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Apple upsets iPhone expectations by focusing on performance

The iPhone's features — or, in some cases, the lack of them — surprised many observers at Apple's Worldwide Developers Conference in San Francisco

By Charles Arthur  /  THE GUARDIAN

Apple CEO Steve Jobs announces the new Apple iPhone 3G at the Apple Worldwide Developers Conference in San Francisco on Monday.

PHOTO: AP

Apple overturned not one but two prevailing expectations on Monday, abandoning the iPhone revenue model by which carriers paid it a slice of monthly income in favor of application sales, and announcing that the next version of its Mac OS X operating system — "Snow Leopard" — will focus on performance, not features.

The iPhone 2.0 announcements include a dramatic drop in price, which in the UK will mean that in some cases the new handset, available from July, will be free with a £45 (US$88) monthly tariff. In the US the price was dropped from US$399 to US$199, with a US$45 a month tariff. The price seriously undercuts the leading player, RIM, with its BlackBerry, which is priced at US$350 in the US. Apple last cut the price of the 8GB iPhone in the US in September, after it had been on sale for just 60 days, from US$599 to US$399, and discontinued the 4GB model. The latest cut means the price has fallen to a third of its starting price in just a year.

But it was iPhone’s features — and, in some cases, lack of them — that surprised pundits.

As expected, Apple added 3G capability, but it shunned improvements to the 2 megapixel camera, did not add voice or speed dialing, picture messaging or SMS forwarding, and did not add Bluetooth profiles, any of which would increase the flexibility of the phone for little power consumption. Instead it added GPS, which despite being comparatively power-hungry will allow third-party developers to write location-based services that could be lucrative for Apple, developers and the services themselves.

The announcement, made at the company’s annual Worldwide Developers’ Conference in San Francisco, put iPhone applications at the center of Apple’s plans for the coming year, before a receptive audience who can benefit from selling their products to iPhone users: Apple will keep 30 percent of revenues from applications sold on its “App Store,” which will resemble the online iTunes Store.

By contrast, the next version of the Mac OS X operating system was pushed far into the background; Jobs barely mentioned it, except to confirm the code name. The name — following on from the previous version, dubbed “Leopard,” which was released last October — implies the changes that Apple confirmed in a later press release, saying that instead of packing it with features it will focus on shrinking its footprint and adding performance.

Snow Leopard will be released some time next year — which may see its launch occur in the same timescale as the next version of Windows, where Microsoft has been going in the other direction, promising multi-touch features. Microsoft paused in a comparable fashion with Service Pack 2 for Windows XP, released in autumn 2004, though in that case the focus was on security, not performance, after it became clear that flaws in the software were being widely exploited online.

Apple, however, seems to feel that consumers are, for now, sated with things to do on their computers, and that the operating system should move aside.

The next version will “hit the pause button on new features,” said Bertrand Serlet, Apple’s head of software, in a statement.

The new version will be optimized for the multi-cores now common in the Intel processors Apple uses, incorporate support for Microsoft Exchange (making it more attractive to businesses considering Macs) and be able, through 64-bit addressing, to use up to 12 terabytes of RAM (6,000 times more than is standard on present Macs). It will also be able to access spare cycles on graphics processing units.

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