Competing with the iPhone

ÀGarmin’s Nuvifone, scheduled for a H2 rollout, was even less complete and on display in a fishbowl-shaped case. The model Garmin had on display looked a little plasticky to us, included a very simple layout, very few buttons and a large 3.5" touchscreen display. When it will be available for purchase, the device will feature a built-in camera, GPS for navigation with North America maps preloaded and HSDPA support. A Garmin representative noted that the fishbowl model was "as close as [he has] come to one". We will have to wait a few more months to actually see a working unit. We were a bit surprised to see that Garmin’s booth actually lacked information about the phone and the representatives were not able to provide information about how the phone will work and how its key features would be implemented – at least features that went beyond the main three functions of calling, searching and map viewing.

It is quite apparent at CTIA that instead of taking a risk with groundbreaking new feature, handset makers are trying to compete with the iPhone on hardware specs and endless features, although Apple demonstrates that fewer features implemented exceedingly well trumps a boatload lot of features that are hastily integrated. In our opinion, the hardware specs game could backfire as Apple’s has learned how to create cutting-edge computer hardware in compact form factors.

That thought, of course, brings up the most recent analyst rumor about the iPhone, the imminent release of a 3G iPhone. It was generally expected to launch at WWDC in July, but it looks it could appear even sooner. Piper Jaffray analyst Gene Munster reported an iPhone shortage in 20 of Apple’s 180 US retail stores, suggesting that inventories are cleared out an upgrade is one the way. Gartner analyst Ken Dulaney cited "sources in Asia" who told him that Apple ordered 10 million 3G iPhone units from the world’s largest manufacturer of electronics components, Hon Hai.

If we believe the rumors, than the 3G iPhone will have a redesigned casing, a 30 FPS video camera, GPS, slimmer profile and better battery life. If that is the case, then Apple will be able to eliminate most of the main complaints about its first-generation iPhone. And, Apple could be driving the software path towards video calls, as recent patent filings indicated that Apple will be bringing its Mac videoconferencing solution, dubbed iChat, to the iPhone. With iChat, the 3G iPhone user will be able to place video calls to other 3G iPhone users, desktop iChat and AIM users and even Apple TV users watching their big screen TV.

At least right now, Apple is uniquely positioned for a vertical integration of its hardware, mobile operating system and applications. Whereas competitors have to shop for the operating system and applications somewhere else, Apple tightly controls all three under one roof. Microsoft’s just updated Windows Mobile 6.1, but we yet have to see if it will be a match for the iPhone (Mac) OS and Android-powered phones that are yet to appear in the second half of the year. If we look at the iPhone SDK and upcoming software update with enterprise-grade security features, the iPhone isn’t only consumer device anymore, it is moving into the business as well.

It has been 14 months since the iPhone has been unveiled, but this year’s CTIA shows that traditional cellphone makers are still behind Apple in designing a “cool” smartphone. And while the new generation of phone sis catching up, the next-gen iPhone could reestablish or even extend the lead. As long as Apple is skating to where the puck is going to be, and not where it has been, handset makers are going to have a tough time knocking-down the iPhone.