Apple Soars
Dec 26, 2006
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Apple Computer continues to ride the success of the iPod. iPod turned 5 years old in 2006, and 5 years was more than enough time for the little music player to establish itself as one of the most popular and influential consumer products ever. The iPod continues to grow in popularity as it expands in capability, and in 2006 the video iPod was launched, along with plans for streaming movies. Rivals continue launching new consumer electronics devices positioned to topple iPod from the top slot, or at least grab some of its market share. No one even came close in 2006. The 2007 contender will be Microsoft's Zune, planned to begin shipping November 2006, with months of pre-launch marketing already struggling to create an iPod-like base of loyalty—or the perception of one.

The iPod has become an industry unto itself, with hundreds of accessory products not on the market.

Intense consumer loyalty to iPod and the ease of use of the iTunes player may leverage Apple into the business of home networking. ABI Research said in a market study in July that Apple's iTunes service might have the potential to outstrip the iPod business, giving it an opening to home audio and video markets ahead of its competitors. "The battle for portable devices has already been won by iPod (unless Microsoft's strategy for its Zune platform succeeds), but in the home and mobile markets, the prize is still up for grabs," commented Research Director Vamsi Sistla. "iTunes could be a Trojan Horse through which Apple can enter the home market sooner than the competition."

Apple's Extraordinary Year

When fourth quarter results were announced in October, CEO Steve Jobs called it "an extraordinary year." A whopping 39 million iPods were sold in 2006, and 5.3 million Macs, "while performing an incredibly complex architecture transition." That transition, away from IBM chips to new Intel chips, seems to have occurred without inconveniencing Mac users significantly.

Apple's Chief Financial officer said Apple ended the year with more than U.S. $10 billion in cash, after increasing revenue by $11 billion in 2 years."

But the news wasn't all good for Apple in '06. Midyear, the company agreed to pay $100 million to rival Creative Technology Ltd. to settle five patent lawsuits over iPod technology. The suit threatened to block imports of the digital music player.

What's worse: Apple has joined the rank of big corporations that may need to significantly restate past results. This came after an investigation "determined, among other things, that stock option grants made on 15 dates between 1997 and 2002 appear to have grant dates that precede the approval of those grants for accounting purposes."

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