Jobs the survivor as Apple triumphs

Steve Jobs, the chief executive of Apple Computer, will this weekend be putting the finishing touches to Wednesday's quarterly results announcement that should prove the crowning glory to a remarkable 12 months for the 49-year-old technology tycoon.

Next week's figures will cover the Christmas shopping period which analysts reckon should show that sales of iPods, Apple's revolutionary portable digital music player, burst through the 4 million barrier in the October-December quarter alone.

Worldwide, sales of the gadget, already a design icon, are reaching the 10 million mark, helped by the barnstorming success of iTunes, the online music store where iPod users have bought well over 200 million tracks.

But on Wednesday Mr Jobs will not just be basking in the glory of a stunning Christmasfor iPod. His other seasonal triumph has been The Incredibles, the latest three-dimensional animation hit from Pixar, the Hollywood production house he bought in 1986 from George Lucas, the Star Wars impresario. The film has grossed well over US$200m (NZ$286m) so far and has consolidated the reputations of Pixar and Mr Jobs among Hollywood's most powerful names, having already produced hits such as Toy Story and Finding Nemo.

However, if all that was not enough, Mr Jobs has also triumphed over a personal crisis. In August he revealed he had undergone surgery for pancreatic cancer. Normally a killer, Mr Jobs's cancer was identified as a neuroendocrine tumour, a rare form that can be treated and cured by surgical removal, whereas the more common adenocarcinoma form usually proves fatal.

Having taken August off work to recuperate, he was back at his desk in September to carry on a business career which has seen him create Apple Computer, with co-founder Steve Wozniak, from his parents' Santa Clara garage in California in 1976, only to be ousted in a boardroom coup in 1985.

Shunned by the company he helped to create, Mr Jobs went on to form NeXT Software and to buy Pixar. The former was eventually bought by Apple in 1996 for US$400m to try to boost what were by then its dangerously flagging fortunes.

The deal not only brought Mr Jobs back into Apple's core but offered him the chance to organise his own putsch, forcing out the incumbent chief executive Gil Amelio.

If NeXT brought him back into the Silicon Valley fold, Pixar made him a Hollywood power broker through a crucial joint venture deal with the Walt Disney company, one which gave him billionaire status when the film company floated in November 1996.

After his return to Apple, it was five years until the company launched the first iPods, with the iTunes music store following in 2003. However, the graphics show just how quickly the iPod and iTune operations have been growing over the past year, with iPod now controlling 87 per cent share of the market for portable music players. The success has coincided with a dramatic rise in the Apple share price, which started the year at US$21.70 and now trades at US$64.47.

Apple's dominance in this market was brought vividly to life yesterday when a disgruntled iTunes customer started legal proceedings against Apple, suing the company for an alleged breach of competition law by allowing iTunes to work only with an iPod.

The case is thought highly unlikely to succeed but the reasons why it will probably fail are the same reasons why Apple could feasibly lose its status as the portable music king, just as it lost its early advantage in desktop computing. To succeed, Thomas Slattery, the customer who has brought the case, will have to prove that iTunes is so pervasive that it represents a market in its own right. Limiting consumers to one device to use iTunes could, therefore, be construed as anti-competitive. But the reality is that iTunes is not alone. New legal music download sites are appearing weekly. While iTunes is undoubtedly popular, it is certainly not the only way you can access thousands of tracks over the internet. In the UK, Tesco and HMV have launched download sites, as has Microsoft and a raft of internet service providers.

More importantly, these rival sites are also accessible using one of the many rivals to the iPod music player, be it from Sony, Philips or a plethora of smaller specialist manufacturers.

Eight years ago, before the return of Mr Jobs, the talk was of Apple succumbing to a takeover, having lost its leadership inthe desktop computer market. Could the same happen again in the digital music market?

Apple went from leader to laggard in computers after being superceded by IBM, which launched its first personal computer in 1984, containing the operating system and microchip technology of Microsoft and Intel respectively. Much of the IBM product aped the operations of the Apple machines but at a reduced price.

Since the prodigal son returned to Apple, the company has stabilised its financial position, although it still has only a 1.9 per cent share of the desktop computer market. IBM has had its own problems and gave up the PC market altogether last year, selling its remaining PC business to Lenovo of China. Both IBM and Apple have seen cheaper, more efficient "me too" producers such as Dell and Hewlett-Packard overtake them and dominate the market. The possibility of something similar eventually happening to Apple in the digital music business is obvious.

But the sudden and explosive success of iPod and iTunes could yet give Mr Jobs a new opportunity to exploit, which could help protect its position in the digital music market and give its personal computer business a further boost. The question is whether he can turn the undoubted consumer success of his music-related products into greater sales of his Apple Mac computers - high-specification desktops that have yet to find mass market appeal.

A visit yesterday lunchtime to Apple's new retail store in Regent Street proved the pulling power of the Apple brand. Hundreds were milling about inside, testing the iPods but also playing with the new iMac G5, Apple's latest desktop dream machine. But it was not just browsing. The queues at pay tills were impressive with many consumers who, through the iPod, are getting their first taste of an Apple product.

The company is doing all it can to leverage the iPod success. The Regent Street window display pronounces "From the creators of iPod. The new iMac G5," to encourage the army of new customers to at least take a look at its computers as well.

But it seems certain Mr Jobs will not be relying on the £1,200-plus G5 for new business.

In another Apple legal move, the company has launched a lawsuit to gag the Think Secret website, which has published detailed stories about a new launch from Apple of a cheaper Apple Mac. Apple maintains the information Think Secret has based its stories on is "confidential".

If the rumours swirling the technology industry are true, Apple could be about to launch a version of its much-coveted personal computer but within the price range of far more consumers - the sorts of consumers who were busy snapping up iPod music players yesterday.

- INDEPENDENT