Apple Inc. v. Samsung Electronics Co. Ltd. et al

Filing 1022

Administrative Motion to File Under Seal Documents Re Apples Opposition To Samsungs Motion For Summary Judgment filed by Apple Inc.. (Attachments: #1 Proposed Order, #2 Declaration Of Peter W. Bressler In Support Of Apples Opposition To Samsungs Motion For Summary Judgment, #3 Exhibit 1, #4 Exhibit 2, #5 Exhibit 3, #6 Exhibit 4, #7 Exhibit 5, #8 Exhibit 6, #9 Exhibit 7, #10 Exhibit 8, #11 Exhibit 9, #12 Exhibit 10, #13 Exhibit 11, #14 Exhibit 12, #15 Exhibit 13, #16 Exhibit 14, #17 Exhibit 15, #18 Exhibit 16, #19 Exhibit 17, #20 Exhibit 18, #21 Exhibit 19, #22 Exhibit 20, #23 Exhibit 23, #24 Exhibit 24, #25 Exhibit 59, #26 Exhibit 60, #27 Exhibit 61, #28 Exhibit 62, #29 Exhibit 63, #30 Exhibit 64 (Part 1 of 2), #31 Exhibit 64 (Part 2 of 2), #32 Exhibit 65, #33 Exhibit 66, #34 Exhibit 83, #35 Exhibit 84, #36 Exhibit 85, #37 Exhibit 86, #38 Exhibit 87, #39 Exhibit 88, #40 Exhibit 89, #41 Exhibit 90, #42 Exhibit 91, #43 Exhibit 92, #44 Exhibit 93)(Jacobs, Michael) (Filed on 6/1/2012)

Bressler Decl. In Support of
Apple’s Opp. to Samsung’s
Mot. For Summary
Judgment
Ex. 18

Why the Apple phone will fail, and fail badly [printer-friendly] • The Register

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Original URL: http://www.theregister.co.uk/2006/12/23/iphone_will_fail/

Why the Apple phone will fail, and fail badly
It's the Pippin all over again
By Bill Ray
Posted in Mobile, 23rd December 2006 05:02 GMT

Comment The hype is reaching fever-pitch, and the odds are still stacked that Apple
will announce a device combining the functionality of an iPod and a mobile phone in
January next year, but whether such a device will actually sell is another question.
There seems little question that an Apple phone product will be launched in 2007, and
that it will work with the iTunes service and have a very pretty industrial design and a
smooth interface. Strapping an iPod to a mobile phone is not a great technical
challenge, which makes it all the more remarkable that Motorola did it so badly with
their ROKR handset. Maintaining the features which made the iPod so popular in a
mobile phone will be much more of a challenge.
The iPod brought with it amazing industrial design, a well designed interface, and a
new usage paradigm. Portable music players already existed, but the iPod was better
looking and easier to use. It also came with the promise that you didn't just carry
music with you, you carried all your music with you. That factor alone changed the
way portable music was perceived, and was central to the adoption of the iPod.
The iPod has moved away from that paradigm, with the Nano and Shuffle only able to
store the most diminutive music collection, and recent rumours suggest that an Apple
phone will have 8GB of flash-based storage; comparable with the Nano. But it was
that function which sold the concept to many people, with the style and simplicity of
use keeping them hooked.
It is important not to underestimate the importance of the iPod industrial design, or its
scope. I recently had to sit in a pub as two iPod fans reminisced about feelings when
opening their first iPod box, and their overwhelming admiration not for the product,
but for the box in which it came. It was sickening, but demonstrated the loyalty iPod
fans feel, and the expectations that will need to be met.
The clever design of the iPod stretched into the software - the clean and simple
interface is indeed easy to use, and users seem very comfortable with iTunes on their
PC. But creating a simple interface for a single function is one thing. Replicating that
experience to manage all the functions of a mobile phone is another thing entirely.
Mobile phones are not complex to use because of bad interface design, they are
complex to use because they are complex devices with a myriad of features. The

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Why the Apple phone will fail, and fail badly [printer-friendly] • The Register

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fiercely competitive mobile phone business has driven interface development at an
astounding rate: it has become de rigueur for every new handset to feature a
revolutionary new interface mechanism.
Apple is extremely good at creating simple interfaces, and it is likely that the Apple
phone will have a pleasing interface which is relatively easy to use and recognisably
iPod branded, but it won't need to appeal to the iPod users, it will need to appeal to
the network operators.

Who buys mobile phones?
When a manufacturer launches a new mobile phone handset they take the
specification, or prototypes, round to the network operators and try to convince them
that this phone will be the next big thing. In most markets mobile phones are sold to
customers with an enormous subsidy provided by the network operator, who intends
to make the money back through additional service use.
The operator will have a list of features they like and will compare that list to the newly
-developed phone to calculate the subsidy: a camera might be worth a fiver, while a
one-touch-to-send-MMS button could be worth £20. The idea is that easier access to
more premium features leads to greater revenue, and thus pays off the subsidy.
In this way a phone that might cost hundreds of pounds can be given away for free,
depending on the tariff, and the industry is sustained by customers paying off the cost
of their handset over several years.
It's not just features which contribute to the negotiated subsidy. Big advertising by the
manufacturers also contributes as networks want to offer popular handsets at low
prices, particularly in markets where network choice is often decided by handset
availability and price.
Exclusivity will also enhance the subsidy - as little as a month's exclusivity on a
handset will massively increase the subsidy, and the amount the network operator will
spend promoting deals involving the handset. Few manufacturers will agree to this,
but some can be convinced.
Mobile phone manufacturers know this, and have copies of the network operators'
features lists, as well as a clear idea of what kind of deals are available. The industry
is competitive, but tightly organised and pretty incestuous as staff move between
operator, manufacturer, and supplier while maintaining their contacts and golfing
partners.

Who will pay for the Apple phone?
A new player coming into the market is either going to have to offer the phone
unsubsidised, at its true retail cost, subsidise it itself, or find a way to convince
network operators they can gain from subsidising the handset.
A few companies have tried to offer phones without subsidy; relying on stylish design
and branding to off-set the high cost and lack of features. Most notable was Xelibri, a

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Why the Apple phone will fail, and fail badly [printer-friendly] • The Register

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range of good-looking phones which Siemens tried to sell direct to the public before
giving up in 2004. It is possible for very high end handsets such as the Vertu [1] range
from Nokia, but when your handsets start at $4,500 a couple of hundred quid subsidy
is neither here nor there.
The Apple phone will be able to charge a premium for style, but put a £330 iPod
phone on the shelf next to a Sony Walkman handset with similar capabilities which is
free and it will be a tough sell for anyone.
Some have suggested that Apple will simply set up their own Mobile Virtual Network
Operator (MVNO) and just fund the subsidy; making the money back on calls and use
of the iTunes service. However, iTunes has always existed to sell hardware, not
subsidise its production. The service isn't supposed to make money, and while it
might or might not lose a great deal of money it certainly can't be called upon to cover
the cost of a stylish handset any more than it could cover the cost of handing out
iPods for free.
So we are left with Apple trying to sell its phone to existing network operators using
the same tactics as its competitors. It might make play of its simple interface, and
easy access to operator services, but far more likely Apple will use network
exclusivity to sell the idea to a single operator in each territory.
The iPod is now a valuable brand, and one associated with the youth market
operators are so keen to attract. This alone could make the Apple phone attractive,
especially if only one operator has such an association.
By limiting the distribution of the handset in this way Apple will be spared the need to
negotiate with dozens of different operators, and can share the promotional costs with
the operator of choice - who will be hoping customers will switch networks just to get
one. Such a deal would reduce the number of handsets Apple would be able to sell,
but that might be no bad thing as it would reduce Apple's exposure while (hopefully)
demonstrating its ability in the market.
But it would also make Apple dependent on that operator, and on that operator's
commitment to the project; particularly when the first flush of publicity is past.

It's business, not pleasure
Apple will launch a mobile phone in January, and it will become available during
2007. It will be a lovely bit of kit, a pleasure to behold, and its limited functionality will
be easy to access and use.
The Apple phone will be exclusive to one of the major networks in each territory and
some customers will switch networks just to get it, but not as many as had been
hoped.
As customers start to realise that the competition offers better functionality at a lower
price, by negotiating a better subsidy, sales will stagnate. After a year a new version
will be launched, but it will lack the innovation of the first and quickly vanish.

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Why the Apple phone will fail, and fail badly [printer-friendly] • The Register

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The only question remaining is if, when the iPod phone fails, it will take the iPod with
it. ®
Links
1. http://www.vertu.com/homepage.jsp?lang=en

Related stories
Apple said to have 3G-enabled iPod in pipeline (11 July 2011)
http://www.reghardware.com/2011/07/11/ipod_touch_to_get_3g/

Amp'd volume fading (5 June 2007)
http://www.theregister.co.uk/2007/06/05/ampd_chapter_11/

Nokia revamps business range with added e (12 February 2007)
http://www.theregister.co.uk/2007/02/12/nokia_business_3gsm/
Apple channels iPods for record Q1 run (17 January 2007)
http://www.theregister.co.uk/2007/01/17/apple_q1_07/
iPhone locked down, Apple confirms (12 January 2007)
http://www.theregister.co.uk/2007/01/12/apple_lockdown_iphone/

101 uses for a dead iPhone (11 January 2007)
http://www.theregister.co.uk/2007/01/11/top_iphone_tips/

The iPhone: a Naomi Campbell of a product (10 January 2007)
http://www.theregister.co.uk/2007/01/10/iphone_will_fail_again/

Why I want the iPhone to succeed (10 January 2007)
http://www.theregister.co.uk/2007/01/10/iphone_where_is_the_market/

Computer takes a back seat at Apple (10 January 2007)
http://www.theregister.co.uk/2007/01/10/apple_computer/
iPhone... but what happened to the iPod scroll wheel? (10 January 2007)
http://www.reghardware.com/2007/01/10/iphone_no_scroll_wheel/
Jobs unveils iPhone to 4,000 drooling fans (9 January 2007)
http://www.reghardware.com/2007/01/09/iphone0109/
iPhone a smash - because everyone else is stupid! (9 January 2007)
http://www.theregister.co.uk/2007/01/09/apple_iphone_letters/

Amazon.com reveals iLife '07 update due (4 January 2007)
http://www.reghardware.com/2007/01/04/amazon_ilife_update/

Apple fixes first-gen iPod Shuffle DRM playback glitch? (27 December 2006)
http://www.reghardware.com/2006/12/27/ipod_shuffle_itunes_fix/

Apple iPhone to ship H1 2007, analyst claims (14 December 2006)
http://www.reghardware.com/2006/12/14/analyst_forecasts_h1_07_iphone_debut/

Apple iPhone to have two batteries, no network ties? (4 December 2006)
http://www.reghardware.com/2006/12/04/apple_iphone_details_emerge/

Apple iPhone 'to use PortalPlayer chip' (22 November 2006)
http://www.reghardware.com/2006/11/22/portalplayer_iphone_design_win/

Apple orders '12m iPhones', paper claims (15 November 2006)
http://www.reghardware.com/2006/11/15/apple_iphone_contract_claim/

Apple iPhone 'on track' for early '07 intro, mole claims (15 September 2006)
http://www.theregister.co.uk/2006/09/15/apple_iphone_coming_jan/

Apple iPhone slips out in Paris? (14 September 2006)
http://www.reghardware.com/2006/09/14/apple_iphone_at_large/

Apple mobile due early 2007, analyst claims (6 September 2006)

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Why the Apple phone will fail, and fail badly [printer-friendly] • The Register

Page 5 of 5

http://www.theregister.co.uk/2006/09/06/apple_iphone_in_six_months/

Apple 'iPhone' coming tomorrow/delayed to 2007* (31 March 2006)
http://www.reghardware.com/2006/03/31/apple_iphone_speculation/

Apple to muscle in on MVNO market? (18 July 2005)
http://www.theregister.co.uk/2005/07/18/apple_mvno/
© Copyright 1998–2012

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Apple iPhone Will Fail in a Late, Defensive Move: Matthew Lynn - Bloomberg

Page 1 of 3

Apple iPhone Will Fail in a Late, Defensive Move:
Matthew Lynn
Commentary by Matthew Lynn - Jan 14, 2007

Jan. 15 (Bloomberg) -- Few products have been launched with such a blizzard of publicity as Apple
Inc.'s iPhone.
To its many fans, Apple is more of a religious cult than a company. An iToaster that downloads
music while toasting bread would probably get the same kind of worldwide attention.
Don't let that fool you into thinking that it matters. The big competitors in the mobile-phone
industry such as Nokia Oyjand Motorola Inc. won't be whispering nervously into their clamshells
over a new threat to their business.
The iPhone is nothing more than a luxury bauble that will appeal to a few gadget freaks. In terms of
its impact on the industry, the iPhone is less relevant.
If column inches and airtime guaranteed commercial success, Apple would already have a global
hit on its hands. For the past week, it has been impossible to open a newspaper or look at a Web
site without reading something about the shiny new phone.
Certainly, it looks like a nice piece of equipment. The iPhone combines Apple's iPod music and
video player with a mobile phone as well as having wireless Internet access for e-mail. Instead of
lugging around a phone for making calls, an MP3 player for listening to music, and a Blackberry for
checking your e- mail, you can do all three on one device. Even better, you only need one charger.
It will be released in the U.S. in June, with a rollout to the rest of the world later, and will cost $499
to $599, depending on how much storage space you want. How many might they sell? Ten million
in 2008, according to Apple Chief Executive Officer Steve Jobs.
Three Reasons
Not everyone is sold on the idea.

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Apple iPhone Will Fail in a Late, Defensive Move: Matthew Lynn - Bloomberg

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``The iPhone will not substantially alter the fundamental structure and challenges of the mobile
industry,'' Charles Golvin, an analyst at Forrester Research Inc., said in a report this month.
There are three reasons that Apple is unlikely to make much of an impact on this market -- and
why it is too early to start dumping your Nokia shares.
First, Apple is late to this party. The company didn't invent the personal computer or MP3 player,
but it was among the pioneers of both products. Yet there is no shortage of phones out there. There
are already big companies that dominate the space, all of whom will defend their turf. That means
Apple will have to fight hard for every sale.
Next, the mobile-phone industry depends on cooperation with the big networks. Phones -- the high
-end ones in particular --are usually sold with a network contract. The provider subsidizes the
handset in the U.K. and hopes to recoup its money with ridiculously expensive charges for calls and
data. Yet Apple has never been good at working with other companies. If it knew how to do that, it
would be Microsoft Corp.
Network Opposition
On top of that, its rivals will be pulling out all the stops to prevent the networks offering iPhones.
Sure, a big operator such as Vodafone Group Plc would like an exclusive deal to sell the iPhone in,
say, the U.K. market. Against that, how much does it want to annoy Nokia -- and what kind of
incentives will Nokia be offering not to go with the Apple product? There will be lots of tough
conversations between companies that know each other well. Apple will find it hard to win those
negotiations.
Lastly, the iPhone is a defensive product. It is mainly designed to protect the iPod, which is coming
under attack from mobile manufacturers adding music players to their handsets. Yet defensive
products don't usually work -- consumers are interested in new things, not reheated versions of old
things. Likewise, who is it pitched at? The price and the e-mail features make it look like a business
product. But Apple is a consumer company. Will your accounts department stump up for a fancy
new handset just so you can listen to Eminem on your way to a business meeting?
Fresh Competition
In many ways, that is a shame. The mobile-phone industry is becoming a cozy cartel between the
network operators and a limited range of manufacturers. It could certainly use a fresh blast of
competition from an industry outsider.

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Apple iPhone Will Fail in a Late, Defensive Move: Matthew Lynn - Bloomberg

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It may come -- but probably from an entrepreneurial start-up somewhere. How about phones with
fewer gadgets but better at making calls? Or with never-ending batteries? Or chargers that don't
weigh three times as much as the phone?
It won't come from the iPhone. Apple will sell a few to its fans, but the iPhone won't make a longterm mark on the industry.
(Matthew Lynn is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Matthew Lynn in London at [e-mail].
To contact the editor responsible for this column:James Greiff at [e-mail].
©2010 BLOOMBERG L.P. ALL RIGHTS RESERVED.

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