A Vision for a Future Apple: Jobs Can Make iPhone Soft, and Bet the Farm

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Date: Wednesday, September 18th, 2002, 08:10
Category: Archive

How will the Apple of the future grow, as the economy recovers and the company works to build its profits and stock price? Apple’s got its fingers in a lot of pies, strategically. With the pro market, the plan is clear: buy up lots of tools, from movie tools to audio editing, and pour money into improving those tools and recruiting more users. In the case of Emagic, the strategy is hardly subtle: Apple is offering major cash-back incentives for PC-using Logic users to switch to the Mac and use newly Mac-only Logic. I think this strategy makes sense — and in the case of audio, Apple’s purchase of Logic is more likely to shake up existing Logic users than it is to cause headaches for rivals MOTU and Steinberg in this fiercely product-loyal market. But while margins are high on pro systems, this is still Apple the cash cow, milking loyal pro users: solid business, but hardly likely to generate revolutionary future growth.

I think Apple is still too visionary a company to be satisfied on the sidelines, milking away. But Apple’s severe downsizing of the past years has left it without the oversized R&D department that generated revolutions like the Mac and Newton. Apple is unlikely to feel nostalgic about THAT: even the mighty Mac was dwarfed by the 70s-vintage Apple II in actually making money in its first few years, and I needn’t even talk about Newton. So why not leverage Apple’s real strength: smart packaging and iconic ease of use? That could lead to a revolution in the consumer space.

Jobs is practically spelling it out. I think .mac is likely to appear on cell phones very soon. Apple would join Microsoft and AOL in working to add cell phone capabilities, but with a killer app: iCal. Farther down the road, things get a lot more interesting: Apple has taken Darwin and Rendezvous open source. Now it needs to get hardware manufacturers to integrate Rendezvous networking into 802.11b, Bluetooth, and 3G-based devices. (And the beauty of this? Everything is protocol-independent, so you don’t have to pick.) Suddenly, iChat works with 3G cell phones and 802.11b-based PDAs. As Jobs suggested, TVs can show iPhoto slide shows, stereos can play iTunes playlists. But why stop there? Add Apple’s already-publicized strategy with companies like Ericsson to integrate the MPEG4-based, totally scalable QuickTime with phones, and imagine Apple also starts working with cable companies and consumer electronics, and you may be watching TV and movies thanks to Apple, too. Via Rendezvous, you could even record a show over the Internet. Forget iPhone hardware: the key is total connectivity. And Apple could provide the missing pieces to finally make broadband multimedia and the connected household something no one can resist.

So what’s to say anyone is going to pay attention to Apple, with a loyal, if quirky user base, but rarely taken seriously? That’s where Jobs’ greatest test as a leader will come. Apple could have a legitimate role, developing underlying technologies that could work with anything (Rendezvous, Darwin, QuickTime), while handing to partner companies a giant early-adopter platform, prepackaged (that’s us, running OS X Macs). All the above trends are being predicted right and left. But Apple is making the technology happen now — and its measly 5% market share could be just enough to start a revolution. Remember, radio and TV started with a much smaller installed base, and this isn’t nearly so revolutionary. If Apple can hit the streets and show how much money these technologies could make other companies, it might just have a shot at that fabled “other 95%” after all. It would reverse the Microsoft story: give away the software, and make money on the hardware. And all this with surprisingly little risk. For the first time, a computer company can keep milking the (dog)cows — and bet the farm.

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