iPhone 5 rumor roll-up for the week ending Aug. 12

Italian iPhone images, Russian bliss, Chinese LTE, cloud phone

The iPhone 5 is a world-historical event, even though it's not, technically, an event yet. This week the iOSsphere rumors ranged far afield, with contributions from Italy, Russia and China.

New imaginary images of the phone emerged, along with rumors of the iPhone-in-the-cloud, more evidence that The Date will be sometime before sometime in November because that's when the Russians will get it, and a lesson in the difference between gross margins and RAM.

"A lie gets halfway around the world before the truth has a chance to put its pants on." -- Winston Churchill

This is what the iPhone 5 looks like. If some of the rumors are true.

Frustrated with the lack of iPhone 5 prototypes turning up in bars, and with grainy photographs or slicker renderings of possible iPhone 5 cases, MacRumors took the phone by the horns and created its own images.

SMARTPHONE NEWS: Harvard class project compares iPhone, Windows 7, Android, Blackberry usability; triggers a wave of invective

The website commissioned an Italian design firm to take the specs for the case designs and "reverse engineer" an image of an iPhone that would fit in them. And here's what they came up with

The Internet went bonkers. "This Could Be What Apple's iPhone 5 Looks Like," was MacRumors' own self-enthusiastic headline. "This is what the iPhone 5 will most probably look like," headlined an even more enthused TheNextWeb.

But VentureBeat's staid headline drained a lot of the drama: "New iPhone 5 images based on leaked design specs."

How lame is that?

So you now know what the iPhone 5 will look like. If it looks like an artist's conception based on the early designs of third-party product prototypes that are being built without knowing what the iPhone 5 really looks like.

As one MacRumors commenter, Midi Evil, put it: "Wow, hopefully."

The new cloud iPhone: cheap, less storage but still, like, magical.

The latest twist on the stubbornly persistent rumor of an additional and cheaper new iPhone, besides the iPhone 5, is from Electronista, which boldly declared this week that Apple "may" be about to launch the "iCloud iPhone." That's based on the claim of "three anonymous sources."

Not one. Not two. But THREE!

These sources do a lot of alleging, which means "to assert without proof," the almost perfect definition of an iPhone 5 rumor. "While Apple is still expected to launch a separate iPhone 5, the iCloud iPhone will allegedly offer a cheaper option at the expense of most of its flash storage," Electronista alleges. "Owners would therefore be dependent on iCloud and other Internet services for access to things like music, documents and video."

The iCloud is Apple's Internet-based data and content storage included with the pending release of iOS 5: photos, documents, music and so on can be stored there and accessed from iOS devices, as well as Mac and Windows computers. [see PC World slideshow: "Apple iCloud: A Visual Tour"]

The cheap iPhone will cut costs even further "supposedly" because it will return to the aluminum-back casing instead of the current, more expensive glass case.

Electronista: "Apple is said to be aiming at a $400 unsubsidized price tag, some $200 less than an unsubsidized iPhone 4 currently costs. The device might then be completely free on a carrier contract, something Apple has never before attempted."

A silence falls over the wireless industry, as Apple CEO Steve Jobs, dressed in faded jeans and black turtleneck, steps into the spotlight. A hushed voice over the speakers: "Ladies and Gentlemen, Steve will now attempt something Apple has never attempted before: to sell an iPhone for free." The audience, on the edge of their seats, gasps. In the electric silence, Steve begins a Zen Buddhist chant and raises his arms ... a woman's voice cries out, YESSYESS! Steve, I'll buy it! I'll buy it!" The crowd roars.

The iPhone 5 will go on sale in Russia in November.

And that's important to Americans because it means it goes on sale in the U.S. before then. This is called "evidence," in the iOSsphere.

The cosmopolitans at CultofMac picked up on published reports that the iPhone 5 will go on sale in the Russian Federation, formerly the Evil Empire, in November, "with that date being 'almost immediately' after the US release."

They were quoting from the original story, in Russian, at RBCDaily.ru. For the linguistically challenged, a brief item by Bloomberg said RBCDaily was "citing handset retailers it didn't identify."

The reason: The iPhone 4 was released there months after the U.S. release, "causing a large volume of unauthorized sales," as RBC delicately put it.

Perhaps the timely release is a byproduct of the way Steve Jobs and Russian President Dmitry Medvedev hit it off during the latter's Silicon Valley tour in June last year. 

In honor of Steve and Dmitry, and our two nations' iPhone 5 solidarity, we present the "Anthem of the Russian Federation."

iPhone 5 will have Nuance-powered speech-to-text.

Technically, this is a feature in iOS 5. But we all know what that means.

Improved speech capabilities via Nuance's voice software has been rumored for awhile, but this past week, a "reliable source" sent 9to5Mac a screenshot of the iPhone virtual keyboard with the addition a new button: one with a microphone.

"Just click the microphone icon next to the space key and start talking," 9to5Mac explained. "Once the key is clicked, a new microphone overlay will appear as long as you are talking." The "translation" into text appears onscreen as you speak, according to 9to5Mac. "This is of course software in beta testing, so the final version may appear differently, at least we know it is actually in testing right now."

It's amazing how much you can learn from just looking at a screenshot from a reliable source.

iPhone 5 will have 4G after all! But it won't be the iPhone 5.

Wow. "China Mobile 'confirms' next gen iPhone to be 4G!" That's how Giz-China.com headlined its scoop.

"China Mobile claims that it has reached an agreement with Apple to bring to bring its 4th generation TD-LTE mobile data connection to the next generation iPhone," it reported breathlessly. But the claim "doesn't specify which model of iPhone it will be in." Oh.

Nevertheless, it "could hint at the next generation iPhone actually being an iPhone 4S type device, with updated 4G capabilities, rather than a totally new iPhone 5 design."

It certainly could perhaps possibly under certain circumstance maybe hint at that.

The Internet echo chamber drew out the implications: "Bringing the iPhone to China Mobile would be an incredible leap forward for the iPhone," declared MacTrast

Of course, the last Great Leap Forward in China, launched by Communist Party Chairman Mao Zhedong, was also pretty incredible, but not in a good way. Dutch historian Frank Dikötter wrote that that "coercion, terror, and systematic violence were the very foundation of the Great Leap Forward" and it "motivated one of the most deadly mass killings of human history." The death toll estimates ranging from 18-32 million. There's no app for that.

"Hypothetical teardown" of iPhone 5 reveals ... something or other.

This is the kind of thing that makes one's head ache.

A screenshot of a possible Bloomberg chart estimating gross margins and sales price for iPhone 5 is being interpreted mainly as a hypothetical but somehow still real list of iPhone 5's actual components.

Under the headline "Bloomberg posts 'hypothetical' iPhone 5 teardown, 512MB RAM," Seth Weintraub at 9to5Mac posted a screenshot of a chart which he said was "just on the Bloomberg machines now."

Weintraub zeroed in on the hardware. "We were expecting more RAM on this as yet non-existant [sic] iPhone 5," he wrote.

The chart lists various components and their price estimates. Based on these assumptions, it estimates the cost of the "iPhone 5" to be $270.10, with a gross margin of 56.4%, resulting in a retail sales price assumption of $210. The screenshot identifies the "source" as "Bloomberg Industries Estimates."

We couldn't find anything like this on the Bloomberg news website. A commenter to the Weintraub's post, Bulldog7, made a similar point: "I was wondering where you guys actually found this on bloomberg????...I'm familiar with bloomberg terminals...and can't find it there either."

Despite Weintraub's headline, the chart's own headline makes it clear what the purpose of the chart actually is: "Apple 'iPhone 5' Hypothetical Gross Margin Analysis."

Everything we know about gross margin we learned from this Wikipedia post: "Gross margin is the difference between revenue and cost before accounting for certain other costs. ... Margins represent a key factor in pricing, return on marketing spending, earnings forecasts and analyses of customer profitability."

Apple currently sells an unlocked 16GB iPhone 4 for $649 (or $199 through a carrier with a two-year contract). If the chart's components list and associated cost estimates are accurate, then the "iPhone 5" will be about $30 cheaper than the current model.

But for Apple and its investors, the key thing is the margins. Apple's margins have been increasing over the past years, driven by iOS-based sales, as shown in this thorough January analysis by Asymco's Horace Dediu.

"The [company's overall] gross margin percent, which measures the direct or variable costs of production vs. price, shows a healthy rise in the last five years from slightly below 30% to around 40%," he writes. "The Operating Margin, which also includes the overhead or fixed costs like R&D and SG&A, shows a similar rise, reaching about 30%."

"Margin expansion while sales quadruple is a good indicator that a company is producing real value not just trading sales volume for profit," Dediu writes. As of January 2010, Apple's overall gross margins reached more than $10.3 billion for the quarter, an astounding jump of 543% from five years ago. Dediu calculates that iOS-based products, which didn't exist five years ago, power about 70% of Apple's current gross profits.

So the importance of the "Bloomberg teardown" has nothing to do with the amount of RAM. It was to do with Apple's capacity to maintain very high margins on the next iPhone, without increasing its price and possibly offering it at a slightly lower price.

Just how hard it is to do that, and how successful Apple is at it, can be seen in Dediu's more recent post that compares smartphone selling prices and profitability for the leading vendors. 

John Cox covers wireless networking and mobile computing for Network World.

Twitter: http://twitter.com/johnwcoxnww

Email: john_cox@nww.com

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