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Reinventing Apple

As demonstrated in the last two decades, product innovation holds the key to Apple's success. But can it fend off competitors such as Creative Technology and Samsung?
Written by Vivian Yeo, Contributor

It is anyone's dream to, at 30, be worth a fortune and have an adoring public. Then again, Apple Computer is not just anyone.

But, just like one caught in between a quarter-life crisis and a mid-life one, Apple's growth in the next decade may not mirror the fairy tale of its yesteryear. More so than ever, it needs to keep its operating system (OS) malware-free and successfully fend off iPod killers.

A white paper released recently by security vendor McAfee showed that between 2003 and 2005, the annual rate of vulnerability discovery on the Mac OS jumped 228 percent. In contrast, the discovery rate for Microsoft products during the same period was 73 percent.

In February, reports of the first Trojan in the wild to target the Mac OS X surfaced. It was followed quickly by a proof-of-concept worm that spreads by means of Bluetooth. A third flaw--within the week--attacked Apple's Safari Web browser. Apple released a security update that fixes 20 vulnerabilities soon after, but had to revise the update two weeks later.

Industry players say that in terms of absolute numbers, the volume of attacks on the Mac OS is relatively low, but the takeaway message to note is the fact that it is not impenetrable.

Apple of consumers' eyes
Brought together by two undisputedly brilliant college dropouts on April Fools' Day, 1976, the first Apple product Steve Jobs and Steve Wozniak delivered was a self-assemble computer kit. The Apple II came along in 1977, and then other milestones such as the launch of the Apple Macintosh in 1984 were reached.
The two Steves, who both left Apple in 1985, made a great combination. Wozniak, in Singapore last June to deliver a keynote for the iX2005 conference, jested that whatever product he came up with, Jobs would either tell him to make it smaller or suggest selling it. "Everything that Apple built had to be great," he said.
The early to mid-1990s were tumultuous years for the company, as the company faced leadership changes. Yet it managed to roll out a number of machines, including the PowerBook 100 and PowerMac 6100/60. Jobs' return to the helm in 1997 was followed swiftly with the launch of the iMac in 1998 and subsequently the iBook. The eye-catching designs and bold colors created buzz again for the company.
Apple kicked off the 21st century with its first portable music device, the iPod player. Other milestones followed--most notably the birth of the iPod Nano and the video iPod last year. The icon also opened retail stores around the world, and for the first time introduced Intel-based machines.
Its 30th anniversary came and went last month, but all was quiet on the corporate front save for a software update that allows iPod users to set volume limits. The notion of a new product release that hopeful Apple fans held never materialized.

"Many believe that using an Apple operating system is a form of security in itself, believing that they are far less susceptible to malware than Windows users," said Stuart McClure, senior vice president of global threats at McAfee, in a company statement last week. "While the threats targeting the Mac operating system are low in volume, the use of Apple products does not provide an invisibility cloak from malware, and users need to be more vigilant about security as adoption rates soar and attacks on Apple operating systems increase."

Ooi Szu-Khiam, senior security consultant at Symantec Singapore, agreed, saying that Symantec was "not entirely surprised" about the attacks and Apple's subsequent patch problems.

While there is no denying customers' need to play their part to protect themselves, Apple, too, has a role to play to prevent widespread damage, said Jay Tan, industry analyst for ICT practice at Frost & Sullivan Asia-Pacific. "Apple will do well to ensure quality and timely patches for any potential vulnerabilities that may be discovered," he noted.

Sound music players
One hot issue in the digital music industry these days revolves around digital rights management.

Much has been said about Apple's proprietary digital rights management. For example, Rob Glaser, chief executive of online music vendor RealNetworks called the company's refusal to make the iPod compatible with non-iTunes software "pigheadedness".

In March, France went as far as to pass a law requiring digital content providers to share details of their rights management technologies with rivals, which Apple dubbed "state-sponsored piracy". In a sign of respite, however, the French government has reportedly removed wording from the proposed legislation in an apparent change of heart.

Rivalry in the portable music player market has also intensified over the last two years.

According to Claudio Checchia, IDC's research manager for consumer markets in the

Asia-Pacific region, Apple is still the dominant player in the region, and will "remain strong in the market". At the same time, the MP3 player pie is growing, and other contenders such as Creative, iRiver, Samsung and Sony are seeing greater shipment numbers, he added.

Creative Technology is a perennial shadow, unshakable and, many feel, still a step behind Apple. Its founder and chief executive Sim Wong Hoo has had to borrow ideas from its better known rival, such as putting his signature onto the Zen player after Apple had a limited edition version with rock band U2's endorsement.

The Singapore company, though, is no laggard when it comes to technology, having produced a music player with video capabilities before Apple announced its Video iPod. It also holds the patent for the navigation of music on MP3 or other audio players, which it wants to wield against Apple.

Creative, which declined comment for this story, suffered a net loss of US$114.3 million, with a loss per share of US$1.38, during the third quarter ended March 31. The company, nonetheless, is still bullish over the MP3 player market, according to Craig McHugh, president of Creative Labs. In a conference call on its earnings last week, McHugh noted that analyst IDC ranked Creative as the world's No. 2 flash player vendor, in terms of market share. The analyst report was released in April 2006.

Another keen competitor is Korean consumer electronics giant Samsung, which was ranked 20 among the top 100 global brands in the world in 2005, according to Interbrand.

At the Consumer Electronics Show in Las Vegas earlier this year, the company vowed to spend tens of millions of dollars on advertising and marketing of digital audio and video products. It also announced plans to launch a broad array of products with the aim of dethroning Apple.

Edwin Koh, Samsung Asia's regional director for marketing and strategic planning, said demand for Samsung's MP3 players in 2005 grew 250 percent over the year before. The company's semiconductor and LCD (liquid crystal display) businesses, he noted, gave it the competitive edge over its rivals.

"From a business perspective, being a leading semiconductor and LCD manufacturer ensures us of our supply of these components, and allows us to influence their pricing, and thus the manufacturing cost of our MP3 products," he added.

If Apple is fazed, it's not showing it.

Tony Li, Apple's director of product marketing in the Asia-Pacific region, told ZDNet Asia in an e-mail that going forward, Apple will focus on innovation and performance.

The company, he said, will continue its aim to "be the benchmark of innovation and develop products and technologies that offer customers the best user experience". He added that Apple will "set the bar" in portable digital entertainment, making specific reference to Apple's iPod and iTunes.

Li also reiterated the company's strong support for Intel. He said that having Intel processors power Apple personal computers will help "create the best computers of the future", delivering greater performance on the iMac and MacBook Pro without sacrificing the form factor.

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