautions not to let limited developer support hinder the iPhone platform," he wrote. "The platform with the most active developer community will likely win the battle in the mobile computing arena."
In addition, Munster said the proliferation of third-party applications is a critical step in the future of the iPod, which has been met with its first signs of demand softness over the past several quarters. He believes the advent of "this feature-rich Internet-connected platform," coupled with lower pricing, will inevitably spark a new chapter of growth for the devices which have recently shown signs of flirting with their saturation point in the market.
However, some challenges to this approach remain, according to the analyst, such as cost reduction. For example, a tear-down analysis of the iPhone and iPod touch suggests that Apple pays $15 for the Wi-Fi module in the devices and roughly $30 for the touch-screen.
"For a $99 or $149 iPod, these costs apply margin pressure that will force Apple to innovate around the idea of an Internet connected iPod, which requires a larger screen than current iPod nanos, and an improved user input interface (like multi-touch technology)," Munster wrote. "We believe Apple is developing such solutions that will enable the company to deliver lower cost, Wi-Fi connected iPods in the near future."
The analyst also advised clients that the company has licensed Microsoft's ActiveSync technology, and thus plans to include support for enterprise-grade "push" email as part of a June software update to the iPhone. Nevertheless, he said, Apple still faces an uphill battle against Blackberry maker Research in Motion (RIM), whose approach towards push email funnels messages through Network Operations Center (NOC) in Canada, which is less taxing on its handset's battery life and thus results in an excellent user experience.
"So, the new iPhone features put the device on equal footing with Windows Mobile devices, but RIM offers a unique solution for enterprise customers," Munster explained. "Additionally, most businesses using the Blackberry platform have also purchased specialized hardware, which represents a significant hurdle for widespread iPhone adoption in business environments. Apple's move enables the iPhone to begin competing with Blackberry and Windows Mobile, but some hurdles to adoption remain, like the cost of the iPhone."
In a research note to his own clients, American Technology Research analyst Shaw Wu shared a similar view on the matter.
"From the demo and our checks with beta testers, Apple's implementation of ActiveSync appears superior to existing ActiveSync implementations by other vendors," he wrote. "[However,] we continue to believe it is difficult to replicate Blackberry's robust push e-mail, but iPhone has improved their product and is preaching the benefits of a simpler architecture [...]. While this is an improvement, Apple has a long road ahead in making inroads in Enterprise."
Both Munster and Wu maintained their Buy rating on shares of Apple, making no changes to their model. However, both said Thursday's announcements reinforce their convictions that Cupertino-based company is well on its way to surpassing its goal of selling 10 million iPhones in calendar year 2008.
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