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Steve Jobs in a Box

This person adds, “I think that we passed the high-water mark for iPod profitability about six months ago. I don’t see it going anywhere but down. All of which is why the iPhone is so important for Apple.”

It took half an hour, no more than that, after Jobs unveiled his gleaming new toy for the bloggers to dub it the Jesus Phone. Here was the gizmo we’d all been pining for lo these many years: a music player, camera, e-mail tool, Web browser, and cell phone, all rolled into one impossibly seductive package. After watching Jobs enact the ta-da moment with typical brio—“I didn’t sleep a wink last night”—even cynical observers were smitten. “What a weird fucking day Tuesday was,” Josh Quittner, the editor of Business 2.0, remarked. “It was as if we were all participating in a shared consensual hallucination … All these supposedly hard-bitten tech reporters wandering around like they were getting laid for the first time.”

The panting over the Jesus Phone must have satisfied Jobs no end: Every product he crafts he regards as a sacred object, the primary aspiration of which is to incite naked lust. And in the months since then, the breathing has only gotten heavier. At the launch, the sales goals Jobs set forth were demure: 1 percent of the world market, about 10 million units, by the end of 2008. But industry analysts are less bashful. Piper Jaffray’s Gene Munster forecasts sales of 15.6 million units in that time—and 45 million in 2009. “Apple has been so good at executing these different multimedia elements with the Mac and iPod that they might be able to take over with their phone,” says a London-based telecom investor. “Nokia and the rest of those guys are absolutely shitting themselves.”

Jobs has done little to dampen either the giddiness or the panic. “It’s the best iPod we’ve ever made,” he says of the iPhone. “It’s an incredibly great cell phone … And it’s the Internet in your pocket for really the first time. If it was any one of those three, it would be successful … but it’s all three!”

Rarely has Jobs’s reality-distortion field emanated such potent vibes, obscuring the gaping potholes into which the iPhone could tumble. The first is price: $499 or $599, depending on storage capacity. “Five hundred bucks for a phone?” Microsoft CEO Steve Ballmer recently said to an audience of high-school students. “I wouldn’t want my kids carrying it around. Anybody here ever lose a cell phone besides me?”

Next on the list is one of the iPhone’s ostensibly slickest features: its touch-screen virtual keypad. When Jobs was asked in Carlsbad how much debate there was inside of Apple about eschewing an actual keyboard, he replied, “Uh, none.” None? “We actually think we have a better keyboard,” he said. “It takes a few days to get used to … Once you learn how to trust it, you will fly.”

But for serious e-mailers—the sort of businesspeople likeliest not to blanch at the iPhone’s price—the absence of a keyboard is hugely problematic. Sky Dayton, whose latest start-up, Helio, sells a rival smart phone called the Ocean, points out that touch-screens on electronic gadgets have a pretty miserable history. Helio considered and rejected using one for the Ocean, Dayton says, because of “the fundamental need for tactile feedback when you’re typing—it’s like, ‘I’ve got thumbs and I want to use them.’ ”

Dayton goes on to enumerate what he sees as the iPhone’s other shortcomings: “No removable battery. No removable memory. No GPS,” he says. “It has a bigger screen, so watching a movie on it will be better—but with no removable battery, you’re not really going to want to do that and make phone calls. So you’ve got the houseboat problem: It’s neither a house nor a boat, it’s both, and it’s not particularly great at either.”

It’s only fair to note that many of the doubts about the iPhone are being conjured by Apple’s adversaries. But that doesn’t mean that their contentions should be discounted automatically as bogus—though Jobs, no doubt, would argue vigorously to the contrary. Indeed, the scorn he heaps on his foes is scathing and total. “The usual suspects will try to copy the [iPhone] hardware, and it will take them some time, and maybe they will and maybe they won’t be able to,” he maintains. “But the software is at least five years ahead of anything we’ve seen out there. And it’s really hard to do.”

Nobody sensible would deny that Jobs is right that the software on cell phones and wireless e-mail devices is almost comically bad. But maybe not forever. For the past two weeks, after meeting Dayton at Helio’s offices in Los Angeles, I’ve been demo’ing an Ocean. Its design isn’t as quite as snazzy as the iPhone’s, but it’s pretty cool—and maybe more functional. The device is what’s called a dual slider: Push the face of it upward, there’s a phone keypad; push it sideways, there’s a keyboard. And its software is smart, intuitive, and impishly graphical, with an aesthetic that nods toward anime.