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Steve Jobs in a Box


The point here isn’t that the Ocean is a serious threat to the iPhone; Dayton’s start-up has fewer than 100,000 customers so far. The point is that Apple is entering a crowded and quickly changing sector—one populated not only by massive companies such as Nokia, Motorola, and Samsung but also with scrappy, innovative upstarts.

And all these companies have one distinct advantage over Apple, which is that they already understand and are accustomed to coping with the biggest albatross around the neck of the cell-phone business: the carriers. Making matters worse for the iPhone, the carrier Jobs chose to deal with exclusively—for the next five years, no less—is the “new” AT&T, formerly Cingular, which is widely seen as having the slowest network and the worst technology of the major players. (It’s safe to assume the terms of the deal were the most favorable on offer.)

Some critics have wondered why Apple didn’t release the iPhone as an “unlocked” device that could be used with any carrier. “No way,” says a venture capitalist who knows the cell-phone market inside out. “The mobile business is the best business in the world, and the operators are not going to be willing to let any device manufacturer take on their subscribers. Nokia has been trying to establish a direct relationship with the customer for twenty years, and they haven’t been able to do it. You have no choice but to do a deal with the devil. And you know it kills Jobs to have to do that deal.”

Undoubtedly. For 30 years, Jobs has hewn to the conviction that Apple’s strength is that, as he puts it, the company makes “the whole banana”—hardware, software, and everything in between. This approach is no small part of the reason that the Mac was trounced in the PC market by Windows. On the other hand, it explains why Apple thumped everyone with the iPod. Whatever its virtues and demerits, however, the whole banana has been Jobs’s ideological touchstone. And now he is entering a business where success or failure will depend on the efficiency and savvy of not just another company, but of AT&T. Oy vey.

Yet the whole banana isn’t the only shibboleth that Jobs is jettisoning with the iPhone. Another is the company’s laserlike focus, which is being sacrificed at the altar of both the iPhone and Apple TV—Jobs’s attempt to put the company at the intersection of the Web and television. At the D conference, Jobs announced a deal to deliver YouTube via Apple TV. He also said that, though initially he thought of the product as a next-generation set-top box, his strategy had changed: “One day we realized, wait a minute, there’s a lot more DVD players out there than there are set-top boxes … We just want to be a DVD player for this new Internet age.” Some hobby.

The risks for Apple of being stretched too thin by wading into two gargantuan markets simultaneously are already becoming apparent. For years, one of the company’s greatest strengths has been its ability to improve the Mac operating system at a staggering pace. But, in April, Apple was forced to delay its next OS upgrade from June until October—because it needed to shift engineers over to the iPhone project.

“He has no idea of the difficulties he’s bringing on himself, trying to do so much, so fast,” says the CEO of a conglomerate for which overstretch has always been a problem. So what advice would he offer Jobs?

“I wouldn’t give him any advice,” comes the reply. “Because he’d never take it.”

A few hours after Jobs’s conversation with Walt Mossberg at D, the crowd started lining up for what was billed as a historic reunion: For the first time in eons, Jobs and Bill Gates would be appearing together on the same stage. Naturally, the hope was that they would pound furiously on each other—verbally, that is; actual fisticuffs seemed a dream too far—and there was reason to believed that such prayers might be answered. Earlier in the day, Jobs had quipped, in answer to a question about the popularity of iTunes on Windows, “It’s like giving a glass of ice water to someone in hell.”

Gates was apparently furious about the crack. And not surprisingly, for it touched a nerve that had been raw since 1996, when Jobs had uncocked a scorching and widely noted critique of Gates’s company in the PBS documentary series Triumph of the Nerds. “The only problem with Microsoft is that they have no taste,” Jobs said. “They have absolutely no taste, and I don’t mean that in a small way. I mean it in a big way—in the sense that they don’t think of original ideas and they don’t bring much culture into their products.”


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