Can Steve Jobs unplug cable TV?

CBS and Disney may join Apple's $30 per month TV service, says the Wall St. Journal


[Originally posted Dec. 22, 2009 on Fortune.com]

This could be totally disruptive. Or it could be another "hobby" like Apple TV that never quite takes off.

In a front-page story published Tuesday, the Wall Street Journal reported that CBS (CBS) and Disney (DIS) are "considering participating" in Apple's (AAPL) plan to offer television subscriptions over the Internet.

It was the first hint of interest from TV content providers since the news broke last month -- in All Things Digital, another News Corp. (NWS) property -- that Apple was preparing to offer such a service to its 100 million-plus iTunes subscribers.

As initially described, customers would pay Apple $30 a month for streaming access to the best of TV.  Cable companies charge Americans an average of more than $70 a month for huge bundles of programs, most of which their subscribers never watch and didn't ask for.

Apple's service would be more like a streaming music service that offers all the content you want for a flat monthly fee. Without a critical mass of popular TV shows, it will never get off the ground. But if Steve Jobs can broker enough deals in Hollywood, the company may be, as MG Siegler puts it in TechCrunch Monday night, "on the verge of kneecapping the cable industry."

Hedge funds: Riding the AAPL slingshot

Jason Schwarz's "Seven Reasons the Shorts Love Apple" is an investor's must-read


[Originally posted Dec. 20, 2009 on Fortune.com]

"If you can keep a good stock down," writes Jason Schwarz, "then you are able to load up for the ride back up. It's like a slingshot -- the harder you pull, the more propulsion you generate."

Schwarz, an investment analyst with a knack for self promotion -- through a newsletter, an e-book, and a new hardcover -- has written an easy-to-follow primer on why Apple (AAPL) has become the hedge funds' favorite punching bag. It was published as a gallery last week in TheStreet by Jim Cramer, a guy who knows a thing or two about manipulating Apple's stock price. (See here.)

For investors who wonder why Apple goes down just when common sense suggests it should go up, it's a must-read.

Below fold, the highlights:

Video: Three bullets and a MacBook

Lily Sussman is back from Egypt with the laptop that got "blown up" at the Israeli border

[Originally posted Dec. 19, 2009, on Fortune.com]

Three weeks ago, an American student working in Cairo was questioned for two hours at the Israeli border before security officials confiscated her Apple (AAPL) MacBook, called in a sapper, and shot it full of holes.
Lily Sussman, 21, told the story on her blog, where it drew more than a thousand comments and a fair amount of coverage in the Mideast press.

Before she flew home for the holidays, she gave The Daily News Egypt the video interview posted below the fold.

UPDATE: By luck or careful aim, Sussman's hard drive emerged unscathed. "I've managed to recover all the data!" she writes. "Yayy...It's a survivor. I have yet to hear back from the man handling my case about when and what I will be compensated."

[Follow Philip Elmer-DeWitt on Twitter @philiped]

Morgan Stanley drinks the Apple Kool-Aid

The investment bank has seen the future and it looks a lot like the iPhone



[Originally posted Dec. 16, 2009 on Fortune.com]

Apple's (AAPL) iPhone was the hero of an hour-long conference-call seminar on The Mobile Internet presented Tuesday by Morgan Stanley.

The report was intended to be a follow-up to Mary Meeker's 1995 "The Internet Report," which became known as "the bible" of the dot-com boom.

Graphics like the one at right charting the rapid growth of the iPhone/iPod touch/iTunes ecosystem -- the fastest new-tech ramp up in history, according to Meeker's team of 27 research analysts -- dominated the 92-slide PowerPoint stack.

This particular slide shows that the rate of adoption of the iPhone and iPod touch in their first nine quarters on the market outpaced NTT's DoCoMo two-fold, Netscape five-fold and AOL eight-fold.

Based on past performance, according to Morgan Stanley, Apple is in the "pole position" in the race to dominate mobile Internet computing, which is supposed to be for the 2000s what desktop Internet computing was for the 1990s, personal computing for the 1980s, mini computing for the 1970s, and mainframe computing for the 1960s.

The Gray Lady visits the App Store

Apple's controversial software emporium gets a sympathetic hearing at the New York Times

[Originally posted Dec. 6, 2009 on Fortune.com]

Apple (AAPL) only opens its doors to reporters when it needs something from them -- like glowing reviews for a glitzy new gadget.

What it needs right now, apparently, is a friendly account of what's going on at the iPhone App Store, a runaway hit galloping so fast that even Apple -- a company that knows a thing or two about control -- is having trouble holding on to the reins.

And a sympathetic ear is what it got from Jenna Wortham, a former Wired freelancer who joined the New York Times two years ago to cover Web start-ups and mobile communications for the paper's Bits blog.

Apple granted Wortham interviews with two senior vice presidents -- Phil Schiller, who supervises the App Store approval process, and Eddie Cue, who runs iTunes -- which she supplemented with material from Morgan Stanley's Katy Huberty, Flurry's Peter Farago, a handful of developers, and Apple's major competitors.

Her 3,000 word piece is the lead story on the front page of the Sunday Business section, and Apple PR should be pleased. Among the highlights:

Ad wars: Droid manly; iPhone girly

Motorola targets young men with its most testosterone-heavy TV commercial yet

[Originally posted Dec. 4, 2009 on Fortune.com]

Someone had fun writing this ad copy:

Droid. Should a phone be pretty? Should it be a tiara-wearing digitally clueless beauty pageant queen? Or should it be fast? Racehorse duct-taped to a Scud missile fast. We say the latter. So we built the phone that does. Does rip through the Web like a circular saw through a ripe banana. Is it a precious porcelain figurine of a phone? In truth? No. It's not a princess. It's a robot. A phone that trades hair-do for can-do.

The new Droid commercial that debuted in prime-time Thursday night (and is pasted below the fold) opened a new front in Motorola (MOT) and Verizon's (VZ) $100 million ad campaign to take market share from Apple's (AAPL) iPhone.

Earlier commercials had appealed to the fragile male ego with icons of masculinity: stealth bombers, heavyweight fighters, rock-crushing machinery.

This one goes after the competition by painting it -- and its users -- as effeminate.

The great iPhone death watch

What critics were saying about Steve Jobs' smartphone in the months before it launched

[Originally posted Dec. 1, 2009 on Fortune.com]

Three years ago, when it became clear that Apple (AAPL) was about to unveil some kind of mobile phone, critics began to weigh in on its chances of success. AAPLinvestors' Terry Gregory, building on a list of skeptical quotes begun by MacDailyNews, has put together what may be the definitive collection.

A sample:

“We’ve learned and struggled for a few years here figuring out how to make a decent phone. PC guys are not going to just figure this out. They’re not going to just walk in.”
Palm CEO Ed Colligan, commenting on then-rumored Apple iPhone, 16 Nov 2006

“Apple is slated to come out with a new phone… And it will largely fail."
Michael Kanellos, CNET, 7 December 2006

"The only question remaining is if, when the iPod phone fails, it will take the iPod with it.”
Bill Ray, The Register, 26 December 2006

The smartphone wars, one year later

The iPhone leads the pack, Android is gaining, everybody else is losing share

[Originally posted Nov. 24, 2009 on Fortune.com]

It's been a year since Google (GOOG) released Android OS, the open-source smartphone operating system widely perceived as the most likely to overtake Apple's (AAPL) iPhone in the long run.

As it happens, Google this month also purchased AdMob, the world's largest purveyor of mobile phone advertising. So this seemed as good a time as any to take a snapshot of the changing smartphone marketplace, as measured by ad requests to AdMob's network.

We reviewed a year's worth of AdMob data -- including the October numbers released Monday -- and charted it on the graph at right (reproduced full-size below the fold).

There's a bias in the data, since AdMob ads run better on iPhone OS and Android devices than on, say, Research in Motion (RIMM) BlackBerries. But the trends are clear.

Jailbroken iPhones infected, again

Security experts report that a malicious worm is tunneling its way through Dutch iPhones

[Originally posted Nov. 23, 2009 on Fortune.com]

This may be one of those "I told you so" moments that gives comfort to people on both sides of the Apple-Microsoft divide: Those who claim that Apple's (AAPL) products are no more immune to malware attacks than Microsoft's (MSFT), and those who insist that Apple's operating systems are nearly impenetrable, as long as you play by the rules.

According to the Dutch security firm XS4ALL, a software worm has been spreading through the Netherlands that can seize control of iPhones without their owners' knowledge and hand it over to a server in Lithuania.

"This worm is doing really bad things," XS4ALL's Scott McIntyre told security.nl.
Only a few hundred iPhones have been infected so far, according to the BBC. But if the worm gets into large Wi-Fi networks, thousands could be at risk.

This is the third reported iPhone malware incident in as many weeks and by far the most dangerous.

Does AT&T turn into a pumpkin in June?

Its Cinderella contract with Apple for the iPhone runs out in seven months, says one analyst


[Originally posted Nov. 22, 2009 on Fortune.com]

Broadpoint AmTech's Brian Marshall, who has replaced Piper Jaffray's Gene Munster as the most bullish of the mainstream Apple analysts, made several assertions of fact in an Bloomberg TV interview Friday that -- if true -- struck me as newsworthy. Chief among them:

• The contract that gives AT&T (T) exclusive access in the U.S. to Apple's (AAPL) iPhone expires in June 2010.
• Apple is now getting a $450 subsidy from AT&T for each iPhone it sells; after June, that subsidy will be reduced to $300 for all carriers, domestic and international.
• The 4% of AT&T subscribers who use the iPhone consume roughly 40% of the network's bandwidth.

Here and in a research note issued last late month, Marshall has been lobbying heavily for Apple to start selling the iPhone through Verizon (VZ). It turns out he may have personal reasons for doing so. He told Bloomberg's Pimm Fox that whenever he travels to New York or San Francisco with his iPhone he gets dropped calls "all the time."

"A very frustrating experience," he said, "but I'm not going to move away because Apple has their hooks into me"

You can hear all this, plus what Marshall has to say about the Chinese iPhone market, Windows 7's effect on Mac sales and Apple's 2010 earnings, in the interview posted below the fold.

UPDATE: Financial Alchemist's Turley Muller takes issue with virtually everything Marshall says in this interview. See here.

[Follow Philip Elmer-DeWitt on Twitter @philiped]

Mac ads haunt Steve Ballmer

Shareholders press Microsoft's CEO about Apple's marketing campaign

[Originally posted Nov. 20, 2009 on Fortune.com]

Those Get-a-Mac ads make "you all look like a buffoon," one long-time shareholder (and father of four Mac-using children) told Microsoft (MSFT) CEO Steve Ballmer at the company's annual meeting Thursday. "I'm just wondering why your marketing group can't do something to try to rein in this next generation, because you've got a real bad image out there."

"We all watch television," Ballmer responded, before quickly changing the subject to Microsoft's market share.

"The truth of the matter is, we do quite well," he said, according to TechFlash's Todd Bishop, who seems to have taken the best notes. "Even among college students, we do quite well. Do we have an opportunity for improvement? We do. Some of that is marketing, some of that is phase of life. It is important to remember that 96 times out of 100 worldwide, people choose a PC with Windows; that's a good thing. Even in the toughest market, which would be the high end of the consumer market here in the U.S., 83 times out of 100 people choose a Windows PC over a Mac."

Ballmer acknowledged that Apple (AAPL) had "picked up a couple of tenths of a percent of market share," an achievement some in the audience seemed to find laughable.

Apple relents. Bobble reps rule!

An iPhone app illustrated with caricatures of the 111th Congress finally gets the green light


At least someone at Apple (AAPL) has a sense of humor.

Less than a week after the iPhone Developer Program rejected as "objectionable" and "defamatory" an application illustrated with caricatures of U.S. Senators and Congressmen, the company has  reversed itself and approved the app.

Bobble Rep for the iPhone and iPod touch was conceived by director Ray (Super Capers) Griggs and illustrated by Mad Magazine caricaturist Tom Richmond. The drawings serve as an entry into a data base of information about the politicians, whose oversized heads bobble when shaken or flicked with a finger. The app is now available for sale here for $0.99.

"I'm glad Apple came to their senses," says Richmond, "and realized that this app is not only not derogatory or insulting to our congressional representatives and senators, it's a beneficial program and a little fun as well."

Richmond spent months drawing the heads of all 540 members of the 111th Congress, including nonvoting members from Puerto Rico and Guam.

Fox News on Saturday was taking credit for Apple's decision to approve the app, although it was Richmond himself who drew national attention to its rejection earlier this week with a widely read entry in his blog.

See Apple bans Nancy Pelosi bobble head.

[Follow Philip Elmer-DeWitt on Twitter @philiped]

The iPhone wars: AT&T vs. Verizon

Ma Bell strikes back with a letter, another lawsuit and its own coverage maps

[Originally posted Nov. 13, 2009 on Fortune.com]

Claiming "irreparable harm," AT&T (T) has filed its second lawsuit in two weeks asking a U.S. District judge to force Verizon (VZ) to pull its new TV ads -- cartoons that depict the iPhone as the latest arrival to the "island of misfit toys." The issue, once again: coverage maps that AT&T claims are "false" and "misleading."

On Thursday, AT&T followed up with a "set the record straight" letter reminding customers and the press that it, not Verizon, carries the "most popular smartphones" -- i.e. Apple's (AAPL) iPhone -- and that its customers, not Verizon's, have access to more than 100,000 applications.

The letter includes a link to the version of AT&T's coverage map -- shown above -- that the company thinks Verizon should be showing in its ads.

We're not so sure. Let's look a little closer at this map -- and some others -- below the fold.

Rumors: A Verizon iPhone in 2010

Two sources say Apple is building a hybrid "worldmode" phone that Verizon could use

[Originally posted Nov. 12, 2009 on Fortune.com]

Judging from reader comments in this space, there are a lot of cellphone owners in America locked into Verizon (VZ) contracts who would buy an iPhone in a minute if they didn't have to switch carriers to get it.

Verizon has made it pretty clear that it would cut a deal with Apple (AAPL), were it not for a couple of impediments: 1) the contract that makes AT&T (T) the iPhone's exclusive U.S. carrier, and 2) the fact that Verizon's network (based on CDMA2000 technology) is incompatible with Apple's smartphone (which uses W-CDMA (UMTS)).

The first roadblock -- AT&T's contract -- is set to expire next year, according to a widely cited 2008 USA Today article that included an interview with chairman Randall Stephenson. (Stephenson declined to comment on the details of the contract.)

The second barrier could also disappear were Apple to build a new iPhone that is compatible with both AT&T and Verizon's networks.

Apple bans Nancy Pelosi bobble head

A Mad Magazine cartoonist's guide to the 111th Congress runs afoul of Cupertino's censors

UPDATE: Apple relented. App approved. See here.

- - - -

Someone at Apple (AAPL) needs to take a refresher course in American history -- and maybe a lesson in libel law.

Last summer Tom Richmond, one of Mad Magazine's top illustrators and two-time winner of the National Caricaturist Network's "Caricaturist of the Year" award, began drawing a likeness of every Senator and Representative in the 111th Congress -- 540 caricatures in all, including non-voting members from Puerto Rico, Guam, etc.

The idea, he explains, was to create an illustrated database for the iPhone and iPod touch that would allow users to find the name, party affiliation, phone number and website of their senators and congresspeople via zipcode or GPS. Each head was placed on one of 12 cartoon bodies and would bobble when shaken or flicked with a finger.

The project was the idea of Ray Griggs, director of the movie Super Capers (rated PG for mild language, rude humor and brief smoking), for which Richmond did the art. Griggs had shown the finished app around and stirred up some interest. He was booked to appear as a guest on Fox News next week with Glenn Beck and Mike Huckabee.

You can probably guess what's coming next.

Inside Apple's industrial design lab

A rare visit with the man who designed the iMac, the iPod and the iPhone

[Originally posted Nov. 9, 2009 on Fortune.com]

"I guess it's one of the curses of what you do," says Jonathan Ive, Apple's senior vice president for industrial design, "is that you are constantly looking at something and thinking 'Why why why is it like that? Why is it like that and not like this?'"

Ive's five-minute appearance in Objectified is one of the centerpieces of Gary Hustwit's 2009 documentary about contemporary industrial design. It's a follow-up to Hustwit's amazing Helvetica (2007), the only full-length film about a typeface.  Objectified may not be as surprising or groundbreaking, but it does feature this rare inside look at Apple's (AAPL) secretive design lab, an inner sanctum on the Cupertino campus only slightly less guarded than Fort Knox.

"I remember the first time I saw an Apple product," says Ive as the camera pans across a busy Apple Store. "I remember it so clearly because it was the first time I realized when I saw this product I got a very clear sense of the people who designed it and made it."

Below fold, unless Hustwit has pulled it, a YouTube clip of that video.

Droid vs. iPhone: The reviews are in

Motorola and Verizon invited comparisons, and that's what they got

[Originally posted Nov. 5, 2009 on Fortune.com]

The Droid lands in stores Friday, and on Thursday the heavyweight reviewers -- which is to say the Wall Street Journal's Walt Mossberg and the New York Times' David Pogue -- weighed in.

Given that Motorola (MOT) and Verizon (VZ) pitched the Droid in its first TV ad as everything Apple's (AAPL) and AT&T's (T) iPhone was not, it was perhaps inevitable that every reviewer so far, including these two, treated its arrival as a grudge match.
 
Mossberg's review is positive but tepid -- especially the video version. He plods through the comparisons item by item like a slightly boring homework assignment. His top-line summary:

The man who put the 'i' in iMac

Meet the creative director who named a generation of Apple products


[Originally posted Nov. 4, 2009 at Fortune.com]

The TBWA\Chiat\Day creative team was horrified in 1998 when Steve Jobs pulled back a cloth and revealed the bulbous teardrop that came to be known as the Bondi-Blue iMac.
But then Jobs wasn't so crazy at first about the name they proposed for it.

No one had ever seen anything like the new computer, veteran creative director Ken Segall tells Cult of Mac's Leander Kahney in an exclusive interview published Tuesday evening.

"We were pretty shocked but we couldn’t be frank," Segall recalls. "We were guarded. We were being polite, but we were really thinking, 'Jesus, do they know what they are doing?' It was so radical."

Segall eventually came up with "iMac," a name that connected the original 1984 Macintosh with the rapidly expanding Internet. But Jobs took some convincing.

Below the fold, excerpts from the story as Kahney tells it:

The man who put the 'i' in iMac

Meet the creative director who named a generation of Apple products

[Originally published Nov. 4, 2009 on Fortune.com]

The TBWA\Chiat\Day creative team was horrified in 1998 when Steve Jobs pulled back a cloth and revealed the bulbous teardrop that came to be known as the Bondi-Blue iMac.

But then Jobs wasn't so crazy at first about the name they proposed for it.

No one had ever seen anything like the new computer, veteran creative director Ken Segall tells Cult of Mac's Leander Kahney in an exclusive interview published Tuesday evening.

"We were pretty shocked but we couldn’t be frank," Segall recalls. "We were guarded. We were being polite, but we were really thinking, 'Jesus, do they know what they are doing?' It was so radical."

Segall eventually came up with "iMac," a name that connected the original 1984 Macintosh with the rapidly expanding Internet. But Jobs took some convincing.

Below the fold, excerpts from the story as Kahney tells it:

Brit blog names iPhone 'world's worst'

In June, Apple's smartphone was the editors' choice at CNET UK. How times have changed.



[Originally published Nov. 3, 2009 on Fortune.com]

"The iPhone may be the greatest handheld surfing device ever to rock the mobile Web, and a fabulous media player to boot," writes CNET UK's Flora Graham in a mock award citation posted Tuesday. "It may be the highest-rated mobile phone on CNET UK, rocking the pockets of half of our crack editorial team. It's certainly the touchscreen face that launched a thousand apps. But as an actual call-making phone, it's rubbish, and we aim to prove it."

What follows is a litany of complaints no iPhone owner hasn't heard -- or expressed -- before. But to read them in a publication that four months earlier named Apple's (AAPL) device the "world's best touchscreen phone" is unexpected. And in Ms. Graham's voice, sort of fun.

To quote a few of her sharper lines:

How Apple sliced its pie in 2009

The Mac and iPod slices shrank between '08 and '09. iTunes grew a bit. iPhone grew a lot.

[Originally posted Oct. 28 at Fortune.com.]

Steve Jobs likes to describe Apple's (AAPL) business model as a stool built on three-legs: the Mac, the iPod and the iPhone.

But a quick glance at the 2009 Form 10-K, which Apple filed on Tuesday, shows that it is now more like a four-leg chair, with a couple of wedge-shaped pillows on the side.

The Mac and iPod still bring in the biggest part of Apple's total sales revenue -- 37.7% and 22.1%, respectively -- but their shares of the pie are shrinking.

The iPhone, meanwhile, is rapidly catching up, thanks to unit sales that grew 78% and GAAP revenue (swelled by deferred revenue dating back to 2007) that grew 266%. The iPhone now accounts for 18.5% of Apple's sales, just behind the iPod.

The fourth leg of the chair is the line item Apple calls "other music related products and services" but which is mostly iTunes Store sales -- music, video and apps. It continues to grow at a steady pace and now represents about 11% of Apple's net sales.

Spreadsheets summarizing Apple's revenue streams are pasted below the fold. Apple's 2009 Form 10-K is available as a pdf file here.

[Follow Philip Elmer-DeWitt on Twitter @philiped]

Steve Jobs is $300 million richer

His net worth shot up to $5.4 billion Wednesday, only partly thanks to Apple


[Originally posted Oct. 21, 2009 on Fortune.com]

In September, Steve Jobs' $5.1 billion earned him the No. 43 spot on Forbes' list of the 400 richest Americans. Since then, Apple's shares have rocketed to a new all-time high, closing Wednesday at $204.92.

So Jobs was a lot richer Wednesday than he was in September -- $300 million richer, at least on paper -- but only 3/5 that increase is thanks to Apple (AAPL). The rest is Disney's (DIS) doing.

[Jobs was even richer before the market gave up most of its gains in the last hour of trading. See below.]

According to the two companies' proxy statements, the bulk of Jobs' net worth is in the form of preferentially owned stock:

• 5.426 million shares of Apple (most of it from a 2003 grant of 10 million shares, later reduced to pay taxes)
• 138 million shares of Disney (from when Disney acquired Pixar)

In the six weeks since Forbes took its financial snapshot, Apple has gained 32.42 points (as of Wednesday's close) while Disney inched up 87 cents. But because Jobs' net worth is so much more closely tied to Disney than to Apple, those 87 cents carry a lot of weight in his portfolio. Bottom line: by Wednesday night, Jobs' holdings had increased in value ...

Apple earnings: How the analysts got it so wrong

Everybody failed to predict Cupertino's blowout quarter, but some failed worse than others

[Originally posted Oct. 20, 2009 on Fortune.com]

"Well, that was quite embarrassing!" writes "deagol," a widely read amateur analyst whose estimate of Apple's (AAPL) fourth quarter earnings fell 16% short of the record profits the company reported Monday.

The irony is that deagol, who filed a long post-mortem mea culpa on his website Monday night, had less to be embarrassed about than 18 of the 19 Wall Street analysts we polled in advance of Apple's fiscal 2009 4Q earnings report. (See The Street awaits Apple's earnings.)
Once again, the amateurs and independents out-performed the professionals in our quarterly Apple analyst bake-off. The color-coded spreadsheet is pasted below the fold.

But first, some general comments about why everybody failed to predict that Apple's profits would grow 46% or that the company would sell a record 3 million Macs -- up 17% in a quarter in which its competitors, selling cut-rate Windows boxes at razor-thin profit margins, grew an anemic 2%. (See here.)

The key misses:

Verizon vs. AT&T: There's a map for that

[Originally posted Oct. 11, 2009 on Fortune.com]

UPDATE: Since this was posted, AT&T has sued Verizon in a U.S. District Court, claiming false advertising and petitioning for restraining orders that would keep this ad off the air. See here.

- - - -

Borrowing a line from Apple's (AAPL) "There's an app for that" TV ad campaign, Verizon (VZ) launched a high-profile attack on rival AT&T (T) last night in the middle of Monday Night Football's Viking-Packer game.

"If you want to know why some people have spotty 3G coverage," goes the voice over, as a scruffy-looking character frowns at his iPhone. "There’s a map for that."

A YouTube version of the ad -- captured, ironically, on an iPhone 3GS -- is pasted below the fold.
The campaign begins at a moment of high drama in the smartphone wars. It was launched on the eve of a Tuesday morning press conference at which Verizon discussed its plans to compete against Apple with devices running Google's (GOOG) Android operating system. (See here.)

And it follows both a new wave of complaints about AT&T's sluggish service and a widely-read estimate by Morgan Stanley that if Apple were to sell the iPhone through both AT&T and Verizon, its share of the U.S. handset market could rise from less than 5% today to more than 12%. (See here.)

Below: Verizon's new TV ad.

Battle of the buzzwords: Apple vs. Microsoft

[Originally posted Sept. 20, 2009 at Fortune.com]

Apple (AAPL) is awesome. Microsoft (MSFT) is muscular. Apple execs speaks in adjectives; Microsoft's in gerunds. Cupertino wants to show us how cool its products are, and how easy-to-use. Redmond wants us to know how hard it's going to compete to grow its market share.

That's the take-away message from the pair of videos pasted below the fold.

The first -- Apple's Sept. 9 "It's only rock and roll" presentation boiled down to just the adjectives -- has been viewed nearly half a million times since it was posted last week by justanotherguy84.

The second -- which we put together Sunday morning at the suggestion of TechFlash's Todd Bishop -- is Microsoft COO Kevin Turner's July presentation to analysts boiled down to just the buzzwords. Turner is, as Bishop promised, a modern master of techno-business jargon.

Let's go to the videos. Each is less than two minutes long.

Microsoft's grinning robots

[Originally posted Sept. 28, 2009 at Fortune.com]

One of the disadvantages of reading American newspapers is that you don't get Charlie Brooker delivered to your doorstep.

Brooker is a British comedian and, as everyone who reads The Guardian knows, the author of the Screen Burn column that appears in G2 every Monday.

He's also Britain's funniest and most enthusiastic Apple (AAPL) basher -- an honorific he secured with a Feb. 5, 2007 column that included this classic paragraph:

"I hate Macs. I have always hated Macs. I hate people who use Macs. I even hate people who don't use Macs but sometimes wish they did. Macs are glorified Fisher-Price activity centres for adults; computers for scaredy cats too nervous to learn how proper computers work; computers for people who earnestly believe in feng shui." (link)

Now, in Monday's Guardian, he offers a sort of bookend to that 2007 column -- a companion piece in which he reveals his true feelings about Microsoft (MSFT) Windows. He still hates Macs and Mac users, but it's not as if thinks Windows is so great. In fact, he writes:

Apple's tablet stoppeth one of five

[Originally posted Sept. 23, 2009 on Fortune.com]

Coleridge's Ancient Mariner had nothing on Apple's (AAPL) much-rumored tablet.

Without even a prototype -- like Microsoft's (MSFT) -- to look at, 21% of 3,100 respondents in a RBC Capital/ChangeWave survey said they'd be interested in buying an Apple tablet computer in the $500 to $700 price range. That's better than the 9% who said they would be interested in buying the original iPhone in an April 2007 survey -- after Steve Jobs had unveiled it, but before it had been released.

"The promising early interest illustrates the market opportunity for a Mac-based Tablet," writes RBC analyst Mike Abramsky in a Wednesday morning note to clients.

Among the other findings in the survey:

Boiling Apple down to its adjectives

[Originally posted Sept. 15, 2009 on Fortune.com]

Last week we counted how many times Apple (AAPL) marketing chief Phil Schiller used the words "amazing" and "incredible" in his presentation at the "It's only rock and roll event." (Answer: an incredible 15 times each.)

Now someone who calls himself justanotherguy84 has taken the exercise one step further. He (or possibly she) has posted a 2-minute YouTube video of the entire Sept. 9 event stripped of just about everything but the adjectives.

Ever wonder how Steve Jobs and company leave the indelible impression that Apple's products are really great, really easy and just plain awesome?

Check it out below the fold.

Apple's amazing, incredible Phil Schiller

[Originally posted Sept. 12, 2009 at Fortune.com]

The day after Apple's (AAPL) "It's only rock and roll" event, Erik Sherman asked on CBS's BNET why the media missed the strategic importance of the gaming announcements that were made that day.

He has a point. Apple spent nearly a third of the hour-plus long presentation talking about the iPod touch -- the "funnest iPod ever" -- and how it stacks up against handheld game machines made by the likes of Sony (SNE) and Nintendo.

Yet the attention of the press seemed to be on everything else: the return of Steve Jobs, the video camera on the iPod nano, the camera missing from the iPod touch.

I went back and reviewed the podcast video of the event and I think I've found the reason: Phil Schiller.

Why are there no Mac viruses?

[Originally posted Sept. 2, 2009 on Fortune.com]

There are, as far as we know, no Mac OS X viruses in the wild.

To prove that assertion wrong, you only have to name one.

Academic proofs of concept and theoretical vulnerabilities don't count. Neither do computer worms, Trojan horses, spyware, adware, spam or any of the other nasty species in the zoology of malware.

That eliminates Inqtana-A, iBotNet, MacSweeper and a handful of other examples of Mac malware usually trotted out at this point by PC apologists. Nor can you count the 10-second Zero Day Pwn2Own Safari exploit that got so much press attention last March. None of these, strictly speaking, were viruses.

The issue comes up anew because Apple's (AAPL) latest Get a Mac ads are once again hammering Microsoft (MSFT) for those "thousands of viruses" to which its operating systems and application suites are heir. And that, in turn, has led to a resurgence of comments in this space to the effect that a) Macs are just as vulnerable as Windows machines and b) the only thing that protects them is their miniscule market share.

Those ideas, while widely promulgated on the Web, are wrong. The fact that Mac OS X represents less than 4% of the worldwide installed base of computers might explain why there are fewer Mac viruses. But it wouldn't explain why there are none.

So what's the answer?

First, let's define some terms.

Apple's Q2: A test of fundamentals

[Originally posted Aug. 22, 2009 on Fortune.com]

When Apple (AAPL) reported its fiscal 2009 first-quarter earnings, exactly three months ago, the stock opened the day at $78.20, its lowest point since October 2006.

On Wednesday, when Apple is scheduled to report its second-quarter results, the same shares opened at $122.27 -- a 56% increase.

While that's still below the price targets set by most analysts -- many of whom revised their targets upward in just the past week -- some think Apple's share price has got ahead of itself.

RBC Capital's Mike Abramsky (an Apple bear) said as much in a note to clients Tuesday. "Valuation has risen faster than peers ... and while we expect near term upside around the refreshed iPhone, we continue to see elevated challenges ahead to valuation."

Still, Apple is not in the same kind of trouble as its competitors -- like Dell (DELL) for example. Apple still has rich cash holdings ($25 billion, or $29 per share), enviable profit margins (34.7% last quarter) and the deferred revenue from seven quarters of iPhone sales (which could add 30 or 40 cents to its earnings per share).

But the company has a basic problem with its fundamentals: two of its three primary engines of growth have stalled.

As Silicon Alley's Dan Frommer points out, the Street is expecting Apple to report that it shipped 2.1 to 2.2 million Macs in the second quarter -- a year-over-year decline of 4% to 9%. That would represent the first time in five years that Mac sales have shrunk. Moreover, it's being compared with a quarter (2008 Q2) in which Mac sales grew by more than 50%. (See chart below.)

Arrington to Apple: Liar liar pants on fire

[Originally posted Aug. 22, 2009 on Fortune.com]

"A total lie." "Untrue." "Misleading." "Complete fabrication." "Way beyond misleading."

Those are some of the nicer things Michael Arrington had to say about Apple (AAPL) in his analysis of what he calls "Apple's long rambling letter to the FCC."

Arrington, for those who don't have Techmeme on their morning reading list, is the former securities lawyer and serial entrepreneur who runs TechCrunch, arguably Silicon Valley's most influential tech blog.

The letter he's referring to is Apple's formal response to an inquiry by the Federal Communications Commission into the role AT&T (T) played in Apple's rejection of Google's (GOOG) powerful Google Voice app. See here.

AT&T's answer: we played no role. Google's answer: redacted. Apple's answer: we never rejected the app; we just haven't, for various reasons, approved it yet. (link)

Arrington's response: Apple is lying through its teeth. In particular, he writes:

Why Google's CEO had to leave Apple's board

[Originally posted Aug. 3, 2009 at Fortune.com]

Much has changed since Eric Schmidt joined Apple's (AAPL) board of directors in August 2006, almost three years ago.

Schmidt, the former chief technology officer of Sun Microsystems (JAVA) and now the CEO of Google (GOOG), brought to Apple's board deep expertise in Web search and advertising, a shared distrust of Microsoft (MSFT) and almost no conflicts of interest.

But in the past three years the areas of overlapping interests -- from smartphones to browsers to operating systems -- have grown so great that the Federal Trade Commission in May opened discussions with the two companies about whether Schmidt's presence on Apple's board constituted a violation of the Clayton Antitrust Act. (link)

And on Friday the Federal Communications Commission launched a pointed inquiry into Apple's decision to bar a powerful Google voice mail management program from its iPhone App Store -- an inquiry that put Schmidt and Apple CEO Steve Jobs on opposite sides of a Federal investigation.
Finally Jobs announced on Monday what had come to seem an inevitability: that Schmidt was off the board.

Putting lipstick on Microsoft's pigs

[Originally posted Aug. 6, 2009 on Fortune.com]

At the end of a long report on the Apple Stores -- and the corner he believes they have turned -- Needham analyst Charles Wolf turned his attention this week to Microsoft (MSFT) and its plans to launch a fleet of company-branded stores of its own, complete with wall-sized digital screens, spaces for free public events and "Guru" bars to deal with customers’ software complaints.

Let's hope Steve Ballmer isn't on Needham's mailing list, because Wolf's two-page description of Microsoft's efforts and its products may be most dismissive ever produced by a Wall Street analyst. He even goes so far as to evoke the old lipstick joke that got Barack Obama in so much trouble with Sarah Palin during the primaries.

"Microsoft has always touted itself as an innovator," Wolf begins in a section entitled The Sincerest Form of Flattery. "But the company’s true genius has stemmed from its ability to copy the ideas of others."

And the company it's most fond of copying, he says, is Apple (AAPL).

Goodbye iPod, hello iPhone

[Originally posted Aug. 5, 2009 on Fortune.com]

Apple passed an important milestone last quarter that nobody on Wall Street seems to have noticed: the iPod, once Apple's (AAPL) No. 1 source of revenue, fell into third place after the Mac (No. 1) and the iPhone (No. 2).

Think of Apple's business model -- as Steve Jobs often does -- as a three-legged stool: Mac, iPod, iPhone. As recently as 2006, the iPod leg accounted for 55.5% of Apple's revenue. By last quarter, its share had shrunk to less than 18%.

But this is a good thing, argues Bullish Cross' Andy Zaky, a day trader and occasional blogger whose estimates of Apple's earnings regularly beat -- by a long shot -- the estimates published by professional analysts.

"Many Apple critics have argued that Apple would essentially fall off the earth because at some point in time the iPod's growth would collapse," says Zaky. "The second part is true.  The iPod growth rate has in fact fallen off a cliff as Apple posted its first yearly drop in iPod sales ever in Q3."

"However," he adds, "Apple is still firing on all cylinders thanks to the explosive growth of the iPhone."

To make his point, Zaky has prepared three charts that pretty much say it all.

Report: Foxconn paid iPhone suicide's family $44,000

[Originally posted July 27, 2009 on Fortune.com]

Much has been written -- especially in China -- about the case of Sun Danyong, the 25-year-old Foxconn employee who jumped to his death from a 12th-story apartment in Shenzhen two weeks ago after being interrogated about a missing next-generation iPhone prototype.

The story cast a harsh light on working conditions at Foxconn -- the brand name of Taiwan-based Hon Hai, one of the world's largest manufacturers of computer components -- and the culture of secrecy that surrounds Apple (AAPL) product development. (Apple issued a statement last week that it was "saddened by the tragic loss of this young employee.")

Monday's New York Times moves the story forward in several new directions -- including Foxconn's claim that products in Sun's charge had gone missing before and a report that the company has tried to make amends by giving Sun's girlfriend an Apple laptop computer and his family 300,000 renminbi, or more than $44,000.

[UPDATE: The Associated Press, quoting an unnamed Foxconn official, reported a higher figure Tuesday: $52,600 to the parents, plus $4,385 per year as long as either of them remains alive.]

Apple vs. Palm: Fresh shots across the bow

[Originally posted July 24, 2009 on Fortune.com]

To the delight of an armada of tech writers, Palm (PALM) has responded to the shot Apple (AAPL) fired across its bow last week with a cheeky little blast of its own.

The issue is whether Apple will continue to allow the Pre to sync seamlessly with iTunes, the feature of Palm's whizzy new smartphone that got the most attention in advance of its launch in early June.

Apple unleashed an iTunes software update last week that shut down the feature. It was accompanied by a sharply worded warning that -- uncharacteristically -- named names. The update, it said, had "disabled devices falsely pretending to be iPods, including the Palm Pre."

Palm responded with a quick workaround. In its description of the new features of an operating system update released Thursday, Palm's official blog saved the best -- Steve Jobs-style -- for last:

Apple's Q3 2009: Analyzing the analysts

[Originally posted July 22, 2009 on Fortune.com]

Tuesday was not a good day for professional analysts as a class -- and Merrill Lynch's in particular.

Not only were most caught off guard by the strength of Apple's (AAPL) record third-quarter results -- see here -- but the men and women who track the company for banks and brokerage houses were bested once again by a bunch of bloggers, day traders and amateurs analysts.

In the color-coded chart excerpted above -- and pasted in full below the fold -- the estimates that were closest to the mark are highlighted in green and the worst highlighted in red.

IT on the iPhone: 'Use at your own cost and peril'

[Originally posted July 12, 2009 on Fortune.com]

Ever wondered why your company will support Research in Motion's (RIMM) BlackBerry but not the iPhone? Does it seem like the corporate deck is stacked against Apple (AAPL)?

A conference call with four chief information officers organized by Morgan Stanley's Kathryn Huberty last week might have confirmed your worst fears.

Of the four guests, only one -- the CIO of a multi-billion dollar company who runs a Mac shop for the "creatives" who work there -- actively supports the iPhone.

The other three dismissed the device with varying degrees of curiosity and contempt.

Why Google's CEO had to leave Apple's board

[Originally posted Aug. 3, 2009 on Fortune.com]

Much has changed since Eric Schmidt joined Apple's (AAPL) board of directors in August 2006, almost three years ago.

Schmidt, the former chief technology officer of Sun Microsystems (JAVA) and now the CEO of Google (GOOG), brought to Apple's board deep expertise in Web search and advertising, a shared distrust of Microsoft (MSFT) and almost no conflicts of interest.

But in the past three years the areas of overlapping interests -- from smartphones to browsers to operating systems -- have grown so great that the Federal Trade Commission in May opened discussions with the two companies about whether Schmidt's presence on Apple's board constituted a violation of the Clayton Antitrust Act. (link)

And on Friday the Federal Communications Commission launched a pointed inquiry into Apple's decision to bar a powerful Google voice mail management program from its iPhone App Store -- an inquiry that put Schmidt and Apple CEO Steve Jobs on opposite sides of a Federal investigation.
Finally Jobs announced on Monday what had come to seem an inevitability: that Schmidt was off the board.

“Eric has been an excellent Board member for Apple, investing his valuable time, talent, passion and wisdom to help make Apple successful,” Jobs said in a prepared statement. “Unfortunately, as Google enters more of Apple’s core businesses, with Android and now Chrome OS, Eric’s effectiveness as an Apple Board member will be significantly diminished, since he will have to recuse himself from even larger portions of our meetings due to potential conflicts of interest. Therefore, we have mutually decided that now is the right time for Eric to resign his position on Apple’s Board.” (link)

Although pressure on Schmidt to step down had mounted in recent weeks, Schmidt told attendees at a technology conference as recently as July 10 that he saw "no issue" with his remaining on the board. (link)

But Apple's decision to reject Google Voice -- an important application into which Google had sunk a lot of time and money -- may have been the last straw.

"If nothing else," writes TechCrunch's Erick Schoenfeld in Why Schmidt Had to Go, "last Friday's letters from the FCC [were] a wake-up call to Apple that Google stands on the opposite side of the fence when it comes to the evolution of the mobile Web. Google wants the mobile Web to be as open as the Internet. ... Apple is not about being open. It never has been...

"Google wants to diminish the importance of any single computing device in favor of Web apps which sit in the cloud and are accessible from all devices -- mobile phones, Macbooks, Dell laptops, or whatever. As much as is physically possible, it wants to replace the operating system with the Web.

"Ultimately, that is a bigger threat to Apple than Microsoft ever was."

See also:

• The FCC is asking Apple and AT&T all the right questions
• Antitrust inquiry: How Apple and Google compete
• Google CEO Schmidt leaves Apple board

[Follow Philip Elmer-DeWitt on Twitter @philiped]