POLL: What is the BEST Apple Product of 2008?

Sure, we still have a little over a month to go before the end of the year, but it's safe to say that Apple is done offering up new products in 2008. Looking back on the developments of the year, there are some pretty impressive things that have come out of 2008 in regards to Apple releases. I'm curious, though, as to what you think is the BEST of these amazing products. Here are the contenders: 1) Macbook Air - Apple kicked off the year by showing us this extremely thin, extremely...

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Hot Future Tech Coming to Your Mac, iPhone and iPad

Some seriously cutting-edge tech is cresting the horizon, ready to take your Apple devices and other gear to the next level of awesome. We’ve searched out the breakthroughs on the verge of becoming reality to discover how Macs, iDevices, and other tech are about to become even more impressive.�Illustrations by ArtBombersIf you’re a regular reader of Mac|Life, you know that every January we look at the fanciful future of Apple, ranging from the prototype cars to the VR goggles that might emerge from Cupertino one not-so-soon day. This is not that story. This story is about real tech that genuinely works--it’s visible on the horizon, and it could be in your Apple gear in a year or three. Think of this story as a preview of the near future.Of course, we can’t say for sure that all this technology will end up in future products (we’re good, but we’re not psychic). Some of it may never leave the lab. What you can rely on is that old standards will hit their technical limits, and progress will march on. But for a reasonable-guess preview of how Macs, iPhones, iPads, iPods, and other tech will grow, evolve, and improve in the coming years, continue reading.�The Display's the Thing�Since the original Macintosh, our screens have been passive windodws into Apple's machines. That's about to change.�3D in Your Home�Three-dimensional TV has been a glimmer in the eye of television and movie studios since House of Wax and other 3D features first popped out at audiences in the 1950s. But the gimmick never caught on, thanks in large part to clunky technology that sacrificed picture quality. As James Cameron would be happy to explain to you, times and tech have changed, and in 2010, 3D is making the jump from the big screen into our homes…and hands.Despite technological advances, the principles behind 3D haven’t changed much in 60 years. When a 3D image is displayed, two pictures of the same scene taken from different perspectives are shown. Those spiffy glasses make sure each is sent to only one eye, then our brain combines the two images into one, complete with the illusion of depth. A more mysterious part of the brain is responsible for deciding if it’s worth paying 10 bucks for popcorn at the multiplex.But really, we can’t picture Steve wearing those dorky glasses at the introduction of the iMac 3D (but when we do, it always puts us in a good mood). Simplicity is Apple’s mantra, and what’s simpler than 3D screens that do the filtering for you, providing a 3D picture while eliminating the need for special eyewear? Such screens--called autostereoscopic displays--exist today. Some are peppered by tiny lenses that direct images to each eye; others use a layer of fine slits to split the display’s light in two. One of these technologies is about to get a boost from Apple’s biggest mobile-gaming rival, Nintendo. Announced this March and due for release in spring 2011, the Nintendo 3DS will be nothing less than a shot from the House That Mario Built across Cupertino’s bow. This next-gen upgrade to the popular DS handheld will sport sophisticated dual touchscreens, motion control, and--mamma mia!--autostereoscopic 3D.Competition is another Apple mantra, and it’s no secret that Apple sees games as a big part of the success of its Multi Touch devices. Steve won’t sit still if competitors like Nintendo can gain an advantage that draws gamers away from Apple and back to the Mushroom Kingdom. If Cupertino can improve on the 3D experience offered by Nintendo’s next handheld, you can bet that App Store games--and maybe even the iPhone and iPad OS--will enter the third dimension too.�OLEDs...So Pretty!�Today we watch videos everywhere from the living room to the hotel room on our HD TVs, MacBooks, and iPads. As great as those devices are, couldn’t they all stand to have even thinner, brighter, and more energy efficient screens? Trick question--of course they could. The good news is they will, thanks to OLEDs, an acronym for organic light-emitting diodes.OLED screens aren’t grass-fed, free-range displays sold at Whole Foods, but they do use organic material (that is, material derived from the element carbon) to produce a picture. Unlike traditional LCD screens that require power-hogging backlights to project their images, OLEDs generate their own light when electricity passes through the organic polymers sandwiched between layers of film in the display. Because those layers are only about 500 nanometers thick (that’s even skinnier than a human hair) and don’t require much else besides a power source to work, OLED screens can be dramatically slimmer and lighter than conventional displays now on the market.Better still, large OLED displays are relatively easier to make than LCDs, and their gorgeous picture makes your spiffy plasma TV look like a 1950s Zenith. That’s because there’s no need to grow sheets of fragile crystals. Instead, organic molecules are sprayed onto film in a process much like inkjet printing, and that film can be transparent, flexible, or even foldable. An OLED screen’s flexibility and toughness make it suitable for use in a wide range of gadgets, most of which haven’t been invented yet. From giant HDTVs and miniaturized smartphones to futuristic heads-up displays in cars, OLEDs can potentially be incorporated into almost anything--potentially even woven into clothing. And because of their brightness, vibrant colors, and wide viewing angles, you’ll always look great in your 720p iSweatshirt Pro.But don’t camp out in front of your local Apple Store for certified-organic MacBooks or casual wear just yet. While OLED screens are popping up in more and more devices (perhaps most famously in Google’s Nexus One smartphone), the technology’s best days are yet to come. Manufacturing OLED screens is still an expensive proposition, leading to high prices and tepid consumer interest. But as OLED’s momentum builds and costs drop, expect to see a gradual shift in the computer and electronics world away from LCDs, much like the transition that phased out bulky, inefficient CRTs. And expect to see Apple jump on the OLED bandwagon when the time and money are right. With its combination of energy efficiency, size, and image quality, we think OLED has a bright future in Apple’s Macs and its growing line of sleek mobile devices.�E-Papers, Please�Popularized by e-readers like the Kindle, e-paper has plenty to offer a company focused on mobile devices. Its slim design is durable, lightweight, and legible in bright sunlight. The secret lies between the sheets--plastic sheets holding tiny wells filled with black and white particles suspended in liquid. When the wells are charged, the particles move to the screen to appear as text. No backlight is required, and because electricity is only used once to draw the contents of each page, e-paper sips power compared to the LCDs in Apple’s portable lineup. Color e-paper is so hot, you gotta wear gloves. Metaphorically speaking, that is. Photo: LG.Phillips LCD., LTD.But while e-paper does monochrome well, most of today’s e-readers use filters to colorize their black and white text with pictures--and they simply can’t compare to LCDs. That will change. Philips is working on new technology using colored particles in a process much like blending ink dots in traditional print. The results should finally make good on e-paper’s promise, but they’re still years away.Even then, will Steve subscribe to e-paper? The iPad’s LCD screen would seem to be the last word on the subject, but Apple could always use multiple displays in its devices. For instance, e-paper battery monitors could offer much more information than the little green lights they use today.�The Wireless War�If you’re like us, your living room entertainment setup is the second most precious collection of gear in your home (next to your beloved Mac, of course). Every night, you’re on the couch with a bowl of popcorn in front of an HD screen complete with a Blu-Ray player and 7.1 sound. Trouble is, that sweet setup means fistfuls of wire to fuss with. But those knots may not stay tangled much longer.As home entertainment setups get more complex, something has to give. If two competing wireless standards--WirelessHD and Wireless Home Digital Interface (WHDI)--have anything to say about it, that something will be our HDMI, DVI, and other AV cables. Both standards promise something like Wi-Fi for multimedia. Compatible devices (laptops, game consoles, and mobile phones) will use them to find your HDTV automagically over the air in a system that “just works”--and the whole idea of ditching all those cords works in a big way for us.WirelessHD devices may be available from Panasonic, LG, Vizio, and other manufacturers by the time you read this. WirelessHD delivers uncompressed video up to 1080p, multichannel audio, and other data--including Hollywood-approved DRM--at speeds up to 4Gbps, with a theoretical ceiling of 25Gbps. That’s a lot of data, but WirelessHD will only carry it up to 33 feet. The WHDI standard will move your movies as far as 100 feet, but at only up to 3Gbps. You’ll be able to compare how the two standards fare against each other when WHDI devices hit stores late this summer or early fall. Only time will tell which of these standards will be a hit with consumers or whether Apple will adopt one or play a waiting game. Let’s hope we’re not kept waiting for the release of Avatar 2 before we can stream movies, games, and more from our iPads to our televisions.» Future Apple Devices: iPad 3, iMac 3D, Cinema Display» Expected Arrival Date: 2013» You'll Also See It In: HDTVs, handheld game consoles, displays» Future Awesomeness Rating: Deeply AwesomeNext page: Printers and Processors >>Powerful Prints�Yes, print and printers have a future in our networked world. No, they won't be like anything you've seen before.�Fab It Yourself�Teleporters and matter replicators may be the stuff of science fiction, but with 3D printers, you can create physical objects with your Mac out of thin air (and a lot of plastic). Apple hasn’t sold printers since 1997, but if anything could get them back into the game, 3D printing is it.For decades, 3D printers have been used to create “rapid prototypes” for manufacturers and architects. The idea is much the same as conventional printing--you design something on your computer, and the printer produces a hard copy. But these hard copies need time to cool. 3D printers take designs built in 3D modeling programs and melt plastic to “print” them with thin strands built up layer by layer into a finished product. The idea is about to get a big boost from HP, which will begin selling 3D printers this year at “bargain” prices expected to start under $15,000. So much for 3D printing for the rest of us, right?The MakerBot prints...in 3D! Want.Not quite! If you have a techie DIY streak, 3D printing can be yours today for under $1,000. MakerBot’s compact Cupcake printer is available as a kit that, once assembled, lets you manufacture objects up to 4x4x6 inches using Lego-quality ABS plastic. The idea is catching on, and other low-cost 3D printers (like the RepRap and Desktop Factory) are poised to slowly do what HP’s high-end offerings probably won’t--make 3D printing the desktop publishing of the next decade.Of course, it will take a while for 3D printing to catch on, but if it does, expect Apple to take note. After all, our Macs have helped us make things since 1984. There’s no reason to stop now.�An Inkless Job, But Someone Has to Do It�Let’s face it, next to Mafia Wars and Farmville, printing is one of the biggest energy hogs in an office. The paper and toner cartridges required by today’s printers consume a lot of energy to use and recycle. But greener workplaces may be one step closer to reality thanks to two new inkless, reusable printing technologies that are poised to send old-fashioned hard copies sailing on a one-way trip into the wastebasket of history.Late last year, Japan’s Sanwa Newtec company introduced the PrePeat 3100 II, a compact black-and-white printer that prints using heat instead of ink. The secret’s in the “paper”--flexible, waterproof, recycled plastic that reacts to the PrePeat’s thermal mechanism. Best of all, when you don’t need a page any longer, you can just feed it back into the PrePeat to erase it or print a new document as many as 1,000 times per page. Right now this green new world will cost you (the PrePeat retails for $5,600), but expect prices to drop if the technology becomes more widely adopted.Meanwhile, researchers at Xerox are using ultraviolet light to develop a technology called Erasable Paper. The process hits specially coated paper with a specific wavelength of UV rays to print your document to the page, and you can erase and reuse a sheet whenever you need to. If that sounds like a tanning bed for interoffice communications, you’re more right than you know. Like a tan, these printouts fade away over time, and within 24 hours, a UV-printed page will be blank again. While self-destructing Mission: Impossible documents are cool (and well-suited to sharing data with short lifespans), the limitation is one reason Erasable Paper is still being refined in Xerox laboratories.» Future Apple Devices: iLife '13» Expected Arrival Date: 2013» You'll Also See It In: iLife '13» Future Awesomeness Rating: Fit To Print�Dueling Processors�Current technology can only take CPUs so far. But don't worry--tomorrow's breakthroughs are being designed today.�More Cores for Your Buck�Smaller processors offer greater speed and improved energy efficiency, but engineers racing to make the best chips possible are running afoul of the laws of physics. Conventional manufacturing methods can only make circuits so small, and even the power of Steve’s reality-distortion field can’t change that. But some amazing new technologies might.For years, multi-core technology has given us Apple chips that pack the power of multiple CPUs into a single chip. Intel’s Xeon, Core i7, and venerable Core 2 Duo processors deliver up to six cores, and eight-core machines are coming soon. We hate to break it to those processors, but a new prototype from Intel unveiled late last year promises that a lot more muscle is on the way to the Mac.Intel calls it the single-chip cloud computer (SCC), and it boasts a whopping 48 cores on one processor…with room to grow to over 100. Computers derived from the SCC will bring the brawn of today’s massive data centers (the “cloud” of the chip’s name) to desktop-sized machines, paving the way for smaller, greener clusters. Initially, Intel is planning to build only 100 of these experimental chips so engineers can figure out what to do with all that power before it lands on the market. Intel is just one of the companies now developing “many core” processors, but given its relationship with Apple, it’s a good bet that the first Mac with the power of the cloud will have Intel inside.�DNA Processors�Meanwhile, another company is taking a radically different approach to building tomorrow’s processors. Last year, researchers at IBM announced a chipmaking breakthrough that uses something called “DNA origami,” and it’s as cool as it sounds. The process arranges strands of DNA into shapes used as scaffolding for carbon nanotubes and silicon nanowires, the tiny structures that could one day move data through really, really small processors.DNA origami is a “bottom-up” approach to chipmaking that builds the chip’s circuits, as opposed to more conventional “top-down” methods that carve silicon away, and it has a promising future. DNA designs could potentially deliver chip circuits as small as 6 nanometers--that’s just dozens of atoms wide! So Apple has good reason to keep an eye on how its story unfolds. They’ll have to be patient. The technology is still evolving and likely won’t produce commercial chips for another five years at the soonest.» Future Apple Devices: MacPro Extreme» Expected Arrival Date: 2015» You'll Also See It In: Windows PCs, Skynet» Future Awesomeness Rating: Sheer GeniusNext page: New Wires and New Storage >>Magic Buses�Our future gadgets will do more wirelessly than ever before. But they'll be able to do even more with wires.�It's USB's World, We Just Live Here�Once an upstart newcomer, USB has become an elder statesman in the electronics world with a presence in almost every device on Earth. But USB’s data-transfer speeds, last boosted by USB 2.0’s introduction in 2001, haven’t aged gracefully. Thankfully, USB 3.0 is here to breathe new life into an old favorite.USB 3.0 cables definitely lose the beauty contest to Light Peak (below).At first glance, USB 3.0 (a.k.a. SuperSpeed USB) doesn’t seem like a radical departure from its predecessor, and that’s a good thing. It’s backward-compatible with USB 2.0 and even uses the same rectangular port we all know and love, so your old devices will work just fine with the new standard. So don’t worry, you won’t have to buy a new USB beverage warmer for your cubicle.But USB 3.0 brings two new tricks to the table. The first is speed--its transfer rates reach up to 5Gbps, or 10 times USB 2.0’s performance. The second is improved power management, which means reduced power consumption and more juice for devices that need it. USB 3.0 gear is already on the market, so it’s only a matter of time before Cupertino rolls out the first Macs with the SuperSpeed standard. We hope they come soon--we’ve got HD video to import!�One Wire to Rule Them All�Fiber optic cables, long used by telephone companies to connect landline phone calls, have numerous advantages over traditional copper wires. So why haven’t they made it to the desktop yet? Intel hopes to put that question to rest with a new technology called Light Peak.Light Peak is Intel’s answer to…well, just about every cable in use today. From HDMI to USB, if it carries data, Light Peak can replace it. That’s because Light Peak’s bandwidth starts at 10Gbps, and its theoretical ceiling is a whopping 100Gbps. And since Light Peak’s flexible fiber optic cables transmit light, not electricity, they can carry data up to 100 meters without a hitch. That’s plenty more meters than we need, but some room to grow can’t hurt, right?Light Peak brings fiber optic speed to computing. And pretty colors, too.However, despite a planned 2011 rollout, don’t expect to sync your 5G iPhone with Light Peak. Intel is still working out ways to combine power with Light Peak to charge devices while beaming data at warp speed. One thing’s for sure, though--when Light Peak finally strikes, it’ll be fast.» Future Apple Devices: Almost all of 'em» Expected Arrival Date: 2011» You'll Also See It In: Every gadget on Earth» Future Awesomeness Rating: Blazing Hot�Reading, Writing, Revolutionary�Say goodbye to your old drives. Say hello to a new world of speedy storage.�It's RAM! It's a Hard Drive! It's Both!�There’s nothing New Age about “universal memory,” but it could usher in a new age of computers and electronic devices. Universal memory is any next-gen storage that combines the speed and affordability of today’s DRAM with the permanence and capacity of flash memory. Two technologies are fighting to rewrite the rules, and the winner may be coming to the Mac sooner than you think.Phase-change memory (PCM) gets our vote, if only for its cool name, which is derived from the use of chalcogenide glass that changes from a crystalline to an amorphous state with heat. It’s the same material used to make rewritable optical discs, but in PCM, the two states represent different electrical charges, or a zero and a one. PCM represents a major leap in durability over flash memory, and can be written to up to 100 million times versus flash’s upper limit of just 100,000 read-write cycles. Samsung has already begun producing 512MB PCM modules for use in mobile phones, but 1GB modules are still on the way. Looks like phase-change doesn’t happen overnight.The race for better memory is run on a tiny field, though, and IBM’s racetrack memory may have the inside track. It uses something called spintronics--don’t you want to hear Steve say that at a keynote?--to manipulate electrons into moving magnetic bits down nanoscopic, U-shaped “racetracks” to read and write data at blazing speed. Yet racetrack memory’s biggest asset may be its scalability, theoretically allowing HDD-size capacity to be squeezed into a much smaller area than competing technologies allow. But until racetrack memory is ready to leave IBM’s labs, this dark-horse contender will be one to watch, not buy.�Kind of Blu�Steve famously quipped that bringing Blu-Ray to the Mac was “a bag of hurt,” but Sony’s multimedia power-platter is still rolling along after years of Cupertino’s cold shoulder. Movie lovers--and anyone who wants to share giant files--can take comfort that when Blu-Ray finally arrives on Macs, it’ll be better than ever. Having long shed its 25GB limit, Blu now boasts capacities of up to 400GB, and 1TB discs are coming in just a few years. The promise of this year’s 3D Blu-Ray players is just one more feature that will keep Mac fans gazing longingly--sigh--at Big Blu’s bag of tricks.» Future Apple Devices: MacBook nano, Apple TV Blu» Expected Arrival Date: 2013» You'll Also See It In: Smartphones, PCs» Future Awesomeness Rating: Memorably CoolNext page: Networking, Power, and Interaction >>Network It Out�Tomorrow's wireless communications will be more important than ever. Good thing our networks will be able to keep up.�4G or Not 4G?�Poor AT&T. Just as it’s getting the hang of supporting the iPhone on its 3G network, 4G networks will begin popping up from Sprint this year and from archrival Verizon in 2011. What does that mean for us, besides catty PR fights among the carriers? A blazing fast mobile internet with enough bandwidth for HD movies, video chats, and--we hope--fewer dropped calls.Like 3G wireless networks, 4G isn’t a single new technology. It’s a blanket term for a range of technologies and specifications that add up to the same thing: speed. Current 3G offers downloads of roughly 1.4Mbps. Compare that to 4G’s promised bandwidth of at least 100Mbps, and you’ll see what the fuss is about. 4G works its magic in part by using MIMO (Multiple In Multiple Out) technology to broadcast using several antennas simultaneously on multiple frequencies.4G’s strengths make its eventual adoption by Apple a no-brainer, no matter which carrier has the iPhone next year. Apple is serious about establishing the iPad as a mobile media device, and it’ll want a big pipe to carry movies and music to cellular customers. That’s just what 4G provides. As for the iPhone, who knows? Steve may decide to stick with AT&T and its 4G network expected to roll out alongside Verizon’s in 2011.�Crank Up the 802.11AC�Closer to home, we’ll use 802.11n Wi-Fi, but at faster speeds than we’ve seen before. Apple has sold 802.11n devices since 2007, but the protocol’s final standard was only approved in 2009. Happily, that means the business of making Wi-Fi as fast as possible can begin in earnest. Like 4G, 802.11n uses MIMO to improve performance, but manufacturers couldn’t take full advantage of the technology before the protocol was complete. Now that it is, devices can officially support maximum speeds between 400 and 600Mbps…if your hardware has the antennas to deliver the boost. Expect that hardware to start arriving in stores later this year.But the Mac life is never a simple march of progress, and there’s always something new on the horizon. Sweet! Work drafting the next Wi-Fi protocol, 802.11ac, has already begun. Devices supporting the new standard aren’t expected until 2012 at the earliest, but they’ll boast speeds of up to 1Gbps when they’re available. At press time, Ethernet’s agent was unavailable for comment.» Future Apple Devices: 2G iPad, Airport Express Plus» Expected Arrival Date: 2011» You'll Also See It In: Smartphones, netbooks» Future Awesomeness Rating: Wildly Wireless�More Power to You�Apple is going power mad. Its future devices will charge up almost anywhere.�Powered by the Sun�Solar power is overdue for a makeover, and if anyone can do it, it’s Apple. In 2008, it applied for a patent to slip solar cells beneath a device’s LCD screen, and early this year, it applied for another patent to cover portable devices with solar collectors.Solar-powered MacBooks? Yes please!�Wilder still, a March 2010 patent describes a MacBook with a solar panel that folds to collect sunlight or even to illuminate the LCD screen without drawing power from the battery. We’re still waiting for these designs to see the light of day--ha!--but it’s clear someone at Apple has spent a lot of time looking at the sun.�Go Wireless�Besides flying cars, wireless electricity is the ultimate in futuristic convenience. Today’s charging mats come close, but the magnetic induction they use keeps devices tethered to one spot. That’s why we hope Apple adopts WiTricity’s technology for truly wireless power up to several feet away from the base station. The science involved would baffle the DHARMA Initiative, but it involves something called sharply resonant strong coupling to generate an oscillating magnetic field that’s captured and converted to electricity by a sensor in your device. Or it will, anyway, when WiTricity-powered gear reaches stores sometime in the future.Wireless power? As in, electricity beamed through the air? Shocking.» Future Apple Devices: iPod solar, ElectroMagneto MacPro» Expected Arrival Date: 2015» You'll Also See It In: Nice weather, mad scientists' lairs» Future Awesomeness Rating: Simply Electrifying�Your Valuable Input�No matter how cool Apple’s upcoming products are, they’ll only be as good as what we can do with them. Here’s how we’ll interact with the future.�Touchier Mice�The mouse has plenty of life left, at least according to Microsoft. It’s produced some stellar mice over the years, but Redmond’s recent Multi Touch prototypes could be the best yet. The FTIR (Frustrated Total Internal Reflection) Mouse’s high-res camera tracks finger gestures through a curved piece of clear acrylic so you can scroll, swipe, and pinch around on the acrylic in order to manipulate onscreen objects. The Orb Mouse works on much the same principle, but offers a whole hemisphere to interact with in your hand.The shrunken Side Mouse looks more like a wrist rest than a traditional rodent--its tiny camera tracks your fingers as they move across your desk or whatever surface you happen to be working on. Best of all, these mice incorporate the Multi Touch equivalent of keyboard shortcuts to perform zooms and other common commands quickly. Cupertino, start your copiers!Microsoft's FTIR Mouse makes magic out of a high-res camera and a piece of acrylic that together create Multi Touch-style input.But the coolest input technology on the horizon for Apple’s gear lies in--big surprise--touchscreens. Future Multi Touch devices will sport haptic feedback, or the sort of physical response you’ve gotten for years from vibrating gamepads and cell phones, to help make input feel more natural. In 2011, Artificial Muscle is bringing to market its EPAM (Electroactive Polymer Artificial Muscle) technology, which tenses and relaxes touchscreens in response to input. That sounds pretty fascinating all by its lonesome, but Apple’s recent patent applications show it has something more subtle in mind--a layer inside the touchscreen that delivers vibrating feedback localized to specific onscreen buttons and switches. That level of fine-tuned feedback would make typing on the iPad’s large screen even more satisfying and could pave the way for MacBooks without physical keyboards.» Future Apple Devices: Majestic Mouse, MacBook Touch» Expected Arrival Date: 2012» You'll Also See It In: Microsoft's mice» Future Awesomeness Rating: Terrifically TactileNext page: Too Wild for Apple? >>Too Wild for Apple?�Some of these technologies may seem out there even for Apple, but yes--chuckles aside--they’re real. Besides, today’s head-scratchers could be tomorrow’s game-changers. Maybe.�Huff and Puff into the Mic�You’ve finally gotten your mind around Multi Touch, but are you ready for Multi Puff? Zyxio’s Sensawaft technology lets you control a mouse cursor, scroll through text, or do just about anything else with your electronic devices using only your breath. The assistive possibilities for disabled users are obvious and awesome, but breath control could have other, less practical uses, too. Imagine blowing into your earbuds’ microphone to control music playback, skipping an annoying voicemail with a hiss, or puffing on your iPhone to zoom in for a kill while playing your favorite shooter. Apple’s engineers could do so much with this, it’s breathtaking.�Keep Your Finger on the Pulse�An iPhone fingerprint scanner makes a lot of sense, especially considering that Apple has so many intriguing patents out on the idea. Sure, a fingerprint-savvy screen would simplify security--and make “slide to unlock” really mean something--but we like to think about the possibilities for everyday iPhone control hinted at in Apple’s patents. With the iPhone of tomorrow, specific fingers could be used for certain functions, letting you change settings without even looking at the screen. You could use your thumbprint to play a song, your index-finger print to rewind, and your middle-finger print to...er…emphatically skip a song for those tunes so bad that a one-star rating just doesn’t cut it.You might not be able to remember a passcode that unlocks your iPhone, but we're betting you'll be able to remember your fingerprint.�Project Your Ideas�Pico projectors--low-power, handheld projectors--are handy for quickie presentations or impromptu slideshows with the family. Some of them even project with RGB lasers instead of white light for a picture that’s always in focus. But the image of these mini projectors will really improve if Apple ever makes good on recent patents to integrate them into MacBooks and iPhones. Sure, you could strike up a Keynote presentation on the go with a MacBook Pico, but throwing up movies, music, iTunes visualizations, and photo albums anywhere sounds like a lot more fun.�Wii Want Our Apple TV�Motion control brought gamers flocking to the Nintendo Wii, but can it do the same for Apple TV? Someone in Cupertino must think so, judging by a patent for a Wii-like motion-controlled remote to go with Cupertino’s set-top box. Sounds good to us. Apple’s Remote iPhone app is great, but it’s always seemed very “un-Apple” to require another device to deliver a satisfying Apple TV experience. Motion control--especially with the enhanced precision and reliability brought by the floating magnetic compass noted in Apple’s patent--would be a slick solution, and not just for easier navigation. Apple’s patent also describes using the remote to draw on the screen and manipulate photos with the flick of a wrist. That could give Steve’s favorite hobby product some much-needed pizzazz to help it catch the public’s eye. After all, the day will come when Cupertino will update the Apple TV again, and when it finally does, you may not even recognize it. What can we say? We want to see the little guy make good.Next page: Patently Awesome >>Patently Awesome�Apple’s patents are tea leaves that portend what technology’s cutting edge will look like for years to come. Here are some of tomorrow’s ideas Cupertino thinks are worth protecting today.�Nine Lives, Three Dimensions�OS X is the big cat that makes Cupertino’s products tick, but it’s Apple’s hardware that usually captures the public’s attention. That oversight will finally be corrected if a patent for 3D OS X becomes a reality.The 3D in question depends on parallax, the effect by which objects appear to change their position relative to each other as a viewer’s perspective changes. By keeping tabs on your position (likely with a head tracking iSight camera), this “OS parallaX” would alter the appearance of onscreen objects to form a simulated 3D space in which you could interact with files, study 3D objects, and more. While this could open up exciting new ways to use your Mac, it would also require complex new hardware and software, so don’t count on peeking behind alert boxes anytime soon.�An iPhone Gamepad�Judging by a recent patent, the iPhone and iPod touch might have more than just high-tech improvements in their future. Thanks to a unique accessory, someday soon we may be gaming old-school--with a twist--on our Multi Touch devices.In a few years, near field communication will let your iPhone be the boss of your videogame console, TV, and even your sprinkler.We love playing games on the iPhone, but sometimes we pine for the 20th century simplicity of physical controls. Call Apple’s potential solution the “GameFrame,” a shell that fits around your iPhone to add a D-pad, buttons, and other handy moving parts to the iPhone experience. Too old-fashioned for you? The device could also communicate wirelessly with HDTVs, opening the door to big-screen App Store gaming on the go. Hero of Sparta 3 on a 40-inch flatscreen? We’re so there!�"Home Screen" Gets a New Meaning�The iPhone’s superpowers seem to be growing by the day, but you haven’t seen anything yet. In the future, you won’t think twice about using it to lock the door, turn on the lights, and even water the lawn of your personal fortress of solitude.Apple’s recent home-control patent hinges on a technology called near field communication (NFC), a short-range wireless technology that’s slower than Bluetooth while offering a much quicker pairing time. That’s just the thing to control the Xbox, DVD player, and garden-sprinkler system shown in the patent application. Unfortunately, this remote-control magic requires NFC-enabled devices that are, like the iPhone that will interact with them, years away.�Slice the Mac into Pieces�To create, sometimes you must destroy, and the most intriguing Apple patent we’ve come across yet takes apart the familiar Mac we’ve used for decades and scatters it into…well, something else. We’re not sure if what it describes is a portable computer, a desktop machine, or something in between, but we call it the “MultiMac.” And we want one.The "MultiMac" splits a Mac into its component parts, which live where you'll use them.If it was built today, MultiMac’s components--a projector display, input devices, and a CPU--would be separate components, each powered wirelessly and communicating with each other over the air from wherever you wanted them to be. You could tuck the CPU on a bookshelf, surf from the couch, and project a movie on the wall as if using one device. Apple’s focus (pardon the pun) seems to be on the projector, which would do more than just show vacation pictures. The patent describes it as a networked device with multiple sensors controlling focus, color, or even built-in cameras. What are the chances those cameras could power a 3D OS X? Hey, we can dream.Will MultiMac be a novel new computer that ties together exciting new technology, a sophisticated Keynote presentation system, or a hub to synchronize a home full of mobile devices? We’re not sure, but that’s half the fun of being a Mac fan. Only Apple knows what’s coming next, and they’re not telling…yet.�
15 Things We Might See at WWDC 2010

�After search giant Google hurled a barrage of not-so-subtle spears in Apple’s direction at the Google I/O developer conference, all eyes are now on the World Wide Developer Conference that Cupertino will be launching June 7 with a keynote from CEO Steve Jobs.While a fourth-generation iPhone is a given at this point after an absurd number of leaks in recent weeks, Apple CEO Steve Jobs himself promised an inquisitive e-mailer only a few days ago: “You won’t be disappointed.” So we put our thinking cap on and came up with this list of cool stuff we might see when WWDC 2010 kicks off June 7 and wraps up on June 11.Safari 5 (or maybe 4.5)We think Safari is still pretty great, even against more recent challengs from Google Chrome and Firefox 3.6. But with the Chrome browser finally out of beta this week, Apple may have to work harder to pound out Safari’s remaining limitations.Among them: No API for extensions, as noted this week by Daring Fireball’s own John Gruber after Google’s announcement that Chrome is now officially “stable.” That means that great third-party software like 1Password and Evernote has to resort to kludgy hacks to work intimately with Safari. Heck, even good ol’ Adobe Flash might work better with an API (stranger things have happened). Gruber also calls out Apple for not empowering Safari with a true ability to automatically reopen pages left open when the app was closed. Yes, please.New Mac Pros -- Finally!The poor Mac Pro has certainly gone neglected, with its last update more than a year ago. Worse yet, the desktop behemoth still carries a form factor borrowed from the Power Mac G5 before it -- and in computer years, that makes it a veritable dinosaur.Although we’ve heard plenty of rumors about Intel’s new six-core Core i7-980X processor landing in a refreshed Mac Pro as far back as January and February of this year, the summer has arrived and there’s still nothing official on the radar. Creative professionals are likely worried about Apple’s silence with regard to such new hardware, but that could all change with one presentation.Mac OS X 10.7Many developers are also rightfully worried that this year’s WWDC is too focused on iPhone OS, and many questions remain as to when Apple might shed some light on their intentions for Mac OS X 10.7. Granted, Snow Leopard 10.6 was released only last September, but that update was more about optimizing Leopard 10.5 than adding hot new features to the Mac (unless you count getting back a bunch of hard drive space as a “hot” new feature).Our prediction is that Mac OS X 10.7 will get at least a cursory mention at WWDC 2010, and we won’t get a real preview of a new desktop operating system until WWDC 2011. Thankfully, Snow Leopard 10.6 runs like smooth, creamy butter most of the time -- and Apple keeps the updates coming regular enough to squash anything that comes up, with a 10.6.4 patch already in beta testing.iPhone OS 4.0 for iPadWe’ve already seen all of the cool stuff that’s presumably coming next month with iPhone OS 4.0, such as Folders, multitasking and threaded e-mail. But we were bummed to hear that the fresh new iPad won’t get the 4.0 love until sometime this fall, by which time Apple will likely be on 4.1 or so.Here’s hoping that Apple will give us at least a peek at iPhone OS 4.x for the iPad at WWDC -- after all, developers will certainly appreciate a longer lead time to rework their apps for the tablet device after having to rush them together between late January and early April for the U.S. iPad launch. The rest of us will just have to wait… and weep.The Real Apple TV Take 2Remember back in January, 2008 when Apple took the wraps off “Take 2” of its “still a hobby” Apple TV? Despite a price drop, closer ties with iTunes and the ability to purchase content directly from the box itself, the Apple TV has continued to bore most everyone who sees it, except for the die-hard hackers who continue to squeeze as much as possible out of the device’s anemic processor and (gasp!) Mac OS X 10.4 Tiger operating system by way of unsanctioned apps like nitoTV and Boxee.We figure the time has come for a truly revolutionary overhaul of Apple TV, especially now that arch-nemesis Google is breathing down Apple’s neck with Google TV, slated for release this fall. Rumors abound that Apple TV may get iPhone OS-ified and will adopt the tiny A4 architecture that will come standard in the next iPhone. Additionally, the new Apple TV will have 1080p HD and 16GB of storage, as well as be a part of Apple's rumored new cloud storage network. The best part about these rumors is that the device is slated to sell for only $99, which will make die hard Apple fans with a tight budget extremely happy. MobileMe: Now With More Free!Recent rumors have speculated that Apple may take a cue from Google and start offering their cloud-based MobileMe service absolutely free to all users. While that would no doubt raise the ire of longtime .Mac users who have paid good money each year to stay with the often-questionable service, it’s really the only recourse Apple may have to keep up with Google now.MobileMe itself isn’t spectacular as it exists now, save for its awesome push e-mail, Find My iPhone, contacts and calendars. The recent web-based Mail beta shows that Apple is taking baby steps toward improving the service, but they’ve got a long ways to go yet. Let’s see that acquisition of Lala start moving iTunes into the cloud, for instance, and speaking of that...iTunes in the CloudSince Apple purchased Lala.com, pundits have been short-circuiting their craniums trying to guess exactly what Cupertino plans to do with the technology -- and equally as important, when that fateful day might arrive. We’re not so sold on the idea of having iTunes “in the cloud” -- call us old fashioned, but it’s kind of nice to actually feel like you own your music, especially now that it’s finally DRM-free.Be that as it may, Apple now appears late to the cloud-based music game, with Google stepping up to the plate to make Android such a cloud-centric experience. We’re not sure that WWDC is the right forum to finally reveal what the company is doing with Lala’s brains, but surely Apple will have to play their hand soon enough.NEXT: iPhones, iTunes and the MacBook Air>>��A Fourth-Generation iPhone No One is ExpectingWhat if Steve Jobs got on stage for his keynote on June 7 and presented an iPhone that was totally different from what Gizmodo and others have leaked? A new report this week from Digitimes has posed just such a possibility, and proposes that the project, codenamed “N91” -- the leaked iPhone we’ve already seen is “N90” -- may exist as “a parallel product to back up the N90 in case there are major delays due to significant modifications in casing, display resolution, digital camera support and so forth.” The report goes on to describe the backup product as more similar in style and form to the existing iPhone 3GS.�At this point, everyone is expecting the leaked iPhone (which has been dubbed “iPhone HD” by pundits) to allow some kind of video chatting thanks to the widely exposed leaks of the device with a front-facing camera. Would you be disappointed to see the equivalent of an “iPhone 3GS Plus” at this point? We would...Final Cut Studio 4Sure, we know that the third generation of Final Cut Studio was only released last year, but the update offered little in the way of new features and seemed to take away more than it gave (especially for PowerPC owners, who are now permanently relegated to Final Cut Studio 2, as the newest version requires an Intel processor). The biggest problem with Apple’s pro video suite is that, despite the big 64-bit push with Snow Leopard 10.6, none of Final Cut Studio is 64-bit native -- and those applications could use it.It might be out of character for Apple to unveil a new Final Cut Studio at WWDC, but given the recent hysteria among video professionals upon hearing rumors that the high-end software might be “dumbed down” to make it more consumer-centric, any news on its future would be good news.iTunes 10Speaking of apps that could use a 64-bit kick in the pants -- Apple, what’s going on with iTunes? Despite being the center of the known universe for all iDevices, iTunes continues to be upgraded on top of molasses-like legacy code. It’s like living in a parallel universe, knowing that the Windows version of iTunes is actually faster than it is on the Mac -- that speaks volumes.While cool new features would be welcome also, the reality is that iTunes hasn’t grown all that much over the last few major releases -- does anyone really use the Genius feature, for instance? Where is the built-in lyrics feature for music? (Apple added a section for such metadata several versions back, but you have to do the footwork yourself.) Or how about better media management capabilities, now that we’ve got ever-bigger video files to sync to our iPad but are running out of space on our internal hard drives?iTunes 9.x feels pretty kludgy by this point, so anything is welcome here -- but keep in mind that most big iTunes updates tend to come later in the year, often coupled with the release of new iPods.iLife ’11Maybe we’re starting to sound like a broken record here, but iLife ’09 is another Apple package that’s getting long in the tooth, and could also use a much-needed 64-bit transfusion. We can’t be the only ones who notice that iPhoto, for example, starts to bog down the more we throw pictures at it, so… there’s that. And don’t get us started about iMovie, which for all of its simplicity is an absolute speed dog when you actually have to use it.Hey, perhaps we’re just impatient -- but it seems to us that for all the advancements in the processor and graphics speed of our Macs, it doesn’t take long before all this great software starts to bog down. iLife ’11 might be a few more months in the oven, but it’s never too early to request that Apple slow down on the new features and pull a Snow Leopard here: Let’s see some performance tweaks!iPhone OS + Jailbreak = LoveIf Apple really wanted to make heads spin at WWDC, they’d put down their swords and start playing nice with the jailbreak community. You know, those guys (and gals?) who tirelessly work to free iPhone OS from Apple’s shackles so we can install stuff that Cupertino wishes didn’t exist in the first place, including a GSM unlock for our iPhone (which also frees us from AT&T’s heavy ball and chain at the same time).Frankly, the “cat and mouse game” (as Steve Jobs himself has referred to it) has kind of landed in favor of the jailbreak community anyway of late, with even the latest iPhone OS 4.0 beta build being easy prey for the jailbreak geniuses. Maybe it’s time for Apple to stop worrying and love the jailbreak, officially opening up the device to other apps beyond their gated App Store walls. We can dream, can’t we…?MacBook Air, ReduxNow that the MacBook and MacBook Pro lines have gotten a souped-up refresh and the iPad is on the scene, the MacBook Air is beginning to look a little more overpriced and underpowered than usual. Even though the device is barely two and a half years old, it may be time for Apple to either put it out of its misery or rework it as a touchscreen-enabled, lust-worthy member of Cupertino’s notebook lineup.It’s not hard to imagine that one day soon, the MacBook Air might very well become the “iPad Extreme” -- think of an iPad with attached hardware keyboard, maybe even capable of dual-booting both Mac OS X and iPhone OS so you can get the best of both worlds. We might line up for that one!iPhone Goes CDMAWill they or won’t they? An iPhone compatible with the CDMA networks used by Verizon Wireless and Sprint here in the U.S. has been rumored and desired since the device took center stage at the Macworld 2007 keynote, and here we are more than three years later and AT&T continues to have an exclusive clamp on the GSM-only device.Of course, rumors have run rampant in recent months that AT&T’s exclusive contract is about to end, and that possibly both Verizon and Sprint will finally get in the iPhone game -- to the detriment of AT&T, who is reported to lose possibly as much as 40 percent of its customer base as they defect to one of the CDMA carriers. No better time to announce such a device than at WWDC, where an annual refresh of the iPhone hardware is expected to be a lock.All we ask is that Apple make it an “all in one” device -- meaning both GSM and CDMA, so we can sign in blood with Verizon, Sprint or AT&T here and then have the freedom to buy local GSM-based SIM cards for international travel. Is that asking too much?Presenting… Something Totally New?Apple has had a busy year refreshing its Mac hardware, announcing and subsequently launching the iPad and prepping for the rumored fourth-generation iPhone expected in June, but what if we’ve all overlooked something totally new? Cupertino would seem to have all of the bases covered, from laptop and desktop computers, portable media devices, mobile phones and peripherals -- but that doesn’t mean they can’t still sneak in a curve ball to “shock and awe” us.The question is, what might that be? Only Steve Jobs and maybe a handful of others in Cupertino presumably know the answer to that question, but Apple has a way of dazzling us by reinventing something we’ve always taken for granted, such as the cell phone (with the original iPhone in 2007) or even our very definition of “portable” music (the original iPod in 2001).Whatever it might be, you’re almost certainly guaranteed to have never needed it before, but you’ll surely have to have it once Steve Jobs whips it out. That’s just how Apple rolls.*****Of course, WWDC isn’t simply about hot new Apple products -- it’s about the company intimately working with third-party developers to create the next generation of software that we’ll all swoon over. One thing that the iPhone OS-based devices have shown us: The future is less about hardware and more about the software that runs it.Viewed in that light, the developer conference isn’t simply a “gee-whiz” keynote with fancy new toys from Apple, but rather a plentiful seeding of developer talent that will grow over time and continue to harvest wonders for years to come. We can’t wait to see what Apple helps them create next!
Will Google's Android Play DOS to Apple's iPhone?

Daniel Eran Dilger Today's broad array of smartphone operating system contenders are offering lots of potential answers to a problem that only requires one. It appears the market has two options ahead: either pool generic hardware makers behind a single operating system and deliver a smartphone marketplace that resembles the Windows PC market, or watch them fall to a dominant leader and have a smartphone market that resembles Apple's iPod ecosystem. This decision isn't going to be made by a class of intellectual elite, or by government mandate. it's going to be made by the market itself. Here are the factors that will influence the outcome, either marginalizing Apple's iPhone into a niche as the company has twice experienced previously at the hands of DOS in 1981 and Windows in 1991, or positioning it as the dominant leader as Apple has achieved for itself with the iPod since 2001. The third segment in this series looks at Google's Android and the Open Handset Alliance as a possible “DOS-attack” against Apple's iPhone. Subsequent segments will look at Nokia's newly opened Symbian and other mobile contenders challenging the iPhone. Will the iPhone Meet its Match from a Modern Day DOS? Will Windows Mobile Play DOS to Apple’s iPhone? Will Google's Android Play DOS to Apple's iPhone? Will Symbian Play DOS to Apple's iPhone? Google Acquires Android. In 2005, Google purchased a startup named Android, which had been in business for nearly two years. The secretive startup was known only to be working on software for mobile phones. It was being run by a who's who of mobile industry veterans, including Andy Rubin, the founder of Danger. Rubin had earlier worked at WebTV along with Chris White and Andy McFadden, both of whom had also joined Android. Richard Miner of Orange and Nick Sears of Tmobile also brought their mobile provider experience to Android. At the time of the acquisition, Google didn't announce any plans for Android and instead only told BusinessWeek, “We acquired Android because of the talented engineers and great technology. We're thrilled to have them here.” It appeared that Google was only going to be expanding its search services for mobile phone users, along the lines of the Google SMS answer system it had recently released. Google Buys Android for Its Mobile Arsenal - BusinessWeek Windows XP Media Center Edition vs Apple TV: The Fall of WebTV The GPhone Myth. As reports began to leak out about talks between Google and hardware makers throughout 2007, rumors began to fly about “the GPhone,” a competitive offering that was supposed to take on the iPhone. Some phone enthusiasts hoped Google would jump in to rescue the struggling OpenMoko project and turn it into a viable project that could attack Apple's new smartphone. In October 2007, I printed the Great Google GPhone Myth, taking apart the idea that Google would be directly competing against the iPhone, and describing that Google was really working on a free alternative to Windows Mobile as a conduit for getting its search and related services on a broader variety of mobiles. Google's services were already on the iPhone. In November, Google played its hand: it had organized a consortium of companies called the Open Handset Alliance to develop open standards for mobiles. The first product from the group would be Android, a mobile operating system built on the Linux kernel. Google wasn't getting into the phone handset business at all; it was only making sure that its mobile search products would not risk being marginalized by the threat of Windows Mobile on phones in the same way Microsoft had been working to leverage its PC monopoly to push Google search off the Windows desktop. The Great Google gPhone Myth Introducing Android: Leader of Linux. Two weeks later, Google released an early version of the Android software. On top of a Linux kernel, Android uses a specialized version of a Java Virtual Machine that takes Java language code and turns it into what Google calls “Dalvik bytecode” rather than Java bytecode as a standard JVM would. This allows Google to leverage existing and familiar Java language tools without paying Sun for a Java license. Like Mac OS X and its fraternal iPhone OS, Android includes a variety of open source libraries, including SQLite and WebKit. On top of that, Google developed a series of frameworks that handle the tasks Cocoa Touch does on the iPhone. Android also bundles a set of applications. While Apple adapted its existing Mac OS X to work in a mobile environment to create the iPhone OS, Android is more like a customized Java environment running on a specialized mobile Linux variant: elements of maturity in an otherwise experimental new platform. What is Android? -Google Android was by no means the first mobile OS using Linux. Both Palm and its amputated ACCESS software arm have Linux-based mobile platforms. Nokia has Maemo, which it uses in its Internet Tablets, and also recently acquired Trolltech and its Qtopia mobile Linux platform. Motorola has teamed up with MontaVista Software to use its Mobilinux. Intel created the Moblin project for mobile Linux, aimed at Internet devices. Google's OHA also isn't the first consortium to attempt to standardize a mobile Linux platform. The OSDL started the Mobile Linux Initiative to define requirements for hardware; the Consumer Electronics Linux Forum (CELF) then worked to define various phone profiles aimed at the Japanese market; the Linux Phone Standard (LiPS) Forum tried to do the same thing in Europe. In 2007, LiPS was folded into the new LiMo Foundation, along with the OSDL. All of these committees have had some overlap and some complementary features. Several of Google's OHA partners are also LiMo members, including NTT DoCoMo, Wind River, and Motorola. So why didn't Google just join LiMo? “LiMo, very candidly, wasn't moving fast enough,” OHA board member John Bruggeman told CNET. Google hopes to herd the Linux cats into a progressive, structured platform that can battle against Symbian and Windows Mobile to succeed as the new DOS of smartphones. Will Google fracture or unify mobile Linux? The Presumption of the Necessity of DOS. The previous segment examining Windows Mobile pointed out how the PC industry as a whole assumed that Microsoft's desktop Windows monopoly would easily take over dominance in the MP3 player market, pushing Apple into a niche position. This was expected because DOS had pushed Apple's early computers into a reduced role starting in 1981, and Microsoft had repeated this again in 1991 when the DOS world migrated to Windows, effectively pruning Apple's Macintosh into a Bonsai platform. The inability of one company to dominate any product category has been frequently repeated by PC industry pundits as a given, despite the fact that history is full of examples of this happening. Sony dominated personal music players for two decades under the Walkman brand even while equally large competitors tried to push it from this position; Nintendo has similarly owned handheld gaming despite ill-fated efforts to grab a piece of its pie by products running a generic platform such as Microsoft's WinCE (Gizmondo), Linux (GP32), and Symbian (N-Gage). In fact, outside of the Windows/DOS PC, there are actually few examples of a generic platform taking over an industry. Nearly every other consumer-facing product uses proprietary platforms: car makers, stereo equipment, appliances and so on typically all use designs custom to their maker. The paradox of the Windows PC market has been that Microsoft's broadly licensed software supposedly saves hardware makers from investing in software development while ensuring compatibility, when in reality it adds significant costs to PC makers while limiting their ability to differentiate themselves. That explains why PC makers have been perpetually merging together and going out of business while Microosft has rolled in money over the last two decades. Parallel efforts to copy Microsoft in broadly licensing an operating system have regularly failed: IBM's OS/2, Apple's Mac OS, Palm's PDA OS, even Microsoft's own efforts to duplicate Windows dominance in other markets, from copy machines to PDAs to smartphones to SPOT watches to music players. The closest copy may be Symbian, but its customers are partners, not simply consumers of a generic third party's operating system as Windows licensees are. That indicates it is not necessary to duplicate the dominance exercised by Microsoft over the PC industry in the smartphone market. Google's Android and Symbian exist more as technology sharing pacts among manufacturers, but both aspire to take Microsoft's DOS role among smartphones. However, the idea that Apple's iPhone must be dethroned by a modern-day DOS, whether Windows Mobile, Android, or Symbian, is not just debatable, but does not sync with the reality of more recent events. Apple's recent history of the iPod further refutes the idea that a software analog to Microsoft is needed. The iPod Emergence: Apple & Pixo vs IBM & Microsoft. Apple's iPod in 2001 made no effort to clone the DOS business model; it actually did the opposite. When Apple entered the market, there were a number of existing MP3 devices using custom software, hardware designs, and DRM codecs. The iPod used off the shelf components to deliver a custom MP3 player using third party software, but Apple also added its own technologies: easy to use sync with iTunes, a fast Firewire interface that made uploading music far faster than the prevailing USB 1.0, and an attractive industrial design. With the iPod, Apple played the role of IBM in 1981, using Pixo's embedded operating system to enter the market quickly, just as IBM had used DOS. The difference was that Apple didn't direct any market attention toward Pixo and added a lot of value on top of that core embedded OS. A modern day Compaq couldn't simply clone the hardware and license Pixo to run on it in order to compete against the iPod, because the iPod was much more than just generic hardware running Pixo software. As the iPod developed, Pixo's role diminished and was eventually displaced. Just like IBM, Apple jumped into a new market just as demand was beginning to explode. Apple made MP3 players far more attractive to a general audience by delivering greater playback capacity than most entry level devices offered, along with an ease of use that encouraged buyers to jump in at the higher end of the market. That left Apple with not only the lion's share of the market, but also by far the most profitable segments of the market. Two decades prior, IBM badly fumbled its play with the early PC and ended up irrelevant in the PC world by the late 80s, sideswiped by Microsoft's DOS and the cloners who were licensing it in parallel, notably Compaq and later HP and Dell. Steve Jobs had witnessed that happen, and was determined to not let it happen again to Apple. Rather than being manipulated by a software middleware vendor as IBM had, Apple worked to incrementally develop the iPod market itself. After consuming the hard drive-based player market, Apple took on the Flash RAM-based market with a tiny hard drive system used in the iPod Mini, and followed up with Flash-based devices of its own in the Nano and Shuffle. This allowed Apple to progressively serve an increasingly wider market, incrementally growing upon an established foundation. With the iPod, Apple became, in effect, an IBM with its own internal Microsoft. Microsoft's Failure Despite Features. In contrast, Microsoft entered the music player market by promoting music player hardware reference designs around WinCE. However, it was unable to ship a finished design until the iPod had become firmly established around 2005. Later branded as PlaysForSure, the devices were sold by various hardware makers and all purported to support the same DRM and the same music subscription services while also offering a broader array of hardware that presented video before the iPod did, supported wireless before the iPod, and so on. Despite these unique features, all of those PFS designs still failed. Microsoft blamed the failure of PFS upon its music store and hardware partners and decided to take Apple on itself in 2006. It relaunched a Toshiba PFS player as its own device under the Zune brand, adding WiFi music sharing features and a larger display than the current Pods had. It failed dramatically as well. Did Microsoft's attempts to float a new DOS among music players fail because of Apple's success, or due to Microsoft's own problems? The failure of the Zune, which followed the iPod model rather than the DOS model, seems to suggest that Microsoft itself was to blame. Consider too that Microsoft's Windows Mobile phones, which use the same underlying operating system as its failed PlaysForSure music players and the Zune, had similarly flopped even before Apple could release a charismatic phone equivalent to the iPod. Of course, when the iPhone was released, it hit Windows Mobile hardest. The iPhone made Windows Mobile Smartphones look ridiculous and underpowered, and made Windows Mobile Pocket PC phones look clumsy and awkward, despite the fact that they both supported a variety of features the iPhone didn't, including the ability to edit documents, capture video, send MMS, and so on. Simply adding on features did not enable Microsoft to compete against Apple. The only conclusion that can be drawn from all this is that competing against Apple requires more than just having a feature arsenal. Microsoft's failures in themselves do not necessarily mean that Google's Android will fail in its attempts to float its own smartphone platform. Why Microsoft’s Zune is Still Failing Microsoft’s Zune, Vista, and Windows Mobile 7 Strategy vs the iPhone Will Google Succeed where Microsoft Failed? Microsoft's demonstrated inability to successfully enter consumer markets for MP3 players and smartphones has given observers little faith that the company will somehow turn things around in late 2009 when its next generation of devices are expected to be released. However, prior to that the first fruits of Google's efforts to build its own smartphone operating environment will arrive. Will Google's Android take over Microsoft's crown as the “DOS vendor” among smartphones? Supporters of Google's Android project point to some parallels between Android for smartphones and Windows on the PC: Android will allow hardware makers to differentiate in ways that can offer features Apple can't (or doesn't want to); it should allow software developers to offer features Apple does not allow on the iPhone; it embraces open, hobbyist experimentation in ways that Apple currently isn't; and it opens the potential for content providers that Apple is not interested in allowing. Openness is Android's key competitive feature. Will all this openness allow Google to unseat the iPhone to become the primary platform developers want to participate in, and subsequently soak up the market for third party hardware makers that Windows Mobile serves? While Google currently has no market share due to the fact that no Android phones have yet shipped, it does have broad vocal support from a variety of the same kinds of hardware manufacturers that supported DOS and Windows and helped to make those platforms successful in the desktop PC market. HTC and Android. The first Android phone is expected to be the HTC Dream; Taiwan's HTC (High Tech Computer) also manufactures Palm's Treo Pro phone as well as many of the most visible Windows Mobile devices. In addition to models produced under its own name, HTC also sells Windows Mobile devices under the Dopod brand, as well as no-name phones branded by providers, such as AT&T, Orange, Sprint, T-Mobile, Verizon Wireless, Vodafone, and others. HTC will also be building the XPERIA X1 Windows Mobile phone for Sony Ericsson. HTC was quick to throw its support behind Android despite its long term alliance with Windows Mobile. Why would it so enthusiastically support an unproven platform from a company that has no experience in consumer hardware platforms? One can only assume that HTC is not happy with the current state of Windows Mobile, and desperately wants another “DOS” to succeed where Microsoft's has so spectacularly failed. As an Original Design Manufacturer for Palm, HTC watched as Palm adopted Windows Mobile in place of the Palm OS and subsequently fell even deeper into crisis. Palm's only successful phone since has been its Palm OS-based Centro. HTC undoubtedly sees Android as its ticket to becoming the next Dell, but without a similar dependance upon Microsoft. Android for mobile phones is essentially playing the role of Linux for PCs, except that it has the backing of a major company behind it. Can Android Take on the iPhone with Openness as its Feature? As great as this sounds, it's important to consider that Linux on the desktop has made no significant progress in eating into Windows dominance after a decade of trying. Being open, free, flexible, and decentralized hasn't been enough of an advantage to get consumers to migrate from Windows to Linux in any fraction of significance. Similarly, in the music business, Linux-based MP3 players have had no impact on the iPod, despite offering more features, flexibility, support for additional codecs, and so on. In the mobile phone area, Linux enjoys a sizable portion of the smartphone market, but this is almost entirely due to phones sold by Motorola in China, where the advantages of Linux' openness are void. Motorola's Linux phones offer nothing to users in terms of openness or flexibility, and are really no different in terms of features than other appliance 'feature phones' based upon closed operating systems. And again, a key problem with assaulting Apple in a feature war is that neither the iPod nor the iPhone became popular by being “highly featured.” They both delivered perhaps 80% of the functionality found in all other devices in the market. Rather than trying to match every feature and cater to every niche as Microsoft had with Windows Mobile, Apple's devices did a few things very well at launch, and incrementally developed into full featured devices that still lack some of the more unique features of their competitors. Further, in terms of openness, the demographic that embraces Linux' characteristic freedoms is not the same as the demographic that buys smartphones in quantity and then pays for data service. This is a critical fact to consider because a big part of the iPhone's success stems from the fact that it is being pushed by mobile providers who want to capture the cream of the market willing to pay a premium for data services. The Frankenphone. Combining the fractured aesthetic of HTC's Windows Mobile phone hardware with Android's software, based upon Linux' perpetually unfinished DIY openness and Google's Java-like development platform, will not result in a product similar to the iPhone. Instead, it will look a lot like phones that have already failed in the market. Apple's advantage comes from slick hardware designs with a close attention to detail, combined with software that purposely does less so that it can do what it does better. Even Apple's own conservative attempts to broaden its software capabilities with iPhone 2.0 have resulted in instability problems that can be blamed upon both Apple's early releases of its phone operating system and software from inexperienced third party developers new to the platform. Would the current frustrations with iPhone 2.0 be somehow mitigated by additional openness that also embraced all kinds of variables from different hardware makers with less quality control than Apple, a loose committee of additional cooks working to serve up operating system features targeted at every possible conceived need, and a wider third party software group with fewer constraints on illegal behaviors? The Failure of Open. While it is politically unpopular to criticize the well meaning efforts of open source contributors, the failure of Linux on the desktop, the failure of the vaporware Indrema game console, and the failure of the OpenMoko project to deliver a workable phone within a year of its deadline all underline the serious problems open development faces in the world of consumer oriented devices. Open has simply failed to deliver on its promises in the world of consumer hardware. OpenMoko was supposed to release its first mobile phone to consumers for $250 several months in advance of the iPhone. When the iPhone shipped, the group then announced new plans to get its phone out by the end of 2007. Instead, this spring the group announced new plans to move to an entirely different development platform, and ship its phone mid year for $400 with limited functionality and incomplete software outside of basic GSM phone features. Linux's notable successes, from Motorola's Linux phones to the Tivo DVR to Linksys Routers, have often come without any associated openness or freedom, and were instead delivered simply to provide their manufacturer with a free kernel to build upon. This indicates that while Linux may find its way into an increasing number of smartphones, it will likely not be accompanied by the glorious freedom of an open development environment Google has said it would offer with Android. Apple iPhone vs the FIC Neo1973 OpenMoko Linux Smartphone Can Google Succeed Where Open Has Previously Failed? Despite “openness” being Android's strongest competitive feature compared to Apple's iPhone, Google recently revealed that its wide-open development model is intentionally gravitating towards a closed association of top tier partners due to practical considerations. In July, Google accidentally sent out a notice that revealed that it had been seeding private SDK updates to only a subset of its contributors, angering those who believed that Android would be as open as Linux on the desktop or the OpenMoko project. Further, Google has restricted initial development to higher level APIs just as Apple did, further indicating that Google itself realizes that being wildly open to impress a minority of hobbyists will not result in the commercial success of its new platform. That serves to neuter Android's primary advantage over the iPhone. Without delivering on the premise of being wide open, Android is really just a less mature set of Java libraries used to create a specialized binary that runs on a Linux foundation. Unlike Apple's iPhone, Android phones won't have a slick user interface developed by professional artists, nor the iPhone's legacy of mature software development frameworks crafted over the last thirty years, nor the iPhone's tightly integrated hardware with award winning industrial design, nor its marketing power tied into the iPod and Apple's retail stores. Android won't be an open iPhone, it will only be a Windows Mobile phone with a better kernel that runs specialized Java software instead of Win32 or .NET code. Don't expect consumers to be impressed by that. The Biggest Missing Feature. There is one remaining factor that strangles to death any last remaining hope that Android might assassinate the iPhone and assume the crown of the “DOS of smartphones.” That is: Android delivers zero price advantage to consumers. In 1981 and 1991, consumers who wanted Apple computers faced the sticker shock of a somewhat arrogant price tag. Apple sold its computers, as it still does, at the higher end of the market, but there was simply far more range in prices available. In 1981, that meant the Apple II was $2600 and the new Apple III was $3500, even before you added a monitor. On the low end, Commodore sold its far less powerful, but “still a computer” Vic-20 for $300, while IBM entered the market with the IBM PC at $3000. Over the next few years, Apple focused on delivering additional sophistication at the same price, releasing the $10,000 Lisa and then the $2,500 Macintosh. IBM continued selling PCs in the same $3,000 to $10,000 range, but other DOS PC vendors began selling machines at prices that ranged as low as $1500. That left Apple with a roughly $1000 price premium over low end PCs. The products weren't really comparable, but consumers only saw the huge price difference. In 1991, Apple was still selling moderate to high-end Macintoshes for $3,800 to $10,000; the crippled Mac LC was $2500, and obsolete-at-birth Mac Classic ranged from $999 to $1500. Windows allowed PC makers to ship a functional $1500 PC and claim a rough approximation to Apple's $2500 entry level system, maintaining that apparent $1000 price premium. Today, pundits are lucky to find a Dell or HP system that is even a couple hundred dollars less than a comparable Mac. However, in the smartphone business, the iPhone 3G is now the same price, if not less, than generic competing phones on the market. Even more significant is the fact that the price of the phone hardware is nearly nothing compared to the cost of the service plan. This fact simply eases any price premium that could cause buyers to flock to a smartphone running a generic operating system over buying the iPhone 3G, regardless of whether it runs Windows Mobile or Android. 1990-1995: Planting Software Seeds Android Partners Have Already Failed. That same pricing principle similarly prevented buyers from considering many of the alternatives to the iPod. While Apple's original iPod models were more expensive than many of the first MP3 players on the market, they were price competitive with models offering similar features. By 2004, it was Apple who was undercutting MP3 competitors on price. Microsoft offered zero price advantage when it began selling the Zune, a major factor in its failure, but Microsoft simply couldn't out-price the iPod; it was already losing money offering the Zune at the same price as the iPod. Apple now has tremendous market power in buying RAM and other components that will prevent any competitors from being able to offer a huge discount over the iPhone's $199 price tag. Even if competitors were to give their phones away, they would only offer a $200 discount to users who would then still need to pay the same mobile fees to use the phone. Android's other partners, including Samsung and LG, have already failed to capture any significant market share in the music player market. Are they going to maintain their position as smartphone makers now that they face similar competition from Apple, its iPod ecosystem, its iTunes Music and Apps Store, Apple's retail store experience, and other factors that are pushing the iPhone? If they can, it is not obvious how partnering with Android will help. Other Problems for Android. Android was announced in early November 2007 and was followed with an early preview SDK within a couple weeks, a month ahead of Apple's initial announcement of the iPhone 2.0 SDK. However, between March and July 2008, Apple delivered nine progressive releases of its SDK, opened its App Store, and sold 60 million apps, raising $30 million to support iPhone software development in just the first month. It has since released three more SDK updates to developers related to iPhone 2.1, which is expected next month. Android just published its first open SDK beta update earlier this week, warning developers that “applications developed with it may not quite be compatible with devices running the final Android 1.0.” Additionally, Android still has no phones available. By the time the HTC Dream is expected to launch, Apple will have an installed base of around ten million iPhone (and iPod touch) users supporting software development through iTunes. The business model for selling Android apps is no better than that for selling jailbreak iPhone apps: there is no iTunes Apps Store to promote them, so users will have to track them down on their own. Android developers also have no real freedom that jailbreak iPhone developers lack. The only difference is that there are ten million iPhones to sell jailbreak apps to, and currently zero Android phones. If selling a jailbreak iPhone app sounds like more trouble than its worth, imagine trying to sell Android apps to a non-existant audience. Now add the official iPhone App Store into the mix, where publicity, promotion and profits are booming. What platform is going to have the most applications? How many users will flock to a smartphone platform with no apps? The wisdom of releasing a desirable phone and achieving a significant installed base before releasing an SDK makes a lot more sense in retrospect. Additionally, while Apple has a decade of experience in shipping regular updates to Mac OS X and its Xcode developer tools, Google has only shipped a random assortment of web-oriented SDKs (a number of which have been abandoned) as a tangent to its core business of selling advertisements. When the Android SDK 1.0 is finished later this year, developers will not only lack an installed base to sell their apps to, but will also have no high profile market for selling their apps in, and subsequently no financial incentive to develop applications that add value to the Android platform, just like Linux on the PC desktop. Around the same time, possibly within the next month, Apple will be shipping its second major OS release: iPhone 2.1. Apple will also be upgrading its entire user base to the new software so that developers will have a cohesive platform to target. This mirrors the efforts Apple has taken to upgrade its Mac OS X users to the same reference release. Mobile developers will be seeing money pouring in via iTunes while crickets chirp in the Android section of various mobile online stores. Apple’s iPhone Vs. Other Mobile Hardware Makers: 5 Revenue Engines Same Same, But Different: DOS Model Problems. Android developers will also have a series of other problems to manage. Like Windows Mobile, Android is intended to support everything, from BlackBerry-style keypad phones with a small touchscreen to the simple Windows Mobile Smartphone form factor lacking a touch screen to iPhone-like full size touch screens. Also like Windows Mobile, Android phone makers will have the option to leave off Bluetooth, WiFi, GPS location services, graphics hardware acceleration, and so on. Each Android phone will also have unique camera hardware, support for different video and audio codecs, and varied support for other differentiating proprietary services demanded by mobile operators. This will force developers to to make complex decisions regarding the lowest common denominator they choose to support. So while the iPhone will have a cohesive feature set, a managed software environment, and a functional market, Android will be a loose federation of hardware makers selling the same random features found on Windows Mobile today, with a chaotic development environment that lacks any central market for users or developers. And it will be run as an experiment by a company with no experience in consumer hardware or platform development. The Missing Tap. One specific example of the “DOS model problem” is that Android currently does not support multitouch. It's not touched on in the API, and Google quietly tap dances around its omission. Why no multitouch? Because multitouch screens are expensive, and most OHA hardware members are more interested in making a profit in a competitive phone market rather than impressing consumers as Apple did with the iPhone. Most existing smartphones, even those trying to directly rival the iPhone, use a stylus driven, pressure sensitive tap screen or a simpler, cheaper touch technology that lacks support for sensing multitouch. The iPhone's screen can actually sense up to five fingers at once, but the primary feature multitouch offers on the iPhone is the two fingered tapping and the pinching effects everyone associates with it. Android could certainly support multitouch if there were a demand for it, but that's the point: Google knows that its hardware partners are cheap and unlikely to put out hardware that actually competes with the iPhone. Instead of using expensive technologies that deliver clever yet largely invisible functionality, OHA members, just like PC makers, are far more likely to add flashy, impractical gadgety fluff that's cheap to tack on, such as slide out keyboards, neon tubes, and scratch and sniff stickers. That's how you impress gullible nerds on the cheap. Google itself is blowing smoke and erecting mirrors to distract from the reality that it being a “DOS vendor” means supporting bargain basement hardware from penny pinching duplicators. Android has been demonstrating some “wow” features such as a Street Maps app that pans around based on an internal compass in the demonstration phone. The problem is that that kind of thing only makes for a fun demo. Nobody needs to twirl around their phone in the air to see a view of the other side of the street, but everyone who has used an iPhone will wonder why they can't pinch to zoom out. Even worse, most Android phones aren't going to have a compass built into them, so Google is demonstrating features most Android users won't be able to use. That Sounds Like Microsoft… Google's design decisions are beginning to look a lot like Windows Vista; rather than actually working to make laptops boot faster, Microsoft came up with the idea of adding a small screen to the back of Vista laptops so users could check their email without having to wake the system up. But this was a stupid idea for a number of reasons, the most obvious being that most users just want a laptop that boots up quickly. Few laptops got the mini screen, but every user who tries Vista on their laptop will wonder why it doesn't boot up as fast as Mac OS X Leopard. In the same way, Google is advertising features for Android that most users won't ever see in their actual phones while ignoring things people will expect based on their exposure to the iPhone. Android is simply selecting the wrong features. Android will offer the advantages of supporting MMS, recording video, and the list of other features Windows Mobile already supplies. Those features didn't stop Apple from firing past Microsoft in the smartphone arena however, just as the Zune's highly touted WiFi and screen didn't phase iPod buyers. Incidentally, just months after the Zune, Apple had not only demonstrated a larger display but a higher definition multitouch screen, and not only WiFi, but functional WiFi that could be used to browse the web or check email. This suggests that Apple, with its faster release schedule, won't stay behind any of the leading features potentially offered by Android for very long. Android partners, however, will find it as difficult to catch up with Apple's unique features, just as Microsoft has been stymied to keep up with Mac OS X, the iPod, and the iPhone. The underlying reason: both Google and Microosft are tasked with maintaing support for a huge variety of hardware options demanded by all their partners. Apple has the unique circumstances to do only what it needs to do itself. Android in Windows Mobile's Shoes. Like Windows Mobile, Android faces a difficult market. In the US, it competes against the popular BlackBerry in corporate markets and the iPhone among consumers. Worldwide, it competes against entrenched market leader Nokia. The difference is that Google, unlike Microsoft, has no in. Windows Mobile was adopted by Windows-bound IT shops despite its weaknesses. Nobody has any preexisting reason to try an Android phone apart from hobbyists and open software enthusiasts, a demographic that has done little to move Linux on the PC desktop. Google also lacks Microsoft's installed base; it's starting from zero. The smartphone industry initially doubted Apple's chances of making much progress with the iPhone, despite the company having the Mac platform, the iPod, retail stores, platform development experience, marketing savvy, industrial design prowess, and so on. Google doesn't have any of those things. Mobile Providers vs Android. Apple also started with an exclusive partnership with AT&T, a three legged race that demanded effort from both. Google is hoping that hardware makers handle the hardware details and that mobile providers will be excited to sell its Android phones. While hardware makers such as HTC clearly appreciate having found a free alternative to Windows Mobile, it's not obvious why providers would be excited about Android, as it promises an openness that most mobile providers strongly oppose. AT&T took a big risk in getting behind the iPhone, as the phone encouraged users to use email rather than fee-based SMS and MMS, it supported WiFi for data access, and it bypassed AT&T's MEdia Net services to plug into iTunes instead. Verizon refused to parter with Apple and grant it those kinds of concessions. Is AT&T going to take a similar risk to partner with a phone that is not exclusive to it, and is Verizon now going to open its arms to support phones that do not exclusively support BREW, VCast and its other proprietary services? While Android may well eat into Microsoft's Windows Mobile business by stealing away its hardware makers, it seems unlikely that Android will ever serve as more than free alternative to Windows Mobile in a market where Windows Mobile is increasingly irrelevant. Android may have the dubious distinction of swallowing Microsoft's mobile business the same way Microsoft ate up the Palm OS, but even if it accomplishes that goal, Google will likely find itself unsustainably hungry immediately afterward. It will also find itself swimming in a shark tank of hungry rivals, including Nokia's Symbian, RIM's BlackBerry, and Apple's iPhone. Symbian is the final generic platform vying for the opportunity to play DOS in the smartphone market. The next article will examine Nokia's chances in its bid to match Microsoft's PC dominance in the mobile market while setting out in a new venture to copy Android's open software model. Did you like this article? Let me know. Comment here, in the Forum, or email me with your ideas. Like reading RoughlyDrafted? Share articles with your friends, link from your blog, and subscribe to my podcast (oh wait, I have to fix that first). It's also cool to submit my articles to Digg, Reddit, or Slashdot where more people will see them. Consider making a small donation supporting this site. Thanks!
2007 Apple Year in Review: Security

With the year rapidly coming to a close it's time for all those year-end retrospectives to pop up across the internets (and traditional media). 2007 was an especially busy year for Apple who introduced a plethora of revolutionary new hardware and software that has given fodder for post-upon-post to blogs old and new. When not contributing to TAB (or spying on the Caldari for the Amarr in EVE Online) my focus is on all things related to information security (i.e. my day job). With that in mind, I thought it would be interesting to do a “security year in review” as it relates to our favorite OS & hardware vendor to see where we've been and where we're headed, tossing in a bit of advice to help keep your holiday computing secure. Back To Where We Started�From January kicked off with The Month of Apple Bugs (“official” web site), a project whose sole intent was to show the world that even Apple has a chink in its dragon-scale armor. While daily flaws were revealed, none were earth shattering and the interest in their releases died down substantially very quickly into the project. The founders showed their lack of professional integrity when they admitted they weren't notifying vendors before releasing the exploits. If the project's integrity wasn't in question from the start, a contingent of vocal uses argued that various bugs had no security impact whatsoever, and it became painfully obvious that the project had to go fishing for issues in many cases since some of the bugs weren't even for Apple-released products. Number�Crunching According to the National Vulnerability Database, there were 79 common vulnerabilities & exploits (CVEs) for “Mac OS X” and 45 for “Mac OS X Server”. The same numbers for 2006 were 106 and 55, but these are difficult statistics to trend since the 2005 data shows 96 & 72 respectively. Overall, it does appear that the operating systems get harder to break through as Apple matures. Apple officially released 32 product and OS security updates, each fixing one or more vulnerabilities (with their latest one for Tiger [10.4] in November 2007 fixing over 40). Unfortunately, Leopard even had a few vulnerabilities as the 10.5.1 update fixed three security issues with the new firewall. New! Impoved!�Insecure! Two of the product highlights of the year were the release of the iPhone and Apple's answer to Microsoft Vista - Leopard [OS X 10.5]. The iPhone had detractors from the start, and some of them went off to find a way to make it do what they wanted it to do on their schedule. These hacks have been beaten to death in the blogs and there's even a central repository for them. Unfortunately, many of them require exposing and exploiting security vulnerabilities on the device in order to “free” them from Apple's iron grip. Apple has not been as quick as some would like to patch the device, but they have addressed the security issues as they come up and have done a better job issuing fixes and features than other smartphones (and I've had smartphones from other vendors). There were reports of broken phones after updates due to using these hacks and it's my firm belief that you get what you deserve when you decide to exploit security holes in order to gain functionality. Patience will have paid off for those users who decided to wait for Apple to do the right thing and release an API letting developers go beyond pretty iPhone-tailored web pages. While the iPhone stole the show for the year, Leopard was not without relevance since it may have been the most anticipated operating system release ever (well, perhaps Vista beat it slightly due to the constantly sliding schedule). How successful this release was is a topic for another post, but it was not without many new security features, including application sandboxing, code-signing, library randomization and a new firewall configuration (there was a slew of changes under-the-hood as well). These features were heavily scrutinized, with the new firewall taking an especially hard beating and was the subject of the aforementioned end of year 10.5.1 patch. Expect The�Unexpected The Mac platform gained even further popularity in 2007, but this visibility came at price. As more users flock to OS X we can expect to see hackers migrate there as well. The engineers over at McAfee's AVERT Labs identified a rise in crimeware on OS X, showing that the bad guys see profit in targeting this new playground. This was further demonstrated in November when the Net was abuzz with the news of a trojan horse aimed at Mac users. Then again, November is a rather slow news month. Sadly, 2008 may be a dangerous year for iPhone users with many researches flagging it as a prime target. Given how little problem Apple supporters have with handing over the platform to the enemy by identifying and exploiting vulnerabilities, I'm not surprised. Keeping Safe For The�Holidays 'Tis the season to demonstrate our wanton consumption and many happy individuals will be recipients of a brand new Mac later this month. While the out-of-the-box Mac experience is still a fairly secure one there are some things you can do to ensure that it stays that way. Even though new boxes will be shipping with Leopard, the Tiger Security Configuration Guide - approved by our friends at the NSA & Apple - provides a good starting point for boosting the security profile of your dektop. If you're really the adventurous type, you can even make your Leopard firewall experience a bit more secure. The advent of real malware on the Mac means that you should also definitely consider using anti-virus/anti-malware software. Thankfully, there are many to choose from. McAfee VirusScan 8.6 was the first Leopard compatible anti-virus product, with MacScan (more spyware-focused) and Sophos Endpoint Security & Control coming in shortly thereafter. Norton seems to be lagging behind, but it's in good company with the freely available ClamXav. For all those Airport Extreme recipients, you should definitely check out Glenn Fleishman's Take Control of Your 802.11n AirPort Extreme Network to ensure you've configured your network as securely as possible. And To All A Good�Night Overall, my take is that 2007 was a good year for Apple in terms of security. The Cupertino crew smacked down bugs as quickly as they arose and managed to build products with new features that have laid the foundation for even more secure applications and operating systems in the coming years. Despite the news that Macs are in the sights of more malicious malcontents, it remains the most secure and productive computing platform available today.
Apple’s Mobile Dominance and MobileMe

It’s becoming abundantly clear that Apple needs to improve MobileMe. Obviously, Android is now Apple’s biggest threat in the mobile space and Google’s innovation wheel isn’t slowing down. To fully understand just how bad Apple is at running Internet services, let’s take a trip back in time. At the Macworld keynote on January 5, 2000, Steve Jobs released iTools which was built for Mac OS 9. Features included: An @Mac.com email address 20 megabytes of iDisk web storage An easy to use web page builder called Homepage A KidSafe product that ensured a safe Internet experience for the little ones If you’re dying to know more, here’s the press release. What made the offering such a breakthrough is that it was an absolutely free service, back when Google was still just a search engine. Because of the seamless integration with Mac OS and the fact it was free, millions of Mac users signed up for iTools. This was the highlight of Apple’s Online Services product and, ever since, Apple has struggled to keep up. In 2002, iTools was rebranded as .Mac and the price shot up to $99.95 a year. Apple dropped KidSafe, upped the iDisk storage too and introduced “Backup” which was an OS X app to backup files and folders to the online iDisk. It was pretty clear that Apple didn’t truly put a lot of thought into .Mac because, while Apple.com was touting, “Macs don’t get viruses”, .Mac touted that you get a McAfee’s Virex Antivirus software for free just for joining and Apple stores across the U.S. were required to maintain a 60 percent attach rate for .Mac on all new Macs sold. Apple still had a better service than any other web service, mostly because the cloud services that were existent saw Macintosh as too small of a market (remember this is 2002) and Apple seamlessly integrated .Mac into the system to the point where a power user may be nagged to just buy it already as Quicktime and iMovie had a “Send to .Mac” feature and Apple Mail placed .Mac as the first choice when adding a new e-mail account. Apple lost thousands of subscribers in the shift to a paid model but many stayed until Google and other competitors began strengthening their cloud offerings. In 2008, Apple finally upgraded the aging online subscription model with real features that power users were aching for. MobileMe, released in June of 2008 at WWDC, still included e-mail, iDisk and your own personal homepage (via iWeb ’09) but the new killer feature was sync. You could now keep multiple PCs, Macs, iPhones and now iPads in sync instantly via the web with calendars, contacts and email talking to each other to ensure the latest info is always on the device you have with you. Apple’s foray into cloud syncing was a failure at first. Steve sent out this letter shortly after MobileMe’s launch admitting the MobileMe launch was a failure saying, “The launch of MobileMe was not our finest hour.” Apple gave out free months of service to people who purchased the new service and improvements were made. Since then, Apple has done little to add to the service and MobileMe is now completely overshadowed by every other competitor in the market. Even startups like Box.net started by a couple of guys with some angel financing were able to top Apple’s iDisk that was introduced back with iTools in 2000. Apple added features like “Find my iPhone” in 2009 and continued to make slight improvements, but Google offers e-mail, sync, storage, calendars, contacts and more for free. Sure, Google has advertising but no one seems to care, because $99 for an email address and some syncing between devices is completely ludicrous now that we’re half-way in to 2010. We featured a post in February, “10 Ways to Make MobileMe Perfect” which detailed exactly what Apple needs to do to find relevance again among a slew of superior products from competitors. Another great example of Apple completely missing an opportunity with MobileMe is the iPad. Why must you sync with iTunes and deal with a difficult-to-use interface to get documents on and off of the iPad? Why isn’t MobileMe the key that makes iPad a true on the go device? In his review, John Gruber writes: Apple has MobileMe, but because it’s a paid service, they can’t (or at least won’t) assume that all iPad owners are going to use it. But then even those of us who do u se MobileMe get stuck with a first-run iPad experience that involves a tethered USB connection to a computer. The Apple Way is to assume that your primary data stores for these things are locally stored on your Mac or PC — Address Book, iCal. I think most of the Mac community has accepted that iTools, .Mac and now MobileMe is a product for new users and not a service for power users and my personal motto became, “those who know, don’t use MobileMe.” It wasn’t until Google’s I/O conference last week in San Francisco that I realized how poorly Apple is positioned in the fight for mobile dominance. Google released Android version 2.2 with over the air everything. You can purchase music in your web browser and it’s on your Android phone instantly. The same goes for Google Maps links, which you can click “send to phone” and the maps app opens automatically. The real power of Android is entering your Google ID and all of your data comes down from the cloud and stays in sync without ever plugging into a computer. Apple has completely failed at this. I’m not writing the death of MobileMe just yet. Apple’s recent beta release of a new and improved MobileMe webmail is a step in the right direction, but it still has a long way to go. Apple purchased Lala.com which is an incredible startup that allows you to stream music that you’ve purchased from anywhere and Apple has announced the closure of Lala on May 31 (only a few days ahead of WWDC). One can only imagine that Google’s ultra-cool over the air music purchase technology demoed last week will soon be old news as iTunes in The Cloud becomes a reality where your entire music library travels with you anywhere as long as you have an Internet connection. The ultimate task for Apple is to bite the bullet and make MobileMe free again. It’s easy to compare Google to Apple’s products when one is free and the other is $99, but when comparing two free services and accounting that MobileMe is built into every Apple device you own, it’s a much easier consideration for users. Doing the math is easy when you consider that Apple might make $99 per user per year but losing an iPhone sale to Google’s Android platform is a far greater loss and Apple needs to free MobileMe from a subscription model to compete head on with Google. Of course, there’s a lot more Apple can do beyond simply offering up MobileMe for free. Remember iWork.com? This collaboration tool goes head to head with Google Docs in many ways but it’s still in beta over a year after being previewed at Macworld 2009 and Apple lead us to believe it would actually be charging for this when iWork left public beta. I could go on and on comparing Apple to Google in every way, but it’s clear that Google is the winner and that wouldn’t change even if Apple dropped the price of their suite of tools to $0. That boat has set sail and Apple is still offering a miniscule 20GB iDisk storage and iDisk is just as reliable as it was 10 years ago. Let’s hope Google’s kick in the butt with Android 2.2 will encourage Apple to step it up and bring MobileMe up to speed very soon. For those interested in cloud computing or data centers, check out our Structure conference in June.
20 Years of Image Editing: Photoshop from 1.0 to CS4

� �From its humble beginnings on a grad student's Mac Plus to its complete photo-editing domination, Photoshop has changed the world in 20 short years.� Photoshop is everywhere. And while fundamentally it is the standard professional-quality image editor, it’s also a cultural touchstone with a reach that extends to advertising, fashion magazines, television, film, and the news. Lighter versions like Photoshop Elements, Photoshop.com, and even Photoshop Mobile on the iPhone have distilled its power for the masses, and sites like PhotoshopDisasters.blogspot.com chronicle painful misuses for everyone to point at and giggle about. “Photoshop” the verb was even added to Webster’s dictionary in 1992.In such a Photoshop-saturated society, it’s easy to forget that the software hasn’t been around forever. Since February 2010 marks the 20th anniversary of Photoshop 1.0, now is the perfect time to revisit everything from Adobe’s systematic dismantling of its competition to the way the software was used to make Katie Couric “lose weight.”�Two Decades of Photoshop�We give you every single Photoshop release, plus the effects of Adobe's software on its competition and our culture.�1987�Release: Thomas Knoll, a PhD student at the University of Michigan, creates a program called Display for his Mac Plus. It can display 256-shade grayscale images on a 1-bit black-and-white screen with dithering.�1988�Release: Display is renamed Photoshop, and the Knoll brothers (Thomas and John, an effects expert at Industrial Light & Magic [ILM]) license the first version to Barneyscan, a slide-scanner manufacturer. Approximately 200 copies of version 0.87 ship bundled with the scanners.Cultural: The first working version of Photoshop appears at Apple, and the era of Photoshop piracy begins as engineers pass it around amongst themselves and gape in awe.�1989�Release: John Knoll demos Photoshop for Adobe's primary art director Russell Brown and founder John Warnock. Adobe signs a distribution deal with the Knoll brothers.�1990�Release: Photoshop 1.0 ships. It requires an 8MHz processor and 2MB of RAM. The software fits on a single 3.5-inch floppy disk. Key features include color correction, image optimization for output, Curves, Levels, and the Clone tool.Cultural: Photoshop is used extensively at ILM during postproduction work on The Abyss.�1991�Cultural: ILM continues to use Photoshop to create digital composite shots for movies like The Rocketeer, Hook, and Terminator 2: Judgment Day.Release: Photoshop 2.0 (code-named Fast Eddy) ships with CMYK support, Duotones, the Path tool, and rasterization of Illustrator files. But the HSB and HSL color modes in 1.0 are gone.Cultural: John Knoll covertly releases a program to revert Adobe Photoshop's "eye" application icons back to the original "1HR Photo Shop" icon.Release: Adobe releases an SDK for third-party plug-in development. Later in the year, Aldus (developer of PageMaker) releases the Gallery Effects plug-in package.�1992�Release: Kai Krause releases Kai's Power Tools, a popular plug-in set for Photoshop featuring graphically rich (and often bewildering) visual interfaces.�1993�Release: Photoshop 2.5 (code-named Merlin) ships with 16-bit image support, palettes, Quick Mask, Dodge and Burn tools, and the Variations visual color-correction tool. This is the first Photoshop version available on Windows as well as Mac.�1994�Cultural: Time magazine runs a cover photo of O.J. Simpson that was photoshopped with very dark color correction, creating controversy over how African Americans are portrayed by the media.Release: Photoshop 3.0 (code-named Tiger Mountain) introduces image layers, often considered the most important feature ever added to the program.Release: Alien Skin Software delivers the first drop-shadow effect plugin for Photoshop.Competition: Adobe acquires Aldus, keeping PageMaker on life support by burying Windows-only image editor PhotoStyler.Competition: HSC Software introduces Live Picture, billed as a next-generation nondestructive image editor, for a whopping introductory price of $3,995.�1995�Competition: HSC Software lowers Live Picture price to $995 in one fell swoop, angering early adopters who paid full price.Competition: Quark introduces XPosure image-editing software at the Seybold Seminars in Boston. Developed in conjunction with Japanese electronics giant JVC, the product boasts a nondestructive filter featuring "lenses"... but it never ships.�1996�Release: Photoshop 4.0 (code-named Big Electric cat) ships with nondestructive adjustment layers, Actions, macros, grids, guides, the Free Transform tool, and a radically redesigned user interface. Photoshop 4.0 LE (Limited Edition) is bundled with a wide range of image scanners.Competition: Macromedia ships its xRes image editor, which also features nondestructive image editing. Although it soon became another footnote in image editing hisotry, you can still see a bit of its DNA in Adobe Fireworks.�Next Page: Photoshop Timeline continued >> 1997�Competition: Former Apple CEO John Sculley becomes chairman of Live Picture and tries to salvage Live Picture technology for web applications.�1998�Release: Photoshop 5.0 (code-named Strange Cargo) ships. New features include the History palette and its multiple undos, editable type, layer effects (now called Styles), spot colors, ICC color management, and the Magnetic Lasso tool. CMYK files go to 64-bit (16 bits/channel). The new 3D Transform plug-in is the forerunner to the 3D menu in the current Extended version, and this is also the first Photoshop that supported integrated online updating.Competition: Live Picture is spotted selling in mail-order catalogs for under $100.�1999�Release: Adobe ImageReady 2 becomes part of Photoshop 5.5, allowing animated GIFs and sliced JPEG images. This release also adds the Extract command (for isolating images from their backgrounds), the Art History Brush, and Save For Web.�2000�Release: Photoshop 6.0 (code-named Venus in Furs) includes vector-based shapes, content layers (solid, gradient, and texture fills), Layer Styles, the Liquefy filter, a tool options bar, layer-based slicing for HTML work, and an extensive interface overhaul.�2001�--- �2002�Release: Photoshop 7.0 (code-named Liquid Sky) ships with the Healing Brush tool, a revamped brush engine, integrated image browser, custom workspaces, and even a spell checker. It's the last version that runs under OS 9.Release: Adobe releases the consumer-oriented Photoshop Elements package, which replaces the earlier LE versions of Photoshop that were bundled with many third-party scanners and digitizers.�2003�Release: Photoshop 7.0.1 update includes support for RAW image formats via the Adobe Photoshop Camera Raw plug-in.Release: Photoshop CS (code-named Dark Matter), included in all Adobe Creative Suite editions, has layer groups, the Shadow/Highlight and Match Color tools, text on a path, the Lens Blur filter, custom keyboard shortcuts, and JavaScript support. CS is the first version to require activation, have Standard and Extended versions, and a PDF manual.Cultural: Photoshop CS also includes code to automatically detect attempts to scan currency banknotes, fueling many conspiracy theories.�2004�---�2005�Release: Photoshop CS2 (code-named Space Monkey) ships with Bridge (which replaces integrated Browser), Smart Objects, Spot Healing tool, Vanishing Point and Red retouching tools, HDR (high dynamic range; 32 bits per channel) merging abilities, and the Lens Correction filter. A rather significant but subtle addition to CS2 is the ability to select more than one layer at a time.�2006�Release: Adobe releases a public beta of Photoshop Lightroom, an image-management database aimed at professional photographers.Cultural: Newswire service Reuters is caught in a scandal when it's busted using Photoshop to enhance smoke plumes in an image of Beirut.Cultural: CBS's official photo of news anchor Katie Couric is photoshopped to shave a few too many pounds off her frame.�2007�Release: Photoshop Lightroom 1.0 ships.Release: Photoshop CS3 (code-named Red Pill) ships with native Intel processor support, Smart Filters, the ability to import and process video, significant interface revisions, the Black and White conversion tool, far more support for editing images with more than 8 bits/channel, and a seriously improved Clone tool.�2008� Release: Adobe launches the Flash-based Photoshop Express app on Photoshop.com, offering limited image-editing functionality and online storage.Cultural: Iran's state-run media agency releases a photo of a missile test, altered to add a fourth missile. (The third missile from the right is a clone of the second missile.)Release: Photoshop Lightroom 2.0 is released, adding 64-bit operation, multiple-monitor support, localized image corrections, and enhanced editing abilities.Release: Photoshop CS4 (code-named Stonehenge) ships with OpenGL acceleration, Content Aware Scaling, 64-bit support for Windows Vista (but not Mac!), improved RAW image processing, and auto layer-alignment tools.�2009�Release: Adobe makes Photoshop.com available for the iPhone as a free mobile edition, delivering limited image editing on the run.Release: Adobe launches a public beta of Lightroom 3.0, featuring better grain- and noise-management tools.�2010�Cultural: Photoshop turns 20! China is the traditional gift, but we'd prefer CS5.�Next Page: The Evolution of Photoshop Splash Screens >> Making a Splash�We’re so used to seeing a splash screen every time we open Photoshop that we hardly pause to glance at it any more. But really, the wild, way-out splash screens on the beta versions of Photoshop over the years are a lot more eye-catching. Peep this gallery of the beta splash screens next to their official-release counterparts. (Click to enlarge)�Version 2.5��Version 3.0��Version 4.0��Version 5.0��Version 6.0��Version 7.0��Version CS��Version CS2��Version CS3��Version CS4� �Next Page: Vintage Photoshop Toolbars >> Vintage Tools�The photoshop toolbar has evolved over the years too--first to add more tools, then to streamline its appearance and take up less space.��Next Page: Interview -- Photoshop Unmasked >> Photoshop Unmasked�Two Adobe power players talk about Photoshop's birth, evolution, and future.�Adobe’s Senior Creative Director Russell Brown and VP of Product Management for Professional Digital Imaging Kevin Connor are two of the brightest stars in the Photoshop galaxy—they’ve rung up 38 years of Adobe experience between them. Brown even won an Emmy in 2008 for his Dr. Brown’s Photoshop Laboratory show on tv.adobe.com. We probed their giant, Photoshop-filled brains with these chin-scratching questions…�Mac|Life: What are your first memories of seeing Photoshop?Russell Brown: My first viewing of it was when John Knoll gave me a demo in 1989. I recall that he created a soft-edge selection mask and painted into it with a soft-edge brush. Wow! This was downright amazing. Nothing like it was possible on the Macintosh or PC at the time. Technology like this was only available on high-end prepress systems. I knew that what I was seeing was a serious new tool that was going to change my life.Kevin Connor: Prior to joining Adobe, I was working at a small startup company. We had one copy of Photoshop installed on one of the Macs in the office, and I remember stepping through the menus and tools just to see what they could do. It was probably version 2.5. I also remember a freelance designer we worked with at the time marveling at all that could be accomplished by manipulating color channels.�Mac|Life: Russell, is there a specific Photoshop feature that you can't live without?RB: That would most definitely have to be layers. Nothing can replace layers. I’m sure that about 90 percent of our users might say the same thing.�Mac|Life: Kevin, how do you see Photoshop evolving over the course of the next decade?KC: A number of trends will influence that. From a technology standpoint, the big trend is computational photography. Increasingly, software algorithms are being used to derive photographs that could not be directly captured using traditional optics and sensors. Today, this technology can give us seamless panorama photos or wide-angle shots with no distortion, but in the future, it may even give us the ability to manipulate a photograph in three dimensions, adjusting vantage point and focus after the capture. Ultimately, it can also lead to software that is smarter about understanding the contents of a photo and can manipulate it as more than just a collection of pixels.Another trend that will affect Photoshop’s future is the distribution of workflows across the web and mobile devices. It may not make sense to move all of Photoshop into a web-based application, but certain things may be done better on the web or on the road, and products will start to blur the line between the desktop, the web, and other devices. As we manage these big changes, we also need to continue to evolve the Photoshop interface so that these new capabilities can fit in naturally, while older capabilities can be refreshed and improved. Of course, it’s hard to say yet precisely what you’ll see in five years or 10 years, but these are things we’re already working on today that we expect to influence the product for some time to come.�Mac|Life: Russell, any particular online Photoshop resources you'd recommend to our readers?RB: Definitely. In fact, here's a list of my favorite websites for Photoshop information:>> blogs.adobe.com/jnack/>> www.photoshopuser.com/psuser.htm>> www.mogo-media.com/welcome-pst.php>> www.photoshopnews.com>> www.lynda.com>> www.russellbrown.com�Mac|Life: Do you think there will ever be a viable competitor to Photoshop?KC: There’s always competition, but if we do our jobs right, people just don’t notice! I’m being a little facetious, but my point is that Photoshop is a very big target, and companies both big and small have continuously taken aim at it. They just haven’t generally been successful.�
Why Dan Frommer and Scott Moritz Are Wrong on iPhone Sales

Daniel Eran DilgerSilicon Alley Insider's Dan Frommer says Apple's announcement of reaching its million mark goal in iPhone sales three weeks early is actually bad news for Apple and is convolutedly "below plan." He also says the announcement only props up the speculative conjecture by Scott Moritz of the Street that Apple's iPhones sales are somehow woefully below expectations. They're wrong, here's why.The PremiseFrommer wrote that Apple isn't selling iPhones as fast as planned and is set to only sell around half of its 2008 goal.His premise revolves around the idea that if Apple were selling iPhones at "a constant rate," a million phones in 74 days would be five million per year. However, because it sold over a quarter of those in the opening day and a half at the end of June, Frommer calculates that sales of the remainder in the 72 days since the first of July mean that Apple is only hitting a "3.6 million annual run rate."By the end of 2008, that would only result in 5.8 million units instead of the ten million goal Apple. [Silicon Alley Insider: Apple's iPhone: 1 Million Is Below Plan]Strike One: The Run Rate Myth.The most obvious problem with that idea is the fact that devices don't sell at a constant “run rate." Apple's iPhone sales took off at launch much faster than the original iPod due to the fact that a swell of early adopters were ready to buy it after being convinced over six months of anticipation. At the same time, many potential buyers held off on plans to buy the iPhone until they could read reviews and get a real sense of how it worked. Many were also locked into contracts with Verizon or Sprint. With only six months of advanced notice, it will still be a few more months before the majority of buyers who want an iPhone even get the chance to buy one without having to pay outrageous fees to cancel their existing mobile contract. iPhone sales are also now taking on the network effect of the iPod, as early adopters show their friends. All these factors have difficult to estimate impacts upon sales that make trying to figure a static “run rate�? a very simplistic and pointless exercise.However, there is another factor that simply blows the entire idea of a static “run rate�? out of the water. Last November, I predicted that sales of the Zune would bomb that winter because Microsoft had failed to critically examine Apple's historical sales patterns. Sure enough, the Zune was thrown against the rocks by Apple's riptide. Frommer's idea ignores that same reality by imagining that iPhone sales will schlep along at a linear pace. Had Frommer tried to calculate an "annual run rate" for the iPod based on a portion of third quarter sales at any point over the last half decade, he would never have been close to accurate. That’s because Apple’s iPod sales roughly triple every winter quarter.In 2002, it sold nearly as many iPods in its winter quarter as it did the first three quarters combined: 219,000In 2003, it actually sold more iPods in its winter quarter than in the first three combined: 733,000In 2004, it again sold more iPods in its winter quarter than in the first three: 4,580,000In 2005, it sold more than 4 million units every quarter, but still sold nearly three times as many in the winter: 14,480,000.In 2006, it sold more than 8 million units every quarter, and then sold over 21 million in the winter quarter.In 2007, it has maintained quarterly sales between 10.5 and 9.8 million per quarter.[Strike 3: Why Zune will Bomb this Winter]Strike Two: The Have it Both Ways Myth.One particularly annoying bit of analysts' talk about Apple's expectations is that they can't seem to decide if Apple's projections are bad because they are conservative lowballs, or if they are bad for being overly enthusiastic figures the company won't be able to reach. They often try to describe them as both, loading contempt on both sides of the scale. This makes them look very foolish. Do they think we have no memory, or are they just changing their stories back and forth in sheer desperation?Frommer tried to argue both sides at once in the same article. Recall that Apple only ever gave two iPhone sales goals: one million by the end of the first quarter of sales, and ten million by the end of 2008. In his piece, Frommer suggests Apple will only be able to sell 5.8 million iPhones by the end of 2008, based on that fallacious "run rate." That would be just over half of Apple's ten million goal. However, he then says that Apple's immediate short term goal was an unimpressive low ball, no doubt because Apple reached it three weeks early.Apple's stated goals must be a greatly frustrating logical conundrum for Frommer, because even at a “run rate" of one million in a quarter, Apple could only ever hope to sell six million iPhones by the end of 2008, another five quarters later. No wonder he's faced with trying to say that the immediate goal was too low and the longer term one is too high! Frommer needs to stop trying to pound round facts into square holes just so they can be stacked up like bricks the way he would like them to be.Strike Three: The Market Bearing Price Myth.While Frommer and Moritz are enamored with the idea that iPhone prices could only be cut if sales were in crisis, a variety of obvious market realities don't support that simpleton idea. Between now and the end of 2008, Apple has just two holiday seasons. If it wants to dramatically exploit its historical potential for selling roughly three times as many gadgets during the winter season, it makes sense to trade off unit pricing for volume sales, even if it could perhaps sell fewer at a higher price and make more short term profits doing so.Such a strategy isn't unique. Microsoft and Sony currently lose money on their new game consoles in desperate bids to establish their gaming and HD video playing platforms. Even so, this year they both cut prices again to accelerate volume demand. Nintendo purposely aimed low to capture volume sales using a more attractive price point. Given high demand for the Wii and extremely constrained availability, Nintendo "should" seemingly raise its console price and profiteer. It hasn't. While prices are clearly linked to demand, it is a common fallacy to think that the "right price" is always the highest the market will bear. Jobs' 99 cent pricing in the iTunes store is clearly not the top price consumers will pay for downloads. Music labels are fuming that other licensees such as Verizon will collect $2.50 or more for portions of a song sold as a ringtone. Jobs wants media prices low to induce volume sales and attract buyers to the legitimate market for music and movie downloads. Labels and studios want "market pricing," in part so they can jack up the price of popular music to exploit consumers, and in part so they can exploit artists by threatening to release their work at lower tiered prices and signal to the market that their careers are over.[Universal vs Apple in the iTunes Store Contracts][Nintendo Wii vs Microsoft Xbox 360 and Sony PS3]This All Happened Before.Dial back the clock twenty years, and you'll discover that Steve Jobs also fought with Apple CEO John Sculley over the price of the original Macintosh. The desire to use an expensive but pioneering amount of RAM and a futuristic new processor had inflated the price of the Mac, but the design team was still able to deliver it at a fairly attractive price point of $1,995. Scully determined that the Mac would still sell at $2495, delivering high profits to fund splashy advertising. Nothing on the market was really similar to the Mac apart from Apple's $9,995 Lisa. VisiOn for the PC similarly cost nearly $10,000 and did far less. Sculley thought that the market would bear anything Apple might charge. Andy Hertzfeld recalled on Folklore.org that in October 1983, "Steve Jobs strode into the software area one evening, looking angry. 'You're not going to like this,' he told us, 'but Sculley is insisting that we charge $2495 for the Mac instead of $1995, and use the extra money for a bigger marketing budget. He figures that the early adopters will buy it no matter what the price. He also wants more of a cushion to protect Apple II sales. But don't worry, I'm not going to let him get away with it!'"Jobs fought Sculley over the price increase, but Sculley prevailed. Sure enough, Macs did sell well out of the gate to early adopters at the higher price, but sales then began to stall. While Jobs couldn't cut the price for the original Mac to induce wider adoption in the mid 80s, he could choose to cut the price of the iPhone early and use interest in the iPod Touch to ramp users toward the iPhone. That price cut will dramatically boost sales this winter, just as iPod price cuts and feature refreshes do every year.Apple will earn less profit on individual hardware sales of the iPhone, and may even earn slightly less money overall this quarter than it might have selling the iPhone at $599. However, a $399 iPhone will dramatically boost the company's sustainable subscriber revenues and devastatingly cut into stationary rivals like Palm and the Windows Mobile licensees, giving them little opportunity retool and strike back with copycat products. [Price Fight - Folklore.org][Office Wars 3 - How Microsoft Got Its Office Monopoly]Strike Four: The Myth of Unlimited Availability.Another problem with idea that iPhone sales were in crisis--and that a price cut is a conspiracy to hide the truth--is that Apple sold out of iPhones in many of its retail stores throughout the first three weeks on sale.Carl Howe of Blackfriar's Communications tracked iPhone availability every day through July, and then animated the results in a movie that depicts just how constrained iPhone inventories in Apple's retail stores were. So not only did Apple meet its 94 day goal 20 days early, but it did so despite having no or few iPhones to sell in many of its stores during the first 21 days. Price isn't just related to demand, but also to supply.That also demonstrates the fallacy of Scott Moritz' assertion that Apple secretly planned to sell a million iPhones in a day and a half, and was sorely disappointed after failing to do so. How could Apple have planned on selling a million units in one day when it didn't even have a million units on the shelves of its stores during the first month? Remember, Moritz wasn't saying Apple had a delivery problem in getting enough units to stores as Nintendo is experiencing with its constrained supplies of the Wii. Instead, he tried to suggest that interest in the iPhone was far below Apple's estimates, and buyers were leaving it on the shelf like Windows Vista. The result, he claimed, was that "rivals were rejoicing."The only real rejoicing by rivals was that Moritz was volunteering to repeat the talking points handed to him by Verizon shill Roger Entner of IAG Research. Just hours before Apple announced it had sold a million units, Moritz tried to get some traction out of the idea that Apple had dropped the price in desperation to find another half million or so customers over the next three weeks. Apple isn't the typical tech company being run by visionless bean counters. It it were, it would have continued selling $600 iPhones at least through the end of September and then announced that it had sold its million. Apple had to push out new iPods in early September and fit the iPhone into the price range because next month it will be rolling out Leopard and a series of new software updates. Apple feeds the press in small, consistent, and regular feedings so reporters know what to write. If Apple were a big stupid company such as, say HP, it would parade out a mix of dozens of consumer and business products all together in one big event, and nobody would ever hear about any of it. HP did.[Why a million iPhones in 74 days is better than you think- Blackfriars][HP's marketing this week: fashionable but ineffective - Blackfriars][Unraveling Anti-Apple Panic: the iPhone Launch Success] [More on Scott Moritz and the Jim Cramer Misinformation Engine]Strike Five: It's Too Late to Deny the iPhone.The most comical part of Frommers’ analysis is that he’s trying to stuff a cat back into a bag and explain that there was never really any cat, long after everyone in the room heard the purr and pet the thing. Sorry, but the windows of opportunity to doubt the iPhone have long since closed.Real Windows Enthusiasts were aware of the need to deny the iPhone well before its release. They all chimed in with reasons why the iPhone wouldn't work, wouldn't offer what consumers want, and wouldn't sell well, all hoping that their non-stop misinformation campaigns would act as a self-fulfilling prophesy. They failed miserably.John Dvorak began his smear campaign immediately, appearing on CNBC to say that the iPhone was "trending against what people are really liking in phones nowadays, which are those little keypads.�? He explained, “The BlackJack, the Samsung, the BlackBerry obviously pushes this kind of thing. The Palm, all of these. I guess some of these stocks went down on the Apple announcement, thinking that Apple could do no wrong. But I think Apple can do wrong, and I think this is it." Reader Jim Barrow sent in a link to a MarketWatch article from March, where Dvorak scribed a rambling diatribe entitled "Apple should pull the plug on the iPhone." He offered no factual basis for worrying that the iPhone might not work out apart from the offhanded comment that "there is no likelihood that Apple can be successful in a business this competitive," words which echoed Dvorak's 1984 observation that "the Macintosh uses an experimental pointing device called a 'mouse.' There is no evidence that people want to use these things."In April, Dvorak inflamed his 'pull the plug' rhetoric further in a TWiT podcast, where he reported to an audience of hundreds of thousands that the iPhone only delivered "40 minutes of talk time" and "the interface fouls up constantly.�? Dvorak said that his inside information on the iPhone came from a "guy at Cingular who’s testing the product," adding, "he’s telling me confidentially and I shouldn’t be telling anybody."[John Dvorak: How Wrong Can One Guy Be?][Readers Write: Don't Write About John Dvorak Anymore]It'll Be the Death of You.Dvorak was joined by Rob Enderle, who called the iPhone “damned�? and “not a very good phone�? at every opportunity in the months before its launch, despite not really knowing anything about it, or even ever offering any rational criticism. Instead, Enderle appealed to fantasy fears of sexual assault, murder, and the violent death of children, all of which he suggested might somehow be related to the iPhone. Unaware that a password protected iPhone--or even a unauthorized unit without a configured service plan--can still be used to make emergency phone calls, Enderle wrote about, "an emergency situation where, say, a woman was being raped and couldn’t call for help because she didn’t remember her iPhone password." As I understand, with a Windows Mobile phone, even if the unit crashed while trying to place the call, at least the victim could use it like a brick as a blunt weapon. Enderle also feared that being unable to take out the battery would somehow making recharging it impossible, resulting an a scenario where one might end up on “the wrong side of town�? with a dead iPhone and be murdered because of it. Being on the wrong side of town was apparently the source of most murders prior to the arrival of the cell phone, which somehow made it safe to be in bad neighborhoods. For those who unfazed by the prospect of one's own own grizzly death in relation to the iPhone, Enderle appealed to his readers to please think of the children, particularly the potential for their brutal decapitation in an iPhone-related collision. "If you are buying this phone for a child or another member of your family," Enderle warned, "please emphasize that entering data on this phone while driving is dangerous." In contrast, operating the slide out keyboards of an HTC brick phone, or using both hands to thumb type on a BlackBerry may or may not save your children as they drive off an embankment, but at least you'll know they didn't die at the hands of Apple's "damned" iPhone.[SCO, Linux, and Microsoft in the History of OS: 1970s][Mac OS X vs Linux: Third Party Software and Security]Pure Concentrated Evil with a Multitouch Screen.Brian Lam of Gizmodo published an impassioned plea to boycott the iPhone shortly before its launch, due to the fact that Cingular had purchased the AT&T name, a brand Gizmodo's writer correlated with "monopoly tactics" in the late 70s. Gizmodo hasn't ever called for the boycotting of Verizon Wireless, which is well known for its anti-consumer tactics and which shares just as much blood with the old AT&T as its Baby Bell sibling Cingular, nor has it ever urged the boycott Microsoft products due to "monopoly tactics." Gizmodo also failed to boycott any other GSM phones that are tied to AT&T.Gizmodo's Lam and Enderle then teamed up with Slate's David Sessions in an article purporting to expose Apple's rated battery life for the iPhone. Sessions complained about the attention the iPhone was getting, and tried to dismiss Apple's announcement of a two fold increase in battery life over what was originally advertised. Unbelievably, Sessions and friends could only explain away the iPhone's jump in talk time by crediting its glass screen, saying that "glass transmits light more efficiently than plastic." That and some witchcraft.However, all of these individuals sharply reduced their squirt rate of false information after the iPhone's successful launch. In day and a half, Apple sold 270,000 iPhones compared to the 500,000 Palm OS Treos, 1.03 million RIM BlackBerrys, and 1.51 million Windows Mobile phones that were sold worldwide in the first 90 days of 2007.Apple has since nearly matched highflying RIM in sales during July, despite being limited to a single carrier and only offered for sale in the US. At this point, denying the iPhone is like saying the Earth is flat. It might be fun to do at a Renaissance Faire, but pretending to seriously doubt reality is not a good career move unless you work for the Street--or perhaps Rupert Murdoch, as Dvorak does.[Secret iPhone Details Lost in a Sea of Hype and Hate][iPhone Sales vs Zune, Palm, RIM, Symbian, Windows Mobile]And Now: a Warning.Let it be known that anyone who publishes further misinformation or blows out similar inanity will risk being instantly awarded a Zoon on the spot. No complicated voting, no tedious application process. New Zoon nominees will be rubber stamped with the same effortless fast tracking as the ECMA declaring Microsoft technology as an international standard.In fact, I’m going to totally Zoon Dan Frommer and Scott Moritz right now, as well as John Dvorak, Rob Enderle, Brian Lam, David Sessions, and even Roger Entner. And John Sculley. And while I’m handing out an intellectual property construct that costs me nothing to distribute, I will also award Steve Jobs with a Zoon for the whole two month “just kidding�? iPhone pricing situation, although I might take half of it back if I get a $100 coupon that doesn’t force me to spend $500 to actually use it. So let that be a warning to you out there on the Tubes thinking about how to linkbait an article at the expense of the progress of technology. I have a rapid firing gun full of Zoons and I’m not shy about cranking them out. Be sure to post any nominees.What do you think? I really like to hear from readers. Comment in the Forum or email me with your ideas. Like reading RoughlyDrafted? Share articles with your friends, link from your blog, and subscribe to my podcast! Submit to Reddit or Slashdot, or consider making a small donation supporting this site. Thanks!
Why the iPhone Platform is Still the Best Game in Town

How quickly we forget our very recent history. On January 9, 2007 Steve Jobs announced the iPhone at the Macworld convention. The original iPhone was to be serviced exclusively by Cingular. Also in January of 2007 we learned that Cingular, originally a joint venture between SBC and BellSouth, would be re-branded as AT&T. We then slowly learned as the iPhone's official release date drew closer, that the iPhone would continue to be exclusive to AT&T, would not be subsidized by AT&T, and you could purchase phones directly from Apple Retail Stores. As the layers of this onion were pealed back even further, we learned that Cingular (or was that AT&T?) agreed to pay Apple nearly eighteen dollars per month per subscriber for the privilege of being exclusive. Apple was also in control of the activation process which required an iTunes account. Moving forward Apple was also responsible for distributing all updates to the iPhone, not the carrier, not AT&T. Apple was completely in charge, completely. Oh, and there was one more thing, no third-party native apps, only web apps. In fact, Steve Jobs was at that time quite adamant that there would never be natively developed applications for the iPhone and that web 2.0 applications would be all that developers would ever need. Who Owns the Relationship with the Customer? What this fundamentally did was change the dynamics of whose customers were they first. The carrier's or the device manufacture's? A question that, until this point in time, was never asked. The point that Apple was making, was that consumers would choose Apple products before they would choose a cell phone carrier. And Apple was right. For the first time, a device manufacturer was in control of the relationship with the customer ahead of the carrier. If you owned an iPhone, you belonged to Apple first, then perhaps to the cell phone carrier. This change in the fundamental relationship with the consumer was cemented by large numbers. Very large numbers. Some of the largest numbers in the history of mobile computing. Then it happened, the App Store opened on July 10, 2008 and the next day the iPhone 3G was launched with iPhone OS 2.0. All existing iPhones and iPod touches were able to update to iPhone OS 2.0 as well. A new player was introduced into the equation, the third-party developer. Apple may have won the battle with the carrier in establishing its position with the customer, there was no question there. Apple came first in that relationship. But where does this third wheel fit in? A distant fourth place in line would be the manufactures of development tools and technologies that third-party developers choose to use. Companies like Adobe that manufacture these tools and technologies are even further removed from the mobile customer. Their focus is on making life easier for developers, not better products for mobile customers. It only makes sense since their customers are the developers. But just how important would this new iPhone development platform be to third-party developers and companies that build solutions that these third-party developers use? As only time would tell, and that all depended on what was at stake. And in the beginning, what was at stake was not yet known. That is, not until the numbers started rolling in. Quarter over quarter record-breaking sales of iPhones and iPod touches, and quarter over quarter record-breaking sales of Apps and unimaginable download statistics. Now everyone wants to own the customer. The only player that was clearly out of the race was the carrier, they were just along for the ride. This is all well and good for the device manufacturer, cellular carrier, and third-party developers. But there was another quite player out there whose battle was already over. The music and movie industries. What everyone seems to have missed was that the explosion of the iPhone into the hands of consumers was more of a play of convergence than its ability to surf the web, respond to e-mail and play games. A cell phone, and an iPod in one device (not just a phone with iTunes installed). Forget everything else. Everyone had a cell phone, and everyone had an iPod. And in June of 2009, when the price dropped to $99, absolutely everyone started thinking about using their iPod to answer phone calls. This is an important factor to consider. Everyone who had (or still has) an iPod is utilizing iTunes to manage and even purchase their music. Once you have a sizable music library in iTunes, and you have grown accustomed to purchasing musing from the iTunes Music Store, you are pretty much hooked. And the numbers on this side of the equation are not too shabby either. In April of 2008, Apple finally passed Walmart and iTunes became the #1 Music retailer currently representing more than 25 percent of all music sales in the U.S. Consumers have a relationship with their music, not their device and certainly not their cellular carrier. What has always defined the relationship has been the music. And Apple was and still is in control of that. It really had nothing to do with how great the iPhone was or was not. The fact that the iPhone is great only strengthens the bond, but it did not create the bond. That bond between consumers and Apple began with the iPod and remains intact due to the consumers owning and maintaining sizable music libraries via Apple’s software, hardware and online services. Every so often the music industry has tried to wrestle control of the customers away from Apple, but has thus far been unsuccessful. So now we can come to understand why developers are flocking to the iPhone platform and developing applications for Apple’s iPhone. There is a huge install base of customers purchasing apps that seems to increase quarter over quarter. And these customers have proven time and time again that they are willing to pay for music, movies, apps and connectivity. Focusing on the Apps, for the most part, since its debut on the market, Apple has maintained a single platform. The variations between the iPod touch and iPhone has remained subtle. Each being able to host the latest version of the iPhone SDK. Making the current total of units an astounding 50 million units. 50 million units all on basically the same device, running basically the same OS, and all able to access the same software from the same App Store. With the device manufacturer owning the relationship, and in control of software updates and distribution of third-party applications. What's more is the length of time that this particular situation has been stable. Three years running on a stable platform (which also includes iPod touch devices) to a growing number of users that now totals 85 million customers. Never before has such a consistent mobile platform been available to as many users for this length of time. Multi-Platform Investment That brings us to the value proposition. There is a cost associated with supporting additional platforms when developing mobile applications. And that cost will be balanced against the total opportunity there is to be gained. Each splinter in the platform, be it screen resolution, device capabilities, of operating system difference all increase the cost of targeting and maintaining software on that platform. These costs are not only related to writing code specific to each platform. The way that a Blackberry user expects to interact with an application is different from that of an Android user and different again from an iPhone user. Each platform has its own Human Interface Guidelines. This requires modifications in the design of the application as well as the support of variations in the testing cycle. And depending on how great the variances between devices are within a given platform, the approach to on device quality testing may vary as well. Looking at the current competition, RIM may still outnumber based on the total number of units sold to date, but if one takes a closer look, one will quickly discover not only a seriously fragmented collection of device profiles to test against, but also some rather low numbers of individuals downloading and using third-party applications. The “Crackberry” does one thing better than any other device on the market, and that is e-mail. The problem is that times change and most consumers are not utilizing e-mail as their primary means of electronic communication. Twitter and Facebook are replacing SMS and e-mail. So much so that in a recent survey, 40 percent of all existing Blackberry owners claim that they will switch over to iPhone when they replace their current device. What would be interesting to know is how many of those same Blackberry customers already have an iPod and an established iTunes music library. RIM’s only fault is that they have been a player for a long time. And over time, a device manufacture’s will ultimately start to splinter, and their customer base will fragment making the maintenance of applications for third-party develops across all fragments more and more expensive. Then there is Android. Can anyone honestly deny that Google will help Android become the dominate licensed operating system across portable devices? The problem that third-party developers face is that right out of the gate Google fragmented the market. With the OS divided into almost equal thirds presently (1.5, 1.6 and 2.1), the number of new Androids coming to market is mind numbing. Buyers remorse with a locked in two-year contract has become par for the course. The support costs for third-party developers on the barley one year only Android platform is that it is actually in worse condition than Blackberry. The number of variances based on-screen resolution, device capabilities and operating system versions is a nightmare to manage. And at the rate to which new devices are coming out, it is impossible to test on device across all variations, simply impossible. What is worse still is that each device manufacture can decide whether or not to include the “Google Experience” with their device, and decide on their own when to provide updates for the carrier to push out to the carrier's customers. This will prove to be problematic for those responsible for identifying testing scenarios, budgeting time, and scheduling regression tests to ensure consistent quality. Android Platform Versions Return on Investment What will the ongoing development costs be and what is the potential gain? For iPhone the overall support costs are currently low as the platform is not too terribly fragmented. Another thing that Apple has going for it is the predictably in which it operates. Almost like clockwork year after year. Original iPhone released June 2007, iPhone OS 2.0 announced March 2008, iPhone 3G released June 2008, iPhone OS 3.0 announced March 2009, iPhone 3GS released June 2009, iPhone OS 4.0 announced April 2010. Developers can plan for it, and business investors that fund third-party development can budget for it. A very stable platform with extremely predictable release cycles. Can the same be said for Android after just one year? Who knows when the next device will be making its way to consumer, what version of the OS it will have on it, and which manufacture will produce it. We don’t even know if it will be a phone or a television set! Not only does Google not own the relationship with Android customers, neither does the device manufacture. The carrier is still in control of the relationship following the old school paradigm of cell phone carriers. With RIM, the majority of users are hanging on to older devices that are not capable of running a modern mobile application. Certainly nothing on par to what can be developed on the most recent Blackberry OS, or even on Android or iPhone. And will RIM have its Blackberry 5.0 out of beta and on enough devices long enough for any sort of return on investment before Blackberry 6.0 is released? While RIM may in fact have a model more closely resembling Apple in the fact that they own the customer relationship first, not the carriers, RIM suffers from its long running legacy. Conclusion The point being is that the iPhone is a very well-managed, barely fragmented (as of today) platform with a huge customer base that can’t seem to get enough apps to satisfy their need to make mico-purchases at the app store. The iPhone has effectively replaced the candy rack at the checkout aisle for impulse purchases. Under the guidance of Steve Jobs, and since October 2001 with the introduction of the iPod, Apple has been earning its right to own outright the relationship it has with its customers. Through rigorous engineering best practices, and the ability to deliver a quality product like clockwork year after year, the consistent stability of the platform has made the iPhone a safe haven for third-party developers. Developers that are interested in developing high quality solutions to a well-groomed customer base that is willing to pay for that experience. What could possibly be a justifiable reason for the government to step in and take all that away?
Four Safe High-Tech Plays

With so much uncertainty and turmoil in the markets these days, investors need to choose stocks that combine safety with solid growth prospects. In choosing such low-risk, core holdings, one principle that has served us well over the years has been to focus on “franchises.” In the investment world, “franchise” is a term most people associate with Warren Buffett. It refers to a company that has a secure and sizable share of its market. Even better is if the company has a secure place in a growing market. It's easy to identify franchises in sectors like consumer products or fast-food. Just ask any 5th grade class to name some companies they've heard of, and they will rattle off names such as Wal-Mart (WMT), Procter & Gamble (PG), Johnson & Johnson (JNJ), Coca Cola (KO), etc. However, there's one sector where it gets a little harder to spot the true franchises. Yet this sector has proven very rewarding in the past, and will continue to do so... TECHNOLOGY FRANCHISES FOR A TURBULENT WORLD No matter which nation leads the world in the future – China, the U.S., or some other – technology will remain an important sector. The question, when looking for safer bets, is whether there are any real franchises in the technology arena. After all, technology constantly evolves, making it hard for any company to hold onto dominant market share for the long term. On top of that, technology hasn't been around nearly as long as other sectors. Companies like Coca Cola or Johnson & Johnson began over a century ago. Technology, as we normally think of it, incorporates digital electronics, which only got its start in the 1950s when the first silicon transistor was built. So the longest lived technology firms have only been around 60 years. That's not quite long enough to really be called a franchise, and may be one reason Buffett has seldom invested in tech stocks. That said, we do have a few recommendations in the tech sector that come as close to franchises as you are likely to find. They may not be the fastest growing tech stocks, but they are well established with steady growth, and we believe they will be around for the long haul. Pick #1: Intel (INTC) The first such company that comes to mind is Intel. The company's roots go back to one of the inventors of the transistor, a man named William Shockley. A rather authoritarian, egotistical, and paranoid man, Shockley had a hard time earning loyalty from co-workers and employees. At one point, eight of his researchers at Shockley Semiconductor (known as “The Traitorous Eight”) left his employ to found Fairchild Enterprises. Later on, two of the eight, Robert Noyce and Gordon Moore, created Intel. Noyce has since passed away, but Moore remains Intel's largest shareholder and his proteges continue to run the company. (Moore is also famous for penning 'Moore's Law.') In terms of age and lineage, Intel certainly resembles a franchise. Admittedly, the company has had its up and down periods. But today, it has a near monopoly as a manufacturer of microprocessors whose designs remain firmly based on the transistor. Intel has also ventured into other types of chips. While it's too soon to say whether these new product lines will succeed, we suspect they will. Even if they don't, microprocessors are an essential component of all computers and many other devices, and Intel's dominant position in them should guarantee the company's longevity. Naturally, Intel's size and maturity makes it difficult for the company to grow as fast as it once did, but it should continue to grow well for many years. It has an exceptional balance sheet and extraordinarily high free cash flow. As much as any company can be assured a role in future technology, Intel is a number one choice. Pick #2: Microsoft (MSFT) What other tech firms could qualify as franchises? Obviously, Microsoft comes to mind. Like Intel, Microsoft has a long lineage, one that stretches back to the original operating system for the personal computer, DOS. Along with Apple (AAPL), Bill Gates's company was also the first to develop a graphic user interface (GUI) that greatly added to the PC's popularity. Though Gates has more or less retired from Microsoft, one of his colleagues and former Harvard classmates, Steve Ballmer, runs the company today. Microsoft has been through fewer wars than Intel, and it may be losing some of its franchise. Open source software, including Linux is a real threat. However, the majority of servers and PCs today do run Microsoft operating systems. In the applications area, Excel is unchallenged as a spreadsheet. It may be a little soon to declare Microsoft a real franchise, but the company has been around since the advent of personal computers. It's grown rapidly into a mature but solid company. In the wake of the recent financial crisis, it's one of the few companies in the world to still hold a AAA rating. Pick #3: Qualcomm (QCOM) Our third top pick is Qualcomm, which has patents centered on the CDMA platform used in the majority of the world's cellphones. The patent portfolio alone is a strong argument for calling this company a franchise. In addition, the head of Qualcomm today is the son of the company's founder. Qualcomm has been through its share of battles in the past, both legal and technological, yet its product still dominates its market. Recently, Qualcomm's stock suffered a huge drop in price on news that earnings may be less than expected. However, it is the nature of franchises that even when earnings dip they can still retain market share and bounce back. If you believe that mobile telephony and web browsing will continue to spread throughout the world and that the company's long-term earnings growth remains certain (which we do), then you will see Qualcomm as a strong buy today. Pick #4: Visa (V) Our fourth pick, Visa, you may see as more of a consumer franchise – and a questionable recommendation given the economic climate. However, the company, while public only since March 2008, is certainly a tech franchise, owning the world's largest payment network. The company leverages its worldwide network by collecting fees for its use from credit card issuers, while steering clear of the consumer default risk. Other card companies, like American Express, have their own data networks too, but they also take on some of the default risk. The brand was created in the 1970s, and has only gained steam with the proliferation of plastic payment. The company's stake in credit cards is impressive, but debit cards have been a larger part of growth in recent quarters as credit card issuers have cut credit lines and increased fees. The company maintains a 75 percent market share in debit cards. Both its universally recognizable (and trusted) brand name, and extensive data network create a moat around the company's business, and we see this franchise as a buy. And now for a runner-up, which is also worth acquiring... A Close Runner-up: Apple (AAPL) Despite calling it a runner-up, we also rate Apple as a buy. Apple was the first real PC line and the main inventor of the graphic user interface. Apple lost the race early on to Microsoft because it ran its company a little differently and it was harder to create applications for Apple computers. But more recently, under the influence of one of its founders, Steve Jobs, Apple has become one of the most remarkable tech stories of the past decade. The company has established its brand on many products and has a strong balance sheet. And the shares are not overpriced. Is Apple really a franchise? We think it's too soon to say. If Jobs's grandson were running the company, we might concede the point. However, we think Apple is run too much like a small entrepreneurial enterprise with one creative guy at the top who calls all the shots. It remains to be seen whether the baton of leadership can be successfully passed on to someone else without the company faltering. In the meantime, and assuming Jobs stays healthy, Apple should remain a very dynamic and profitable company. You may be wondering why we haven't included companies like IBM or Hewlett-Packard in our list of top lower-risk tech picks. Well, those are great brand names, but they are stamped on very different product lines than what they started with. For instance, IBM originally made mainframe computers; today it's mostly a service company. In other words, it has not established a long-term major position in one market. Finally... A FEW WORDS ABOUT CHINA We noted two main things about last week's conference in Davos, Switzerland. First, there was no discussion of China's conflict with Google (GOOG), as apparently the Chinese can not only censor the internet, but they can also prevent the topic from being addressed in an international forum. The other important item was that China, though it fully expects to meet its growth target this year, is worried about rising commodity prices. The reason they're worried must naturally be that they will be buying a lot of commodities. Considering that China also expects slow growth in the developed world, the implication is that China's commodity consumption must be climbing very rapidly. So we continue to like China as a place to invest, and we view commodities as a growth arena. However, feel free to balance out your portfolio with the four lower-risk tech companies we mention above. They are a great balance between franchise and dynamism.Disclosure: Leeb Group, its officers, directors, shareholders, employees and affiliated entities and/or clients of such affiliated entities may currently maintain direct or indirect ownership positions in financial instruments (i.e., stocks, bonds, options, warrants, etc.) of companies or entities whose underlying exposure is in the companies mentioned in this article.
★ Oh Joe You Didn’t

Joe Wilcox published a piece Friday titled “Apple was NOT more profitable selling cell phones than Nokia in Q3” (caps emphasis his). It’s in reference to the widely-cited (and linked from DF here) report last week by Strategy Analytics which concluded that Apple generated more profits than Nokia from mobile phone handset sales last quarter. Wilcox was skeptical — nothing wrong with that — and conducted his own investigation into the numbers: Well, hell, that sounds reasonable enough, right? Wrong. Apple and Nokia SEC filings tell a different story. Both companies announced third calendar quarter results a few days apart in mid October. For devices and services, Nokia reported profits of €785 million, which is about US $1.1 billion. Apple reported total profits — that is for all products — of $1.67 billion in its earnings press release, and later the 10-K filing. I searched the 10-K, and, as I expected, Apple doesn’t breakout iPhone profits. But it doesn’t have to for purposes of this discussion. I don’t doubt that Apple is more profitable per handset, since iPhone is a smartphone, than Nokia. But the numbers don’t add up to Apple’s overall handset profitability exceeding Nokia’s during third quarter, unless someone is making the bold assumption that all, or nearly all, Apple profits came from iPhone. They surely do not. What? Apple made only $700,000 on iPod, Macintosh, retail and software — $1.6 billion — on iPhone. No way. The disturbing lack of fact checking seems to be a trend when it comes to Apple these days. This is disturbing. Either Joe Wilcox has uncovered a massive, widely-reported error, or, he has made a fool out of himself. What Wilcox is arguing is that Apple only reported $1.67 billion in total profit for the quarter, so how could they possibly have made $1.6 billion from the iPhone alone? But that’s not what Apple reported at all. Perhaps if Wilcox had actually read more than just the first paragraph of Apple’s press release announcing the company’s earnings, he’d understand. Apple’s announcement stated: Apple today announced financial results for its fiscal 2009 fourth quarter ended September 26, 2009. The Company posted revenue of $9.87 billion and a net quarterly profit of $1.67 billion, or $1.82 per diluted share. These results compare to revenue of $7.9 billion and net quarterly profit of $1.14 billion, or $1.26 per diluted share, in the year-ago quarter. Gross margin was 36.6 percent, up from 34.7 percent in the year-ago quarter. International sales accounted for 46 percent of the quarter’s revenue. In accordance with the subscription accounting treatment required by GAAP, the Company recognizes revenue and cost of goods sold for iPhone and Apple TV over their estimated economic lives. Adjusting GAAP sales and product costs to eliminate the impact of subscription accounting, the corresponding non-GAAP measures for the quarter are $12.25 billion of “Adjusted Sales” and $2.85 billion of “Adjusted Net Income.” As everyone who follows Apple should be aware, Apple is accounting for iPhone sales over eight quarters. This practice is unusual, but it’s not complicated. This is how they’re able to give software updates to iPhone owners free of charge, and, conversely, because iPod sales are not accounted for on a subscription basis, why iPod Touch users must pay for the same updates. When Apple sold an iPhone last quarter it only accounted for one-eighth of the revenue and profits for that quarter. The remaining seven-eigths will be accounted for over the next seven quarters. Subscription-based accounting does not mean that Apple doesn’t pocket the cash from iPhones all at once. They do — at least since June 2008 when they switched to the model of being paid an up-front subsidy from the carriers, rather than the per-month revenue-sharing model they used with AT&T for the first year. It’s all just a matter of accounting. What Apple calls “non-GAAP measures” are its way of saying “this is how much money we actually made this quarter”. The “adjusted net income” of $2.85 billion is effectively what Apple would have reported as profit for the quarter if they weren’t using subscription based accounting for the iPhone and Apple TV. This is how Apple’s cash on hand has grown by $21 billion in the last three years, from $14.5B on 30 September 2006 to $36.2B on 26 September 2009. (Click “Balance Sheet” and “Annual Data”.)1 It is true that Apple does not specifically break out the revenue or profits from iPhone sales. But unless you think Apple is selling a lot more Apple TVs than most of us do, it’s pretty safe to say that the iPhone accounts for nearly all of the difference between Apple’s GAAP and non-GAAP reported profit, which difference came to $1.18 billion for the quarter. That suggests Strategy Analytics’s numbers are in the ballpark. It’s also worth noting that Nokia does not account for its handset sales as Apple does — Nokia accounts for them “normally”, up front, in the quarter in which they were sold. Even if Strategy Analytics’s $1.6 billion figure is a little high, they’d have to be wrong by over $500 million for their overall conclusion (that Apple made more profit than Nokia selling phones) to be wrong. Here’s another back-of-the-envelope calculation. Apple does release the total number of iPhones sold during each quarter. Last quarter it was 7.4 million. So take Strategy Analytics’s estimate of $1.6 billion in profit, divide by 7.4 million iPhones, and you get $216 in profit per iPhone, which, again, sounds like it’s in the ballpark. (Unsubsidized 16 and 32 GB iPhone 3GS models — the most popular iPhones — sell for $599 and $699 respectively, and Apple’s reported gross margin for the quarter was 36.6 percent.) As for Wilcox’s would-be exposé, I’m almost embarrassed to quote his concluding paragraph: As for Apple’s overall phone profits being higher than Nokia’s, don’t believe it. Just because dozens of Websites report something as true doesn’t make it so. Because of the extent of misreporting, I can’t say where the fault lies. The Strategic Analytics report, which again I haven’t seen, might have gone no further than present numbers showing that Apple makes more profit per phone than Nokia. That absolutely makes sense. But to assert that iPhone generated $1.6 billion profit during a quarter when all Apple products generated $1.67 billion is simple stupidity. Simple stupidity indeed. If you subscribe to the Market Share gospel, it’s perhaps very hard to wrap your head around the idea that a company with 2.5 percent unit sale market share generates more profit than a company with 35 percent market share. But the numbers aren’t complicated. The iPhone really is that big a deal. That Wilcox is so utterly befuddled by Apple’s iPhone accounting — convinced that Apple is generating far less cash than they actually are — makes me wonder how many analysts and investors are likewise confused about this. Probably many. So it’s worth noting that a recent accounting rule change may change the way Apple reports these numbers in the near future, such that Apple could report revenue from iPhones the way casual observers expect — in the quarter the sales occurred. Here’s what Henry Blodget wrote about the rule change in September: The new rule will allow Apple to recognize the iPhone hardware revenue and profit at the point of sale, while an estimated value for the software will be recognized over the life of the device. A change in accounting shouldn’t make a difference, but I’m guessing it will. Look for Apple’s stock to jump up if they make this change.�↩

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