Bloomberg News

Apple’s Jobs Set to Unveil ICloud to Deflect Google Android

June 06, 2011

(Updates with today’s trading in fifth paragraph.)

June 6 (Bloomberg) -- Apple Inc. Chief Executive Officer Steve Jobs, addressing an annual developers conference today, may give consumers a new way to access digital songs and information on smartphones and computers.

Jobs, on medical leave since Jan. 17, will make his second public appearance of 2011 at Apple’s conference in San Francisco. He will preview software updates for Apple’s iPhone, iPad and Mac, as well the new iCloud online storage service, which may help those devices wirelessly share the same materials.

Apple is using iCloud to retain its dominance in the smartphone and tablet markets amid fresh competition from devices powered by Google Inc.’s Android software. The new service may improve how users can access content across different Apple devices, keeping customers from defecting to rivals, said Frank Gillett, with Forrester Research Inc.

“The world we’re headed to is where you don’t have to think about which gadget has your stuff,” Gillett said. “As people get their content organized around one of these personal ecosystems, then it will be incredibly sticky because migrating won’t be convenient.”

Apple, based in Cupertino, California, advanced $1.81 to $345.25 at 9:41 a.m. New York time on the Nasdaq Stock Market. The shares had climbed 6.5 percent this year before today.

MobileMe Breakdowns

The company’s earlier foray into Web-based services, MobileMe, got off to a slow start, dogged by breakdowns, including one that kept users from sending or receiving e-mails. MobileMe, with a $99 annual subscription fee, eventually gained 3 million users, according to Forrester. That’s a fraction of the potential customer base for iCloud.

“This is kind of the new normal for Steve Jobs and Apple,” Eugene Munster, an analyst at Minneapolis-based Piper Jaffray, said in an interview on Bloomberg Radio’s “The First Word” with Ken Prewitt. “That he may not be full time involved at the office, but he is definitely involved and this is a sign he is involved strategically.”

Apple may design iCloud to include features of the older offering, such as storage for e-mail, contacts, calendars, photos, plus new options for music, said Ashok Kumar, an analyst with Rodman & Renshaw in New York. Storage for movies and television shows may be added later, he said.

Apple announced last week it would preview iCloud at its Worldwide Developers Conference, without providing more details. Tom Neumayr, a spokesman for Apple, declined to comment beyond the May 31 statement.

Record Label Agreements

Apple has agreements with major record labels for a service that would let people access their iTunes song libraries from any Apple device through an Internet connection, instead of downloading a copy of the song to a device, said people familiar with the plans.

Apple will scan the songs customers have purchased from iTunes and quickly mirror those collections on the company’s servers, said the people, who declined to be named because the talks are private.

Google and Amazon.com Inc. each introduced cloud music services in recent months, letting users upload songs to remote servers and access them from a browser or smartphone with an Internet connection. The uploading process can take hours.

Through licensing deals with record labels, Apple has entire collections on its servers. That means it can more quickly provide customers access to their songs.

Working Together

The iCloud service can help all of Apple’s products and applications running on its devices work more seamlessly together, said Matt Drance, the founder of app maker Bookhouse Software and a former Apple software engineer.

By adding new Web features, Apple could loosen the need for users to regularly plug in an iPhone, iPad or iPod to keep the devices synchronized, he said. Instead, the updates could be made wirelessly.

The need to constantly plug in the devices to sync applications is one of Apple’s prominent “rough edges,” said Scott Stanfield, the CEO of Vertigo, which makes applications for companies such as NBC.

“You can buy content on all those devices, but because it’s so complicated synchronizing movies and music and applications, it’s kind of a disincentive,” Stanfield said. “If they make it so you can sync over the air that would be great.”

Apple will also use its developers conference this week to preview new updates to the operating system for Mac computers, called OS X Lion, and the fifth iteration of the iOS software that powers the iPhone, iPad and iPod Touch mobile devices. The company won’t unveil a new iPhone, as it did at the event last year, two people familiar with the plans said in April.

Making Money

The gathering draws designers and entrepreneurs behind more than 350,000 applications available in the company’s App Store. Apple says it has generated more than $2 billion in revenue for the developers since the store opened on the iPhone in 2008.

Jobs, in the midst of his third medical leave since 2004 as he battles a rare form of cancer, will be a welcome sight for developers as well as investors at the conference, Kumar said.

“The fact that Steve Jobs is out there front and center is the biggest positive,” said Kumar. “He’s the main event.”

Apple is competing against companies such as Google, and Microsoft Corp. for the loyalty of developers who make the gaming, picture-taking and business-productivity applications. Google held a similar developers conference last month, where it showed off features of its Android mobile operating system.

Competitive Edge

Apple has an edge because of the money its App Store generates for developers, said Michael Gartenberg, an analyst with Gartner Inc.

“Apple has shown they can deliver the customer and they can deliver the customer’s credit card,” he said.

In an update of the iOS software that runs the iPhone, iPad and iPod Touch, developers also have been asking for a new notification system for sending users alerts, as well as enhanced voice recognition features, said Tim Bajarin, an analyst at Creative Strategies.

Apple’s success in enabling customers to easily access their files and other content across multiple devices will be key to keeping customers and developers locked in to its ecosystem, said Forrester’s Gillett.

“We’re beginning a flip from which gadget you use to which service helps you manage all your information,” Gillett said.

--Editors: Lisa Rapaport, Nick Turner

To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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