The Good Apple

 

The Macworld Conference & Expo in San Francisco was full of surprises and announcements, as Apple CEO Steve Jobs unveiled the much anticipated iPhone and announced a company name change – from Apple Computer Inc. to Apple Inc. – reflecting the company’s increased movement into the realm of consumer electronics.

"Every once in a while a revolutionary product comes along that changes everything," Jobs said, explaining that the iPhone would "leapfrog" past current generation smart phones.

The touch screen iPhone is a cellular telephone/iPod combo that will allow users to play music, surf the Internet and yes, even make phone calls.

The phone operates on Macintosh’s OS X and supports Wi-Fi and Bluetooth technology. Less than half an inch thin, the iPhone also features a 2-megapixel camera.

The device will synch through iTunes on computers running Mac OS X or Microsoft Windows, as well as synch e-mail and Web bookmarks.

Jobs cued up the phone’s iPod function with the song "Lovely Rita" from the Beatles’ Sergeant Pepper’s Lonely Hearts Club Band, leaving some speculating whether the computer giant had settled its long-running legal battle with the Fab Four over name and logo issues. But Jobs made no further references to a Beatles distribution deal and the iTunes store has yet to offer any material by the band.

But that doesn’t mean the online store is failing by any means. Jobs announced an iTunes milestone – more than 2 billion songs sold, pitting the store as a contender against retailers Wal Mart, Best Buy and Target.

As for the iPhone’s call functions, users can either scroll through contacts for single-touch dialing or tap out numbers on an onscreen touch-display keypad. The company is also introducing a "visual voicemail" feature that will allow users to jump to messages of highest importance.

Apple has signed an exclusive contract with AT&T’s Cingular Wireless Network in the U.S., where the iPhones will begin shipping in June. Two models will be available, a 4-gigabyte for $499 or an 8-gigabyte for $599. No announcements have been made as to whether the company will provide discounts or rebates for the device with contractual subscription agreements.

Jobs also announced the debut of a $299 Apple TV device designed to bridge the gap between computers and televisions. The TV set-top hard drive will link to a user’s computer, allowing downloaded movies to be accessed for viewing on a television. That makes Apple’s new distribution deal with Paramount, which will increase the company’s online selection to nearly 250 movies, that much tastier.

With all the good news, Apple shares jumped $7.10, closing at $92.57 on the stock market that day.

The Bad Apple

However, it wasn’t all rainbows and sunshine for Apple. The company is facing several lawsuits at this point, one stemming from the announcement of the iPhone itself.

While Jobs debuted the product at Macworld with his expected bravado, execs at networking company Cisco Systems were left wondering what had happened to talks of a contracted licensing deal between the companies to use the name iPhone, which Cisco has owned since 2000.

In fact, the company released its own iPhone – an Internet phone that uses Voice over Internet Protocol (VoIP), just a few weeks ago.

Apple has apparently approached Cisco many times asking to use the name, and the companies have been in discussions over the past few weeks. But when Jobs made the announcement, no contract had been signed and Cisco took legal action. Apple argues that the products are inherently different phones, but Cisco says they could converge in the future.

Apple also disclosed in a regulatory filing that it is facing a suit that alleges it has created a monopoly by using a copy-protection system that prevents iTunes music and video from playing on products made by rival companies.

And with a securities lawsuit on the horizon accusing the company and some current and former execs of improperly granting, recording and accounting stock-option grants, it looks like Apple is set for a busy year in court.

Digital Sales To Double By 2011

Digital music sales are expected to reach about $2.5 billion by 2011, according to JupiterResearch, a leap from 2006 sales figures of nearly $1 billion.

The firm predicts that digital download spending will grow at a rate of 16 percent annually over the next five years, while subscription services are expected to grow at a rate of 32 percent annually.

Digital sales are not expected to compensate for lost CD sales, however, and the firm predicts users will often continue to use downloads and subscription services to sample music rather than purchase entire albums.