Apple’s Q3 2008 Financial Conference Call on July 21, 2008 was covered by most of Apple’s most popular news sites such as MacNN, MacDailyNews, AppleInsider and others. Several common themes emerged from that conference call and were echoed the following morning. The main themes were Steve Jobs’ health, record profits and yes, the “mysterious transition” that sparked commentary from heavy hitters and bloggers alike. Fortune, for instance, is pretty sold on Apple revamping their iPod line, with iPod touch-like controls and solid state drives to replace the old hard drives. MarketWatch thinks that the iPod touch is overpriced and is due for a major price drop. They quoted a Lehman Brothers analyst who stated that “This category could be slated for a major overhaul in terms of pricing, especially given that the iPhone could cannibalize the segment.” The International Herald Tribune points to speculation that Apple will introduce a new kind of device that is smaller than a laptop but larger than an iPhone.

On the bloggers’ side of the news equation, we have Mike Cane who’s convinced that Apple’s product transition is all about an ebook and John Tokash who believes we’ll see an all new product entry like the “Carputer.” The Silicon Insider wants to see Apple get serious about Apple TV and I couldn’t agree more. Unfortunately, that’s not going to happen this fall. Nor will Apple introduce a specialty H.264 chip which was suggested by the grand daddy of bloggers himself, I Cringely. According to Cringely, “smart readers right away saw [it] as a change of chips, because they start expensive and become very cheap over time.” Ah, the old “smart readers” trick. If you don’t agree with the enlightened elite, then you’re just out of luck apparently: Sure thing, Cringely.

Well, it’s evidently that time of year again: Welcome to Apple’s Crazy Circus. It’s rolling into a town near you with clowns, high trapeze artists and daring acts. Get your bag of popcorn and get ready for the Really Big Show. Man – can Steve Jobs make the media jump on cue or what? I mean honestly, who does it better than he? That’s right: Nobody. Three weeks after Apple’s Q3 conference call and the brouhaha still continues with yet more predictions. Is there anything left to say on this matter? Well, there actually is. This report will quickly touch on a few key lines that arose during Apple’s conference call, look to Steve Jobs’ own prediction and take a peek at a few of Apple’s War Room documents.

The Transition: Expect Off-the-Charts

During Apple’s Q3 2008 Financial Conference Call, Apple’s CFO pointed to multiple events that were in their pipeline. At the 23:26 mark of the conference call Oppenheimer stated that ” As we look beyond the September quarter, we would anticipate gross margins to be about 30 percent in fiscal quarter 2009. We’re very confident in our new product pipeline, our growth opportunities and the decisions that we’re making for our future.” At the 56:00 minute mark, he further stated that “I can’t get into our new product pipeline – but I have told you regarding the September quarter that one of the reasons that we’ll see gross margins being down sequentially is because of a product transition here.”

While most articles that have been written about Apple’s mysterious product transition have stemmed from Peter Oppenheimer’s veiled guidance, may I remind you that Apple’s supreme commander has actually spoken of this matter over a year ago. “Yeeesssss” - it had been reported by the Sydney Morning Herald, ” that the evening before the iPhone’s dazzling debut, Jobs moved to assure his employees that the Mac still mattered. During a company-wide town hall meeting, he told staff they had “the best Macs ever” in the pipeline, while “additional products due next year were “off the charts”.

The logic is rather simple. If the Mac still matters, then the “additional products” that Jobs referred to have to remain in context with the Mac. Remember, the pep talk was to console his Mac-loyal troops – not further depress them with yet more off-the-chart non-Mac product predictions. So – unless Steve Jobs is really Hannibal Lector, I think we could be assured that the predicted off-the-chart products will end up favoring their Mac line-up in some capacity.

Bouncing Ideas Around the Rubber Room

Welcome to the Rubber Room where I’ll bounce a few crazy ideas around that originate from Apple’s very own bag of patents. No great idea could escape the patent process and delving into Apple’s creative process helps us to better understand some of what is being discussed in their War Room. No secret sources need apply. Then again, not every idea escapes into the wild, but many of them do. Being that there are hundreds of Apple’s patents published each year, I’ll of course only choose a handful of hopefuls that are balanced between what is off-the-wall and off-the-charts. Remember, the context of this exercise is to place emphasis on the Mac side of the equation.

MacBook with Integrated iPod: This is a very unique application that could actually hold some value. As the patent graphic suggests, Apple could integrate an all-touch surface iPod that could double as a MacBook trackpad. This would certainly appeal to students and assist Apple in future back to school marketing. On the other hand, the integrated iPod could be designed to be removed from its built-in dock and used as a wireless mouse with extra storage capacity for those who are true road warriors. This could easily be on most business traveler’s wish list and make for a great gift idea year round. Apple’s patent 20040224638 covers the basic concepts of this idea under Figure 10.

A Notebook-Tablet: In late July of this year, Apple provided us with our first-look at a proposed notebook tablet . The industrial design is shown here to easily accommodate conversion into a tablet by sliding the notebook display over the keyboard. The illustration clearly illustrates that Apple is working with a new sliding mechanism within the device’s chassis to accommodate the conversion process quickly and accurately.

To prove that the MacBook Tablet concept is to be taken seriously, Apple released secondary patents that same day which presented us with new touch relevant applications. The new touch applications covered the repurposing of Apple’s iLife suite. Their patent figures illustrated new touch interactions with iMovie, iPhoto and iTunes. Apple’s patent figures were also distinctly shown to be in an aspect ratio that would strongly suggest that the applications were first being designed for a notebook/tablet. Patent 20080165161 was one of three patents covering this concept.

The Duo Dock Reborn: The Duo Dock was a great idea for its time and still mystifies many as to why Apple ever dropped it. A January 2008 patent now confirms that Apple is in fact thinking the very same thing. For many of us, this is an idea that makes a whole lot of sense. Think of it: You could retain your MacBook for your on-the-go lifestyle while having the convenience of connecting to an iMac docking station for those times when you just need to have a larger display – without cluttering up your desk. It doesn’t get any better than that. And, when you think about it, the iMac docking station may already have its notebook companion in place today. Think of Apple’s MacBook Air. All of the complaints about missing drives and features would be moot within the context of such a system. The latter point isn’t from the patent of course, but it sure has its merits. With notebooks being Apple’s number one best selling computer, the addition of an iMac Dock would only build on that strength.

Live TV To Go: In my recent report titled Microsoft Tries to Derail Apple’s Innovative Mystique, I pointed to several distinct competitor products that are trying to derail Apple’s winning technology and form factors. It only stands to reason therefore that we should expect to see Apple once again raise the technological bar in some these specific areas while attempting to remove any perceived advantages that their competitors may have. Sprint, as pointed out in my report, had to alter their initial marketing campaign for the Instinct smartphone because Apple’s updated iPhone had removed 3 out of the 5 advantages that they believed they had in their Instinct vs. iPhone challenge.

One of the remaining advantages of the Instinct phone is their live TV feature – and on that front, we’ve recently learned that Apple has two patents covering just that service (see 1, see 2). It’s definitely on Apple’s roadmap. The question is whether they could roll it out for Christmas. There’s a chance they could if they’ve made a deal to tap into AT&T’s “TV to go” service, that is.

iCinema Shades: Admittedly, this is the unlikeliest Apple product to see the light of day this year, for sure. But you have to admit that if Apple could pull off a cool pair of iCinema Shades in the not-too-distant future, they’d have the buzz of the industry all to themselves – again. The interesting twist to Apple’s version of these shades is that they focus the product on doubling as a pair of hand-free binoculars. Being hands free at a sporting or music event could add a great deal of value. And if Apple is taking that angle, it’s not much of leap for future iteration to advance the technology enough to enable some basic stargazing capabilities. Yikes! Now that could actually end up being a lot of fun.

A Touchy Classic: In March of this year an Apple patent came to light that pointed to the likelihood of the iPod Classic being the next iPod to integrate Apples touch technologies. The patent focused primarily on the Classic iPod adopting the iTunes Cover Flow application as shown below in patent figures 23A – 23H.

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The first tier of patent figures noted above as 10A, B and C surfaced in a secondary touch patent filing this past July. This particular patent that reviewed new touch based volume controls for the iPod Classic was one of 34 new patents to further enlighten us about Apple’s ongoing advancements in touch technology. Apple’s COO, Tim Cook, made it very clear during Apple’s Q3 conference call that they were going to be very aggressive defending their Multi-touch IP (Intellectual Property).

So – What Will The Crazy Ones Deliver?

The prevailing wisdom on the street is that Apple will overhaul their MacBook line-up – and there are two excellent ways that they could accomplish this effectively. Firstly, we could see Apple introduce a MacBook Tablet so as to extend their touch technology up the hardware food chain while supporting Apple’s new iPhone developer community and new App Store. That certainly makes a lot of sense.

Secondly, we could see Apple introduce a very sexy new iMac Docking Station. It could be the surprise of the year and might even accommodate Apple’s current MacBook Air lineup. Thirdly, we could see an all new touchscreen based iMac Touch. That covers the Mac side of the equation.

On the iPod/iPhone side of the equation, we’re likely to see larger Flash Drives (SSD) introduced, the iPod Classic gain some added touchscreen features and the price of the iPod touch fall by $100 or more.

The long shots for this year could include a new wireless Live TV service for the iPhone and a new iPhone Nano. Admittedly, the latter would be considered a bit of a stretch for this year. The former, however, could be good and bad news. The good news is that it would provide the iPhone with yet another cool and convenient new service to counter Sprint’s Instinct challenger. The bad news is that it would likely require a new chipset. That would make Cringely happy – but early 3G iPhone adopters very angry: Grrrrr. Stay tuned.

At the end of the day, it comes down to whether you trust Apple’s CEO or not. If you believe in his prior forecast for 2008, then you have to expect, yes expect, to see some off-the-chart products before the year is up. Do I believe in that forecast? Hell yes. Any time I look at a photo of Apple’s Fifth Avenue Store in New York (as seen in the outset of this report), I find it to be a subtle reminder that off-the-charts cool is really something that Apple likes to deliver, in fact, needs to deliver – just to be Apple.

Yes, Apple’s Crazy Circus is coming to town and we’ll know soon enough what The Crazy Ones have been working so hard on this year. The competition won’t be so happy because this is the time of year that they usually end up saying: Oh no, not again. Yes, that’s the fun part for most of us – Ha!

Cheers!
Neo