SNE) and Samsung and gripes about a camera-deprived tablet that relies on AT&T ( T) for 3G coverage are a reminder that Apple's hits and misses still matter. "When we think about the products that Apple has produced in the last decade or so, the level of fanfare coming from Apple doesn't always translate into mass-market consumer adoption of its products," says Susan Kevorkian, Apple analyst at IDC. "Apple is very talented at developing hardware, software and services and marketing the above, but all of its efforts don't succeed in the same way." The history lesson embedded in iPad's evolution from the Newton PDA through the i-product lines is Apple's road map through the obstacles ahead. When the Newton struggled with lack of memory, the iPod beefed up its own memory with each ensuing generation. When Apple's collaboration with Motorola on the ROKR phone fizzled, it went in-house with iPhone development and relegated AT&T to its carrier/whipping boy.
When the iPhone 3G lacked a workable camera, voice command, robust battery and other features that would have separated it from its high-end iPod sibling with something less flimsy than a receiver with tinny voice quality, Apple upgraded with the 3G S and downgraded the price of what are now entry-level products. The results were 17% smart-phone market share for the iPhone, according to Gartner ( IT), and nearly 60% for the iPod for MP3 players -- even if the former eventually made the latter seem functional by comparison. "The company can't rewrite the rules of consumer behavior," says Ross Rubin, NPD Group's executive director of industry analysis. "The iPod was the evolution of the Sony Walkman and the notion of portable music, which already was well-established." Even if the iPad isn't perfect in its first incarnation, it gives Apple a lot more of what investors love: upside. Apple this year has vowed to aggressively expand its retail presence beyond its 284 existing retail outlets, and the iPad's price does exactly what it was meant to do -- take up floor space between $299 iPhones and iPods and $1,999 MacBook Pros. Its accompanying iBooks and commitments from publishers Hachette Book Group USA, Harper Collins, MacMillan, Penguin Books and Simon & Schuster provide a revenue stream it won't have to share with a third-party retailer like Barnes & Noble ( BKS) or Amazon ( AMZN). Finally, instead of sharing its kitty with Intel ( INTC) or Samsung every time it needs a processor, the home-grown A4 Apple threw into the iPad opens the door for increased vertical integration and, potentially, profits.
Yet for all of last week's revelry and rosy projections, Apple remains a two-screen entity whose products are scarcely on speaking terms. Though somewhat more successful than its competition in maintaining a luxury price for its popular laptop and smart-phone brands, Apple has yet to approach their level of cross-platform integration. Samsung's apps, for example, function across its PC, smart-phone, Blu-ray and television products. Sony's XCross Media Bar, meanwhile, has standardized the interface on all its electronic products, including its multimedia plaything PlayStation 3. Microsoft ( MSFT), meanwhile, has made it clear that Xbox and Windows 7 are its first steps toward fully integrated Microsoft homes of tomorrow. "Apple hasn't had that Trojan horse into the living room," Rubin says. "Apple TV has had to be an iTunes accessory, so if you bought media in iTunes and are looking for a way to link it to a big screen, that's what Apple TV is." Considered in some circles to be Apple's biggest flop of the past decade, Apple TV may also represent its greatest growth potential. Despite a $229 asking price, with its content limited to iTunes, Google's ( GOOG) YouTube and Yahoo's ( YHOO) Flickr, and the death of its cheaper 40-gigabyte model, Apple TV and its AirPort wireless connections may be the company's best hope for full integration. Analysts say that, by taking a page from Sonus and Roku's multimedia receiver devices, and by switching from its pay-per-view iTunes rental model to something more akin to Netflix's ( NFLX) subscription service, Apple's "failure" could become its biggest asset.
"Those products are sophisticated, but Apple has talent to compete to compete with them," Kevorkian says. "Apple TV just need streaming video support, though it may require Apple to go back to draw board with own product." -- Reported by Jason Notte in Boston.