iPhone “4S” is for Strategy

In the wake of yesterday’s Apple keynote announcing the iPhone 4S, which left many people disappointed and dropped Apple’s stock by 5%, I’ve noticed that there are a few things that the industry is waiting to catch their breath on and adjust their rumor mills accordingly. Just like the jokes that cropped up over the iPad’s name, the disappointment of receiving a “4S” instead of a “5” will also fade, which is why it will be available in a week. You should never need to wait for speed…

Speaking of which, although the “S” officially stands for “speed,” as it did with the 3S, there’s a subtlety that it also means “strategy.” Bear with me on a few deductions:

1. This release model and timing were planned long before Steve Jobs’ departure from the company. The fact that the industry expected this to be Tim Cook’s moment to shine was irrelevant. Cook’s presentation was no different than what Jobs himself would have presented, so it’s a hint that most things at Apple are continuing on exactly the same momentum as they have been. Jobs’ absence was an acknowledgement of that.
2. Cook set the stage for future presentations: it’s less about him, and more about Apple as a whole. In other words, he let Jobs continue to be Jobs, and continue to be regarded and respected for his role, while also showing more of Apple’s cards. The “one more thing” hallmark of Jobs was notably absent, because that’s Jobs, and will forever be Jobs only. There is no “one more thing” with Cook, because the future is going to be less about Cook, and more about Apple.
3. The 4S is an iPhone 3/3S replacement product. Not enough of an upgrade to woo iPhone 4 early adopters, but significant enough to be a “must have” for iPhone 3 users, who, internationally are just ending their 3-year contracts. It’s also the perfect model to attract the iPhone 3S users who have already proven they want the stepped-up model, and whose 2-year contracts are just ending in the US.
4. It coincides with iOS 5 which has a one-year life, because iOS 6 will launch just after the iPhone 5 next year, and both will be a major rewrite. Why? Because iOS 6 will also need to service the 4th generation iPad (the 3rd will come out next spring*) which will be a major technology advancement, and for which the iPhone 5 will need some huge upgrades to match. Since the iPhone 4 was a complete redesign, there needed to be a pacifying model to keep the supply chain of complementary products functioning for one more year while the phone is completely re-engineered.
5. There was a brief jab at HP, Dell and Microsoft with the statement that consumers don’t want tablets: they want iPads. It’s a hint that Windows 8, while it will still be successful in its own way, will only truly work on tablets that are intended to function like desktops.**
6. The hardware changes are mainly intended to be hints at the future. The upgraded processor and increased RAM brings the iPhone to desktop-like production. The addition of software tools like voice instructions and online card printing are a hint at the future of services.***
7. The brief stock drop is actually great news for shareholders. Apple knew what this would do, and let it happen. Shareholders can now buy more stock at the reduced rate, knowing that next year’s iPad 3 and iPhone 5 will boost the value tremendously, and investors now will get a great return on their money over the next year.

In the end, a purely strategic move for Apple, and a real hint at things to come.

[divider]

* I expect the iPad 3 to be another technology hinting product. The iPad 2 brought minor revisions and a speed boost. Essentially, it was a 1S, but for strategic reasons, it needed to be called the iPad 2. The iPad 3 however, will introduce groundbreaking new features, like a retina-style display, improved cameras, a processor and RAM boost, and very likely a software tool for remote desktop capabilities to OS X Lion (something like “AirDisplay for Everything Else”). The 4th generation iPad, in spring or summer 2013 however, will likely come shortly after an iOS 6 announcement, and a developer announcement about the next version of OS X (which will probably get a new name). Something will blend OS X and iOS together, and it won’t happen until about 18 months after Lion’s release, which would mean some time around early 2013. iPhone 5 will be the first hint, and iOS 6 along with iPad 4 will be the main iteration of it, followed by a new line of Macs (something in the MacBook Air family) sporting the new OS.

** Watch for this. Windows 8 will be released along with a slew of tablet-laptop hybrids. Consumers will jump on them quickly, but will soon recognize how much it differs from an iPad. And by the time Microsoft releases a fully trustworthy tablet (remember that HP has already failed at this, so that really only leaves Dell to get it right; and Dell has a bad reputation with home users), Apple will already be on their third model of iPad. And since iPad 3 will have groundbreaking new features, the new Windows tablets will look antiquated the day they’re launched. By the time there’s widespread consumer adoption, Apple will have responded with a new OS that will marry iOS and OS X making the iPad even more desirable for the consumer, and making Windows 8 look like Windows 3.1. Consumers still won’t want tablets… they’ll want iPads. And when the new OS is released, within a year of Windows 8, Microsoft will still be three years out from catching up, and the iPad will be on version 7 by then.

*** The future of services is inevitable. Apple has a business enemy in Google because of Android, but Apple has a more stable revenue model. Google makes its money from involuntary participation (revenue derived from advertising, which is why their products are all free: no one wants to pay for stuff associated with Google, as is evidenced with non-free Android apps). Apple on the other hand, makes its money from completely voluntary participation, almost to the point of absolute dependency (consumers crave Apple products, and would step over their own mothers to get one). Because of this difference in revenue methods, consumers are willing to pay Apple for the next big thing. And the next big thing Apple is betting on, is that people won’t want to continue “searching” but will want to start “doing.” With Google, you type your queries, find your results, and then try to apply those results to what you’re trying to do. For example, typing “Meeting with Fred at 10am” into Google yields nothing of value. If you want that to be a calendar entry, you have to switch to Google Calendar. In other words, with Google, you have to know how to do something before you can tell Google what you want. Apple is putting that all in one place, so all you need to know is what you want to do, and it will show you how. It’s a hint that Google will get less relevant for the average consumer. Similarly, the cards app is another service hint: print is still important, but it’s less about you, and more about the people you engage with. Cards is an example of remote printing at its finest. Print this, and send it where it needs to go. The old model is, print this, and then I have to figure out what to do with it. Again, with Apple, tell it what you need to do, and it will show you how.