Analysts: Expect iTV, Leopard News at Macworld

News Analysis: Industry watchers say the annual event may bring word of an improved, full-screen iPod and an Apple cell phone compatible with iTunes.

Each year, in the weeks leading to Apple Computers Macworld Expo in San Francisco, the rumors and speculation begin circulating about what CEO Steve Jobs and his team will unveil during the major keynote address.

This year is no exception.

Many industry watchers predict that Jobs will dedicate a large portion of his Jan. 9 keynote address to describing in greater detail the so-called iTV device, which he previewed in September. Also, Jobs is expected to give the audience an update on the status of the soon-to-be released Mac OS 10.5, called Leopard.

Analysts also say the time may be right for Jobs to talk about the long-awaited "iPhone," Apples rumored cell phone offering that will work with iTunes, and possibly a new iPod with a larger video display and touch-screen capabilities.

Steve Baker, an analyst with NPD Group, said Jobs will likely spend a good deal of time talking about iTV, since it has already been previewed in public.

The iTV device, which resembles a Mac mini, has the ability to wirelessly connect a Macintosh to a television through HDMI or component video, and analog or digital audio.

/zimages/6/28571.gifClick here to read David Morgensterns take on Apple and what Steve Jobs means to the company he co-founded.

With Macworld coinciding with the International Consumer Electronics Show in Las Vegas this year, Baker said he suspects that Apple is looking to make an announcement that will help carve the Cupertino, Calif., company a niche in the high-end television and digital entertainment space. The iTV product also gives Apple an opportunity to talk about what type of content the company can offer through existing products like iTunes.

In 2006, Apple announced it would start offering Disney movies through iTunes.

Tim Bajarin, principal analyst at Creative Strategies, said Apple may have the best combination of technology to connect PC content—movies, images and photos—to the "digital home" with its iTV.

"I would hope that they bring us to an update on iTV," Bajarin said. "We believe that iTV was actually the most important announcement that came out of Apple last year at the developers conference. Apples approach may be the best way yet to connect PC content to other parts of the home."

The iPhone is a different story.

While Jobs could talk about the device, it may be too early for an official debut, Baker said. One question, he said, is how Apple will provide network cellular service. Its not clear if that will be provided through either a Wi-Fi or WiMax connection, or through a third-party provider.

"Is it going to come out now?" Baker asked, noting that despite a lot of speculation based on patent plans, there has not been much official noise about Apple and a cell phone. "It will be there at some point. Apple has to protect the iPod and the iTunes franchise."

Apple-related Web sites and blogs have also suggested a number of possibilities regarding the nature of the iPhone.

In summing up his prediction for this years Macworld, Gene Munster, an analyst with Piper Jaffray, wrote to investors in a Jan. 4 report that Apple is "almost certain" to release an iPhone. This cell phone, he wrote, will be integrated with iTunes, and the company is in a good position to take advantage of the market.

"Just as Apple waited several years to enter the MP3 market, we believe the company is well-positioned to enter the phone market now that early music-enabled handsets have tested the waters," Munster wrote. "Apple will differentiate itself by offering iTunes integration on Macs and PCs, and by leveraging its expertise in software engineering for media-playing devices."

Unlike Baker, Munster said he believes that Apple will use multiple MVNOs (mobile virtual network operators) for cellular service, with Cingular Wireless likely taking the lead.

Adding to the iPhone speculation, the Web site Apple Insider reported on a story Jan. 4 about Jobs opinions on the subject of an Apple cell phone. The article also reports about a possible tablet PC.

Analysts also expect some major Leopard news. The new operating system was detailed to an extent at the Worldwide Developers Conference in August, but analysts are expecting more specifics now since Leopard will find itself in competition with Microsofts Windows Vista operating system.

The enterprise version of Vista has already been released and the consumer version is scheduled to roll out on Jan. 30. The Mac OS 10.5 is scheduled to roll out later in 2007, possible in the spring, and analysts agree that Jobs will likely not announce a firm date yet but might offer some more details.

/zimages/6/28571.gifClick here to read more about the competition between Vista and Leopard.

"At a minimum we expect a demonstration of new features available in the Mac OS Leopard due this spring, possibly including a virtualization implementation of the current Boot Camp feature which allows the use of both Mac OS and Windows," Richard Farmer, an analyst with Merrill Lynch, wrote to investors the week of Jan. 1.

Shaw Wu, an analyst with American Technology Research, also wrote to investors this week that any Leopard update will help boost sales of Apples Macintosh line of notebooks and desktops.

As for the Mac itself, experts were split as to whether Apple will offer anything new for its signature product. At the Macworld show in 2006, Jobs unveiled the first Intel-based Mac, and before the end of the year, the entire line had adopted the Intel processor.

In their reports, Farmer and Munster both wrote that Apple may offer an "ultraportable" Mac, while Bajarin said there was the possibility of a surprise update, since the company does its best to keep new products and offerings strictly under wraps until the last minute.

Then there is the iPod. Apples music player dominates the market, but it now faces competition from other players, like Microsofts Zune, as well as cell phones, which have increasingly become dual-function music players.

In his report, Wu forecasts that Apple will have sold 15.5 million iPods during the final quarter of 2006.

/zimages/6/28571.gifClick here to read about Apples recent trouble with the SEC.

Apple will have to offer some major innovations in order to keep up with the pace of other music players and retain the dominant market share it has enjoyed in the last five years, Bajarin said. Except for the reconfigured shuffle and the expanded memory on both the traditional iPod and the Nano, there has not been a major update to the actual hardware itself.

"The competition for MP3 players and portable music players is really heating up and Apple needs to take a major step in innovation to really keep its lead," Bajarin said.

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