Steven Levy: Apple Computer Is Dead; Long Live Apple

Apple Computer Incorporated is no more. On Jan. 9, CEO Steve Jobs announced that the name he and Steve Wozniak gave to their new business 30 years has changed. It will now be called simply Apple Inc. Jobs had deleted the word "computer" with the same ruthlessness that he once used to deny cursor keys to the original Macintosh, and an on/off switch to the iPod.

It was no coincidence that Jobs revealed this on the day that he unveiled the iPhone, Apple's long-awaited entry into the mobile marketplace. The device further broadens the scope of the company once known primarily for making things with keyboards. It also enhances Apple's legacy for swooping into a creatively moribund category and upending the established players with a level of style and innovation that has seemed beyond their grasp.

During Jobs's keynote address at the Macworld Expo in San Francisco on Tuesday—a seamless two-hour infomercial that mesmerized 4,000 people, some of whom had waited all night for a seat—he promised three devices: a full-screen iPod, a smart phone and an Internet communicator. The iPhone, of course, is that complete trinity in one 4.8-ounce package, with the features of those three potentially disparate products superbly integrated. The look of the device is classic Apple: stunningly austere, with a lush 3.5-inch screen ringed in black and a single button underneath. There are also controls (for volume and ring-silencing) on its slim sides (less than half an inch thick), but they are almost imperceptible. The real controls are built into the software—task-appropriate buttons, switches, sliders, and scroll bars that appear on the high-density "multi-touch" screen, which has the intelligence to discern which touches are intentional and which are just random bumps. (This is in addition to a sensor that figures out if you're holding the screen vertically or lengthwise, adjusting the orientation likewise, or another sensor that determines if the phone is being held to your ear, in which case the touch screen goes dormant so your cheek won't accidentally switch your phone call to an iTunes movie.)

The screen allows for a range of digital (as in finger) inputs. You can tap on a virtual keyboard, double-tap on a movie to switch it from full-screen to wide-screen, swipe at a photo to move to the next one in the slide slow and pinch an image of a Web page to resize it for reading. Also, making use of the touchscreen, Apple has substantially improved the navigation abilities of the iPod, so much so that you almost don't notice that the click wheel is missing. "It's the best iPod we've ever made," Jobs told me in a postkeynote interview and hands-on product demo. (Apple isn't confirming, but I'd expect the rest of the iPod family to follow suit sometime later this year.)

At every turn, Apple's engineers and design experts have attacked the problems of performing complicated tasks in the squinched-up environment of a handheld device, and turned awkward processes into delightful ones. The things you do with an iPhone are familiar to many mobile-device users—e-mail, photography, messages, music, even watching video. But Apple's relentless focus on simplicity, efficiency, utility and fun makes the iPhone seem a different species than its competitor, something more personal, more approachable and, ultimately, more desirable than anything else out there. The best I can compare it to is the transformation that came when Macintosh popularized the graphical user interface in the computing world, and the cold environment of the digital world suddenly welcomed "the rest of us," as Apple's ads put it. Like previous Apple breakthroughs, though, the iPhone is pricey—depending on how much memory you get, either $499 or $599, along with a mandatory two-year contract for Cingular cell service. (And you'll probably want an additional data service on top of that.) That's a couple hundred bucks more than competitors.

The iPhone came about pretty much the same way that the iPod did five years ago—because earlier versions made by other companies really stunk, and Apple's music-loving engineers and designers wanted a great player in their own pockets. In 2007, lots of people have issues with the current generation of smart phones, none so much as people who worked at Apple.

The problem with making a mobile phone, however, is that you need a cellular network to handle the phone calls and information. Unlike the open Internet, the big mobile nets are closed systems, commonly referred to as "walled gardens," based on a business model of locking customers into long-term contracts and then charging that captive audience with costly services. Jobs himself once referred to the Cingulars, Sprints and Verizon Wirelesses of the world as "orifices." But a couple of years ago, he realized that he would have to deal with them. "We talked to several of them and educated ourselves," he says. He finally decided to deal with AT&T's Cingular network. "[They] were willing to take a really big gamble on us. We decided what the phone is. We decided what software would be on the phone. And so we could make the product we wanted."

But it's not like the walled garden has gone away. "You don't want your phone to be an open platform," meaning that anyone can write applications for it and potentially gum up the provider's network, says Jobs. "You need it to work when you need it to work. Cingular doesn't want to see their West Coast network go down because some application messed up."

Still, since the iPhone runs a full version of OS X, the operating system of the Macintosh computer, it's reasonable to expect the device to take advantage of that power by running lots of applications, even if Apple has to vet them to make sure they won't compromise the integrity of the network. In the version we saw last week, there aren't a whole lot—the notable ones include SMS text messaging, the Safari Web browser, e-mail, iPhoto, Google maps and two mini-applications (known as widgets) for weather and stock prices. Jobs says we can expect more apps on the phone by the time it ships in June. (For instance, one might expect the iPhone to allow users to view Word documents, something that the prototype doesn't do today.)

But cynics may note that instead of Apple's instant-messaging program iChat, there is that aforementioned SMS messaging program. On the screen, when you send and receive messages, the display resembles the way you view them on iChat, in colorful text balloons. But because each message is an SMS text message, depending on the billing plan, users may get charged a few cents each time they say "wassup." (iChat lets you gab all you want for free.) Maybe this won't be a problem—Jobs hints that Cingular may offer different billing plans for iPhone, though for now he isn't saying for sure. In any case, Jobs say, "There's no reason we couldn't have iChat on here." So bring it on.

Another intriguing possibility not yet exploited in the iPhone is the ability to take a song from one's iTunes music library and instantly make a ring tone from it. "Wouldn't that be cool?" says Jobs, after I brought it up. "It could be done." Then he rubbed his fingers together, the universal symbol for "that would cost us." Meantime, he noted, the iPhone has a collection of built-in ringtones in various categories from jazz to Americana. The ones he demonstrated sounded sufficiently tasteful that one would not be mortified if your phone went off during a dinner party.

To Jobs, the whole issue of what future applications may run on the iPhone, and what billing system it uses, really isn't the point. The big picture, he emphasizes, is how Apple has delivered what he considers a triumph on the scale of the original Macintosh and the iPod. "[The iPhone] is five years ahead of what everybody else has got," he gushes. "If we didn't do one more thing, we'd be set for five years!"

How successful can the iPhone be? Jobs claims that the consumer demand for smart phones will ultimately eclipse the now-dominant business market. ("I see a lot of soccer moms with smart phones," he says. "A lot.") For now, he'd be happy if Apple started out by grabbing 1 percent of the billion-unit mobile phone market in 2008. One percent doesn't sound like much, but it's still 10 million units—between $5 billion and $6 billion in additional revenue, with hopes of an even bigger share for Apple down the line.

Not bad for a former computer company.