WinInfo Daily UPDATE, January 10, 2007: At Mac-Less MacWorld, Apple Completes Transition to Consumer Electronics Company

At Mac-Less MacWorld, Apple Completes Transition to Consumer Electronics Company 

During his MacWorld Conference and Expo 2007 keynote address in San Francisco yesterday, Apple cofounder and CEO Steve Jobs did the unthinkable. He didn't discuss any new Macintosh products, instead saying early on that this year's MacWorld would be about Apple's other new products. Jobs then went on to devote almost the entirety of his two hour speech to an expensive high end smartphone that won't ship for at least six months.

Onlookers who were looking forward to the secret new features in Mac OS X 10.5 Leopard that Jobs promised back in August 2006 will have to wait. The upcoming OS wasn't even mentioned. There was no talk of new Mac hardware nor of new iLife or iWork application suites. Jobs didn't discuss whether the Mac had gained market share in the PC industry and didn't provide any sort of counterpunch to the upcoming launch of Windows Vista, which is expected to further distance Apple from the mainstream computer market.

No, Jobs has clearly sensed that there are changes brewing in the market. Although Apple's yearly revenues for Mac computers have barely gone up in more than five years the company's revenues from its iPods and related products and services have skyrocketed. In fact, in 2006 iPod related revenues will almost certainly match those of the Mac for the first time. Apple, it seems, is becoming a consumer electronics company.

Jobs indirectly admitted as much. First, he announced that the company was changing its name from Apple Computer to Apple, a tacit admission that the Mac is no longer the company's focus. Second, Jobs said after his keynote that the company now has four major product categories: Mac, iPod, Apple TV, and iPhone. Two of those products were formally announced in the past six months one yesterday.

The Apple TV is by far the least interesting product. Due in late February and costing $299, the Apple TV is an expensive set top box that streams music TV and movie content from Apple's iTunes software on a PC or Mac. As Microsoft's David Caulton sarcastically but accurately put in a blog entry, "It's a $299 device that lets you watch TV in your living room." The point is that the Apple TV doesn't offer much value over existing solutions and it certainly doesn't offer any of the storage or backup features of Microsoft's Windows Home Server or the digital video recording DVR functionality of Windows Media Center. In short, it's not a very compelling product.

The iPhone, however, will get a lot of press despite its amazingly high price. At $499 and $599 depending on the model plus a two year contract with Cingular, the iPhone might just be the highest priced phone on the market. It does, however, offer that indefinable something that graces so many Apple products: a beautiful if large for a phone form factor, an elegant UI and more technology per square inch than perhaps any other device on the planet.

The iPhone features a beautiful 320 x 480 pixel widescreen display with touch controls, multimedia and remote email capabilities, and numerous high end features. It functions as an iPod, a smart phone and an Internet communicator, and it runs an embedded version of Mac OS X, the OS at the heart of Apple's Mac computers. Microsoft has provided embedded versions of Windows for several years.

Jobs said that Apple's goal is to seize just 1 percent of cell phone sales this year which requires the company to sell 10 million iPhones. That goal is certainly reachable, as Apple will pass the 200 million mark for iPods sold this year. But success in the smart phone market isn't guaranteed. Apple's phone won't run on Sprint or Verizon networks which together account for almost twice as many customers as Cingular the network for which the iPhone is exclusively made. Even the iPhone name is contested. Cisco Systems previously trademarked the term and never gave Apple permission to use it. Apple says it's negotiating with Cisco for the rights to the name. And it's unclear how big the market is for a device that's so expensive. Most cell phone carriers give away or heavily discount smartphones to customers who sign two year agreements. No such luck with Apple's iPhone, sorry.

Whatever happens you have to give Jobs credit for having the courage to reinvent Apple yet again. Jobs has been at the helm for most of Apple's historic shifts including the Macintosh in 1984 Mac OS X in 2001 the iPod in 2001 and the shift to the Intel platform in 2006. If Jobs pulls off this transition Apple could very well become the next Sony a consumer electronics super giant with a valuable brand lust worthy products and a presence in numerous lucrative markets. That would be quite a feat.

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