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MacWorld: Analysis: MacWorld is disappointing? Yeah right.

Analyst Opinion - I’m typically the last person to come to Apple’s defense but in this case while I was covering the event for Bloomberg TV and watching Apple’s stock price drop even I had to say the expectations of investors were unreasonable.

There are few companies that are lucky enough to have blockbuster products. Apple has had several, two in the last decade (maybe three if you include the original iPod, the iPod Nano, and the iPhone). Expecting them to do it every single year is unreasonable and not practical. It was that kind of expectation that may have hurt Apple’s stock after yesterday’s MacWorld keynote. But I’ll argue, now that I’ve had some time to think about Apple’s new products, that – while others may disagree – that they actually did pull off a hit. They just did it in two parts rather than one product.

At this year’s MacWorld, Apple set the bar in two areas, Apple TV Take Two and the new MacBook Air. Let’s chat about just how big both will likely be in the overall scheme of things.

Blu-ray out, Apple TV Take Two in

Last year, we saw the pointless battle between Blu-ray and HD-DVD and the first Apple TV offering, which really didn’t provide a good alternative even though buyers really wanted one. The first Apple TV was a terrible design, but having said that, it was arguably better than anything else in its class, which means the entire stand alone set-top box segment should have been scrapped (and don’t get me started on most cable offerings). This was because there wasn’t much content and what content there was simply not very good in quality or quantity. Generally, there wasn’t enough stuff and what there was you didn’t want to watch.

What a difference a year makes. Warner Brothers basically called the HD Optical fight in favor of Blu-ray but then at CES we found out just how screwed the early Blu-ray adopters were (unless they have a PS3, their hardware is probably just about to become obsolete with the release of Blu-ray 2.0). Personally, I think that will upset enough people so that Blu-Ray won’t really ramp beyond a niche of users for this technology who want to build HD libraries (realize there is no real advantage in buying a movie because you don’t really own it, you are just licensing it). In today’s market most of us are watching our pennies, which means that rentals or Netflix-like subscriptions make a lot more sense.

While content still isn’t ideal for Apple TV Take Two, it is vastly better than the previous version. It looks like it may be good enough this time around. Where it is particularly light is in HD content and where it is also exposed is in households with no or slow Internet connections. But this product now appears to be the benchmark. Its lower, sub-$230 price helps a lot (notice pricing is now similar to the successful Nintendo Wii and in shooting distance of the magical $200 price point, which they likely could reach by year end). Also it doesn’t need a PC intermediary, a step that was pioneered by products like Sonos for music.

Even bigger, though content is severely limited right now, is legal DVD ripping (initially this only applies to movies from 20th Century Fox) of movies. This truly could be big because one of the biggest annoyances that DVD owners face is the inability to rip the movie and put it on an portable media player like an iPod or iPhone, or their laptop hard drive so they can leave the disk (and the optical drive) at home. If this spreads, this could be a huge game changer and make buying DVDs much more attractive though the initial movie “Family Guy Presents : Blue Harvest” isn’t exactly the film I’d put at the top of my list.

This offering now has the feel of the first iPod and while it may take one more turn to fill out a number of these features (more HD download content and more DVDs you can rip) in order to make sales ramp into huge numbers, for a lot of us it is now close enough. I think sales should pick up for them nicely as a result. And, frankly, I’m actually thinking seriously about getting one now.

MacBook Air

Another stunning announcement was the MacBook Air notebook. I’ve been watching these thin-notebook announcements for the last decade. The first was from HP and it was nearly a decade ago when that company came to market with a paper thin notebook with lots of compromises. It was over $8000 in today’s dollars, had horrid battery life, had a keyboard with little travel, it was painfully slow, and it was comparatively fragile. However it also pulled an iPhone like crowd wherever it was shown. About 5 years ago, Sony brought out the x505 at about half the HP’s price in today’s dollars for the really cool graphite version, it had a better keyboard, better (though still too short) battery life, and the performance was just adequate.

Now Apple has brought out the MacBook Air at less than half the price of the Sony with good battery life, nice keyboard, apparently good performance (thanks Intel), and a LED backlit screen. I personally think the flash drive based option is the most desirable but still too expensive. What is happening here is that Apple now takes this form-factor into the mainstream and makes it a reasonable choice for a lot more folks.

This product is also a showcase for eliminating the optical drive and, much like they did with the 3.5 floppy in both introducing and then eliminating it, this could be what was needed to move away from optical drives on most laptops as well. Movie downloads and software can be installed over the network and you really don’t need the optical drive in the notebook anymore.

In short, I think the MacBook Air does a good job of setting the stage for what is to come in notebook computers in 2008 and that makes it incredibly important in my book.

Wrapping Up : MacWorld a success in two parts

Part of our problem is that we are looking for single killer offerings and at this MacWorld there wasn’t anything like the iPhone. But, if you add the Apple TV improvements to the MacBook Air, I think the combination is not only potentially as big as the iPhone. I think the result will end up touching us in more ways, even if we never buy an Apple TV or an Apple notebook.

So, I actually think that while Steve Jobs didn’t pull a single big rabbit out of his hat, he pulled a couple good sized smaller rabbits making more than enough difference. Of course, if this is what they do in an “off” period, it kind of makes you wonder what they will do in the second half of the year when hot new products are much more likely.

Rob Enderle is one of the last Inquiry Analysts. Inquiry Analysts are paid to stay up to date on current events and identify trends and either explain the trends or make suggestions, tactical and strategic, on how to best take advantage of them. Currently he provides his services to most of the major technology and media companies.

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