Coop's Corner

Time to dump smartphone data plans? Why not? The cell phone market is stagnating--and worse while only a fraction of wireless customers own smartphones. Any way you look at it, the global cell phone market appears to be in miserable shape.

Some recent headlines to consider:

• Motorola loses $3.6 billion

• Sprint Nextel announces plans to cut 8,000 jobs

• Nokia's profits plunge 69 percent

• New subscriber growth at T-Mobile USA (which coincidentally offers the only Google Android phone in the U.S. market) suffers a steep decline.

•  While the fourth quarter is usually the best time of the year for carriers, global vendor shipments fell in the period by more than 12 percent compared with a year ago.

(Credit: Strategy Analytics, Bernstein analysis)

Against this backdrop, the (increasingly few) optimists out there believe that smartphones will ride to the rescue of the wireless industry. Ryan Reith of IDC put it this way:

"As long as operators are able to continue to subsidize these devices, and developers continue to enhance applications, then this segment will be a silver lining to an otherwise gloomy market."

That's the conventional wisdom and it might be the right prescription during a normal period. But we're living through such a rough patch that not only is North America reaching a cell phone saturation point, but even the optimists at IDC worry that sales may wilt in the face of weakening demand, currency volatility, and reduced access to credit.

In tech-obsessed areas, such as Northern California, New York, Boston, and Los Angeles, you'll find lots of people who have traded up and bought fancier, higher-margin smartphones. They are in the minority. Fact is that smartphones represent 17 percent of the 1.3 billion mobile handsets expected to be sold around the world this year.

The rest may be dying from iPhone envy or whatever. But they ain't close to signing their name to the line which is dotted. The culprit: the exorbitant cost of the various data service plans.

I'm not concerned here with the geeks, the cool kids with the big bank accounts or the corporate types who can justify the purchase to their bosses. For the average Joe, who already pays a fortune for subscription television and Internet service, paying a monthly data service on a smartphone qualifies as a luxury that can be postponed until normalcy returns. A dowdy cell phone is more than enough to put you in touch with the wife and the kids and hey, you can also call Sal's Pizza for Saturday night delivery. Your cell phone may not run Google Latitude just yet. But trust me, Western civilization will survive.

In the meantime, I'd like to offer a modest proposal, courtesy of Bernstein Research's reliably incisive Toni Sacconaghi. In a note published Wednesday, Sacconaghi discussed the impact of the monthly charge for required data service and the effect on sales of Apple's iPhone. Here's the crux of the argument:

"Apple is effectively not participating in 83% of mobile handset market today. To more effectively address this part of the market, we believe Apple should offer an iPhone that does not require the user to sign up for a data plan. Note that we do not necessarily believe that a non-data plan iPhone needs to be priced significantly lower at retail than the current 3G iPhone ($199 in the US, with service contract), but waiving the data plan requirement alone would save users on the order of $30 per month, or $720 over two years-making it accessible to a much larger base of users."

Sacconaghi was writing about Apple and AT&T, but let's extend the analysis elsewhere. Maybe other carriers wind up subsidizing less of the upfront cost of their devices. (Or maybe not.)

That wouldn't be charity. There's a good business case to be made. In Apple's case, Sacconaghi estimates that a non-data plan iPhone represents an additional $7 billion in annual sales and $4 billion in gross profits (assuming 3 percent market share).

Of course, the carriers may deem this nonsense and instead decide to hold out as long as they can. It wouldn't be the first time they resisted change, but there are tens of millions of potential new subscribers up for grabs in an increasingly volatile world.

As if Steve Jobs and Apple haven't commanded enough headlines during the past couple of weeks. Late Friday, Bloomberg reported that Jobs is considering a liver transplant.

In a telephone interview with Bloomberg's Connie Guglielmo, Jobs refused to comment on his health status: "Why don't you guys leave me alone--why is this important?"

The article, which quotes anonymous sources said to be "monitoring his illness," says that Jobs is weighing the transplant "as a result of complications after treatment for pancreatic cancer in 2004."

A spokesman for Apple said the company had no comment on the report.

On Wednesday, Jobs announced he was stepping aside for a six-month medical leave of absence. The mystery over his drastic weight loss has fed all sorts of speculation about what's ailing him. In an e-mail to Apple employees, Jobs wrote the following:

"...during the past week I have learned that my health-related issues are more complex than I originally thought. In order to take myself out of the limelight and focus on my health, and to allow everyone at Apple to focus on delivering extraordinary products, I have decided to take a medical leave of absence until the end of June."

"I have asked Tim Cook to be responsible for Apple's day to day operations, and I know he and the rest of the executive management team will do a great job. As CEO, I plan to remain involved in major strategic decisions while I am out. Our board of directors fully supports this plan."

Jobs, who is the closest to what is a rock star in the tech industry, wants his private life to be private. And like other celebrities, he would prefer that people stop obsessing about his health or other aspects of his private life. But it goes with the territory.

Celebrity obsession is a part of the culture-just check to see what the most popular search terms are on Google or watch Entertainment Tonight.

Still, it's understandable that Jobs wants to be left alone to deal with his medical problems. I sympathize. He doesn't have to say anything to anyone. But Apple Inc. might as well be "Jobs Inc." to many people. As the head of a company that is almost synonymous with this name, he unfortunately has some disclosure obligations.

Dan Farber contributed to this report

If you're an Apple shareholder or employee, the good news is that Steve Jobs' health is not in any immediate danger.

Or so we're supposed to surmise from the cryptic note issued by Jobs early Monday on the state of his health--and the even more cryptic note put out by his employer.

At the unveiling of new MacBooks in October, Steve Jobs tersely addressed concerns about his health: "That's all we'll talk about with Steve's health today. Want to see (his blood pressure) higher? Just ask him more questions."

(Credit: James Martin/CNET News)

Here's the relevant text from Jobs' statement Monday:

As many of you know, I have been losing weight throughout 2008. The reason has been a mystery to me and my doctors. A few weeks ago, I decided that getting to the root cause of this and reversing it needed to become my #1 priority.

Fortunately, after further testing, my doctors think they have found the cause--a hormone imbalance that has been "robbing" me of the proteins my body needs to be healthy. Sophisticated blood tests have confirmed this diagnosis.

The remedy for this nutritional problem is relatively simple and straightforward, and I've already begun treatment. But, just like I didn't lose this much weight and body mass in a week or a month, my doctors expect it will take me until late this Spring to regain it. I will continue as Apple's CEO during my recovery.

OK, it's great to know that he's not facing a cancer recurrence, as some had speculated. Jobs is a tech icon and the industry would be much the poorer were he to retire from the scene. But this latest PR stunt is going to raise new questions. Not about the exact nature of Jobs' ailment but about the parsimonious way Apple has communicated with the public about the health of its CEO.

Until now, the mantra was "Steve's health is a private matter, Steve is our CEO." The impression Apple wanted to leave was that everything's just fine at the helm. That shaded the truth--and I'm being charitable here. At this point, how can you trust the official chronology offered up by Jobs and Apple? Even with Monday's statements, I can't call it communication so much as stonewalling.

True to form, Apple won't care a fig what outsiders may think. "Just keep on buying and don't bother us with the rest of it." Talk about a reality distortion field.

See also:
• Steve Jobs discloses hormone imbalance
• Health concerns force Apple's Jobs from Macworld
• Apple's last Macworld beginning of new era

Click here for more Macworld Expo coverage from CNET News.

The health of Apple CEO Steve Jobs has been a topic of concern for some months now. On Monday, with the company's Macworld show getting under way, Apple and Jobs issued statements on Jobs' health. We'll be following this breaking story throughout the day.

In October, Steve Jobs briefly addressed his state of health onstage at an Apple event.

(Credit: James Martin/CNET News)

CUPERTINO, Calif. -- It is widely recognized both inside and outside of Apple that Steve Jobs is one of the most talented and effective CEOs in the world.

As we have said before, if there ever comes a day when Steve wants to retire or for other reasons cannot continue to fulfill his duties as Apple's CEO, you will know it.

Apple is very lucky to have Steve as its leader and CEO, and he deserves our complete and unwavering support during his recuperation. He most certainly has that from Apple and its Board.

Here is a separate letter from Steve Jobs:

Dear Apple Community,

For the first time in a decade, I'm getting to spend the holiday season with my family, rather than intensely preparing for a Macworld keynote.

Unfortunately, my decision to have Phil deliver the Macworld keynote set off another flurry of rumors about my health, with some even publishing stories of me on my deathbed.

I've decided to share something very personal with the Apple community so that we can all relax and enjoy the show tomorrow.

"I will continue as Apple's CEO during my recovery."

--Steve Jobs

As many of you know, I have been losing weight throughout 2008. The reason has been a mystery to me and my doctors. A few weeks ago, I decided that getting to the root cause of this and reversing it needed to become my #1 priority.

Fortunately, after further testing, my doctors think they have found the cause -- a hormone imbalance that has been "robbing" me of the proteins my body needs to be healthy. Sophisticated blood tests have confirmed this diagnosis.

The remedy for this nutritional problem is relatively simple and straightforward, and I've already begun treatment. But, just like I didn't lose this much weight and body mass in a week or a month, my doctors expect it will take me until late this Spring to regain it. I will continue as Apple's CEO during my recovery.

I have given more than my all to Apple for the past 11 years now. I will be the first one to step up and tell our Board of Directors if I can no longer continue to fulfill my duties as Apple's CEO. I hope the Apple community will support me in my recovery and know that I will always put what is best for Apple first.

So now I've said more than I wanted to say, and all that I am going to say, about this.

Steve

See also:
• On eve of Macworld, Jobs talks health
• Now Apple's credibility really is in the balance
• Apple's last Macworld beginning of new era

Click here for more Macworld Expo coverage from CNET News.

Sony boss Sir Howard Stringer has to be one of the most charming executives in all of techdom. But as Arthur Miller taught us, a smile and a shoeshine go only so far.

Remember this quote?: "You can take iPod and beat us over the head with it, but it's only one product. And we have a thousand products. Apple has two or three."

Oh boy. I'm sure Stringer winces whenever that quote gets trotted out. Now Stringer, who has been CEO since 2005, is reportedly mulling what the U.K.'s Times suggests will include "job cuts and sweeping changes to management and manufacturing processes."

The Times' sources say the changes likely will get announced after the Consumer Electronics Show and will "abolish or fundamentally alter many of Sony's long-established business practices."

If you think you've heard that before, well, you have. Sony's been hampered by internal bureaucratic rivalries for years. Inconclusive fights over formats and digital rights management have put too much distance between Sony and its consumers. The upshot: Products that are good, not great. That title has been passed along to Apple.

That's left Stringer exhorting Sony to get more imaginative. Last May, he reportedly urged his minions to "get mad." Jawboning only got Sony so far. If the Times' report is correct, the company's about to go to Defcon 1.

I'm not sure how much to get excited about all of this. If Stringer's as capable an executive as he's been portrayed--and the guy definitely is a blue-chip talent--this is the point where he must prove his super hero cred. Anything less, and he's going to wind up as toast. Will the same also be said of Sony?

Bobbie Johnson, who blogs for the Guardian.co.uk, has published what may be the silliest post of 2008. But let's not rush to judgment; there are still nine more days, so he still has a chance to top himself.

Earlier today, we reported that Apple's AppStore rejected a book authored by our CNET colleague, David Carnoy, because it said the work contained "objectionable content." The rejection cited a clause in the iPhone SDK that states: "Applications must not contain any obscene, pornographic, offensive or defamatory content or materials of any kind (text, graphics, images, photographs, etc.), or other content or materials that in Apple's reasonable judgement may be found objectionable by iPhone or iPod touch users."

(Credit: CNET News)

Tom Krazit's piece described the following:

"In its rejection letter, Apple singled out the passage in question, which we actually can't print either. Let's just say it involves a teenage girl telling a detective that she overheard her friend asking a gentleman caller to "love me like you mean it," just with a slightly more emphatic verb."

It's not terribly difficult to put two and two together. (Even Johnson was able to figure that one out.) But under the flamboyant title, "CNET censors story on iPhone censorship," (subtitled: A sad tale of how fearless campaigners against censorship couldn't bring themselves to say one little word), Johnson reserves his verbal shotgun for our choice of language. To wit:

"CNet's complaint about Apple censorship (thinly-veiled as a "now Apple's screening edgy books" story) is undermined somewhat by the fact that the CNET website won't even print the offending word.

Maybe it was a super slow day at The Guardian or perhaps he could not resist the titillation. But Johnson was milking this for all it was worth to play the part of bad boy.

"Well, I've got no such compunction about swearing--hey, we're all grown-ups, right?--so here are the terrifying literary tidbits that both Apple and CNET thought we couldn't handle."

The rest of his post quotes portions of the texts containing the words supposedly too much for us to bear. So since the blogosphere is a continuing conversation--ostensibly, to help us understand who we all are and what we believe--let me fill in the holes left by Johnson's lazy fiction with fact.

Context, not shock value, is the ultimate arbiter on whether language is appropriate or not. For instance, my favorite magazine, The New Yorker, periodically publishes short stories in which the dialogue gets raw. Quite raw. Some may pine for the days when The New Yorker was not so "modern." Not I. Its pages are simply a reflection of an increasingly complicated modernity.

So why treat our pages differently? We don't. Again, it's all context. Here's a link to previous CNET News articles where the subject matter and the language complemented each other.

The gist of The Guardian piece is that we don't have the guts to call things by their proper name because we're a bunch of prudes. Was Tom Krazit's post about Apple any less newsworthy because he opted to be descriptive rather than blunt? I don't think so.

Over the years, I've become inured to the rah-rah pumpathon that is CNBC. With the notable exception of the delightful curmudgeon Mark Haynes, the channel's anchors and correspondents dutifully perform their function as glorified cheerleaders for Wall Street.

But now CNBC's Silicon Valley bureau chief, Jim Goldman, can add to his impressive credentials the title of media apologist for both Apple and Steve Jobs

(Credit: CNET News)

In a postearlier Wednesday, Goldman came out swinging against unnamed market "manipulators" responsible for punishing Apple stock, especially in the aftermath of Apple's abrupt announcement that Steve Jobs would not keynote January's Macworld. Taking his lead from MacDailyNews, which lamented that "there's only so much Apple shareholders can take," Goldman wants the Securities and Exchange Commission to impose an "uptick" rule ,which prevents you from just shorting with abandon and supposedly would slow down future bear raids against Apple.

"MacDailyNews cites a great comment from John McCain last September: 'The regulators were asleep, my friends, they were not working for you. (The SEC has allowed abusive short-selling to turn) our markets into a casino.' Great point. And consider that if Bernie Madoff clients can be killed by massive market manipulation, how can the little guy expect to compete on a level playing field?"

Bernie Madoff?

Goldman depicts MacDaily News as being "Apple-centric." That's understatement. The Fox News of Appledom is more like it. That MacDaily News would push for SEC intervention on Apple's behalf should surprise no one. But before descending on Chris Cox's office, let's consider how we arrived at this juncture.

More than any other CEO, Steve Jobs has become synonymous with his company. Is there a more accomplished executive in the contemporary business world? At the very least, Jobs deserves a place among the Top Three with Sam Walton and Warren Buffett.

I won't speculate on his health but Jobs is a pancreatic cancer survivor. Let's not pretend. So when Apple drops its PR bombshell less than a month before Macworld, you have to wonder what's behind that decision. Maybe he's burned out or maybe he's in the middle of writing the Great American Novel. Who knows? Apple has since imposed its famous cone of silence.

But with Apple shares getting shellacked on Wednesday as the rumors flew, Goldman was downright incensed how "any momentum Apple enjoys is quickly, electronically dashed by those betting against the company."

"The web lights up with concerns about Steve Jobs' health; whether he's dying; or will be incapacitated; or will be resigning or retiring. And shares get destroyed, no matter how fundamentally solid Apple might be...The fact is, posting "gaunt," or "frail," or "Steve Jobs is ill" is the financial equivalent of yelling fire in a crowded movie house. And if that kind of thing is going to be tolerated, government should step in and either investigate the manipulators, or bring back the Uptick Rule."

To be sure, Apple's stock has been the target of unsavory shorts from time to time, but you want to talk about market manipulation? Ask Goldman's colleague Jim (Booyah) Cramer. The guy's apparently an expert.

Fact is that Apple brought on this mess. After the June developers' conference, questions got raised about Jobs' appearance. The company said his health was a private matter. Some argued that the demands of corporate governance or greater transparency should require Apple to be more forthcoming. But that was the final word from corporate.

So now what to think about Jobs' mysterious withdrawal from Macworld?

This is not the way a company as PR savvy as Apple usually rolls out the news. We don't know whether Jobs is feeling punk or whether he was dumped in a power struggle. That makes it a rumor monger's field. No surprise there. In blaming dark forces for spreading rumor and innuendo for financial gain, Goldman misses the bigger point. Apple could have avoided all of this by opening up. Instead, its communications with the outside world continue to assume the contours of a raised middle finger.

Some marketing genius decided it would be a splendid idea to plaster the subway station I arrive at in the morning with posters promoting Microsoft's "I'm a PC" campaign. So twice a day, five days a week, I'm face to face with one of the worst advertising spots in Madison Avenue's history.

Then when I get home and turn on the television, the same ads--this time in full motion color with sound--are all over the airwaves.

(Credit: Microsoft)

Get me an ice pick so I can drive it between my eyeballs and get it over with already.

I'm obviously late wading in here, but I wasn't swept up in the first round of harrumphing when the ads first hit in September. Even though I never thought the spots were very interesting, I figured Microsoft would improve upon them. Eventually. After all, this was part of a $300 million ad campaign that Microsoft planned, in part, to counter Apple's successful Mac versus PC series.

Silly me. I think Rory Carlyle's tongue-in-cheek summary says it all: "I'm a PC and my commercials are terrible."

No doubt there's someone high up in the Redmond bureaucracy who believes it's possible to corporately manufacture cool. But it just won't wash. When I was a kid, an advertisement for Bic pens ripped off a popular counterculture phrase of the era with the corny television refrain, "Write on." (Get it? Write on, not "right on." Ugh.)

As contrived as that was, it paled compared with this stinker from IBM for its now-defunct line of PS/2 computers...(How you gonna do it?...You're gonna PS/2 it") Vanilla Ice couldn't have done worse. A friend who worked in Big Blue's marketing department at the time candidly allowed that the jingle would have had better success as a WASP rap ditty.

The production quality of Microsoft's "I'm a PC" spots is higher, but technical excellence alone can't compensate for the core problem: conceptually, the ads fall flat. Maybe it's me but parading a bunch of goofs all declaring that they're "a PC" and I'm thinking it's "Stepford Wives" time. If the idea was to counter the impression fostered by Apple's series of lacerating Mac ads, Microsoft should rethink its original assumption. Now that Steve Ballmer says he's no longer thinking about Yahoo, he should devote a few brain cells to cleaning up this mess.

The ads simply grate. As John Gruber put it in a post a while ago:

"And so what makes Microsoft's new "I'm a PC" commercials so jaw-droppingly bad is that they're not countering Apple's message, but instead they're reinforcing it. That the spots themselves jump between dozens of different people who "are" PCs, that the spots make a point of emphasizing that there are a billion Windows-running PCs worldwide, this only emphasizes that "PC" is not a brand name but a generic."

"Microsoft's new ads emphasize the same message as Apple's: that the Mac is the one and only brand-name computer in the world."

Write on. Err, right on.

Finishing off his column for Wednesday's edition of The New York Times, Tom Friedman offers a novel suggestion:

Somebody ought to call Steve Jobs, who doesn't need to be bribed to do innovation, and ask him if he'd like to do national service and run a car company for a year. I'd bet it wouldn't take him much longer than that to come up with the GM iCar.

No, it's not a GM

(Credit: Tesla Motors)

Friedman obviously doesn't expect General Motors to act on the idea (although Jobs did simultaneously manage both Apple and Pixar for nearly a decade). His larger point, I think, was to contrast the mindsets that prevail in Silicon Valley and Detroit. And as the political powers try to grapple with the fate of GM and the U.S. auto industry, they must be wishing there was a way to perform a gene graft.

In his piece, Friedman approvingly cites a column in The Wall Street Journal by Paul Ingrassia, who used to run that paper's Detroit bureau. It deserves quotation in length:

"In return for any direct government aid," he wrote, "the board and the management (of GM) should go. Shareholders should lose their paltry remaining equity. And a government-appointed receiver--someone hard-nosed and nonpolitical--should have broad power to revamp GM with a viable business plan and return it to a private operation as soon as possible. That will mean tearing up existing contracts with unions, dealers and suppliers, closing some operations and selling others and downsizing the company...Giving GM a blank check--which the company and the United Auto Workers union badly want, and which Washington will be tempted to grant--would be an enormous mistake."

So on and so forth. But as important as all this is, these are process questions to get GM through the near term. However, the salvation--not just for GM but the entire American auto industry--depends upon the sort of innovation that has helped the technology business thrive through several economic cycles.

Without putting Jobs on a special pedestal, he embodies a textbook example of how creativity can rescue a near-moribund operation. After Jobs returned to Apple in 1997, he did not hesitate to pull the plug on dead-end projects like the Newton, or ruffle feathers by cutting off the Mac clone makers. At the same time, he infused Apple with a design aesthetic that manifested itself in the development of products such as the iMac, the Mac OSX, the iPod, and the iPhone. None of this was preordained; it was the result of innovative thinking and fast execution.

Now contrast Apple's experience with that of GM. That company let itself get addicted to churning out hulking gas guzzlers because that's where the easy money came from. Energy was relatively cheap and management's thinking was that "green" was the purview of left-wing pansies who ran San Francisco. (GM Vice Chairman Bob Lutz, who is on record dismissing the potential of hybrid autos, also was quoted saying that global warming was "a total crock of [expletive deleted].")