All Things Digital

OK. So maybe Amazon’s Kindle isn’t “the Zune of reading.” Certainly, that’s the impression given by CitiGroup analyst Mark Mahaney’s prediction that the e-book reader will generate three-quarters of a billion dollars for Amazon (AMZN) by 2010. That’s about 1% to 3% of the retailer’s revenue.

“We admit having very limited visibility into the current ramp of the Kindle,” he writes. “And there is the obvious point that Kindle sales could easily cannibalize existing AMZN book sales. But we believe the broader point is that it is not unreasonable to see the Kindle as having a material impact on AMZN’s revenue–low single digits–within two to three years. That may not sound like a lot, but given the company’s current $20 billion revenue run rate, that’s impressive.”

Sure is. If you have hard metrics on which to base such a claim. Sadly, that’s not really the case here. Because Mahaney’s estimate is based on, get this, Kindle’s sales ranking on Amazon’s site and the number of customer reviews it’s been given. From those stats, and Amazon’s apparent difficulty in keeping up with demand for the device, Mahaney figures that 10,000 to 30,000 have been sold in about three months. And then, referencing iPod adoption rates, he extrapolates his figure of $750 million by 2010 from that. Seems a jacktastic stretch of the imagination, doesn’t it?

Was he inebriated? Do you even know anyone who owns a Zune?”

–-Apple CEO Steve Jobs on Microsoft’s claim that the Zune is now a worthy alternative to the iPod.

Despite its feature differentiations and, er, “distinctive” color palette, Microsoft’s (MSFT) Zune has yet to prove itself the iPod killer it was once touted as. Since its launch in November of 2006, the Zune has sold 2 million units. In comparison, Apple (AAPL) in its last quarter sold 10.6 million iPods–quintuple Microsoft’s cumulative sales to date. Zune’s market share in this space during the first quarter: 4%. Apple’s share: 71%.

Clearly, the only thing being killed by Microsoft’s iPod killer are Microsoft’s chances for unseating Apple in a market that would seem–according to relatively flat year-over-year iPod sales–to have peaked without it.

Try as they might, financial analysts attending Apple’s (AAPL) Q2 earnings call yesterday were unable to goad company execs into giving up a launch date for the 3G iPhone. Peter Oppenheimer, Apple’s CFO, and Tim Cook, the company’s COO, refused to confirm rumors that the company plans to announce the device this summer, though they did–as they always do–claim Apple has a number of exciting products in the pipeline.

And that was confirmation enough for analysts. Citigroup’s (C) Richard Gardner promptly issued a research note pitching June 9, the kickoff of the company’s annual Worldwide Developers Conference, as the likely date of the 3G iPhones’ debut. Wrote Gardner, “We expect a steady stream of new products beginning on 9 June with a 3G iPhone and iPhone/iPod touch SDK, continuing with a refresh of the complete laptop line in July/August and concluding with a complete refresh of the iPod line in August/September.”

June 9 seems a plausible, if not bleedingly obvious launch date. Announce the 3G iPhone at WWDC, with an eye toward an official release on June 29, the first anniversary of its predecessor’s debut? That gives Apple plenty of time to reach its goal of shipping 10 million iPhones by the end of 2008. The company has so far sold 1.7 million iPhones worldwide, leaving 8.3 million more to go if it wants to hit the 10 million mark. Uncrating the 3G version of the device in early summer, perhaps in concert with a move into the massive Japanese and Chinese markets, would make reaching 10 million iPhones shipped an easy matter.

If there’s been a slowdown in U.S. consumer spending, nobody told Apple. This afternoon, the company reported second-quarter revenue of $7.5 billion on net income of $1.1 billion, or $1.16 per diluted share, pretty much blowing the doors off Wall Street expectations.

Apple (AAPL) shipped 2,289,000 Macs (up 51%), 10,644,000 iPods (up 1%) and 1,703,000 iPhones during the quarter.

“We’re delighted to report … the strongest March quarter revenue and earnings in Apple’s history,” said CEO Steve Jobs, recycling the soundbyte CFO Peter Oppenheimer used to describe the company’s 2007 March quarter.

Clearly, business is good in Cupertino. That said, Apple says it expects fiscal third-quarter earnings of $1 a share on revenue of $7.2 billion–a bit below analyst expectations. And the Street, which by now should be familiar with Apple’s under-promise-and-over-deliver earnings highjinks, isn’t at all happy with that forecast. The company’s shares slipped a bit in after-hours trading.

If Digg founder Kevin Rose is right, Apple’s next generation iPhone will include not one, but two cameras–the second a front-mounted video camera designed for iChat AV.

During a recent episode of his weekly Diggnation vidcast (see above), Rose claimed that the new iPhone reportedly being prepped by Apple (AAPL) for a summer release will enable video conferencing over AT&T’s (T) high-speed 3G wireless network.

Like most such predictions, Rose’s should be taken with a grain or two of salt. His last iPhone premonition, which had the device featuring slide-out keyboards, dual batteries and CDMA and GSM support, was laughably inaccurate. That said, he did accurately predict the debut of iPod nano ahead of its 2005 debut. So there may be something to his latest claim. Certainly, it sounds plausible.

Looks like the long and winding road that leads to the iTunes Store may disappear after all.

With their trademark dispute over the “Apple” brand finally settled and the solo work of Beatles John Lennon and Paul McCartney already for sale on iTunes, Apple (AAPL) and the Beatles’ Apple Corps. are rumored to be negotiating a business alliance that will bring the Fab Four’s remastered back catalog to the digital music store–for a sum of as much as $600 million.

Reports of the deal have the Beatles’ back catalog arriving on iTunes “within months,” perhaps even accompanied by a special edition “Yellow Submarine” iPod. That said, they should all be taken with a grain of salt–if not an entire salt flat. Apple has already dismissed them as “unsubstantiated speculation.” “This is not news, nor is it a scoop,” an Apple spokesman told Billboard.

Perhaps. Perhaps not. Discussing a potential iTunes deal with Billboard.com last November, McCartney said “it’s down to fine-tuning, but I’m pretty sure it’ll be happening next year, 2008.”

We’re telling IT executives to not support it because Apple has no intentions of supporting (iPhone use in) the enterprise. This is basically a cellular iPod with some other capabilities and it’s important that it be recognized as such.”

–Gartner analyst Ken Dulaney, July 2, 2007

Today’s an important one for Apple (AAPL). The company is hosting a “town hall” meeting to discuss an iPhone software roadmap. Presumably, this event will see the release of more details about the eagerly anticipated iPhone SDK, but perhaps not the debut of the SDK itself. Certainly, that’s the impression given by the invitation to the event–”Please join us to learn about the iPhone software roadmap, including the iPhone SDK and some exciting new enterprise features.” Enterprise features? Ready to eat your words, Dulaney?

But whether the SDK is released to developers today or not, this event promises to be a watershed one. Because it heralds a vast new addressable software market for developers. After all, the iPhone and iPod touch run OS X, and presumably most future iPod models will as well. Which likely means that applications written for Mac in Xcode–Apple’s development toolset–will be deployable on any OS X device. They’ll be “write once, run anywhere”–anywhere there’s OS X, that is. And word on the street has it that we may see a few of them as early as today.

The event begins at 10 a.m. PT (1 p.m. ET). Updates to follow …

UPDATES:

• The event’s begun. You’ll find streaming video of the event here.
• The next iPhone software update will include support for Push Email, Push Calendar, Push Contacts, Global Address List, Cisco VPM, Certificates and WPA2/802.1x, Security Policies, Device Config, and Remote Wipe. Wow.
• Responding to customer demand for Microsoft Exchange on the iPhone, Apple has gone ahead and licensed ActiveSync for the device.
• Exchange will be native to the iPhone. Jobs must be muttering multiple “BOOMS” from backstage.
• Nike and Disney have been testing Exchange for iPhone and are pretty happy with it.
• Scott Forstall is now taking the stage to talk about the iPhone SDK. Apple giving developers the same tools and APIs it uses to develop iPhone apps.
• Apple took Cocoa and created Cocoa Touch, a new framework for building apps.
• The OS X kernel is the same for desktop and iPhone.
• Xcode has been expanded to support iPhone. It will code complete APIs for the iPhone SDK. (See? What’d I tell you: write once, run anywhere there’s OS X.)
• SDK includes Interface Builder and iPhone Simulator that allow developers to run their apps on their desktops. “It runs on a Mac and simulates the entire API stack on your computer,” Forstall says.
• Forstall builds a quick “Hello World” app, drops it on the iPhone and runs it. Quick and easy.
• “This is an app I just built in two minutes. But we wanted to see what we could build in two days. So we built Touch FX,” Forstall says. It’s an image editor that allows you to warp photos by pinching them.
• Forstall then demos Touch Fighter, a point-and-shoot game.
• Did I mention the SDK is available today? Good luck downloading it …
• Whoa. Travis Boatman from Electronic Arts takes the stage and demos an iPhone version of Spore. They’ve already ported 18 levels. (Hope SDK includes tool for building spare batteries.)
  

• Apple really pulling out all the stops on this one. Chuck Dietrich from Salesforce.com onstage now.
• Salesforce ported one of its automation tools to the iPhone, one that graphically displays how salespeople are performing against their goals.
• Next up: AOL. AIM for iPhone. Took five days to build.
• Larry Ellison takes the stage to announce Oracle Database 11g for iPhone.
• Kidding.
• Epocrates demo. Clinical reference app for doctors.
• Ethan Einhorn from Sega up next.
• Ha! Super MonkeyBall for iPhone. “This is not a cellphone game. This is a full console game. … We had to fly in a developer to upscale the art for the iPhone,” Einhorn says.
• Jobs back onstage. Announces the iTunes App Store. “You’re a developer who just spent two weeks or a bit longer writing an application. What’s your dream?” Jobs asks. “To get it in front of every iPhone user.”
• Apps can be downloaded wirelessly or sideloaded via iTunes. “This is the exclusive way to distribute iPhone applications,” Jobs says, adding: “We are controlling distribution.” (We will control the horizontal. We will control the vertical. You are about to participate in a great adventure. You are about to experience the awe and mystery which reaches from the inner mind to… The iTunes App Store.)
• Developers price their own apps and they get 70% of the revenues they generate. Apple takes 30% for running the App Store.
• Apple plans to release an iPhone 2.0 software update in June that will include enterprise capabilities, App Store, etc.
• One more thing …
• Oh, look: It’s KPCB’s John Doerr. Must be here to demo i’MRich for iPhone.
• Doerr announces the iFund for iPhone developers.
• $100 million to start. Boom.BOOM. BOOM! “That should be enough to start about a dozen Amazons, or even four Googles! … If you want to invent the future, the iFund wants to help you build it,” Doerr says.
• END

(Spore photo courtesy Gizmodo)

We’re thrilled to report our best quarter ever, with the highest revenue and earnings in Apple’s history.”

–Apple CEO Steve Jobs

Well, the street didn’t much care for Apple’s latest financial guidance, did it? Shares of the company tumbled in after-hours trading after Apple offered a disappointing second-quarter outlook.

Though Apple posted its highest quarterly earnings and sales in history today thanks to strong sales of Macs and iPods, its second-quarter guidance fell well short of Wall Street’s expectations. Looking ahead, Apple said it expects earnings of 94 cents a share on revenue of $6.8 billion in its second quarter. Wall Street was looking for earnings of $1.09 a share on revenue of $6.99 billion.

And with concerns of an economic slowdown looming large after Intel issued a cautious outlook for 2008 last week, the market reacted with predictable knee-jerk horror, sending Apple shares down more than 11% 15% 17% in after-hours trading. “All of the numbers were fine,” Piper Jaffray analyst Gene Munster told CNBC. “They continued to gain market share. The issue is that people wanted a more confident ‘guide.’ There’s nothing wrong with the actual numbers, it’s just that people are worried there’s going to be a break.”

Or that we’re already at the beginning of one: iPod sales in the states were flat year-over-year …

Apple introduced a new version of its eight gigabyte iPod nano digital media player this morning. And it’s pink, which according to Apple is among the iPod’s “much-requested” colors (noticeably absent from that list: the “National Park Bench Brown” shade pioneered by Microsoft’s Zune team.)

“Customers are going to love the gorgeous new pink iPod nano,” Greg Joswiak, Apple’s vice president of Worldwide iPod Product Marketing, enthused in a gushy press release. “The pink iPod nano is perfect for people who want a great new color this spring, or who are searching for a special Valentine’s Day gift.”

Note: Digital Daily’s John Paczkowski is off sick today. This post is being filed from notes taken at the Macworld keynote at San Francisco’s Moscone Center by Associate Editor John Sullivan. Check back later for Paczkowski’s take on the proceedings.

After a week of rumor buildup and speculation, Apple CEO Steve Jobs’s Macworld keynote seemed almost subdued. He gave the crowd what it expected in terms of new iPhone apps and additional iTunes features, and then finished with the announcement it had been primed for: the MacBook Air, the world’s thinnest laptop computer.

Jobs began his keynote a few minutes past 9 a.m. For the barely contained crowd (Moscone West was packed), the aura of anticipation was heightened by rock and hip-hop music blaring over the speakers. After the lights came down, the crowd hooted and yelped. Then, after a Mac Guy/PC Guy video (about what a terrible year it was for PC guy, who finishes by telling Mac Guy he’s “gonna copy everything you did in 2007″), Jobs took the stage in his uniform black turtleneck and blue jeans, declaring: “Clearly something is in the air today.”

After noting that 2007 was an “incredible” year, an “extraordinary” year, capped by the “revolutionary” iPhone, Jobs announces that he will address four things:

1. Leopard:

   This was the most successful release of Mac OS X, Jobs notes, with 5 million units sold. He quotes reviews from Walt Mossberg of The Wall Street Journal (and co-executive editor of this site), David Pogue from the New York Times and Ed Baig of USA Today.

   As for Time Machine: For backing up files, it works great, he says. Today, he’s announcing a companion product: a backup appliance called Time Capsule. Plug it in, turn it on, enable Time Capsule on all your machines: one with 500 gigabytes ($299) and another with one terabyte ($499). “We want people backing up their content,” he says. “[This] is a perfect companion to Leopard.”

2. iPhone:

   “Got some great news for you,” Jobs announces. “Today is the 200th day the iPhone is on sale. Sales of 4 million so far. What does this mean for the smart-phone market?” He quotes research: RIM had most sales (39%); Apple had 19.5%; Palm 18%. First 90 days, iPhone equaled Palm, Motorola and Nokia sales combined, Jobs says.

   SDK for the iPhone is coming in late February, Jobs continues, but: “We wanted to give something today.” He lists “great new features”: maps with location; Webclips to customize home screen; SMS messaging to multiple people; chapters capability for video; and support for Lyric.

   Map app looks much more localized, customizable; drop a pin, move a pin. Developed in conjunction with Google, Jobs says.

   SMS more than one person: With the new app, you can message multiple recipients–one click and you can send multiple messages.

   Webclips: We worked with Google on this app, Jobs notes again. The icons can be added to screen of iPhone. Jobs demos a “jiggle” function to edit Webclips and rearrange them. This feature can add up to nine home screens to the iPhone.

   How do we make maps work? Jobs asks: Skyhook Wireless, which mapped Wi-Fi hotspots and located 23 million of them. “Isn’t that cool? It’s really cool,” Jobs enthuses. Triangulation is the key, he says, noting that’s what Google is doing.

   “All of this is available today as a free update to all iPhone users,” he proclaims, to applause.

   Then, almost as an afterthought: iPod Touch. “We’ve decided to add five apps”: maps with Wi-Fi location, mail, stocks, notes and weather–all of which will be built in to new models, with a upgrade available to existing users for $20.

3. iTunes:

   “We sold our four billionth song this month,” Jobs notes, adding that on Christmas Day, iTunes sold 20 million songs. It has sold 125 million TV shows and 7 million movies.

   But, he adds, we think there’s a better way to deliver movies: iTunes movie rentals. Not like music, which you buy to listen to a thousand times. You watch a movie once. Touchstone, Miramax, MGM, Lionsgate, New Line are all on board, plus (big applause): 20th Century Fox, Warner Bros., Disney, Paramount, Universal and Sony. “We have every major studio supporting us: really, really great films…We’re gonna launch with 1,000 films by the end of February.” And you can watch them anywhere, Jobs notes: Mac, PC, iPhone–anywhere with broadband. When you rent, you get a 30-day window to watch a movie, with a 24-hour start/stop time frame. Plus, he notes, you can transfer them around your devices, too. Cost: $2.99 for library titles, $3.99 for new releases.

   Jobs repeats point that all movies can be moved to a different device: e.g., iPod or PC. But what about flat-screen TV? “All of us have tried,” Jobs says of that hurdle, “and we’ve all missed.” But now, he adds, we’re back with Apple TV, Take 2: No computer, but it still syncs with TV.

   The iTunes movies can also be rented in high definition with Dolby 5.1 sound. You can get podcasts, photos from Flickr and .Mac. Finally, Jobs mentions a YouTube connection: 50 million videos. So you can buy TV shows and music and play this iTunes content on TV too.

   The HD-quality option is $1 more, Jobs says: $4.99 for new releases. (Demo: Jobs shows free preview function for “Blades of Glory,” as well as an almost instantaneous download and play of movie). Full DVD quality. Then, he gives an HD demo of “Live Free or Die Hard”: “Very strong,” Jobs opines.

   TV shows: Over 600 shows, he notes, at $1.99 per episode. All can sync with PC or Mac.

   Podcasts: lot of HD podcasts, very cool. “HD content streaming free.” Shows “incredible” clip from Teton.

   For Apple TV: free software upgrade for current owners. But because “We want to make Apple TV even more accessible,” starting today, Jobs says, the new price is $229 (from $299).

   “I think we’ve got it all together,” Jobs says, noting Apple has a great working relationship with Fox. He then introduces Jim Gianopulos, chairman and CEO of 20th Century Fox Filmed Entertainment: “When you get down to it, there are two things,” Gianopulos says. “Make great movies, and give them to audience in as many ways as they want.” People want choice, he adds, viewing options, access, control and availability.

   “This is the coolest thing we ever heard,” Gianopulos says. “Music, then iPod. Phone, then iPhone. Apple does things in innovative ways. We’ve been working on DVD…[his Blu-ray mention draws applause]…But we also don’t want to deny the viewer the option of having a copy”–a physical copy of the movie. He shows first one, a take-off on “Star Wars.” “It’s an exciting beginning with Apple,” he concludes.

4. MacBook Air.

   Jobs is back: “There’s something in the air,” he repeats. “As you know, Apple makes the best notebooks on the planet. Today, we’re introducing a third kind of notebook: MacBook Air.” After comparing all subnotebooks, he announces: “There was room for improvement.”

   So, MacBook Air stats: .76 of an inch at thickest part to .16 of an inch at thinnest. “We’re talking thin here; let me show it to you now.” He picks up a manila envelope and produces the aluminum device; crowd oohs and ahs at its size. Yet it has a full 13.3-inch display; “gorgeous” Jobs says. It also has a built-in camera; full-size back-lit keyboard; multi-touch gesture function–in short, Jobs says, “We’ve taken things we’ve learned from iPhone and now they’re in our computers.”

   How did Apple do it? Three things: battery; 1.8-inch drive; 80GB hard-disk drive (or 64 SSD, as an option). The laptop’s board is the size of a pencil. “An amazing feat of engineering,” Jobs notes. “And we didn’t compromise on performance: speedy processor: Intel Core 2 duo.” Jobs mentions Apple’s great relationship with Intel; “We asked them to consider smaller packaging on their chip: They came up with the same chip in a package that is 60 percent smaller, and that’s why we were able to build the MacBook Air,” Jobs remarks.

   Then Intel CEO Paul Otellini comes onstage and delivers his take on how the two companies collaborated on meeting the challenge. In short, a commitment to innovation drove the effort.

   Bottom line: After more discussion of the MacBook Air’s features, Jobs mentions price: All these features–along with a battery that gives five hours per recharge–for $1,799. Audible “wow” from the audience.

   One other side of MacBook Air, Jobs adds: environmentally conscious: aluminum case; arsenic-free glass; mercury-free and bromide-free components, plus less packaging.

So, Jobs concludes, “The thinnest notebook in the world joins MacBook and MacBook Pro, the best in the industry.”