Apple's iPhone: Technology Product of the Year

Apple's iPhone: Technology Product of the Year

Wildly popular communication device could become a game-changing enterprise platform.

Oh, iPhone. Even typing your name feels trite at this point -- but that's exactly what makes you a perfect candidate for IndustryWeek's IT Product of the Year for 2007.

Even for those who didn't wait in line for days to buy one, there's no doubt that by now, the tide of hype associated with Apple's iPhone has washed up on your shores. Whether during the initial buying barrage, the backlash over the $200 price drop, the "bricking" of many illegally modified iPhones by Apple, or the bombshell announcement of Apple's reversal of position on third-party software development, this newest "must-have" device has been in the news since its launch six months ago.

Since its theatrical unveiling nearly one year ago, the iPhone has inspired the kind of contentious cultural divide usually associated with significant icons or landmark events -- i.e., you're either sick to death of hearing about it (if so, read no further) or you can't get enough of it -- in which case, read on.

What is the iPhone? The iPhone is a pocket-sized Macintosh computer that uses an unique and intuitive touch-screen interface for surfing the web, scrolling through pictures and music, and making calls, sending text messages and emails. The ability of users to literally let their fingers do the walking through the iPhone's operating system, and even around the Internet, has been described by even the most jaded tech reporters as a "thrilling" experience.

This potent combination of the extreme usability of an Apple-designed touchscreen operating system with the portability and "cool factor" of an iPod media device makes for a product that raises the bar for what people expect from their information appliances, and signifies the contemporary convergence of disparate technologies into a single, handheld unit. With 1.4 million units sold to date, the inevitable verdict is that Apple's iPhone has been a golden fusion of product development, design and marketing -- and another huge win for Apple Inc., an IW 50 Best Manufacturer.

Calling it "golden" is no exaggeration -- ounce for ounce, the iPhone is some pretty precious metal. Consider the margins for a moment. A teardown of the device by the tireless tech investigators at iSuppli reveals that the standard (8GB) iPhone has a total hardware bill of materials and manufacturing cost of $265.83, "generating a margin in excess of 55% at the $599.00 retail price," comments iSuppli principal analyst Andrew Rassweiler.

And that's not even counting the revenues from AT&T's exclusive iPhone contract. The tough deal Apple struck with AT&T has been estimated by Piper Jaffray analyst Gene Munster to be worth about $18 per month, per contract, for every iPhone activated on AT&T's network, adding up to more than $430 of revenue for each device for a typical two year deal. Pre-price drop, that means every iPhone sold brought in a ballpark estimate of $1,030 of revenue.

Another equally golden aspect of the iPhone is the "halo effect" currently shining onto the rest of the Apple line. In his year-end statement to investors, Apple COO Timothy Cook noted that Apple shipped 2.2 million Mac computers, a 34% jump over a year ago, and 400,000 more units than the company's previous quarterly record. Most tellingly, 50% of the Macs sold in Apple retail stores were to people who had never owned a Mac before, Cook said.

Finally, a recent corporate decision by Apple's leadership could bring a new, perhaps even more lucrative, customer segment on board for the iPhone -- the business smartphone user community. By "opening up" the iPhone to third-party development, Apple is removing a major stumbling block to development and upscale market penetration and giving legions of clever, talented and eager "independent software developers" (formerly forced to operate as hackers) the chance to build tools that will legally integrate the iPhone, and Apple in general, further into the enterprise.

Whether or not this new, user-improved product immediately grabs executive market share from RIM, Nokia, Palm and others, there is no doubt that the iPhone will have an impact, either direct or indirect, on every handheld computer device that comes after it. That fact, more than anything else, makes the iPhone our choice as the IW IT Product of the Year for 2007.

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