Drop the Computer

“WE'RE going to make some history here today,” said Steve Jobs this week at the beginning of his annual speech at Macworld, his company's cult-like trade show in San Francisco. He was as good as his word. First, he launched a product that promises at last to bring digital entertainment from people's computers to their television screens without fuss. Then he unveiled an even more impressive device that transcends the description “mobile phone”. Mr Jobs, who was so excited that he had lain awake all night, made it clear that he considered this day a watershed in the three-decade history of Apple Computer, a point that he emphasised by announcing that his firm would henceforth drop “Computer” from its name.

Indeed, Apple's laptop and desktop computers, which are selling briskly, were hardly mentioned. Nor were Apple's iPods, which dominate the market for portable music players. Both of the new products are really computers, but people won't think of them as such, since they will be in their pockets and living rooms. The mobile phone—provided Apple can settle a legal dispute over the name with Cisco, a network-equipment company—is called the iPhone. It will go on sale in America in June starting at $499, in Europe in the autumn and in Asia next year. The television-set add-on is called Apple TV and will hit stores next month at $299. With these two products, Mr Jobs intends to enter and transform new industries, and ultimately people's lives—just as he did in 1984 when Apple transformed computing with the launch of the Macintosh, and again in 2001 when it introduced the iPod, which shook up the music industry.

That Mr Jobs' announcements had such an impact during this particular week says a lot, because the rest of the consumer-electronics, computer and telecoms industries were simultaneously congregating at the Consumer Electronics Show, the world's biggest technology fair, in Las Vegas. There, many of Mr Jobs' old and new rivals were talking about much the same things as he was. Microsoft's Bill Gates introduced the “Windows Home Server”, his answer for uniting computers and television sets. Olli-Pekka Kallasvuo, the boss of Nokia, a mobile-phone giant, unveiled new handsets that can hold music and videos. His rival, Ed Zander of Motorola, did the same and rode a yellow bicycle around the stage to illustrate the point that “content moves with you.” And so forth.

But all the gadgets being peddled in Las Vegas were “evolutionary”, whereas Apple's were “revolutionary” and thus noteworthy, says Tim Bajarin, the boss of Creative Strategies, a technology consultancy in Silicon Valley. This is particularly true of the iPhone. Officially, it falls into the category of “smartphones” like the Treos or BlackBerrys that seem almost surgically attached to business people these days. But Mr Jobs used that term in mockery, since many of these phones are, to him, so patently dim-witted. Yes, they can send and receive e-mail, but why have a tiny keyboard when you do not need it for most of the phone's other functions? Indeed, as Mr Jobs was talking, shares in Apple soared and they plunged at Research in Motion and Palm, the makers of the BlackBerry and Treo respectively.

Unlike rival products—but in keeping with Apple's approach—the iPhone's front panel has only one mechanical button. The thin, small slab has a touch-screen which displays whatever buttons, keys or icons are relevant to the task in hand. When playing music, the iPhone shows album covers; when writing e-mail, a small keyboard; when a call comes in, the caller's identity from the address book; and so on. And whereas any other company would have foisted a stylus on its victims, Mr Jobs gloated, Apple lets them use fingers to scroll, drag, type and resize. Just as the Macintosh was a breakthrough in 1984 for its mouse, and the iPod in 2001 for its click wheel, the iPhone's stroke of genius is this new “multi-touch” technology. “And boy have we patented it,” said Mr Jobs.

Along with more than 200 other patents, this technology should put the iPhone “five years ahead” of its rivals, reckons Mr Jobs. This claim is hard to judge. The iPhone is not the only phone that can switch automatically between a short-range Wi-Fi connection and a mobile-phone network, depending on which one it sniffs. But it is the only phone with a web browser (Apple's Safari) that displays web pages in their full splendour. It is also the only phone that has “visual voicemail” to save users from the hassle of listening to all their messages before getting to the important ones—a joint innovation with Apple's partner, Cingular, America's largest mobile operator. And it is by far the best handset for photographs, music and videos.

In his commercial goals, Mr Jobs was more conservative. Around one billion handsets are sold each year and Apple hopes to sell 10m iPhones, capturing 1% of the market, in 2008. Yet just as the original iPod led to smaller and cheaper models, thus exceeding Mr Jobs' initial projections, so the iPhone too could become a big family of products. This must be worrisome to Motorola, Nokia, Samsung and, above all, to Sony Ericsson, which concentrates on selling high-end music handsets under its Walkman brand.

Amid all the excitement, Mr Jobs' biggest concern has nothing to do with Apple's products. The risk, rather, is that Apple will become more deeply mired in a financial scandal over the backdating of share options, a practice that it and more than 200 other firms have now admitted to. Apple disclosed last June that it had awarded options with dates manipulated to make them more likely to pay out. It has since filed four statements with securities regulators, and each time Mr Jobs' role has grown. Last month two board members, including Al Gore, America's former vice-president, issued a report ostensibly clearing Apple's boss of responsibility, but confusingly and contradictorily detailing bad options grants (and even a fictitious board meeting) that involved Mr Jobs.

Mr Jobs will not be in the clear until regulators give their own verdict. Many other affected firms have atoned by letting errant bosses go. For Apple, whose identity is inextricably wound up with its co-founder and boss, this might spell disaster. Mr Jobs does have able lieutenants, such as Timothy Cook, his number two, who took over for six weeks while Mr Jobs had cancer surgery in 2004. But Apple without Steve Jobs would lose its shine.