Silicon Insider: Have You Used Your iPhone Lately?

Aug. 30, 2007 — -- Used your iPhone lately? More important, have you seen anyone else use their iPhone lately? And what does that say about the future of Apple?

When I took off for the U.K. in early July, the Apple iPhone craze was still at full throttle. As some readers may know, my oldest son was even hired by a local venture capitalist to camp overnight in front of a local AT&T store in order to be one of the first iPhone customers. The local news stations carried live feeds of crowds gathered around AT&T stores, and experts competed to see who would come in with the highest unit sales prediction for the product.

As it happens, before Tad could actually buy the iPhone, I had to sign for it, as he is a minor. So, I dutifully drove down to the local shopping center, loaded the tent and sleeping bag into my truck, and went in to sign the papers. Needless to say, it was pandemonium inside and outside the store.

Outside, the line of anxiously waiting customers stretched the length of the block, and scores more people had shown up just to gawk and be part of history. Inside the store, tired buyers paced nervously waiting for their boxes to be brought out of the vault -- and then held up their new purchases as they left the store to the cheers from the throng. Even for a cynical old newsie like me, it was pretty exciting stuff.

While I waited for Tad to finish the paper, an ecstatic clerk came up and shoved one of the demonstrator iPhones into my hands, shouting over the noise, "Wanna try it?"

Sure.

As has been written ad nauseum by now, my first encounter with the "Jesus Phone" was pretty awe-inspiring. It is a beautiful piece of product design -- and when the clerk turned it on for me, I was absolutely blown away by the quality and clarity of the display, as well as the smoothness of the user interface. And, like most other people, I was astounded by just how quickly I was able to use the device without a manual or any other help. Far more than even the iPod -- indeed, even as much as the original Macintosh -- the iPhone had an instant "Wow" factor.

So great was that "Wow" that it nearly overwhelmed the cognitive dissonance that began to grow within seconds after I started playing with the iPhone. First there was the matter of actually using the phone itself: accustomed to the latest generation of tiny, ergonomic cell phones, the iPhone seemed chunky and flat. This wasn't something I wanted against the side of my head all day long.

But my real disappointment came when I tried to use the touch screen keyboard. I had written in this column before the iPhone's release that I had real doubts about the practicality of a touch screen on a telephone, because not only would it not provide the tactile feedback needed for real typing, but would be an annoyance to a generation of people now trained at typing in phone numbers without looking.

The iPhone proved to have as good a touch screen as I'd ever seen -- you'd expect nothing less from Apple -- but to my mind it didn't work. Try as I might, I could not accurately type with any real speed.

So, I came away from my brief encounter with the iPhone impressed with the concept but disappointed in the execution -- and glad I hadn't spent my five hundred bucks (or more accurately, $2,000, including the service) on one.

But the Wow factor was very real, and so I wasn't surprised at the early reports that the company was meeting all but the most outrageous unit sales predictions in those first days. Nor was I surprised that a number of buyers had to wait several days to get onto the system -- Apple's decision to go with AT&T having been recognized for months as a key weakness in the iPhone.

Still, by the time I stepped onto the plane, the iPhone was still the darling of the media, Apple stock had recovered from the dip after the Sprint news, and unit sales were strong. It looked like Apple, the most brilliant consumer electronics innovator of the 21st century, had another phenom on its hands.

I was out of touch for most of the next month hiking in the U.K. And during the few moments I had to watch or read the news, I didn't see much about the iPhone -- but then, I didn't expect to -- the device not yet being marketing in Europe (and, given the current state negotiations, it may not be for some time).

But what I did expect to see upon my return to Silicon Valley was iPhones everywhere, defining the new consumer zeitgeist in the same way the iPod did at the end of 2001.

Instead, nothing. In fact, even though I live just two miles from Apple headquarters, I have still yet to see an iPhone in daily use. Tad spotted a guy using one at the gym, but otherwise, nada.

Both Apple and Wall Street are still confidently predicting 10 million (Apple's prediction) or 15 million (a few analysts) unit sales, but on the evidence I've seen (admittedly anecdotal), I have a hard time believing it will happen. Indeed, I have a growing hunch that Apple may not pull this one off.

A couple years ago, I wrote that I detected a whiff of death around Microsoft. I took a lot of guff for that. But these days, after Zune and, even more, the endless delays in getting the uninspiring Vista operating system to market, I'm not sure many would disagree with my assessment.

Now don't get me wrong. I don't see a similar slow decline for Apple. On the contrary, this is a company running at its very peak: Its computers, which last month sold one out of every six PCs, are finally stealing back market share after nearly a quarter century of backing up; the iPod is the product of the century so far, and the company has had the courage and capital to launch itself into the biggest tech business of all, wireless telephony.

Moreover, the cult of Apple -- that army of true believers who buy any Apple version 1.0, thus funding 2.0 and beyond -- has probably never been stronger. This in turn almost guarantees that no new Apple product can ever again fail. These days, when Steve Jobs speaks, the world listens … then applauds.

But what I do sense about Apple these days is a deep vulnerability -- and with it, enormous risk. Apple's corporate ecology is a very delicate thing, built in large part on Jobs' personality, the company's arrogant sense of its own exceptionalism, and the faith of those true believers. This is a company that will burn out or nova long before it fades away -- and given its structural fragility, that event could happen at any time… even when it is on top.

That is precisely what happened in 1987, when Jobs was driven out of the company, and by 1997 when he made his now-famous return, Apple was at death's door. In the last 10 years, he has accomplished one of the greatest second acts in business history. But 10-year cycles seem to define Steve Jobs (1977 was the beginning of Apple Computer), and we are now reaching the end of yet another decade.

As was already being predicted before the iPhone even appeared, version 2.0, with G3, a removable battery, and improved quality and service, might actually live up to the iPhone fantasy Jobs created last January. But as Jobs knows better than anybody, you only get one shot at blowing a market apart -- and by the evidence of my eyes, ears and fingers, iPhone 1.0 isn't going to do it.

The true believers are doing their best to help, with new blogs and Web sites dedicated to the product trumpeting its praises. But I'm also reading a disturbing number of pieces by tech reporters who bought iPhones during the hysteria, but who now find they rarely, if ever, use it.

This is not good news. Tellingly, what was good news was the story last week that some kid had hacked the iPhone, thus rendering it open to other carriers. To this, the market and the media reacted enthusiastically. When the world applauds a failure of your business strategy, that can never be a good sign.

Ambition and success have led Apple to three gigantic markets -- PCs, music and telecom -- simultaneously. That takes a lot of money and a lot of talent, and even Apple may not have enough of either, especially with competitors mounting profit-crushing counterattacks on all three fronts. What happens when Apple starts being hammered by Nokia in phones, HP and a resurgent Dell in computers, and online wireless digital music players that circumvent iTunes … all at the same time?

For all of its current success, were Apple to suddenly get crushed in one of those businesses, or (with a distracted, departing or debilitated Jobs) lose its vaunted juju, the company could find itself in a terrifying collapsed stock/lost talent/LBO or merger scenario in a matter of months.

Just before the iPhone was introduced, veteran journalist John Heilmann in a New York Magazine article asked if it was possible that Apple had peaked. I'm not sure I'd go that far. But I do know that in business, as in mountain climbing, as you near that peak, it gets ever easier to slip and take a very big fall.