[FoRK] NYTimes.com Article: Oh, Yeah, He Also Sells Computers

khare at alumni.caltech.edu khare at alumni.caltech.edu
Mon Apr 26 19:38:41 PDT 2004

The article below from NYTimes.com 
has been sent to you by khare at alumni.caltech.edu.

Odd. I was just over at Apple today, and I had the same thought about the iTunes mini poster. Great minds lede alike! ;-) :-)

Anyway, I'd love to see what they could do with a 1080p projector chip for < $1000 and consumer HD cam... :-)

Gotta love the magical marketing machine,

PS. Sportcoat count sighted at Apple today: 1 
... and that was mine :-)

khare at alumni.caltech.edu

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Oh, Yeah, He Also Sells Computers

April 25, 2004


Cupertino, Calif. 

STROLL the corridors and the atriums on Apple Computer's
corporate campus these days and you will notice that
something is missing. Gone are the posters and graphics
accenting the company's sleek personal computers. In their
place, in the main lobby, is a striking, three-story-high
billboard celebrating Steven P. Jobs's brand-new
billion-dollar consumer electronics business - the iPod
digital MP3 music player. 

In just two and a half years, Mr. Jobs, Apple's chief
executive, has managed to take a well-designed hand-held
gadget, add software connecting it to Macintoshes and
Windows-based personal computers and convince the recording
industry that he has found an elegant solution for ending
its nightmare of digital piracy. In doing so, he has
shifted the emphasis of Apple from what made it famous -
hip, even lovable computers - to what he hopes will keep it
relevant and profitable in the future: products for a
digital way of life. 

In fact, the wild success that Mr. Jobs has enjoyed with
the iPod may have come in the nick of time. For all the
acknowledged design and ease-of-use advantages of the
Macintosh, Apple's overall PC business is still growing
more slowly than that of its Microsoft- and Intel-based

Moreover, it was obvious at the Consumer Electronics Show
in Las Vegas in January that a horde of consumer goods and
computing companies is preparing a fresh assault aimed at
bringing computerized gadgets into every nook and cranny of
the home. In particular, two powerful Apple rivals, Sony
and Microsoft, are betting that Mr. Jobs is wrong when he
says, "It's about the music!" This year, both companies
plan to release more expensive, hand-held combination video
and audio players that their executives hope will blow the
iPod away. 

So will Apple eventually be overwhelmed by its bigger,
better-heeled competitors? Throughout the technology world,
there seems to be a simple, uniform answer to that
question: Never underestimate Steve Jobs. 

With roots both in Silicon Valley's digital culture and the
1960's counterculture, Mr. Jobs has long been an arbiter of
what is cool in technology, much like a real-world version
of a trend-spotting character from "Pattern Recognition,"
one of the cyberpunk novels by William Gibson. 

AND, helped by his growing prominence in Hollywood through
his second company, Pixar Animation Studios, Mr. Jobs has
attained a level of influence over how life is lived in the
digital age that is unmatched by even his most powerful
computer industry rivals. "He is the Henry J. Kaiser or
Walt Disney of this era," said Kevin Starr, a culture
historian and the California state librarian. 

Since returning seven years ago to Apple, the computer
maker he helped to establish in 1976, Mr. Jobs has created
a fusion of fashion, brand, industrial design and
computing. He has opened a chain of 78 retail stores to
showcase Apple's consumer-oriented designs and to surround
the company's computers with an array of digital consumer
products. The stores themselves have become another
billion-dollar business, a feat all the more impressive
considering that one of Apple's chief competitors, Gateway,
failed with a similar retail strategy during the same

As a result, Apple is acting less like a computer company
and more like brand-brandishing, multinational companies
such as Nike and Virgin. The iPod's success is also the
clearest indication that Mr. Jobs, if he is to successfully
revamp Apple, will ultimately win not by taking on PC
rivals directly, but by changing the rules of the game. 

The Apple that is starting to emerge may be a harbinger.
The company's growth may no longer be defined by its PC
market share, now a declining sliver of the PC industry,
but instead by Mr. Jobs's ability to create consumer

Mr. Jobs, who says he has a 70 percent share of the market
for legal music downloads and a 45 percent share of the MP3
market, sees the shift as sweet vindication. "We're getting
a chance to see what Apple engineering and Apple design can
really do once we get out from underneath the 5 percent
Macintosh operating system share," he said. 

To some people in the industry, Mr. Jobs, of late, has even
outshone his old nemesis, Bill Gates of Microsoft - not in
market share, of course, but in innovation. "Both Bill
Gates and Steve Jobs arrived with the idea of digitizing
the world, but Gates has lost his way," said George F.
Colony, the chief executive of Forrester Research, a
computer industry consulting firm. "Despite all of his
warts, Jobs has kept the dream alive, whether it's movies,
music or photos. I call him the digitizer." 

Two striking figures in Apple's most recent quarterly
financial results, announced on April 14, underscore Mr.
Jobs's new approach. In the last three months, Apple sold
807,000 iPods, surpassing for the first time the number of
Macintosh computers it sold (749,000). At the same time,
revenue for products other than Macintoshes reached 39
percent of the total of $1.91 billion for the quarter, more
than double the percentage two years ago. 

"It's fascinating that the company is morphing into
something else," said Charles R. Wolf, a Wall Street
analyst at Needham & Company, adding, "Jobs is absolutely
brilliant in understanding consumer products." 

In fact, throughout his career, Mr. Jobs has been notable
as much for the products he has resisted selling as for the
ones he has pursued. During the mid-80's, after his
falling-out with John Sculley, the former PepsiCo executive
he hired in 1983 to run Apple, Mr. Jobs resisted repeated
proposals from young Macintosh engineers to join them in
efforts to create hand-held digital devices that would
ultimately become the Newton and General Magic projects. It
would be a wise decision, for both Newton, the personal
digital assistant, and General Magic, a similar hand-held
computer, proved to be ahead of their time, and neither led
to successful consumer products. 

Several years ago, Mr. Jobs said in an interview last week,
the company was ready to introduce Apple-branded Internet
service. Two weeks before the launch he killed the idea
because he had decided it wasn't a viable business. 

More recently, Mr. Jobs has been publicly skeptical about
tablet computers and hand-held video players. And
executives familiar with the history of the iPod design
effort said that he initially was not in favor of making
the iPod compatible with Windows-based computers.
Obviously, he came around - and, as a result, the company
will probably never be the same. 

People who know Mr. Jobs well say he disdains strategic
thinking as it is practiced by large corporations. Several
people who have worked with him describe his business
approach as "instinctual." 

Underscoring that point, when he returned to Apple in 1997,
Mr. Jobs contacted every consulting firm that had major
contracts with Apple, according to a person familiar with
the events. One by one, he called in the firms' directors,
asked for a review of their work, thanked them and then
told them their services would no longer be needed. 

It has become apparent that the way Mr. Jobs designs
products has changed fundamentally during his second tour
of duty. In creating the iPod, the iTunes Macintosh and
Windows software and the iTunes music store, Apple has not
just designed products; it has also designed a business
system. That may help explain why, almost three years into
Mr. Jobs's foray into digital music, his major competitors
are still playing catch-up, or, as in the case of
Hewlett-Packard and Time Warner, have decided to ally with

Mr. Jobs's recent approach to product development is a
radical change from the past. He once said his goal was to
become an "industrialist." In his early years at Apple and
at Next, the computer company he founded after he left
Apple in 1985, he spent much time leading development
efforts with hardware and software. In both cases, he built
automated factories in Silicon Valley. 

BY contrast, Apple says it developed the iPod in just six
months, faster than any major product in the company's
history. The hand-held device, which contains more
computing power than an early Macintosh, was put together
starting in 2001 by hardware designers led by Tony Fadell,
a young engineer who had worked at the Apple spinoff
General Magic, at Philips Electronics and briefly at
RealNetworks, led by Rob Glaser, who has developed the
Rhapsody music service. 

In the late 1990's, Mr. Fadell tried to start his own
Silicon Valley company, Fuse, designing consumer
electronics products, including some related to digital
music. When Fuse failed to get financing, he went to Apple,
first as a contractor in February 2001, and then in April
that year as the senior director of the iPod and other
special projects. 

He would eventually build a 35-member team of engineers
from Apple and other companies. Using a version of a
microprocessor that powers most cellphones, the group
brought the iPod together rapidly by relying on software
licensed from a small start-up, Pixo, a cellphone software
company founded by Paul Mercer, another former Apple

Since Mr. Jobs returned to Apple, he has increasingly
insisted that the company speak with just the voices of top
executives, so Mr. Fadell was not permitted to comment for
this article. But Mr. Fadell's decision to go to Apple
instead of staying at RealNetworks may come to be regarded
as a turning point in the digital music battle. 

RealNetworks had been trying to develop consumer
electronics products based on the company's RealPlayer
software program. Mr. Fadell, however, lasted only six
weeks at the company because, his friends said, he did not
see eye to eye with Mr. Glaser, the chief executive. As a
result, several former Apple employees suggested, Mr.
Glaser might have allowed an iPod-like hit product to slip
through his fingers. 

Despite iPod's success, skeptics say Mr. Jobs's digital
music venture will not be enough to offset a flagging
performance in the PC business. "The success of the iPod
doesn't seem to have significantly changed Apple's market
share," said T. Michael Nevens, a director at both Borland
Software and Broadvision and the former director of
McKinsey & Company's technology consulting practice. And
Mr. Nevens said that there was "no support for the theory"
that the new digital appliances would bolster computer

Mr. Jobs, however, does not appear to be banking on that
happening. Instead, he is betting on his ability to rapidly
replicate the iPod's success by creating a string of
digital consumer product categories. 

In Silicon Valley, where speculation about what Mr. Jobs
may do next is a favorite spectator sport, the betting is
that the company is preparing to introduce such an effort
in July at its World Wide Developers Conference in San

WHAT new products will be unveiled? No one outside this
famously secretive company may know for sure. But because
Mr. Jobs has been so publicly critical of tablet computers
and hand-held video players, some outsiders have suggested
that Apple may choose to offer a Macintosh-style
interactive television system for the living room,
competing with Media Center PC's, designed by Microsoft and
Intel, and with the PSX video game and digital video
recorder, soon to be released by Sony. 

But another avenue is more likely, according to several
people close to the company. Mr. Jobs is legendary for
being idiosyncratic and unwilling to follow industry
trends. Wouldn't Apple's co-founder want to avoid the
crowded market for digital entertainment products, they
suggest, and turn his laser focus on a mobile digital
communications product? 

Last year, the company quietly added two new wireless
standards, known as 3GPP and 3GPP2, to its QuickTime
software for sending and receiving multimedia over digital
cellular networks. Because Apple was an early leader in the
Wi-Fi market with its airport wireless networking base
station, the reasoning goes, the company may be hard at
work on a line of digital mobile phones that would take the
company into the fast-growing voice-over-Internet-protocol,
or VoIP market. 

But if that is Apple's strategy, Mr. Jobs isn't saying.
After all, surprise is at the heart of all the company's
marketing campaigns, and who would expect less from the man
who once rented San Francisco's symphony hall to introduce
a new computer? Even for Mr. Jobs and Apple, some things
remain the same. 



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