iPhone 3.0: Dead on Arrival?

If you're like me, you're wondering whether Roger McNamee, a co-founder of Palm (Nasdaq: PALM  ) sugar daddy Elevation Partners, was tuned in yesterday when Apple (Nasdaq: AAPL  ) previewed version 3.0 of its iPhone operating system software.

McNamee, you may remember, predicted doom for the iPhone in an interview with Bloomberg News two weeks ago. "You know the beautiful thing: June 29, 2009, is the two-year anniversary of the first shipment of the iPhone ... Not one of these people will still be using an iPhone a month later." [Emphasis added.]

I swear it sounds like something from an SNL skit. Mr. Over-Dramatize-Everything, the guy who ends every sentence with an exclamation point. Let Andy Samberg play the role.

Open mouth, insert whole body
Palm has since backed off from McNamee's prediction, like a wounded dog that had taken too many beatings and was about to receive another. Quoting from an SEC filing intended to (ahem) "clarify" McNamee's comments:

The statement in the second paragraph of the article that "not one" person who bought an Apple, Inc. iPhone on the first shipment date "will still be using an iPhone a month" after the two-year anniversary of that day is an exaggerated prediction of consumer behavior pattern and is withdrawn.

Smart. The iPhone's new features should be enough to hold their own against Palm's Pre and new handsets from Research In Motion (Nasdaq: RIMM  ) and Google's (Nasdaq: GOOG  ) Android partners. Let's review.

Universal search
Apple is making its Spotlight search technology available to iPhone users, so that anything stored within can be found with a simple text query. Think of it as Google for your phone -- an important tool if, as the iEmpire intends, you view your iPhone as a portable computing platform.

Micropayments
As much of a success as the App Store has been -- Apple says that there have been more than 800 million downloads to date -- it has resembled an all-or-nothing buffet: Buy, use, move on. That's changing in version 3.0. Apple is adding support for in-application micropayments, allowing game and other developers to charge more for accessing additional functions. The takeaway? Developers have more incentive to create rich software for the iPhone.

Cut-and-paste
The big dog of feature additions. Apple has created a programming interface -- one of 1,000, News.com reports -- that will allow users to copy text, photos, and SMS messages and paste them into different applications. Think of each saved keystroke as an opportunity to make the iPhone experience more enjoyable, and draw in more users. 

Other features include point-to-point connections between iPhones via Bluetooth for multiplayer gaming, increased access to global positioning data, and multimedia text messaging. (Still no video support, however.)

OK, you can take your elbow out ...
So the new iPhone looks like it'll be more functional and friendlier to developers, which could discourage them from devoting development time to alternative platforms such as Palm's webOS.

Yet McNamee may still have a point. His comments weren't just aimed at the iPhone, but also its network partner, AT&T (NYSE: T  ) . Quoting from his Bloomberg TV appearance:

It's not that AT&T's a lousy network provider; it's that their stuff is just -- it's new, and it's going to take a few years to get the kinks out. It doesn't matter whether you're using an iPhone or any other 3G device on the AT&T network. It's just less stable.

Less stable than Sprint Nextel (NYSE: S  ) and Verizon (NYSE: VZ  ) , McNamee goes on to say. Sprint is Palm's network partner for the Pre, so his comments do suffer from bias.

Even so, a common refrain from my iPhone-wielding friends and you, our readers, is that while the iPhone itself is wonderful, Ma Bell's network service is awful. Earlier trouble with dropped calls likely contributes to the malaise.

Still ... Not one iPhone early adopter will renew, Mr. McNamee? You know better. So do the rest of us. We've seen what iPhone 3.0 can do.

Sprint Nextel is an Inside Value pick. Apple is a Stock Advisor selection. Google is a Rule Breakers recommendation. Try any of these Foolish services free for 30 days. There's no obligation to subscribe.

Fool contributor Tim Beyers had stock and options position in Apple and Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy needs to put you on hold for a moment. Be right back.


Read/Post Comments (12) | Recommend This Article (16)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 18, 2009, at 3:33 PM, theinformer4 wrote:

    For one he is a moron I have had more issues with palms than any other smart phone. I have no issues with the iPhone. I think that he fears it. That is the only reason he would be talking trash right now. Plus are you kidding me Sprint is by far the worst service provider to have, I bet AT&T turned the PRE down! The iPhone is still the best smartphone on the market. Anyone can argue against that and lose!

  • Report this Comment On March 18, 2009, at 3:35 PM, ericAZ480 wrote:

    Nice headline AGAIN Tim. Your attempt at getting readership (and advertising dollars) also spreads negative sentiment to most of the online crowd who are skimming headlines. You're a genius.

  • Report this Comment On March 18, 2009, at 4:04 PM, choicenotchance wrote:

    Can always count on fool.com headlines to bring in the clicks...

  • Report this Comment On March 18, 2009, at 4:20 PM, alex1506 wrote:

    McNamee can say everything he wants, but after 2 years with my Palm there is no way I will go for an other Palm ever. The PRE may look ok but Palm phones are not reliable at all !! Looking forward getting an Iphone!!

  • Report this Comment On March 18, 2009, at 4:44 PM, ericAZ480 wrote:

    APPLE'S DEAD! Now as you continue reading you wonder...what horrible fact about Apple would make someone say that? Just like this article. Nothing is dead...not Apple, not the iPhone...it just got you to read. Don't you feel cheap and used?

    P.S. The Palm Pre is yet another "iPhone Killer" that will fail at actually killing the iPhone.

  • Report this Comment On March 18, 2009, at 4:46 PM, papamaui wrote:

    Mr. McNamee of Palm reminds me of Mr. Balmer of Microsoft: "Open mouth and insert foot. Both need to take a course in how to handle their feelings in more positive and constructive ways.

    I've used an iPhone since its introduction and I think its great! And AT&T must have beefed up their service in my area because impossible or dropped calls have been eliminated. I've also switched from PC to Mac and for the first time, I'm enjoying my computing experience. Long live Apple!

  • Report this Comment On March 18, 2009, at 7:30 PM, kirasaw wrote:

    The biggest point to remember is that Apple has 28 BILLION dollars in CASH! Do you know what Palms market cap is ??? 750 Million hmmm so Apple could offer Palm stock holders a 500% premium and never miss the money heck they could offer a 1000% premium and still have way more cash left than Sprints market cap! They could buy Palm and shut it down and simply walk away with the engineers and patent portfolio and actually feel they got a deal LMAO!

  • Report this Comment On March 19, 2009, at 12:15 AM, Aryabod wrote:

    Only a fool would underestimate the Pre after seeing and using it at the Consumer Electronic Show. This phone is by far the best Smart phone to date if it ever comes to market. Apple quite rightly has a lot to be concerned about since it is likely to lose its lead position in the Smart phone sector, however that is no indication that the iPhone is down and out. The sooner you accept the truth the sooner you will be able to counter your competition. Apple knows that they have a serious challenger in the Palm Pre and if they what to stick to their laurels they will lose valuable time to make a decent counter thrust to regain the top position. My bet is that the Pre is going to do wonders for Palm and Sprint, however they will have to fight tooth and nail to continue to benefit from their offerings, especially when the competitive environment is gettting ever more crowded. Two years ago the iPhone had a two year competitive advantage and it did well to take advantage of its position, however this luxury no longer exists. If anything the Pre will have a 12-24 month lead in the next generation of phones, however this too will evaporate with time. The moral of this missive is that companies no longer have the luxury being "functionally emotional" about their products. They have to constantly be on their qui vie and innovate if they wish to be perpetually competitive. If the Apple wants to continue leading in the electronic sector it will have to continue innovating and emulating the competition. I say let the better man or product win. At this moment the Pre has one on the iPhone, but the iPhone is far from being down and out.

  • Report this Comment On March 19, 2009, at 3:50 AM, Alfiejr wrote:

    ha-ha, this post is a clever joke by "the Fool," right?

    the Pre is a nice little toy for geek love. all 999 of you who post on every forum in the world 99 times a day. but for us consumers who number in the many millions (incl. the 30 million iPhone/touch owners, growing @ 20 million per year), it is utterly irrelevant.

    if and when it actually exists as mass production hardware that can be sold sometime later this year, it will:

    - have virtually no application supply worth spit to market to consumers (and they're only web apps anyway).

    - have utterly no ecosystem of computer software or hardware accessories to connect with.

    - have a company behind it that could be in Chapter 11 by December 31 before the warranty even expires.

    boy, that's a great marketing package.

    Apple did not design the iPhone 3.0 software to be a Pre killer. it obviously has much bigger ambitions than that. the Pre will just be collateral damage.

  • Report this Comment On March 22, 2009, at 2:36 AM, quixel wrote:

    LOL all these negative comments are from Apple fanbois so i take them all with a grain of salt and consider the source.The blogger is an APPLE A$$hole so I throw his opinions into the gutter also.

    What gets me is the common Apple comment that Pre isn't even out yet so you guys are all just salivating over hype.....hmmm kinda like when Tim Beyers says We've seen what iPhone 3.0 can do.!! IT is ok for Apple to say we have seen what Iphone 3.0 can do??? When did you play with an Iphone 3.0 timmy boy?? Discount the Pre and Sprint but hype the future Apple Products...sniff sniff I smell a bigoted fanboy.

  • Report this Comment On March 22, 2009, at 2:47 AM, quixel wrote:

    On March 18, 2009, at 7:30 PM, kirasaw wrote:

    The biggest point to remember is that Apple has 28 BILLION dollars in CASH! Do you know what Palms market cap is ??? 750 Million hmmm so Apple could offer Palm stock holders a 500% premium and never miss the money heck they could offer a 1000% premium and still have way more cash left than Sprints market cap! They could buy Palm and shut it down and simply walk away with the engineers and patent portfolio and actually feel they got a deal LMAO!

    Then why can't they offer a better service rate on the Phone? Apple coud help susidize the plans so they are not so outrageously over priced.You also are lying about ATT networks as they are shitt still in most areas.Oh by the way I have both an Iphone 3g(the service sucks and drops calls still at least once a day or so!!!) and also have had Palms in the past.I will Definately without question drop the Iphone when the Pre comes out.Already just got a grandfathered Sprint plan of $30 a month for the everything plan =D eat that suckers when you pay over $100 a month

  • Report this Comment On March 23, 2009, at 8:35 AM, Babble100 wrote:

    Apple does need to break out of its lockdown with AT&T. It weakens a great device. Sure the colorful apps are fun, but the buyer is first and foremost interested in a communication device.

    Android for example is open to VoIP providers like skype, saving users bigtime moola when they are within wireless range. Apple is cut off from that important feature.

    I fear the apps are a distraction. Apple needs an "its the economy, stupid" type shoulder-tap. As in, "its communication, stupid."

    If they don't get this, less elegant devices that do better communication are gonna gain ground. You heard it here first.

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