Business | Technology
iPhone's future success revolves around software
In the technology business, sometimes it is not the big changes but the smaller, incremental moves that matter the most.
- Financial Times
- Published: 23:41 December 23, 2008
In the technology business, sometimes it is not the big changes but the smaller, incremental moves that matter the most.
In 2007, gadget-lovers swooned as Steve Jobs unveiled the iPhone, Apple's much-anticipated foray into the mobile handset market. But it wasn't until this year, with the launch of a faster, 3G version of the Apple handset and the unveiling of the iPhone 'App Store' - which lets customers browse and install thousands of games and tools directly from their mobile phones - that the handset came into its own.
Boosted by the iPhone 3G's launch in 20 countries in July, Apple took the number three spot in the global smartphone market in the third quarter, according to Gartner, the market research group. In less than 18 months, iPhone sales have eclipsed those of smartphones using Windows Mobile, the mobile operating system that Microsoft has been working on for the better part of a decade.
Until now, Apple has enjoyed being the first mobile phone maker to hit on the winning formula for a touch-screen handset.
But competitors are racing to catch up. Research in Motion with its Blackberry Storm, and Google with its G1 phone based on the internet search group's Android operating system, already have touch-screen alternatives of their own. Nokia's response to the iPhone - its touch-screen N97 - is set to hit store shelves next year.
Apple, meanwhile, has thrown substantial marketing muscle behind the iPhone's App Store. It is betting that just as it took the combination of the iPod and iTunes to make Apple a leader in digital music, the success of the iPhone will revolve at least as much around software as it does around hardware. History is on Apple's side, but the company's shareholders - stung as its shares halved this year in spite of the iPhone's gains - are no doubt hoping for an even better 2009.
Jaguar Land Rover
Spare the tears for the Tatas. The idea that the Indian conglomerate cannot scrape together the wherewithal to keep the line moving at Jaguar Land Rover (JLR) is risible.
Sure, not all of the $62.5 billion (Dh229.6 billion) group's divisions are firing on all cylinders. Tata Steel's market capitalisation has plunged 80 per cent since the start of the year to $3.5 billion, a fraction of the £6.2 billion (Dh33.9 billion) it paid to acquire Corus, the Anglo-Dutch steelmaker, in early 2007.
Tata Motors, similarly, is now worth just $3.5 billion, barely more than the $2.3 billion it paid Ford for the two British luxury marques making further calls on its apparently depleted coffers.
But Tata Group is quite capable of funding Tata Motors through the cycle if it wants. It pumped cash into its car arm when its rights issue to finance the purchase of JLR fell flat. It did so again this week, with a cash infusion for JLR.
The truth is that Tata Motors overpaid for a trophy asset at the top of the cycle and must now nurse it through a particularly severe cyclical slump in demand. After making a £310 million operating profit in the half-year to June 30, JLR is now haemorrhaging cash. That, though, is the nature of cyclical businesses. It should not be an automatic cue for a state bail-out.
The latest red herring is that JLR is a special case because it contributes to the UK's intellectual property firepower with its £400 million annual research and development programme. R&D, though, should not be a sacred cow that goes unexamined.
The public policy case for helping a manufacturer of 4.2-litre gas-guzzlers reinvent itself as a producer of marginally less environmentally obnoxious products is not strong.
Tata Motors' best argument for a government bung is that it's at a competitive disadvantage because of beggar-thy-neighbour policies pursued elsewhere that benefit rivals such as BMW.
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