Yes, Apple Should Release a Wal-Mart Phone

Supposedly, Apple is gearing up to release the 4GB iPhone exclusively through Wal-Mart soon after Christmas. All this for 99 bucks. Current models are 8GB ($199) and 16GB ($299)

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From one perspective, the Wal-Mart phone would cheapen the iPhone brand, because of the price and distributor. Looked at another way, however, Apple could rapidly scale volume, increasing the likelihood that iPhone and its supporting App Store would emerge as the preeminent mobile platform—and one destined to displace the PC. But current data rates will have to come down first. My reasons why a Wal-Mart phone makes sense:

Distribution. The iPhone already is widely available, but more locations would be better. Wal-Mart's global reach would make iPhone available in the numbers of outlets necessary for real sales success. Apple learned the importance of distribution from iPod, which is available from more than 40,000 retail location. Heck, my local Macy's Home Store has an iPod vending machine.

But distribution isn't enough. Wal-Mart shoppers look for low prices, and $199 for the device plus $30 a month for data is too high. But a $99 iPhone with the capacity of a 4GB Zune for the same price would appeal to a broad swath of buyers. It's buy a 4GB music player and get a great data-capable phone for free. For budget buyers, the phone would move.

Recession. Right now, Wal-Mart is the only major retailer benefitting from global economic woes. Wal-Mart's emphasis on low cost goods and value for the money is pulling in shoppers, even as competitors lose them. While distribution is good, traffic is even better—and Wal-Mart has got plenty of it.

Cost is related. That $99 price would be low enough for many people, particularly when looking at how many devices—media player, GPS, mobile phone and handheld game console—the iPhone would replace.

Something else: Lower price, even with lower capacity, means more kids could buy the phone with their own money. The rumor mill has the Wal-Mart phone coming out immediately after Christmas. Seems strange that Apple would miss Christmas, right? Wrong. That's when tweens and teens will be flush with Christmas cash.

Platform. I believe that $99 is the right price with the right distributor for Apple to sell lots more iPhones faster. Wal-Mart also might be concession that the recession would otherwise slowdown iPhone adoption. Apple needs to increase iPhone adoption, fast.

The PC era is over. The mobile's time has come. It's inevitable that most tasks people use a PC for today they will use a mobile device for tomorrow. The cell phone is leading contender, but, like the PC, applications are a necessity. Apple's App Store now claims 10,000 applications. Apple has an early platform lead and the device volume and development tools to woo developers. But it's still early days. In third quarter, Apple sold 4.7 million mobiles out of the total 309 million, according to Gartner. Apple's volume is a pittance.

Apple also faces pending application store competition from Google and Research in Motion—and, someday, Microsoft. Right now, there's a race to establish the dominant mobile platform. Apple's early lead is no assurance of success. The Windows PC shows the way: There comes a point where volumes are high enough that the platform has enough users for assured success.

Yesterday, I told my 14 year-old daughter about the Amazon Mobile app, which features experimental feature "Amazon Remembers." She had been talking about Christmas shopping for friends. She downloaded the app, which required her to have an Amazon account to use it; I set one up for her, linked it to my Amazon Prime service and sent a $50 gift certificate for Christmas shopping. Using Amazon Remembers, she snapped pictures of items in the house; later she received e-mail from Amazon identifying the items and their prices. She could now shop in stores, compare prices to Amazon and place orders right from iPhone. This kind of application, linked to commerce, is very sticky—the kind that establishes a vital platform.

Nokia. The world's largest mobile phone manufacturer has a problem: It has only one touchscreen cell phone ready for market, the 5800 XpressMusic. Related, Nokia offers no consumer smartphone to compete with iPhone. Nokia offers lots of reliable, low-cost phones, and in the United States most of the manufacturer's phones are free from most carriers.

Nokia is on rapid pace to catch up, starting with the 5800, Ovi service and forthcoming N97 smartphone. Nokia's main advantage remains volume and distribution (outside the United States, anyway). But there's no compelling platform. Symbian is a worthy mobile operating system, but Nokia has got no consolidated application store, and its developer story isn't as good as Apple's. Nokia can be beat, if Apple can sell lots more cellulars now and in the process win end users and developers to iPhone as a mobile platform. Broader distribution and lower pricing can get Apple farther faster and maybe far enough along to eventually break Nokia's mobile dominance.

Nokia should not be underestimated. The company has made huge strides just over the past six months with its push into online services supporting its handsets. But Ovi, Nokia's new mail service and even the new music store are works under construction. But I expect all the pieces will be ready as a services package by the time the Nokia N97 ships next year.

Nokia's music store should concern Apple, even considering iTunes' dominance. The 5800 XpressMusic comes with a year of unlimited downloads from Nokia Music store. It's a great example of how software plus hardware plus services should be done.

The iPhone comes up short on features that particularly appeal to younger consumers, the market segment best ready to buy a $99 iPhone after Christmas: Video and SMS. Nokia mobiles and phones from most other manufacturers offer these features as standard.

The race is on, and Apple could become the new Microsoft—on mobiles, anyway—by rapidly selling more iPhones. Wal-Mart is one means of building up volume even during the recession.

[Please send your tips or rumors to watchtips at live.com].

Posted by Joe Wilcox on December 5, 2008 2:39 PM