Apple invests $200 million in EarthLink

The computer maker finally hooks up with an ISP and also announces that the iMac continues to sell in high numbers.

Tom Dunlap
4 min read
Jobs' Macworld keynote - CNET, Jody Levine SAN FRANCISCO--Apple will invest $200 million in EarthLink, joining the swelling ranks of computer makers forging alliances with Internet service providers to distribute their products in an increasingly cutthroat market.

The investment was announced today by Apple cofounder Steve Jobs, who said he is finally dropping the awkward "interim" qualifier from his official CEO title. At the Macworld trade show here, Jobs also reported record sales of the iMac--the multi-colored computer that has become emblematic of his company's comeback--and took the wraps off the delayed Mac OS X operating system.

But the Internet was the main theme of the morning. Under terms of the EarthLink deal, the ISP will become the exclusive ISP in Apple's Internet Setup Software included with all Macintosh computers sold in the United States.

Apple will profit from each new Mac customer that subscribes to EarthLink's service. In addition, Apple will invest in the ISP and receive a seat on its board of directors, the companies said.

Analysts have long been awaiting some sort of ISP deal from Apple, as nearly every other major computer maker has entered into a partnership with a carrier. Gateway, among others, has seen substantial revenue growth through service fees.

Jobs also unveiled a host of new Web-based services and a revamped Web site that in many ways will resemble a portal like Yahoo rather than a corporate site. Among the new services, Apple will publish iReview, a Web site review service, and run an electronic greeting card site called iCards. Services for data storage, personalized Web addresses and site blocking for minors will also be included.

Jobs touched on many issues in his two-and-a-half-hour keynote, including Apple's increasingly important online sales business. The online Apple Store is now bringing in $1 billion in annual sales, he said.

Another software product, office suite AppleWorks 6, will be out later this year and will cost $79, he said.

Jobs Macworld keynote - CNET, Jody Levine Customers snapped up 1,350,000 Macs in the quarter, which works out to "one Mac every six seconds," Jobs told the thousands of attendees at Macworld, a show devoted to all things Apple.

The iMac took the computing world by storm when first introduced in 1998, a major part of Jobs' triumphant return to the company he co-founded. The computer has been at or near the top of the sales chart since its introduction.

On the software front, Jobs said a beta of the new Mac OS X operating system will go to developers in the spring and will begin selling in the summer. The system, which will be preloaded on all Macs a year from now, will be simpler to use and contain a new interface called "Aqua," he said.

Aqua's drop-down menus on applications will be in color and translucent, rather than appear as solid gray boxes, so users will be able to see through them. In addition, the bottom of computer screens will be given up to a "dock," a modified tool bar that allows users to monitor applications running in the background.

Mac OS X largely brings in "fit and finish" details, Jobs said.

Along with announcements from the Cupertino, Calif.-based firm, a plethora of products will also be unveiled at the show, which runs through Friday. Many of the products revolve around the FireWire high-speed connection technology.

Executives and analysts were heartily

ISP turf wars
Internet service providers are signing up PC makers and retailers in an effort to lock in customers. Here is how the major players stack up.
AOL: Investments and bundling deals with Gateway ($800 million) and Emachines (amount unknown). Promotions with Circuit City, Wal-Mart.
MSN: King of retail. Rebates through Best Buy, Radio Shack, Office Depot and OfficeMax. Microsoft investing in both Best Buy ($200 million) and Radio Shack ($100 million). MSN Web terminals in cooperation with Compaq, others coming.
EarthLink: Revenue sharing with Apple after $200 million investment. Unlike AOL or MSN, EarthLink receives, rather than makes, investment.
UUNet: Underlying backbone for ISP service offered directly by Dell, Compaq.
Yahoo: Free ISP service in deal with Softbank, Kmart.
impressed, especially by OS X. "This is not your daddy's Mac," said Rob Burgess, CEO of Macromedia. "Apple is design. Everything you see here you want."

Macromedia was one of several companies to appear on stage to pledge support for the upcoming operating system. Executives from ID Software, Quark, Adobe and Microsoft also made appearances.

"Apple never got respect for its innovations with the user interface. Steve wants to win some of that back," said Rob Levitus, who has authored several Apple books. "These [announcments] are plays to show Apple is an innovator."

One aspect of Apple's business model that will likely be touted in the near future is the integration of hardware and software. Unlike with Windows computers, where the PC and the operating system come from different manufacturers, Apple makes both the operating system and the box.

In the past, developing the PC and its system was a burden, but now that the company is more financially secure, it could allow Apple to introduce innovations more rapidly, analysts said.

The iDisk storage solution, for instance, illustrates what Apple can do, Levitus said. With iDisk, announced today, users can store files on the Web. Although the files reside on the Web, Mac OS computers will recognize and display them as files that are on a user's hard drive, making them easier to retrieve.

A number of other companies offer Web storage, but it is not integrated in the same manner.

"Apple is the last company in our industry that makes the whole widget," Jobs proclaimed.