Problems And Pains: Apple’s Top 10 List Today.

What you won’t find on the list are the usual suspects. For example, Microsoft. While any company that holds a 90-percent or so market share could be considered a problem for a smaller competitor, Microsoft’s got so many problems that they’re not much of an issue for Apple these days.

Apple can’t make products fast enough, so Supply and Demand could be a problem, right? It’s not. Check the Apple Store online and you’ll see much shorter wait times for delivery of the new iPod shuffles and Mac mini computers. Other products are selling fast but Apple has the supply line running smoothly.

Tiger? It’s the next version of Mac OS X and by all accounts is a substantial improvement over Panther (in my opinion, the best Mac OS ever). Things are running so well in Tiger development that there’s rumors it’ll be released early. No problem there.

Apple’s hottest product of the past couple of years has been the iPod and iTunes Music Store. You might suspect a few iPod problems on the Top 10 List and you’d be right.

So, in reverse order, Problems and Pains: Apple’s Top 10 List.

Problem #10: TiVo, TV, and Movies
Apple has no presence in the emerging digital “living room.” There’s all the cable company set-top boxes. There’s TiVo. Even Microsoft and PC makers have “media PCs.”

No Apple. Just when it looked like TiVo’s stock price would make it an attractive buy-out (Apple could pay for TiVo with petty cash), TiVo signs a huge deal with Comcast.

Apple needs to bring expertise and product to the living room. Soon. An iMovie Store? A Sony deal? Buy TiVo? Something. But fix that problem.

Problem #9: LuxPro’s Super shuffle
iPod knockoffs will be a growing problem for Apple. If it’s not in the form of yet another Sony Walkman-iPod-Killer, it’s LuxPro’s clone of the iPod shuffle.

Sure, the Super shuffle will never make it to the US (trade dress and all the legal issues), but there’ll be more. Knockoffs muddy the water. Apple needs to deal with the clones quickly, reduce the publicity, move on.

Anyone else notice that there’s only a $50 spread between each model iPod from the $99 shuffle to the iPod photo?

Problem #8: Trade Secrets and Free Press
Apple is notoriously secretive about products and rightly so. As a journalist I want to be able to dig up as much information about Apple and products as possible.

ThinkSecret and other Mac web sites have been sued by Apple because the sites crossed the line and more than likely knowingly published a few of Apple’s trade secrets and enticed individuals to break NDAs (non-disclosure agreements).

Apple’s in the right here. But the legal action won’t end soon and will put a damper of a journalist’s right to free speech. The whole thing is a big PR problem that Apple needs to fix soon.

Problem #7: Real, Napster, and Music Subscriptions
Both Real and Napster are desperate and need to do something to crack the music market. In nothing flat (well, three years or so) Apple has taken the online music scene by storm and owns the market.

To gain an ounce of public recognition, Real CEO Rob Glaser and Napster CEO Chris Gorog have simply resorted to name-calling and insults instead of building a better mouse trap.

However, online music subscriptions are beginning to gain traction and could find more than a niche following. That opens up the world of WMA music players to hundreds of thousands of users.

Apple needs a subscription service before Napster and Real gain more ground. I predict an Apple music subscription service by the end of 2005.

Problem #6: The Beatles and Record Companies
Apple the computer company is being sued by Apple the record company because the latter is in the music business and believe the former should not be.

A court (or out of court settlement) will decide, though this one looks to be leaning toward Apple the computer company (they don’t “make” music).

The other side of the coin is record companies. Apple has gained considerable clout in the music industry. Record companies are losing control while Apple gains more control. Guess who doesn’t like that change?

Apple’s also rumored to be looking at the purchase of a growing startup company that could eliminate the record company as a middleman for recording artists. Or, if Apple doesn’t control that process and the technology, elimnate Apple as the middleman, by allowing artists to sell direct to the public.

Could Apple become a music distribution company and compete with the labels? Regardless, both the Beatles’ law suit and relationships with the recording labels represent a big set of problems for Apple.

Now, on to the remaining Top 5 of Apple’s Problems Today. Click Here for the next page. Sneak Preview: Chips, Stocks, Steve, and Disease.

Problem #5: Viruses, Worms, et al
How can this be a problem for Apple and why is it ranked in the Top 5? There are no known viruses or worms or spyware for Mac OS X. What’s the problem?

There will be. Unlike Windows, which gets a new virus every day, the Mac has none. The first one will be a big headache and a PR nightmare.

Apple needs to be prepared to respond quickly, both technically to plug whatever hole may exist, and publicly to minimize the fallout.

Problem #4: IBM and Motorola
Motorola screwed Apple big time with a line of chips that could not get past the 500 mhz speed trap for, oh, about 12 years (so it seemed at the time).

Apple then cuddles up to the other PowerPC chip maker, IBM. The result? Faster chips, lots of publicity, even an announcement that 3ghz chips would be available by mid-2004. It’s almost mid-2005 and no 3ghz chips in sight.

Apple’s dependency on Motorola and IBM for chips that are competitive with Intel’s offerings is a weakness. It’s also a serious problem that doesn’t have a short-term solution.

Sony, IBM, and others have collaborated on a next generation chip called “the Cell.” Apple needs to be in line when those chips roll out the door.

Problem #3: Steve Jobs Successor
This is a serious problem. Few companies that are so influential in their industry are so tied up with the fortunes of the co-founder and CEO as Apple is with Steve Jobs.

Jobs just turned 50 and has earned more fortunes than most people would ever dream of.

Few would argue that he rescued Apple from a certain death and has steered the company back to financial health, mindshare market share, and brought “cool” back to the Cupertino Mac and iPod maker.

Who’s next in line? What happens to Apple when Steve’s no longer around? Is there an internal heir-apparent? What’s the plan?

If “as Steve goes, Apple goes” is accurate, a stronger-than-strong #2 guy needs to step forward.

Problem #2: iPod and Itunes Market Share
How could these numbers possibly show up as a problem or a pain for Apple? The iTunes Music Store reportedly has a 70-percent market share of the legal music downloads.

The iPod has about 90-percent of the portable hard drive music player market share. First Quarter numbers are likely to show Apple owns a chunk of the US flash-based music player market, and will probably own that market by end of summer, even before the next holiday shopping season.

What’s wrong with that picture, Tera?

There’s only one way to go. Down.

90-percent of anything is hard to hold on to. Even the perception that Apple’s losing a little marketshare in either music downloads or portable music players to anyone is bad news.

Why? Because that inevitable shift leads to the worst problem on my list for Apple Computer.

Problem #1: Apple’s Stock Price
What goes up, must come down. If you bought AAPL a few years ago when the price flirted with $13 a share, lucky you. What was the recent high before the split? Nearly $90? It’s at $40 now (after the split). Sell and move on.

What can Apple do to prevent a stock price slide or, at best, stagnation? The PE ratio is already nearing an abnormal level, despite recent analysts saying it’ll go higher (I always consider that a bad sign). I don’t think there’s much they can do.

This stock has nowhere to go. Rather, it has nowhere to go up.

If a couple of the problems and pains on the list are not taken care of by Apple, AAPL will not hit the “target of $55” as some predict. It’ll drop like a rock.

That’s a look at Apple’s problems and pains; my Top 10 List. What about you? Did I miss a problem? What do you think? Share your comment and/or experience with other readers and click the Comments link below.

What else could go on the list? Lackluster marketing of Mac products? Shrinking Mac market share? Both have argumentative quality. What’s on your list?

update from tera It’s not all gloom and doom, though the above list seems to weigh heavy. Apple’s current position is substantially better than, say, oh, I don’t know, back in 1996 when SATAN ran the company into the ground.

Apple has over $6-billion in the bank, a growing market share (even against PCs), highly acclaimed software products (by nearly everyone, but we still want something to compete with Office), awards, awards, awards, and they OWN the portable music market (no one is close).

Physics enters into every equation, sooner or later. What goes up, must come down. To make the “ups” higher and the “downs” not so low, Apple will need to solve the problems on my Top 10 List.

Are you a betting person? Bet on these three: 1) internally, Apple’s list of problems and pains is longer than mine, and, 2) they’re already hard at work on all of them, 3) Apple will win more than they lose.

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