People seem to have very high expectations from this WWDC, which isn’t unusual. Most expect new handsets and a hopeful handful still expect the mythical Apple Tablet to be finally announced. I am not that interested by new hardware. New handsets will come at some time, that we know, and since we know that they will be running iPhone OS 3.0, which is already available for current devices, I really don’t care if they are announced at the show or two months from now. As for the tablet, my guess is that we will have to keep waiting.

However, most people seem to be much less interested by Snow Leopard. That is probably a mistake. Apple has deliberately set low expectations for this release and is probably set to over deliver in several areas, even though nothing has been announced. Regarding the new features that we know about, like Grand Central and OpenCL, we have no exact idea what kind of impact they will represent in terms of performance gains. I hope to be pleasantly surprised. Like last year, I will keep my finger crossed for Windows and iPhone versions of iChat which would make the Mac version more useful.

On the iPhone front, I have high expectations for significant third party hardware device announcements that can be controlled from the phone. Building a strong ecosystem around the iPhone is key to its long term success and Apple has been very clever to open the development of non-trivial hardware extensions to third parties. It would be nice to see Arduino work with Apple to allow hardware geeks easily create new hardware gadgets for the iPhone. That would open a new market for the phone in universities all over the world.

However, despite all the improvements that Apple has included in this new release, it is clear that this is just a transition product that will improve the user experience but that nobody can seriously define a revolutionary. Those who expected the iPhone OS to run on new types of devices, like a larger tablet or a smaller, cheaper phone are probably disappointed. There seems to be nothing in this release that allows existing applications to run on different form factor devices. That doesn’t mean that we won’t see a new generation of iPhones relatively soon. In fact AppleInsider has already reported on some of the features the new phones are expected to sport when they are released this summer. However, these products will be evolutionary (better camera, improved speed, etc), not revolutionary.

So, what should we think of those rumors that tell us that Apple has been shopping for 10” LCD screens? They might be still be true, but they just won’t be for a device running the iPhone OS. That probably means that if Apple chooses to release a Netbook later this year, it will most likely be a Mac, or at least a device much closer to a Mac than to an iPhone.

Immediately rumors started to fly about possible new features to be included in the new version of the OS. While this update may bring us some new features like cut & paste support or tethering that users have been clamoring for over the last few months, this is not likely to be the most relevant part of the announcement.

Why do I believe that? I will start with a disclaimer, I do not have sources within Apple. This is just logical reasoning, based on what we know. So, what do we know? Apple could implement tethering, MMS support or cut and paste without having to release a new SDK, months before launching a new device. There is more to this announcement than building excitement for the next OS release. Apple needs the developer community to start working on their applications to provide a smooth migration path for users.

I can only think of three reasons that could explain this urge from Apple to mobilize its developer community. The most obvious reason is that it includes major changes that require programmers to test their applications for compatibility. The next one is that it includes significant new capabilities that the developers could leverage to create new applications. Finally, Apple could be releasing a new version of the IDE (Integrated Development Environment) that would make development much easier for unexperienced programmers.

So, what does this mean for the average user? Well, it depends on which of the previous options turns to be true.

What would require widespread testing of all current applications? There has been much discussion over the Internet about new form factors for the device. Some wish Apple would release an iPhone nano, while others are waiting for a larger iPhone tablet. Right now, this cannot be achieved, because the GUI is not scalable. Applications are designed for a 480*320 display. If Apple is planning to release new models with larger or smaller screens, this will have to change and it will require significant work from developers. Look for “Resolution Independence”. Other hardware changes, such as a higher resolution camera or expanded sound capabilities could also require changes to the APIs that would require less but still significant testing. We may not know how the new iPhone models that Apple will certainly launch later this year will look like, but we will have a pretty good idea as to what to expect feature wise.

There is no doubt that the App Store has been a total success. With over 25,000 applications released since its inception, the iPhone is now the mobile platform that offers the largest software catalog. Still, many enterprises find it difficult to hire the talent to create business apps. If Apple wants to fully crack the corporate market, it needs a simpler development environment for those reluctant to learn Objective-C. I do not really believe that Apple is moving in this direction, but it is a possibility.

Finally, there could be significant new APIs added to the SDK. For example, currently support for SOAP and REST services, as well as XML, is spotty at best. These new APIs could open the door to a whole new generation of applications without requiring Apple to release radically new products.

The good news is that these options are not exclusive, and therefore, we may see all of them turn true next week. However, that is probably wishful thinking. On Tuesday we will know.

I am sure that most do not realize the significance of this announcement. In the past, Apple has used many dirty tricks to artificially increase the number of attendants to WWDC. For example, there used to be a separate conference for Quicktime content creators. I believe that Apple cancelled that event two years ago and folded it within WWDC. Last year there was a session track for web developers, presumably to pave the way for new web applications targeting iPhone users. The result was that if you engaged in conversation with people you didn’t know you were likely to find out that they had absolutely no clue about Objective-C or XCode.

This year things are likely to be quite different. Apple no longer needs tricks to fill Moscone West up. Gone are the tracks for web developers and video content creators. There still is a track for System Administrators but the rest of the sessions are designed exclusively for developers. This means that even if attendance only grows to six thousand (the Convention Center was already packed last year), this will still represent a very significant increase in the number of real programmers attending the event. It is a clear sign that many of those 200,000 persons who downloaded the iPhone SDK are actually using it and want to be prepared for the launch of the app store at the end of June. This is going to be the best WWDC ever!

In fact the most discussed topic during this week at CES was the decision taken by Warner to abandon the HD DVD format. It is widely expected that this announcement will quickly lead to the demise of this format. This is certainly a victory for consumers, even though Blu-Ray is more expensive than HD-DVD, and sends a clear message to the CE industry (Sony included) about the need for standardization.

Many have been quick to point out that Blu-Ray’s victory may be short lived and that in the near future digital downloads will replace physical media for high-end video. No need to be a rocket scientist to know that this is true. Still, it will take a couple of years before most people in developed markets can download a 20GB file in less than two hours (the average movie viewing time). That means that there is an opportunity for movie studios to make some real money out of HD media over the next five years or so.

What is interesting, is that unlike previous revolutions (CD, DVD, Blu-Ray), digital downloads will not compete with previous the standard by offering higher quality but instead will focus on convenience exactly like the iPod which offered less audio fidelity than CDs but was much more convenient. Right now we still do not have the iPod equivalent for digital video. Sure, media centers and next-gen consoles like the XBox 360 and the PS3 are attractive for those who get their content illegally and store it on a collection of big hard drives but what about the average user who wants access to a large library of content, potentially all movies ever made? The solution is clearly a video on demand (VOD) system and not a media centre.

Apple, Microsoft, Google, cable companies and many others seem to have understood that trend perfectly well and are racing against each other to be able to be the first company to provide a viable solution. Right now cable companies offer a very limited amount of titles and CE companies until now had no rentals, which is key to succeed in this market. That will change quickly, starting next week with Apple expected announcements. However, competitors will follow quickly as this is in the best interest of content owners. Since there is no standard for video rentals we can expect competition to be as harsh as the blood bath we witnessed during 2007 Blu-Ray vs HD-DVD death match. However, in this case the consequences for consumers may be much more beneficial. Since rentals disappear after viewing the movie, the is no concern about losing your investment. Consumers will take their decision based exclusively on price, ease of use, media quality and library size (as well as product availability and awareness).

Who will win this war? Google, Apple and Microsoft are already well positioned as they have demonstrated that they know how to handle large collections of digital media. In the short term Apple has an edge with the popularity of the iPod, while Microsoft can leverage their huge XBox installed base. Right now I am discounting Sony which is in my opinion more focused on making Blu-Ray a complete success than in competing in this emerging market. In the end, it will come down to each company’s ability to partner with content producers as well as creating attractive, reasonably cheap devices. Since this will be a long war, expect the company with the most focus to ultimately win.

I am not convinced, although the idea seems intriguing. Having a laptop that can dock behind a large monitor could allow Apple to sell more monitors and make MacBooks more attractive to potential customers who want to enjoy more screen real estate at their usual workplace. It is an incremental improvement over existing solutions. The problem is that Apple rarely settles for incremental improvements, they tend to prefer radical new designs. So, what if that laptop was not really a laptop but instead an Internet tablet, a larger iPhone if you prefer. This device would work as a standard Macintosh computer when docked and as a portable internet device when used as a stand-alone product.

I have been thinking about how such a device would work and it is clear to me that in order to save energy, this dual personality is required. When docked, the processor could run faster and be refrigerated efficiently using any of the technologies described in the patent. Undocked, with the processor running at lower frequencies, no refrigeration would be required, just like in the case of the iPhone. However, customers are not likely to accept a device that runs their existing Mac applications slower when on the move. That is why such a device would need to behave as a “super-iPhone” with a multi-touch UI and not as a Mac when not connected to the dock. This may seem a weird idea. After all, the reason we buy laptops is to have our computers with us at all time, right? Yes, but most of us do not use our laptop the same way at home or at the office as we do while traveling. At the office I generally create content, outside I display content. That means that I usually need more horsepower at the office than outside. In fact, I would argue that if that such a device allowed me to display presentations, read digital books, browse the Internet, watch videos, listen to my music and update my blog, that would cover most of my needs while on the go. Sure, I would lack the capability to work on my projects with XCode at a Starbucks but that is something most users do not care about. The nice thing about such a design is that it could transform tablet users into Mac users with just the purchase of the dock (which would presumably be optional).

So, can such a device be built today? Sure, if you open a laptop you will see that it does not contain much circuitry. Most of the space is used by the HDD, the optical drive and the keyboard which can be replaced by flash memory, eliminated and substituted by an on-screen equivalent respectively. The question is if such a device would be successful with customers. I am not sure, while early adopters would probably rush to buy such a product, this concept still represents a major paradigm shift and Apple would need to educate the market on how to use such a device, which is both difficult and costly. That is why I do not believe that such a device will be introduced by Steve Jobs on January 15. However, you never know…

Offering rentals in addition to movie purchases will not change this fact. To be really competitive and win new customers, Apple needs to offer a much larger movie selection but foremost they need to move to HD, and that probably means moving to 720p. So far, not a single rumor has indicated that this will be the case. That means that either that may be the secret Steve Jobs is keeping for MacWorld or that this new effort will not create a major breakthrough in terms of new users moving to iTunes to get their movies.

I know that there are many out there who have still not adopted HD. Nintendo for example is making a killing selling the Wii to customers who do not care about HD and that is fine. However, when you sell a device like the AppleTV which does not advertise support for resolutions less than 480p and favors connecting to a TV through an HDMI connector, that is obviously not the public you are targeting.

Right now Apple offers three devices that could display HD content, the AppleTV, the iPhone and the iPod touch. Add to that all the Macintosh line of computers. However, Apple also offers two other devices, the iPod nano and the iPod classic which do not offer the proper display size ratio to support HD content. That means that moving to HD would leave out many recently released products. That doesn’t make much sense. If Apple chooses to move to HD they will probably have to keep offering regular content for many of their customers. That could explain some of the rumors about variable content pricing. It may turn out that the price will not vary based on the content, but instead based on the resolution of the content. That would be more in line with what Apple is already doing with iTunes plus.

Of course, right now all what I have been saying is purely speculative. However, if Apple wants to compete effectively in the media server arena, they will need to move to HD at some point, even if it is just to match what others are already doing. MacWorld seems to be the perfect occasion to announce such a move and in my opinion this would be a far more important announcement than just movie rentals.

The good news is that on-line prices seem to be reasonable. While it still is cheaper to buy in the U.S., the difference is now much smaller. This is good news because it may encourage many customers to shop locally. Until now, Mexico has been a minor market to Apple if you look at the sales numbers. However, that is not really true because wealthy Mexicans (those more likely to buy from Apple) tend to buy their mobile products (those that can be easily smuggled through the customs) in the U.S. and that skews the numbers significantly.

For example, if you were to walk into any Starbucks in Mexico City today you would have a good chance to see Macs outnumber PCs. The same happens with iPhones and iPods which can be found everywhere. Most of these sales never go through Apple Mexico and are therefore accounted as U.S. sales.

While this new on-line store may actually have a negative impact on both local dealers (used to low unit sales and high margins) as well as the physical Apple Store sales in the U.S. it may give Apple Mexico a chance to grow significantly beyond their current small local market (desktops used by graphic designers and universities). If this turns out to be true, we may finally get better local support, which is badly needed.

Right now, the Apple TV is still a good value proposition for those who store large amounts of pictures in iTunes and buy TV episodes through the iTunes store. However, since TV shows are only available in the U.S. and in the U.K. (although there doesn’t seem to be a large selection available there) that severely limits the potential of the device.

It seems that Apple is working with the movie studios to offer online movie rentals. That could prove to be a smart move as it it obvious that nobody wants to go to Blockbuster to pick a movie and deal with late fees. Such an initiative could provide a much needed boost to the Apple TV sales. I am not sure that it will be enough, though as competitors are moving fast too.

For example, DivX recently announced that Sony had licensed their technology for the PS3. That means that PS3 customers will be able to use a single device to play games and view both blu-ray high-res movies as well as DivX content downloaded from the Internet (not that I would ever do that…). That is a great value proposition. You can now get a PS3 for US$499 and that includes 15 Blu-ray movies if you buy the device from Wal-Mart. Even if you price each movie at US$15, that puts the cost of the device at US$275, that is US$24 cheaper than the Apple TV.

From what I have been reading, I am not the only one doing the math and many are seeing the value that the PS3 delivers. It seems that Apple needs to do something quickly if they want to move more Apple TVs during the holidays and extend their current lead in the digital download market to the living room. However, time is running out, only three days to black Friday, and if Apple doesn’t release any updates to the device by then, we can be quite sure that there will be no updates until next year. That could be a big mistake.

A couple of months ago I was wondering what kind of OS an Apple cellular phone would use. At the time, I thought that using OS X was unrealistic. The reason I believed that is because there have been traditionally large differences between operating systems for embedded systems and full fledged computer. This may not be evident for the general public who may think that Linux or Windows Mobile have some close relationship with their desktop counterpart, but it is a fact.

The fact that the Apple TV runs a scaled down version of Mac OS X shows that Apple is moving down the same path. However, the effort seems far from complete, based on the fact that a fully functional computer is still required in order to stream video from a computer to a TV. That is why the Apple TV is relatively expensive when compared to similar (not identical) products from the competition. The foundation Apple is working on was designed for desktop computers, not embedded systems and it shows. The only experience Apple has with embedded devices is the iPod and they were not responsible for most of the design decisions, relying instead on third party suppliers like PortalPlayer (now owned by nvidia).

Developing a true embedded OS takes time. Microsoft has spent years working on Windows Mobile and we know how bad that system was in earlier versions, when it was known as Pocket PC. Linux is just emerging now as a true contender in this market. From my point of view, based on the analysis of the AppleTV hardware and software, Apple does not have at this time a true, mature, embedded OS. This is probably the reason why the iPhone will not support, at least initially third party applications.

The important question however is, does it matter? A couple of years ago I would have answered with a resounding YES. Today I am not so sure anymore. New technologies mean that embedded devices are getting more powerful by the minute, offering capabilities and performance much closer to what desktop computers can deliver. Origami devices (ultra mobile PCs) are a clear example of this trend, small devices running a full desktop OS. This means that having a true embedded OS is no longer the same strategic advantage it used to be. Apple may have to struggle quite a bit to overcome the limitations of OS X as an embedded operating system for some time but ultimately creating a complete software foundation over a complete OS may turn out to be a good decision for the future. Maybe this is another demonstration of ““I skate to where the puck is going to be, not where it has been.”.