All await Apple’s next big thing

Steve Jobs’s announcement on Tuesday that Apple Computer would begin shipping its first computers containing Intel chips six months earlier than expected won predictable applause from adoring Apple fans.

Among some industry watchers, however, there is a sense of waiting for the other shoe to drop.

Shares in the computer maker, which was founded by Mr Jobs and his partner Steve Wozniak 30 years ago this year, have more than doubled over the past 12 months. They hit a high on Wednesday, as Apple basked in the afterglow of record first-quarter revenues, bolstered by stronger-than-expected sales of the iPod personal music player.

To justify its rich valuation, analysts say Apple will need to come up with several blockbuster products this year, much as it did with the video iPod and the iPod nano in 2005. And although the move to Intel chips will give a badly needed boost to Apple’s core computer line, it is more akin to a catching-up exercise than to the coup needed to sustain the company’s strong sales growth.

“[The Intel roll-out] was bread and butter,” says Bob O’Donnell, analyst at IDC. “It brings them into a new era in that they’re on a level playing field with everyone else.”

Intel processors may put Apple on an equal technical footing with PC rivals but the company faces other challenges selling its computers to a broader audience.

Apple computers tend to be more expensive. Low-end models of its new dual-core MacBook laptop will retail for $1,999.

“The price points are higher than Windows [PC-based] people are used to,” says Mr O’Donnell. “Not that many people buy $2,000 notebooks.”

Strong iPod sales should continue to drive growth in Apple’s top line in 2006. But growth could slow next year as competition for the iPod increases and Microsoft, Apple’s chief rival, unveils its new Vista operating system, according to Richard Gardner at Citigroup.

Gene Munster at PiperJaffray expects Apple to deliver a steady stream of updates to the iPod this year. But some analysts think Mr Jobs may be eyeing an even bigger prize – a device that brings together video, photos, music and the internet in the living room.

Companies are gearing up for a push into the digital home but the strength of the iPod brand could give Apple a big advantage.

No such device was in evidence at Macworld. But Mr Jobs did offer a tantalising glimpse of what the software that sits on such a machine might look like when he demonstrated an updated version of iLife, a software suite that lets users create and share photos, videos and music.

ILife’s latest features include an enhanced photo-sharing function, an upgraded DVD video editor and a “podcast” recording studio, along with an easy-to-use program for building web pages.

“They are putting the fundamentals in place so when it is time, you could transfer everything very cleanly and quickly [to a home media device],” says Mr O’Donnell at IDC.

Apple’s iMac desktop computers already come with remote controls. The company also offers a 23-inch widescreen display that can resolve every pixel of a high definition DVD.

“[Apple] are moving the PC closer and closer to where you would be okay putting it in your living room,” says Ted Schadler at Forrester Research.

No doubt investors will be keeping a close eye on Mr Jobs as they await news of Apple’s next big thing.