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  • The News that Makers of iPhone “Killers” Don’t Want to Hear

    September 23rd, 2011

    A key element of making a new product a success is customer retention. If someone buys the product once, you hope that they’ll consider buying a newer version when the time comes. So even if you succeed in converting lots of new customers, if they go elsewhere next time, a company’s chances for long-term success are severely diminished, unless they attracted lots and lots of new customers to replace the ones who’ve departed.

    Now the common meme played out in the media is that the Android OS must remain on top because it is growing faster than the iOS. Certainly the fact that there are a number of Android OS licensees shipping regular updates to their hardware would, by sheer force of numbers, dictate a better chance to sell more product.

    But a recent survey of smartphone owners from UBS Investment Research, as quoted in AppleInsider, paints a troubling picture not just for the Android OS, but RIM and the BlackBerry as well. According to the survey, conducted this past August, the iPhone has an 89% retention rate. In the scheme of things, forgetting how the rest of the crowd is doing, that’s a pretty high number. Yes, there have been one or two tech pundits boasting how they dumped their iPhones for Android gear, but clearly they are few and far between.

    The survey reports that the next highest retention rate belongs to HTC, with just 39%. Samsung, currently under siege with ongoing intellectual property infringement complaints from Apple, gets just 28%. Motorola, destined to become Google’s hardware arm and obviously its preferred Android maker, is stuck with 25%. As far as troubled RIM is concerned, their retention rate has dropped from 62% to 33% in the last 18 months.

    Now to be fair to the Android OS licensees, a survey question as to whether customers would stick with Google’s mobile platform listed 55% as saying yes. On the other hand, with such a poor level of support for the hardware that runs Android, you have to think that these results are anomalous. If customers like the OS, why would they reject the hardware? Do they believe that somehow Android OS would fare better if the handset makers could produce better gear?

    According to the AppleInsider report, the survey involved 515 customers with a focus on what they called “international high-end consumers.” Now these are the ones that mobile carriers would likely cherish, because they would probably have fatter contracts and thus provide more revenue.

    Indeed, recent comments from Sprint CEO Dan Hesse, the very person featured in that company’s recent TV ads, has already admitted the company’s financial guidance is being hurt because they do not yet offer the iPhone. I say “yet,” because there are published reports that there will be a Sprint version when the next iPhone is introduced, perhaps at that rumored October 4th media event. It’s not at all certain where T-Mobile stands, but perhaps in limbo until the issues over that proposed merger with AT&T are resolved. In the end, if the Department of Justice’s lawsuit is upheld, that deal will be off. So if T-Mobile is consigned to independence for the foreseeable future, it might make sense for Apple to build a slightly revised GSM version for that system. The difference would involve T-Mobile’s 3G network frequencies, which are different than the ones supported by AT&T.

    In any case, the UBS report also predicts Apple’s stock price will rise to $510, which seems perfectly sensible in light of reports that sales of iPhones, iPads, and even Macs, are remaining quite high. Perhaps we’ll know more if that media event takes place, because Apple will often reveal especially favorable sales results at the start of such presentations, although the quarterly financials, to be released later in October, will be where more details will be offered.

    In the meantime, anticipation continues to rise over the form of the next iPhone. Some are going all out and talking about an iPhone 5, with a substantially revised case to house the higher-performing internal workings. Another talks of an iPhone 4s, which is basically a refresh that incorporates the new hardware, but is otherwise unchanged except, perhaps, for some revisions in the antenna layout to reduce the so-called “death grip” effect.

    Then again, an iPhone 4s may simply be a second model, a slight revision to the iPhone 4, one to be sold at a lower price and replace the iPhone 3GS at the entry-level. An iPhone 4s might also be more suitable for so-called prepaid customers and others who buy their mobile handsets at full price up front. A roughly $600 list price may be daunting, but something in the $200 to $300 range may be considered almost affordable if there’s no two-year contract requirement.

    You might also notice that, with all the publicity about the next iPhone, and even perhaps the iPad 3, even if it’s not expected until next year, how you read few reports anticipating any greatness from Android OS handset makers, RIM or those building Windows Phone 7 gear. But that’s in keeping with the UBS survey, which demonstrates that customers love their iPhones, but don’t much care about the rest.



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