Will Apple's innovations and influence ever translate into market share?
Tomorrow, Apple Computer Inc. CEO Steve Jobs will stride onto the stage of San Francisco's Moscone Center and announce his company's next wave of new products. As usual, loyal users of Apple's Macintosh computers are swapping urgent rumors about what Jobs will reveal, and as usual, Apple refuses to offer so much as a hint.
But one thing is certain: When Jobs begins to speak tomorrow morning, executives of the world's biggest computer and consumer electronics firms will be paying attention.
That's remarkable, considering that Apple holds less than 5 percent of the world's personal computer market, and is dwarfed by rivals like Microsoft Corp., Dell Computer Corp., and Japanese electronics titan Sony.
But market share is one thing, mindshare quite another. Under Jobs, Apple has positioned itself as the "thought leader" of America's high-technology sector, winning a reputation as one of the world's most innovative firms.
"I think the reason here is really extremely simple. They make really good stuff," said Josh Bernoff, principal analyst for Forrester Research in Cambridge. "In order for them to compete in a Microsoft-dominated world, they have to create products that are just outstanding."
Not only outstanding, but also industry-transforming. Apple's iPod portable music player, which debuted in October 2001, has since become the industry leader, and given Apple a foothold in the consumer electronics market.
Apple followed up last April with the iTunes Music Store, the first Internet service to let consumers buy and download popular music for a flat per-song fee of 99 cents and no monthly membership fee.
Apple claims it has sold more than 25 million songs so far, and now offers the iTunes service, as well as the iPod, to users of Windows computers as well as Apple's Macintosh line.
Roger Kay, vice president of client computing at industry research firm IDC Corp., said that the popularity of iPod and iTunes among Windows users has given Apple a rare opportunity to go beyond the hard-core Macintosh loyalists.
"Basically Apple has been confined to its own base for all of its existence," Kay said. "The iTunes play has basically given them a chance to sell into the Windows base."
Awed by the success of iPod and iTunes, the rest of the industry is playing catch-up. Rival online music services like Rhapsody and Musicmatch have begun offering pay-as-you-go music downloads; rival computer makers Dell and Gateway Inc. have rolled out portable music players that aim to improve on the iPod. Dell spokesman Cody Pinkston candidly admits that his company's new Digital Jukebox is simply following in Apple's footsteps.
"Dell's not typically a trailblazer in terms of the actual technology," Pinkston said. The iPod "did create a significant market for these types of products . . . that really opened the door for us to go in and create some new value."
Apple has never shied away from iconoclastic decisions. The Macintosh was introduced 20 years ago, with icon-based user interfaces, the first mass-produced computer "mouse," and built-in networking years before any of these features were available on Microsoft-based PCs.
Apple introduced the first palmtop computer, the Newton. It flopped, but the concept was successfully resurrected by Palm Inc. More recently, Apple led the WiFi wireless networking boom by introducing its AirPort system, the first version of WiFi targeted at the consumer market.
With this kind of track record, technology specialists await each Jobs keynote speech as if it were a State of the Union address for the entire computer industry.
"Every time Macworld rolls around, I say, do I have to go?" said Kathleen Maher, senior analyst at Jon Peddie Research in Tiburon, Calif. "But you have to go, because he may do something."
But what will Jobs do this time? Apple officials refused to comment for this story, and other Apple-watchers have had no better luck.
"Apple is rare in that it has this almost CIA level of secrecy," said Nick Deplume, editor of Think Secret, one of several popular Apple "rumor sites" that trade in speculation about the company's upcoming products.
Think Secret, citing anonymous sources inside the company, is predicting that Apple will unveil a new line of cut-price iPod music players, for people put off by the $300-$500 price of the current product line.
A juicier rumor comes from macosx.com, which predicts that Apple will introduce a TV set-top box that will record and play back TV shows, store digital photographs, and distribute digital music throughout the home. This kind of "home entertainment server" computer is exactly the kind of product that could help Apple break out of its narrow market niche, according to longtime Apple analyst Tim Bajarin of Creative Strategies Inc. in Campbell, Calif.
"It'll be interesting to see if and how [Jobs] eventually extends the Mac to the digital entertainment paradigm," Bajarin said. "That's where they could pick up some significant market share."
Like the iPod and iTunes, an Apple home entertainment server might appeal to millions of consumers who'd never consider buying a Macintosh computer. Those are exactly the customers Jobs must win, if he ever hopes to make Apple's market share match its mindshare.
Hiawatha Bray can be reached at bray@globe.com.
