If Apple Didn't Plan the 'Lost iPhone' Leak, It Should Have
As most Americans have probably heard, a prototype of the next generation of the phone, which Apple (AAPL) is expected to release this summer, was left at a bar in Redwood City, Calif., where it was picked up by an unknown character who sold it to tech site Gizmodo for $5,000. Gizmodo editors promptly tore the phone apart and declared that it was real and it was spectacular. The story made the rounds on The Today Show, The View and Good Morning America, not to mention thousands of articles online and in print. Even if you're a billionaire like Steve Jobs, you can't buy that kind of press.
While one could argue that Apple could sue Gawker Media (owner of Gizmodo) into the next millennium, the obvious question, is what are the damages? As far as most financial analysts are concerned, this was a net win for Apple, and if it wasn't orchestrated by the company, it should have been.
"Apple had to do this," says Trip Chowdhry, an analyst with Global Equities Research, who believes the whole drama was staged. "Right now, Android [Google's (GOOG) mobile phone operating system] is on fire, and Apple hasn't done anything to seriously refresh its phones over the last couple years. They had to let the world know that there was something as compelling as the Droid coming up."
Leak May Have Hurt Sales of Current iPhone
It's hard to imagine that such a complex and convoluted set-up could have been masterminded by Apple, but the point that Android-based phones pose a legitimate threat to Apple certainly should be a concern for Apple investors. Google more than doubled its smartphone market share in the three-month period ending February 2010 (from 3.8% to 9%), according to market research firm comScore. Further, Chowdhry argues that many of the features revealed by Gizmodo in the 4G iPhone aren't terribly novel and that for many consumers, the device may not matter as much as the carrier.
"The front-facing camera has long-been rumored and it's already available on some Android phones in Asia," Chowdhry says. "Anyone who attended [wireless conference] CTIA saw them. The usability gap between the Android and the iPhone has narrowed and now consumers are more concerned with what network the phone runs on, and the network that offers the best service has the winning recipe."
It's probably not quite that simple, though. Not all press is good press and there's still some danger that potential iPhone buyers may delay purchases as a result of the product leak, says Leander Kahney, editor and publisher of the Cult of Mac and author of several books about Apple and Steve Jobs. (In the interest of full disclosure, Kahney was also my former editor at Wired.com.)
"One of the main reasons Apple keeps products secret is so that sales of current models don't collapse," Kahney says. "Once people get wind of new products, they stop buying the current models. I don't think anyone in their right mind would buy an iPhone now. They're going to wait six to eight weeks to see the new phones."
It's possible though, those are sales that will be postponed rather than lost.
"The international market represents 70% of the iPhone market right now, and I don't think the leaked product is going to change anyone's buying patterns," says Brian Marshall, an analyst with Broadpoint AmTech Research. "Especially in the U.S. -- I think here, you've got a lot of people waiting for the phone to come to Verizon (VZ)."