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Faithful await Apple's vision

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Apple Inc. had an incredible 2007. It launched the iPhone, saw a huge uptick in Macintosh computers sales and enjoyed the near doubling of its stock price.

As people flock to the annual Macworld Conference & Expo here this week, one thing is less clear: How will Apple, which has become the "It" company of digital life, top last year?

That question will be answered in part on Tuesday when Apple Chief Executive Steve Jobs takes the stage at the Moscone Center for one of his highly anticipated Macworld keynote speeches. He is expected to explain his vision for the company's future and introduce new products and services, including online movie rentals through the iTunes Music Store.

Over the years, Apple's health has been reflected by attendance at Macworld, which is produced by IDG World Expo Corp. For this year's show, the 24th, vital signs are good. More than 50,000 people are expected to attend, 10,000 more than last year. The number of exhibitors has jumped 20% to 475, and for the second year in a row, organizers are tapping space in a second conference hall.

Exhibitors showing off Macintosh-related accessories include such Apple competitors as Microsoft Corp., Hewlett-Packard Co. and IBM Corp.

Clearly these are the gravy days for the Cupertino, Calif., company. But industry analysts say its growth is expected to slow this year, in part because of concerns about the economy's effect on consumer spending.

After soaring to a record closing price of $199.83 on Dec. 28, Apple's stock has dropped 13.6%, ending Friday at $172.69. Some wonder whether Apple has peaked.

"It's one of those companies that keeps going up, and people say it shouldn't, and it keeps going," said Steve Hach, a senior analyst at ValuEngine Inc., a stock research company in Princeton, N.J. "There's intangible things going on that are tough to get a handle on. It could be that people love their iPods and think, 'I better buy that stock.' "

Apple doubters say the firm's competitors have become more savvy. Competing music and video players cheaper than the iPod are more widely available, and the entertainment industry is actively helping iTunes' competitors by selling music and videos via Amazon.com Inc. and other online stores.

And although Macintosh sales have taken off, HP and Dell Inc. have taken note, jazzing up their computers for consumers.

"Apple benefited in the past because [rivals] were not so focused on the consumer," said Tavis McCourt, an analyst at Morgan Keegan & Co., an investment banking firm in Memphis, Tenn.

Others say the company is merely catching its breath before another enormous growth spurt. The Macintosh computer, whose market share is less than 5% globally, has room to grow in international markets, as does the iPhone, which was introduced at last year's Macworld and commands less than 1% of the U.S. cellphone market.

Apple is expected to continue its effort to become the gateway of digital entertainment.

Jobs is expected to announce a new movie rental service Tuesday. A number of major studios -- including Walt Disney Studios, 20th Century Fox, Paramount Pictures and Warner Bros. -- have signed up for the digital video-on-demand service through the iTunes store, which will offer 30-day rentals for prices ranging from $2.99 for older films to $5 for high-definition movies, according to people familiar with the plans. Viewers will have 24 hours to watch the film once it has been started.

The service is expected to help beef up sales of the AppleTV set-top box, which serves as a bridge between the computer and the living room TV. Adoption of the device has been slow, in part because only one major Hollywood studio, Disney, allows Apple to sell digital versions of new releases the same day the movies are released on DVD.

Apple's business model is now based primarily on selling computers and devices. But if it adds movie rentals, the company might change itself into more of a service company, said Andy Hargreaves, senior research analyst at Pacific Crest Securities. That could make it an even bigger player in the media world as people get more of their entertainment digitally.

The Apple faithful flocking to Macworld will be looking for more signs of what's to come, said Paul Kent, the show's general manager.

"People always ask the question, 'How they are going to top themselves?' " he said. "But here it's always asked knowing that they will."

michelle.quinn@latimes.com

Times staff writer Dawn C. Chmielewski in Los Angeles contributed to this report.

Copyright © 2014, Los Angeles Times
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