So was nine months of relentless iPhone hype and froth just a distraction? Not quite, but you could be forgiven for thinking so. I believe Apple’s most important product of 2007 was actually announced this week, and its significance has been slow to sink in. It might be one of the cleverest moves Apple’s ever made.

The ‘Jesus Phone’ today looks like it was really ‘John the Baptist’.

I hope Apple has ordered enough parts, because the iPod Touch is going to be a sensation – at least for one Christmas shopping season, if not more. Not only does the Touch bring Apple’s big gimmick breakthrough, its capacitive multi-touch interface, to its key music products, it does so at a very low entry point: $299 (or £199). That, rather than $499, is the market sweetspot.

But the whizzy interface is simply a means to an end. Because the Touch has Wi-Fi, so you get the most attractive web browsing device at a very low cost, too.

And as a bonus, the importance of which few pundits or bloggers have realised yet, Apple stealthily enters a new market altogether: the connected PDA. This ‘Second Box’ business is one that almost everyone has neglected, because they’ve followed the conventional wisdom that Everything Must Be Converged. But what if that isn’t true?

Unlike the iPhone, which is locked down at the carrier’s request, third-party applications will not be restricted on the Touch. All it’s lacking is Bluetooth – which was apparently in early specifications, but didn’t make it into version 1.0 – and removable storage.

In short, the Touch brings much of the value proposition of the iPhone to people who are perfectly happy with the phone they’ve got – or who are locked into a long contract with a network operator. All along, I’ve pegged the iPhone as a defensive move disguised as an offensive strategy. If Apple hadn’t introduced a phone, it would be marked down for imminent death at the hands of the mobile phone companies – Sony Ericsson does music very nicely indeed.

My, how that script is going to need a rewrite, after this week…

Perhaps the clues were there all along. iSuppli pegged the bill of materials for the iPhone at just over $200, giving Apple a profit margin of over 50 per cent. That suggested Apple could put much of the technology in a much lower-priced device, which it’s gone and done.

As we can now see, Apple has fulfilled its primary responsibility to its shareholders: to strengthen and extend the appeal of its most successful product line, the iPod.

Where does this place Apple in the great ‘convergence’ debate?

Sitting very nicely, actually. With the iPod Touch, Steve Jobs is saying: ‘Look, you can have your One-Box converged device if you really, really want it. But people won’t mind two – if the second is attractive enough.”

Opting for ‘best of breed’ actually gives you much more choice, of course. In Europe and Asia – although not, alas, the US market – small and stylish phones are available for next to nothing. These do 3G, are so small you can wear them as jewelry, and they’ll also run Mobile24 or Google Maps, or Opera Mobile, very nicely. Because of a strange bug for which Nokia and Zimbra can both be blamed, my ‘dumbphone’ actually does IMAP email fetches more reliably than an E61i. The consequence is that the ’smartphone’ category has really become a distinction without a difference.

What the introduction of the iPod Touch implies is that you can keep your beautiful, small, low-end or mid-range phone. The Touch will take care of music, and once it has Bluetooth, the rest. Long live the PDA!

The losers in this are manufacturers of do-it-all converged devices, particularly high-end smartphones. Nokia has most to think about here because, as the champion of One Box converged products, it’s been undertaking some very ill-advised marketing recently.

Firstly, it’s selling its easy-to-use consumer devices – phones – as “multimedia computers” – reminding us that computers are hard-to-use, and using a word, “multimedia”, that no civilian has ever, ever used. And it’s been making fun of the public who choose several best-of-breed devices, with its Great Pockets ad campaign:

Now my first thought on seeing this was not, ‘how stupid, carrying several devices’, but ‘Hey! What a fantastically useful pair of trousers!’

But don’t listen to me – I’m funny like that.

I’m the contented user of a Nokia N800 tablet – it has a great radio and a decent browser. But even with its generous removable storage slots, and its 800-pixel screen, I can’t imagine many people opting to pay a premium – it’s around $385 retail in the US – to buy the tablet over an iPod Touch.

At a stroke then, Apple makes one market category look ridiculous, while stealthily entering another.

At times you can feel sorry for Nokia. The company is damned when it dares to plan for the future, and it’s damned if it doesn’t.

But that illustrates the depth of its dilemma. Today, Nokia is phenomenally successful in one business – handsets – which generates £27bn ($54bn) a year, with a margin of between 15 to 20 per cent.

However, Nokia relies on a small number of powerful customers as its route to market. This isn’t a problem for every business. If you sell fighter aircraft, you know who your handful of customers are, and can schmooze them directly. If you sell bangles from a market stall, you can choose which market you sell from. Nokia doesn’t have the luxury of either: its channel is its market.

And “getting from here to there” is the problem.

At great expense last week, Nokia began to imagine itself as a very different kind of company: a vertically integrated services business. Mobile users would flock to the company’s new portal, Ovi, for games, music, information and “social” interaction. You might call this a “post-operator” world, but it’s also a “post-Nokia” world, as it presumes that both data and devices are commoditised. It’s a Plan B.

However, the strategy takes today’s complex mobile data eco-system and promises to torch it. Today, there’s room for a Real Networks selling games or ringtones, for example, or an AQA providing an answers service. Nokia’s Ovi portal effectively declares war on all these smaller service providers. That can be considered bad manners (or a business necessity) – but it isn’t fatal to Nokia’s plans. It’s the biggest, would-be service companies who are the most threatened.
(more…)

When one looks at the prime assets of the Nokia of five years ago, it’s alarming to see how many have been discarded. At the turn of the decade, the Finnish giant boasted a formidable reputation for reliability, security and ease of use. Now it’s thrown all three out of the window, with security being the last to go.

The diminishing reliability of these devices isn’t unique to Nokia, and it may be a consequence of having so many products, in so many markets, all at once. But engineers deep in Nokia we’ve spoken with describe how they grew weary at being conditioned only to fix a proportion of bugs. It offends an engineer’s pride to release a flawed product, but this became a way of life. There was simply too much to do.

As for usability, the company which pioneered an interface that helped popularize the digital mobile phone – NaviKey™ – now falls far behind much of the competition. With feature phones, Nokia’s interface has failed to evolve with the tactile and graceful interface of Sony Ericsson, for example.

At the high end, the story is far worse. The S60 UI initially provided Nokia with a clever bridge to the future, but it looks pedantic and cumbersome besides Motorola’s MotoRizr 8, let alone Apple’s iPhone. Nokia answers the perennial S60 user’s question, “Why so many clicks?” by adding extra hardware buttons, such as the slow and inflexible “Multimedia” key. S60 is incredibly poorly written in parts, but Samsung has demonstrated that it doesn’t have to be sluggish, by using its own chip to speed up its first European S60 phone. Yet Nokia has ensured most of its smartphone users have a substandard experience, by starving the devices of sufficient memory or fast enough processors.

It doesn’t augur well that the company’s skill at exploiting the emerging markets owes little to its recent R&D work: it’s succeeded with low cost models in China by dusting off older, more reliable, and easier-to-use technologies. In other words, it’s living off past glories, rather than looking to the future.

In fact, Nokia now appears to quite relish the complexity of its devices. Quite bizarrely, a company which had no need for an inferiority complex appears to have acquired one.
(more…)

So, PalmOS ends up in the hands of an Japanese mobile browser company that almost no one has ever heard of. It’s a sad sign that expectations for PalmOS software have been so low, for so long, that PalmSource stock leapt 70 per cent on the news.

The origins of this decline have been well documented here at El Reg, we’ll only recap the key mistakes before raising a spectre that haunts this tale of Silicon Valley history: a spectre called Apple. 

(more…)

Every bar has a condom dispenser. Why doesn’t every store have a data dispenser? Because you don’t want to shag a computer, of course. But this is an idea that remains largely unexplored.

At 3GSM last week, Nokia tiptoed into a market that one day might be enormous: the “proximity server”. If you’ve attended a tech conference in recent years you might even have used one without giving it a second thought. San Francisco pioneer WideRay has been in the business for five years: it beams the schedule to attendees on demand via Infra Red or Bluetooth. Inside the server is a cellular SIM, which updates itself from the network. But it could beam anything: ring tones today, MP3 files tomorrow. With an increasing number of punters having Bluetooth phones, the market potential increases daily. When we looked at the idea almost two years ago, it seemed proximity servers could have deep consequences, such as the potential to transform product branding, or at least make the retail experience less daunting for shop-o-phobics.
(more…)

Nokia is reining in R&D, with the axe falling hardest on its 3,000-strong multimedia division founded a year ago. The exact number of staff affected isn’t known, but a press release issued on Tuesday from Nokia Multimedia says the cuts are intended to reduce R&D expenditure to 9 to 10 per cent of net sales by the end of next year. That’s roughly the level it was in 2001. According to Nokia’s most recent annual report, consolidated R&D rose from 9.6 per cent of net sales in 2001 to 12.8 per cent in 2003.
(more…)