The Dangerous Road Ahead For Apple Computer.

Don’t get me wrong. I love this company and their products. They innovate, implement, and inspire. Apple has made a good transition from Motorola G4 chips to IBM’s G5 chips. The change from Mac OS 9 to the stability and flexibility of Mac OS X was relatively painless (I’m an early adopter).

The excitement generated by a successful move into the music business with iTunes, the iPod, and the iTunes Music Store is a remarkable, textbook classic product marketing venture.

Apple’s stock price continues to be a darling. There’s almost $5-billion in the bank, no debt, and the company struggles to meet with demand in nearly every product line.

So, what’s wrong?

The road ahead is treacherous and about to change quickly. I’m not just talking speed bumps or a few potholes. Apple is about to careen off the highway and into the ditch.

First, the iPod and iTunes Music Store. We’ve all heard the plaintiff cry, “Microsoft is coming. Microsoft is coming.” It may surprise you to know that Microsoft’s entry into portable downloadable music doesn’t bother me too much.

If Apple can prosper selling hardware and software against the Microsoft hegemony, they’ll do just fine with the best music “solution” in the business.

That’s the problem.

Years ago, when Apple was just a thought in the back of both Steve’s minds (founders Steve Jobs and Steve Wozniak) they decided to call their new startup company “Apple Computer” because they so admired the Beatles and their record company, Apple Corp.

Apple Computer became a big success and to keep the copyright, trademark, and legal hounds from Apple Corp from upsetting the Apple Computer apple cart, the computer Apple settled a number of lawsuits and paid millions of dollars to the other Apple.

Years passed. Then Apple the computer company decided to get into the “music business” in a big way with iTunes, then the iPod, and then the iTunes Music Store.

The Apple Computer-cart is about to crash.

Apple Corp (the Beatles’ record company) and Apple Computer (our favorite computer company) are now at odds over music. This conflict could cost Apple (the computer company) some very big money and make the other Apple richer than they are now, which is very rich.

You see, it isn’t about who’s right and who’s wrong. I’ve read excerpts of the last agreement between the two Apples and it appears as if the Mac Apple is in the clear—they don’t produce music themselves and they don’t sell CDs (stipulations in the agreement).

Of course, that’s about all they don’t do, so Apple the Corp has an argument.

And a chance to win.

A big company like Apple Computer, with a huge market share of online music and the portable music player business now has something substantial to lose. They could lose it, too. Stranger things have happened in courts of law.

To mitigate the risk of a huge award to Apple the record company, Apple the computer company will be forced to “settle.” That will cost the company a lot of money, much prestige, the current hot product winning streak, tumble the stock price (temporarily) and set the stage for moving the company straight into a ditch.

That brings me to Point #2 and Page 2.

It won’t be Microsoft that causes Apple to ditch their current success streak.

Click Here for Page 2…

Continued from Page 1…

Apple Computer’s high-flying success streak will end because of certain immutable laws we all must face. “All good things come to an end.”

Steve Jobs is right. The PDA business is going the way of cell phones. We can only carry so many gadgets and I’d rather have my iPod than a Palm Pilot but the cell phone is more important (mostly) than either.

Portable music players will make the transition from separate device in the pocket to become a feature on future cell phones.

Honest. It will happen.

Apple the computer company believes it, too, hence the deal with Motorola (the cell phone maker) to make music from iTunes available as playlists on future cell phones.

Whither art, thou future iPod? It’ll become a cell phone. Hard drives will get smaller, require less power, and carry more music. It’s only natural that the market for standalone portable music players begins to shrivel up and dry.

Long live the portable communicator device; cell phone, camera, music player.

Apple Computer doesn’t make cell phones and they’re not likely to ever get into that business, although that business could take business away from them. Would you buy a cell phone that is also an iPod? Of course, that won’t happen this year. Or next. Perhaps the year after. It will happen.

If Apple the record company is a speed bump, the natural forces of change in the market place come together to form a slippery spot in the road.

What puts Apple inexorably into the ditch?

The seemingly one constant in the universe. Change.

Our favorite computer company, the one with their finger on the pulse of both hardware and software for the digital hub, cannot be all things to all people and keep up with the pace of change against all comers. Not with a 3% to 5% market share (despite the much higher mindshare numbers). Current portable music player market share must drop as competition continues to increase and improve.

The same holds true for the online music scene. Market share must drop in the face of more competition and more choice.

All of these events—a settlement or award to Apple the record company, marketshare losses to competitors in online music and portable music players, the move from a portable player to a feature within a cell phone, and the sheer competition of “Apple against the world”—will be seen as publicly humiliating examples of gloss slipping from Apple’s shining crown.

The hat trick capper to this whole scenario?

Stock price, Bill Gates, and what I want for Christmas.

Apple the computer company is a darling stock. Demand for products is high. Traffic in the retail stores is high. Mindshare for “cool” products is high, stock is high.

With a few speed bumps, slippery roads, and a ditch just ahead, that comfortable stock price may not be within the next year. Companies make drastic changes when the stock price is threatened. Companies often push the marketplace with unncessary products when the stock price is threatened.

Bill Gates publicly chided Steve Jobs recently regarding the iPod, iTunes Music Store, and Apple’s lack of a portable media device. Does Gates know something about Apple’s future products that the rest of us don’t know?

Does Apple have something waiting in the wings, waiting until timing is just right, waiting for the holiday buying season of 2005; and does Bill Gates know or suspect what it is?

I think so.

Apple works on many products which never see the light of day, so it’s not only possible but likely that our favorite computer company is working on a “tablet media device”. Or not. It seemed to me that Gates knew of something that Apple was working on and pressed to get the Cupertino folks to admit it.

Secrecy and security are strong at Apple Computer. Certainly more so than at Microsoft. Still, it seemed that Gates was dropping more than just hints; more than just an invitation to join him at the media device banquet hall. It appeared to be a taunt aimed at Apple.

That brings me to what I want for Christmas.

A tablet media device. True, it’s gotta be bigger than an iPod but smaller than an iBook. It must be wireless. It must also act as a, ready for this? Videophone. It should run Mac OS X, play and broadcast movies, music, and much more. Battery life has to about 10 hours (or four). This Apple media device must sync with my desktop computer’s home directory, and my iPod, and my Motorola et al cell phone.

When will we see such a device? Either just before Apple hits the ditch, or just afterwards (think of it as barrier or a tow truck; your choice). And when Apple tops 100 + retail stores in the US and a dozen or so stores in other countries? Why? Because you’ll need to see this device to believe it and the best place to see it (and buy it) is in Apple’s own retail environment.

Plausible? Certainly. The recent string of successes make up a road for Apple that’s been unimpeded. That must end sometime.

These thoughts bring on additional thoughts. Should Apple buy TiVo? Who will Apple partner with next? What are your thoughts? Click Comments below to share your thoughts with other readers.

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