Silicon Insider: iPhone Craze: the End of an Era?

June 14, 2007 — -- Here we go: the great closing act on perhaps the most remarkable boom in high-tech history.

As anybody who is not in a coma undoubtedly knows, Apple will formally begin selling its much anticipated new iPhone June 29.

The phones will be sold both at Apple Stores (but don't count on finding one there for a while -- they apparently aren't taking preorders) and at AT&T stores (but supposedly only at company-owned stores and not franchises or resellers -- if you can tell them apart).

Apparently, even at this late date, most of the stores that will be carrying the iPhone on opening day don't even know yet how many units they will receive, or whether they are allowed to open at midnight on the 29th.

All of this suggests that on the penultimate day of this month we will have one of those classic high-tech buyer frenzies -- people camping out in parking lots, bursting through newly unlocked store doors, triumphantly showing off their new purchases to news crews -- the likes of which we haven't seen in a decade. It should be great fun.

But there will be one crucial difference this time. Usually these mass hysteria events (think of Windows 95) kick off a new boom in high tech. But my sense is that, this time, the introduction of the Apple iPhone will instead bring down the curtain on the latest up-cycle.

That's more a matter of timing than anything else. The iPhone, as I noted a couple weeks ago, is the most visible manifestation of a burst of acquisitions, entries into new markets and Hail Mary products that have characterized the biggest players in tech over the last few months.

The stock market is up, companies are flush with cash, and they are starting to peak out in their existing business. For those reasons, they are making bold moves to position themselves for the next downward phase of the classic four-year high-tech business cycle.

For Apple, a successful iPhone launch will bolster the company's revenues through the likely industry downturn this fall and nicely position it for the impending "Third Screen" revolution. It will also goose the sales of iTunes by creating yet another platform for users. That's a win-win for Steve Jobs.

Before we get into the nature of that next boom, here are a few preliminary and random comments on the iPhone and the madness that is already starting to form around it:

The iPhone Madness

Though the parallels between past Apple product introductions and the present one seem obvious, to my mind the differences are much more important.

For example, the Macintosh came along at a time when the PC world was already finding itself locked into the PC paradigm. The iMac was introduced into a maturing industry that had lost any interest in product design or innovation. And the iPod literally created its own market.

Thus, in each case Apple inserted a wildly innovative product into a market that either had grown tired, or didn't even exist.

Neither of those things are true about the cell phone industry. On the contrary, the high end of the phone business, where the iPhone is targeted, is wildly competitive and innovative. This will not be one of those occasions for Apple when it can revolutionize a market and enjoy a couple years of raking in profits before its plodding competitors catch up.

Indeed those competitors are already in hot pursuit. Almost from the moment the iPhone was announced we have seen advertisements for a host of new high-functionality phone/MP3 player combination products -- some of which, frankly, are sexier looking than the iPhone.

This is a brand new phenomenon. For the last decade, it has always been Apple that has carried the torch of smart and elegant design in the face of all of those dreary beige boxes in the PC. Now it's up against folks that not only know elegant, but also know sexy -- and how to reach the pocketbook of teenage girls.

Taking a Risk With Design

Somehow, almost without our noticing it, the tech world changed. New design tools, reconfigurable components, and, ironically, the example of Apple itself, has made consumer electronics companies both more willing to take design risks -- and more capable of turning on a dime to take those risks.

When Apple introduced the iPod, its competitors were paralyzed for months. By comparison, the six-month lag between the announcement of the iPhone and its introduction has give phone makers more than enough time to not only design but build their response.

The iPhone commercials are impressive, especially when they portray the nearly seamless integration of the various functions (watching a movie, looking for a seafood restaurant, getting a map, calling for reservations), but we have seen a lot of this before.

Worse for Apple, I think most of us viewers know that in real life things never quite work out that smoothly. As integrated as these functions are supposed to be, typically we'll still use them one at a time – which makes one wonder if the iPhone is really worth its high price (especially after you also have to sign a contract with AT&T and, apparently, sign up with iTunes).

The other thing that makes me suspicious about these ads -- and not just for Apple, but for all makers of multifunction phones -- is that you never actually see anybody making a phone call. That is, you never actually see a user holding those clunky things up to their ear and talking (heck, you don't even see it being used with the Bluetooth earpiece).

Why is that? My suspicion is that art directors have tried that shot and found it so aesthetically unpleasing that they have consciously suppressed its use. Now I may be wrong about that, but you must admit, it is suspicious. And if the iPhone actually looks kind of dumb held up to the side of your face -- well, that's got to hurt sales.

Finally there was the rather cryptic remark this week about the iPhone made by uber-reviewer Walter Mossberg of the Wall Street Journal that though he could see a lot to like about the iPhone, he could also see "some things I don't like about it."

Mossberg is the single most influential writer in the world when it comes to reviewing new tech products, and his word can all but make or break even the biggest product.

But Mossberg is also considered something of an Apple fanboy. Thus, it was generally assumed that the iPhone would get a big thumbs up in Mossberg's Journal column. So, that little hesitation in Walt's comment about the device hit the tech world like thunder. It was like the pope announcing that he had reread the New Testament and now had some second thoughts.

What does this mean? Who knows? But you can be sure that Mossberg's review a couple weeks from now will be parsed and deconstructed down to the last semicolon by everyone in the tech world…and if the iPhone comes up wanting, the excitement will wear thin very quickly.

iPhone's Fate

So, bottom line: Will the Apple iPhone be a success?

Of course it will. What we can't know yet is the magnitude of that success. But even that doesn't matter, except to Apple shareholders and employees. For the rest of us, the iPhone has already done its most important work.

If, as I believe, the iPhone is the final act of the tech boom of 2003-2007 -- an historic and remarkable return to glory against the seemingly impossible odds created by the dot.com crash and Sept. 11 -- it is also the opening act of the next tech boom, likely to start in 2008-2009.

That boom will be even bigger than this one, and, because it will be driven by entrepreneurial start-ups rather than established companies (as this one was), it will be much crazier. And what will likely spark it, and then propel it for most of its duration, will be the Third Screen Revolution -- the rise to equivalence of the cell phone as the third great access point to the Internet, to entertainment, and to social networks. Two billion new consumers will come onto the Web in the next decade, almost all of them through the cell phone.

And when that happens, we will look back at the Apple iPhone as the device that not only set off the revolution, but pointed out the direction it should go.

Tad's Tab: The latest from the teen tech trenches, from Michael Malone's 15-year-old son, Tad Malone:

TAD'S TAB: At weirdconverter.com you can find conversions of the lengths and weights of the most eclectic items. For example, 3,200 eyeballs have the equivalent weight to one Tom Cruise (he's 200 pounds). The list of items is updated constantly, and the Web site has a suggestion page to take new requests.

This work is the opinion of the columnist and in no way reflects the opinion of ABC News.

Michael S. Malone, once called the Boswell of Silicon Valley, is one of the nation's best-known technology writers. He has covered Silicon Valley and high-tech for more than 25 years, beginning with the San Jose Mercury News, as the nation's first daily high-tech reporter. His articles and editorials have appeared in such publications as The Wall Street Journal, the Economist and Fortune, and for two years he was a columnist for The New York Times. He was editor of Forbes ASAP, the world's largest-circulation business-tech magazine, at the height of the dot-com boom. Malone is best-known as the author or co-author of a dozen books, notably the best-selling "Virtual Corporation." Malone has also hosted three public television interview series, and most recently co-produced the celebrated PBS miniseries on social entrepreneurs, "The New Heroes." He has been the ABCNEWS.com "Silicon Insider" columnist since 2000.