Palm investor Roger McNamee recently stated that when the phone contracts of the initial iPhone owners expire this summer, they’ll all be jumping ship for the Palm Pre - which should be shipping by then.
“You know the beautiful thing: June 29, 2009, is the two- year anniversary of the first shipment of the iPhone. Not one of those people will still be using an iPhone a month later. Think about it - If you bought the first iPhone, you bought it because you wanted the coolest product on the market. Your two-year contract has just expired. Look around. Tell me what they’re going to buy.”
First of all, this statement belies a common misconception about Apple owners - namely that their purchasing decisions are fueled by and are a function of their desire to be “cool”. While these customers undoubtedly exist, the iPhone has sold millions of units simply because its feature set leapfrogged all other competing smartphones in one fell swoop. Think about it - the iPhone was unveiled more than two years ago, and competitors are still struggling to play catchup. Apple doesn’t create hype to sell products. Rather, the ingenuity of the products themselves create the hype.
Second, let’s assume for a second that Apple users are as ‘cool consious’ as McNamee implies. Why, then, would they purchase a Palm Pre when the iPhone is still the yardstick for ‘cool’ in the smartphone market. Sure, the Palm Pre has gotten rave initial reviews, and it may very well prove to be a slick device, but the majority of this hype lies solely in the domain of the geeky who actually pay attention to what happens at CES. The reality is that the average iPhone user probably has never even heard of the Palm Pre. Also, keep in mind that as slick as the Palm Pre appears to be, it doesn’t really offer anything that new that will impress users to the extent that they’ll drop their AT&T iPhone plans. Sure, it has a qwerty keyboard, but if that was such an essential feature for users, then they would have presumably have already switched to another phone. What are you left with? Palm Cards? MMS? Cut and Paste? All cool, but features like cut and paste aren’t enough to sell a phone.
The iPhone is essentially a software platform, and as users inevitably become more tied to the content it holds, whether it be games, music, or movies, it’s extremely unlikely that a significant portion of iPhone users will all of a sudden decide to jump ship and sign up for a new 2 year contract with a different service provider. Signing up for a new phone in 2007 meant giving up your old phone. Now it means giving up an assortment of software and media content, which is undoubtedly a harder sell for a company like Palm to make.
Quickly, there’s an old story about Boston Celtics legend Larry Bird competing in the NBA 3-point shooting contest in the mid 80’s that comes to mind. In the locker room before the competition, Bird, ever the trash-talker, looked around and brashly asked the other competitors, “So which of you guys is playing for second place tonight?” If you’ll indulge me and my basketball analogy for a second, the iPhone is currently the ‘Larry Bird’ of smartphones at this point. Competitors are basically fighting over who’s going to win second place as the iPhone continues to nail shots from the corner with the multi-colored money ball.
Okay, back to reality.
Admittedly, the Palm Pre looks awesome, but implying that the Palm Pre will be an iPhone killer when it doesn’t even have a hard ship date is a bit delusional at this point. McNamee, though, seems like a good guy and really seems to genuinely believe in the inherent quality of the Palm Pre, and that’s something you gotta respect in a time when most companies are churning out phones that are just “good enough.” Palm, on the other hand, is actually trying to create a phone that is “better than”, and that can only be a good thing for the industry. The Palm Pre may well prove to sell like hotcakes, but if so, it’s highly improbable that that’ll be the result of defecting iPhone users.
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