Byte of the Apple - BusinessWeek

Follow Up: Rogue Amoeba Updates Airfoil Speakers For iPhone

Arik Hesseldahl — Mon, 23 Nov 2009 18:47:42 -0500

On the heels of today's column in which Apple VP Phil Schiller defends Apple's app review process word comes today from Rogue Amoeba, that is iPhone app Airfoil Speakers, has been updated to version 1.0.2.

A prior version had been rejected because it used images of Apple products — images that in fact were taken from the computer itself, but which Apple judged to have been infringing upon its trademarks.

Rogue Amoeba now reports in a blog post that the images have been restored in the new version. Apple, they say, has changed some internal policies, and will thus allow the app to work as originally intended.

Does that mean that Rogue Amoeba and its team are going to change its mind and continue developing iPhone apps? Read on for more on that.

Apple Launching New iPhone Ads Tonight

Arik Hesseldahl — Mon, 23 Nov 2009 13:12:01 -0500

Apple is launching two new iPhone ads on TV tonight. The ads are intended to tout the iPhone's ability to hold a simultaneous voice and data connection at the same time, something you notably can't do — at least as far as I know — on other phones running on other networks.

One ad shows a set of work-related scenarios — looking at an email from ~~the boss~~ a client while you're still talking to him — and a social scenario as well — sending your friend directions to the movie theater while you're still talking.

The ads can't help but be viewed against the backdrop of the fight between Verizon Wireless and Apple's partner AT&T, the one that's spawned a lawsuit for Verizon's "There's A Map For That" TV spots. Here we see Apple doing its part as both a good AT&T partner, and touting a great feature of the iPhone all at once.

The ads will appear tonight during "House" on Fox, "Dancing With The Stars" on ABC, "How I Met Your Mother" on CBS and several others including The Daily Show on Comedy Central and several of the late-night talk shows.

I've embedded the ads after the jump.

Rumors Emerge That Apple Tablet Is Delayed

Arik Hesseldahl — Thu, 19 Nov 2009 08:59:53 -0500

Taiwan's DigiTimes is reporting today that Apple has decided to postpone the launch of its pending tablet product until the second half of 2010.

The main reason for the supposed delay is switch in the displays being used: Apple, the report says, wants to use a 9.7-inch Organic Liquid Crystal Display (OLED) on the device, that costs about $500 from the manufacturer, said to be South Korea's LG Electronics. A display at that cost would push the tablet's final price into the $1,500 to $1,700 range, too high for most consumers.

The report goes on to suggest that Apple is planning two tablet models, one with a 9.7-inch display, another with a 10.6-inch display.

Since costs on the display are coming down fast, waiting until the second half of the year will help Apple sell the tablet at lower price, in the $1,200 to $1,500 range, the report says.

These prices are of course higher than what we've previously heard. I've been assuming that the final price would come out to below $1,000, between the price of the least expensive MacBook and the iPod touch, say about $700 to $800.

I'm not the only one who's been thinking this way. Gene Munster of PiperJaffray is out with a research note today on the heels of the DigiTimes report and says first and foremost that Apple investors shouldn't worry about this reported delay, primarily because most analysts haven't factored the tablet into their Apple forecast models for 2010. And if Apple were to release a tablet on Sept. 1, 2010, Munster assumes Apple would sell about 650,000 units at an average selling price of $600. That would amount to a 1% increase in revenue.

If you take the iPhone 3GS as a starting point, its bill-of-materials cost is about $179 according to iSuppli estimates, Munster says. If you take out the iPhone functions, you're left with a BOM of $160. Then if you assume the display is three times the size of the iPod touch, you reach a BOM estimate of about $480. From there you have to work in Apple's distribution, retail margin and other factors to arrive at a final price. "The piece for retail pricing that is unclear are Apple's retail margin expectations around the tablet. We believe Apple will price the tablet to compete in the netbook market at the expense of margin," Munster writes.

He's maintaining his overweight rating on Apple stock and his $277 price target based on a multiple of 25 times Apple's estimated FY 2010 GAAP earnings per share of $11.10. This morning Apple is trading down nearly $4 or nearly 2% at $202.50.

Does Dell Have The Right Answer for China?

Peter Burrows — Fri, 13 Nov 2009 09:09:22 -0500

Dell confirmed its entry into the smart phone business this morning, almost three months after its marquee partner--mega-carrier China Mobile, owner the world's largest cellular network--announced that it would offer a Dell phone to its 500 million or so subscribers. On the face of it, this seems to be a pretty clunky way to announce the new phone, called the Mini 3.

And yet Dell's actual entry into the market comes on the heels of Apple's disappointing official launch in China, where it's hooked up with smaller carrier China Unicom. While the Chinese seem to love unlocked iPhones, they're not willing to pay the exorbitant price of $880 or more--especially for a device that's had its Wifi capability turned off to comply with China Unicom's demands. The Dell phone doesn't support Wifi either, and I haven't seen an official price for it yet. But my understanding is they are aiming at the lower-end, more affordable end of the smart-phone spectrum.

Dell still has plenty of competition to worry about, since China Mobile has a stable of ten device-makers developing to its oPhone platform, including LG, Philips and Samsung. All will be selling devices built on Google's Android standard. That's terrific for China Mobile and probably for Google, but means a fragmented market for the handset crowd. So while millions of phones will be sold, it's hard to imagine a true break-out hit emerging. And it's harder to imagine that break-out hit coming from Dell.

Still, it's nice to see Dell back in phase with the market. So often over the past few years, it seemed to have the wrong emphasis relative to the market. When the economy was earlier this decade, it's products and brand were considered too pedestrian by many. Then, just as the economy tanked, Dell was trying to go up market with more stylish, design-oriented PCs.

Here's Dell's full release, after the break.

Apple To Reinvent Apple TV...For The Rest Of Us

Peter Burrows — Mon, 02 Nov 2009 15:07:53 -0500

It seems Apple is rethinking its TV strategy, in a way that might--if the company can pull it off--give consumers the option to pay Apple less than half as much as they currently pay their cable or satellite provider for a monthy TV subscription.

According to All Things Digital's Peter Kafka, Apple has been trying to convince programmerrs to make their shows available as part of a subscription, available via iTunes. The monthly price would be around $30, he reports.

We've heard these rumors before--but that doesn't mean they're not true. And the approach makes sense. It would give consumers more of what they really want--a lower bill, anywhere access, without having to buy another gizmo.

It also fixes some problems with Apple's current TV plans. It's clear, by Steve Jobs' own admission, that the company's Apple TV device is mostly for hobbyists. The products tepid sales may be less a reflection of the product's quality, than of the simple fact that most humans conceive of TV as a service--something that is simply delivered into their homes, not something they have to buy, set-up and repair. It's no surprise that Apple tried this approach first; it's the ultimate "product company," filled with employees (and a CEO) that like coming to work to great some neat new object of desire. But unlike other forms of media (music fans, for instance, have long purchased their music in the form of a product such as a vinyl album, CD or digital download), TV viewers have always paid that monthly cable or satellite bill (or received terrestrial broadcast TV service for free).

The new subscription approach also fits with what's happening in the world. Technologically, it fits with the rapid rise of digital streaming, in which a consumer views a piece of content that resides out on the Internet, as opposed to having to store a copy of that content on the hard drive in their PC, iPod or iPhone. So long as the content can be delivered in this manner glitch-free, streamed content fits better with how many people want to get their digital video: on whatever screen is most convenient. While the Apple TV might appeal to people that are fixated on watching Web-fare on their big screen TV, more people I know are far more interested in getting TV content, and any other kind of content, onto their laptop, PC or smartphone.

No company is as well positioned to satisfy this demand than Apple. Many carriers have plans to make their content available in more numerous, and interesting ways. Microsoft continues to push its "Three Screens and a Cloud" vision. But only Apple has iTunes. Hundreds of millions of people have tthis program installed on their PCs, Macs, iPods and iPhones, and more than 75 million have an ongoing billing relationship with the online store by the same name. Rather than any one product, it seems to me Apple's greatest imperative should be maintaining iTunes' role in these consumers' lives. The Apple TV may never be a hit. But consumers that decide to get their TV via iTunes rather than their current provider will be much more likely to buy new Apple products down the road. Certainly, many would consider a device for watching TV that is more portable than a MacBook, but larger than an iPhone. A tablet device, for example.

All of this remains conjecture, and assumes that Apple iTunes chief Eddy Cue can land the necessary content deals. It won't be easy, since these partners will be loath to cross their current distributors. But don't count Cue out. I wrote about him in the magazine recently, and my sources all say he's an immensely talented negotiator, that has pulled off many deals that looked impossible.

Such was the case when Apple first got studios to sell downloads via iTunes in 2005. After Jobs won over Disney, Cue wooed many of the others, says one former Apple manager. “Once a deal is worked out with a leader in a particular deal--in this case Disney--Eddy's great at convincing the others that they better get on the bandwagon." He does it with charm, rather than threats, says the source. "He's a schmoozer in the grand style--in a good way. Most of the people he deals with think of him as a close personal friend."

Google Voice Get More Flexible For iPhone Users

Arik Hesseldahl — Tue, 27 Oct 2009 11:06:31 -0500

Rob Hof has a post next door on Tech Beat regarding today's news that Google Voice is allowing people to sign up for the service using their existing mobile numbers.

The classic complaint about Google Voice is that you have to start with a new number, and then pass that number around to everyone who's likely to call you in order for it to be effective. That presents a mild annoyance. If someone is accustomed to calling your cell phone number all the time, they just keep calling it and when they leave messages, they go not to Google Voice, where they get transcribed and forwarded to your email address and stored indefinitely. Rather these messages go to your wireless carrier's voice mail system where they're stored for a limited time, hard to get at, impossible to forward or share, and never transcribed.

As part of the rollout of the new features I noticed something very interesting on my Google Voice account. I noticed that the two mobile phones attached to my Google Voice account, one a Blackberry on Verizon, the other an iPhone on AT&T, had a new setting: "Activate Google voicemail for this phone." I clicked it and was given instructions on phone number to dial that began with *71. Essentially what I think it does is tell your wireless carrier to forward an unanswered call to Google Voice, essentially bypassing the carrier's voice mail system.

That means people call and leave messages on my mobile number will get transferred to Google Voice. And because those messages go straight to my email address, I'm more likely to respond to them quickly, or to return the call, and I can effectively forget about the passcode to get into my mobile voice mail account.

And if you're an iPhone user and a Google Voice customer, you can more closely integrate the two products into a more seamless experience, whether or not Apple ever gets around to approving the Google Voice application for the iPhone.

What's still missing from Google Voice is number portability for land lines. I would really like to transfer my home telephone number to Google Voice, and stop paying the exorbitant fees to Verizon for a phone I rarely use. I'd get rid of it entirely except for the fact that its in the 212 area code, for New Yorkers, losing a 212 number is, as I once wrote, like giving away a pet. Services like RingCentral, which I reviewed in the magazine over the summer, and Vonage allow number portability. Why not Google Voice?

Julius Genachowski, FCC Chairman, iPhone User

Arik Hesseldahl — Fri, 23 Oct 2009 19:35:18 -0500

FCC Chairman Julius Genachowski was here at BusinessWeek's offices in New York today for an extensive interview with the staff. We talked about numerous things, including his agency's quest to begin crafting new rules around net neutrality, the matter of Apple, AT&T and Google Voice , and the Obama Administration's efforts around using economic stimulus money to build new broadband pipes.

During the entire conversation he took the opportunity to charge his iPhone, and after we had wrapped up the interview someone asked him what his favorite app is.

For the record, the chairman's favorite iPhone app is Vito Technology's Star Walk, a simple astronomy application that harnesses the iPhone's GPS capabilities to present an on-screen view of what stars and constellations should be visible on a clear night from your current location. He said he's recently been introducing his 5-year old daughter to the pleasures of stargazing, and that the application has been useful in explaining what they're seeing in the night sky. As you move the phone right and left or up and down, the view of the sky shown on the phone moves with you. It also contains links to Wikipedia articles about celestial bodies like planets and nebulae and it contains information on the phases of the moon. (Image below from Appcraver.)

What Do You Think of Apple's Win7 Ad Offensive?

Peter Burrows — Fri, 23 Oct 2009 12:57:31 -0500

Last week I wrote a story in the magazine about Apple's plan to use the Windows 7 launch as an opportunity to woo consumers who've been thinking about moving to the Mac anyway. So on Win7's launch day yesterday--and two days after it spiced up its own product line with new iMacs and MacBooks--it made its pitch via three new TV ads. Here they are:

Broken Promises

Teeter Totter

PC News

Microsoft, of course, had it's own ads related to its launch. Here's a sample:

My Idea TV Commercial - Collaboration.

My Idea TV Commercial - Jack’s Snap

Personally, I think Apple wins this inning of this ongoing marketing war, in a big way. Apple's ads play on a reality that millions--make that hundreds of millions--of people recognize: that despite promises with each new release of Windows, people's PCs still run into plenty of maddening problems. Of course, using a Mac isn't a guaranteed one-way ticket to computing nirvana. But then, Apple has only to convince people to try something new. The ads make the case in a compelling way.

As for the Microsoft ads, I think they're just a tad abstract for the job at hand. First off, the greatest leap forward with Windows 7 is that it's better at the basic blocking and tackling--not fantabulous new features and capabilities. As such, I don't think the "ideas" being highlighted will move too many couch potatoes to go order a new PC.

More to the point, I think Microsoft missed an opportunity to turn a negative into a positive. The reality in the marketplace is that millions of people who have not wanted to buy Windows Vista are looking for reasons to go buy Windows 7. The company should have found a funny, humble way to poke fun at itself--to admit that, yes, Windows 7 is better than its predecessor, and that nobody is happier that the Vista era is over than Microsoft itself.

Nokia Sues Apple For Patent Infringement Over iPhone

Arik Hesseldahl — Thu, 22 Oct 2009 11:08:56 -0500

Finland's wireless giant Nokia said today that it is suing Apple for what it says are violations of 10 patents it holds on several wireless technologies.

The patents in question, it says are fundamental to making devices like the iPhone compatible with certain wireless network standards including GSM, the network technology behind AT&T Wireless and other networks on which the iPhone operates around the world, as well as wireless LAN technologies, which means Wi-Fi, and UMTS.

Nokia's complaint -- which I haven't read in full yet -- apparently is based upon the principle that when companies contribute their intellectual property to industry standards they need to get compensated for it. Nokia's press release quotes Ilkka Rahnasto, Vice President, Legal & Intellectual Property as saying that "By refusing to agree appropriate terms for Nokia's intellectual property, Apple is attempting to get a free ride on the back of Nokia's innovation." Nokia says the patents have been infringed by all Apple iPhones shipped since 2007.

The case has been filed in the Federal District Court in Delaware, and as soon as I have a copy of the complaint, I'll post it here. The press release is here.

Update:As promised here's a copy of Nokia's complaint which I uploaded to Scribd. It's also embedded below.

An Apple spokesman declined to comment citing the company's policy of not commenting on pending litigation.

Nokia vs Apple - Complaint

Apple Stock Hits An All-Time High

Peter Burrows — Wed, 21 Oct 2009 12:26:36 -0500

Yes, it's true. Apple's stock at the moment sits at the rarified price of $205.04--higher than the former best of $202.96 set on Dec. 27, 2007. Amazing, considering the state of the economy. But understandable in many ways, given the company's blockbuster fourth quarter and the huge runway it has for further growth in existing (Mac, iPhone) and expected (tablets) markets.

So where does this put Apple in terms of overall value, versus some other leading tech companies? Here's a quick look:

Microsoft -- $236 billion
Apple -- $183 billion
Google -- $176 billion
IBM -- $162 billion
Cisco -- $140 billion
HP -- $115 billion
Oracle -- $111 billion
Dell -- $30 billion

A Reader's Voice Comment About Mac Prices

Arik Hesseldahl — Wed, 21 Oct 2009 11:50:43 -0500

Reader "Browne" from Florida has some comments via Google Voice in response to Peter's post from Monday on Mac prices.

This of course reminds me to remind you that you too can leave comments in your own voice via the Google Voice widget at the top right of this page. Just click it once and enter your phone number, pick it up when it rings, and wait for Google Voice to answer, and then leave a message. (A few people who call in seem to get confused by the process.)

As always we promise not to share your phone number so long as you're cool with us using your voice here. That is unless you tell us specifically not to in your message.

The Other Ads Attacking Apple

Arik Hesseldahl — Tue, 20 Oct 2009 15:54:31 -0500

Check out the ad below for the Motorola Droid phone, which runs, naturally, Google's Android, and is coming soon to Verizon. I first noticed it on TV last night, though I don't remember what show I was watching.

As my colleague Olga Kharif points out next door on Tech Beat, Craig Moffett of Sanford Bernstein thinks these ads may be a sign that talks may have broken down between Apple and Verizon over CDMA version of the iPhone. He wonders if this may also be Verizon's way of ratcheting up the pressure on Apple. Or maybe Verizon has walked away from the iPhone entirely. That would likely be good news for AT&T, rumored to be nearing the end of its agreement to carry the iPhone exclusively in the US.

Apple Announces Major Consumer PC Upgrades

Arik Hesseldahl — Tue, 20 Oct 2009 11:59:00 -0500

Hot on the heels of its knockout earnings report from last night, Apple is seizing more attention today with a significant upgrade to its consumer PC lines, specifically the entry-level MacBook, the iMac, and the Mac Mini.

Here's the rundown:

The MacBook has been redesigned with a new polycarbonate shell, which has a unibody design similar to that of the Aluminum unibody found on the MacBook Pro. It has a new look, with rounded edges, has a seven-hour battery that's built in, just like on the MacBook Pro. It also has an LED screen, which gives the entire Apple notebook line backlit LED-based displays, which I think is new. Its microprocessor is an Intel Core 2 Duo at 2.26 GHz and hard drive space starts at 250GB. Price: Still $999.

The iMac is getting a major face lift. It too has LED-based displays of sizes of 21.5 inches and an impressive 27-inches. In fact the only non-LED based display in Apple's line-up is the 30-inch LCD screen still offered. Apple VP Phil Schiller told me last night that getting an LED screen of that size is no small feat, so don't expect an LED replacement right away.

The 21.5-inch model is a classic consumer design, sporting chips from Intel running at 3.06 GHz and 3.33 GHz. It will sport Intel Core 2 Duos at speeds of 3.06 GHZ and 3.33 GHz. Graphics options include the Nvidia GeForce 9400M or the ATI Radeon 4670. There's support for up to 16 GB of RAM, and up to 2 terabytes of hard drive capacity. The starting price ranges: $1,199 to $1,499.

The 27-inch model is something else entirely. It's aimed at the professional who might otherwise buy a Mac Pro, but who wants an iMac, because they look better. I saw the screen on this monster last night and it's really impressive in person. It starts at $1,699, but there's another model that has a quad-core Intel Core i5 chip, that starts at $1,999, and which won't ship until November.

The entire iMac line will ship with a new mouse, dubbed Magic Mouse that replicates the multi-touch surface found on Apple notebooks, and which supports the same two-finger gesture movements for scrolling up and down and for moving back and forth between Web pages. Both iMac models will also have slots for SD cards, typically used in digital cameras. I generally wasn't crazy on the whole multi-touch touchpad thing on notebooks, that is until I bought a MacBook Pro over the summer.

While I still tend to use a traditional two-button mouse more often than not, I like the touchpad a lot more than I ever expected to and use it more often than before. So if you like that touchpad, and even if you like a two-button mouse, then you're going to love the Magic Mouse, because it gives you the best aspects of both. You can make the same two-finger gestures for scrolling and snapping back and forth between pages, but also, you can configure the mouse to recognize the "right click" found on a traditional mouse, as the click toward the right side of the mouse. Yes it looks a little weird when you first see it -- its very thin and smooth -- but I think it's going to be very popular. Also, both the Magic Mouse, and the default keyboard that ship with the iMac are wireless.

Finally, the Mac Mini, much loved, but always rumored to be due for retirement, got some love today too. The new entry-level Mini still sells for $599 and sports a new 2.26 GHz Intel Core 2 Duo chip, an Nvidia Geforce 9400M graphics card and a 160-gigabyte hard drive. A second model priced at $799 boosts the performance on the Intel chip to 2.53 GHz and the hard drive space to 320 GB.

As many probably already know, it turns out that many Mac Mini owners use their machines as inexpensive servers. Seeing an opportunity -- Apple's Xserve professional server line starts at $2,999 – Apple has launched a Mac Mini server for $999. The target Schiller says is small businesses for whom an XServe would be too expensive, as well as enthusiast consumers looking for an inexpensive, small-footprint media server server to share files around the house. The server has the same dimensions as the traditional Mac Mini, and supports storage capacity as high as One terabyte, but lacks an optical drive. It ships with a server version of Apple's Snow Leopard operating system.

How Low Will Apple Go On Price?

Peter Burrows — Mon, 19 Oct 2009 17:37:50 -0500

Apple had plenty of highlights to impart on its earnings conference call with analysts today. The company enjoyed its highest profit margins ever, recorded record Mac and iPhone sales, and posted revenue growth of 12% and profits growth of 18% for the full year. Those are numbers most companyies would gladly accept in good years--and could only dream of in the worst one in fifty years.

But maybe the most important message was in CFO Peter Oppenheimer's comments on the topic of pricing. While Apple has made noises about getting more aggressive in the past, so far the move down market has been very limited. It sells that old white MacBook for $999, for example. But Oppenheimer repeatedly said that the company planned to deliver "greater value to consumers" in the quarters ahead. He cited lower ASPs (average selling prices) as a reason why those record gross margins will come down from 34% to more like 30% in the current quarter. And COO Tim Cook talked about "closing the umbrella," so that rivals with lesser products couldn't steal business simply by offering lower pricetags.

So what does this mean? It's possible prices for existing products may not come down much, but that the company will simply bring out new products with lower ASPs. Clearly, that could include the much-rumored iTablet--though my sources don't expect that until 2010. Or maybe there's a mystery product the rumor sites haven't caught wind of yet. Or maybe Apple plans to lower that old white MacBook to $900 or come out with a sub-$1000 iMac -- moves that Sanford Bernstein analyst Toni Sacconaghi thinks could expand Apple's available market for portable PCs by 50%.

Either way, it's bad news for PC rivals looking for a means to stem Apple's market share gains. And it's probably bad news for me in a more limited way, since I bet my boss Peter Elstrom a dinner that Apple wouldn't significantly slash prices. Peter figured the time was right, given the still tough economy and Apple's desire to take the steam out of Microsoft's Windows launch. We should know the winner soon enough.

Apple Net Rises 47% As Q4 Earnings Beat Consensus

Arik Hesseldahl — Mon, 19 Oct 2009 15:58:51 -0500

Apple once again trounced the expectations of analysts in reporting results for its fiscal fourth quarter ended Sept. 26. The company reported revenues that grew 25% over the same quarter a year ago and profits that grew 46%.

Apple reported revenue of $9.87 billion, and a profit of $1.67 billion or $1.82 per share.

The results bested the estimates of analysts, many of whom had worried that rumored shortages of a key component for the iPhone might have affected sales of the popular wireless device. The consensus estimate of Wall Street analysts had called for Apple to report per-share earnings of $1.42 on sales of $9.2 billion.

Apple's stock began trading up substantially -- by more than $13 or more than 7% -- in after-hours trading as the results were reported. The stock finished the regular trading session higher at $189.96, up $1.81 or nearly 1% after opening at $187.84. The stock has been flirting with the $200-per share mark, a level not seen in nearly two years. On Oct. 15 Apple stock hit a 52-week high of $192.32, less than 6% off its all-time high of $202.96 set on Dec. 27, 2007.

Apple set an all-time single-quarter sales record with its Macintosh computers, selling 3.05 million, accounting for $3.95 billion, or 40% of sales. Apple finished the year just short of the 13 million unit mark for the fiscal year, an improvement over the prior year of nearly 3.3 million units.

IPhone unit sales also set a quarterly record or 7.4 million units, amounting to a year-on-year improvement of nearly 7%. IPhone sales broke the 20-million unit mark for the fiscal year.

IPod sales declined slightly year-on-year to 10.177 million, down from 11.05 million, and also down sequentially from 10.215 million from the third quarter.

Apple finishes its fiscal year 2009 with sales of $36.5 billion, up more than 12% from fiscal 2008, and per-share profit for the year $6.29, beating the consensus estimate by 41 cents.