Apple CFO Peter Oppenheimer, July 21, 2008:
We will be delivering state-of-the-art new products that I cannot discuss today that our competitors will not be able to match.
OK, what are our best guesses about the “Brick”? Entirely new technology/application/market? New twist on an existing product?
Here are my guesses and why I’m thinking that way:
“Brick” is a code word, yes, but there is usually at least some cryptic reference to the actual product when companies devise code names for projects. Based on that observation I’ll assume it’s a product that is not self contained, but hooks up to something else, since “brick” implies something that does not interface with human beings by itself.
Now, what product could Apple be working on that is not self-contained and why? Apple has a proclivity for producing all-in-one objects where it makes sense. So let’s assume all-in-one doesn’t make sense for this product. Why? Because what it connects to, and what interfaces with human beings already exists. That would include things like video displays, keyboards, networks, sound systems, and digital TVs.
Out of all of this, two likely candidates emerge as potential “bricks”. The first is a consumer CPU tower that would fit into the product line somewhere between a Mac mini and a MacPro. Apple really needs something customizable in the price/performance slot in between those two products. The iMac is there, but is limited performance-wise by its form factor. Many folks want a traditional form factor that uses higher performance components, and can use their existing (formerly Windows) monitor and other peripherals. I suspect that there are a large number of potential switchers who don’t want a Mac mini, can’t justify a Mac Pro, and don’t want to abandon their expensive displays and other peripherals. So yes, a consumer level tower would help accelerate the move from Windows to Mac. Such a product would likely be greeted with luke-warm enthusiasm by analysts and investors, but I believe it would quickly prove to be the item that finally breaks the switcher logjam, producing a flood of new Mac users. If that product actually replaced the iMac that would account for Apple discontinuing orders for some classes of chips and Apple’s recent statement about margins being reduced due to “product transitions”.
On the other hand, Apple has a product designed to be a “brick” already. It’s called AppleTV. It has lain pretty much dormant for a year or so now, existing in that state of product limbo peculiar to Apple products that are part of future ecosystems that don’t yet have the rest of the pieces in place. If AppleTV is waiting for the rest of it’s ecosystem to emerge, what are the factors that dictate that timing? Let’s look at what we know will happen, but hasn’t yet happened:
1. Analog TV disappears forever in Feb 2009. Why try to develop a system prior to that event if that system would have to deal with both analog and digital TV? Wait until analog is dead or taking its last gasp, then release a product for digital only.
2. The iTunes store has only recently added features like movie rentals that would fit an AppleTV ecosystem, but what is not yet there is a high speed distribution system that is not dependent on one of Apple’s content vending competitiors, like Comcast or Verizon. Both have shown a willingness to throttle competitive content when they can get away with it and in the case of AppleTV suddenly adding millions of downloads per hour they could justify it. But how can Apple get content from iTunes to AppleTV without going through hostile territiory?
3. WiMax is the answer to the question posed in #2. Wimax is fast, with up to 70Mbs speeds, and it has a range of up to 30 miles. In addition to the 2.5 GHz band already licensed to WiMax developers, the 700 Mhz licensed frequencies being cleared by the demise of analog TV in February will be available to WiMax. A few years ago Apple acquired massive amounts of physical server space that it has yet to announce that it has put to use. Seems to be some opportunity for synergy there.
4. WiMAx is about to go commercial in several test markets, like Reno and Portland.
5. Sprint has balked at continued development of WiMax with Clearwire. Clearwire owns massive amounts of WiMax frequency licenses and needs a new partner/buyer. Apple needs the technology and has lots of cash. Never forget that Craig McCaw built and sold the system that is now AT&T Wireless. I don’t think he has ever had intentions of doing anything but selling Clearwire at the appropriate time.
So does the “Brick” refer to some new evolution of an AppleTV based content delivery system based on WiMax? Does Apple become the buyer for Clearwire? A partner to replace Sprint? I don’t know. I don’t have all the pieces. This one is a long shot, but who knows?
