Rumors of a 7- to 7.85-inch iPad have been swirling around for a long while now. We’ve seen reports get killed moments after they initially break, only to be sneakily resurrected weeks or months later. The rumor simply won’t die.

The problem, however, is that this one in particular is a tough nut to crack. When you take all the evidence both for and against a little iPad, you’re still left with no real conclusion.

So conclusion aside, here are some of the reasons Apple may, or may not, introduce the little iPad:

For:

The greatest threat to Apple’s iPad is the 7-inch Amazon Kindle Fire. It retails at about $300 less than the iPad, sports a solid browser, has access to plenty of Android apps, and is a great hub for any and all of Amazon’s media content. It also happens to be a 7-inch tablet. Should Apple choose to offer a smaller iPad at a lower price (which the market would most certainly demand), it could snatch back the market share Amazon’s stolen in the past few months.

Gaming on tablets is big, but too big a tablet ruins the fun. According to numbers out of comScore in November, 2011, gaming topped the list of entertainment activities on a tablet, beating out watching video and listening to music, with 67 percent of owners gaming at least once a month, and 23 percent playing daily.

That said, Apple’s 9.7-inch iPad isn’t what I’d call the best for gaming. Graphics and display quality are top-notch, to be sure, but holding the device for very long — especially stretching that thumb around the edge — can be incredibly tiring. Despite the fact that it has failed me considerably, I still prefer playing games on my 7-inch BlackBerry PlayBook, even if there aren’t many games to choose from.

Most smaller Android tablets use a widescreen aspect ratio, leaving a dead zone in the middle of the screen that’s mostly untouchable. The iPad 2 sports a 4:3 screen, which makes even the 10-inch model full touchable. A 7-incher would only be that much better, with greater pixel density and a lighter, easier feel in the hand.

Apple is kind of obsessive when it comes to “thin and light,” and a smaller iPad would also mean a thinner iPad. See, if Apple were to build a smaller iPad, chances are it’d be built using the normal screen assembly technology that allows for the iPad 2′s incredibly thin profile.

However, a smaller iPad/screen means a smaller battery, which usually takes up a solid chunk of space under the hood. Less screen means less power needed for backlighting it, which inevitably takes us back to a smaller battery.

Thin and light! Thin and light! Thin and light!

Amazon may release a 9-inch Fire… Why not fight Fire with fire? The word right now is that Amazon has plans to release a 9-inch Fire to compete with the iPad. While, like the 7-inch Fire, it probably won’t have all the capabilities of the iPad, a larger Fire will still retail at a (much?) lower price point than its competitor. For people who mostly browse the web, read, email, and Facebook/Twitter, a lower price point will be more than enough incentive to venture away from the iPad.

To be clear, it’s not like Apple’s in some dire position. Cupertino still dominates the market with a 58 percent share as of January, 2012. But that’s down 10 percent from the previous quarter, while analysts claim that 40 percent of Android’s 39 percent share in the tablet market are attributable to the Nook Tablet and the Fire.

It’s undeniable: Apple is slowly but steadily losing share to Android, most notably the Fire, and what better way to steal it back then by launching a 7-incher right in Amazon’s face?

Against

The most notable and evidential reason why Apple wouldn’t release a little iPad is because Steve Jobs said so. In an earnings call in October of 2010, Jobs said that “7-inch tablets are tweeners: too big to compete with a smartphone and too small to compete with the iPad. These are among the reasons that the current crop of 7-inch tablets are going to be DOA — dead on arrival.”

Jim Dalrymple points out that Apple made both a 7- and a 9.7-inch iPad right at the beginning and chose to go with the bigger version, which at a first glance would indicate that it’s not going to happen. At the same time, that was a long time ago if we’re counting in tech years and it wouldn’t be the first time Jobs obliterated a product category only to announce something similar to it shortly after. Anyone remember iBooks?

Why release a product to compete in a market you already own? Though its market share has fallen since its debut, Apple still absolutely dominates the tablet market right now. A 58 percent share of a market, with not one of its competitors anywhere near that share, leaves Apple with no real reason to put anything smaller in stores.

I’m sure some of you will say I made an entirely contradictory point up there with Amazon grabbing share, but it’s all about perspective. Perhaps one person thinks that now is the time to plug up any leaky market share dribbling into Amazon’s hands, while someone else may think that Apple should wait until it absolutely has to throw a lower-priced option into the ring.

Too many choices can be a bad thing, and Apple’s well aware of this. Look at iPhone releases: one model at a time. Apple’s all about making one absolutely stellar, blow-your-mind, make-you-believe-in-magic product and selling it well. Design, sell, repeat.

Tablets are meant to be simple, easy-to-use products. It’s not like a PC, where users have to review list after list of specs and configurations before figuring out what fits. Some companies, like Samsung, want to stretch across every category of the tablet market with different spec’d and sized models under a shared brand. One of the iPads greatest advantages is being the iPad, rather than an iPad Lite, or an iPad Air, or whatever.

It would be a deviation from Apple’s current strategy and over-arching mission statement of “Keep it simple, stupid” if they were to start switching things up now.

So… Will Apple release a 7-inch iPad? Truth be told, your guess is as good as mine, but it would seem that there are advantages in either case.

In a few weeks, Apple will unveil the next generation iPad, John Packowski of AllThingsD confirms today. If history (and carrier code) is any indication, it should go on sale shortly after that. Maybe even just a few days later. And that’s interesting because it doesn’t give developers a lot of time to prepare. And they’ll want to prepare for the higher resolution “Retina” display that the device will pack.

The situation is similar to the Summer of 2010. That year at WWDC, Apple unveiled the iPhone 4, the first device to feature a Retina display. That conference took place on June 7. The iPhone 4 first went on sale on June 24 — two and a half weeks later. That timeframe allowed some developers to get their apps Retina-ready, but for many it took quite a bit longer. Again, this year, the window may be even more condensed.

But as Steve Jobs noted at the iPhone 4 unveiling, the Retina display made existing apps “look even better”. One reason for this is that the version of iOS that shipped with the device automatically rendered text to be optimized for the new display. Expect the same for the Retina iPad. But Jobs also noted that apps which updated to higher-resolution artwork would look “stunning”. “We suggest that you do that,” he said at the time.

And that will undoubtedly be the suggestion again. Luckily, because the Retina display iPad has been rumored for a long time and because many developers remember the initial Retina transition, some developers have jumped the gun and prepared the graphics in their iPad apps to be Retina-ready as well.

The first two iPads had a resolution of 1024 x 768 — which actually isn’t all that far from the Retina display iPhone resolution of 960 x 640. The new iPad will have a resolution of 2048 x 1536. Earlier this week, it was revealed that Apple was now requiring developers to submit Retina-level screenshots of their apps to the App Store (for new apps, at least). Some assumed this was related to the gradual fade out of the iPhone 3GS. But it may also be related to this new iPad. Because Apple allows the iPad to run iPhone/iPod touch apps with the option to scale them up 2x, non-Retina iPhone apps (480 × 320) will undoubtedly look pretty bad on the Retina iPad.

Given how many visually-focused apps there are for the iPad, some developers are worried how their apps will look on the new device. Apple, of course, isn’t talking yet. While there may be a handful of larger developers that will get an early peek at (or a heads up on) the Retina iPad, most will get to see the thing the same time the rest of us do — on stage in early March.

Some aren’t just worried about the iPad either. Rumors have been circulating for a few months that Apple may also be on the verge of launching high-resolution Mac displays. It’s looking increasingly likely that Apple will do a one-two high-resolution punch with high-res Macs (probably MacBook Pros or maybe even a new MacBook Air) and Retina iPads in the coming weeks.

Recent code changes in OS X with added HiDPI support suggest the former may be coming very soon.

If you think a 2048 x 1536 iPad sounds great, think about a 2880×1800 MacBook. Unlike resolution changes in the past, elements on the screen wouldn’t get smaller, they’d just get crisper. But to take advantage of all those pixels, Mac developers will also have their work cut out for them updating all the graphical elements in their apps.

My suggestion is that developers get ready. The future is looking crisp.

Shocking news of the day: Apple is preparing to announce the iPad 3. Crazy news, I know. That announcement, if AllThingsD is to be believed, should come in the first week of March. The next-gen tablet itself is reportedly an upgraded version of the iPad 2, featuring a dual-core CPU and a higher-resolution display. But then again, that’s to be expected. Of course the iPad 3 will have better specs than the year-old iPad 2.

Apple announced the iPad 2 in the same timeframe last year. Steve Jobs made a surprise return from medical leave to deliver the announcement. It was sadly the last Jobsnote. There’s no word who will take the stage and announce the iPad 3, though.

If this rumor doesn’t pan out, it’s still a safe bet that the iPad 3 announcement is right around the corner. Apple generally sends invites out two weeks in advance so the announcement could still happen this month.

Call it a sort of a bear hug: Sprint, the also-ranniest of the also-rans in the carrier world, lost money selling phones that, on the aggregate gained them subscribers. It’s also Catch-22, a blindside, and a mess.

According to Sprint, the company reported a net loss last quarter while still selling 1.8 million iPhones and increasing their subscriber base by 1.6 million. How? The costs associated with provisioning and supporting these new phones drove operating losses to $438 million, up from $139 million in Q4 last year.

The company reported increased subscriber numbers – 55 million this year. Forty percent of Sprint iPhone buyers were new customers. They nearly doubled capital expenditures this year.

Sprint is in a strange place. Like T-Mobile, the company has always been overshadowed by the bigger guys and never gained traction after acquisition. While using ostensibly the same hardware, Verizon has roundly trounced Sprint by advertising improved coverage and reception.

However, unlike T-Mobile, Sprint has the iPhone. This move – beyond any network improvements or handset acquisitions – is what’s keeping the company afloat. The net loss shown this year happened because Sprint was supporting the iPhone, a wild situation in which a company’s best-seller is actually dragging it down.

If the iPhone taught consumes anything it’s that mobile broadband is a right, not a privilege. The right to Instagram, Yelp, and browse all day and night is seemingly god-given and that same god knows that the iPhone hasn’t been useful for making calls these last few years. In short, we’re looking at a product that would upend any carrier’s view of the world, not just Sprint’s.

For decades, carriers worried about getting calls from point A to point B. Now they have to worry about tethering, massive data downloads to small devices, and always-on connectivity. They have to worry about angry Tweets, upset Facebook posts, and maintain gear that is cutting edge and prone to failure. So, in the end, it didn’t make financial sense to go the popular route, but hopefully it will buoy Sprint’s prospects in the long term.

The iPhone taught carriers that it wasn’t enough to dump out a feature phone or two and keep the power on in the switch room. Sprint’s troubles – masquerading as opportunity – is the finest example of the change that is currently rolling over the operator landscape.

photo credit: ucumari via photopin cc

On Saturday, February 4, something strange happened to Qihoo 360, a security software company. Their apps, at least the ones in the Apple App Store, were missing.

After reaching out to Apple, the company learned that Apple had removed their apps based on “unusual user rating activities by unknown sources on certain Qihoo 360 applications.” There was no further explanation.

However, today Apple has reinstated Qihoo 360′s iOS apps, without asking the company to modify any of them.

Seems fishy, right?

Bloomberg reports that these “unusual user rating activities” included both negative and positive comments towards the company, but didn’t have any further information on the nature of these ratings.

In the interim, Qihoo fell 6.1 percent on the NYSE on February 6 for a share price of $17.89, the company’s lowest share price since January 4. Luckily, analysts speaking with Bloomberg estimate that only about five percent of the company’s user base are Apple product owners.

There has been much debate about what the post-PC era is, when it will arrive, or whether it’s already here. But key pieces of new data, emerging last week, are making the case that we crossed the imaginary line from the “PC” era to the “post-PC” era at the end of 2011. According to analysts at Canalys, two major computing milestones were achieved at the end of this year: smartphone shipments outpaced PCs for the first time ever, and Apple became the world’s largest PC maker, if you count iPads as PCs (as well you should).

Combined, what these numbers tell us is that the post-PC era is happening now. Right now. And maybe we need to think about how we define “PC.”

In Q4 2011, vendors shipped 158.5 million smartphones, up 57% on the 101.2 million units shipped in Q4 2010. For the year, there were 487.7 million units shipped, up 63% on the 299.7 million units shipped in 2010. Meanwhile, the global PC market grew just 15% in 2011 to 414.6 million units. The smartphones have won.

The funny thing about that PC shipments number is that, on its own, it doesn’t paint the most accurate picture of today’s PC landscape. There weren’t 414.6 million desktop, notebook and netbook computers shipped in 2011 – those were at 112.4 million, 209.6 million and 29.4 million, respectively. The 414.6 million number includes 63.2 million in “pad” shipments, Canalys’s preferred term for tablets. That means 15% of the “PC” shipments in 2011 were tablets, largely Apple’s iPad. In Q4, tablets were 22% of the total PC shipments. And the tablet segment of the market grew 274.2% year-over-year.

Also in Q4 2011, Apple became the leading worldwide “PC” vendor (if you count the iPad as a PC) with 15 million iPads and 5 million Macs shipped, representing 17% of the total 120 million client PCs shipped in Q4. It overtook HP (now #2), Acer, Dell and Lenovo in the process.

Overall, the PC market grew 16% year-over-year, Canalys noted last month. Without tablets, it declined 0.4%.

Of course, there’s still the question of whether or not tablets should be broken out into their own computing category, positioned against the traditional “PCs” when tracking device shipments. For what’s it worth, I think it’s fine to count tablets as PCs – after all, PC means “personal computer,” not “machine running Windows.” The fact that we still equate the word with a desktop, monitor, keyboard and mouse combo is a testament to the empire Microsoft built, and is now losing.

Case in point: netbook shipments dropped 25.3% from 2010 to 2011. Desktops grew a paltry 2.3% and notebooks grew just 7.5%. This is end of the “PC” era in action. While the 209.6 million notebook shipments still make that the largest category of “PCs,” the growth trends here, if sustained, dictate that’s its only a matter of time before the shift to tablets becomes even more pronounced.

Think about it: what’s the first “PC” you’re going to buy for your kid, as a new member to the post-PC computing generation? If you respond “notebook,” I’d say you’re lying. That kid is getting an iPad, even if they end up stealing yours. If not an iPad, then they’re getting a phone.

And smartphones are PCs, too. The most affordable ones.

This past quarter, smartphone shipments overtook PCs, a hugely important milestone that speaks volumes about the state of modern-day computing. The computer-in-your-pocket has moved from being “a niche product segment at the high-end of the mobile phone market to becoming a truly mass-market proposition,” explains Canalys of the change.

In Q4, Apple broke records by shipping 37 million iPhones – the most ever shipped by a single vendor in a quarter. Previously, Nokia held the record with 28.3 million phones shipped in Q4 2010. What a difference a year makes.

But Canalys cautioned that it expects to see smartphone market growth slow in 2012, as vendors exercise “greater cost control and discipline” to focus on profitability. This is the only discordant note to the report. Smartphone growth slowing? No offense to the analysts, but I’ll believe that one when I see it. Just watching Apple’s sales alone, it’s clear you can’t underestimate its power to deliver record-breaking numbers. In addition, just because vendors like HTC and Motorola are going to launch fewer smartphone models in 2012, that doesn’t (necessarily) mean they’ll sell fewer overall phones. If anything, the companies are hoping that their increased focus on “hero” devices will help them increase sales.

One thing is clear, however: that post-PC era everyone’s been talking about since the day the phrase slipped off Steve Jobs’ lips has arrived. We’re living it. Anyone who wastes their time debating its existence (tablets are PCs! phones are PCs!) is arguing semantics. The shift itself, whatever you want to call it, is happening.

So perhaps “post-PC” isn’t the best terminology. If everything’s a PC, then maybe what we’ve achieved is something more akin to “PCs Everywhere.” Not as catchy, though.

Photo credit top: Lokesh Dhakar, flickr; bottom: agirregabiria, flickr

According to new research from the NPD Group, Apple passed LG and Samsung to become the top-selling U.S. handset brand in Q4 2011. Combined, the three available models of the iPhone (iPhone 4S, iPhone 4 and iPhone 3GS) accounted for 43% of the U.S. smartphone market.

Android, however, continued to see larger market share at 48%.

Together, iPhone and Android accounted for over 90% of U.S. smartphone sales, leaving little room for any up-and-comer like Windows Phone, or even the declining brand that is RIM’s BlackBerry.

Android’s market share may continue to grow, too, given that more first-time smartphone buyers were choosing Android over iPhone this past quarter, the firm found. Based on NPD Group’s monthly Smartphone Track service, 57% of first-time smartphone buyers went with an Android device compared with just 34% who purchased iPhones.

NPD suggests that the reason for these consumers’ Android preference has to do more with availability – Android has “wide carrier support,” the report says. Also helpful is Android’s large app selection and its support of LTE at Verizon.

The overall portion of handset sales that were smartphones also climbed in Q4 2011, now accounting for 68% of the total U.S. phone market. That’s an increase of 18% from Q2 2010, said NPD. The average cost per smartphone, however, hasn’t seen as much movement, down from $149 in Q4 2010 to $143 in Q4 2011.

Not surprisingly, Apple’s record-breaking quarter (its fiscal Q1, running September 25-December 31), led to the iPhone 4S coming out on top as the best-selling handset in Q4. It also earned the top three slots among the top five handsets for the time period:

1. Apple iPhone 4S
2. Apple iPhone 4
3. Apple iPhone 3GS
4. Samsung Galaxy S II
5. Samsung Galaxy S 4G

Ross Rubin, executive director, Connected Intelligence for The NPD Group, said that consumers were attracted to the iPhone 4S’s ”faster processor, improved camera and the Siri speech-driven agent.”

“The iPhone 4S outsold the iPhone 4 by 75%, and outsold the iPhone 3GS, available for free on AT&T, five to one,” Rubin noted.

Editor’s Note: This post is written by guest author Peter Csathy, who is President & CEO of online video enabler and transcoding company Sorenson Media. Previously, he served as President & COO of online music pioneer Musicmatch. Thus, the following is written from the perspective of a long-time media executive, and meant to be a conversation-starter. Csathy blogs at Digital Media Update.

Apple’s all-in-one physical flat-screen iTV is coming, make no mistake. And, when it does, it will represent Apple’s attempt to reinvent the television experience in much the same way it did for music. But, while media execs were hopelessly naive in Apple’s presence back then, they feel they are ready this time. They are determined not to let Apple rule the premium online video world like they did (and still do) for online music. The question is, do they have the will?

Apple will, of course, follow its established playbook, which most CE companies inexplicably still do not follow, and seamlessly marry its beautiful hardware (the iTV) with its underlying software and services (in this case, movies and television) in the same way it did with music via the iPod and iTunes. Apple’s goal is to be the center of the online movie and television universe for consumers (just like it is for music). Yes, content is king to Apple, but only because content serves as the Trojan Horse consumers ride into Apple’s kingdom of riches (initially Macs and iPods, and later iPhones, iPads and the inevitable iTV).

Ay, but there’s the rub. The content king-makers — motion picture and television studio execs — now know this. They have seen this movie before, and this time they are determined to monetize content more directly for content sake – for themselves. Apple transformed itself into the #1 most valuable global company and juggernaut that we see today precisely because those media execs handed Apple the keys to unlock music value in the online world.

Steve Jobs wooed them with his charms, pitched a great story, and established the rules of the online music licensing game. Apple’s massive growth in the past decade all started there with its iPod-iTunes 1-2 knockout punch. That, in turn, led to the resurgence of Macs, which led to the iPhone, then the iPad. Apple would be a very different company today if didn’t get the music it needed 10 years ago.

And, how did Jobs’ playbook work out for the labels and musicians? Not so well. Online music sales (and royalties) were an asterisk next to iPod sales. Don’t get me wrong. Rampant piracy — and the music industry’s misplaced attack strategy — destroyed significant content value. Nevertheless, the music industry’s negotiations with Jobs one decade ago resulted in a massive transfer of value and wealth to Apple.

So, what lessons have media executives learned from this past decade?

Lesson #1 — Dictate the Rules of the Game, Rather Than Have Them Dictated to You.

Music execs were on their heels reeling in fear when Jobs approached them a decade ago with the promise of iTunes. They had no real experience with the Internet. They certainly had no experience with technology (many still do not) – and how it could be used for both good and evil. Piracy was rampant. Napster ruled the day (the bad one, not the good one). Kazaa’s Niklas Zennstrom was public enemy #1 (now of course he is a media insider with Skype, Joost and others). The music industry was understandably panicked.

Jobs promised a way out – under three conditions. First, Apple must be able to sell individual tracks unbundled from albums. Second, its price for those unbundled tracks must be $.99 each. Third, Apple must define and control the entire online music experience. The music industry capitulated, and these 3 commandments are fundamental rules of the game that still largely rule the day.

Well, those rules haven’t worked out too well for music creators and owners. Lesson learned. So, one decade later, media execs are striving to proactively dictate the value of their content and support multiple online experiences and business models. But, even now, they frequently significantly under-value their content. More on that later.

Lesson #2 — Never Again Put Too Much Power in the Hands of One Distributor.

Prior to iTunes, piracy was rampant, and only relatively small players (including my former company, Musicmatch) played legitimately in the online music world. Amid this backdrop, media execs empowered Apple to be the first and only established online music source and experience. As a result, iTunes incredibly still commands 60-70% of all online music sales. That represents incredible power in the hands of one. It represents a downright monopoly.

Media execs are determined not to allow that kind of power in the hands of any single player in the online video world. They instead are committed to fostering an eco-system of as many legitimate distributors as possible. They actively license their prized motion picture and television assets to all those willing to pay.

That’s why we already have myriad established behemoths in the premium online video game. We have Netflix, Amazon Prime, Hulu, Google/YouTube, Comcast. The list goes on and on. Apple too is on that list, but it is behind the curve this time. Those same media execs who ceded control to Apple ten years ago have refused, thus far, to broadly license their crown jewels on Apple’s terms. But Apple — or more accurately, Apple’s massive hoards of cash – can be very persuasive. More on that later.

Lesson #3 — License Broadly & Make the Licensing Landscape as Confusing and Opaque as Possible.

Media execs aren’t panicked this time. They have a decade of learning under their belts. Yes, piracy continues to be rampant, but they now understand that it cannot simply be litigated into oblivion. The best defense truly is a better offense. Support better customer experiences, make your content available broadly to those legitimate distributors willing to pay, and experiment with business models and terms.

That’s why we have over-the-top (OTT) “Internet TV” models in which content is monetized via paid downloads, subscriptions, and ads. We also have big cable’s “TV Everywhere” models in which consumers must continue to pay their monthly cable fees. And, coming soon, Google and others will become virtual cable operators that will also distribute live linear programming like ESPN. Apple too wants to be on that “virtual MSO” list, because that is the kind of premium content that ultimately moves mountains of consumers. Case in point: DirecTV’s “NFL Package.”

This melange is great for the studios. No two content licensing deals are the same. Each negotiation takes place in a black box. No clarity. No certainty. Just the way media execs like it (I know, I have been there). Now THAT’s power! Right? Up to a point. More on that later.

Lesson #4 — Be Audacious — After All, Content is King.

Jobs ultimately taught music execs one fundamental truth – that content is THE key to unlock tremendous value online. The corollary to this is that without content, value is lost. That’s why all the deep-pocketed tech titans are lining up for a chance to play in the premium online video game. Just as it is for Apple, premium online video distribution is strategically central to their business. Apple? Sell its hardware. Amazon? Sell more goods and services. Google? Sell more ads. Comcast? Hold onto those cable subscriptions. Netflix? Survive!

These players have inked a steady stream of significant licensing deals just in the past few months, the financial terms of which are almost never disclosed (remember, just the way the studios like it). But, one telling deal’s terms did slip out – Netflix agreed to shell out nearly $1 billion to stream shows from the CW Network. Think about that – if the CW can command those kind of numbers today, think about the price tag for real “premium” content like ESPN. And, we are still in the early innings of this premium online video game.

Apple – with its head-spinning $100 billion war chest – is a lock to win (or at least be a massive winner in) the online video game, right? Most likely, the answer is yes. The inevitable iTVs will fly off the shelves. But, Apple isn’t alone this time. It is playing on a crowded field with other deep-pocketed and committed players (including CE guys like Samsung). Even more importantly, to really hit it out of the park, Apple’s coming iTV must be an experience. That means Apple must offer an extremely deep pool of compelling video content from the start (including sacred programming like ESPN). Otherwise, consumers will find holes, get frustrated, and look to fill those holes with programming offered by others.

Each frustrated customer represents real significant loss, which is especially magnified in Apple’s case because of its closed product eco-system. For Apple, it’s not just about a single product sale (like an iTV). That sale, instead, marks the beginning or continuation of a long-term lucrative purchase relationship, which is the key driver of Apple’s stratospheric growth. That’s why Apple will be willing to strike very different content licensing deals with media execs this time around.

Of course, Apple doesn’t control the content – the studios do. So, who really holds the cards here? Will the studios be as audacious as Steve Jobs was one decade earlier and demand terms that they believe reflect the true value their content creates for distributors over time? In Apple’s case, one truly audacious idea could be to seek a share of revenue for every iTV sold. Remember, not every license deal must be the same. Value means very different things to different players. If Apple, or any other online distributor, refuses to play, then they lose out. No soup for you! There are many others (including the studios themselves), but only one ESPN!

Or, will media execs instead go for the quick-fix of easy money? After all it’s hard to say “no” to someone writing a big check. If they do go this instant gratification route (which is more consistent with their DNA), at least they should realize that their prized motion picture and television assets will be worth significantly more than they think in the online world over time. Avoid long-term deals!

So, yes, media execs have learned their lessons well. Content is, in fact, king. Apple will continue to wear the crown, however, unless media companies have the will and creativity to take it back. After all, Apple made $46.3 billion this past quarter alone, a number that dwarfs global motion picture box office receipts for the entire year. Apple could buy Hollywood. But, will Hollywood let it?

Excerpt image from SoulInTheMachine.com

Thirty spokes meet at a nave;
Because of the hole we may use the wheel.
Clay is moulded into a vessel;
Because of the hollow we may use the cup.
Walls are built around a hearth;
Because of the doors we may use the house.
Thus tools come from what exists,
But use from what does not.
- Tao De Ching

There’s a carousel in a small Cape Cod town that we visited this summer and the kids rode it a few times. The carousel is quite old and quite handsome and it makes a great diversion of an evening. I’m reminded now of trying to take pictures of the kids while they rode the carousel. For a while I’d wave and try to get their attention as they roared past, their laughter dopplering around the edge of the curve, and then, after four or five tries I’d give up and just watch. It’s a wheel, an endless circle, designed to delight and enthuse and distract.

Reading the recent back and forth between Stephen Fry – an Apple apologist – and Mike Daisey – an Apple user/abuser – I’m reminded of that carousel. The gist is this: Mike Daisey woke up the NPR-listening world with his long piece of Foxconn for This American Life. It was a great piece – dramatic, educational, and eye-opening – but it’s definitely nothing we haven’t seen before. Some could say that it was The Jungle of Chinese manufacturing, a tell-all with just enough outrage to make us rethink a great horror. But the problem is this: Daisey is an actor and knows how to bring out the story, just as John Steinbeck was a writer and knew how to populate the Dust Bowl with Christ figures. That doesn’t make the story less effective – it makes it more so – but it does make the story less true.

The problem is the endless circle of blame and apology. Daisey is correct in many of his assumptions, but offers a way forward that is currently unenforceable. But if you argue against Daisey’s points, you’re an apologist. But, as Paul Krugman writes:

We keep going over the same ground here. The argument can be delineated like this: Foxconn is an evil sweatshop. Apple is a huge Foxconn customer. They should change things. Two of those things are true, a third is false.

To be clear, I’m with the crowd that says that Apple is, at best, ignorant of Foxconn’s problems and at worst ignoring them. I agree things must change and Apple is in a great position to do it. But I don’t agree with the first point. I’ve seen sweat shops and Foxconn is a factory. If many of the major brands (I recall that Ford was a customer at one factory I visited) knew that their promotional USB keys were made in a building that looked like a gulag, they’d be skewered. Here’s hoping they are, one day. However, Daisey’s Foxconn story – written outside of the factory – and my own research, written inside the factory – don’t jibe. His discoveries that people get sick or are injured in factories are naive and I suspect his sample size of employees who approached him is far smaller than we realize. To go into the Foxconn factory is to see a place staffed by college-age kids and engineers who work 10 or so hours a day building electronics. There is no great Dickensian work house nor are there sad-eyed madonnas of the assembly line chained to the soldering irons. This isn’t the mundanity of evil – this is just mundanity.

Nor am I saying that Daisey’s interviewees are malingerers with an axe to grind. I’m sure their lives are ruined or much harder thanks to Foxconn. The value of Daisey’s efforts is his ability to give these people a voice in an environment that would normally quash that voice. He’s doing what artists must do – reflecting a time and place through his own lens.

My own opinion is simple: Apple needs to do more for the people in its manufacturing chain. I will not pretend that Apple can simply wave a magic wand and make every Foxconn employee rich and happy, but it has the cash and the wherewithal to further disrupt the Chinese supply chain and improve the lot of Foxconn’s employees. But I also agree with what one Gawker commenter said: “I believe Tim Cook will do more good for those employees (and already has, in point of fact) than Mike Daisey ever will.” Apple on the aggregate couldn’t care less about our existence nor does it deserve our undying respect and admiration. On an personal level there are plenty of folks inside Apple working and worrying about worker’s rights in China, but as an entity we are talking supply chains and price management. Apple makes excellent tools for our digital age, that’s it. To defend or excoriate the company is like screaming into the wind. However, through their constant rejiggering and improvements, they have essentially created a Western, ISO-compliant factory environment in a corporate culture that used to force underperforming employees to stand outside wearing a sign that said “I am a bad worker.”

What Daisey did is made us think. Did he do it the right way, using the right tools? Absolutely not. Will he improve the lot of the workers he interviewed? I doubt it. But will his efforts – and the efforts of many who came before him – help bring the Chinese worker out of penury? Sure, eventually.

I opened this piece talking about a carousel in Cape Cod, a delightfully bourgeois setting for a piece on poverty wage labor practices. I get to go to Cape Cod and put my kids on a carousel because my job involves dicking around on the Internet all day (I suspect Daisey’s does too). My one wish is that every Foxconn employee, at some point in their lives, will be able to sit down to an unhurried meal, chat with family, and maybe ride a carousel. I think it’s in Foxconn’s best interests to ensure that that happens – and soon – and I think that we’re nearly there. Things will get better, I’m sure of it, and I also feel that they already have.

Once upon a time, in a land far, far away, there lived a website called Apple.de. And on this website, in historical Deutschland, there lived three iPhones and an iPad. They were a happy bunch: some wise but slow with old age, others quick and lean, but they all had one tragic flaw in common.

According to a court in Germany, all four of them are infringing on Motorola patents related to embedded 3G/UMTS wireless technology, FRAND standards essential patents to be specific. This means that the technology within the patents is now a standard across the industry, and the company that owns said technology is required to license it to competitors under fair, reasonable, and non-discriminatory terms.

That said, the Mannheim Regional Court has enforced a permanent injunction on the iPhone 4, iPhone 3GS, iPhone 3G and the iPad 2 3G. Luckily for German fanbois, the ban only affects Apple’s online presence. Customers can still purchase all four products in various retail locations, including Apple brick-and-mortar stores.

This all comes back to a ruling in December, where the Mannheim court issued a preliminary injunction against Apple’s infringing products.

German: “Derzeit nicht verfügbar”
English: “Not currently available.”

You may notice one wireless Apple device — the one that speaks — missing from the list. That’s likely because the iPhone 4S uses a Qualcomm chip as opposed to an Infineon/Intel chip. FOSS Patents suggests that Moto and Qualcomm have a licensing deal already in place, which would mean that Apple is covered by extension with regards to the 4S.

In other Apple/Motorola/Germany-related news, Moto also won a permanent injunction today against Apple’s iCloud push email feature. This means Apple customers in Germany will likely be forced to revert back to the old method of push email, rather than using iCloud.

Update: According to AllThingsD, Apple will have its banned products back online and available on its German site very soon. Apple was in the midst of appealing the ruling while it was removing the products from its online storefront, and the appeal has won the Cupertino-based company a suspension of the injunction.

Here’s the official statement from Apple:

Apple appealed this ruling because Motorola repeatedly refuses to license this patent to Apple on reasonable terms, despite having declared it an industry standard patent seven years ago.

Yesterday, Gizmodo ran a story about a supposed bug in iOS, specifically related to iMessage. The title: The Apple Bug That Let Us Spy on a Total Stranger’s iPhone. Essentially, Gizmodo got ahold of an iPhone that was receiving iMessages not intended for that phone. The fact that some of these messages were quasi-sexual in nature and that the phone belonged to a teenage boy made the story more salacious. But here’s the thing, fear mongering aside, this “bug” is something that is so convoluted that it’s almost not worth even addressing. Almost.

Here’s what happened: a kid was having trouble with his iPhone. His mother took that iPhone to an Apple Store. When there, an Apple Store employee screwed up. Rather than following protocol and using a test SIM to debug the phone (Apple has test SIMs in their stores for this exact purpose), he oddly used his own SIM. This essentially turned the kid’s phone into the retail employee’s phone. The employee probably thought this was fine since it would only be temporary while he fixed the phone. The problem — which one has to assume he didn’t realize — is that even after you take the SIM out of the phone, the pairing leaves behind an imprint of that SIM. In this case, the iMessage account.

iMessage has made a lot of headlines in the past few months as it’s Apple’s brilliant way of helping to destroy the rip-off that is SMS. One key element of iMessage is the ability to pin an Apple account to the service alongside your phone number. This needs to happen in order for users to take full advantage of iMessage. Because of this connection, Apple can automatically figure out whether to use standard SMS or iMessage within the iMessages app. And iMessages has a bonus: the ability to work with many devices at once, ensuring your messages stay in sync.

These upsides — trying to make something that’s somewhat complicated as user-friendly as possible — lead to a downside like this. If you happen to be swapping SIM cards, you might transfer your iMessage credentials over to this other phone. But let’s be honest, how many people are going to do that? In the U.S., most people have no idea what a SIM card even is. And if they do, it doesn’t matter since most iPhones are locked. In other countries, SIMs are obviously popular, but this issue would involve you swapping SIMs with someone with an unlocked phone (and not wanting to set up your own iMessages account when you swap back).

But none of that is even what happened here. In this case, an Apple retail employee simply made a mistake. Reached for comment, an Apple spokesperson acknowledged this:

“This was an extremely rare situation that occurred when a retail employee did not follow the correct service procedure and used their personal SIM to help a customer who did not have a working SIM. This resulted in a temporary situation that has since been resolved by the employee.”

The bigger issue here is if your phone is stolen. Ars Technica actually addressed this about a month ago. This is still an edge case (as the vast majority of phones aren’t stolen), but Apple should come up with a way to remotely disable iMessages on a per-device basis. The way to do it right now seems to be to disable your Apple account, which is unfortunate (see: update). Of course, having your phone stolen in the first place is unfortunate. And unless it’s remote-wiped immediately (which rarely happens), any crook can get access to things likely much worse than your iMessages. This is a downside of life and scumbags.

Speaking of scumbags, it sure was nice of Gizmodo to run several of this Apple retail employee’s private messages and images along with the name that everyone knows him by. Part two of this story will probably involve kidnapping him, locking him in a basement, and liveblogging his emails — which were not secured because Apple doesn’t have a security feature to auto-lock and wipe phones when someone is hit over the head by a two-by-four.

Update: Apple has pointed out the following things that can be done if your device is stolen to ensure the problems above don’t occur:

Remote Wipe and then call your carrier/de-activate your SIM (de-register must be within 24 hours after Remote Wipe)

or

Activate a replacement phone with a replacement SIM using your same phone number

or

Change your Apple ID password (only works if you use an Apple ID with iMessage)

[photo: flickr/anonymous9000]

When Steve Jobs took the stage at Macworld in 1998, he did something unusual. For the first time in any presentation he had ever given, he ended with a slide reading, “Oh, and one more thing…” This phrase would of course enter the Apple lexicon in the subsequent years. But what was it that was hidden behind this first “one more thing”?

“Think Profit.”

You see, Jobs had just been named interim CEO in September 1997 after successfully pushing out the man who brought him (back) in, Gil Amelio. And he had good reason to do that: under Amelio, Apple had lost $1.04 billion in the prior year and was less than ninety days from being completely broke. Just a few months later, as he announced on stage, Jobs had the company back in black: a $45 million profit — the first profit the company had seen in more than two years.

Jobs’ move wasn’t magic. He slashed thousands of jobs and killed off dozens of products. Walter Isaacson details this time in his Steve Jobs’ biography. One part in particular stuck out to me.

In 1997 Apple was selling StyleWriter color printers that were basically a version of the Hewlett Packard DeskJet. HP made most of its money by selling ink cartridges. “I don’t understand,” Jobs said at the product review meeting. “You’re going to ship a million and not make money on these? This is nuts.”

I was thinking about this in relation to Amazon’s recent earnings. The company posted a record $17.4 billion in revenue in Q4 2011, but from all those sales, they were only able to squeeze $177 million in profit. Compare this to Apple’s most recent quarter in which they posted a record $46.33 billion in revenue and, more importantly, a record $13.06 billion in profit. The margin difference could not be any more stark.

Obviously, the first thing everyone jumps to is to say that Amazon and Apple are in two different types of businesses. Amazon is a retailer while Apple sells hardware. But the line is increasingly blurring between the two companies. Amazon now sells a number of hardware products thanks to its Kindle line. Apple, meanwhile, sells plenty of content via iTunes.

The thing is, even with Amazon entering the hardware game, they’re not making the kind of money that Apple is. In fact, with the new Kindle Fire tablet, it’s believed that they’re losing a small amount of money on each one sold. “This is nuts,” you could imagine Steve Jobs saying once again.

But is it nuts?

Amazon clearly views products like the Kindle Fire as a loss-leader to keep customers happy and keep them shopping for more content. Apple’s model is the exact opposite. Content sales are a loss-leader to keep customers happy and keep them buying new hardware.

At least for now, one model is working, one isn’t. Not only did Amazon only make $177 million on sales of $17.4 billion last quarter, they’re warning that they could actually lose money this quarter. They have enough money in the bank to sustain this for sometime, but at some point, they’re going to have to get back in the black in a meaningful way. And if they keep selling hardware, investors are going to look at their margins compared to Apple’s and wonder what the hell is going on?

Amazon has said time and time again over the years that they’re perfectly happy to live in the low-margin space. But these most recent margins are likely getting too thin for comfort. The Q4 profit numbers are 58 percent lower than they were a year earlier. Presumably, they have a plan that justifies these losses for the sake of the bigger picture. But again, it’s not unreasonable to think that this bigger picture will eventually pit Amazon against Apple directly.

Amazon may find itself in a race to get to Walmart-size revenues before there’s true competition in the space. Last quarter, Walmart pulled in $109.5 billion in revenue, which led to $3.3 billion in profit. As with Amazon, the margins are awful, but at that scale, it doesn’t matter. Walmart’s quarterly revenue more than doubled Apple’s which resulted in profit less than a quarter of what Apple saw — but at the end of the day, Walmart still walked away with over $3 billion in their pockets. That’s all that matters.

As their dance with the dreaded red line proves, Amazon isn’t anywhere close to operating the way Walmart does yet. In fact, Amazon’s margins are so slim that Facebook, which just filed to go public today, recorded nearly double the profit of Amazon last year ($1 billion versus $631 million). That’s pretty crazy when you think about it.

Jobs’ decision to exit Apple from the printer business 15 years ago proved to be a smart move. Of course, had Apple been selling ink — which has ridiculously high margins — it may have been a tougher call. Amazon’s problem is that the “printers” they’re selling have crappy margins and the “ink” they’re selling has crappy margins. It’s starting to sound a little nuts.

Two weeks ago, the excellent Building Windows 8 blog posted an in-depth look at the upcoming operating system’s new file system, ReFS. It reminded me of the promise of so many years ago that OS X would be changing its file system from HFS+ to ZFS. Not a promise many remember or even cared about at the time, but it was, in fact, important.

ZFS support was dropped amid development and legal problems, but Don Brady, who was heading up the file system transition team at Apple, left to pursue it independently. And now he’s releasing a piece of software, Zevo, which finally adds ZFS support to any Intel Mac running 10.6.6 or later.

Most of you are probably wondering why you should even bother about something as invisible to the average user as the file system. It’s a fair question, and the short version is that HFS+ has its roots in very old computing practices (think PowerPC processors running OS 9) and is missing some features that are becoming more critical every year. The long version is here in John Siracusa’s 10.7 review on Ars Technica, where he breaks down feature by feature where HFS+ falls short.

Zevo comes in four flavors: Silver ($20), Gold ($40), and Platinum (no price yet), plus a Developer edition that isn’t fully detailed yet. Each adds more features, but many basic benefits of ZFS are there to begin with, like bit-level error detection. Unfortunately, you can’t boot from a ZFS volume right now, so you’ll need to create a ZFS partition and keep your data there. This isn’t surprising, but it is a little disappointing. It’s not the full conversion people were hoping for, but only Apple can provide that, and they don’t seem to want to.

Should you buy it? You should probably at least ask your IT guys. But it’s nice to see this little gem of geekery resurface after so many years in limbo. If I get a new MacBook Pro this year (a high-res one, naturally), I might just stick this on there for kicks. At this price, it’s really not much of a hit, and it’ll be great for my cred.

[via MacRumors]

Welcome, kids, to TIL – Today I Learned. Today’s TIL is “Don’t post your correspondence with AppleCare representatives or Apple will totally tell the government on you.”

David Boles had a nice Apple monitor that died on him. He had a little trouble transferring AppleCare coverage to his new monitor after it pooped out and so he posted some advice on his blog. Nothing major, just “don’t forget to connect your AppleCare accounts.” Very innocuous.

But then, from out of the inky shadows, comes Apple like the Spanish Inquisition, informing him he’s breaking the law worse than Josey Wales:

I suspect that this email didn’t come from a native English-speaker (“If no compliance is made, further action will have to be forced upon”) and it’s laughable that anyone would hold that “This transmission” garbage up as proof that you can’t post an email. Heck, I just reposted it so now Apple will have to sic the government on me, too.

Anyway, it’s a fun situation that I’m sure will be cleared up by nobody caring about it in a few days.

According to the latest report from Strategy Analytics, Apple has now overtaken Samsung to become the world’s largest smartphone vendor by volume. Apple achieved 23.9% market share during Q4 2011, narrowly beating out Samsung’s 23.5% share.

In addition, Apple shipped 37 million units in Q4, again going neck-and-neck with Samsung and its 36.5 million units shipped during the same time.

However, notes Neil Mawston, Executive Director at Strategy Analytics, “while Apple took the top spot in smartphones on a quarterly basis, Samsung became the market leader in annual terms for the first time with 20% global share during 2011.” Apple’s annual share, meanwhile, was 19%.

In other words, Apple won the quarter, not the year.

Smartphone global shipments reached nearly half a billion units in 2011 (488.5 million units), the firm found, turning the smartphone battle into a two-horse race between Apple and Samsung in terms of units shipped.

Nokia, the one-time smartphone leader, is still holding onto a top spot, in position #3, with 19.6 million units shipped during Q4 and 77.3 million shipped during 2011. But Nokia’s global share has been halved from 33% in 2010 to just 16% in 2011, indicating its ongoing decline.

Although Strategy’s numbers paint the Samsung vs. Apple battle as a tight race between mobile giants, there’s a big difference between the numbers being reported here. As MacRumors points out, Samsung no longer reports its mobile phone sales numbers, while Apple discloses its units sold each quarter. That means analysts are estimating Samsung’s numbers, but Apple’s numbers are provided by the company itself. It could be that Apple’s lead is even greater than what’s seen here.

Update: A report from the analysts at Canalys has just come in, and confirms the same thing – it’s an Apple vs. Samsung battle.

According to the firm’s latest findings, Apple’s record shipment of 37 million iPhones shipped in Q4 beat the previous record held by Nokia of 28.3 million phones shipped in Q4 2010. Another shocking figure: the huge volume of iPhones shipped exceeded the size of the entire market of 4 years ago, when 35.5 million smartphones shipped globally.

The firm also noted Nokia’s shipment of 19.6 million smartphones, calling it “a decent performance given its current transitional state.” However, Canalys stopped short of estimating Samsung’s phone shipments at this time, saying that the company doesn’t disclose these numbers publicly. They did say that Samsung’s quarterly smartphone growth was around 30% and mobile phone shipments were up 10%, though.

Says Canalys Vice President and Principal Analyst Chris Jones, “the numbers are still coming in, but our early take on the state of the smartphone market is that, while Apple and Samsung clearly saw phenomenal performances, many other vendors have struggled. The full impact of this difficult quarter on hardware and software vendors will become clearer over the next week, when final results from the likes HTC, LG, Huawei and ZTE are announced, and Canalys publishes its full Q4 2011 worldwide country-level databases.”

The New York Times has published a long article on Foxconn which, while it doesn’t provide much in the way of new information, does act as a sobering reminder of just how companies like Apple can make so very much money. When our own John Biggs visited Foxconn, he focused on the company itself, its scale, its intentions. When I wrote about Apple’s suppliers failing to meet environmental standards, it was more about the laxity of regulators within China. Today’s NYT piece depicts Apple as prime mover and potential catalyst of change — but its actions and information from insiders suggest that it is simply unwilling.

There is a certain genius to negotiating down the price of every screw and wire, and never paying a yuan more than is absolutely necessary. As in design and build quality, Appls’s accomplishment in this areas is something to which other companies can only aspire.

Something the article only fleetingly acknowledges is that Foxconn is used by most of the major electronics brands in the world. Samsung, Microsoft, Amazon, and the rest all contract with Foxconn to manufacture, assemble, or finish their products. The threatened mass suicide the other week was, in fact, at an Xbox production facility. The author implies that HP and Nike “push” their suppliers, presumably in a good way, but Apple does not.

The comparison is made without much in the way of evidence. But it doesn’t appear that Apple is being unfairly targeted: people from within Apple confirm the company’s attitude towards suppliers, and acknowledge that they rarely back up their threats with action. This is for the reason that has been making the rounds over the last week: the suppliers they have are the best in the world, and they are barely able to keep up with Apple’s demands.

There’s a sort of power inversion going on there. Here is Foxconn, which celebrates whenever a client like Apple comes by to make a big order. And here is Apple, which dictates the terms and is, to some extent, the money in the relationship. But which one of these two could fare better if the other backed out? Foxconn would have to spend a few billion reconfiguring its factories to pump out Galaxy Tabs and Kindle Fires. Apple, which has come to rely on Foxconn’s guarantee of millions of products being manufactured at will, and to specs that may change by the hour, would be adrift.

So it has never been a surprise to me when I hear that Apple, and others, only do so much to change the situation in factories and factory towns in China. The simple fact of it is they’re not the ones at the reins. Foxconn and China have our all-important tech companies by the scruff of the neck, and bear the big bad audits by Apple (more likely by people representing people representing Apple) like they’d bear a kitten swiping at their face. It’s a high stakes game, and Foxconn and its like hold all the cards.

Well, not all the cards. As I wrote once, the reason Apple does the things it does is to please us, the consumers. We demand a new iPhone every year that must be better and cheaper. We insist that a thousand dollars is too much for a state of the art computer. We want bigger TVs and external hard drives and slim cameras. And we, almost without exception, fail to care when our demand for more iPads drives Apple to double its orders, driving Foxconn to push more overtime, driving poorly-maintained ventilation systems to their limits, driving a spark to ignite an aluminum-dust explosion. It’s not our problem, it’s Apple’s or it’s Foxconn’s or it’s China’s. Very reassuring.

One dreamer quoted in the NYT article says: “If they committed to building a conflict-free iPhone, it would transform technology.” Yes, and at the same time, it would transform Apple into a bankrupt company. A conflict free iPhone would cost far, far more and would in all likelihood not be as well-built. Apple knows this. The system we and they have in place works, unfortunately, at least for everyone but the workers coated in N-hexane. And at a twelve to a hundred thousand dollars a pop, they aren’t worth rocking the boat for, especially when you’ve got record profits coming in.

Just don’t forget that we’re in that boat too. Unlike many other companies whose profits come largely from ads, enterprise products, or components, the vast majority of what Apple makes comes straight out of a consumer’s pockets, more or less willingly. More than any other mega-corporation you and I deal with on a daily basis, we are fully in control of our contributions to this company. We’re part of this. Some would say the biggest part.

7 of the world’s most powerful tech companies have been accused of forming an antitrust conspiracy to suppress the compensation of their employees by entering into “no poach” agreements. Today, a San Jose judge heard a motion to dismiss a class action civil lawsuit in which former employees seek damages from defendants Apple, Google, Adobe, Intel, Intuit, Pixar, and Lucasfilm.

The damning evidence against the defendants from a 2010 Department of Justice investigation that I first uncovered last week, as well as the plaintiffs’ opposition statement indicate there is more than sufficient evidence for the dismissal to be denied and the case to proceed towards trial. If the defendants lose to or settle, tens of thousands of full-time employees with the companies between 2006 and 2009 could be compensated.

[Update 4:30pm PST 1/26/2011: Judge Lucy Koh says "This case is moving forward...this case is going to survive the motion to dismiss." That means the defendants' motion to dismiss the case will almost surely be denied when the judge files her official ruling soon. Koh said she may dismiss some specific claims but the plaintiffs will be allowed to amend their complaint. She mentioned "It's hard to make the inference that there was no conspiracy". Read on to find out why and what that means for the companies. More details from the hearing at the end.]

Specifically, the senior executives of the defendants, including Apple’s Steve Jobs and Google’s Eric Schmidt, are accused of entering into a network of identical, interconnected illegal agreements not to recruit each other’s employees. Each agreement by itself may be a violation of antitrust laws including the Sherman Act, the Cartwright Act, and other California laws.

The plaintiffs also claim the agreements constitute an overarching antitrust conspiracy because each was made with knowledge of the other agreements, and relied on the other agreements to achieve a common goal of reducing compensation and mobility for highly sought-after skilled tech employees.

According to the plaintiffs’ statement (PDF), the chronology of some of the  agreements is as follows:

• January 2005 – Pixar senior executives (which include Steve Jobs) draft written terms for a no-poach agreement and send them to Lucasfilm
• May 2005 – Apple and Adobe make agreements
• 2006 – Apple and Google make agreements shortly after Eric Schmidt joined Apple’s board of directors
• April 2007 – Apple and Pixar make agreements
• June and September 2007 – Google enters into agreements with Intuit and Intel that are identical to the agreements between Apple and Google, Apple and Adobe, and Apple and Pixar

Additionally, Steve Jobs personally contacted Palm’s CEO Edward T. Colligan to propose an unlawful agreement, writing “We must do whatever we can” to stop competitive recruiting efforts between the companies.” Colligan declined Jobs’ offer, writing “Your proposal that we agree that neither company will hire the other’s employees, regardless of the individual’s desires, is not only wrong, it is likely illegal.”

The plaintiffs request “The Court should deny the motion, lift the stay of discovery, and permit Plaintiffs ‘to secure the just, speedy, and inexpensive determination’ of this action.”

The defendants claim that the agreements were isolated and not interconnected. They claim the agreements were pro-competitive parts of legitimate collaborations between the companies, many of which had executives on each other’s boards or started as the same company as with Pixar and Lucasfilm.

The defendants also claim “The alleged bilateral arrangement provide no support for the overall conspiracy that plaintiffs have alleged in order to name the defendants in a class action”. They motion for continuation of the partial stay of discovery and for the case to be dismissed.

However, my research and sources indicate the defendants’ claims are false, the plaintiffs case is plausible, and so there are no grounds for dismissal. Furthermore, the only reason more evidence about the interconnection between the agreements isn’t available is because they were made so secretively.

The case should be allowed to proceed because the plaintiffs have produced “smoking guns” indicating a deep conspiracy. Specifically, “Do Not Cold Call” lists which defendants used to implement the agreements, and the written terms of Pixar’s agreement with Lucasfilm. These signal that today’s joint motion to dismiss the case should be denied because if discovery is permitted to continue, there’s a reasonable expectation that evidence of illegal activity will be revealed.

Finally, the precedent is that motions to dismiss are “viewed with disfavor and are properly granted only in exceptional cases…A complaint satisfies Twombly [is only eligible for dismissal] if the allegations, taken as a whole, are not ‘facially implausible’” according to the plaintiffs’ statement. Therefore, it would take a very strong presentation by the defense for Judge Lucy Koh to dismiss the case.

If the defendants’ motion to dismiss the case is denied, the case will move towards a trial by jury in June 2013. Rather than leave an assessment of damages to the judge and jury, the defendants may try to settle the case, similar to how they settled with the Department of Justice’s federal case in 2010. In the defendants lose or settle, full-time employees of the defendants could be compensated for the 10-15% of lost wages estimated by the plaintiffs’ law firm Lieff Cabraser.

Update 4:30pm PST 1/26/2012: The judge has lifted the stay of discovery, saying “This case is moving forward…this case is going to survive the motion to dismiss.” Though her official statement hasn’t been filed, she’s likely to deny the defendants motion to dismiss the case. She also ordered Google to produce draft emails in addition to sent emails, and designate which are drafts and which were sent.

During the hearing, the defense argued against the conspiracy accusation and joint liability. It stated that plaintiffs don’t deserve compensation from companies they never worked for and that their employers didn’t have agreements with just because they were part of the so-called conspiracy.

The judge seemed somewhat sympathetic to this, and asked if the plaintiffs would consider breaking up the case to focus on each unlawful agreement separately. The plaintiffs maintained that the agreements were all interconnected.

Afterwards, The head attorney representing the plaintiffs, Joseph R. Saveri of Lieff Cabraser, told me the plaintiffs were comfortable moving forward with their single, joint antitrust conspiracy complaint. The plaintiffs will file an amended complaint that removes any claims dismissed by the forthcoming judge’s statement.

Next, another Case Management Conference is set for April 18th, where that amended complaint from the plaintiff will be reviewed. On June 28th, the court will convene to hear class certification to define what employees are eligible to be represented by the class action lawsuit. The plaintiffs plan to assess evidence surfaced during discovery and determine if only software engineers, software engineers and scientists, or all of the defendants’ employees will be represented by the class action lawsuit.

Following the hearing, Saveri gave reporters a conservative calculation of the possible damages that employees could be compensated for. He said software engineers make $100,000 a year (they make more), their compensation was “suppressed between 5 and 10%” and “tens of thousands of employees were affected”. That means for each year an entry-level full-time software engineer worked at one of these companies, they might be entitled to damages of $5,000 to $10,000. Higher paid veteran engineers could be entitled to much more. The total damages could therefore be at least $150 million if just 10,000 entry-level engineers were affected.

Apple’s iPad reigns supreme from whatever angle you choose to look at the tablet market (profits, apps, quality, market share, mindshare, you name it), but research firm Strategy Analytics this morning said Android did manage to capture a record 39 percent tablet OS market share in the fourth quarter of 2011.

Apple maintains the lead with 58 percent market share in Q4 2011 (down from 68 percent in the fourth quarter of 2010).

Peter King, a research director at Strategy Analytics, says global tablet shipments (the research firm explains that these refer to ‘sell-in’ and not over-the-counter sales—an important difference, those Android tabs could sit on the shelves forever at Best Buy and never be bought) reached an all-time high of 26.8 million units in Q4 2011, surging 150 percent from 10.7 million in Q4 2010. He added:

“Apple shipped a robust 15.4 million iPads worldwide and maintained its strong market leadership with 58 percent share during the fourth quarter of 2011. Apple shrugged off the much-hyped threat from entry-level Android models this quarter.”

They did indeed, even if these aren’t really ‘threatening’ Apple at all. Android climbing to 39 percent share (up from 29 percent in Q4 2010) is, nevertheless, meaningful, but here’s the thing: Strategy Analytics includes Amazon’s Kindle Fire in the list of Android models it tracks the distribution of.

The Kindle Fire runs a heavily customized version of Android, sure, but it’s a different beast from, say, Samsung’s Galaxy Tab or Motorola’s Xoom. I would love to know how much of that 39 percent market share can be attributed to the undeniably strong sales numbers of the Kindle Fire.

Put differently, imagine if Amazon didn’t opt for Android or hadn’t yet released the Fire. Which Android tablet makers would be posing a serious threat to Apple then?

I wouldn’t go as far as to say Android tablets ‘failed’ miserably in 2011, but it’s a far cry from success if you ask me. A lot of people expected Android to be on par with iOS by now.

Worth noting: Strategy Analytics is not including Android-powered ebook readers in its latest report.

Update: you should also definitely read LAPTOP Mag’s Analyst: Kindle Fire, Nook Tablet Have 40% of Android Tablet Sales

I have no doubt Android tablets will actually end up commanding a larger tablet OS market share than Apple’s iOS over time, but that will be a logical result of its distribution model and not “Android winning” (basically, Apple chooses not to focus on market share but on profit margins). That Android model also comes with a real, unquestionable fragmentation problem.

Apple shouldn’t worry about the surge of Android in terms of tablet market share, desktop PC makers and the likes of RIM, Nokia and Microsoft should. Especially with an iPad 3 coming in 2012.

Something that crossed my mind: Strategy Analytics estimates that Microsoft captured a mere 1.5 percent global tablet OS market share in Q4 2011, which is very ironic if you think about how early the software giant started thinking about tablet computers and their potential in the enterprise and getting such devices into consumers’ hands.

Says Strategy Analytics: “The upcoming release of Windows 8 this year cannot come quickly enough for Microsoft, so its hardware partners can start competing more effectively in the tablet space”.

No shit.

$46.33 billion in revenue. It’s a number the biggest and best tech companies in the world can only dream to hit in a year. Apple hit it in one quarter. $13.06 billion in profit. It’s a number no tech company would ever aspire to in one quarter because it’s ridiculous. The only companies that have ever thought about such numbers are oil companies. And even then, only 3 of them have actually hit it. Ever.

Until yesterday.

I’ve already tried to give some context to the stunning Q1 2012 results that Apple posted. But the truth is that they’re still unbelievable. Perhaps the next step should be to figure out how they could post such numbers.

The simple answer is that Apple’s iPhone sales were off the charts. 37 million units sold is mind-boggling when the previous record was 20 million, set in Q3 2011. A year ago, in the same holiday quarter, Apple sold “just” 16 million iPhones. That was also a record at the time and lead to record revenue and profit at the time. This year, Apple quite simply took things to the next level — and then went a level beyond that.

Because the iPhone is over 50 percent of Apple’s revenues, amazing iPhone sales equates to amazing revenues. Again, the simple answer. But to figure out why this quarter was so far ahead of any other quarter, you have to go deeper. It was really a confluence of events.

First of all, this past quarter was set up by the preceding quarter, which saw Apple fall short of Wall Street expectations for the first time in years. But as we noted at the time, this was misleading. Apple surpassed their own expectations (which isn’t surprising given that they’re always low), but failed to meet Wall Street’s simply because Wall Street’s numbers were lazy. Analysts didn’t take into account the fact that the new version of the iPhone did not launch in the summertime, as it had in years past. Because it did not — and again, the iPhone is about half of Apple’s revenue — there was no burst in iPhone sales that Apple usually sees in Q4.

Instead, that burst came in Q1 — last quarter. And unlike previous years, this burst was compounded because Q1 is also Apple’s holiday quarter. A new iPhone plus holiday shopping season is apparently like gasoline on a fire. Now we know.

But it would be foolish to think that Apple’s big numbers were only about the iPhone. Remember, Apple set new records in Mac and iPad sales as well. The iPad in particular is interesting because while it’s Apple’s newest business, it’s already the second-largest in terms of revenue. This past quarter, 20 percent of revenue came from iPad sales.

The third-biggest source of revenue is Mac sales — they accounted for 14 percent of Apple’s revenue last quarter. In other words, 87 percent of Apple’s revenue last quarter was from products that all saw record sales.

The lone dim spot in Apple’s numbers were iPod sales, which continue to decline year-over-year. But because the other businesses have grown so massive, so quickly, the iPod only accounts for 5 percent of Apple’s revenues now. Pretty soon — maybe even next quarter — the iTunes Store itself will be a bigger money-maker for the company. When you consider that iTunes (including the App Store) was initially set up to be run as a break-even business, this is impressive.

Something else to consider: the iPhone, iPad, and Mac have the highest margins amongst Apple major products. The iPhone 4S, because it is largely based off of the design of the iPhone 4, probably has one of the best margins that Apple has ever seen. That rings especially true when you hear that Apple’s overall gross margin for the quarter was 44.7 percent. It’s a number so big that Apple CFO Peter Oppenheimer said he couldn’t recall ever seeing a number so high in his 15 years of service. And he was skeptical that Apple would ever hit it again.

That huge margin meant huge profit. In fact, it meant profit the likes of which had never been seen before by a technology company.

Something else: Q1 2012 for Apple happened to span 14 weeks. This was unusual, and Apple was quick to note as much in both their press release and on the earnings call. Normally, quarters span 13 weeks (do the math: 13 x 4 = 52). You simply cannot discount an extra week of sales. And you especially cannot discount it during the holiday quarter.

And one more thing: the passing of Apple co-founder Steve Jobs in October drove people all around the world to Apple Stores to pay their respects. When people visit Apple Stores, they don’t often walk away empty handed. And what better way to pay respect to Jobs than to buy a product from the company he cared so much about? It’s a delicate subject, but worth mentioning.

Again, this monster quarter was all about a confluence of events. It was about a new iPhone launch during Apple’s typically busiest quarter merged with a newer product, iPad, coming into its own, and the Mac continuing its methodical growth. Add to that amazing margins plus one more week of sales — and the fact that Apple as a whole has been killing it for several years now across the board — and you get a jaw-dropping quarter. It all came together.

Next question: will Apple be able to replicate the magic next quarter? Well, no. The quarter after the holiday one is typically weaker as consumer spending cools. And when you consider that it will span the regular 13 weeks instead of 14, you have two things working against it. Add to that the fact that the iPhone 4S will no longer be a new product, and you have another dip. There could be a new iPad in the quarter — but it may only go on sale at the tail-end. Or it may not be on sale until the following quarter — we’ll see. Either way, that probably dings iPad sales a bit next quarter too.

But even with all those things working “against” Apple next quarter, Oppenheimer still gave guidance of $32.5 billion in revenue. That would be Apple’s second-best quarter ever. And again, Apple always low-balls such numbers, so perhaps $35 billion in a more reasonable guess.

In other words, Apple may only have the second-best quarter of any tech company ever in terms of revenue next quarter. And profits may only be near the bottom of the all-time top 20 amidst the oil empires. Boo hoo.

[photo: flickr/ConvenienceStoreGourmet]

Modern day video editors can be daunting. While it’s better than the literal cut-and-paste practices of yesteryear, opening a new video editor can feel like stepping into the cockpit of a spaceship. Unless you’re trained to fly spaceships, in which case this analogy is broken (and also, you’re awesome.)

Looking to distill video editing down to its simplest form — a game like experience, they say — is Game Your Video, a new iOS app from Global Delight.

Here’s how it works: you pick a video from your library, and play it back. As it’s playing, you poke any of the myriad effect buttons (things like jitter, shake, spin, RGB splitting, or speed tweaks) sitting at the bottom of the screen to start the effect. The video keeps playing with the effect applied on the fly. Tap it again, and the effect stops. Don’t like the effect? Stop the video, drag back to that point in the timeline (which isn’t so much a timeline, really, but an iMovie-esque thumbnail summary) until the cursor is on top of the effect highlight, and tap a button to remove it.

The same effects can be applied in real-time to videos being shot through the app, using an identical mechanic: tap an effect to start, tap it again to stop. You can also pick songs from your iPod library as your video’s soundtrack, and cut/join clips with just a tap or two. Want to make your friends sound like a chipmunk (or an axe murderer)? You can do that, too.

It is really quite simple — at least in its overall concept. Some of the finer nuances of the UI can be confusing at times; it took me a few minutes to figure out, for example, that to edit videos you’ve already recorded you have to hit a specific “Game Your Video” button rather than the camera roll button sitting right next to it. None of it’s hard to wrap your head around — but given that they’re trying to make something for an audience daunted by other video editors, it’s probably worth fine tuning.

Here’s a quick video of my desk demo of some of the effects:

Will it turn you into the next Scorsese? Nah, but that’s not the point. It’s for adding cute little effects to your clips before tossing them up on Twitter or Facebook — and for that, it gets the job done.

Game Your Video launched this morning, and is going for $1.99 in the App Store.