Not only are Apple’s three primary businesses each doing extremely well, but each retains significant potential for growth, Tim Cook, the Cupertino company’s chief operating officer said yesterday.

In a wide-ranging question-and-answer session at the Goldman Sachs Investment Symposium in Las Vegas, Cook fielded queries about “missing” iPhones, the possibility that the iPod market has become “saturated,” why the Mac’s market share has seen explosive growth and what Apple hopes to achieve with the Apple TV.

Much of what Cook had to say wasn’t new, although it was far more engaging than the sleepy, redundant comments he and CFO Peter Oppenheimer serve up to analysts during those quarterly earnings conference calls. Frequently he sounded very much like the Apple cheerleader he is paid to be, but at times Cook offered clues about Apple’s broader strategies.

Let’s look at what Cook said by category (he switched among topics frequently during the session, which you can hear for yourself here):

The iPhone: Cook said the iPhone has received the highest customer satisfaction ratings of any product Apple has ever shipped, a notable achievement for a company that routinely scores very highly in customer satisfaction.

When asked a question that has been buzzing on the Web for weeks – what’s become of the million or so iPhones Apple said it has sold but have never been activated – Cook acknowledged most of them have found their way to countries in which the iPhone is not yet available.

Without addressing the shared revenue Apple loses from its partner carriers when an iPhone is unlocked for use on another network, Cook said the company “smiles” at the problem. “It means there’s great demand for the iPhone,” he said.

The company will apply the lessons it has learned from selling the iPhone in the U.S. and three European countries as it proceeds with plans to expand availability of the product elsewhere in Europe and in Asia this year, Cook said.

Most intriguingly, he said Apple is not “married to any business model,” suggesting Apple could deviate from having one exclusive carrier per country. Cook explained that different market conditions could require a “different business model,” and in some places “being exclusive might not be in our best interests.”

This may be the first public indication that Apple is considering different approaches to the iPhone-carrier model, at least in some nations. However, Cook only had nice things to say about Apple’s relationship with AT&T, a disappointment to those hoping for a re-evaluation of the exclusivity deal in the U.S.

Cook indicated Apple expects the issue of unlocked iPhones to diminish as the device becomes available in more countries, and ominously hinted at a “series of actions” aimed at thwarting iPhone hackers (presumably those unlocking it, not those installing software on it).

Better news for iPhone owners was Cook’s frequent references to the week-overdue announcement and release next Wednesday (March 6) of the iPhone SDK, which will permit developers to write software legitimately for the iPhone and iPod Touch.

The iPod: Cook reiterated Apple’s position that the iPod Touch is a fresh platform for the company and that developing that platform is a priority. He artfully answered a question about flat iPod sales in the holiday quarter by pointing out that while unit sales increased by only 5 percent, revenues increased by 17 percent, primarily due to the higher margins on the iPod Touch, introduced only last fall.

Meanwhile sales of the low-end, lower margin Shuffle slipped 17 percent worldwide. Cook said Apple cut the price on the Shuffle to $49 Feb. 19 because “we believe there’s elasticity in the market,” whatever that means. He added that the price drop should boost sales a bit in “emerging markets” (such as China and India) as well as in the U.S.

The Mac: “The ceiling for the Mac is nowhere in sight,” Cook said in discussing the Mac’s market share. He noted that Apple sold 7 million Macs in a PC market of 260 million, leaving a lot of room for further growth.

In responding to a question asking why the Mac has become more popular with customers – he said the platform grew 44 percent in the last quarter alone – Cook described the Mac’s gains as “almost a movement.” He continued: “I think it’s gone, in many people’s minds, to asking not why buy a Mac, but why not?”

He cited two statistics showing the Mac’s resurgence in the education market. One was Student Monitor’s annual survey of college students conducted each summer asking which type of computer they planned to buy; this past summer those who said they were buying a Mac rose to 44 percent, 20 points higher than the previous year. Cook gave no source for the second statistic but said the company learned Monday that “Apple has surpassed Dell as the number one supplier of portables to higher education for 2007.”

Apple TV: Cook waffled a bit on the Apple TV, last year described by CEO Steve Jobs as a hobby and the low sales of which led to some Apple critics deriding it as a failure. “We say no to a lot of things,” he said in explaining why Apple expended resources on developing Apple TV. “We do products where we can make a difference and where we control the primary technology.”

Later Cook acknowledged Apple TV is a “niche product,” but said the company thinks that “something cool cold come out of this product.” He essentially admitted the company had erred in treating video like music, expecting customers to buy video as they buy music at the iTunes Store.

Somehow Apple missed that most people watch movies just once and would rather rent than buy them (wasn’t Blockbuster a big enough hint?) The availability of movie rentals combined with the recent changes to Apple TV – essentially releasing it from the bonds of the PC so it can download movies directly from the Internet –sets up the video realm as “an area that could be big for us,” Cook said.

Posted by David Zeiler at 4:58 AM | Permalink | Comments (8)
                    

Although Apple has declined to make an overt push into the corporate market, a few daring business customers bought iPhones anyway. And they like them.

Three out of five business customers (59 percent) who bought an iPhone said they were “very satisfied” with it, leading all other smart phones, according to a survey on corporate IT spending conducted by Rockville, Md.-based ChangeWave Research.

While Research in Motion ranked second on the customer satisfaction question with 47 percent saying they were “very satisfied” with their BlackBerries, ChangeWave notes this is an 8 percent decline from the previous survey.

The survey, composed of 2,013 business customers, was conducted Feb. 11-15 and released last week.

Of course, the iPhone still lags in market share -- ChangeWave’s data shows Apple (5 percent) trailing RIM (73 percent), Palm (18 percent), Motorola (9 percent) and Nokia (7 percent).

The picture is a bit brighter for the iPhone on the planned purchases front. Of the survey sample 11 percent said they would buy iPhones, second only to RIM’s 77 percent. However, that’s a 3 percent drop for Apple from the November survey, not the direction it wants to go.

At the same time, RIM picked up 3 percent, demonstrating the BlackBerry’s powerful grip on the corporate smart phone market.

Apple’s not-so-secret weapon is that customer satisfaction rating. It should gradually help win over more corporate customers, even without Apple marketing the iPhone as a business product.

And despite its dominance of the market, RIM’s service outage two weeks ago (as well as one last April), could inspire disgruntled business customers to take a look at the iPhone as an alternative.

It’s conceivable the iPhone could crack double-digit share in the corporate smart phone market at some point -- no trivial achievement for a product targeted primarily at consumers.

Posted by David Zeiler at 3:15 AM | Permalink | Comments (4)
                    

Oh, we Mac users are a sensitive lot.

Last week numerous Mac-oriented Web sites made note of a video report by Brittany Umar of TheStreet.com that had a little fun with some statistics on what sort of people use Macs. (The research by Mindset Media was published originally in AdAge Jan. 28.)

Most of those sites had several pages of comments from less-than-amused Mac users pointing out how few, if any, of the characteristics described in the video – provocatively titled “Mac Users Are Snobs” -- applied to them.

Citing the Mindset Media report, Umar says Mac users are apt be “self-centered,” “arrogant,” “conceited” and “self-important.”

Then Umar describes the lifestyle habits of the typical Mac user: more likely to eat organic food, drive a hybrid car, patronize Starbucks Coffee, care about the environment and be a social and political liberal.

A few of the characteristics ascribed to Mac users were downright odd: we supposedly buy five pairs of sneakers each year and favor teeth whitening products.

The extent of the reaction from the Mac community since she posted the video last weekend inspired Umar to post a commentary on the whole affair on TheStreet.com’s site on Friday cheerfully urging Mac users to see the positive side of the report.

Writes Umar: “Be proud, o Mac user! Do you not see the positives in some of these characteristics? Being green is the new black, after all.”

Indeed, not all of the characteristics are bad, such as being “more intellectually curious,” being a perfectionist and as Umar points out, being green. Mac users are also much more likely to purchase music online than PC users (50 percent vs. 16 percent).

And while no one likes to be pigeonholed, there’s no need for any Mac user to consider the report an affront. Such research data merely reports generalities and tendencies; it doesn’t mean every characteristic necessarily applies to every Mac user.

I would not have thought this needs to be said, but I read a lot of comments by clearly annoyed Mac users (although a fair number also took the opportunity to poke fun at themselves.)

How do I stack up against the criteria? My ex-wife can tell you I’m self-centered, arrogant and conceited. I drive a Toyota Prius. “A strong need for recognition?” Well, I’m writing this blog, aren’t I?

On the other hand, I never go to Starbucks, I buy one pair of sneakers every five years, I don’t care about organic food and I hardly fit the description of a “liberal.”

Anyway, what do we Mac users care what a reporter for TheStreet.com says about us? Obviously we’re all way smarter than she is.

Posted by David Zeiler at 10:41 AM | Permalink | Comments (11)
                    

It was a month before I even took it out of the box, but now that I have had a few days to play with my new printer/scanner/copier, I’m glad I took Apple up on its offer.

Back in January when I bought my new Mac Pro, the Apple Store employee helping me suggested I also buy an all-in-one device as part of Apple’s seemingly perpetual “Perfect Companion” promotion.

The “Perfect Companion” program offers a rebate of up to $100 if you buy a qualifying printer from the Apple Store (either one in a mall or the online version) at the same time you buy a new Mac. If you choose a low-end model for under $100, the rebate completely covers whatever you pay up front.

I pondered the suggestion. On the one hand, I didn’t really need a new printer; I already had a Brother black and white laser printer and two color inkjets, not to mention a standalone scanner.

I suspect many people buying a new Mac might think the same thing – why bother? By now most people have at least one working printer in their house.

But having a spare is never a bad idea. If your printer is old, advances in even the least expensive models could yield much better results than the old warhorse you’ve been using. And if you’ve never had the space-saving convenience of an all-in-one, that alone can make Apple’s offer worthwhile.

Yet another excellent idea: if you truly don’t need or want another printer, you can always give it to a family member or friend, or better still, donate it to a school or church.

For me the Perfect Companion offer ultimately proved difficult to refuse – it was free, after all.

Of the models offered I chose the HP PhotoSmart C4280 All-in-One (price $99.95), which combines scanning, copying and printing functions. I have always been wary of combo devices – devices with multiple capabilities historically do none of them well – but it has been a long time since I took a look at one of these.

As it happens, the PhotoSmart C4280 does a respectable if not spectacular job at each function. For the average home user, it’s more than adequate.

Actually what impressed me most were the programs HP included to run the scanner and manage the images it creates. HP clearly put an earnest effort into developing Mac OS X-native software. After years of suffering with buggy scanning software that usually looks like a bad port from a Windows cousin, HP’s offerings were a welcome relief.

Which brings up one more reason to buy a device from Apple along with your new Mac – you know the third-party devices Apple sells in its stores will play nicely with Macs. You can’t always be sure how well a peripheral from Best Buy or Circuit City will work with your Mac.

Posted by David Zeiler at 4:11 AM | Permalink | Comments (3)
                    

Have you ever had an auto mechanic you didn’t quite trust tell you that your car needed a repair “just to be on the safe side”?

The latest alarm bell from U.K.-based security software firm Sophos reminds me of just such a circumstance.

Last week Sophos announced results of a self-admittedly unscientific poll conducted on the company’s Web site. Of the 350 people who responded, 93 percent said they believed the Mac will be targeted more in the future, up from 79 percent two years ago.

This follows January’s annual “Security Threat Report” from Sophos that devoted an entire page to the “rise of malware for Apple Mac computers.” The discussion centers on the OSX/RSPlug Trojan that emerged last November.

Some of you may recall that Trojan – only a series of poor user decisions (starting with visiting the porn sites where the Trojan was found) can result in a compromised Mac. It does not exploit any vulnerability in the Mac operating system or software.

The OSX/RSPlug does not destroy data on a Mac, nor can it spread from Mac to Mac as a virus would. Instead it changes some network settings to redirect the user’s Web browser to fraudulent sites designed to fool users into punching in such personal information as credit card or bank account numbers (otherwise known as “phishing”).

Sophos was one of the companies to make a big deal out of OSX/RSPlug when it was first detected, trumpeting how Mac users of its security software were protected.

That’s right, Sophos makes Mac versions of its security software, so it’s no shock the company would have strategies to, uh, encourage sales.

Not that the folks at Sophos are lying. The OSX/RSplug Trojan is real, and some Mac users doubtless have fallen victim to it. But that malware relied upon user gullibility, not the sort of OS vulnerabilities that require dedicated security software.

Now Sophos offers a “poll” indicating rising fear among Mac users that the platform is increasingly likely to be targeted by hackers. Hmmm … I wonder who’s been contributing to that?

If nothing else, the Sophos poll shows the drumbeat of shrill warnings from Sophos and other vendors of security software have sunk in. Growing numbers of Mac users – and in particular switchers moving over from the malware-plagued Windows platform – have begun to consider the necessity of purchasing security software.

It’s like the auto mechanic telling you to replace your air filter because it’s better for the health of your engine, you’ll get better mileage, yadda, yadda, yadda. All true. But if your air filter isn’t dirty and isn’t due for replacement for another six months, maybe that auto mechanic is stretching the truth a bit to play on your concerns. So you replace the air filter.

No harm done exactly, but then again you didn’t really need it -- not yet, anyway. That’s how I feel about security software for the Mac. I have yet to see any hard evidence that Mac users truly need anti-malware protection.

I know that vulnerabilities in the Mac OS, Safari and QuickTime are discovered all the time, and that there have been numerous “proof-of-concept” exploits. Nevertheless, we have yet to see a single example of Mac malware that can spread in the wild.

In its annual report, Sophos predicts (as have others over the past few years) that the Mac’s rising market share will attract more attention from “financially motivated hackers.” I believe Sophos will be proven correct. But until we see malware that exploits a weakness in the software rather than the user, I’m not going to lose any sleep over it.

As long as Mac users let Software Update download Apple’s periodic security updates, use the Mac’s built-in firewall and -- most importantly -- exercise vigilance and common sense, they should remain safe.

If someday a particularly gifted hacker succeeds in creating a self-perpetrating bit of OS X malware, I will be among the first to buy and install security software on my Macs.

But not until.

Posted by David Zeiler at 12:40 PM | Permalink | Comments (6)
                    

Incremental updates to Mac OS X traditionally have consisted primarily of bug fixes. Significant changes to existing features are saved for the major updates (Panther, Tiger, Leopard).

So when Apple let loose the much-anticipated 10.5.2 update to Mac OS X Leopard Monday, changes to two features introduced with the release of Leopard last October pleasantly surprised many veteran Mac users.

One change is the addition of an option in the Desktop System Preference Pane to turn off the translucent menu bar at the top of the screen. Some Mac users detested this new feature because the patterns of desktop images could make menu items hard to read. Personally it didn’t bother me all that much, but it’s nice to have the option to make the menu bar opaque again.

Apple also tweaked the Stacks feature, which allows users to click on special folders in the Dock and see the icons of its contents fan out across the desktop. Some users didn’t like how the folder looked like a pile of icons with only the topmost icon identifiable. Not only that, but they disliked how the icons fanned out from the Dock. The more items, the harder the feature was to use.

Apple has addressed these complaints by offering users choices. Control clicking on a Stack reveals several new options, such as making the Dock icon appear as a folder and setting the folder’s contents to appear as a list. This works much better for folders with numerous items.

It’s very un-Apple-like to alter fresh features in a version of OS X not six months old. Could it be that Apple has decided to listen to its users?

Of course most of the 10.5.2 update consists of an assortment of fixes and system improvements (you can read Apple’s official list here.)

Other observations:

Mac Pro’s Reboot on Wake From Sleep: Incremental updates sometimes fix other issues not noted in Apple’s documentation. As have most other owners of the new Mac Pro, I had hoped the 10.5.2 update would fix the dreadful “reboot on wake from sleep” problem.

After a day and a half and more than half a dozen wake from sleeps, I have not yet had an unexpected reboot. However, reports on Mac forums indicate that other Mac Pro owners still are experiencing the issue even after upgrading to 10.5.2. Others owners also report unresolved problems with their graphics (which I thankfully have not had.) Apple needs to fix this soon. Its Mac Pro customers – those who have bought Apple’s priciest hardware -- deserve better. (UPDATE: I had a new twist on this issue occur; my Mac Pro rebooted while I was sleeping. When I went to wake it I faced the login screen. Zoinks!)

Improved performance: One point of speculation that dates back to before the Mac Pros were announced was that the 10.5.2 update would contain optimizations designed to extract even better performance out of the new models.

I have run both the Geekbench and XBench benchmarking software on my Mac Pro since upgrading to 10.5.2. Given the variable scores I tend to get from these programs, it doesn’t look like this update has boosted performance.

But the Leopard Graphics Update, which users only can install after installing 10.5.2, did improve my graphics scores noticeably in XBench’s Quartz Graphics Test, which leapt from averaging in the low 200s to averaging in the mid-250s, a 25 percent increase.

To upgrade to 10.5.2: If you’re running Leopard and haven’t yet updated to 10.5.2, simply click on the Apple Menu and select “Software Update.” After the Mac reboots, go back to the Apple Menu and repeat the process to obtain the Leopard Graphics Update. A word of warning: the 10.5.2 update weighs in at a bulky 343 megabytes, so a fast broadband connection will come in handy.

Posted by David Zeiler at 4:21 AM | Permalink | Comments (7)
                    

Two research reports released last week indicate that Apple released the iPhone just in time to benefit from a major consumer shift toward “converged devices” – in other words, smart phones and wireless handhelds.

One report comes from Canalys, a technology market research company based in the U.K. Canalys says that shipments of converged devices rose 72 percent year-over-year in the fourth quarter of 2007.

According to the Canalys data, Nokia owns the worldwide smart mobile device market with a 52.9 percent share. RIM comes in second with 11.4 percent. But Apple edged out Motorola for third with 6.5 percent -- a noteworthy achievement considering the iPhone was available for just six months of the year and in just four countries.

“When you consider that it launched part way through the year, with limited operator and country coverage, and essentially just one product, Apple has shown very clearly that it can make a difference and has sent a wake-up call to the markets leaders,” Canalys senior analyst Pete Cunningham says in the report.

In the U.S. Canalys estimates that the iPhone took 28 percent of the converged device market in Q4 of 2007, putting it in second place behind RIM (41 percent) but way ahead of Palm (9 percent).

What’s remarkable about Canalys’ U.S. numbers is that the iPhone’s 28 percent share exceeds the combined share of all the Windows Mobile device vendors (21 percent). At least in the world of smart phones, the Mac OS has bested its Windows rival.

The other report is a survey from Rockville, Md.-based ChangeWave Research, which examined cellphone buying among 4,182 respondents.

“Research in Motion [maker of the Blackberry] and Apple appear to be the primary beneficiaries of the seismic shift toward more-advanced cell phone,” the ChangeWave report says. The iPhone ranks first among those planning to buy a cellphone in the next six months with 17 percent while RIM is a close second with 16 percent.

At least one Apple competitor, Motorola, appears to have suffered from the introduction of the iPhone last year. The percentage of those surveyed planning to buy a Motorola phone in the next six months has plunged from 33 percent in October 2006 to 11 percent in the latest survey. So much for the early criticism that Apple would struggle against the established cellphone makers.

Meanwhile, Apple’s partner AT&T appears to have gotten a boost from being the sole iPhone service provider in the U.S. Among respondents who plan to switch carriers in the next six months 25 percent named AT&T, a gain of 2 percentage points.

In the customer satisfaction portion of the survey, the iPhone had an extraordinary showing. Apple led the pack by a large margin with 72 percent of iPhone owners saying they were “very satisfied.” RIM was second with 55 percent and LG third with 41 percent. Palm was last with 30 percent.

The iPhone’s high customer satisfaction ranking reflects two other ChangeWave surveys covering Apple products. In a survey on operating system satisfaction, 81 percent of Mac OS X Leopard users were “very satisfied” versus 53 percent for Windows XP Home and 27 percent for Vista Home Premium.

Another survey released in December on PC purchasing habits showed 80 percent of recent Mac buyers “very satisfied,” with Dell a remote second at 61 percent.

Apple’s consistently high customer satisfaction ratings should pay off as time goes on, attracting more and more new customers while keeping existing customers loyal to the brand.

Was there any bad news in the reports? Yeah, a little. The ChangeWave survey showed a 3 percent drop in respondents planning to buy any cellphone in the next six months, from 26 percent to 23 percent. It looks like concerns about the economy may slow spending on cellphones over the next few months, and that’s likely to affect iPhone sales.

Posted by David Zeiler at 5:56 PM | Permalink | Comments (8)
                    

Starting in March, Baltimore-based Polk Audio will be selling two of its iPod-related products in the Apple Store – both the online version and the brick-and-mortar mall outlets.

Baltimore area audiophiles have long known of Polk Audio, which makes speakers and an assortment of other audio equipment. Of course, in the 35 years since its founding Polk has become a nationally and even internationally known brand name.

According to an article in This Week in Consumer Electronics, the two Polk products “are the I-Sonic ES2, an iPod-docking iTunes tagging tabletop stereo with HD radio and the miDock Studio, a portable AC/DC iPod speaker.” The I-Sonic will cost $499 and the miDock Studio $229.

Stereophile magazine noted that getting Apple’s blessing to be carried in its retail outlets means the products have met Apple’s “Made for iPod” (MFI) criteria. Stereophile quotes Apple Senior Vice President of Worldwide Product Marketing Phil Schiller explaining that the MFI program “seeks to formalize how accessory makers work with Apple – while also preventing consumers from getting stuck with knockoff products that don’t perform as advertised.”

Knowing Polk’s fine reputation, it’s no surprise it earned Apple’s stamp of approval.

Posted by David Zeiler at 7:14 AM | Permalink | Comments (0)
                    

“For some users, there’s never enough memory,” Greg Joswiak, Apple Vice president of Worldwide iPod and iPhone Marketing, said in yesterday’s press release announcing memory-enhanced versions of the iPhone and iPod Touch.

Apple is banking on it.

The new model of the iPhone boasts 16 gigabytes of storage capacity, twice that of the existing iPhone. The catch: you’ll pay a $100 premium for that extra 8GB of memory. Apple will continue to sell the 8GB version for the same price, $399, with the new one going for $499.

The iPod Touch got a similar upgrade. The existing 8GB and 16GB Touches do not otherwise change and will be sold at the same prices ($299 and $399) while a new 32GB model will go for $499.

Here we see Apple applying a lesson it learned with the introduction of the iPhone last year. Recall that originally Apple sold a 4GB model selling for $499 and an 8GB model priced at $599. Just two months later came the infamous $200 price cut on the 8GB model and the elimination of the 4GB model, which wasn’t selling nearly as well.

Apple learned that 1) the original iPhone price was too high and 2) most customers willing to buy a premium mobile phone also were willing to pay an extra $100 for the model with the most storage.

Fast forward to yesterday. Instead of following the pricing strategy it typically uses with new Macs and iPods -- offering beefier specs for the same price as the models they replace -- Apple is offering static prices on existing models while counting on the extra memory to entice customers to fork out $100 more.

Silicon Valley Insider did some math based on iSuppli’s breakdown of the cost of the iPhone’s components and calculated the 16 GB iPhone will reap a profit of $201 versus the 8GB model’s $141. (I’m ignoring the AT&T contract factor, since it provides the same profit in both cases.)

On one hand, this move is good for Apple as a company and good for AAPL shareholders because it gooses the iPhone’s profit margins. But it stinks for customers, who aren’t really getting $100 worth of added value with the new models. Flash memory is not that expensive. Silicon Valley Insider surmised that Apple’s profits could be even higher than its estimates, assuming that flash memory prices have dropped further since iSuppli did its analysis last July.

Why might Apple do this? I’m guessing that the ever-growing number of unlocked iPhones – for which Apple does not collect any revenue from a service contract with one of its partner cellular carriers – has thrown the strategic planners in Cupertino for a loop.

Apple has tried bullying customers to preserve that lost revenue by bricking unlocked iPhones with software updates. But that was a public relations catastrophe. Perhaps fearing damage to its relationships with its partner cellular carriers, Apple also has passed on another option -- selling unlocked iPhones at a higher price.

Beyond the problems with preserving high profits, Apple’s lofty goals for making the iPhone/iPod Touch into “the first mainstream WiFi mobile platform” means it needs to sell a lot of both in 2008.

So we get new models with premium prices based on a solitary improvement (albeit an alluring one) provided by a component Apple can obtain increasingly cheaply.

Small wonder Apple’s customers sometimes can’t decide whether they love the company or hate it.

Posted by David Zeiler at 10:42 AM | Permalink | Comments (8)
                    

The Mac’s resurgence will continue over the next several years, according to Gartner research, resulting in the platform’s doubling its market share in the U.S. and Western Europe by 2011.

That prognostication led off Gartner’s list of 10 key predictions for the tech industry the firm released yesterday. While crediting Apple’s business model for much of the Mac’s success, Gartner notes that “failures” of Apple’s competitors also are playing a part. Here’s what the company had to say:

“By 2011, Apple will double its U.S. and Western Europe unit market share in computers. Apple's gains in computer market share reflect as much on the failures of the rest of the industry as on Apple's success. Apple is challenging its competitors with software integration that provides ease of use and flexibility; continuous and more frequent innovation in hardware and software; and an ecosystem that focuses on interoperability across multiple devices (such as iPod and iMac cross-selling).”

Gartner has figured out what veteran Mac users have known for years. The Mac’s ease of use holds great appeal to people who just want a computer that does what it’s supposed to do. That demographic includes most home users, which is where the Mac has made most of its gains.

Gartner doesn’t name names after citing the “failures of the rest of the industry,” but it’s obvious the primary guilty party is Microsoft. Dashing expectations after years of anticipation, the latest version of Windows – Vista -- has met resistance in its first year of release. Many PC vendors, including Dell, had to start offering XP as an option on new PCs.

But the Gartner statement hints at more than the PC industry’s missteps; if you read between the lines, it’s also an indictment of the PC business model. That would be the chaotic system in which one company makes the operating system (Microsoft) while many others build the hardware (Dell, HP, Lenovo, Acer, Toshiba, Sony). And that doesn’t include all the third-party peripherals that may or may not work with your Windows PC.

Apple has long endured criticism for its vertical integration philosophy. “If only Apple would open up its hardware and software, it could compete and gain market share,” they would opine.

Of course, Apple did allow clone making briefly in the mid-1990s, but instead of growing the Mac’s market share the clone-makers gobbled up Apple’s best customers. Steve Jobs killed that bad idea shortly after his return in 1997.

Now Gartner is lauding Apple’s “software integration” and its “ecosystem that focuses on interoperability across multiple devices.” Apple’s ability to integrate its hardware, software and peripherals is what makes it all work so well. Somebody finally gets it.

One other prediction on Gartner’s list also bodes exceptionally well for Apple. By 2012, the company predicts half of traveling workers “will leave their notebooks home in favour of other devices.”

Gartner explains that workers will tire of notebooks’ size and weight: “Vendors are developing solutions to address these concerns: new classes of Internet-centric pocketable devices at the sub-$400 level; and server and Web-based applications that can be accessed from anywhere.”

Again, Gartner does not mention any names. Can you think of any devices that fit the criteria? Name begins with an “i”? Yep, the iPhone fits the bill perfectly, right down to its $399 price tag. But the $299 iPod Touch, particularly with its newfound software capabilities (mail, maps, weather, notes and stocks), may fit the bill even better.

Apple knows it and is already poised to exploit it. CFO Peter Oppenheimer referred to the iPod Touch as “an entirely new type of iPod” in his comments during Apple’s earnings conference call last week. “This new iPod has the potential to grow the iPod from being just a music and video player into being the first mainstream WiFi mobile platform running all kinds of mobile applications.”

While other companies surely will be competing in this space, Apple is the best equipped to make it work as people will expect it to work; its expertise in hardware-software integration will prove an immense advantage here. In a few years, the iPod Touch, along with the iPhone, could completely dominate this sector.

Just FYI, AAPL closed at $133.75 today.

Posted by David Zeiler at 6:29 PM | Permalink | Comments (3)
                    

Anyone who doubted the durability of the iPhone need only read Mike Beauchamp’s story on Flickr, where he posted numerous photos of his iPhone that still works despite falling onto an interstate highway and getting run over.

You can read his first-person account on his Flickr page, but here’s the abridged version: After putting gas in his car at a highway rest stop, Beauchamp forgot that he had left his iPhone sitting on the trunk.

Soon after he got back on the road, he realized the iPhone was missing. He returned to the rest stop and searched 30 minutes for the phone, but had no luck.

Figuring he’s lost the iPhone forever, Beauchamp again got back on the interstate. About a quarter of a mile along he spotted something glimmering in the next lane – his iPhone.

What follows is a testament to one man’s devotion to a piece of hardware. He pulled over and got out of his car, “waiting for the passing cars and trucks to go by so I could run across 2 lanes of 75mph traffic to retrieve my poor phone.”

Alas, even after all he’d been through, Beauchamp faced one last horror. As he waited for the last big truck to pass so he could run into the highway (kids, this is NOT a good idea), it moved over to the lane where the iPhone was lying. From Beauchamp’s account: “As I watched helplessly from the shoulder, the semi plowed [into] my phone at full speed, throwing it to the ditch on the other side of the highway.”

Despite believing he had just witnessed its violent demise, Beauchamp went after the phone. To his astonishment, he heard the iPhone ringing as he approached. He answered it and heard his Mom’s voice (no doubt admonishing him for playing in traffic – Moms always know).

Beauchamp writes that his iPhone retains full functionality. He estimates the device sat on the interstate for about an hour before he rescued it, enduring punishment from cars and trucks traveling at highway speeds.

So impressed was Beauchamp that he called Apple’s customer relations department. They expressed interest in making a commercial out of the incident, which wouldn’t be a bad idea.

It wouldn’t be unprecedented, either. Recall that an amateur’s YouTube video inspired the “Music is My Girlfriend” iPod Touch commercial.

They could even play off the old Timex commercials with John Cameron Swayze: “It takes a dinging and keeps on ringing.”

Posted by David Zeiler at 7:22 AM | Permalink | Comments (3)