Los Angeles Times

What's up Apple's sleeve for '03?

For those that closely follow Apple Computer Inc., true satisfaction comes rarely -- the focus instead always is on when chief executive Steve Jobs will introduce the company’s next product.

So despite a year when Apple introduced one major new product, the flat-screen iMac, and several significant upgrades to existing products, most Mac users are looking for at least one major announcement at the MacWorld computer industry trade show in San Francisco next week.

Apple made great progress in both its hardware and software in 2002, not to mention the rapid expansion of its retail-store chain, which grew from 27 stores to 51 -- and included one outlet in Towson Town Center, which opened in October.

Here's a brief look back at the year at Apple:

Hardware

Apple, based in Cupertino, Calif., kicked off the year by introducing the long-awaited 15-inch flat-screen iMac at MacWorld San Francisco in January. The Luxo lamp-like design was a radical departure from the original egg-shaped iMac introduced in 1998.

Best of all, the machine was relatively powerful for a consumer-targeted machine: a G4 processor, the same powerful graphics card as Apple's professional desktop line and, in the top model, a DVD-burning SuperDrive.

But just six months later, the iMac received a major upgrade. The top-end model received a 17-inch flat screen, an 80-gigabyte hard drive and an even better graphics card.

Rumors abound of Apple placing orders for larger LCD screens -- indicating that a 19-inch version of the iMac could appear next year. Apple, however, does not comment on unannounced products.

Also at last January’s MacWorld, Apple announced an upgrade to its popular consumer laptop, the iBook. The move added a model with a 14.1-inch screen to complement the existing 12.1-inch version.

Despite being introduced in 2001, iBook unit sales increased by 14 percent in 2002, helping to offset an 18 percent decline in the unit sales of Apple's pro desktop line.

The new iMac helped along sales, too, with an 8 percent increase in unit sales that translated to a 30 percent rise in the amount of revenue generated over the final year of sales of the old iMac.

Meanwhile, consumers also were treated to upgrades to Apple’s acclaimed iPod portable MP3 player. The10-gigabyte version introduced in May doubled the capacity of the original to 2,000 songs; a 20-gigabyte version introduced in July can store 4,000 songs.

As of July, Apple started making Windows-compatible versions of the iPod as well.

For cash-strapped educators worried about the more fragile flat-screen iMac, Apple in April produced the eMac, a $999 computer based on the rugged 1998 iMac design but with a G4 processor and a 17-inch screen.

Nevertheless, the eMac struggled to compete with Windows PCs priced hundreds of dollars less.

Apple’s pro lines, however, also saw significant changes. The Titanium PowerBook G4 got a speed boost and an enhanced display in April.

But the real surprise was the slot-loading SuperDrive that accompanied November’s speed bump to 1 gigahertz, making the “TiBook” the first laptop from any manufacturer with built-in ability to burn DVDs.

In August, the pro G4 desktop towers, nicknamed “Quicksilver,” were revised with a slightly redesigned case (mirrored drive doors), dual 1.25-gigahertz G4 processors in the top model and some upgrades to the internal architecture.

But Apple’s most powerful machines continued to suffer from the perception that they’re too slow compared with Intel-based PCs with Pentium 4 chips running at speeds of 2.5 gigahertz and higher.

While pro Mac users and home-based power users won’t see the gap close in the near future, October's announcement by IBM Corp. of a powerful next-generation version of the PowerPC chip, the PowerPC 970, has hopes soaring for mightier Macs before the end of 2003.

In May, Apple went after the business market, offering an attractively priced rack-mounted file server, the Xserve, that has drawn praise from information-technology professionals.

While of little interest to the average Mac user, the Xserve has the potential to grow market share in an area in which Apple previously has had virtually no presence.

Growth in this more lucrative “enterprise” market could help Apple offset its long-term decline in sales to the education market, which in 2002 showed no signs of reversing.

Software

By far the most important software releases from Apple in 2002 concerned upgrades to its operating system, Mac OS X. After several incremental upgrades to OS X 10.1 over the first half of the year, Apple in August introduced OS X 10.2 Jaguar.

Although the immediate benefit of Jaguar was speedier performance, the release introduced several bits of technology that will come to fruition this year.

Among them is Rendezvous, which allows computers and other devices on networks such as printers to automatically “discover” one another with no user effort. Rendezvous could greatly expand Apple’s vision of the Mac as the “digital hub” – that is, a media processing station for photos, music and digital movies.

Consider, too, that Jaguar added support for Bluetooth. The short-range wireless connection standard figures to become a common way to link printers, scanners, cellular telephones and personal digital assistants (like the Palm Pilot).

To use Bluetooth, Macs currently require an adapter that plugs into a common USB (Universal Serial Bus) port, but look for built-in Bluetooth for Macs in 2003.

Putting Rendezvous and Bluetooth together, the future of the Mac as digital hub looks tantalizing indeed.

From Apple’s Rendezvous fact sheet: “Home stereos, televisions and media servers are all potential Rendezvous-enabled consumer-electronic devices. The sheet also mentions "new features and services" without specifying what they might be, but expect to be wowed when they’re eventually unveiled.

Another intriguing Jaguar feature is Inkwell, handwriting recognition technology that’s built into the Mac operating system. Since only those few Mac users who own graphics tablets now can use Inkwell, it figures that some future Apple-branded device (an iPhone, maybe?) will exploit this technology.

But the one glaring omission in Jaguar is support for USB 2.0, the faster version of the ubiquitous USB 1.1 standard for connecting such devices as printers, scanners and digital cameras found on every current Mac and Windows PC.

Apple might be resisting USB 2.0 because it’s now as fast as the Apple-invented FireWire ports built into all Macs and some high-end PCs. FireWire has proven popular in connecting digital-video cameras and external hard drives, but USB 2.0 is now fast enough for these devices -- and other computer makers are including it in new Windows PCs.

Perhaps Apple is waiting until its new, twice-as-fast version of FireWire is ready to deploy.

After helping make USB a standard by including the ports on the original iMac in 1998, Apple would ill-serve its customers by resisting USB 2.0. Because of that 1998 decision, Mac users have more choices among peripherals like scanners and printers. When USB 2.0-only devices appear in the future, Mac users will be left behind.

Since USB 2.0 is fully backward and compatible with USB devices made for the older, slower standard, Apple has no acceptable reason not to adopt it -- and the sooner the better.

Besides Jaguar, Apple had a busy year enhancing its lineup of free software programs, often referred to as the “iApps.” Each of the existing iApps – iTunes, iMovie and iDVD – received upgrades in 2002.

And Apple introduced three new iApps: iPhoto in January, as well as iCal and iSync (as a public beta, an unfinished but usable test version) in September.

The most impressive, iPhoto, allows Mac users to download digital pictures automatically, organize them, share them as a slide show or e-mail, and order prints or even a hardback photo book.

Miscues

Though 2002 was a good year for new Apple products, Mac fans did pick a few bones.

The success of the flat-panel iMac in January led to immediate shortages, with some customers waiting weeks to receive machines. Then, Apple was forced to increase the price by $100 because of a spike in the cost of LCD screens due to a global shortage.

By midyear, however, supply caught up with demand -- and in August, Apple returned to the introductory prices, even reducing them a further $100 in October.

The summer had Mac users stewing over two other Apple pricing decisions. At the July MacWorld show in New York, Apple said the formerly free iTools online service would be renamed .Mac and now would cost $100 a year.

In August, the company said that the release of Mac OS 10.2 Jaguar, which retails for $129, only would have upgrade pricing for those who bought a new Mac or a copy of OS X 10.1 on July 17 or later.

Mac users who paid full price for previous OS X versions, which on older machines ran measurably slower than Jaguar, howled. But Apple stood firm, saying the new version was worth the full price.

Apple quelled some of the backlash against .Mac by offering it to iTools members for $49 for the first year, then threw in 100 free digital prints and other goodies. The true test of .Mac’s success will come in September, when it’s time to renew the memberships.

A MacWorld tiff

One incident in October hinted at a murky future for the Mac trade shows throughout the year, which includes MacWorld San Francisco in January, MacWorld Tokyo in March, MacWorld New York in July and the Paris Mac Expo in September.

Apple and IDG World Expo, which runs all but the Paris show, got into a public spat over IDG’s 2004 plans to move the July show back to Boston, where it was held from 1984 to 1997.

After several days of gruff exchanges, both sides cooled down without really settling the issue. But Apple’s Nov. 7 news release formally announcing its participation in next week’s MacWorld San Francisco concludes with a terse statement that the companies are “still in discussions regarding Apple’s participation in Macworld New York in 2003.”

With Apple’s growing chain of retail outlets providing far more exposure for the company’s products than the MacWorld expos, Apple might seek to wind down its participation in the shows, which entail heavy expenses.

Mac users would miss the excitement of Jobs’ keynote addresses, but the move makes economic sense for Apple.

The most likely scenario is Apple sticking with the San Francisco show, since its close proximity will save on travel costs, while holding periodic product announcements for the press at its Cupertino campus -- as it did with the iPod last year.

What’s next

Steve Jobs’ keynote next week will supply the details on what to expect from Apple in the coming year, but here are a few informed guesses. Recent conversations with folks at Apple have led me to believe the company will make several major announcements next week, among them at least one new product.

For the rest of the year, I see further development of Apple’s digital hub concept, including possible integration with home-entertainment centers. A new device that isn’t a Mac (like the iPod) also is very likely, although its nature will remain a mystery until Apple introduces it.

But the only solid prediction I’ll make concerning Mac hardware is that the IBM PowerPC 970 should appear in the Xserve by summer’s end. If that happens, the chip will appear in a revamped pro desktop Mac some months later, hopefully by the end of the year.

I expect Apple to continue to address the slumping technology market as it has the past two years: with innovation. Apple is one of the few tech companies to actually increase its research and development budget in the past two years.

Frankly, Apple has no choice. With 5 percent of the PC market, its niche status dictates aggressive, creative product development. Apple needs to pull the kind of rabbits out of its hat in 2003 that it did in 2002 merely to survive, but the company’s recent history suggests it will do just that.

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