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For Apple, a Week of Hot Air and Market Share

For Apple, a Week of Hot Air and Market Share

Apple has added a few fresh faces to its Mac ecosystem: A new version of the MacBook Air, another edition of iLife and, coming next summer, OS X Lion. In the world of tablets, Cupertino's deep into its campaign to stake out territory in the face of an incoming barrage of competition. Meanwhile, Facebook takes a grilling, Palm takes another shot at Pre, and Oz takes off.

By Paul Hartsock
10/23/10 5:00 AM PT

Apple held its big Back to the Mac event this week, showing previews of software and hardware to come.

On the hardware side, it has a new, aluminum body MacBook Air. Weighs less than three pounds and boasts up to 30 hours of standby time, five to seven hours of actual use. It comes in two sizes: 13.3 inches and 11.6, which teeters right on the brink of netbook territory, a category of computers CEO Steve Jobs dumped on just a few months ago. Both of these new models also lose traditional spinning hard drives; they use solid-state flash memory for instant-on capability.

Even if they skirt the netbook neighborhood in size, though, they aren't quite nearby in price. The cheapest new Air goes for US$999.

On top of that, there was the introduction of a new edition of iLife, with new features in iPhoto, GarageBand and iMovie. FaceTime has also grown onto the Mac platform as a beta release. And we saw a preview of OS X Lion, the operating system upgrade due out next summer. Jobs described it as "Mac OS X meets the iPad."

One of the more interesting additions to OS X is the creation of a Mac App Store, an online hub where users can easily buy new Mac apps, download them, install them and keep them updated, just like with the iPhone App Store. This going to become a reality in just three months.

It'll be interesting to see where everyone else goes from here. When the original App Store for mobiles landed, other platforms jumped in with similar ideas. It wasn't the first place where you could buy mobile apps, but the idea of a centralized, high-profile hub where buying was easy and you didn't have to do any guesswork was new and catchy. The Mac App Store won't be the first place you can buy software online and download it -- just look up Steam -- but we may see some new online PC software businesses popping up soon.

There's also the possibility that this Mac App Store will behave just like the mobile App Store in the ways its critics find most obnoxious. On top of the sometimes confusing approval process, and all the frowning on software that could be used to color outside the legal lines, censorship is also a concern.

Apple can be a bit of a prude when it comes to making the App Store cut -- get a little too sexy and the app is history. It's even gained notoriety for rejecting some politically minded apps. It's kind of like living in Disney Land. Maybe that's OK if it's just your phone. But lots of Mac applications out there have never had to live up to Apple's standards of decency, and I'm sure quite a few of them simply wouldn't if put to the test. Apple hasn't said its new Mac App Store will ever be the only way to get Mac software -- don't plan on having to jailbreak your iMac anytime soon. But it could well represent the first step in some sort of containment strategy to separate those dirty, filthy prole programs for the Party Member apps.


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Gather While Thee May

Back in summertime, living was easy for Apple as far as tablets were concerned. The idea of the tablet computer has been around for a long time, but Apple redefined the concept on its own terms, invented a tablet with mass appeal, and caught most of its rivals flatfooted. Save for a few relatively obscure competitors and a bunch of products that wouldn't actually make it to shelves for a long time, Apple had this new tablet market to itself for months, and sales were huge.

Those sales helped drive Apple revenues to record levels in several categories. Overall, it took in $23.4 billion -- that's a gain of $8.4 billion over the previous quarter.

But now it's autumn, and other companies are getting ready to launch their own tablet computers in time for the holidays. Samsung's getting its Galaxy Tab ready, and BlackBerry's shown its hand with its Playbook idea. HP's training the webOS mobile operating system for tablet duty, and Microsoft is still teasing as much as it can about its own tablet plans.

So now it's time for Apple to get to work soaking up market share. It needs as many new followers as it can get. If people generally stick to the platform they started on for a long time, and if tablets are the future of computing, then gaining new converts should be a top priority for any platform.

Apple's already shown a little strain in trying to make that happen. In this last quarter -- the one that earned it 23 and a half billion dollars -- margins actually took a significant hit, dropping from 41.8 to 36.9 percent. That's still a decent level for an electronics vendor, but for Apple investors, margins are the crown jewels. The company's stock took a beating in the days following that announcement, but Apple says it needs to be aggressive in pricing. Sounds like a bid to dig up market share.

Also, Steve Jobs has shown again he isn't above bashing a rival or two. He made a rare appearance on Apple's quarterly report conference call to verbally accost two major smartphone competitors who also happen to have designs on the tablet market. He picked apart Research In Motion's BlackBerry sales and gave the thumbs-down to seven-inch tablets. RIM responded by pointing out that his sales comparisons weren't based on the same time periods and that seven-inch tablets are so gonna sell.

On Android vs. Apple, he tried to redraw the argument -- it's not an open vs. closed ecosystem, but rather a fragmented vs. integrated ecosystem, and fragmented is a pain. Google's VP of Engineering Andy Rubin retorted with a tweet that basically invited readers to visit a website where you can download and build up your own copy of Android from scratch. The message: That's what open means.

Kicking sand in rivals' faces is something Jobs has done now and then in the past. The end result is typically that a lot of sand gets kicked right back, but the fact remains that when he's the one who starts it, he gets to frame the conversation to his advantage. Still, it does suggest that Android and RIM are perceived as very real threats to Apple in both phones and tablets. So the mission remains: Snap up that market share before the other guys have a solid foot on the ground.

Another way to make that happen is for Apple to expand its retail channels, so it's inked deals with a slew of big-name outlets: Wal-Mart, Sam's Club and AT&T stores are among the new partners. This follows deals with Target and Best Buy.

But the most interesting name on the list is Verizon. Soon you'll be able to buy an iPad in a Verizon store. That is a prime retail channel -- Verizon is the biggest wireless carrier in the U.S. But it's an odd decision on a technical level. Verizon's network is based on CDMA technology. Apple's longstanding wireless partner, AT&T, has a GSM network. That doesn't make much difference to iPad buyers who only want to surf on WiFi networks, but what about Verizon store visitors who want to pay extra for an iPad that can get online in more places via cellular data networks? The iPad is only designed to work on GSM.

That problem is solved -- Verizon will bundle in a MiFi mobile hotspot with certain iPads. It's a little gadget that translates CDMA to WiFi, letting users surf anywhere Verizon covers.

Considering all Apple's other new partners, though, this Verizon deal will probably only contribute a small portion of total sales. What's most interesting is that Apple has finally come to some sort of arrangement with Verizon. This only lends more weight to the rumor that a Verizon iPhone is going to show up any day now.

I'm Still Here

At this point, the smartphone platform playoffs seems to be a battle for third place. Research In Motion's firmly entrenched, but its app depth chart isn't so deep. Nokia's undergoing a painful transition between Symbian and MeeGo at quarterback. Microsoft is hungry for a comeback. And then there's Palm, a company that looked like it was almost on death's doorstep a few months ago until HP came in and bought the whole team.

Even when it looked like Palm would keep its name and still make products under the HP umbrella, it was still unclear what those products would be, exactly. Did HP snap up Palm just for its tablet potential, or was it still going to keep the smartphone line going?

It looks like the answer is B, at least for the time being. HP has just introduced the Palm Pre 2, the sequel to the original Pre that landed about a year and a half ago. There was also the Palm Pre Plus from earlier in 2010, but the Pre 2 will come with a new operating system -- webOS 2.0.

So what's new with the hardware? Well, the keyboard looks like it's been redesigned, so perhaps you won't be able to shave with the edge of the phone this time around. There's a glass screen, the processor's been pumped up to a full GHz, and the camera now snaps at 5 megapixels. Software-wise, the new webOS brings in Stacks, a new way to sort programs. Then there's HP Synergy, a feature that lets developers plug in new messaging contacts and calendar application sources to let users personalize the interface. It also supports Flash Player 10.1.

So basically, this new rollout will put the Pre on par with the star players of teams iPhone, Android and eventually WinPho 7. But is it enough to merely be on par in terms of hardware and OS, or do you also need a well-stocked app store? Right now, Palm is recovering from a serious injury. Its phone seems fine, per se, but lots of developers have been reluctant to put any work toward making webOS apps due to the uncertainty surrounding it.

Also, the first carrier to get the Pre 2 in the U.S. will be Verizon. That does happen to be the largest carrier in the country, but last time Palm threw a new phone to Verizon, the results were less than spectacular. And Pre 2 won't find much insulation from the competition on Verizon's shelves. For now, that's Android's playground. iPhone will probably be over soon, Microsoft's working on some new Verizon handsets, and BlackBerry is an old friend. Surrounded by rivals like that, it may be easy for Pre 2 to get lost in the shuffle.

No Secrets? That's No Secret

Facebook has had another typical privacy accident -- or at least some of its top application developers did. All of the social network's 10 most popular third-party apps pass along users' identifying information to advertising and Internet tracking firms, according to a Wall Street Journal report -- sometimes they even send along names of the users' friends. Those are clear violations of Facebook's privacy policies.

Named in the report were FarmVille, Texas HoldEm Poker, FrontierVille, Cafe World, Mafia Wars, Treasure Isle, Phrases, Causes, Quiz Planet and iHeart.

Facebook responded by restating its policy: No one can access private user info without explicit user consent, and developers may not disclose user info to ad networks or data brokers. Application suspension and disablement are among some of the measures taken to enforce that policy, said a company spokesperson. Even so, pulling the plug on its top 10 applications would be a tough call for Facebook to make if it's at all interested in maintaining traffic.

Facebook took the position that the incident was being overblown, and that the kind of information reportedly being leaked -- user ID numbers -- does not enable anyone to access more personal information.

Facebook says its going to look into things, but the incident was enough to once again attract the attention of Congress. Representatives Edward Markey from Massachusetts and We-Owe-BP-an-Apology Joe Barton of Texas stuck it to CEO Mark Zuckerberg by way of a pointed letter. They asked him how many users were impacted, when the company found out about it, what it was doing to notify users, and which terms in its privacy policy may have been violated. Eighteen questions in all.

One more question to add to that: Who cares? And I'm not saying that to be dismissive. Seriously, who are the ones who care about this alleged privacy breach, and who are the ones who don't? The Wall Street Journal cared enough to send a reporter after it, organizations like the EFF and EPIC give a damn, and a couple of big-name U.S. representatives think it's a big enough issue to attach their names -- and possibly legislation -- to it.

But what if you're not a privacy watchdog or a politician or a reporter who investigates this kind of stuff for a living? What if you're just some person who's deeply troubled by the idea that advertisers are sucking up pretty much all the personal info you put online and using it to build profiles on you?

It's a legitimate point of view, but if that's got you worried, then what are you doing with a Facebook profile?

This same stuff comes up every couple of months, and it's going to come up again. The ones who think Facebook is creepy or careless about something they value either checked out long ago or did a major re-edit of their personal info and privacy settings. Those who don't care remain using a free service they enjoy in exchange for a little info about themselves to help advertisers convince their clients to keep footing the bill.

But what about the ones who don't care about these privacy issues only because they don't even know about them? They might be appalled about how their info was being treated if only they knew. For whatever reason, their attention lies elsewhere. Those are the ones congresspeople feel they need to protect, either out of a genuine sense of duty or just to win a vote or two by latching onto an issue that sounds a little more hip than tort reform.

Regardless of motivation, though, this repeat attention from Congress and these pointed questions sound like an overture to some kind of regulatory action. That's the kind of development that could seriously hurt Facebook, forcing it to rebuild its business model around some government-mandated obstacle course installed to protect user privacy. And every time an issue like this comes around again, that possibility inches just a little closer to reality.

Farewell to Oz

Even though Steve Ballmer is the CEO of Microsoft, his leadership is often regarded as being stronger on the business side of things. His mind is more on making sales than dreaming up the next five, 10, 20 years of personal technology. That's the perception, anyway.

The one at Microsoft more often though of as inheriting the role of tech visionary when Bill Gates took his leave is Ray Ozzie, the company's chief software architect. Ozzie isn't a longtime Microsofty like Ballmer -- he was originally brought in as CTO only five years ago when the company bought up Groove Networks. But he had the right ideas at the right time. He noticed the rise of Web-based, ad-supported services and spurred Microsoft to jump into that pool, an effort that most recently resulted in stuff like Windows Azure, Windows Live and cloud-based enhancements to Sharepoint and Exchange.

But Ozzie is not long for Redmond. He announced recently he's stepping away to pursue other efforts. He'll stick around Microsoft for a little while for the old transitional easing out, a time at which he'll apparently work on some unspecified entertainment projects. But after that, it's the big wide world.

So who's job is it to fill Ozzie's shoes? Apparently nobody's. Ballmer said he doesn't plan on replacing Ozzie at all -- the chief architect job just won't exist anymore. That may be because there's no obvious successor, but another cause may be related to Microsoft's current structure. Its empire is now really broad -- everything from video games to search engines and ad sales. Perhaps it's no longer practical to call one person a chief software architect and say this guy's vision of the technological future of the company should be the one everyone needs to stick to.

Regardless of how important having a chief architect is for Microsoft right now, the loss of a big name like Ray Ozzie doesn't exactly leave the company looking golden, especially considering how many other high-profile execs have also jumped ship this year. To name a few: J Allard, Robbie Bach and Stephen Elop, who's now heading up Nokia.


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