Apple Floats on iPhone Hype

Australia cannot compete with Steve Jobs and his Apple (NASDAQ: AAPL) empire.  Everyone was so excited to see the new iPhone from Apple that will combine a phone, iPod, Internet access, and a few other things into the one device.

“Great idea!” everyone shouted, “we love it!”  We admit that it does look quite good, but, dare we be the first ones to tell Mr. Jobs that Nokia, Motorola, Research in Motion and SonyEricsson and Palm have been making similar devices for the last five or six years.

There is certainly something to be said for not necessarily being the first to market in order to develop an improved product.  But what makes Apple think that waiting six years to develop something that in reality will be no better than anything else currently on the market, will give them an edge?  And by the time the product is actually released – mid year in the US and early 2008 for Australia – guess what?  The world will have moved on to the next new thing.

Why do we mention Apple?  One reason is that everyone else is so why shouldn’t we.  The second is that this sort of event highlights perfectly the difference between the Australian and US markets.

While the Australian market continues to be heavily influenced by and relies on the resources sector, the US market displays again its reliance on technology and more precisely, on consumerism.

But despite the hype, will the consumer rush out to snap up the latest iPhone when it is released?  Possibly, but possibly not.  If we judge the underwhelming reception by the business community towards Microsoft’s (NASDAQ: MSFT) new Vista personal computer operating system, it could suggest that the exponential growth seen in recent years in the technology sector may have come to an end.

What more could the average citizen really want from technology.  Unless you are an information technology nerd, chances are that you are content with Microsoft XP or 2000 and won’t be rushing out to upgrade.

For most people, as long as they can do a bit of word processing, check out the internet and perhaps maybe entertain themselves with a bit of multimedia action, they are not likely to see the advantage of paying up for an operating system that enables much, much more than that.

The same goes for the iPhone, it looks good, but those that have wanted a PDA phone have most likely enjoyed (if that is the correct word) one for the last few years.  A reasonable number therefore, have doubtless realised that the ‘all in one’ device is not quite the perfect solution they thought it would be.  In a year’s time it could be time to downgrade to a more basic phone rather than continue with gadgetry.

For both products they rely on consumer taste, on fashion and really just on the whim of what people may think is the bees knees at that particular time.

Conversely, the Australian economy, with its export focus on commodities rather than high tech consumer goods is arguably in a stronger position should the fortunes of the global economy turn south.

Being at the start of the economic food chain the Australian economy doesn’t have to worry whether its products are the first to market.  It doesn’t have to worry about developing something today that may be out of fashion this time next year.

In some respects it does have some similarities.  For instance, Australian resources companies want to be sure that it’s major customer (China) isn’t going to go bust and not be able to pay the bills.  Or that its customer’s customer (USA) doesn’t go bust and can’t pay its bills.

However, as AMP Capital Investors analyst Shane Oliver boldly predicts, the resources boom created by China could have another thirty years to run, benefiting especially the West Australian economy.  He may be right or wrong, but could anyone possibly make as bold a prediction about Apple or Microsoft over the same period of time?

Kris Sayce

Kris Sayce, dubbed the ‘Jeremy Clarkson of Australian finance’, began as a London finance broker specialising in small-cap stock analysis on London’s Alternative Investment Market (AIM). Kris then spent several years at one of Australia's leading wealth management firms. A fully accredited advisor in shares, options, warrants and foreign-exchange investments, Kris was instrumental in helping to establish the Australian version of the Markets and Money e-newsletter in 2005.
He is currently the Publisher, Investment Director and Editor in Chief of Australia's most outspoken financial news service — Money Morning.

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