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pWhenever Steve Jobs wants Apple to get into something new, he follows the same tried-and-true modus operandi: He finds the leading expert in the field and puts that person on his company's payroll./p
pBefore Apple opened its own chain of retail stores, the very first thing Jobs did was recruit Mickey Drexler, Gap's CEO, to sit on Apple's board as an adviser./p
pSo when Apple announced this week that it had given a board seat to Andrea Jung, CEO of cosmetics giant Avon Products, it raised the question: What could Jobs be getting into? Could it be related to Avon's expertise in mobile commerce (think iPhone) or the cosmetics company's unique sales operation in China?/p
pValleywag speculated that Jung, who also sits on the board of General Electric, might be a href="http://valleywag.com/341816/new-apple-board-member-the-right-woman-for-job"a peacemaker between Apple and NBC/a, which pulled out of Apple's online iTunes Store last summer. (GE owns 80 percent of NBC Universal.)/p
pOthers noted that Jung is the first woman to sit on Apple's board in a decade, and that she heads up one of the most feminine companies in the world. Avon touts itself as the "company for women," empowering millions of female entrepreneurs. The world of technology is distinctly male, but if there's a high-tech company that appeals to women, it's Apple. /p
pBut there are other, more intriguing, possibilities. /p
pJung is an expert in marketing on a global scale. Avon's ongoing "Hello Tomorrow" campaign is a true giant, blending online, print and TV advertising. Costing $250 million in 2006 and $350 million in 2007, Hello Tomorrow is one of the first campaigns to be truly global. Instead of rolling out localized ads for different markets, the same billboard, TV and radio spots are used worldwide. As Apple expands into new markets, such global-marketing expertise could prove crucial./p
pJung is also an expert in corporate social responsibility. Avon touts its good works as a leading differentiator of its brand. Not only does the company support women's independence and self-sufficiency, it claims to run its business along the strictest ethical guidelines. Avon was the first big cosmetics manufacturer to drop animal testing -- in 1989 -- and its a href="http://avoncompany.com/women/"Avon Foundation raises money to fight breast cancer and domestic violence/a. /p
pApple has weathered a lot of a href="http://www.wired.com/gadgets/mac/news/2006/08/71685"criticism for working conditions in iPod factories/a in China, and from environmental activists for a href="http://www.wired.com/gadgets/mac/news/2006/04/70739"being less than green/a. Could Jobs have recruited Jung to burnish Apple's image socially and environmentally? /p
pMore interesting is Avon's success in modernizing its direct-sales operation through technology, which has led to big growth in developing markets like Eastern Europe, India and China./p
pIn Poland, Avon has set up its own virtual cellphone company (operating as a mobile-virtual-network operator, or a href="http://www.mobilein.com/what_is_a_mvno.htm"MVNO/a) to allow its direct-sales reps in the field to a href="http://www.allbusiness.com/europe/poland/4505941-1.html"order products with their cellphones/a (scroll down). Though Avon has been mum on details, Jung told Wall Street that the MVNO is an a href="http://seekingalpha.com/article/26210-avon-q4-2006-earnings-call-transcript"experimental system for serving direct-sales reps/a in the field./p
pAnd in China, Avon has set up an m-commerce program that allows sales reps to a href="http://www.marbridgeconsulting.com/marbridgedaily/2007-11-16/article/5386/avon_china_launches_m_commerce_platform"order cosmetics, track orders and set up accounts/a over their phones. The system will reportedly be made available to Chinese consumers as a "shopping service." Is Jobs interested in Jung's m-commerce expertise, especially as Apple rolls out the iPhone in Asia?/p
pOr perhaps Apple wants to replicate Avon's unique sales operation in China, which Jung is touting as a href="http://www.cosmeticsdesign.com/news/ng.asp?id=69208-avon-china-direct-sales"Avon's single biggest growth opportunity/a -- worth $1 billion on the bottom line./p
pIn China, Avon isn't a pure direct-sales operation. Instead, it operates a hybrid model that blends 5,500 retail stores, or beauty boutiques, with 130,000 direct-sales reps./p
pSpread out across China, the boutiques act as local distribution points for the field reps. The boutiques service the sales force, providing all kinds of support, including a pickup point for orders. Reps in the field place orders over their cellphones and pick them up at the local beauty boutique./p
pCould Avon's hybrid sales channel be a model for selling Apple's high-tech gear in China? Perhaps Jobs is thinking of setting up hundreds of small Apple boutiques all over China, which will act as distribution points for an army of direct-sales reps. Dressed in black turtlenecks, the reps could travel from village to village, demonstrating the wonders of the iPhone and taking orders wirelessly. Orders could be delivered to the local boutique, which would handle returns and repairs./p
pSuch a model would blend a low-cost sales channel -- something Apple lacks in China -- that could be operated to Apple's high standards, with a unique word-of-mouth marketing mechanism. Apple has always enjoyed this type of user-oriented buzz, which is the most effective type of marketing imaginable, but has never had a system to exploit it. An Avon Lady-style sales operation might be a mechanism for profiting from that passion./p
pDing-dong. Apple calling./p
p- - -/p
pemLeander Kahney is news editor at Wired News and the author of the a href="http://www.cultofmac.com/"Cult of Mac blog/a and two books about technology culture,/em a href="http://www.amazon.com/exec/obidos/ASIN/1886411832/cultofmac-20/104-2198405-7579165"The Cult of Mac/a emand/em a href="http://www.amazon.com/exec/obidos/ASIN/1593270666/cultofmac-20/104-2198405-7579165"The Cult of iPod/a. emKahney's latest book,/em Inside Steve's Brain, emtakes a critical look at how Steve Jobs runs Apple. It will be published April 17 by a href="http://us.penguingroup.com/static/html/aboutus/adult/portfolio.html"Penguin Portfolio/a./em/p
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pIf you've been good this year, Santa might put a laser-etched MacBook or iPod under the tree -- courtesy of the fast-growing gadget-personalization industry./p
pSeveral companies that offer laser etching of laptops, iPhones and other gadgets report that demand for personalization services has never been higher./p
p"We're always booked and cannot keep up with the demand," says Philip Torrone, who co-owns the a href="http://www.adafruit.com/laser/"Adafruit Industries laser-etching service/a. "Over the holidays we've been turning people away." Adafruit's fee for the service starts at $100 for laptops and $30 for smaller gadgets./p
pPersonalization is a booming part of the iPod economy, with several companies offering personalization services like laser etching, custom colorization and printing. And while there's high demand for one-off designs, there's real money to be made in corporate gifting, where an iPod bearing a company logo and custom content are becoming emthe/em corporate tchotke./p
p"It used to be pens, T-shirts and hats," says Bryan Georges, co-owner of MacMedia, which offers the a href="http://www.etchamac.com/"Etchamac etching service/a. "Now it's a flash drive or an iPod. The iPod is the most popular gadget on the planet. It's amazing how much money companies will spend to gift iPods."/p
pDespite Apple's reputation for gorgeous industrial design, customers more than ever want to improve their gadgets' looks with an a href="http://www.flickr.com/photos/laser-etch/1858261034/"etching of the Starship Enterprise/a or the a href="http://www.flickr.com/photos/laser-etch/1858283862/"Porsche badge/a./p
p"People from Apple have actually flown here to etch their MacBooks and iPhones," says Adafruit's Torrone, whose laser-etching service is based in Manhattan, cross-country from Apple headquarters in Cupertino, California. "An amazing design only compliments the design of a Mac, like a nice tattoo on a beautiful woman or man."/p
pUntil recently, Apple was almost alone in offering custom laser etching of a short message on the back of iPods. Now, several companies will laser etch complex designs on not just iPods, but any gadget from a cellphone to a Sony PSP./p
p"The only thing we haven't done is the Zune," said MacMedia's Georges./p
pEtchstar, based in Los Angeles, offers several "special collection" iPod etchings, including designs from citeSpongeBob SquarePants/cite, comics and bands. The company runs a retail customization shop on Melrose Avenue with a while-you-wait service, and will customize iPods with characters and logos from a range of a href="http://www.etchstar.com/gallery.php?tag=cbs"CBS TV shows/a such as citeThe Beverly Hillbillies/cite and citeHappy Days/cite. There's even a citeLaverne Shirley/cite design, and about three dozen different citeStar Trek/cite images. (See this Flickr stream with a href="http://www.flickr.com/photos/7421597@N05"photos of happy customers and their laser-etched gadgets/a.)/p
pIt's not just Apple products that are ripe for this type of personalization -- Torrone's Adafruit has laser etched a gun -- but the best work often comes from Mac-ophile artists and designers, like this a href="http://www.flickr.com/photo_zoom.gne?id=1527978915size=l"beautiful tree on a MacBook lid/a or the iconic a href="http://www.flickr.com/photo_zoom.gne?id=832336440size=l"Flying Toasters screensaver etched onto the back of an iPhone/a./p
pBut the real windfall comes from branding batches of iPods with corporate logos and loading them with custom content to create one-of-a-kind gifts to reward valued employees or special clients. Electronics make up about 2 percent of the nearly $19 billion annual market for promotional gifts, says Paul Kiewiet, chairman of the a href="http://www.ppa.org/"Promotional Products Association International/a, the industry's trade association./p
p"IPods are continuing in popularity," says Kiewiet. "It's a highly desirable item that everyone's looking for and can be personalized with an engraving on the back."/p
pMacMedia, an Apple reseller based in Peoria, Arizona, offers its one-off Etchamac personalization service almost as a loss leader, a form of marketing that introduces the service to would-be corporate clients. Etchamac hopes customers take their custom-engraved iPods to work, where the gadgets will catch the eye of someone in marketing who will then order hundreds of company-engraved iPods for clients or sales prospects./p
pSome companies will spend more than $100,000 for several thousand engraved iPods loaded with custom content, from songs by a particular artist to speeches from a motivational speaker./p
pSony BMG just ordered 200 limited edition Bob Dylan iPods. Loaded with the songwriter's greatest hits, the gadgets were engraved with the lyrics to "Like a Rolling Stone" around the screen. The iPods are likely destined for radio stations in Europe and South America, where they'll be given away in competitions, said MacMedia's Georges. The company's high-profile Etchamac clients include Discovery Channel, Viacom and W Hotels./p
pOrders are growing so fast, the company will launch a full-fledged personalization division next year, Georges said. It's moving to a bigger facility that can offer full-color iPod printing (laser etching is cool, but it is only black-and-white) and custom iPod packaging./p
p
Perhaps the growth of iPod-personalization services is a sign of Apple's growing popularity. When Apple was the struggling underdog, the company's logo was a sign of free-thinking individuality and exclusivity./p
pBut now that every Tom, Dick and Harry has an iPod, yours has to sport a a href="http://www.etchstar.com/gallery.php?tag=hey+poodle"Hey Poodle/a laser etching to stand out./p
p- - -/p
p
emLeander Kahney is news editor at Wired News and the author of the a href="http://www.cultofmac.com/"Cult of Mac blog/a and two books about technology culture,/em a href="http://www.amazon.com/exec/obidos/ASIN/1886411832/cultofmac-20/104-2198405-7579165"The Cult of Mac/a emand/em a href="http://www.amazon.com/exec/obidos/ASIN/1593270666/cultofmac-20/104-2198405-7579165"The Cult of iPod/a./p
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p
On Black Friday, wifey and I took the kids to San Francisco's Union Square to see the tree-lighting ceremony -- but we ended up in the nearby Apple Store buying yet another iPod.
/p
p
I'd wanted to avoid the store -- all stores in fact -- but as we passed by, some excited shoppers who were leaving handed us sales fliers. "It's the only time Apple puts stuff on sale," one of the unpaid evangelists explained, imploring us to pick up a bargain. And so we ended up spending more than $200 on a gift iPod -- but, hey, we saved $30!
/p
p
My little shopping parable is just one of many indicators that point toward Apple having emthe/em blockbuster of all holiday seasons. Consider:
/p
ul class="list1"
li
Black Friday kicks off holiday sales. While Best Buy offered $300 laptops, Apple knocked $100 off MacBooks and a laughable $15 off iPod shuffles. These discounts are barely savings at all, yet the Apple Store was emheaving/em with bargain hunters. And where else do you find people leaving a store encouraging passers-by to go in?
/li
li
This year, Apple has its strongest lineup ever of laptops and iPods. It has five tiers of iPod -- from the $80 Shuffle to the $300 iPod Touch. Analyst Tim Bajarin, an industry veteran not easily bowled over, said no one can compete with such a lineup. Bajarin is predicting 30 million iPods will fly off store shelves this season, up from 14 million last year and 9 million in 2005.
/li
li
Steve Baker, a retail analyst at the a href="http://www.npdinsights.com/"NPD Group/a, thinks Apple's computers will be the big draw this year, not iPods. "The notebooks and the iMacs will be leading the pack this year," he said. "IPods will be strong, but we won't see the same growth as in previous years." Baker predicted the iPod might be a victim of the wider economic slowdown: Shoppers feeling the pinch might skip smaller gift items like the iPod. But those able to weather the downturn are still likely to splash out for new MacBooks.
/li
li
Apple's stores have a "gravitational pull" on shoppers. Nearly 30 percent of shoppers who pass within 25 feet of an Apple Store are drawn inside, according to a survey by analyst Gene Munster at a href="http://www.piperjaffray.com/"investment bank Piper Jaffray/a. Munster is predicting 25 million iPods sold this season, a good number of them higher-priced models.
/li
li
Analysts are cautiously predicting a boffo shopping season overall, despite economic jitters. a href="http://www.shoppertrak.com/"ShopperTrak/a, an automated video tracking system that monitors visitors to shops and malls (a service to which Apple subscribes) reports strong growth in Black Friday shoppers -- up 6 percent to 7 percent last weekend compared to 2006. The average annual increase is usually about 4 percent. "Undoubtedly a welcome sight for retailers," a href="http://www.shoppertrak.com/news_retail_sales_112507.php"the company says/a.
/li
li
Apple's stores last year raked in nearly $1 billion in the holiday quarter and $90 million in profit -- a record that's likely to be broken this year. The stores are unbelievably profitable. They average $4,000 per square foot annually in sales, while the national average is a little over $300 per square foot. "They are way off the scale from other retailers," said Gary Allen, a href="http://www.ifoapplestore.com/"who runs ifoAppleStore/a, which closely tracks Apple's retail chain. Allen notes that Apple sells small, high-priced goods, "but they are still selling a lot of product for the retail space they have."
/li
li
As the holidays approach, a href="http://www.ifoapplestore.com/db/2007/11/20/stores-ready-for-holiday-crush/"Apple is extending store hours/a. Some will be opening at 5 a.m., and at least two (in Somerset, Michigan, and Village Pointe, Nebraska) will be open around the clock, according to ifoAppleStore. Already some locations are stacking boxes of iPods and computers below special tables to speed sales, which are now handled by salespeople toting handheld wireless terminals. Apple has ditched sales tills at many stores. Receipts are e-mailed.
/li
li
Apple can sell boatloads of goods without holding sales. In fact, Apple discounts its goods only one day a year: Black Friday. The policy makes Apple one of only a few manufacturers on the planet that doesn't routinely roll out price-slashing deals. Other goods that are never discounted include high-end Denon audio gear, certain pricey TVs from Sony, and Hewlett-Packard ink cartridges. These products tend to be high-end, in-demand items -- like hot videogame consoles -- or are sold by companies that own their own stores, like Apple, Bose and Coach.
/li
li
Apple eschews one of the computer industry's most-utilized tools: sales fliers inserted in the Sunday newspapers. It's one of the only computer companies that doesn't use the ads to promote weekly sales. "It's pretty unique," says Baker. "They can do the volumes they need to do without the added expense of this kind of advertising."
/li
/ul
p/pp
Apple breaks all the rules of retail, but you can bet Santa's little helpers will bring sacks of cash to Steve Jobs this Christmas.
/p
p- - -/p
p
emLeander Kahney is news editor at Wired News and author of the a href="http://www.cultofmac.com/"Cult of Mac blog/a and two books about technology culture,/em a href="http://www.amazon.com/exec/obidos/ASIN/1886411832/cultofmac-20/104-2198405-7579165"The Cult of Mac/a emand/em a href="http://www.amazon.com/exec/obidos/ASIN/1593270666/cultofmac-20/104-2198405-7579165"The Cult of iPod/a./p
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p
If I had any money and I were allowed to buy Apple stock, I'd be betting the farm on it.
/p
p
Since Nov. 6, when Apple's stock hit a high of $195, shares have dipped a good 40 points. The slide comes because of a combination of factors. It's mostly selling by big investors, but Apple's also getting involved in a wider "tech wreck," thanks to below-par earnings from other companies and general jitters about the subprime-mortgage mess.
/p
p
Closing at $153.76 on Monday, Apple's stock is looking like a bargain. Unfortunately, as a journalist, I'm ethically forbidden from holding stock in companies I write about. (And on a journalist's crummy pay, I'm perpetually broke.)
/p
p
"It's a pre-Thanksgiving sale," says consultant Carl Howe of a href="http://blackfriarsinc.com/blog/"Blackfriars Communications/a, who follows Apple carefully (and owns Apple stock). "I've been picking it up as it goes down."
/p
p
Yeah, $154 is a lot of money for a stock that was in the tank a few years ago. Who isn't kicking themselves that they didn't buy a few shares in February 1997, just before Steve Jobs took the helm again, when Apple was trading below a split-adjusted $4 a share? Since then, the company's stock has skyrocketed. An investment of just $1,000 then would be worth $38,900 now.
/p
p
Still, there's plenty of upside in Apple's stock, even at today's prices, thanks mostly to the way Apple is accounting for sales of the iPhone.
/p
p
Earlier this year, Apple adopted a subscription accounting model for the gadget: iPhone sales will be amortized over a 24-month period. Instead of recording iPhone sales against earnings every quarter, sales will show up as monthly revenue.
/p
p
This is unusual, and Apple hasn't said why, but observers believe it's because new features will be added to the iPhone in coming months. Because of general accounting practices, Apple can't add significant new features unless it charges for them. (In January, Apple charged customers $2 for a 802.11n Wi-Fi software upgrade to MacBooks and MacBook Pros).
/p
p
The company is accounting for the Apple TV in the same way. (Rumors are rumbling that Apple TV will get movie rentals and possibly HD soon).
/p
p
Whatever the reason for Apple's accounting practices, sales of more than 2 million iPhones this quarter won't all be put on the books this year -- the cash will be spread out over the next two years. In addition, ATT is paying Apple an estimated $10 monthly fee for every iPhone.
/p
p
It seems that until recently, most Wall Street stock analysts overlooked this hidden revenue. In the last month, 12 analysts raised their estimates to above $200, thanks to these new streams of steady cash flow, a href="http://www.bloomberg.com/apps/news?pid=20601109sid=aTTQICamfprArefer=home"according to Bloomberg/a.
/p
p
Apple's average target price is now $210, and some, like Piper Jaffray analyst Gene Munster, estimate the stock will hit $250.
/p
p
Blackfriars' Howe says this is entirely realistic. "People are starting to realize Apple throws off money pretty rapidly," he says. "Apple is quite a remarkable business. They've made it into a cash cow, and no one else can replicate it at the moment."
/p
p
By Howe's estimates, each million iPhones sold adds $350 million to Apple's annual earnings, and $2 to Apple's target stock price. If Apple sells 10 million iPhones in 2008, that's $3.5 billion in cash and an extra $20 on the stock price.
/p
p
"And of course, the iPhone is only one -- and currently the smallest -- of Apple's four lines of business," writes Howe. "So unless Apple stumbles somewhere along the way, those $250 price goals that analysts are quoting aren't ridiculous; they're just based on revenue streams and deferred revenue that aren't immediately obvious."
/p
p
Howe predicts Apple's stock will hit $200 in fiscal 2008 and $300 in 2009.
/p
p
Other investors are even more bullish. Fund manager Stephen Coleman, of a href="http://www.daedaluscapital.com/"Daedalus Capital/a in St. Louis, told Bloomberg that Apple's stock will hit $600 in 18 months. (That would value Apple at about $500 billion, the size of ExxonMobil, the biggest company in the United States.)
/p
p
Of course, the bigger picture is that the credit crisis could crash the stock market and plunge the economy into a recession.
/p
p
But don't worry about that. Buy AAPL.
/p
p- - -/p
p
emLeander Kahney is news editor at Wired News and the author of the a href="http://www.cultofmac.com/"Cult of Mac blog/a and two books about technology culture,/em a href="http://www.amazon.com/exec/obidos/ASIN/1886411832/cultofmac-20/104-2198405-7579165"The Cult of Mac/a emand/em a href="http://www.amazon.com/exec/obidos/ASIN/1593270666/cultofmac-20/104-2198405-7579165"The Cult of iPod/a./p
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p
There's been a lot of brouhaha about Leopard, but the most exciting thing about Apple's latest OS upgrade hasn't even arrived yet #151; a wave of third-party applications that make use of new technologies under the operating system's hood.
/p
p
a href="http://www.apple.com/macosx/technology/coreanimation.html"Core Animation/a could prove particularly revolutionary. A powerful programmers' toolkit embedded in Leopard, Core Animation makes it easy to create flashy, animated 3-D interfaces. While some observers dismiss such things as pure eye candy #151 mere special effects to make the UI pretty #151 others have said they may herald the most significant advance in computer interfaces since the original Mac shipped 30 years ago.
/p
p
"The revolution coming with Core Animation is akin to the one that came from the original Mac in 1984," says Wil Shipley, developer of the personal media-cataloging application a href="http://www.delicious-monster.com/"Delicious Library/a. "We're going to see a whole new world of user-interface metaphors with Core Animation."
/p
p
These new interface metaphors will be characterized by the a href="http://en.wikipedia.org/wiki/Direct_manipulation"direct manipulation/a of objects on the screen. Instead of clicking Print and Save commands in pull-down menus, objects on the computer screen will be manipulated directly, like the objects in videogames. The iPhone and iPod touch already make extensive use of direct manipulation, courtesy of Core Animation.
/p
p
How radical these interfaces will become remains to be seen. So far, no apps that make use of Core Animation have shipped. But the potential for Core Animation to create new ways of interacting with the computer is such that several software developers have announced that the next versions of their apps #151 including Delicious Library, FlySketch and TextMate #151 will work only with Leopard./p
p
"With advanced graphics you can do advanced interfaces," says Shipley, whose upcoming Delicious Library 2 will make extensive use of Core Animation. "It's very exciting, because it asks the question, 'What can we do in this paradigm?'"
/p
p
At minimum, Core Animation will help Mac programmers create the kind of fluid, interactive interfaces that already abound in Leopard #151 from the time-tunnel effect in Leopard's Time Machine backup app to the ripples created when new Widgets are added to the Dashboard.
/p
p
It's easy to overlook the number of interface animations already present in the Mac operating system. Everything from opening folders to adding new contacts to iChat is animated, and it's not just for show.
/p
p
The animations provide the user with subtle, nonverbal feedback about how they are using the machine. If, for example, you enter an incorrect password in the Mac login screen, instead of popping up a dialog box, the box shakes itself vigorously, as if shaking its head "no."
/p
p
"That's good design, made possible by animation," writes the anonymous blogger at the Watching Apple website, who's complied a partial list of the dozens of a href="http://watchingapple.com/2007/04/core-animation-indeed-2/"animated interface elements used throughout OS X/a.
/p
p
The animated effects aren't found just in Leopard: They're integral to many products in Apple's lineup, especially devices like the iPhone, iPod touch and Apple TV. Microsoft is also experimenting with animation and direct manipulation with its a href="http://www.microsoft.com/surface/"touch-screen Surface table/a.
/p
p
In theses devices, animation is the key to their operation, allowing direct manipulation of objects on the screen. "The iPhone is pure Core Animation," says Shipley. "There's not a frame on it that doesn't use Core Animation. It shows us what we can do on the Mac. It's already introduced so many new ideas to our lexicon."
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p
So far, the direct manipulation interface paradigm has been restricted to experimental projects or a href="http://en.wikipedia.org/wiki/Direct_manipulation#Direct_manipulation_in_computer_graphics"high-end 3-D apps/a. But Core Animation will enable programmers to create simple, intuitive interfaces that will make direct manipulation possible on the desktop.
/p
p
In the upcoming version of Delicious Library, due around the holidays, direct manipulation of virtual books and CDs will be a key part of the app. When the mouse hovers over a CD, for example, controls will fade up, allowing music on the CD to be played within the app. The controls appear automatically when users turn their attention to the virtual CDs.
/p
p
"There'll be a lot more of these 'heads-up' interfaces," says Shipley. "The secondary functionality will fade in and out as you need it."
/p
p
These controls are the kind of thing that is traditionally hidden in a contextual menu that pops up when a Mac user holds down the right mouse key. But here it is implemented in a sophisticated way that mirrors the way physical objects behave.
/p
p
"It's a lot simpler and much friendlier," says Shipley. "It will be totally prevailing."
/p
p- - -/p
p
emLeander Kahney is news editor at Wired News and the author of the /ema href="http://www.cultofmac.com/"Cult of Mac blog/a emand two books about technology culture,/em a href="http://www.amazon.com/exec/obidos/ASIN/1886411832/cultofmac-20/104-2198405-7579165"The Cult of Mac/a emand/em a href="http://www.amazon.com/exec/obidos/ASIN/1593270666/cultofmac-20/104-2198405-7579165"The Cult of iPod/a./p
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p
The Apple TV is widely considered a flop, a rare misstep from a company known for products that can change the way people use computers and other electronic gear.
/p
p
But the wireless media center might have been a smash, if only the company had learned from its own success with the iPod and designed Apple TV to play video formats popular on BitTorrent and other file-sharing networks. After all, the iPod benefited enormously in its early days from Napster and the millions of MP3s the revolutionary song-swap network helped distribute.
/p
p
The Apple TV has been a bust for several reasons. It's not cheap, its features are limited, and it's missing a DVD drive. Plus, it's not finished -- software updates supporting movie rentals and HD TV are rumored to be pending.
/p
p
But its biggest problem is that it's a locked-down device shackled to a third-rate media service, kind of like the iPhone, which is tied to ATT.
/p
p
The Apple TV is fettered to the embarrassingly anemic and expensive library of third-rate movies available in the iTunes Store. The selection of video content is worse than the local public library, and that's saying something. citeZoolander/cite for $10 anyone? Hell, no.
/p
p
If the Apple TV, which CEO Steve Jobs describes as a "DVD player for the internet," let users tap the net's unlimited range of offerings, things might be different for the floundering device.
/p
p
The iPod rode to success largely on the backs of Napster and other early file-sharing networks, which very quickly changed the way people listen to music. Suddenly, people's music started migrating from their living-room CD players to their computers, but there was no easy way to take all those dubiously acquired MP3s outside the house. Enter the iPod.
/p
p
"People already had huge amounts of music when the iPod came along," said Jorge Gonzalez, editor of a href="http://www.zeropaid.com/"Zeropaid/a, a news website devoted to file sharing. "Then the music industry's lawsuits pushed them to iTunes."
/p
p
The Apple TV could have been in a similar situation with modern file-sharing technologies like BitTorrent and Usenet, but it's designed to play video encoded only in H.264 and protected H.264 (the locked format used by the iTunes Store).
/p
p
These limited video formats aren't commonly found on the file-sharing networks. Much more popular are Windows-friendly formats like .AVI and DivX: After all, most content is uploaded from, and destined for, Windows machines.
/p
p
It is possible to play bootlegged content on the Apple TV, but users first must jump through several hoops, processing files with a conversion utility and then copying them to iTunes to make them available to the device. Software like the a href="http://www.videora.com/en-us/Converter/iPod/"Videora iPod Converter/a and a href="http://www.techspansion.com/visualhub/"Visualhub/a can make the process less painful.
/p
p
In addition, a small but dedicated cadre of hackers has hacked Apple TV to support dozens of different video formats, and they've created plug-ins for video-on-demand services that rival iTunes, like a href="http://www.joost.com/"Joost/a and a href="http://jaman.com/a/home/"JamanTV/a.
/p
p
But the Apple TV hackers bend over backward to say they do not support piracy in any way. One of the main hacker forums, a href="http://wiki.awkwardtv.org/"AwkwardTV/a, makes it clear it a href="http://wiki.awkwardtv.org/wiki/AwkwardTV:General_disclaimer"does not advocate using Apple TV to watch pirated content/a.
/p
p
Of course, Jobs -- who is Disney's largest shareholder -- will never support piracy, either. But the main function of the Apple TV is content -- and there isn't enough to fuel demand for the device.
/p
p
"The problem is that iTunes on Windows is just terrible for watching videos," said Lowell Heddings, an enthusiastic video consumer. "Almost nothing is supported, and there's just too much (digital rights management) involved."
/p
p
But on the file-sharing networks, it's just the opposite. It's super easy to acquire almost any video content, from popular Korean soap operas to obscure science documentaries.
/p
p
"There's been an explosion recently of TV shows and movies online," says Gonzalez. "A lot of it is driven by international users. They can't get the shows at home: citeThe Simpsons/cite, citeLost/cite, citeJackass/cite, citeSex in the City/cite. Mostly mainstream network shows."
/p
p
It's not legal, of course, but the selection of media available is mind-bendingly broad and deep. The process can be automated using RSS feeds and software like Azureus or Videora.
/p
p
Public trackers like a href="http://thepiratebay.org/"The Pirate Bay/a and a href="http://www.mininova.org/"Mininova/a appeal to beginner and intermediate file-sharers, says Gonzalez, but advanced users might login to dozens of private trackers, often dedicated to particular categories of video content: movies, TV series, documentaries, independent films.
/p
p
"There's much better, newer, higher-quality material on private trackers," says Gonzalez, who says three-fifths of the 15,000 known BitTorrent trackers are private or require registration.
/p
p
But the real pros use Usenet, the old and venerated news system. It's secure and -– a href=" /politics/law/news/2007/10/riaa_usenet"until recently/a –- wasn't as closely monitored as other file-sharing systems.
/p
p
Heddings, who runs the a href="http://www.howtogeek.com/"How-To Geek/a website, says he uses Usenet archives like a href=http://www.newzbin.com/"Newzbin.com/a and a href="http://www.giganews.com/"Giganews/a, which cost just a few dollars a month./p
p
"The catalog of items in Usenet is really incredible these days," Heddings says. "I can download virtually any episode of virtually any TV show that I want. I don't even bother watching actual TV any more, since I can just download the shows I like.... It's very rare that I'm looking for something that I can't find."
/p
p
"The consumer market wants on-demand video," he says. "The music revolution has already happened, and video is next.... I think that Usenet and BitTorrent are the same as they always were: Smart people are finding loopholes so they can get what they want. Eventually the companies will have to give in to the pressure."
/p
p
If Apple made it easy for Apple TV owners to tap this incredible and almost limitless on-demand library, the device would likely catch on and become a staple of geek living rooms everywhere. Until then, Apple TV will be relegated to the same small scrap heap that holds the Power Mac G4 Cube and Apple's other failures.
/p
p- - -/p
p
emLeander Kahney is news editor at Wired News and the author of the a href="http://www.cultofmac.com/"Cult of Mac blog/a and two books about technology culture,/em a href="http://www.amazon.com/exec/obidos/ASIN/1886411832/cultofmac-20/104-2198405-7579165"The Cult of Mac/a emand/em a href="http://www.amazon.com/exec/obidos/ASIN/1593270666/cultofmac-20/104-2198405-7579165"The Cult of IPod/a./em
/p
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pWhenever Steve Jobs wants Apple to get into something new, he follows the same tried-and-true modus operandi: He finds the leading expert in the field and puts that person on his company's payroll./p
pBefore Apple opened its own chain of retail stores, the very first thing Jobs did was recruit Mickey Drexler, Gap's CEO, to sit on Apple's board as an adviser./p
pSo when Apple announced this week that it had given a board seat to Andrea Jung, CEO of cosmetics giant Avon Products, it raised the question: What could Jobs be getting into? Could it be related to Avon's expertise in mobile commerce (think iPhone) or the cosmetics company's unique sales operation in China?/p
pValleywag speculated that Jung, who also sits on the board of General Electric, might be a href="http://valleywag.com/341816/new-apple-board-member-the-right-woman-for-job"a peacemaker between Apple and NBC/a, which pulled out of Apple's online iTunes Store last summer. (GE owns 80 percent of NBC Universal.)/p
pOthers noted that Jung is the first woman to sit on Apple's board in a decade, and that she heads up one of the most feminine companies in the world. Avon touts itself as the "company for women," empowering millions of female entrepreneurs. The world of technology is distinctly male, but if there's a high-tech company that appeals to women, it's Apple. /p
pBut there are other, more intriguing, possibilities. /p
pJung is an expert in marketing on a global scale. Avon's ongoing "Hello Tomorrow" campaign is a true giant, blending online, print and TV advertising. Costing $250 million in 2006 and $350 million in 2007, Hello Tomorrow is one of the first campaigns to be truly global. Instead of rolling out localized ads for different markets, the same billboard, TV and radio spots are used worldwide. As Apple expands into new markets, such global-marketing expertise could prove crucial./p
pJung is also an expert in corporate social responsibility. Avon touts its good works as a leading differentiator of its brand. Not only does the company support women's independence and self-sufficiency, it claims to run its business along the strictest ethical guidelines. Avon was the first big cosmetics manufacturer to drop animal testing -- in 1989 -- and its a href="http://avoncompany.com/women/"Avon Foundation raises money to fight breast cancer and domestic violence/a. /p
pApple has weathered a lot of a href="http://www.wired.com/gadgets/mac/news/2006/08/71685"criticism for working conditions in iPod factories/a in China, and from environmental activists for a href="http://www.wired.com/gadgets/mac/news/2006/04/70739"being less than green/a. Could Jobs have recruited Jung to burnish Apple's image socially and environmentally? /p
pMore interesting is Avon's success in modernizing its direct-sales operation through technology, which has led to big growth in developing markets like Eastern Europe, India and China./p
pIn Poland, Avon has set up its own virtual cellphone company (operating as a mobile-virtual-network operator, or a href="http://www.mobilein.com/what_is_a_mvno.htm"MVNO/a) to allow its direct-sales reps in the field to a href="http://www.allbusiness.com/europe/poland/4505941-1.html"order products with their cellphones/a (scroll down). Though Avon has been mum on details, Jung told Wall Street that the MVNO is an a href="http://seekingalpha.com/article/26210-avon-q4-2006-earnings-call-transcript"experimental system for serving direct-sales reps/a in the field./p
pAnd in China, Avon has set up an m-commerce program that allows sales reps to a href="http://www.marbridgeconsulting.com/marbridgedaily/2007-11-16/article/5386/avon_china_launches_m_commerce_platform"order cosmetics, track orders and set up accounts/a over their phones. The system will reportedly be made available to Chinese consumers as a "shopping service." Is Jobs interested in Jung's m-commerce expertise, especially as Apple rolls out the iPhone in Asia?/p
pOr perhaps Apple wants to replicate Avon's unique sales operation in China, which Jung is touting as a href="http://www.cosmeticsdesign.com/news/ng.asp?id=69208-avon-china-direct-sales"Avon's single biggest growth opportunity/a -- worth $1 billion on the bottom line./p
pIn China, Avon isn't a pure direct-sales operation. Instead, it operates a hybrid model that blends 5,500 retail stores, or beauty boutiques, with 130,000 direct-sales reps./p
pSpread out across China, the boutiques act as local distribution points for the field reps. The boutiques service the sales force, providing all kinds of support, including a pickup point for orders. Reps in the field place orders over their cellphones and pick them up at the local beauty boutique./p
pCould Avon's hybrid sales channel be a model for selling Apple's high-tech gear in China? Perhaps Jobs is thinking of setting up hundreds of small Apple boutiques all over China, which will act as distribution points for an army of direct-sales reps. Dressed in black turtlenecks, the reps could travel from village to village, demonstrating the wonders of the iPhone and taking orders wirelessly. Orders could be delivered to the local boutique, which would handle returns and repairs./p
pSuch a model would blend a low-cost sales channel -- something Apple lacks in China -- that could be operated to Apple's high standards, with a unique word-of-mouth marketing mechanism. Apple has always enjoyed this type of user-oriented buzz, which is the most effective type of marketing imaginable, but has never had a system to exploit it. An Avon Lady-style sales operation might be a mechanism for profiting from that passion./p
pDing-dong. Apple calling./p
p- - -/p
pemLeander Kahney is news editor at Wired News and the author of the a href="http://www.cultofmac.com/"Cult of Mac blog/a and two books about technology culture,/em a href="http://www.amazon.com/exec/obidos/ASIN/1886411832/cultofmac-20/104-2198405-7579165"The Cult of Mac/a emand/em a href="http://www.amazon.com/exec/obidos/ASIN/1593270666/cultofmac-20/104-2198405-7579165"The Cult of iPod/a. emKahney's latest book,/em Inside Steve's Brain, emtakes a critical look at how Steve Jobs runs Apple. It will be published April 17 by a href="http://us.penguingroup.com/static/html/aboutus/adult/portfolio.html"Penguin Portfolio/a./em/p
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pIf you've been good this year, Santa might put a laser-etched MacBook or iPod under the tree -- courtesy of the fast-growing gadget-personalization industry./p
pSeveral companies that offer laser etching of laptops, iPhones and other gadgets report that demand for personalization services has never been higher./p
p"We're always booked and cannot keep up with the demand," says Philip Torrone, who co-owns the a href="http://www.adafruit.com/laser/"Adafruit Industries laser-etching service/a. "Over the holidays we've been turning people away." Adafruit's fee for the service starts at $100 for laptops and $30 for smaller gadgets./p
pPersonalization is a booming part of the iPod economy, with several companies offering personalization services like laser etching, custom colorization and printing. And while there's high demand for one-off designs, there's real money to be made in corporate gifting, where an iPod bearing a company logo and custom content are becoming emthe/em corporate tchotke./p
p"It used to be pens, T-shirts and hats," says Bryan Georges, co-owner of MacMedia, which offers the a href="http://www.etchamac.com/"Etchamac etching service/a. "Now it's a flash drive or an iPod. The iPod is the most popular gadget on the planet. It's amazing how much money companies will spend to gift iPods."/p
pDespite Apple's reputation for gorgeous industrial design, customers more than ever want to improve their gadgets' looks with an a href="http://www.flickr.com/photos/laser-etch/1858261034/"etching of the Starship Enterprise/a or the a href="http://www.flickr.com/photos/laser-etch/1858283862/"Porsche badge/a./p
p"People from Apple have actually flown here to etch their MacBooks and iPhones," says Adafruit's Torrone, whose laser-etching service is based in Manhattan, cross-country from Apple headquarters in Cupertino, California. "An amazing design only compliments the design of a Mac, like a nice tattoo on a beautiful woman or man."/p
pUntil recently, Apple was almost alone in offering custom laser etching of a short message on the back of iPods. Now, several companies will laser etch complex designs on not just iPods, but any gadget from a cellphone to a Sony PSP./p
p"The only thing we haven't done is the Zune," said MacMedia's Georges./p
pEtchstar, based in Los Angeles, offers several "special collection" iPod etchings, including designs from citeSpongeBob SquarePants/cite, comics and bands. The company runs a retail customization shop on Melrose Avenue with a while-you-wait service, and will customize iPods with characters and logos from a range of a href="http://www.etchstar.com/gallery.php?tag=cbs"CBS TV shows/a such as citeThe Beverly Hillbillies/cite and citeHappy Days/cite. There's even a citeLaverne Shirley/cite design, and about three dozen different citeStar Trek/cite images. (See this Flickr stream with a href="http://www.flickr.com/photos/7421597@N05"photos of happy customers and their laser-etched gadgets/a.)/p
pIt's not just Apple products that are ripe for this type of personalization -- Torrone's Adafruit has laser etched a gun -- but the best work often comes from Mac-ophile artists and designers, like this a href="http://www.flickr.com/photo_zoom.gne?id=1527978915size=l"beautiful tree on a MacBook lid/a or the iconic a href="http://www.flickr.com/photo_zoom.gne?id=832336440size=l"Flying Toasters screensaver etched onto the back of an iPhone/a./p
pBut the real windfall comes from branding batches of iPods with corporate logos and loading them with custom content to create one-of-a-kind gifts to reward valued employees or special clients. Electronics make up about 2 percent of the nearly $19 billion annual market for promotional gifts, says Paul Kiewiet, chairman of the a href="http://www.ppa.org/"Promotional Products Association International/a, the industry's trade association./p
p"IPods are continuing in popularity," says Kiewiet. "It's a highly desirable item that everyone's looking for and can be personalized with an engraving on the back."/p
pMacMedia, an Apple reseller based in Peoria, Arizona, offers its one-off Etchamac personalization service almost as a loss leader, a form of marketing that introduces the service to would-be corporate clients. Etchamac hopes customers take their custom-engraved iPods to work, where the gadgets will catch the eye of someone in marketing who will then order hundreds of company-engraved iPods for clients or sales prospects./p
pSome companies will spend more than $100,000 for several thousand engraved iPods loaded with custom content, from songs by a particular artist to speeches from a motivational speaker./p
pSony BMG just ordered 200 limited edition Bob Dylan iPods. Loaded with the songwriter's greatest hits, the gadgets were engraved with the lyrics to "Like a Rolling Stone" around the screen. The iPods are likely destined for radio stations in Europe and South America, where they'll be given away in competitions, said MacMedia's Georges. The company's high-profile Etchamac clients include Discovery Channel, Viacom and W Hotels./p
pOrders are growing so fast, the company will launch a full-fledged personalization division next year, Georges said. It's moving to a bigger facility that can offer full-color iPod printing (laser etching is cool, but it is only black-and-white) and custom iPod packaging./p
p
Perhaps the growth of iPod-personalization services is a sign of Apple's growing popularity. When Apple was the struggling underdog, the company's logo was a sign of free-thinking individuality and exclusivity./p
pBut now that every Tom, Dick and Harry has an iPod, yours has to sport a a href="http://www.etchstar.com/gallery.php?tag=hey+poodle"Hey Poodle/a laser etching to stand out./p
p- - -/p
p
emLeander Kahney is news editor at Wired News and the author of the a href="http://www.cultofmac.com/"Cult of Mac blog/a and two books about technology culture,/em a href="http://www.amazon.com/exec/obidos/ASIN/1886411832/cultofmac-20/104-2198405-7579165"The Cult of Mac/a emand/em a href="http://www.amazon.com/exec/obidos/ASIN/1593270666/cultofmac-20/104-2198405-7579165"The Cult of iPod/a./p
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p
On Black Friday, wifey and I took the kids to San Francisco's Union Square to see the tree-lighting ceremony -- but we ended up in the nearby Apple Store buying yet another iPod.
/p
p
I'd wanted to avoid the store -- all stores in fact -- but as we passed by, some excited shoppers who were leaving handed us sales fliers. "It's the only time Apple puts stuff on sale," one of the unpaid evangelists explained, imploring us to pick up a bargain. And so we ended up spending more than $200 on a gift iPod -- but, hey, we saved $30!
/p
p
My little shopping parable is just one of many indicators that point toward Apple having emthe/em blockbuster of all holiday seasons. Consider:
/p
ul class="list1"
li
Black Friday kicks off holiday sales. While Best Buy offered $300 laptops, Apple knocked $100 off MacBooks and a laughable $15 off iPod shuffles. These discounts are barely savings at all, yet the Apple Store was emheaving/em with bargain hunters. And where else do you find people leaving a store encouraging passers-by to go in?
/li
li
This year, Apple has its strongest lineup ever of laptops and iPods. It has five tiers of iPod -- from the $80 Shuffle to the $300 iPod Touch. Analyst Tim Bajarin, an industry veteran not easily bowled over, said no one can compete with such a lineup. Bajarin is predicting 30 million iPods will fly off store shelves this season, up from 14 million last year and 9 million in 2005.
/li
li
Steve Baker, a retail analyst at the a href="http://www.npdinsights.com/"NPD Group/a, thinks Apple's computers will be the big draw this year, not iPods. "The notebooks and the iMacs will be leading the pack this year," he said. "IPods will be strong, but we won't see the same growth as in previous years." Baker predicted the iPod might be a victim of the wider economic slowdown: Shoppers feeling the pinch might skip smaller gift items like the iPod. But those able to weather the downturn are still likely to splash out for new MacBooks.
/li
li
Apple's stores have a "gravitational pull" on shoppers. Nearly 30 percent of shoppers who pass within 25 feet of an Apple Store are drawn inside, according to a survey by analyst Gene Munster at a href="http://www.piperjaffray.com/"investment bank Piper Jaffray/a. Munster is predicting 25 million iPods sold this season, a good number of them higher-priced models.
/li
li
Analysts are cautiously predicting a boffo shopping season overall, despite economic jitters. a href="http://www.shoppertrak.com/"ShopperTrak/a, an automated video tracking system that monitors visitors to shops and malls (a service to which Apple subscribes) reports strong growth in Black Friday shoppers -- up 6 percent to 7 percent last weekend compared to 2006. The average annual increase is usually about 4 percent. "Undoubtedly a welcome sight for retailers," a href="http://www.shoppertrak.com/news_retail_sales_112507.php"the company says/a.
/li
li
Apple's stores last year raked in nearly $1 billion in the holiday quarter and $90 million in profit -- a record that's likely to be broken this year. The stores are unbelievably profitable. They average $4,000 per square foot annually in sales, while the national average is a little over $300 per square foot. "They are way off the scale from other retailers," said Gary Allen, a href="http://www.ifoapplestore.com/"who runs ifoAppleStore/a, which closely tracks Apple's retail chain. Allen notes that Apple sells small, high-priced goods, "but they are still selling a lot of product for the retail space they have."
/li
li
As the holidays approach, a href="http://www.ifoapplestore.com/db/2007/11/20/stores-ready-for-holiday-crush/"Apple is extending store hours/a. Some will be opening at 5 a.m., and at least two (in Somerset, Michigan, and Village Pointe, Nebraska) will be open around the clock, according to ifoAppleStore. Already some locations are stacking boxes of iPods and computers below special tables to speed sales, which are now handled by salespeople toting handheld wireless terminals. Apple has ditched sales tills at many stores. Receipts are e-mailed.
/li
li
Apple can sell boatloads of goods without holding sales. In fact, Apple discounts its goods only one day a year: Black Friday. The policy makes Apple one of only a few manufacturers on the planet that doesn't routinely roll out price-slashing deals. Other goods that are never discounted include high-end Denon audio gear, certain pricey TVs from Sony, and Hewlett-Packard ink cartridges. These products tend to be high-end, in-demand items -- like hot videogame consoles -- or are sold by companies that own their own stores, like Apple, Bose and Coach.
/li
li
Apple eschews one of the computer industry's most-utilized tools: sales fliers inserted in the Sunday newspapers. It's one of the only computer companies that doesn't use the ads to promote weekly sales. "It's pretty unique," says Baker. "They can do the volumes they need to do without the added expense of this kind of advertising."
/li
/ul
p/pp
Apple breaks all the rules of retail, but you can bet Santa's little helpers will bring sacks of cash to Steve Jobs this Christmas.
/p
p- - -/p
p
emLeander Kahney is news editor at Wired News and author of the a href="http://www.cultofmac.com/"Cult of Mac blog/a and two books about technology culture,/em a href="http://www.amazon.com/exec/obidos/ASIN/1886411832/cultofmac-20/104-2198405-7579165"The Cult of Mac/a emand/em a href="http://www.amazon.com/exec/obidos/ASIN/1593270666/cultofmac-20/104-2198405-7579165"The Cult of iPod/a./p
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p
If I had any money and I were allowed to buy Apple stock, I'd be betting the farm on it.
/p
p
Since Nov. 6, when Apple's stock hit a high of $195, shares have dipped a good 40 points. The slide comes because of a combination of factors. It's mostly selling by big investors, but Apple's also getting involved in a wider "tech wreck," thanks to below-par earnings from other companies and general jitters about the subprime-mortgage mess.
/p
p
Closing at $153.76 on Monday, Apple's stock is looking like a bargain. Unfortunately, as a journalist, I'm ethically forbidden from holding stock in companies I write about. (And on a journalist's crummy pay, I'm perpetually broke.)
/p
p
"It's a pre-Thanksgiving sale," says consultant Carl Howe of a href="http://blackfriarsinc.com/blog/"Blackfriars Communications/a, who follows Apple carefully (and owns Apple stock). "I've been picking it up as it goes down."
/p
p
Yeah, $154 is a lot of money for a stock that was in the tank a few years ago. Who isn't kicking themselves that they didn't buy a few shares in February 1997, just before Steve Jobs took the helm again, when Apple was trading below a split-adjusted $4 a share? Since then, the company's stock has skyrocketed. An investment of just $1,000 then would be worth $38,900 now.
/p
p
Still, there's plenty of upside in Apple's stock, even at today's prices, thanks mostly to the way Apple is accounting for sales of the iPhone.
/p
p
Earlier this year, Apple adopted a subscription accounting model for the gadget: iPhone sales will be amortized over a 24-month period. Instead of recording iPhone sales against earnings every quarter, sales will show up as monthly revenue.
/p
p
This is unusual, and Apple hasn't said why, but observers believe it's because new features will be added to the iPhone in coming months. Because of general accounting practices, Apple can't add significant new features unless it charges for them. (In January, Apple charged customers $2 for a 802.11n Wi-Fi software upgrade to MacBooks and MacBook Pros).
/p
p
The company is accounting for the Apple TV in the same way. (Rumors are rumbling that Apple TV will get movie rentals and possibly HD soon).
/p
p
Whatever the reason for Apple's accounting practices, sales of more than 2 million iPhones this quarter won't all be put on the books this year -- the cash will be spread out over the next two years. In addition, ATT is paying Apple an estimated $10 monthly fee for every iPhone.
/p
p
It seems that until recently, most Wall Street stock analysts overlooked this hidden revenue. In the last month, 12 analysts raised their estimates to above $200, thanks to these new streams of steady cash flow, a href="http://www.bloomberg.com/apps/news?pid=20601109sid=aTTQICamfprArefer=home"according to Bloomberg/a.
/p
p
Apple's average target price is now $210, and some, like Piper Jaffray analyst Gene Munster, estimate the stock will hit $250.
/p
p
Blackfriars' Howe says this is entirely realistic. "People are starting to realize Apple throws off money pretty rapidly," he says. "Apple is quite a remarkable business. They've made it into a cash cow, and no one else can replicate it at the moment."
/p
p
By Howe's estimates, each million iPhones sold adds $350 million to Apple's annual earnings, and $2 to Apple's target stock price. If Apple sells 10 million iPhones in 2008, that's $3.5 billion in cash and an extra $20 on the stock price.
/p
p
"And of course, the iPhone is only one -- and currently the smallest -- of Apple's four lines of business," writes Howe. "So unless Apple stumbles somewhere along the way, those $250 price goals that analysts are quoting aren't ridiculous; they're just based on revenue streams and deferred revenue that aren't immediately obvious."
/p
p
Howe predicts Apple's stock will hit $200 in fiscal 2008 and $300 in 2009.
/p
p
Other investors are even more bullish. Fund manager Stephen Coleman, of a href="http://www.daedaluscapital.com/"Daedalus Capital/a in St. Louis, told Bloomberg that Apple's stock will hit $600 in 18 months. (That would value Apple at about $500 billion, the size of ExxonMobil, the biggest company in the United States.)
/p
p
Of course, the bigger picture is that the credit crisis could crash the stock market and plunge the economy into a recession.
/p
p
But don't worry about that. Buy AAPL.
/p
p- - -/p
p
emLeander Kahney is news editor at Wired News and the author of the a href="http://www.cultofmac.com/"Cult of Mac blog/a and two books about technology culture,/em a href="http://www.amazon.com/exec/obidos/ASIN/1886411832/cultofmac-20/104-2198405-7579165"The Cult of Mac/a emand/em a href="http://www.amazon.com/exec/obidos/ASIN/1593270666/cultofmac-20/104-2198405-7579165"The Cult of iPod/a./p
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p
There's been a lot of brouhaha about Leopard, but the most exciting thing about Apple's latest OS upgrade hasn't even arrived yet #151; a wave of third-party applications that make use of new technologies under the operating system's hood.
/p
p
a href="http://www.apple.com/macosx/technology/coreanimation.html"Core Animation/a could prove particularly revolutionary. A powerful programmers' toolkit embedded in Leopard, Core Animation makes it easy to create flashy, animated 3-D interfaces. While some observers dismiss such things as pure eye candy #151 mere special effects to make the UI pretty #151 others have said they may herald the most significant advance in computer interfaces since the original Mac shipped 30 years ago.
/p
p
"The revolution coming with Core Animation is akin to the one that came from the original Mac in 1984," says Wil Shipley, developer of the personal media-cataloging application a href="http://www.delicious-monster.com/"Delicious Library/a. "We're going to see a whole new world of user-interface metaphors with Core Animation."
/p
p
These new interface metaphors will be characterized by the a href="http://en.wikipedia.org/wiki/Direct_manipulation"direct manipulation/a of objects on the screen. Instead of clicking Print and Save commands in pull-down menus, objects on the computer screen will be manipulated directly, like the objects in videogames. The iPhone and iPod touch already make extensive use of direct manipulation, courtesy of Core Animation.
/p
p
How radical these interfaces will become remains to be seen. So far, no apps that make use of Core Animation have shipped. But the potential for Core Animation to create new ways of interacting with the computer is such that several software developers have announced that the next versions of their apps #151 including Delicious Library, FlySketch and TextMate #151 will work only with Leopard./p
p
"With advanced graphics you can do advanced interfaces," says Shipley, whose upcoming Delicious Library 2 will make extensive use of Core Animation. "It's very exciting, because it asks the question, 'What can we do in this paradigm?'"
/p
p
At minimum, Core Animation will help Mac programmers create the kind of fluid, interactive interfaces that already abound in Leopard #151 from the time-tunnel effect in Leopard's Time Machine backup app to the ripples created when new Widgets are added to the Dashboard.
/p
p
It's easy to overlook the number of interface animations already present in the Mac operating system. Everything from opening folders to adding new contacts to iChat is animated, and it's not just for show.
/p
p
The animations provide the user with subtle, nonverbal feedback about how they are using the machine. If, for example, you enter an incorrect password in the Mac login screen, instead of popping up a dialog box, the box shakes itself vigorously, as if shaking its head "no."
/p
p
"That's good design, made possible by animation," writes the anonymous blogger at the Watching Apple website, who's complied a partial list of the dozens of a href="http://watchingapple.com/2007/04/core-animation-indeed-2/"animated interface elements used throughout OS X/a.
/p
p
The animated effects aren't found just in Leopard: They're integral to many products in Apple's lineup, especially devices like the iPhone, iPod touch and Apple TV. Microsoft is also experimenting with animation and direct manipulation with its a href="http://www.microsoft.com/surface/"touch-screen Surface table/a.
/p
p
In theses devices, animation is the key to their operation, allowing direct manipulation of objects on the screen. "The iPhone is pure Core Animation," says Shipley. "There's not a frame on it that doesn't use Core Animation. It shows us what we can do on the Mac. It's already introduced so many new ideas to our lexicon."
/p
p
So far, the direct manipulation interface paradigm has been restricted to experimental projects or a href="http://en.wikipedia.org/wiki/Direct_manipulation#Direct_manipulation_in_computer_graphics"high-end 3-D apps/a. But Core Animation will enable programmers to create simple, intuitive interfaces that will make direct manipulation possible on the desktop.
/p
p
In the upcoming version of Delicious Library, due around the holidays, direct manipulation of virtual books and CDs will be a key part of the app. When the mouse hovers over a CD, for example, controls will fade up, allowing music on the CD to be played within the app. The controls appear automatically when users turn their attention to the virtual CDs.
/p
p
"There'll be a lot more of these 'heads-up' interfaces," says Shipley. "The secondary functionality will fade in and out as you need it."
/p
p
These controls are the kind of thing that is traditionally hidden in a contextual menu that pops up when a Mac user holds down the right mouse key. But here it is implemented in a sophisticated way that mirrors the way physical objects behave.
/p
p
"It's a lot simpler and much friendlier," says Shipley. "It will be totally prevailing."
/p
p- - -/p
p
emLeander Kahney is news editor at Wired News and the author of the /ema href="http://www.cultofmac.com/"Cult of Mac blog/a emand two books about technology culture,/em a href="http://www.amazon.com/exec/obidos/ASIN/1886411832/cultofmac-20/104-2198405-7579165"The Cult of Mac/a emand/em a href="http://www.amazon.com/exec/obidos/ASIN/1593270666/cultofmac-20/104-2198405-7579165"The Cult of iPod/a./p
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The Apple TV is widely considered a flop, a rare misstep from a company known for products that can change the way people use computers and other electronic gear.
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But the wireless media center might have been a smash, if only the company had learned from its own success with the iPod and designed Apple TV to play video formats popular on BitTorrent and other file-sharing networks. After all, the iPod benefited enormously in its early days from Napster and the millions of MP3s the revolutionary song-swap network helped distribute.
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The Apple TV has been a bust for several reasons. It's not cheap, its features are limited, and it's missing a DVD drive. Plus, it's not finished -- software updates supporting movie rentals and HD TV are rumored to be pending.
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But its biggest problem is that it's a locked-down device shackled to a third-rate media service, kind of like the iPhone, which is tied to ATT.
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The Apple TV is fettered to the embarrassingly anemic and expensive library of third-rate movies available in the iTunes Store. The selection of video content is worse than the local public library, and that's saying something. citeZoolander/cite for $10 anyone? Hell, no.
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If the Apple TV, which CEO Steve Jobs describes as a "DVD player for the internet," let users tap the net's unlimited range of offerings, things might be different for the floundering device.
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The iPod rode to success largely on the backs of Napster and other early file-sharing networks, which very quickly changed the way people listen to music. Suddenly, people's music started migrating from their living-room CD players to their computers, but there was no easy way to take all those dubiously acquired MP3s outside the house. Enter the iPod.
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"People already had huge amounts of music when the iPod came along," said Jorge Gonzalez, editor of a href="http://www.zeropaid.com/"Zeropaid/a, a news website devoted to file sharing. "Then the music industry's lawsuits pushed them to iTunes."
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The Apple TV could have been in a similar situation with modern file-sharing technologies like BitTorrent and Usenet, but it's designed to play video encoded only in H.264 and protected H.264 (the locked format used by the iTunes Store).
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These limited video formats aren't commonly found on the file-sharing networks. Much more popular are Windows-friendly formats like .AVI and DivX: After all, most content is uploaded from, and destined for, Windows machines.
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It is possible to play bootlegged content on the Apple TV, but users first must jump through several hoops, processing files with a conversion utility and then copying them to iTunes to make them available to the device. Software like the a href="http://www.videora.com/en-us/Converter/iPod/"Videora iPod Converter/a and a href="http://www.techspansion.com/visualhub/"Visualhub/a can make the process less painful.
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In addition, a small but dedicated cadre of hackers has hacked Apple TV to support dozens of different video formats, and they've created plug-ins for video-on-demand services that rival iTunes, like a href="http://www.joost.com/"Joost/a and a href="http://jaman.com/a/home/"JamanTV/a.
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But the Apple TV hackers bend over backward to say they do not support piracy in any way. One of the main hacker forums, a href="http://wiki.awkwardtv.org/"AwkwardTV/a, makes it clear it a href="http://wiki.awkwardtv.org/wiki/AwkwardTV:General_disclaimer"does not advocate using Apple TV to watch pirated content/a.
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Of course, Jobs -- who is Disney's largest shareholder -- will never support piracy, either. But the main function of the Apple TV is content -- and there isn't enough to fuel demand for the device.
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"The problem is that iTunes on Windows is just terrible for watching videos," said Lowell Heddings, an enthusiastic video consumer. "Almost nothing is supported, and there's just too much (digital rights management) involved."
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But on the file-sharing networks, it's just the opposite. It's super easy to acquire almost any video content, from popular Korean soap operas to obscure science documentaries.
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"There's been an explosion recently of TV shows and movies online," says Gonzalez. "A lot of it is driven by international users. They can't get the shows at home: citeThe Simpsons/cite, citeLost/cite, citeJackass/cite, citeSex in the City/cite. Mostly mainstream network shows."
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It's not legal, of course, but the selection of media available is mind-bendingly broad and deep. The process can be automated using RSS feeds and software like Azureus or Videora.
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Public trackers like a href="http://thepiratebay.org/"The Pirate Bay/a and a href="http://www.mininova.org/"Mininova/a appeal to beginner and intermediate file-sharers, says Gonzalez, but advanced users might login to dozens of private trackers, often dedicated to particular categories of video content: movies, TV series, documentaries, independent films.
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"There's much better, newer, higher-quality material on private trackers," says Gonzalez, who says three-fifths of the 15,000 known BitTorrent trackers are private or require registration.
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But the real pros use Usenet, the old and venerated news system. It's secure and -– a href=" /politics/law/news/2007/10/riaa_usenet"until recently/a –- wasn't as closely monitored as other file-sharing systems.
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Heddings, who runs the a href="http://www.howtogeek.com/"How-To Geek/a website, says he uses Usenet archives like a href=http://www.newzbin.com/"Newzbin.com/a and a href="http://www.giganews.com/"Giganews/a, which cost just a few dollars a month./p
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"The catalog of items in Usenet is really incredible these days," Heddings says. "I can download virtually any episode of virtually any TV show that I want. I don't even bother watching actual TV any more, since I can just download the shows I like.... It's very rare that I'm looking for something that I can't find."
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"The consumer market wants on-demand video," he says. "The music revolution has already happened, and video is next.... I think that Usenet and BitTorrent are the same as they always were: Smart people are finding loopholes so they can get what they want. Eventually the companies will have to give in to the pressure."
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If Apple made it easy for Apple TV owners to tap this incredible and almost limitless on-demand library, the device would likely catch on and become a staple of geek living rooms everywhere. Until then, Apple TV will be relegated to the same small scrap heap that holds the Power Mac G4 Cube and Apple's other failures.
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emLeander Kahney is news editor at Wired News and the author of the a href="http://www.cultofmac.com/"Cult of Mac blog/a and two books about technology culture,/em a href="http://www.amazon.com/exec/obidos/ASIN/1886411832/cultofma
