A Star is Born
10 years ago, on a warm Friday in June, our lives changed forever. It wasn’t obvious at the time. It sure is now. We had never seen anything like the device that went on sale that day. Now, you can’t go anywhere without seeing them. People are absolutely hooked. They bury their heads in them spending hours per day surfing, typing, listening, watching and talking to it. And it even talks back. It’s the iPhone, which was born in 2007, and it has revolutionized how people live their daily lives. It has so many functions. If you’re over 30, chances are you even use it as a telephone…
Before introducing the iPhone, Steve Jobs told people to “remember the moment: The moment before iPhone. Because, in the next moment, everything will change.” Mr. Jobs’ creation set the tone for the next stage of the digital revolution in which we live. It was the next big thing and it didn’t disappoint. The iPhone created an ecosystem for people to integrate devices and content, both remotely and in the home. It made it easier for companies to market and sell their products from anywhere. Transactions were made so much easier. It launched a flood of software start-ups who developed “apps”, a term Apple created when they started the App Store. Steve Jobs believed apps were an easier, faster and more personalized and eloquent way to engage content. Billions of people seem to agree with him.
The iPhone was not the original smartphone. Motorola, Blackberry and Palm all had theirs earlier. In fact, IBM’s Simon is considered the first smartphone, which arrived in 1992. It didn’t seem to make as big of a splash for Big Blue. The functionality of the previous devices was nothing like the iPhone. In 2007, Steve Jobs introduced the revolutionary multi-touch interface that let the iPhone smoothly pinch-to-zoom, scroll quickly and the multitasking that allows you to seamlessly move from music to call to web to email and back. Indeed, we had never seen anything like it. Today, the iPhone accounts for 2/3 of Apple’s annual revenue. It’s that big!
The Next iPhone Super Cycle
This week, the most anticipated event for Apple, and perhaps Silicon Valley at large, took place in Cupertino. It was held at the brand new Steve Jobs Theater. The 10th anniversary iPhone was announced. It is called iPhone X; the Roman numeral 10 not the letter X. This was Apple’s biggest product launch in years and comes with many new features for the Apple ecosystem. The greatest attention getter seems to be the 3D Face ID Recognition feature. There’s no more need for passwords or security codes to use the phone. The device will directly capture a 3-dimensional image of your face, which will be required to open the phone and authenticate use of Apple Pay and other financial accounts. And Apple says that you need not worry if you grow a beard, or wear a hat or glasses, the phone will be able to identify the real you. They say only identical twins that are mad at each other are capable of unauthorized access. That will be a fun test at my house down the road. Of course, this Face ID function comes with its own controversies, but you can see the advancement in technology.
The new iPhone X is water resistant and has a powerful camera that would have been the envy in Hollywood just a couple of years ago. The phone is 70% faster with its A11 bionic chip. It will also come with a charging pad, so you’ll be able to get rid of all those cords. The screen is bigger too, taking up the whole face of the phone. The Home button is gone too. And the price tag starts at a whopping $999.
Perhaps one of the most important additions for this new phone will be its Augmented Reality (AR) functionality. This is the concept of superimposing 3-D objects into the real world. You football fans know how helpful the yellow first down stripe is on TV; that was a very primitive form of AR. The Pokémon Go craze last year was a great example of the capability and the global interest. It’s really just beginning. Video gamers know all about this, and it’s expanding. Retailers are starting to use Augmented Reality to help customers visualize what a piece of furniture would look like in their living room or to try on clothes for custom fitting. Augmented reality will be utilized in sports, further in television as well as in the stadiums and arenas. Augmented reality could be the next big thing for innovators and investors. I just hope it doesn’t prevent people from continued human interaction and enjoying the great outdoors.
Keep in mind, while all of this is new to the iPhone, Samsung has offered a lot of these innovations in its Galaxy phones. Samsung uses Google’s Android operating system, which has over 80% of global market share for smartphones. Apple has just 15% of the total market. But most smartphones in circulation are much cheaper and don’t offer the same functions as an iPhone. The iPhone has a 34% market share in the United States. Apple might not be the innovator like it was under Steve Jobs, but the company continues to produce cool, must-have devices at a consistent pace and its loyal customers continue to pay the high prices. Over 500 Million people visited an Apple Store last year. This new super cycle led by the iPhone X will be a big test. The stock has had a nice run in anticipation. There is a common theme with Apple’s stock and its iPhone launches. Of the previous 11 events, the stock declined on 9 of them. That happened again this week. That’s what you call a “sell-the-news” event. The stock historically sells off for a few weeks after an iPhone launch, but 6-months later the stock was lower only 3 times. Stocks price in anticipated future events. This event didn’t disappoint.
Have a nice weekend. We will be back, dark and early on Monday.