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Macworld surprises may include ISP plan

The trade show's most anticipated event is the expected unveiling of a new portable, but many in the industry wonder if Apple is preparing other surprises.

    The most anticipated event of the upcoming Macworld Expo trade show is the expected unveiling of a new portable computer, but many in the industry wonder if Apple is preparing other surprises.

    It is widely thought that Apple will round out its hardware lineup by introducing a new notebook computer, code-named P1 and aimed at the consumer and education market. But interim chief executive Steve Jobs loves to spring surprises at Macworld Expo--the industry trade show devoted to the company he cofounded--and some analysts anticipate that he will outline a more detailed Internet strategy in his keynote address tomorrow.

    Several PC makers have been experimenting with offering their own branded Internet service with the purchase of a PC, a la Gateway's Gateway.net. Others, such as Emachines, are partnering with CompuServe and offering discounted service that essentially amounts to giving the hardware away.

    Either way, the Internet is one of the primary reasons people are buying computers, and these service deals could wind up generating sales for PC makers at the expense of Apple's iMac. The Cupertino, California, company may decide to follow suit.

    "The Internet service business is not as profitable as before, but [Apple] needs to do something to make it seamless and easy to sign up when a customer takes an Apple home," said analyst Richard Gardner of Salomon Smith Barney.

    Apple has stated that it would elaborate on its Internet strategy before the end of the year, Gardner said, but the spate of rebate announcements--sometimes called "free PCs"--may wind up accelerating that announcement, he speculated.

    Added Alex Mou, an analyst with BancBoston Robertson Stephens: "You'll see something by end of year at the latest."

    "I believe Apple will roll out something internally and through partnerships rather than by acquiring a company," Mou said, adding that he believes the company will mostly offer hints about its future by talking more about the number of online Mac users and other figures. These numbers will help build Apple's case when it goes into negotiations with service providers.

    Why be an ISP?
    iMac buyers can hook up to the Internet via EarthLink using a simplified setup. Apple claims that users can get connected to the Internet in less than ten minutes.

    But once they are connected to the Internet, Apple's customers are essentially given to EarthLink. The latter company gets to keep most, if not all, of the ongoing revenue stream, depending on the deal they have struck with Apple.

    Gardner believes that Apple may be looking to announce that it is doing its own branded Internet service because it still "owns" the customer, even while doing little more than reselling access from another company such as MCI Worldcom.

    "It certainly is a good idea for a PC manufacturer to look at being an overall Internet service," said Rick Miller, senior analyst with Cahners In-Stat Group. "The trick is that the ISP business isn't a high-margin business either. How do you do it in a way that provides value?"

    One possibility is that Apple will set up its own portal site and use it in conjunction with related technologies to make online shopping and Web surfing easier. Last year, the company registered the domain names MyApple.com and MyApple.net, which could potentially serve as the name for Apple's portal.

    Apple could also use other sites to boost traffic--and revenues--through the portal. One such site, according to sources familiar with Apple's plans, is a competitor to RealNetworks' Web site. Sources said Apple is likely to unveil a site at Macworld which will "encourage the adoption" of Apple's QuickTime technology by showcasing a number of content providers in one easy to find location.