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Wednesday, January 12, 2005

Apple Changing Directions?

Yesterday, at about 12 PM Eastern Standard Time (9 AM Pacific), in San Francisco's Moscone Center, Steve Jobs began his Macworld Expo keynote. This event has marked, every year for the past six or seven years since Jobs returned to Apple, the revelation of another fascinating creation of the trademark stylish, high-tech type that the company has now become famous for. Even though it is the most visible Apple event, however, it is nowhere near the only one. The iPod, for example, was released on October 23rd, 2001.

But, back to yesterday. Yesterday, Apple outdid itself yet again. Steve Jobs announced a slew of new things, showing off some of the specific technologies from the upcoming fourth release of Mac OS X, codenamed `Tiger', among which will be Spotlight, the new searching technology that, at least according to Jobs, outdoes such desktop searching functionality as has been introduced by Google, Microsoft, and others recently, if for no other reason than the user interface (a friendly UI being what Macs are renowned for).

Interestingly enough, another part of Tiger is something called the Dashboard. It contains mini-applications called Widgets (programmers will be familiar with the term, as, perhaps, will people with some economics study under their belt) which provide small capabilities, such as weather. Linux users may associate this with such technologies as Karamba and SuperKaramba, though it also bears similarities to some of the things that the Slicker project is trying to do.

The two most important announcements at the Macworld Expo, however, were two new product announcements that are not only visually nifty and economically attractive, but also present a fundamental change in Apple's business model to date.

The first product was the iPod Shuffle. This new iPod is the size of a pack of gum and has either 512 MB ($100) or 1 GB ($150) of static (Flash-based) memory. That is to say, it does not have a hard drive. That means no battery power wasted on skip protection, because there are no moving parts. This also makes it more durable. More importantly, it puts Apple in a sector of the MP3 market they hadn't been targetting until now - the cheap, small Flash-based MP3 players. The thing that really sets this player apart is that it has no screen. That's right, no screen. No way to see any information on the currently playing song.

To use it, you create a playlist in iTunes. Then, you transfer it to the iPod Shuffle (it plugs into your USB port like a USB key would) and set it to play. The switch on the back turns it on, but it has two `on' positions - one to play the playlist straight through, and the other to shuffle the songs. The battery power of the iPod Shuffle is 12 hours, and it recharges in 3 through your USB port. If you want to, you can buy a power adapter which is basically an Apple power brick with a USB port on one end to charge it that way.

The iPod Shuffle was the first indicator that Apple would be changing market strategies a little. Apple is usually well-known for making extremely stylish, but rather expensive products. This brings their MP3 player focus into the stylish but cheap category in conjunction with their existing iPod and iPod Mini lines - high- and mid-range, respectively. Naturally, the Shuffle gets the trademark white earphones that tend to mean that you have an Apple player in your pocket (or, in this case, around your neck).

The second indication of a change in market strategy was the announcement of the Mac Mini - a six inch long, six inch deep, two inch tall box with a slot-loading DVD-ROM/CD-RW drive in the front and all the ports and the power button in the back. It's brushed-steel look goes along with most other recent Macs, as well as with the high-quality flat panels they sell. To understand just how small this thing is, imagine the size of a CD. Add a few centimeters to either side, and you get the image of how long and deep it is. The height... well, one-third that. Twice as tall as the ultraportable laptops today.

The Mac Mini also does not include a monitor - that's for the user to buy. And the price tag is $499. That's right. Macs just leaped from high-end, $1000+ machines, to the low-priced PC market to compete directly with Dell. This is a stunning change in Apple's market strategy, since the sub-$1000 PC has been a challenge for most to undertake profitably. Apple really has to market these as low-priced PCs instead of stylish ones in order to get some serious return on the investment.

The fascinating thing is that this could potentially lead to a leap in market share for Macintosh computers - along with another huge market segment made up of the iPod Shuffle (though this latter one is more unlikely, since Apple is entering the Flash-based MP3 player market a bit late). However, it could also be a complete flop and lead Apple into an unprofitable situation for the year. These two products were a real gamble. But they play into the knowledge that the iPod's popularity has spawned a lot of thinking along the lines of `I would get an iPod, but it's just so expensive... and who needs that much space anyway?' and `I would switch to a Mac, but they just cost so much...' Not anymore.


Anonymous Anonymous said...

Great post, thanks for the analysis!

3:31 PM  

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