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Apple expands its consumer services

The company continues to inch into the services sector with iPhoto, which allows Mac owners to order prints or photo albums from within the photo-editing program.

SAN FRANCISCO--With the introduction of iPhoto, Apple Computer is inching further into the services sector.

The new photo-editing program, introduced Monday at the Macworld Expo here, allows Mac owners to order prints of their digital photos or a hardcover book of pictures--all from within the iPhoto program. Apple is providing the e-commerce engine as well as customer fulfillment, while an unnamed company prints the actual book. In the case of prints, Eastman Kodak is providing those services.

Although the online photography market has proven troublesome for a number of start-ups, it will be only a small part of Apple's overall business and is potentially a new source of revenue.

"It's customer driven," Apple Chief Financial Officer Fred Anderson told CNET News.com. "Obviously, there could be some financial benefit also."

Printing digital photos is not Apple's first foray into the services market. In the past, for example, Apple operated a short-lived online community called eWorld.

The company currently has a suite of consumer-oriented services known as iTools, which helps people create Web pages and offers online storage and greeting cards. Although many iTools services are free, the company does charge for some services, such as storing more than 20MB of files online.

Apple also has its iServices unit, which provides Web hosting and consulting services to businesses. However, that unit saw job cuts last year.

Anderson would not comment on how much additional cash the company might see from the new iPhoto services but said the company is not likely to break out its services revenue on financial statements any time soon. Any revenue would flow into the existing "other" category on the financial statements.

Andrew Scott, an analyst for the Wall Street firm Needham, said that the profit margins on services such as those associated with iPhoto are probably better than Apple's business as a whole. He added that revenue is not likely to be significant in the near future. Still, services could be a growing business for Apple.

"I wouldn't be surprised if Apple continued to offer services that are a natural extension of the digital hub strategy," Scott said.

Apple is not the first computer make to try to grab some of the dollars spent by computer owners to print and share their online photos.

Microsoft came under fire from Kodak last summer when the photo giant complained that Microsoft was trying to steer customers to other players in the online photo business. Kodak and Microsoft eventually reached an accord on the matter.