Philip Pearlman
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Apple has always been known for awesome design and, given the inspired combination of form and function, it is no wonder that the iPod, in five short years, has become the dominant electronic music device.  

And with the advent of the Nano and the Video, one has to wonder, how could Apple possibly make the iPod any cooler?

A very recent patent application provides a clue of at least one improvement that could be in the works. Imagine the device programmed to allow you to navigate selections by voice prompting. The proposed audio user interface would utilize text to speech conversion in order to allow users to make music or video choices without having to ever look at the device. 

So you could be jogging or driving down the highway and choose the Pixies or the Arctic Monkeys without ever having to take your eyes off the road.  

I will be keeping my own eyes open for a patent application that allows users to make selections by voice prompts using recognition technology as this would seem like a natural complement to the proposed audio user interface technology. In the meantime, the prospects sound tres cool.

Apple traded strongly in the pre-market and moved as high as 73.38 or more than 2% higher before 10AM during the regular session on the positive Apple vs. Apple news. The stock dribbled gradually lower for the rest of the morning and throughout the afternoon and gave back all of the early gains to close flat. So call it a push with some mild disappointment at gains lost.

Currently, in the after hours, AAPL is getting whipped around a bit on a halted stock and what appears to be some very negative earnings and guidance news coming from Dell Computer. It would seem to me that any significant weakness on the heels of bad Dell news would provide an entry opportunity as the businesses are actually very different despite operating in the same space. In fact, to some extent, Dell's losses should be Apple's gains.

In addition to the Dell news, Apple shares will likely respond during tomorrow's session to reactions to the new MacBook release. If the hype machine can crank it up just right and if the reaction from gadgeteers and Apple heads is positive, the stock will likely pop over the short term. That said, I would also not be surprised to see traders fade the pop in a repeat performance of today's action. Apple shares have moved from 65 to 72 in just a couple of weeks and could use a bit of a rest (or consolidation) before the attempted run towards the January high.

Update: Dell has re-opened for trading and is getting hit on heavy volume to the tune of a five percent decline. It is mentioning pricing pressure at the retail level which is likely the cause for the after hours sell off in Apple as investors generalize the news across players. As of 4:34PM, Apple trades off .40 from the close.

While Apple heads will get all jazzed by even the release of new colors of iPod covers, the rumored release of a new Intel based MacBook tomorrow is a big deal and has yours truly salivating like a bull dog in a butcher shop.

The new laptop will likely take another shot at Windows based laptops as Steve Jobs and the crew continue their push to gain market share. This is an opportunistic strategy which leverages the success of the iPod/iTunes powerhouse and could result in an additional revenue growth stream for the company. The release also comes on the heels of the hilarious new Apple advertising campaign in which it skewers Windows with the nerdy virus guy.

Rumors have been flying across the blogosphere since last week when a number of sites including The Unofficial Apple Weblog, Appleinsider and MacRumors among others have reported on the coming product release and surmised that indeed Tuesday May 8 would be the big date.

On Friday, TUAW even posted a screen grab of a slip up on the Apple web site which mentions the MacBook by name, suggesting that the release was imminent. More and more, web savvy companies have used this type of leak as a clever way of getting the word out and raising buzz.

I must admit that I can't wait to see the new machine and especially to see how Apple markets interoperability with Windows.

AOL will continue planting seeds beyond its formerly walled garden by offering a free voice-over-Internet phone service called AIM Phoneline. The service will be an extension of its popular instant messaging service and will provide users with a local phone number and the ability to receive incoming phone calls from anywhere. AOL will also offer an enhanced subscription version for $14.95/month which will allow subscribers to make local and long distance calls from their computers.

AIM (along with the other major portals) already sports talk features but Phoneline will be a more robust version which will compete with eBay's Skype as well as traditional telephone services. In addition, AIM Phoneline will be a part of a broader strategy to leverage AOL instant messaging that will include a social networking channel as well (stay tuned for more details on that one as they arise).

Everybody's back to hating Mr. Softie.

But this time the Redmond beast is feeling heat from investors and analysts and not from regulators looking to inhibit the bundling of software or consumers cursing security flaws or the bugginess of Windows.

Yep, now it is investors who are expressing their ire over quarterly financial performance and future guidance which, for the first time, overtly accounts for the piles of cash that must be spent building server farms among other things in order to meet the Google challenge. And such dissatisfaction is coldly evident in the recent price decline of 15% in five trading days since the release.

While negative investor sentiment accelerates, it becomes extremely easy to come up with reasons to avoid if you are not long and to sell if you are. Guidance is punk. Google is swarming. Apple circling. The Vista release has been pushed ever further out into the future -- so on and so forth ad nauseam.

It has for a while now been my contention that search technology will inevitably move towards parity. The rationale goes that as any technology begins to mature, the surviving options all improve through research and development as well as the "borrowing" ideas from each other. We have witnessed this notably in the PC space, a more mature technology, where one can plug in a Compaq or a Dell and get pretty similar performance for a similar price. This is the inevitable process of "commoditization." 

Current conventional wisdom suggests that Google provides the best search results as evidenced by its growth in popularity and market share dominance, while the MSN and Yahoo! products are older, clunkier and less relevant per query. However, a recent study conducted by the Cincinnati based IT consulting firm, Intralink, suggests that relative strengths and weaknesses among popular search engines (including Google, MSN, Ask, Yahoo, AOL and smaller entries Gigablast and Wisenut) exist and that, perhaps, search as a technology is indeed moving towards parity.

The study measured search engines across five factors including relevancy, freshness of content, failure rate, difficult search results and non-organic or extra features. Surprisingly, the composite score of the five factors indicated that MSN measured slightly higher than Yahoo! and Google. Among specific factors, it found that MSN scored highest in relevancy while Ask scored highest in freshness of content.

Apple closed higher by nearly three percent today on moderate volume thank you kindly.

The healthy bump was especially notable as the NASDAQ100, a large cap technology laden index, underperformed the broader indices as a whole and managed to close merely .22% higher. As well, comparable issues such as Dell, Hewlett and Softie all finished fractionally red.

Apple appears to have attracted some buyers as technical indicators have recently turned positive with last week's bounce off the 50 day moving average as mentioned last week in this space.

In addition, the market seemed to like the favorable terms of the 99 cent across the board iTune pricing agreements reached with the big four music labels.

Apple has a great chance to lift even higher from here and a move towards 75 on significantly heavier trading volume and a benign market environment would put the January high squarely in its cross hairs.

You gotta love a company that has the leverage to successfully negotiate a deal with the music industry's largest players that is actually favorable to consumers.

Last night, Apple Computer announced that it had renewed its agreement to price music downloads at .99 across the board with the four major music labels.

As if there was any doubt as to who is penning this melody, Apple was able to leverage its download dominance despite the protests of Warner Music, Sony BMG, ADS and EMI who claim that the modest one price structure makes it difficult for the companies to make money on music distribution through iTunes.

The new deals will only delay the inevitable showdown between Apple and the labels who desperately await either a second viable electronic distribution product to emerge (monthly subscription services have yet to take off) and gain enough market share so hat the big four music companies can bring some added weight to the bargaining table, or the eventual plateau in iPod sales at Apple which will induce Jobs and company to increase margins on downloads through higher prices.

But until such days, music fans can party like its 99,

99 cents that is.

Apple spent the majority of the session higher by about one percent on light to moderate volume and drifted as high as 71.54 or almost 2% at 10:45 a.m.

However, with about 45 minutes left before the 4 p.m. close, equities across the board got blistered after Federal Reserve Chairman Ben Bernanke's dovish comments from last week were apparently clarified in a less benign manner.

These clarifications along with downright hawkish talk from Chicago Fed President Michael Moskow, reported on CNBC, were in turn interpreted negatively by the equity markets and triggered selling in tech issues across the board. Apple was not spared. It fell from 71 to below 69.25 in less than 30 minutes before settling in at close at 69.6 -- a hair more than one percent and roughly in line with the performance of large cap tech as represented by the NASDAQ 100 (NDX).

It seems the Fed giveth and the Fed taketh away.

Brief Update: It also bears noting that at about the same time the sell off in the broad market and Apple begun, Briefing.com, a widely read subscription based news service, posted a note about a Red Herring article that reports that Apple's OS has become more vulnerable to security breaches than it has traditionally been. While it does not strike me that this was the cause of the sudden late day sell off in Apple shares, it is worth a mention and a link for those interested.

AppleInsider is reporting that Justice Edward Mann will be handing down a ruling on the Apple vs. Apple case a week from today.

Recall that in March, Apple Corps, owner of the Beatles "Apple" trademark, brought charges against Apple Computer claiming that the terms of a 1991 settlement  were broken when Apple launched iTunes. In the previous agreement, Apple Computer agreed to not distribute music content on "physical media." Currently, Apple claims that the electronic distribution of music inherent in iTunes is not a breach of the agreement. Apple Computer also agreed to pay Apple Corps $26 million, peanuts considering the value the brand garners today.

The bear case for Apple Computer includes risks that damages might run considerably higher this time around or, worst case, that Justice Mann will order some type of restriction from use of the trademark.

That said, I would not be surprised to see some type of an agreement before the judgment as neither side will benefit from the lengthy appeals process a judgment might provoke.

Even still, while an Apple a day may keep the doctor away, apparently, it does little to keep the lawyers at bay.

Perhaps, there is no purer form of risk taking than knowledgeably predicting unexpected future actions of companies within a dynamic business arena and then taking equity positions in part based on such speculations. And perhaps, there is no more dynamic speculative arena than the technology space where fundamental attributes shift gears as swiftly as tail back Reggie Bush.

A week ago, I blogged on Cringley's entry detailing where Apple Computer may be heading in terms of its utilization of Windows XP applications sans the need for Microsoft's operating system itself. As you might recall, Cringley provides wonderfully insightful musings on possible future initiatives that are as provocative as they are based on a deep understanding of the history and current landscape of the field.

In a recent update to his blog, Cringely again proposes some seemingly wild predictions while backing his reasoning up with rich attention to specific details across a variety of software firms.

Specifically, Cringely offers a version of the future in which Apple buys Adobe as an integral part of a broader strategy to take on the Microsoft operating system and applications dynasties. Along the way, he takes the reader on an expansive journey which compares current competition between Apple and Microsoft to the early 90's challenges between IBM and Microsoft, lays out Apple's possible long time preparations for such a run for OS dominance and characterizes Microsoft as "bloated and paralyzed."

What more could you want from a soothsayer?

No one with a mouse could doubt the growth of Internet advertising over the past couple years. Pop-up blockers be damned, its everywhere you look and the range of different types of ads just keeps growing with every clever new angle from the marketing programmers across firms.

Nevertheless, if you are interested in a comprehensive account of the current state of net advertising, you will love a recently published report sponsored by the Internet Advertising Bureau and conducted by PriceWaterhouse Coopers entitled The IAB Internet Advertising Revenue Report.

The report contains detailed data and analysis of on-line ad revenues culled from financial documents of the major Internet companies.

Highlights of the report include data related to general trends such as overall net ad revenue growth from 2004 to 2005 of 30% and market share gain relative to total ad spending (net advertising revenues up to 5% of all ad spending in 2005 from less than 4% in 2004) to company specific data highlighting robust numbers from leaders such as Yahoo! and Google as well as smaller players such as Marchex and aQuantive.

A free on-line PDF of the report can be found  here and it is well worth the read for those who invest within this space.

So I'm sitting here at the trading desk with CNBC on the television somewhere in the background when The Wall Street Journal's Walt Mossberg comes on the air for a Power Lunch interview with Bill Griffeth. Walt is the personal technology columnist at the journal where he reviews electronics products, software and the like. He's the axe in the field.

So I turn to watch Walt and he is raving about Google's new calendar feature.

Raving!

He loves the simplicity of it. He loves the fact that you can create a calendar and share it with others who can also easily update and edit. He loves that its web based so that you or anyone you are sharing it with can easily access it from a remote computer. He loves that you can import the Redsox schedule with a click and a drag. He loves that it is free.

Bottom line, with Walt gushing you have to figure Google's got a hit on its hands and a great addition to its suite of web based apps to eventually challenge the Redmond beast.

(Those with the paid sub can finds Walt's review here.)

Imagine an Internet environment in which you were taxed each time you downloaded an itune or searched for the directions and customer reviews of that trendy bistro you were headed to this weekend. Or perhaps, somewhat less ominously, imagine that Internet content providers from the behemoths such as Google, Yahoo!, Apple and Amazon to the little guys such as your favorite foodie blog paid the tax which pressured margins for these companies.

Yesterday, the House Committee on Energy and Commerce rejected an amendment proposed by Representative Ed Markey which would inhibit discrimination of Internet traffic. The vote shuns FCC involvement and serves as a defeat for these Internet companies and a victory for major cable and telecom companies such as Comcast, AT&T and Verizon which own the "pipes" that contain the flow of Internet traffic

This net neutrality debate has been heating up big time in recent months as these "pipes" companies pursue an active lobbying effort to keep government regulation away from controlling how they charge those who utilize their infrastructure.

Both sides have a point. On the one hand, it seems like it would be grossly unfair for your Internet provider to allow slow connections to specific sites that you love to visit and have grown to love. On the other hand, the telcos and cable guys do own the pipes.

Personally, I have mixed feelings about it and simply don't want to see it become prohibitive for the little guys to fire up and operate cool and innovative new websites.

Nevertheless, how net neutrality unfolds in Washington over the next two years or so will have a huge effect on the landscape of the web we all surf daily though. At this point it is impossible to predict the resulting terrain. The details will require close scrutiny for those who have a strong interest in the Internet experience or the companies involved as votes such as yesterday's shift the dynamics of who might wind up paying for Internet traffic.