iPhone X First Look… OMG or SMH?
Want to see a chart that has Tim Cook shaking in his boots?
The Apple CEO would prefer that this chart didn’t exist.
Heck, if the chart (below) were a company, Cook would simply buy it — and let his R&D department give it a new design.
So what’s so scary about this dastardly chart?
It shows that Americans’ smartphone usage has found equilibrium.
According to comScore’s 2017 Cross-Platform Future in Focus report, the average American adult (18+) spends two hours and 51 minutes on their smartphone every day.
>> We spend an average of one hour, 56 minutes on social media.
>> We take/make an average of four phone calls, and…
>> We send 34 texts.
Although the latest usage data set a new record, the curve is definitely flattening.
See for yourself…
Armed with these cautionary metrics, Tim Cook took to the stage this week and unveiled the newest iPhones.
Cook’s challenge was crystal clear: How will Apple’s latest iPhones send the “usage” needle further north?
It’s highly unlikely that our texting/talking habits will ever grow from here.
So the answer likely lies with apps.
Fact is, roughly 90% of our smartphone usage is spent on apps.
Let’s give the latest iPhone an “OMG” or “SMH” grade below.
AR Is Key to Apple’s Announcement
When it comes to smartphones, the low-hanging fruit is all gone.
Phone makers have made them fast.
They’re all sleek and can generally withstand a good tumble.
Some of them are waterproof.
Heck, they’ve even made them as “big” as can they can be to still fit in our pockets comfortably.
So how do you differentiate yourself from the rest and come out on top?
Add the stuff the consumer didn’t think they needed.
For instance, augmented reality capability.
Not many people own an Oculus Rift or other dedicated virtual reality device compared with how many own a smartphone.
But thanks to Pokémon GO, millions of people around the world got a taste of just how powerful AR can be as they chased virtual Pokémon down in the street.
Apple has just upped the ante, boosting the processing power of the new iPhones to handle advanced AR applications.
Sure, it will take some time for developers to really build out functionality.
But the simple ability to point your phone at something and have it instantly interact with the environment is groundbreaking.
Now with all the fancy new additions, are the iPhone 8 and X worth the added price?
That depends on whom you ask. The iPhone 6 and 7 were increasingly “expensive,” yet both shattered sales records.
As far as virtual reality goes, Facebook’s Oculus Rift on its own retails at nearly $400. And it’s not even AR-ready yet.
Yes, the facial recognition and wireless charging features are nifty.
But if Tim Cook and co. can force mass adoption of AR through the new iPhones, and as a result squeeze out more smartphone usage… there’s no telling how high Apple shares can fly.
My rating: OMG.
The No. 1 Question We Should be Asking
There’s no question that the iPhone X, like all Apple’s innovations, is very cool.
But the event raised a huge question. Even with Apple’s loyal following, will buyers pay $1,000-plus for a telephone?
The most exciting innovation is that the device recognizes your face and turns on automatically. The feature is called Face ID.
Besides the “cool factor” here, the benefit is that the phone is, ideally, un-stealable. (It needs to be at that price.)
Indeed, Apple claims there is a one-in-a-million chance of it recognizing the wrong face.
The problem is if the phone is dirty or scratched with regular use, the device’s ability to recognize your face may drop considerably. Then you’re locked out of your iPhone X. In fact, Face ID failed to function during the live demo on Tuesday.
The camera is also improved. And I especially like that it can now adjust to the lighting.
Yet it’s important to note that this is a highly commoditized market now. The smartphone has already been around for 10 years — with worldwide sales of $344 million in the first quarter of 2017.
Now, 85% of the market goes to Android phones, which come in at an average price of $220 per device.
The iPhone X is thus being marketed at a 355% premium over the average smartphone… and at a 25% premium over its closest competitor, the iPhone 8.
At that level, Apple’s hopes for volume sales may well be disappointed. Unless next year (after its first full year of sales) is like 1999, with consumers both cash-rich and exuberant.
On balance, SMH.
Forget the Phone… Focus on the Watch
The latest batch of iPhones are innovative enough.
Loyal Apple fans will keep buying. There are 93 million of them with iPhones that are at least two years old.
What’s more, lifelong Android users will continue to cave to the curiosity of what it’s like to be on the other side of the smartphone world.
Recent surveys by RBC analyst Amit Daryanani confirm that two-thirds of respondents are interested in purchasing the newest iPhone. This group includes gobs of current Android users.
In other words, the latest batch of iPhones should unlock a super-cycle of sales, which promises to propel Apple shares high enough to become the first trillion-dollar market-cap company.
By that metric alone, the iPhone unveiling is an OMG event. And the stock is still a must-own.
But what happens when Cook can’t keep innovating enough to keep customers buying more smartphones?
For the record, I’d contest we’re a handful of design cycles away from that day coming.
Believe it or not, the answer is hiding in plain sight.
Cook revealed it during the product launch event this week, too.
It’s the Apple Watch. Now that it’s untethered from the iPhone, it’s positioned to replace our phones completely. Dick Tracy, eat your heart out!
Look for a massive increase in adoption rates in the coming year, including this guy.
It’s also augmented reality. As Jonathan pointed out, all the building blocks are being put in place on the software side to introduce consumers to AR and get them hooked.
Apple’s measured, methodical approach foreshadows the introduction of another new device — AR glasses. Bank on it!
So when the smartphone boom finally dies, Apple’s going to be perfectly positioned to sell us all not one, but two new devices.
Ahead of the tape,
Chief Investment Strategist, Wall Street Daily