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Analysis Interim CEO Steve Jobs didn't spill the beans on Apple's upcoming ISP initiative and Palm Computing partnership at yesterday's MacWorld Expo keynote, but what he delivered instead -- QuickTime TV and the iBook consumer portable -- more than made up for them. Ranked in terms of their importance to Apple's success, Jobs' announcements score very high marks indeed. First, the iBook. We have to admit a certain personal satisfaction here, having accurately anticipated the consumer notebook's real name back in April, but the iBook's real appeal lies in the fact that it's a very important product for Apple. Jobs spoke yesterday about finally filling in the gap in the company's product matrix, but that belies just how big the hole in the product line the iBook's absence created. To see why, let's just go back a year to a point just before the iMac was launched. During Apple's second fiscal quarter of 1998, it shipped around 647,000 computers, all of them professional-oriented products. Twelve months down the line, and Apple's 1999 Q2 saw shipments rise to 905,000 units, an increase of around 40 per cent. That sounds great, but of those Q2 1999 shipments, 487,000 were consumer-oriented iMacs. That leaves 418,000 shipments of professional computers, a decline of 35 per cent. There's obviously been plenty of user base cannibalisation going on here, but that was always to be expected, and Apple did at least manage to win around 258,000 converts to the Mac platform. The message for Apple is clear: it's the iMac that's attracting people to the Mac, not the professional products. If the company wants long-term growth, it has to move further into the consumer space, which is exactly where the iBook comes in. There's no doubt that the iBook will cannibalise sales of the PowerBook G3 (which is probably why Apple wanted to ship the latest G3s well in advance of the iBook), though it will be interesting to see just how the $900 price difference will be balanced by the iBook's lack of internal peripheral bays and PC Card slots. Equally, it will be interesting to see whether those factors are as important to consumers as they are to professional notebook users. For all the iBook's plus points, like the original iMac, there are some major flaws, most notably its 6.7lbs weight, in part due to the fixed CD-ROM drive. And just what on Earth was Apple thinking about when it decided to offer a computer without a microphone socket? However, if the iBook can bring in as many new users -- whether new to the Mac or new to computing, period -- as the iMac, that's going to mean some really good news for Apple's marketshare and its future. Extrapolating from Apple's Q2 1999 sales figures, had the iBook been shipping throughout that quarter, it could easily have pushed Apple's unit shipments growth up to 65 per cent or more, and that's higher than even Dell's industry-leading 50 per cent growth rate. Of course, the iBook won't ship in volume until September, so it will be some time before we see just how well it has been received, but Apple clearly has high hopes for the Christmas period, if CFO Fred Anderson's recent bullish comments about future growth, predicting double figure growth quarter on quarter, are anything to go by. Of course, as a hardware company, you'd expect Apple to be keenly watching unit sales. However, Jobs' strategy takes in other market opportunities, which is why yesterday's QuickTime TV announcement was important too, if not as obviously so as the iBook launch. The Internet streaming media market is just such an opportunity. Right now there are two key players -- RealNetworks and Microsoft -- an emerging entrant -- Apple -- and a number of others who probably won't ever amount to much, thanks to the size of the main contenders. Apple wants to dominate this market, and that means beating Microsoft and RealNetworks. So far, it has been gunning for the former, but yesterday's QuickTime TV announcement drew a bead on RealNetworks. Microsoft is interested in streaming media because it wants to sell more copies of Windows 2000 (aka NT). Apple's plan of attack centres on offering QuickTime streaming technology as open source software to encourage the generally anti-Microsoft Linux and free software communities to adopt the technology. That move not only promotes QuickTime by increasing the amount of QuickTime material available on the Web, but it also helps make Linux appear an even more attractive alternative to Windows NT. It also makes the MacOS more attractive, since the MacOS X version of QuickTime Streaming Server comes will a rather nice, easy-to-use interface. Even if only a few companies shift from PCs running Linux to MacOS X Server, that's still good news for Apple's bottom line. In a sense, Apple's strategy apes Microsoft's own: giving product away to ensure it's dominance. Apple, however, can get away with it because it not only lacks Microsoft's huge marketshare lead, but because it's target is, well, Microsoft. Making QuickTime Streaming Server really cheap also hits out at RealNetworks, which wants to sell its server software and content creation tools. But with over 80 per cent of the market, RealNetworks is largely safe from that kind of action. Now, that marketshare has arisen because RealNetworks is the original Internet streaming media pioneer, so while QuickTime may well be a better video and audio playback technology, RealNetworks has been able to win plenty of support from the major content providers. To beat RealNetworks, then, Apple needs high quality QuickTime content, and so, just as it made it easy for server administrators to adopt QuickTime, by opening the server software, now it's making it easy for content providers to adopt the technology by providing a high performance channel for that content. Apple has already signed up a host of top players, including the BBC, Bloomberg, HBO, Fox, and Disney its subsidiary channels, such as ABC News and ESPN. All these moves encourage users to choose QuickTime as the best way of viewing online streamed media. That, in turn, persuades more content providers to support the technology (as does the inexpensive nature of the server software), which means they spend more money on third-party QuickTime authoring software, so Apple makes more money from the licences it sells to companies like Adobe. It also gives the Apple brand an even higher visibility and, again, that makes it easier to sell computers, which is, after all, where the real money is to be made. ®

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