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Apple shoots for consumer electronics status

Apple's iMacs represent the latest step in the computer maker's drive to become a premier consumer electronics company.

Apple's faster and cheaper iMacs are likely to be a hit with consumers. But more importantly for Apple, the machines represent the latest step in the computer maker's drive to become a premier consumer electronics company.

Within their translucent cases, Apple has incorporated software and hardware capable of "desktop video publishing," as the company calls it. The two top models of iMacs, dubbed DV and DV Special Edition, come with a DVD-ROM drive, special movie editing software designed by Apple, and high-speed, plug-and-play connections for digital video camcorders called FireWire.

Apple said there are already about 7 million camcorders with FireWire connections on the market. This means there's a large group of consumers who can easily tape events and dump video into the computer for editing and playback, and then store the edited material back on tape again.

"I think its going to be the next big thing," said Steve Jobs, interim CEO of Apple, in a speech Tuesday.

Of course, Jobs is well known for his ability to hype Apple products. But in this case he may be right. Apple's timing, at the least, coincides with the current obsession with watching "real" people on television, whether it be through hidden cameras, reality-based shows like Cops and MTV's Real World, or the rising popularity of Web cams feeding a latent interest in voyeurism.

Eventually, Apple thinks it can democratize broadcasting in the same way it spurred the advent of desktop publishing some 20 years ago. Besides offering a complete package for video editing, Apple eventually wants to help people create their own television stations by reselling them transmission time for broadcasting everything from garage-band concerts to cooking lessons.

In his speech Tuesday, Jobs even explicitly positioned the iMac against the most common of consumer electronics devices: the TV. He made a "pitch against clutter" by suggesting that parents could get students an iMac DV instead of a separate TV, VCR, and computer because they can "do it all with one box" by watching DVD movies on the iMac.

Such a push highlights the convergence of the PC and consumer electronics technologies and markets, even as the number and variety of devices grows.

The issue of whether or not Apple is transitioning from being a PC company to a consumer electronics company isn't just a point for academic debate. Analysts say PC companies need to map a plan for competing against the likes of Matsushita, Sony, and Philips as a growing number of digital devices will compete against PCs for consumer dollars.

Why PC companies need to "think different"
In terms of revenue, the PC is already the most successful consumer electronics device, Jobs said in an interview with CNET News.com. In that respect, Apple already is a consumer electronics company. Apple basically invented the consumer PC market, he stated, and "we intend to be a serious player in that segment."

What Apple's latest push shows, though, is a greater awareness that computer companies need to start thinking about selling the computer in a market filled with an increasing array of consumer electronics devices.

Handheld computers, smart cell phones, cable set-top boxes, high-powered game consoles that are morphing into digital entertainment centers, and standalone digital video recorders are among the many new devices that will be competing for consumer dollars.

Forrester Research is predicting that PC revenue will grow only 2.1 percent to $19.9 billion this year before declining as prices continue to fall and new information appliances come onto the market. (See related story).

Others such as Microsoft and Intel are working on plans to keep the PC connected to these devices, but overall most companies are behind in figuring out how to deal with this challenge by marketing and designing their products in new ways.

"The PC industry still mostly markets by 'speeds and feeds,'" said Forrester Research analyst Eric Schmitt in reference to the obsession with technical specifications. "They need to act more like consumer electronics companies in terms of marketing devices that are smaller and come in different colors," he said. Apple, he said, is already ahead of other companies in this regard, having offered consumers' colored iMacs to go with commercials that say its possible to fall in love with your notebook.

As it pushes the PC envelope, Jobs said Apple is studying patterning itself after Sony. Sony has worked on tying PCs to its vast array of stereos and camcorders and, eventually, digital Walkman's. But so far it hasn't yet translated its prowess in consumer electronics into large scale success in the PC market.

Sony executives admit they have had trouble educating consumers about the benefits of convergence. On the other hand, Sony has not made the same kind of high-profile marketing push for PCs that Apple has.

Should Apple make information appliances?
The next logical step for Apple could be to manufacture information appliances. But Jobs is hesitant to go that route.

"The road is littered with a lot of attempts at those devices," Jobs said. "So far, we know they have all crashed and burned, except the PalmPilot. One should tread carefully" in this market, he said.

Schmitt echoes that thought. He expects that there will be "thousands of devices" that fail in the coming years, but that they'd better figure out how to deal with the one that does make it, or risk losing control over their destiny.

So what does the future hold for Apple? Few know for certain. But Larry Ellison, CEO of Oracle and an Apple board member, has hinted that Apple's future perhaps lies in consumer electronics.

"My opinion is that Apple is going to be the great digital appliance company," he said in an interview earlier this week with CNET News.com "As the appliances become digital, the very coolest digital appliances will come from Apple--the easiest to use, the prettiest to look at, the most successful will come from Apple."