E3 press conferences are also unique. It certainly seems that anyone who has commented on a game blog could claim to be a member of the press. E3 press conferences are massive affairs with several thousand people filling up stadiums and theaters. However, even with the loosest definition of the term, most of the people in attendance were not members of the press, but partners, retailers, employees, and game enthusiasts – some of whom camped out a day prior to get into Sony’s event.

The invited guests were quite partisan – and they were out for (virtual) blood. Game demos at Microsoft and Sony including neck stabbing, neck slicing, arrows to the head, shotgun blasts to the head, and some extremely graphic knifing of an elephant monster’s brains. With each gruesome act of gruesomeness the crowds cheered louder. They may have just been trying to determine if they had any hearing left: Microsoft’s press conference was so loud that the company bragged it registered on nearby USC’s seismic monitors. (I’ve been to E3 before, and I came prepared: I brought earplugs.)

Nintendo’s press conference was qualitatively different, thanks to the company’s content which leans towards the whimsical, and the company’s attitude. At an analyst Q&A at E3, Nintendo’s President said that he takes care to protect Nintendo’s brand so that parents and grandparents will feel safe buying a Nintendo system for their children and grandchildren. You never hear that from Sony or Microsoft. The Nintendo fans are just as nuts about their platform as the Sony fans, but the press conference featured more Pikmin and less splattered brains.

If E3 was a game, Microsoft won. Microsoft has long viewed the Xbox as a set top box that plays games, and it is steadily adding content to the Xbox UI which is searchable using Bing and controllable with voice and gestures via Kinect. Xbox SmartGlass leverages Microsoft’s strong position in the living room to make inroads in phones and tablets. SmartGlass turns Windows Phones and Windows 8 tablets into an accessory for entertainment – maps and character bios will appear when watching TV and movies, and the touchscreen becomes a remote. It can also be used for gaming, giving Microsoft a hedge against Nintendo’s gamepad on the Wii U, but the real aim here is Apple, not Nintendo.

Microsoft didn’t give a lot of details regarding how much content will take advantage of the technology, and SmartGlass is just vaporware at this point. Still, it was easily the most strategically important announcement at E3 and could be the differentiator Microsoft needs for its mobile efforts. Microsoft is aiming for ubiquity with SmartGlass, and will be creating versions for iOS and Android as well as Windows Phone and Windows 8. I plan to follow up with Microsoft and find out whether the Microsoft OS’s will be favored in some way.

Oh, and Halo 4 is coming.

Sony didn’t have much to say about its hardware or streaming video services, so it spent far more time showing off new games. The titles that stood out: Last of Us, Beyond: Two Souls, and Assassin’s Creed III. Last of Us is startlingly violent, but the violence directly services the plot, which is something like, “traverse a post-apocalyptic world where you protect your daughter from murderous rapists.” In contrast, the violence in the zombie and war titles is there for its own sake. Beyond: Two Souls looks like a tremendously atmospheric horror/superhero version of Uncharted, and features first-rate acting from Ellen Paige and whichever actor did the motion capture as a wary cop in the clip they showed.

Assassin’s Creed is not exclusive to Sony, but Sony was the only company showing off its sea-based warfare mode, which on a giant display might be realistic enough to generate seasickness. I spoke to a lot of people who really liked Sony’s approach to the press conference – no boring new technology announcements, plenty of gore, and an open bar for two hours before the main event (seriously – there was plenty of obviously drunk whooping with each virtual beheading). However, as an analyst I was terribly disappointed. Sony is losing money in phones, tablets, and even televisions. The only area where Sony has any traction is in gaming, and it is not leveraging that effectively.

Sony’s big mobile gaming news at E3 was that its curated service for old games on smartphones, PlayStation Certified, will change its name to PlayStation Mobile. HTC will also be a PlayStation Mobile partner, ensuring that should the program become relevant to consumers at some point, Sony’s smartphones won’t exclusively benefit.

Sony did show off one innovative product, the Wonderbook, a VR storybook platform for the PS3 that piggybacks on the PlayStation Move. This would have been the laughingstock of E3, but Sony wisely partnered up with JK Rowling, and the first title for the Wonderbook is Book of Spells, which lets Harry Potter fans stare at their TV and pretend that they aren’t muggles after all. The demo was not terribly impressive, but the desire to wave a wand while saying, “Expecto Patronum!” is so strong that Book of Spells is going to sell a lot of PlayStation Moves. For proof of how good wish fulfillment can overcome a terrible game, see Star Wars Kinect, which is simply awful, but my kids can’t stop playing it because they get to be Jedi with lightsabers. Not coincidentally, Star Wars Kinect is one of the best selling games on the market.

Nintendo’s Wii sales are in freefall, and it needs a strong launch of the Wii U in the fall. So at its E3 press conference Nintendo attempted to explain why everyone is going to want a Wii U this holidays season. It failed. Nintendo did learn from the slow launch of the 3DS that people buy Nintendo products to play Mario, and it spent time showing off first party titles for the Wii U. Mario looks terrific in 720p, but the gamepad does not add much to the experience. Nintendo did show off how the gamepad can be used for asymmetric gameplay – where one player has a different view, and sometimes a different goal than other players in the game who are using Wiimotes. NintendoLand appears to be a pack-in title, consisting of 12 mini-games tailored to the Wii U’s unique hardware.

However, the long and boring explanation required to demonstrate Luigi’s Mansion minigame failed to make clear why anyone would want to put in the effort. After the press conference I spent time playing other areas of NintendoLand on the show floor and got a much better sense of what Nintendo is trying to do. The Legend of Zelda: Battle Quest shows off asymmetric coop game play – the gamepad player gets a different view and the ability to shoot arrows, while other players slash away with swords. Donkey Kong: Crash Course has you navigating a Rube Goldberg-type maze, and it flips the map-on-tablet scheme we’ve seen demo’d before. Here, the local view of what you’re doing is on the gamepad, while the TV gets a birds-eye view of the whole course.

In an analyst Q&A session a day after the press conference, Nintendo President Satoru Iwata admitted that they did a lousy job explaining the appeal of the new Wii U titles, and they will have to redouble their efforts before launch. Nintendo loyalists shouldn’t be too hard to convince – Pikmin U looks fantastic, and you can’t play the new Mario titles on anything other than the Wii U. But Nintendo will have a more difficult time attracting non-traditional gamers than it did with the Wii. Microsoft has taken the lead for motion gaming with Kinect, it is building a huge library of searchable entertainment content, and it can claim that SmartGlass gives it all the same capabilities as Wii U. Nintendo will counter that SmartGlass doesn’t exist yet, isn’t designed for low latency gaming, and that developers cannot plan for SmartGlass devices to always be available for gameplay. But those are subtle arguments.

It is worth noting that if Nintendo just attracts loyalists to upgrade to the Wii U, that should be enough to keep the company going without a problem – Nintendo has a strong balance sheet, and the 3DS is now selling briskly, with Super Mario 2 coming this fall. But if the Wii U gets off to a slow start, Nintendo’s shareholders, already extremely upset about the company’s rock bottom stock price, will mutiny.

Unreal Engine 4 demo on NVIDIA GeForce GTX 680:

The press conferences were all about consoles, but the show floor was considerably more diverse. The biggest and loudest booths were still console-oriented. However, PC-based MMOs were out in force, subscription game services had large booths and long lines for their free t-shirts, and there was even a hint of mobile gaming here and there. NVIDIA and Qualcomm both talked about their mobile applications processors and GPUs (NVIDIA on the show floor, and Qualcomm in private meeting rooms). The most gutsy mobile gaming company had to be WeMade Entertainment, a large, established Korean PC social gaming company that is switching its focus entirely to iOS (with plans for Android down the road).

Nobody in the West has ever heard of WeMade, and it is now trying to get traction in the U.S., so it rented a decent sized booth, hired booth babes dressed like the characters in its games, gave out plush logo SWAG, and held a press conference adjacent to the ShowStoppers evening press event. The games are all somewhat formulaic with delightfully “off” translated names (“Rhythm Scandal,” “Project Dragon: The Roar from the Dungeon”). How do you get Western press to come to press conference for a company they have never heard of? You promise to give everyone who registers for the press conference a free 3rd generation iPad, and hope that the stunt gets you coverage. Well played, WeMade. Well played.

Why has the United States been so difficult for Nokia?

It was a combination of factors:

1. Nokia’s business model used to be based almost entirely on volume sales with minimal customization. The U.S. is a carrier-controlled market where the carrier chooses phones and dictates which phones reach the market and which functionality. To succeed in that environment, you need to be willing to customize your devices to meet specific carrier needs – which can mean filling holes in their portfolio or supporting their unique technologies. Nokia simply was not set up to do that in the past.

2. Nokia hated CDMA, expected it to fail, and under-invested in the technology. CDMA makes up more than half of the U.S. cellular subscriber market.

3. Over the years, Nokia successively ignored every form factor that U.S. consumers liked – clamshell phones, super-thin phones, QWERTY phones, and touchscreen phones. Each time, Nokia would lecture everyone about the problems with the new form factor. Eventually, Nokia would begrudgingly launch one or two models with that form factor, but by that point the rest of the industry had long since moved on to the next form factor, which Nokia would publicly disparage… and then the cycle would start again.

4. Nokia’s smartphone line was based on Symbian. Symbian never caught on in the U.S. Part of the problem was that the user interface was horrible, and the OS’s advantages (like the ability to selectively choose data networks) were completely lost on U.S. consumers. Another part of the problem was that Nokia didn’t bring its best Symbian phones to U.S. consumers because of #1, #2, and #3.

5. Nokia would occasionally talk about the importance of the U.S. market with the media and investors, but the company never truly considered the U.S. all that important. If it had, it would have made structural changes to address items #1 – 4.

Does Nokia have a real chance to grow for market share in the U.S. with its Lumia models?

Other than the Lumia models, Nokia has no share of the U.S. market. This isn’t like the UK where Nokia needs to get consumers to buy Lumia phones instead of Symbian models and can rely on rapidly declining – but material – sales of S40 phones. There are no other Nokia phones sold here. Of course, an optimist would say that there is no place to go but up. If Nokia can convince U.S. consumers to consider buying a Windows Phone instead of an iPhone or Android phone, then, yes, it certainly has a chance to grow market share.

It is worth noting that in Finland and throughout Europe, Nokia is a well-known, premium brand. This is not the case in the U.S., where older consumers think that Nokia is a Japanese company that used to make clunky bar phones, and younger consumers have never heard of Nokia at all — aside from the Nokia Theater in L.A. where American Idol TV show finals are televised. Nokia will have to build its brand along with the challenge of convincing consumers to invest in a phone that uses an unfamiliar operating system.

How would you characterize Nokia’s situation in the United States now? Is Nokia’s alliance with T-Mobile and AT&T enough?

The carriers do not want to be overly dependent on Apple – which they have almost no control over – or Google – which actually competes with them in certain situations and acts in ways that the carriers find irrational. So it is in the carriers’ best interest to help Microsoft establish a viable third ecosystem. That doesn’t mean it will automatically succeed, but it explains why T-Mobile and AT&T are eager to invest in Windows Phone at retail and with advertising. However, Nokia needs to get distribution at Verizon Wireless as well as AT&T to have a significant impact on the U.S. market overall. Before that can happen, Nokia needs Microsoft to create a version of Windows Phone that supports CDMA/LTE.

Nokia got off to a rough start by launching the Lumia 900 on a holiday, then discovering bugs in the software. However, its response was amazingly decisive and swift (investigating the problem, confirming it, fixing it, and offering refunds – all within two weeks), and I don’t see any lingering negative after effects. I am not a fan of the Beta Test ads; nothing Chris Parnell says can be taken seriously (that’s core to his comedy), and by calling the incredibly polished iPhone “beta,” Nokia loses credibility. However, Nokia’s merchandising strategy has been brilliant – the cyan (bright blue) phone stands out in a sea of black rectangles, and giving nearly every AT&T store rep a Lumia 900 guarantees that they are familiar with the phone and increases the likelihood that they will endorse it. Regardless, if a consumer asks, “what phone do you use?” the answer is a Lumia 900.

Apps play a very important role in cellphone marketing. Can you describe the competition for app development between Apple, Android and Microsoft applications? Who is the strongest player?

Apple is the strongest and growing stronger. Android has also reached critical mass for apps in smartphones (though not yet in tablets). At this point, it is unlikely that Microsoft will ever fully catch up, but if it can get enough of the important apps along with a commitment from developers to support the OS even if they develop for iOS first, Microsoft can try to use other aspects of the platform (such as the unique user experience, cloud services, or exclusive apps) to attract consumers to buy the phones.

[Image credit: Simon Q]

The problem is that these new BlackBerry fans are buying cheap Curves that RIM makes little money on, and RIM is rapidly losing market share at the high end in developed markets like North America to Apple and Google. It is certainly possible that RIM will be able to defend its market share growth in locations like Indonesia, but cheap Android phones are decimating Nokia’s Symbian business in those same geographies, so it is clear that consumers at all income levels are looking to invest in app-driven mobile ecosystems (and when they do have enough money for an iPhone, they buy them. In droves).

Even if RIM’s unit sales rebound on the strength of BBM in emerging markets, the company needs to get higher margin devices to market that consumers want to buy. To sell a higher margin device, RIM will have to compete directly against Apple, Google, and Microsoft.

What RIM Showed Off

Kicking off his keynote address, Heins tried to dispel the notion that RIM is exiting the consumer market. The vast majority of smartphone sales – even those used for enterprise mobility – are to consumers at retail, so RIM has to compete for consumers if it wants to stay in business. However, RIM finally realized that it won’t win if it tries to be everything to everyone, so it is narrowing its focus to “BlackBerry People,” consumers who focus on personal productivity. This is sound strategy. Then, because RIM simply cannot help but shoot itself in the foot at every opportunity, it undercut that message by bringing a bunch of game developers on stage and highlighting a camera feature of its upcoming OS.

RIM demonstrated three aspects of BlackBerry 10:

• RIM briefly showed a glimpse of the new user interface, which resembles a cross between Windows Phone 7 (tiles on the home page allow quick peeks into the app) and what webOS 4.0 might have looked like (with smooth transitions been multi-tasking apps). It certainly appears RIM is developing a modern touchscreen user interface, but that is table stakes, and this was truly just a peek; there was no hands-on with the UI at the show. Even if the UI is amazing, it is unlikely to drive sales on its own. If people bought phones based on great user interfaces, we would all be using webOS and Windows Phones.

• RIM also showed off a virtual QWERTY keyboard with gestures which it claims is the best virtual keyboard available. If this is truly better than what Apple, Microsoft, Google, and several Android developers have created, this could at least keep BlackBerry users from leaving the fold. It certainly fits with RIM’s focus on productivity-oriented users. However, RIM has promised revolutionary virtual keyboards in the past that didn’t pan out, and Apple, Microsoft, and Google all have new versions of their OSs coming in the second half of the year. Apple and Microsoft are well ahead of where RIM is today on virtual keyboards, and all of RIM’s competitors could improve their keyboards further before BlackBerry 10 even ships.

• Finally, RIM demo’d a ridiculously cool camera feature, which combines elements of best shot (rapidly taking multiple versions of a photo), face recognition, and photo editing. If two people are in a photo, you can rotate an on-screen loop around their faces and create a photo that combines the best version of each of them. This is a great feature, and if consumers bought smartphones based on a single camera feature, RIM would be golden. (They don’t, but that doesn’t take anything away from how impressive this feature is.) [Ed: It's worth noting RIM is using third-party Scalado tech for this camera feature]

The bottom line is simple: there is no way that RIM can catch up to Apple or Google in apps, entertainment, or cloud services. The competition simply has too big a lead. There is also no way that RIM can launch a version 1.0 of an OS that is as polished as rivals who have had years to hone the experience and add features. Therefore, RIM needs to create a platform that is so good in a few critical areas that a subset of consumers are willing to buy a BlackBerry 10 phone despite its obvious flaws in other areas.

RIM did not clear that bar with what it showed off in Orlando. When I pressed Thorsten Heins on this after the keynote, he insisted that there is much more to BlackBerry 10, and that he simply isn’t willing to tip his hand so far before launch. In other words, “trust us.” I would love to see RIM succeed both for personal reasons (I have friends at the company) and for professional ones (healthy industry competition is good for analyst firms — it means there is more to analyze and more clients to analyze for). Sadly, RIM has had a horrific track record executing over the past four years, and it is asking for a further leap of faith. Do you trust that RIM has amazing hidden features on tap, and that it will now be able to execute at a dramatically higher level?

In its favor, the Beats brand has credibility, as it is tied to hip hop legend Dr. Dre and music industry legend (and American Idol advisor) Jimmy Iovine. There is more to Beats than just Jimmy’s impassioned speeches about how important audio quality is; beats headphones have become fashion accessories. I have conducted a completely unscientific survey by observing the public school teenagers walking in front of my home office window on their way to the deli around the corner. Conclusion: 70% of Beats buyers wear them entirely as fashion statement/collars (the cords are actually disconnected!).

HP was the first tech brand to hook up with Beats for its laptops and short-lived TouchPad. The Beats brand is apparently so valuable that HTC paid $300 million (three. hundred. MILLION. dollars.) to invest in the brand, put the Beats logo on its phones, and presumably get invited to really swanky parties with rock stars. I’m guessing AT&T wanted in on all that Beats goodness, but what could it do? HP still has the exclusive on laptops, HTC has Beats for phones, so that left a boombox.

HP gave me a pair of Beats headphones when it was still making TouchPads, and I tested the headphones with and without a Beats-compliant device supplying the audio. The $299 headphones are not a bargain, but they do sound good – the bass is excellent (boosted but still natural – a tough combination to pull off), the midrange and highs are fair, and there is only some lightly audible distortion in the midrange from the noise cancellation (all active noise cancelling headphones have some distortion, as quite literally that’s what noise cancellation is).

The noise cancellation itself is very good, though not as good as Bose’s QuietComfort line. The Beats audio mode on the TouchPad and HTC Rezound (a Verizon Wireless exclusive) are less impressive – as far as I can tell, it’s just an EQ setting. However, the headphones on the Rezound are much, much better than freebie headphones you usually get with phones or media players, and the combination works well.

So how does the Beatbox portable stand up? I got one in to test, and the good news is that it has nice industrial design, and it also allows iPhone/iPod users to choose whether to dock their device in the 40 pin connector, or use it (or any Bluetooth device) remotely as a Bluetooth speaker. The Beatbox’s carry handles make it ideal for lugging to start a party. This is actually the best reason to buy the product, because it plays LOUD. Ridiculously loud.

Honestly, I have tested a lot of audio products, and when plugged into an AC outlet, the Beatbox portable plays louder without distorting than anything else its size. I got out my SPL (sound pressure level) meter and measured it solidly in the 90 – 95 db range from a distance of ten feet away. That’s more than enough to cause permanent hearing loss after just an hour’s exposure according to the alarmist websites I consulted. It’s also loud enough to drive a really good party according to the teenagers I consulted.

The bad news is that, unlike Beats headphones, the Beatbox portable’s audio quality is just fair at any volume. Vocals are clear but not warm, and highs are nothing special. There is a slight boxy coloration to the sound (you can hear the plastic cabinet), and there is no stereo separation whatsoever. The Beatbox portable does not appear to share other Beats products propensity to boost bass frequencies; that isn’t bad, just unexpected. At 7 lbs. it can get quite heavy to carry around – and that’s before inserting six D cell batteries (not included) or considering the 1 lb. power brick for AC (included). It is not waterproof or sand-proof, so if you do take it on the go, you’ll have to stay away from the beach or the pool.

Logitech’s $99 Z515 cannot play anywhere near as loud, but offers equivalent sound quality and an integrated rechargeable battery. Unless you absolutely need to blow the roof off – or you are captivated by the Beats brand – the $399 price tag is awfully hard to justify. But if you do decide to spend a fortune on the Beats brand, you will be in good company; buying into the Beats brand as a consumer will be a lot less expensive for you than it was for AT&T or HTC.

After an exhausting day walking the show floor and paying $4.50 for a bottle of water (this is why you can’t have nice things, New York City), I realized that instead of writing a column about all the cool connected toys I discovered, I was going to end up with something quite different. First of all, Toy Fair reflects an industry with a few very large players – Toys R Us, Walmart, and Target – and a lot of very small independent toy shops. My guess is that the big box stores don’t need Toy Fair – the big vendors court them year round.

As a result, most of the Toy Fair exhibitors seemed to be aiming at buyers for mom and pop stores, and were not quite sure what to do with someone with a press badge. For example, when I would ask about pricing, I was consistently given wholesale pricing by the case – something that never, ever happens at CES, E3, IFA, or even CEDIA, which is aimed at retailers/installers. The booths reflected this emphasis as well; there were aisles and aisles of educational toys, stuffed animals, and crafts – the sort of merchandise you find in independent toy stores. The odd thing was that there wasn’t much in the way of associated services (finance, inventory management software, buyer’s collectives). The odder thing was that none of the goods on display had any sort of connectivity.

I wasn’t shocked to find that green toys promising old fashioned play value from companies like Box Creations had not added WiFi routers to their cardboard forts. I understand – and appreciate – that independent stores are looking for products with play value that utilizes a child’s imagination and encourages deeper play than pushing a button on the back of a doll that says how much it likes fashion and hates math. However, I was a bit taken aback that connectivity was missing from products like science kits, where a smartphone app could be used as a way of instructing, monitoring, and interacting with the circuits/chemicals/biology components.

That’s not to say there weren’t any geeky toys on display:

• littleBits was showing off new components for its system, which can be best described as BugLabs for kids.

• LEGO Systems had new packaging for Life of George, which makes it much clearer that this is an iPhone/LEGO brick combination game rather than a regular box of LEGO. The goal of the game is to quickly build LEGO sculptures that match the picture on your iPhone, which then uses its camera to verify the accuracy of the model. Future variations on this theme are planned. LEGO’s Mindstorms robotics kits were not at the show because the company had nothing new to show off, but an official WiFi module and a 3G module would significantly broaden the uses for the system.

• ThinkGeek had a table with various products from its catalog and online store, along with a prototype of a Bluetooth game controller for iOS devices that looks like an original Nintendo 8 bit game pad. Still, my personal favorite was the lightsaber candle holder, which looks even better in real life as it does in the catalog.

• TeeGee launched an intriguing interactive stuffed animal of the same name. The twist on this modern Teddy Ruxpin (that looks like the offspring of a TeleTubby and a monkey) is that you’re supposed to hide an iPhone or iPod touch inside, which is used for voice recognition, speech, and gameplay.

• DANO Toys was showing off its App Crayon, a child’s stylus for the iPad, along with separate educational apps, such as one that teaches writing to children. There are a lot of styli out there, and some have much stronger brand associations; DANO needs to combine the hardware with the software if it wants to get shelf space.

• There were several vendors showing off Android tablets for children, but, frankly, they all looked terrible. Terrible interfaces, terrible educational software, terrible industrial design.

• Even if there were few genuinely mobile toys, mobile gaming’s influence was strongly felt: Angry Birds was just everywhere. I saw Angry Birds stuffed animals, Angry Birds nightlights, Angry Birds slingshots, foam rockets, flashlights, pens, backpacks, hats, keychains, swirly thingies… and more than one item I couldn’t identify. I even saw a fully analog version of the Angry Birds game: Angry Birds Knock On Wood, from Mattel. I can’t quite pinpoint why this should exist outside of physics teachers and Orthodox Jews suffering from smartphone withdrawal on the Sabbath, but it won a Toy of the Year award.

Finally, while it had nothing at all to do with my original notion of finding connected toys, I was intrigued by Nano Magnetics’ booth full of Nanodots sculptures. Their PR person gave me a vial of their tiny magnets, and I feel urged to warn SlashGear readers to avoid these addictive things at all costs, as there is an inverse relationship between playing with them and productivity. For example, I started writing this paragraph an hour ago.

A Science Museum / Art Gallery

The first thing you notice when you enter the Apple Store in Grand Central Station is that you haven’t entered the store or left the station. While there is a staircase to ascend (you know you’re going in the right direction because a glowing Apple logo is at the top of the stairs), there are no walls. There is no discrete ceiling, either – just the arching roof of the enormous main hall, which is so high that it might as well not exist. The lack of a separation between the station and the store area highlights unique aspects of Apple’s retail approach that have been seen in other stores before – there are no product boxes on shelves, just wide aisles interrupted by large wooden tables with evenly spaced Apple products on them. There are no light fixtures hanging from the ceiling in the cavernous space. Rather than suspend light fixtures from the ceiling and destroy the open feeling, each table is illuminated by an incredibly thin aluminum “T”-shaped LED lamp in the center of the table that nearly disappears. The Grand Central Station Apple Store does not feel like a store at all. Instead, it combines elements of a hands-on science museum with an art gallery.

The shopping experience at Apple’s Grand Central store is mostly similar to other Apple stores, and the changes implemented here are being rolled out globally. Throughout nearly the entire store, there are no product boxes on display, just big tables with evenly spaced products and wide aisles. Every device in the store is live, loaded with apps and ready for hands-on experimentation (compare this to your average big box outlet or carrier retail store where many products are not properly charged, none have apps, and dummy units still exist). Help isn’t just at the Genius Bar, but all around you. If an Apple employee isn’t lurking nearby, you can ask for help via the iPads affixed to the tables as informational displays. Employees carry iPhones in cases which have built in credit card readers, and when a customer asks for help, a map of the store and the location of the customer requesting help (based on the unit used to call for help) is broadcast to the phone/sales terminal of every salesperson in the store. Once one responds, the employee’s picture appears on the iPad that was used to summon help to provide a visual cue to the customer for who to look for in what is sure to be an incredibly busy environment.

From that point on, the employee never has to leave the customer’s side. Employees can act as a trusted advisor – they are non-commissioned and are trained to solve problems, not just sell Apple Care (though there are store quotas they aim for, so at some point, gentle pressure may be applied). There are no cash registers or lines, and the employee does not even leave the customer’s side to close the sale or get products out of inventory. Instead, the employee swipes the customer’s credit card right there, and the order is relayed to a runner who brings the product directly to the customer. This part of the experience feels a bit like buying a copy of an item on display at an art gallery.

Help Yourself

Self-serve is hardly a new innovation in retail overall; consumers can check themselves out at thousands of grocery and home improvement stores across the country. However, it has never really been tried at electronics stores until now. Armed with an iPhone and an Apple Store app that scans barcodes using the camera, customers can buy accessories by EasyPay, which debits the credit card on file with iTunes without ever interacting with an Apple employee at all. There are no obvious security measures in place in the accessories room – and it is one of the few areas in the store that is a true room with regular walls – and there is no Costco-style greeter checking e-receipts.

Still, while Apple is showing consumers a remarkable level of trust, I assume there are hidden cameras, a live feed of EasyPay transactions, and security guards monitoring them in the background (this is New York City, after all). iDevices cannot be bought using EasyPay, nor can some accessories. If there is logic to which products can and cannot be purchased this way, it eluded me. It is not based on price; Monster Beats headphones ($299) can be purchased via EasyPay. It is not based on brand or complexity, either; Apple TV units ($99) require a salesperson, while an Apple AirPort Extreme Base Station ($179) can be self-purchased. The process is clear and simple, though: if a product cannot be purchased using EasyPay, the app offers the ability to summon a store employee for the transaction instead.

In addition to the Genius Bar for free tech support and staging areas where customers can purchase individualized training, Apple has long used its stores to offer free educational seminars on its products and how to accomplish various computing or creative tasks. For its store located in a commuting train station, somebody had the brilliant idea to offer Express Workshops during morning and evening rush hour. These 15 minute mini-sessions are perfect for gearing up before a day at the office (Productivity Apps, 9 AM – 9:15 AM) and what to make for dinner before catching the train home (Cooking Apps, 7:00 – 7:15 PM).

Where is Apple TV?

The one odd note is that the store does not have any televisions – or really any room to demonstrate one. Freestanding tables are not ideal environments to show off living room staples that are often wall-mounted, and if Apple did put large televisions on the tables, it could obscure the open layout that makes the stores unique. This does not mean that the rumors of Apple’s entry into smart TVs are false, but it does mean things will need to be reconfigured at retail if Apple does decide to enter the market. Even if Apple does not start offering a line of 50” HDTVs, the current layout makes it awfully hard to showcase Apple TV. Indeed, even in the largest of Apple’s existing mall and standalone stores, Apple TV is, at best, shoved off into a corner. This presents possibly the only area where Best Buy outdoes the Apple experience – its Magnolia store-within-a-store areas have pseudo living room suites where the virtues of home theater and streaming media players can be experienced.

Physical Retail vs. Online

Apple spends extra for premium, high foot traffic locations to make it easy for people to stop in and play with the products even if they aren’t in the market for a new phone, tablet, or computer. While Apple continues to sell plenty of products online at Apple.com, the evolution of its retail store environment ensures that consumers – even ones who ordinarily buy electronics almost exclusively online – have a reason to come to the store. And then they buy.

Author’s Lament

This year I had a tougher time than usual, not because vendors weren’t willing to send over gadgets for me to test – oh, they were. It just seemed like this year I got a much worse percentage of products that just weren’t good enough to recommend. To make this list, I had to suffer through bad streaming media boxes, terrible QWERTY remote controls, remote control helicopters that were not terribly controllable, clothing made with moisture-wicking technology that didn’t work, useless car-finder gizmos, “revolutionary” earbuds that aren’t, unique speaker systems that sound awful, and an extended battery system for portable game consoles whose installation can break the console itself. I nearly put the helicopter – Griffin’s HeloTC – on the list anyway because sort-of-controlling a little helicopter via an iPhone is cool, and making family members scatter from a perpetually out-of-control helicopter can be great fun. I also received a slew of fitness-tracker gadgets, but haven’t had the time to test them fully. Maybe I’ll do a New Year’s Resolution Gift Guide follow up.

Tablet and Smartphone Accessories

Last year I recommended Belkin’s Woogie case, which apparently has been updated somehow (the upgrade did not arrive in time for this guide). Along the same thought lines, Speck figured out a safe way to give your small child an iPad – by encasing it in foam, making it adorable, and giving it handle arms. The iGuy ($40) works with either the original iPad or the iPad2 and leaves the 40 pin connector, headphone jack, and camera unblocked, but it can be a bit hard to get on and off the tablet.

For mounting an iPad in the car, I was impressed with Vogel’s RingO modular docking station system ($100), which is pricey but fits securely around the headrest. The iPad snaps on or off easily and can tilt for optimal viewing angle. Vogel also sells an overpriced wall mount ($70) but that unit provides no tilt or extension – unlike many of Vogel’s TV mounting systems. An under-counter mount would be ideal for people who use their iPad in the kitchen. Maybe next year?

I like to think of Dream Cheeky’s iLaunch Thunder as a product that is just ludicrous enough to be brilliant: it is a wireless foam missile launcher controlled over Bluetooth by your iPhone, iPod touch, or iPad. The company has made similar products in the past that tether to your PC via USB and can be controlled by an iOS device over WiFi, but who wants to be tethered to a PC? The iLaunch has its own rechargeable battery, offers 270 degree rotation, 40 degrees of vertical tilt, and darts fly straight for about 20 – 25 feet. You can aim via accelerometer (great fun, impossible to get any degree of accuracy) or touchscreen (better, but still not perfect). The iLaunch will not make a dent in any serious cubicle war – firing time is too slow, and you’re going to lose the four darts it comes with (Dream Cheeky really ought to include a few spares in the box). But it looks good, and when placed out of the way and carefully aimed ahead of time, can be a great way to ambush your boss. Just be prepared with a regular Nerf gun for the aftermath.

I’m a big fan of many of Speck’s cases, mostly from familiarity – Speck is more proactive at distributing products to the media at trade shows than nearly any other accessories vendor – but my absolute favorite product of theirs right now are the soft-touch SeeThru SATIN MacBook Air covers ($50). It adds almost no depth or weight – critical for such a design-centric notebook – and protects the Air from scratches and dents (let’s just say that it is possible to dent the Air’s aluminum case and that you do not want to do this). As a bonus, Speck’s cases can make your silver Air jet black or crazy happy orange. The product is mistakenly named “satin” which sounds… frilly. In reality, it’s a rather awesome electric orangey hue.

I tested a lot of keyboards this year. A lot. Keyboards for Macs and PCs, keyboards for Android and iOS tablets, keyboards for Motorola smartphones. The good news is that I can recommend several of them, especially since many people buying tablets are trying to use them as notebook replacements. The productivity software I personally need for my workflow isn’t “there” yet, but if your needs are different from mine, adding a physical keyboard can make a big difference in typing usability. My favorite overall is ZAGG’s brand new FLEX Bluetooth tablet keyboard ($80). The keyboard case acts as a stand for your tablet, and a switch on the back changes the function keys from iOS to Android. Key travel and spacing on the not-quite-full size unit is good, and the internal battery is rechargeable. However, the real reason this is my favorite is because it is incredibly light and compact. Since I don’t always use the keyboard, the minimal size and weight mean I am more willing to carry this one with me, just in case.

However, if you know you’re going to be using a keyboard all the time, the slight additional bulk and weight of Logitech’s Tablet Keyboard (in either iOS or Android versions, $70) is easily offset by superior key size, layout, and travel. Here, too, the cover serves as a tablet stand.

Honorable mention goes to two of Logitech’s other iPad keyboards. The Keyboard Case ($99) sacrifices typing comfort with compressed keys and side ridges that dig into your wrists, but doubles as a handsome hard metal case for the iPad itself. Logitech also deserves credit for creating the Fold-Up Keyboard ($129), which is an expensive, bulky plastic contraption that transforms – literally – the iPad into a netbook. Lift the iPad, and a full-size butterfly keyboard slides open. It is endless fun to open and close, but not so fun to carry around. It also forces you to use the iPad in landscape mode, and the sliding mechanism makes the whole unit feel flimsy. Still the butterfly keyboard makes a great conversation piece, and I have a soft spot for objects that feel like Transformers toys.

Books

Barnes & Noble’s Simple Touch ($99) is my favorite eReader for the technophobe. It has no ads, plenty of content, a dead-simple user interface, and a great price. However, if you’re going to buy someone a vending machine, give them some quarters, will you? Buy them a Barnes & Noble gift card to get them started with their first book or two.

It’s hard to believe, but there are still actual physical books on the market. If you know an adult LEGO fan, one way to delight them by validating their hobby is by giving them the coffee table-sized “The Cult of LEGO” ($39.95, no starch press). The book aims to provide a broad overview of the LEGO phenomenon rather than exhaustively cover any single aspect (such as professional model makers or conferences), but it could be perfect for the adult who has recently re-discovered LEGO – or one who hasn’t yet.

Music

I travel a lot, and I’m always looking for a speaker to take with me on the road. This year’s winner was Logitech’s Tablet Speaker ($29.95), a tube that clips onto your tablet (or not – it works equally well sitting next to a notebook or plugged into an iPod or a phone). It isn’t as compact as I’d like it to be, but is perfectly shaped to fit in that recess between the handles of a rollaboard, is incredibly light, and is fully rechargeable. This is a travel speaker and, while you shouldn’t expect it to be heard over guests at a party, it plays louder and cleaner than internal speakers on tablets or notebooks. It perfectly fills a hotel room with music or can be used by salespeople who give presentations using an iPad.

Does it seem like I recommend a Sonos product each year? Yes. Does Sonos introduce a new recommendation-worthy product each year? Yes. This year Sonos simplified its naming scheme across all its products, launched a free Android control app for phones and tablets, and introduced the $299 PLAY:3, a smaller, lower priced entry into the Sonos line. For the uninitiated, Sonos is a dead simple way to add music to every room in your house – each room can be grouped together with other rooms, or can play its own soundtrack; music can come from your PC or the Internet. The $399 PLAY:5 is still the better sounding unit, but the smaller PLAY:3 can fit in tighter spaces. If you assign two PLAY:3’s to act as a stereo pair, their combined output is preferable to a single PLAY:5. You can also BYOS (Bring Your Own Speakers) with the $499 CONNECT:AMP or jack into your home theater system with the $349 CONNECT. You can buy a dedicated Sonos CONTROL-er ($349), or use any iOS or Android device you happen to have lying around; either way, even the biggest technophobe will have no trouble using – or even setting up – the system. Warning: Sonos has been shown to be addictive. Buying a starter system for a couple of rooms may seem relatively inexpensive, but you will soon find that you “need” to add rooms to the system.

However, if you only want music in one room and you have an iDevice, there are dozens of sound docks vying for your attention. But what if you have an Android phone? Google doesn’t mandate that Android phones adhere to any standard size or port layout, and there isn’t a big enough market for any one Android phone for it to be profitable to build speaker docks for them. Philips saw this chaos as an opportunity, and came up with a unique sliding/rotating connector on the ($162) Fidelio Docking Speaker for Android. It works – I tried about a dozen devices, from the Galaxy Nexus to Motorola’s XOOM tablet – and they all fit, though some fiddling was required in some cases, so this is one where you may want to test it with your phone/tablet in the store. The good news is that sound quality equals, or perhaps slightly exceeds what you should expect at this price level. The bad news is that Philips is cheating – the docking connector is just to keep your phone or tablet charged. To actually play music, you’ll need to connect to the speaker over Bluetooth, a process I always find annoying and sometimes error-prone. Philips includes a remote control and has a music management app for good measure, but I wish it would take the extra step and build a music playback app that outputs digital signals through the microUSB connector, then does D/A conversion in the unit itself.

I often recommend headphones as a great accessory for music players and phones – most work with any device brand/OS, they dramatically improve the audio experience over the cheap earbuds that came in the box. The investment in a good pair of headphones can be enjoyed even as you upgrade to the latest iWhatever. There are terrific headphones at the $100 price point, but if you really want to invest and you were somehow unaffected by the economy, may I suggest ($1350) Ultimate Ears 18 Pro Custom In-Ear Monitors? It will be a truly unique gift, as each pair is custom made for the recipients’ ears (you should also budget for a $75 to an audiologist for the mold making). The UE18’s have six, yes, six individual drivers in each monitor, and the sound quality is astonishing. Sure, there are diminishing returns beyond excellent non-custom headphones such as Ultimate Ears TripleFi 10 ($399) or Shure’s SE535 ($549) – both of which I highly recommend, and those can be found on sale, while the UE18’s… not so much. Still, the difference is easily audible, particularly in the bass region; the UE18’s reveal octaves of bass that lesser monitors cannot reproduce. (Note: I was not able to compare them to comparably priced Westone or JH Audio monitors, even though SlashGear has reviewed the JH16 Pro’s. Those have been customized for Vince’s ears, while these will only fit mine). My sole complaint with the UE18’s is minor: they come in a great little hard aluminum case suitable for roadies, which is bulkier and heavier than the ballistic nylon travel cases Shure uses, which are better for traveling light and using the headphones inflight. That’s a quibble. At this price, you should expect to be amazed, and these things are amazing.

Honorable Mention:

If you find yourself with an Xbox and Kinect system this holiday season, go to the Zune Marketplace (on your Xbox or on the web) and buy Fruit Ninja Kinect. For the life of me I can’t figure out the Microsoft Points-to-real-money exchange rate, but the game costs about $6. Your soon-to-be-sore arms may never forgive me, but I am firmly convinced that one of the best Kinect experiences – along with Dance Central 2 (which somehow makes aerobics fun) – is a fruit slicing iPhone game.

There may be fanbois hyping Siri, but its ads just show what she can do (when the server is up). I’ve been calling Apple’s iPhone ads “30 second tutorials,” and they’re fantastic. They not only show you what the iPhone can do for you, but how easy it would be for you to do those things yourself if you only had an iPhone. In contrast, Verizon Wireless’ ads are ridiculous, and most of the time have nothing to do with the products they purportedly are selling.

The DROID ads may be bad at highlighting individual phones – and do nothing for the merits of Android overall – but they have been effective at getting consumers’ attention and serve as useful indicators that this is a product line consumers should be aware of. The DROID line has been extremely successful because of, not despite the ads. DROID-branded phones sell better than the non-DROID-labeled Android phones sitting right next to them on the shelf. Verizon Wireless measures its advertising effectiveness regularly and has found that it has done such a good job promoting the DROID brand that people walk into AT&T and Sprint stores and ask for a DROID phone, not an “Android” phone. Now, I don’t like these ads, either, but Verizon Wireless isn’t stupid, and it keeps running them because they work.

It’s easy to extend the criticism of Verizon Wireless’ ads to all of Apple’s competitors – there certainly have been some doozies. Palm did itself no favors with its ads for a vampire movie (supposedly an ad for the original Pre). The ad for HTC’s Rhyme is downright creepy, but even that pales next to Sony Ericsson’s 2011 Super Bowl ad, which featured a severed thumb. Microsoft’s first Windows Phone ads were memorable, but conveyed the wrong message: they implied that you can get stuff done quickly with a Windows Phone, but you’ll never love it as much as an iPhone.

But not all mobile advertising is bad. Samsung’s Galaxy S II TV spot is pretty good; it can be summed up as, “our phones have better specs because we’re perfectionist geeks.” The ad does a good job of humanizing Samsung’s brand while highlighting its phone’s screen technology, a key product differentiator, and one of the few specifications where consumers easily understand its benefits. HTC’s “You” ads were terrific, particularly its original “Anthem” ad, which showed people both happy and upset by things they do and associations they have with their phones – it’s rare you see a vendor use negative emotion well. Finally, Nokia’s Amazing Everyday campaign (currently running in Europe) is good – the Finns seem to understand how to advertise Windows Phone better than Microsoft itself.

Speaking of platform vendors, Google should be the one promoting its own platform capabilities, but it isn’t. (Ironically, given how it makes a living, Google doesn’t believe in advertising itself much.) Android licensees have shied away from promoting individual Android features for fear of enriching rivals. Instead, they have focused mainly on their own small hardware differences, which ends up appealing only to the small segment of the market that cares about such things.

However, in a vacuum, whoever is first with a strong message can own that message in consumers’ minds. Android has great features: rich home screen customization with glance-able information, persistent mapping across your phone and the web, the best Gmail implementation, and more. If a vendor highlighted those abilities, it is quite possible that consumers would not just want to buy any Android phone, but the Android phone from the vendor that they know has those features. They might not even realize that other Android phones can do those things, too.

So why hasn’t anyone run ads like that? Partly because they have not been bold enough to do so, fearing that it will not give them meaningful separation from their Android rivals. Some have resisted because, deep down, they don’t want to tie their brand indelibly to Google. But that is part of a bigger problem – many device vendors do not have a strong, independent brand identity. That is one of the key reasons Apple can run 30 second tutorials: everybody already knows what Apple’s brand stands for. Motorola? All Motorola used to stand for was fashion. That’s Ed Zander’s fault, and Motorola in the Sanjay Jha era has been too busy trying to survive to effectively redefine the brand.

But Motorola is hardly alone. RIM can’t seem to decide if it is primarily a business or consumer brand. What does LG stand for? Pantech? Huawei? To an extent, Apple’s rivals need to try to stand out because they need consumers to notice them in the first place. I don’t suggest doing that with creepy vampire girls, creepy four-armed women, or Tron refugees battling cyborgs. But I do understand the impulse.

1. The existing iPhone 4 remains on the market or is replaced with an 8 GB version.
2. Apple introduces the iPhone 5 with a larger display, dual core processor, and camera spec bump. And it’s thinner.
3. Apple updates the iPod line with new colors, tweaked designs, and a smaller nano that is designed to work well as a watch.

[Image credit: John Mitchell]

If the above scenario is not guaranteed, it is at least extremely plausible. It would also be considered a failure by the press, despite the fact that the launch would be followed by gonzo sales. It’s the iPhone 4, the best selling phone in the world, only with better hardware and software. What could be better? Actually… there are reasons to believe that Apple could deliver more than that. I call the following speculation the Worst Case Scenario (for Apple’s Competitors):

Sprint and T-Mobile could get their own iPhone 4 and iPhone 5 devices. It is not unusual outside the U.S. for Apple to sell the iPhone through several carriers, and there is no telling what type of exclusivity arrangements Apple has with AT&T and Verizon Wireless or how long they last. A Sprint iPhone could be virtually identical to today’s Verizon Wireless version. A T-Mobile iPhone would require different frequencies than today’s AT&T version, but Apple might be building one of those anyway in case the DoJ allows the acquisition to proceed. The iPhone is the best selling phone at both AT&T and Verizon Wireless. It would be very disruptive to Samsung, HTC, LG, and Kyocera Sanyo if it were to show up at Sprint or T-Mobile.

If Apple sticks with HSPA+ and CDMA/EV-DO iPhones, Apple could be at a significant disadvantage in terms of network speed. Verizon Wireless has nearly half its network lit up with LTE already, and AT&T is starting its own LTE rollout. Conventional wisdom is that Apple will not launch an LTE iPhone until the chipsets are smaller and more efficient. Apple launched the original iPhone without 3G and fared quite well; it may choose to follow the same approach today. However, Apple has delayed the iPhone launch from its usual late June timeframe to September or October. It is certainly possible that it did so to wait for second generation LTE chipsets.

If Apple does go with LTE in this next round of iPhones, it would not only ruin the one area where competitors can claim a real-world performance advantage, Apple could leap ahead on the technology’s Achilles heel: battery life. Apple can tightly tie its hardware to the OS and manage the usage of the modem. For example, the iPhone might only turn on LTE when the OS is downloading large files or a large number of files where the benefits of added speed and lower latency offset the battery life hit, and then turn it off immediately afterwards – all without any user interaction or knowledge. Things will simply be faster, without a big drain on the battery. This is the sort of thing RIM does with the BlackBerry’s 2G and 3G radios, but is something that could be impossible for Android vendors to match. (Google could counter by building heavily hardware-specific versions of Android for Motorola phones, but that would open up a whole can of worms with its other Android licensees.)

Apple could use some new materials and accompanying manufacturing technique that the competition then needs to scramble to reverse-engineer.

Attacking a slightly different segment of the market, Apple could extend AirPlay to enable console-quality games for the iPhone and iPad that allow the phone or tablet to be the controller, and the TV (via a $99 Apple TV) to be the game console. This would give consumers another reason to buy an iDevice and would give a huge boost to Apple TV, potentially taking off the “hobby” label Steve Jobs has given it.

Apple often takes existing technology and finds a way to make it useful for consumers. NFC has been “just around the corner” for the past ten years. Google is off to a decent start with Wallet and Offers, but the installed base of Android phones with NFC is pitiful. Apple could put an NFC chip in each iPhone and within a quarter or two there would be 20 million (or more) NFC-enabled devices in consumers’ hands. Apple would almost certainly launch corresponding developer tools and merchant terminals to complete the loop.

iPad Pro?

Apple’s iPad is dominating the tablet market, and most of the competition’s high profile launches have turned into high profile flops. At some point Apple is certain to upgrade the display on the iPad to something more retina-friendly, and further distance itself from the competition. Could that point be soon?

One More Thing

The single most disruptive thing Apple could do would be to launch a mid-tier iPhone with an unsubsidized price under $300. Nokia, Samsung, RIM, and Sony Ericsson sell a lot of smartphones in the $250 – $400 range. This price point serves both as a high end device in emerging markets and a mid-tier device in developed markets, particularly those where the majority of phones are sold without contracts and subsidies. (Nokia used to completely dominate entry level smartphones but has been undercut lately by Android phones from Huawei and ZTE). Apple is doing exceptionally well selling the iPhone, but there are large parts of the world where a $700 phone is too expensive, regardless of its attributes or desirability. A sub-$300 iPhone would end up free in the U.S. with a two year contract, or it could be sold partially subsidized by regional prepaid carriers who would use it as a way to compete with their national, iPhone selling rivals, on a level playing field.

Outside the U.S. it would be even more dangerous. RIM is struggling in North America, but its BlackBerry Curve sales in parts of Europe are soaring thanks to BlackBerry Connect. A sub-$300 iPhone with iMessage would be devastating to RIM. If China Mobile had a budget iPhone to offer, it would sell tens of millions of units, making life very difficult for Nokia, Samsung, LG, Huawei, ZTE, and Dell.

How likely is a budget iPhone from Apple? Almost assured, although the timing is unknown. Cost-reducing the iPhone is not trivial, and the end product will still have to be an iPhone in terms of design, capabilities, apps, and content. However, this should not be impossible for a Tim Cook-led Apple. After all, Apple profitably sells the iPod touch for $229, and that is essentially an iPhone 4 without WWAN voice or data. A lower cost iPhone could greatly expand Apple’s addressable market, and it would give the competition fits.

Apple Rumor Column Disclaimer: Avi Greengart is the Research Director for Consumer Devices at Current Analysis. He is a market analyst, and he holds no stock in Apple or any other individual tech company. All wild guesses in this column are his own and are not based on specific information from the hairdresser across the street from a factory in Shenzhen making cases for the iPhone 5, Cupertino bartenders, or DigiTimes.

Steve did not invent Apple products alone. Nearly his entire executive staff — including everyone involved in iOS product design, development, and manufacturing — is still at Apple, and it’s not like they will suddenly forgot the lessons learned from working with Steve over the past decade (the man makes a strong impression).

[Image credit: Brett Weinstein]

Apple’s enormous price and manufacturing competitive advantages were all masterminded by Tim Cook – you know, the guy who’s been the interim CEO during much of Apple’s growth spurt over the past few years, a position that has now been made permanent. Apple’s “overnight success” in phones and tablets was actually built up slowly over the years, with each new product leveraging existing platforms and user interface designs, and each platform expanding its functionality over time. Now that Steve has moved to Chairman of the Board, Apple is not abandoning any of these advantages, rather it is pressing them and building new ones in iCloud and AirPlay.

Apple is probably more dangerous to competitors now than it has ever been. For example, the iPhone 4 has been on the market for over 14 months, its price has not dropped a penny, and it outsells every other phone on the market. In the coming months, a new iPhone will be launched, and that means that today’s best selling phone will almost certainly remain on the market at a lower price point. Unfortunately for Apple’s rivals, that isn’t even the worse case scenario.

Best Case Scenario (for Apple’s Competitors)

1. The existing iPhone 4 remains on the market or is replaced with an 8 GB version.

The iPhone 4 will get an upgrade to iOS 5, which brings iCloud and various software improvements. It is possible that AT&T and Verizon Wireless will decide to subsidize it only down to $99, as they will both have it, so AT&T won’t be able to uniquely offer a low priced iPhone. However, AT&T sold millions of iPhone 3G S’s at $49, so there is every reason to believe that they will do it again. If AT&T sets the iPhone 4 price at $49, Verizon Wireless will probably match it.

2. Apple introduces the iPhone 5 with a larger display, dual core processor, and camera spec bump.

The larger display would still have the highest resolution display on the market, but spread out over a larger surface area, subjectively improving web browsing, media playback, and apps. Apple will almost certainly implement the display along with new manufacturing methods that requires minimal bezel and does not radically enlarge the phone overall.

Apple is reportedly already using HSPA-capable chipsets in the CDMA iPhone, and with the new version, Apple should be expected to enable that functionality. Apple sweats the details; it could also push carriers to offer simpler and more affordable roaming plans as part of the deal or insist that the HSPA portion of the phone remain unlocked for use with prepaid microSIM cards.

Apple will reiterate all the iOS5 benefits, including iCloud. There may be a 64 GB version for folks like me who have way too much content to fit into 32 GB. Oh, and it will be thinner (it’s always thinner).

3. Apple updates the iPod line with new colors, tweaked designs, and a smaller nano that is designed to work well as a watch.

September is traditionally when Apple updates the iPod line, and while pushing out the launch date on the iPhone means that the smartphone will get the lions share of attention, there is no reason to think Apple will neglect the iPod. You might wonder, “what’s the point, aren’t iPod sales declining?” They are, though even in decline the iPod is still selling millions of units a quarter. The iPod has always had an element of fashion to it, and annual updates are a key part of its success.

This scenario would leave Apple with a much improved iPhone at the high end both in terms of hardware and software, it would put an entry level iPhone at Verizon Wireless, and would give retailers a refreshed iPod line. Apple would be set to break all kinds of sales records with the new iPhones, but this would be widely positioned in the press as a disappointment since none of the wilder rumors were borne out.

If the above scenario is not guaranteed, it is at least extremely plausible. However, there are reasons to believe that Apple could deliver more than that. In my next column, I’ll explore what would constitute a Worst Case Scenario (for Apple’s competitors).

Apple Rumor Column Disclaimer: Avi Greengart is the Research Director for Consumer Devices at Current Analysis. He is a market analyst, and he holds no stock in Apple or any other individual tech company. All wild guesses in this column are his own and are not based on specific information from the hairdresser across the street from a factory in Shenzhen making cases for the iPhone 5, Cupertino bartenders, or DigiTimes.

In AT&T’s press release announcing its second quarter 2011 earnings, the following bullet point appeared:

• Best-ever second-quarter smartphone sales of 5.6 million; nearly 70 percent of total postpaid sales were smartphones.

Most of the analysis I saw about AT&T’s earnings related to how many iPhones were sold (3.6 million) and, with some basic math, the revelation that the iPhone makes up 64% of AT&T’s smartphone sales (3.6m out of the 5.6m total). That certainly makes life interesting for Android licensees, Windows Phone 7 licensees, RIM, and HP, who are all fighting over the remaining 36%. Yes, it’s amazing, Apple is blowing the doors off of everyone, yadda yadda yadda. What I think it even more amazing is the second half of that bullet point: nearly 70 percent of total postpaid sales (i.e., phones bought with a two-year contract) were smartphones.

It comes as no shock to anyone that smartphone sales are rising – they have been for several years now. But 70%? That means nearly three out of every four people buying a phone with a contract at AT&T are willing to pay for a data plan. Until recently, the shares were reversed – only 30% of phones sold were smartphones. Admittedly, AT&T is a trailblazer here (other carriers also show huge gains in smartphone adoption, but not this large) and this only refers to the post-paid business (contracts, not prepaid), and not to the installed base overall (which is still a tiny bit under 50% – a stat that is buried farther down in the press release).

As I predicted, capped data and lower cost entry level data plans are opening the market to new users and driving smartphone sales. Some of AT&T’s lofty numbers are driven by its exclusive $49 iPhone, but, realistically, Verizon Wireless will get a “last year’s model” iPhone in time for this coming holiday season, too. It is clear that the majority of phones in the U.S. will soon be smartphones, and this leads to some interesting dynamics for vendors of featurephones and smartphones alike.

One effect is that carriers are shrinking the number of featurephones they offer in favor of more smartphones. Instead of multiple clamshells and a variety of touchscreen and QWERTY phones, carriers are offering just one or two of each. Touchscreen featurephones are less attractive now that real smartphones with better user interfaces are available at the same price and consumers better understand the value proposition that a touchscreen brings. In other words, consumers buying a touchscreen phone for web browsing are already paying for a data plan and will opt for a smartphone. There is still a segment of the market that cannot afford a data plan but still want a phone that looks like a smartphone, but carriers likely will not offer more than one model of this type.

Ironically, consolidation can ironically be a good thing for some vendors – less shelf space means that the featurephone volume goes to whichever phones and vendor remain. As this volume remains significant, vendors can be expected to fight hard to be the last one standing. Counter-intuitively, the situation also favors incumbent vendors like LG, Samsung, Kyocera, and Pantech over Chinese vendors such as Huawei and ZTE eager to break into the national carriers. How? Carriers are focusing on selling smartphones, not featurephones. In some cases, carriers may prefer to consolidate their featurephone business with vendors they are already comfortable with because they value lower support costs over small differences in handset cost. The flip side of this equation is that featurephone vendors must ensure that their quality control does not slip even slightly, as any problems with the few phones being offered will be magnified and could result in the vendor losing the account entirely.

Of course, featurephones will not go away completely any time soon. They remain attractive to segments of the market who cannot afford smartphones, can’t afford data plans, or prefer simplicity. Smartphones are too expensive for many buyers in emerging markets, and even Moore’s Law will not change that in the short term. Similarly, featurephones are still the only way to meet the needs of entry level prepaid phones in developed markets, where the devices are practically disposable. It is important to clarify that simplicity-seekers are not necessarily older demographics, nor only served by featurephones – the iPhone is extremely popular among older consumers as it is easy to navigate, has no menus to get lost in, and has an extremely large keypad.

Sadly, there are several other reasons why good companies make bad products.

Our Customers Love It, So We’re Giving Them More of the Same

If you haven’t read Clayton Christensen’s The Innovator’s Dilemma (Harper Collins, 2003), your business education is missing a core component. The book lays out a premise for what seems to be a good idea: successful companies listening to their customers and serving them more of what they want. Sounds great, right? But if the market is evolving away from that type of product, listening to your existing customers can be fatal.

For example, take Symbian. For years, Nokia sold tens of millions of Symbian phones, and as recently as nine months ago, the company pointed to research showing that its customers loved their phones. And they did. So while Nokia did see fit to adapt Symbian to the new touchscreen paradigm, it saw no reason to radically change its platform strategy and upset their huge Symbian customer base.

The problem was that when these same happy customers went to buy new phones, they discovered that iOS and Android phones were better in new metrics of apps, media and user experience; Symbian may have been familiar, but it didn’t measure up. Sales and profits dropped, and Nokia had to radically change course.

The Distribution Channel Wanted It (Actual Customers? Not So Much)

Another instance of when listening a bit too closely to your customers can be a problem is when that customer is a middleman, not the actual consumer. There are plenty of examples, but one that jumps out at me is LG’s Style-i pen-like Bluetooth message alert dialer thingie from back in 2006. There was almost no practical use for this gizmo, and as soon as this was announced I demanded one for my collection to use as a prop during presentations of what not to do.

When I asked LG why they built it, they said that Verizon Wireless was looking for a unique Bluetooth accessory and they developed it at the carrier’s request. Just looking at the product and trying to describe it to a regular consumer should have been enough to kill the product, but, at the time, Verizon Wireless was LG’s largest customer in the U.S. – and LG didn’t want to say no. (Ironically, while this may have been a terrible product, making it and staying in the carrier’s good graces for its main product line was probably the right business decision overall.)

A Product Of One

Sometimes the product itself is great, but it is competing in a category where the product itself is simply not enough – it really needs to fit into a larger ecosystem. If you cannot get content owners to sign on to your new optical disc format, you can have the world’s best player and it won’t sell. If your product requires integration, you’d better ensure there are integrators with both the capabilities and incentives to do that work, or the best product will be left hanging.

For a contemporary example, take Apple’s iPad: Apple has an army of software developers supporting it, scores of accessories manufacturers developing complementary products for it, and a fully stocked store selling digital media content. Building a nice piece of hardware that does basically the same web browsing / email trick as the iPad without the rest of the ecosystem is not going to be competitive.

It May Eventually Be a Great Product (We Just Shipped it Before It Was Finished)

This is so common that in many cases, the company knows the product needs more work – and ships it anyway. Sometimes the company even announces that the rest of the features (or bug fixes) are coming down the road. So why would a company ship before the product is fully baked? It turns out that there are at least four distinct reasons why a company might ship a product when it clearly needs more work, and one of them is a direct result of Steve Jobs’ success.

1. To please Wall Street. Public companies have to report earnings quarterly, and the pressure to hit those numbers – especially once guidance has been given – can be intense. Shipping a product early often creates problems down the road, but you can always deal with problems down the road… down the road. Or so it seems at the time.

2. To make internal numbers. Sometimes Wall Street isn’t the driving factor, but internal projections and politics. Getting a product out the door and getting revenue in for your division can be the difference between being fired and being promoted. Perversely, in large companies where the success or failure of individual products does not impact the bottom line directly, this tactic can actually work. It goes something like this: ship buggy product, get promoted, blame failure of buggy product on unlucky sap who got your old job; if the buggy product is ever fixed, take credit for launching that product.

3. To hit a sales window. The most obvious of these is the end of year holiday sales season – if you don’t have your product on the shelves by Black Friday, you will miss a rush of sales that will not materialize again for another year. Similarly, if you’re selling a product to college students, missing the back to school sales season means missing out on sales you’ll never get back. A sales window is not necessarily a fixed date on a calendar, it can also be driven by competitors’ release schedules. If you want to make a big sales splash before a competitor launches their much anticipated device or service, but your product is not actually ready yet, there is pressure to release it now anyway.

4. Thinking You Are Steve Jobs Syndrome. There are times when an iterative product development process – getting something out the door and getting customer feedback before making further changes – is the best approach. This works especially well with software and online services. But even with consumer electronics, there are fears that if you spend too long working on a product, you get diminishing returns from those added features or polish. In other words, “the perfect is the enemy of the good.” You also don’t want to be in development forever, after all, Steve Jobs is known for saying, “real artists ship.”

But that’s where Steve Jobs really trips people up – by setting an unusually high bar for launching products with just the minimum features needed to create or reinvent a category. Jobs gets credit for being a perfectionist, for setting trends, and for taking technology and creating stylish, friendly, and profitable packages. But Jobs’ true genius is his gift for understanding what can be left out of these products. Unfortunately, many products do not go through product development with Steve Jobs, and instead of being “good enough” they are actually “missing critical features.”

Did I miss any? Let me know in the comments.

Before I explain how a good company can make a bad product, let’s stop for a second and remember that in some cases, that some bad products are not actually bad products, they just were not designed to appeal to you. One thing that reviewers and analysts always need to keep in mind is that everyone has a built in bias – and I’m not talking about cases of intentional bias or “fanboi-ism,” just the reality that some of us are old, some young, some will buy anything that’s pink, some hate pink, some have large hands, and some small.

For example, if I was evaluating Motorola’s Flipout without proper context, I’d say it’s a terrible phone: the twisting screen requires rotating the whole device for no apparent reason, it is too wide to hold easily as a phone, and the square display means that some Android apps don’t run. However, the Flipout is aimed at teenagers, not 40 year old consumer device analysts (yeah, I turned 40 last week. I’m old now). So I showed it to my focus group of teenagers, and, as I suspected they might, they loved it. Square phones are in, swinging the screen around is reportedly “fun,” and they loved the fact that it has both a full QWERTY keyboard and a touchscreen – the width didn’t bother them one bit.

Other times, the product isn’t bad, per se, it just isn’t competitive with the other products on the market because it is priced wrong or because the market is saturated and this product does not bring anything uniquely valuable to the table. This is something I see all the time, and helping companies understand where their product fits in the market (as opposed to where they think it should fit in the market) is one of the key services a market analyst can provide.

But what about when it is genuinely a terrible product? How did it get to market? And why would a company try to sell a product that they know is awful? I have identified five main causes; I’ll start with two here and finish the list next time.

Performs to Spec

The product is terrible, but it does exactly what the spec called for, so the company thinks its great and can’t understand the criticism. This usually happens when products are designed by engineers or software developers, and are only shown to and tested by other engineers or software developers. Here are some telltale signs that this is the problem:

• There is no genuine consumer need for the product
• Features that consumers expect in a product of this type are missing
• No regular consumer could use the product without a six month training course

Fixing this problem is relatively straightforward: bring in professional product managers and give them the authority to do their jobs.

I’ll Show You

The product is obviously a horrible idea, but it was the pet project of the CEO. Nobody was willing to contradict him throughout the development process (or their objections were ignored). In fact, the CEO still thinks it’s a great product and that he’ll be proven right in time. This happens a lot with CEOs who have had success in the past bucking conventional wisdom. They are used to people telling them that their idea is crazy, have come to enjoy their reputation as an “out of the box thinker” or “maverick,” and may have even come to consider negative feedback akin to validation. This is compounded by the reality that doing something genuinely different is often only way to reap outsized rewards and achieve exceptional growth. The problem is that conventional wisdom is correct some of the time.

Unfortunately, there is no easy solution here – sometimes you have try crazy things. Sometimes they fail. The best you can hope for is to learn from them.

In my next column, I’ll talk about the innovator’s dilemma, incomplete solution sets, and three reasons a company might ship a product before it is ready.

The data answer is simple: 13% of the smartphones at the four national carriers in the U.S. have screens 4” or larger.

The analytical answer is a bit more complicated.

When discussing screen sizes, I don’t think you can ignore the elephant in the room – Apple – which limits its product line and does a lot of thinking and experimenting before launching anything. Apple believes that 3.5” is the perfect screen size, and they’ve sold over 100 million iPhones with that screen size, so it’s hard to argue that they’re widely off the mark. But I will say that as long as you keep the dimensions small with minimal bezel and a thin case I think you can comfortably go to 3.7” without any negative impact on holdability whatsoever. If you asked me what the ideal screen would be, a high pixel density 3.7” display would be it.

Screen sizes of 4” – 4.3” push the limit of what is comfortable to hold — and cross that line for many consumers. While this size is too big for some users, it does appeal to people looking for the biggest possible screen. There can also be retail marketing benefits to this screen size: these devices stand out on the shelf, and poorly trained retail sales staff often gravitate to them as hero devices (even if smaller screened devices are more technically sophisticated).

With this size display, case thickness and tapering matter as much as the display size itself: HTC’s 4.3” Thunderbolt and Samsung’s 4” EPIC 4G (which has a sliding QWERTY) are both bulky, while the 4” Sony Ericsson XPERIA X10 is quite manageable.

Above 4.3” is too big. I have seen a phone with a 4.5” display in an exceptionally thin case that almost works, and the retail marketing bump it will get is probably significant. However, its size excludes half the population (how many woman will want to carry a phone that large?) so I would consider it a niche size at best.

The 5” devices I’ve used are not only too big, they are also too small. Once you get beyond the 4 – 4.25” size, the promise is that you’ll get a better browsing experience. But browsing doesn’t really get better until you hit at least 7”, and you need to get to 9” before you can comfortably see a whole page without scrolling (or squinting) in portrait orientation.

Devices with a 5” display are not just uncomfortable to hold to your face as a phone, they make you look a bit ridiculous when doing it. However, 5” does offer a significantly better media and navigation experience than 4”, so dedicated GPS devices with 5” screens make a lot of sense. For example, Samsung’s 5” Galaxy Player (which I played with recently) could make a lot of sense if Samsung makes it easy to get movies and TV on the device.

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1. Brand: When consumers are thinking about tablets, they say they are buying an “iPad,” not a “tablet.” The iPad was already the category and volume leader, and the iPad 2 builds on that. In this respect, Apple actually benefits from the crowd of new tablets hitting the market. If there were only one or two strong competitors, consumers would be able to weigh the pros and cons of each offering, but with dozens and dozens of options hitting the market over the next few months, decision paralysis can set in and many consumers will throw up their hands and make the “safe” choice: the iPad.

2. iTunes: The iPad is still the only tablet on the market with a huge digital marketplace for movies, TV shows, and music. Some competitors are taking steps in this direction (e.g., Samsung’s Hub), but iTunes remains a significant competitive advantage.

3. App Store: If all you want to do is browse the Web and check e-mail, any tablet will probably suffice. However, Apple has an enormous lead in purpose-built apps. The Android ecosystem is strong and app availability should improve significantly over time, but the iPad 2 is considerably more versatile than any of its competitors right now, and it appears unlikely to lose its lead any time in the near future.

So if you are competing with Apple, what should you do? Rather than copying Apple’s products, copy its old advertising tag line and Think Different.

Apple’s brand is focused on creative types (or those who aspire to be), which is why it spends so much effort creating things like GarageBand. Competitors should target IT managers, knowledge workers, outdoorsy people, or some other group and build software and hardware combinations better suited to those use cases. Of course, this will take imagination and the ability to tie hardware, software, and services together to build unique experiences. There are some companies thinking outside the box (HTC and RIM have clearly differentiated products on their roadmaps), but for the vendors who are trying to out-Apple Apple… good luck. Here are some pointers, you’re going to need them:

• Based on Apple’s financials, it is clear that the iPad with WiFi is Apple’s volume product and 3G versions are merely gravy. Why is the competition only targeting the gravy?

• iTunes remains a significant competitive advantage for Apple – I cannot easily explain to novices how to get a movie onto the XOOM. Rivals need an “iTunes” of their own, but having one just achieves parity with Apple, so partnering is an acceptable approach. However, half measures are not enough; digital media stores must include movies (including rentals) and TV shows and music. If multiple partners are used, the tablet vendor still needs to provide a common interface and single account/billing relationship.

• Nintendo has a significant base of game developers targeting the 3DS; if you cannot muster equivalent resources (for gaming, media playback, or some other use), adding 3D to your tablet is just a gimmick.

• Apple’s rivals can compete on 4G, higher-resolution displays, or a lower price. Even speed is a potential differentiator from a technical perspective; NVIDIA has quad-core processors sampling this month, so rivals could build even faster tablets for this holiday season. However, I must still caution vendors that all of these factors are irrelevant if consumers do not want your product.

Those were the opening lines in my first column for SlashGear back in October of 2009. I went on to note that while I don’t usually make specific product predictions, I would go out on a limb and provide a guess on when we’d see an iPhone on Verizon Wireless: in 2014, when Verizon Wireless completed its LTE rollout.

By then, Apple could provide a single iPhone that worked across both AT&T and Verizon Wireless LTE networks. I later adjusted that estimate to 2012 once Verizon Wireless accelerated the expected completion date of its national LTE rollout.

Proof that I should never had made specific predictions came a few weeks ago when I attended a press conference in New York and got hands-on with an iPhone 4 specifically designed for Verizon Wireless’ CDMA network. It started shipping earlier this month.

Apple isn’t building a CDMA iPhone just to sell a lot of phones. There are certainly financial considerations here – Apple was leaving a lot of money on the table by offering its phone through just a single U.S. carrier (Current Analysis doesn’t create sales forecasts, but if we did, it would be a very big number). However, Apple’s business model is to build a hardware platform once and then focus on software and services.

Other handset vendors build both CDMA and GSM devices, or even multi-mode devices, but for Apple to justify building an entirely separate hardware platform, it needed more than just the promise of additional device sales. Verizon Wireless admitted as much when it noted that it was never in the running for the original 2007 iPhone, and that it had to approach Apple in 2009 rather than the other way around. In addition to being an exceptionally profitable endeavor, Apple had three reasons to build a CDMA iPhone:

1. Blunt the rise of rivals. Without an iPhone, Verizon Wireless was forced to back other operating systems. The carrier proved to be a powerful backer, first fueling sales of miserable touchscreen products from RIM and then increasingly strong Android devices. To some extent, the damage has already been done with Android, which evolved extremely quickly from an OS only a geek could love just eighteen months ago, into a polished user experience with 2.2 and later. Still, an iPhone at Verizon Wireless should slow Android sales going forward and prevent Verizon Wireless from overinvesting in webOS or Windows Phone 7.

2. Offload some of AT&T’s network traffic and disassociate Apple’s brand from AT&T in the U.S. AT&T’s network has repeatedly failed in three locations: the San Francisco bay area (where Apple is located), New York City (where much of the media and most of the financial industry is located), and anywhere a few hundred journalists converge (such as CES press conferences at the Venetian). AT&T has made strides in improving the network performance in Manhattan and the AT&T-Apple relationship remains strong, but Steve Jobs is a perfectionist, and a large part of the consumer experience of a phone is the network it is on.

3. Finally, it turns out that waiting and doing a single LTE/HSPA iPhone is not really an option. Verizon Wireless and AT&T are both migrating to LTE for their 4G network deployments, but, at least initially, both companies are using LTE just for data, not voice. This means that Apple cannot wait for the national LTE rollouts to be complete and then create just a single LTE iPhone, because it still will not function as a phone on Verizon Wireless without CDMA in there, too. (A single LTE device may not work properly on both AT&T and Verizon Wireless in any case; while both carriers are deploying on the 700 MHz band, the specific frequencies used within those bands is far enough apart that the antenna may have to be tuned to one network or the other for best performance.) Given these circumstances, building a CDMA/EV-DO iPhone is a necessary prelude to any LTE iPhone in the future.

So, now that we have a CDMA iPhone, when will Apple build an LTE iPhone? I think I should probably quit making these sorts of predictions once and for all. Sorry.

Stocking Stuffers

For recipients who are accident prone or have mild OCD, the first cleaning solution I have ever recommended is CyberClean. It’s green goop that you press into your gadgets – it is particularly well suited for computer keyboards – and it pulls out all the crumbs, dust bunnies, and [you really don’t want to know]. It doesn’t work miracles, but it does work. It comes in packets or tiny little buckets ($5 – $10 at Best Buy, Amazon, and other retailers).

I thought that I would have a whole section on wire management as several vendors sent me products in this category, but they all lost to Velcro Reusable Self-Gripping Cable Ties ($8.85 on Amazon) which I bought on my own after stumbling upon them while searching for something else. They come in a package of 100, they stay where you put them, they can be reused, they can be used on nearly any size cable, and they cost less than $.09 each. Buy some now.

The Woogie. This isn’t a large, hairy creature played by Peter Mayhew in four Star Wars movies, rather, it may be the most innovative case for touchscreen devices I have ever seen. The Woogie resembles a bright plush octopus and solves the problem that toddlers have with handheld touchscreen devices like the iPod touch: how do you watch those Thomas the Tank Engine videos without touching the screen and causing the movie to pause? Slip the iPhone/iPod touch into the clear pouch on top, and the Woogie rests on your child’s lap. Should it fall, it will be protected. There is an internal speaker that isn’t nearly loud enough (especially in a car), so child-friendly headphones are a must, but that is the only negative I can think of. I cannot overstate how much my 3 year old LOVES this. $20

If you want to give your child an iPad during car trips, Griffin has a solution for that, too. The Cinema Seat ($40) attaches to the back of a car headrest. It attaches with an attached Velcro strap, so it can be removed and used as a regular iPad case if your seven year old chooses not to watch Cars for the millionth time and wants to play Plants vs. Zombies while holding the iPad on his lap instead.

Home Entertainment

Roku pioneered the Netflix streaming digital video player, but there was an explosion of Internet TV boxes this year, and all of them offer Netflix streaming as a highlight feature. Some mighty big names joined the fray, including Apple and Google, and Apple’s $100 Apple TV has the prettiest menus and the best movie/TV rental options. Still, if you mainly want to stream Netflix, the simplest solution – and best value – is still Roku. Even the least expensive box, the Roku HD ($60), can stream movies in high definition (720p; stepping up to the $80 XD or $100 XD|S gets you 1080p support and faster wireless networking) and both setup and operation is exceptionally easy.

A Harmony remote seems to end up on my list every year, and for good reason: the most sophisticated home theater system is useless if you (or your spouse/parent/babysitter) can’t figure out how to use it. Logitech has a massive online database of entertainment products, and the Harmony remotes guide you through programming it through a relatively straightforward online survey. This part of the process is much easier than looking up codes and setting up macros, but it is still not quite idiot-proof. Thankfully, using the remote itself is wonderful: it presents the user with a list of activities (“Watch TV,” “Play Xbox,” etc.) and the buttons are all ergonomically designed. There are bunch of different remotes in Logitech’s Harmony line, and none are new this year. Still, the Logitech Harmony One ($179) is my favorite.

Sonos has long been known for its incredible wireless multi-room audio system. It is dead simple to install, and even complete technophobes can use it. Sonos was one of the first home entertainment companies to provide a free remote control app for the iPod touch or iPhone even though one of Sonos’ products was a touchscreen remote; this year the company added an iPad app. Last year’s big product news was the S5 speaker, an all-in-one unit that adds a zone of music anywhere you plug it in. When Sonos first showed me the S5 speaker, they were adamant that consumers would not want an iPhone/iPod dock to go along with it – after all, Sonos is pulling music from the same PC that an iPod is synchronized with. I argued that consumers would want one anyway. I was right, and Sonos added a Wireless Dock for iPod/iPhone ($119) to the mix this year. Now, a Sonos system is not a stocking stuffer: a full system costs a bit more than $400 per room (the S5 costs $400, and some installations will need a little ZoneBridge box, and some people will want that iPod dock). There are other ways of moving music around your house, but Sonos is still the simplest and most versatile solution, particularly if you want to have music playing in multiple rooms at the same time.

While your giftees are comfortably watching streaming video or listening to music throughout the house they may get hungry. If you really want to complete the picture, send them some Dale and Thomas gourmet popcorn (http://www.daleandthomaspopcorn.com). There are some unique popcorn flavors to choose from, but the kettle corn is addictive and anything with chocolate on it is generally a winner. It also makes an excellent (if late, at this point) Chunukah gift, as all Dale and Thomas popcorn is certified kosher. Sadly, this is another item where I did not receive review units from the manufacturer, and had to test on my own.

They Didn’t Know They Needed This

In-ear headphones are a great upgrade over the cheap earbuds that shipped with your MP3 player or smartphone, and there are many good options from specialty headphone companies like Shure, etymotic, and Ultimate Ears. Even Monster (the overpriced A/V cable company) makes some terrific in-ear headphones. However, if for the ultimate in noise blocking and comfort, you really need custom fit ear molds. Wait, your gift recipient isn’t a rock star? No matter – etymotic’s CUSTOM•FIT program has made customized headphones affordable. For $100, etymotic will connect you with a local audiologist who will make ear impressions (it takes about 10 minutes, it’s completely painless and is actually rather relaxing) who will ship the custom inserts 4 – 8 weeks later (YMMV; mine arrived in two weeks). All of etymotic’s headphones can be fitted this way, including models with built in microphones for use with smartphones. My favorites from the line are the budget ER-6i (currently $71 on Amazon) and higher end ER-4P ($299).

For the gadget lover who does the grocery shopping, I can finally recommend the SmartShopper SS-301 ($129). I have tested a lot of kitchen gadgets, and this is one of the few that has stood the test of time. SmartShopper is a little grey box that sits on your refrigerator (it has a built in magnet) that collects, organizes, and prints your shopping list. You walk up to it, tell it what needs to be added to the list, and it uses voice recognition to add the item. When you are ready to go shopping, its built in thermal printer prints your list, which is now itemized by the section where you will find the item in the store. In this third generation of the product, the voice recognition has been upgraded with Nuance technology and a second list has been added (crucial for those who shop at a supermarket and also a warehouse club or specialty store). The voice recognition still isn’t perfect, and the SmartShopper eats batteries alive (it drains one battery much more quickly than the others), and nobody actually needs one. Of course, nobody needs an iPad, either. That’s why it’s a gift.

For the Apple aficionado who has an iPad and an iPhone or iPod touch, Griffin offers the PowerDock Dual ($60), which charges both items and provides a spot to leave your keys. I can’t really explain why I like this one more than the dozen or so other iPad and iPhone stands and chargers I’ve tested, but I do. (I’m still searching for the perfect iPad case, by the way. I thought I found it, but the sample I received failed the durability test. Next!)

Do you have an old school geek on your list or a writer who uses a Mac? Nothing beats the feel of the original IBM PC keyboards, which uniquely featured buckling spring technology that mimics the feel of IBM’s Selectric typewriters. Some people type faster on these keyboards, others just like the feel. Or the sound – it’s gloriously noisy. IBM stopped making these eons ago, but there’s still a company in Kentucky, Unicomp, who will sell you modern versions of these classics, updated with a USB connection (the Unicomp Customizer 104, available online, $69). For Macs, add $10 to get proper Option and Command keys, and the text entry will be transformed: clicky keys, a full numeric keypad, and an honest to goodness “delete” key.

With so many people using their computers to watch videos and listen to music, upgraded speakers are a great gift that’s still a bit unexpected. For the best bang for the buck, Logitech’s Z623 ($125) 2.1 speakers are hard to beat. They are not the last word in audio quality, but they offer plenty of bass and reasonably well controlled midrange and highs, and they’re THX certified, which means your recipient will think you spent more than you did.

Those pickier about their sound should turn to Audioengine. The company’s speakers are essentially tiny studio monitors for your computer (the company treats them like pricey studio monitors, too – each speaker is packed in its own soft slip case). At this point, I’ve tested most of the company’s line, but my favorite remains Audioengine A2’s ($199). The A2 is a tiny little pair of powered speakers which produce clean, exceptionally detailed and uncolored sound regardless of volume. Despite their size, upper bass is plentiful. Deep bass requires a subwoofer, but I’ve thoroughly enjoyed them without one (Audioengine sells a subwoofer for $349; that’s the one speaker I have not tested yet). Audioengine has larger desktop speakers, too, but I didn’t find that the added size improved the bass enough to justify giving up the desk space, and I really, really like the sound of the A2’s.

However, if you really want to give an over-the-top gift, you can combine a pair of Audioengine P4 unpowered speakers with the N22 desktop amplifier. The P4’s are a bit larger than the A2’s but will look just right next to today’s larger displays. Does separating the amplification from the speaker cabinet appreciably improve the sound? Not to my ears, but this arrangement allows your giftee the option of upgrading the amplifier or speakers in the future – not that they’ll need to.

An all-in-one printer can scan full page documents well, but what do you do if you want to scan in receipts or business cards or some other oddly shaped paper of variable thickness? Fujitsu’s ScanSnap S300 should have been the answer, as it was compact and extremely flexible: load it up with ten documents of any size, press a button, and you have an editable PDF (or email, or JPG, etc., single-sided or duplex). However, the S300 device drivers were notoriously fickle so I never could recommend it, and when I upgraded my XP notebook it didn’t take well to Vista or Windows 7 and I couldn’t get it running on 64-bit Windows 7 at all. Earlier this year, Fujitsu replaced the S300 with the ScanSnap S1300 ($259) and upgraded the software so that it works with PCs and Macs alike. The included software for managing scanned files and handling business cards differs based on platform, but everything I’ve tried has worked on both a Windows 7 64 bit Thinkpad and an iMac running Snow Leopard. Fujitsu also threw in the ability to create searchable keywords by highlighting the word on the document with a highlighter pen before scanning, which I thought would make an awesome party trick, though my wife informs me otherwise. A scanner is not the most exciting gift you can give someone, but there’s a good chance that this gift will still be in use this time next year.

Avi Greengart is a consumer devices analyst for Current Analysis covering phones, personal connected devices, and connected devices in the digital home. Unless otherwise noted, Avi did not pay for any of the products listed above. No company paid for inclusion on this list, and Current Analysis clients did not get preferential treatment.

There is an argument I’m hearing a lot lately that Apple is repeating the mistakes it made in the PC era again today with the iPhone. The argument – which I’ve heard from financial analysts, journalists, and my friend Marc on our walk home from synagogue – goes something like this:

In 1984 Apple ran an ad during the Super Bowl promising that 1984 would not be like [the totalitarian world of George Orwell’s novel] “1984.” Apple then launched the Macintosh, which had an enormous lead over the rest of the PC industry thanks to its graphical user interface. But Steve Jobs decided to keep the Mac a completely closed system while Bill Gates over at Microsoft invited all comers to build apps for MS-DOS. Thanks to the open nature of the PC platform, clone makers from Compaq to Gateway to Dell built more powerful hardware than Apple, Microsoft eventually built its own graphical user interface, and the Mac was relegated to 2% market share.

In 2007, Apple launched the iPhone, which had an enormous lead over the rest of the mobile phone industry thanks to its graphical user interface. But then Steve Jobs decided to keep the iPhone a completely closed system while Andy Rubin over at Google invited all comers to build apps for Android. Thanks to the open nature of the Android platform, vendors from HTC to Motorola to Samsung are building more powerful hardware than Apple, and soon the iPhone will be relegated to a small percentage of the market, and Apple will be in trouble once again.

That’s the argument. It’s wrong on a bunch of levels. Oh, there are parallels, but it’s still wrong.

First, let’s tackle the revisionist history: back in 1984 Apple didn’t have as big a lead as it looked. The Mac was beautiful, but there wasn’t much you could do with it (the advent of desktop publishing single handedly rescued the platform from oblivion). In contrast, the iPhone is a market leader in large part because it is the most versatile platform – there are more, and higher quality apps for iOS than all other platforms combined. App developers nearly always target Apple first because that’s where the money is.

Some argue that this app advantage will be short lived, and app developers will switch allegiance as Android shipments exceed iPhones, which is already happening according to most market sizing numbers. Jobs argues that will not happen because fragmentation within the Android camp makes iOS app development more appealing, but I expect Google to minimize the version fragmentation going forward by slowing down the pace of software releases now that Android is maturing, leaving mainly screen resolution fragmentation as an issue for developers to deal with.

However, while I don’t expect fragmentation to slow Android’s rise, I don’t think Apple has anything to worry about here: it already has the most apps, the best apps, and the deepest selection of good niche apps. It is a leader in mobile gaming. As long as Apple maintains a meaningful share of the market overall, it will remain a premier mobile platform for developers. Apple is also benefiting from the reach iOS has in media devices (the iPod touch) and tablets (with the iPad), not to mention the leading digital media store, iTunes. Android is beginning to compete with Apple in tablets, but the iPad has a significant lead – Google has not even built a tablet-specific version of Android yet, and the iPad enjoys a massive lead in tablet-specific apps.

But doesn’t open always beat closed?

Not necessarily. Google argues that consumers want an open OS. Why? The benefits to consumers for Apple’s controlled environment are clear (the iPhone delivers a consistently good user experience), while Android’s openness has been a mixed bag: there is diverse hardware available, but fragmentation has left some phones unable to run the latest apps, and even as that situation improves, carriers have imposed their own restrictions on core elements of the platform. Cellphones are the most personal of personal technology, and there is no reason to think that we will end up with a single platform. Our present state of seven major platforms (iOS, Android, WP7, webOS, Symbian, MeeGo, BlackBerry) is not sustainable, either, but it is definitely not a zero sum game where if Android succeeds, the iPhone fails.

Apple is dominant in a critical industry metric: profitability – Apple makes more money than anyone else in the industry. It sells high margin devices (the average selling price paid by carriers for the iPhone last quarter was $610) and sells tens of millions of them per quarter (14.1 million of them last quarter). Apple doesn’t break out profitability by business unit, but iPhone revenues were $8.6 billion last quarter and corporate gross margin was over 36%, so iPhone profits are extremely robust no matter how the numbers actually break down. When Google sells an Android phone, it makes nothing, because Google doesn’t sell Android phones; Google licenses the OS for free.

Google claims that Android is profitable thanks to advertising revenues Google accrues down the line, but from that perspective, Google actually gets a fair amount of mobile advertising revenue from the iPhone as well. Google’s business model is different from Apple, allowing both Android and iOS to be successful at the same time. Right now, Apple outsells any individual Android licensee and outearns all of them combined. Even if Android takes an even larger share of the market overall, as long as Apple remains one of the top three or four smartphone vendors and continues selling high margin devices, Apple wins the real game among handset vendors, which is making money.

How likely is Apple to remain one of the top smartphone vendors over the next few years (i.e., large enough to continue to present a healthy target for app developers)? Bet on it. Apple has the lead in apps, consistently refreshes its hardware thanks to strong profits, leads in digital media sales, and owns an incredibly strong brand. Given its position and assets, there are only two things that could realistically knock Apple out: if Apple completely misses an inflection point in how smartphones are used, or if Google chose to use mobile advertising revenue to subsidize hardware (not just the OS), penalizing companies that charge for premium hardware. Either scenario is certainly possible, but rather unlikely, in the near term.

The pace of innovation at Google is astonishing, and Android has easier access to market segments Apple has chosen to avoid – entry level smartphones, QWERTY businessphones, orange square-shaped swivel phones aimed at tweens. However, Apple chose to avoid those segments for a reason: it can make more money by offering a consistent experience on a limited number of hardware variants. Apple is just fine with Google “beating” it in marketshare as long as it can corral the lion’s share of industry profits.

Flash on the Internet

Adobe has repeatedly said that Apple mobile devices cannot access “the full web” because 75% of video on the web is in Flash. Apple argues that much of this video is also available in other formats or as iOS apps. There is some truth to both positions. Most video is accessible on Apple products in one form or another, but the user is sometimes forced to jump through hoops to view it – either by switching out of the browser to an app or waiting a few hours or days for the video that just went viral to get transcoded into H.264. In practice, Apple can probably wait this one out.

The other area where Flash dominates the web is in animation – for web site design elements and games. Apple certainly is no slouch in the gaming department, and in practice I have found that few Flash animation sites are optimized for a smartphone’s smaller screen size. Apple suggests that once developers are reformatting their content for phones, they might as well use HTML5. Adobe counters that many desktop browsers do not support HTML5 at all, and that Flash has a richer set of tools for development and deployment (such as analytics and advertising plug-ins). The bottom line: Flash content rarely works well on phones, and there is no clear answer for content developers who need to straddle multiple formats for full coverage of desktops, phones, and Apple devices.

However, once the focus shifts to tablets, things get much simpler: when surfing the Internet on larger screen devices it is quite jarring to find blank websites where Flash ought to be, and where Flash sites could be properly rendered. Therefore, the lack of Flash on the iPad becomes a real liability, and while it apparently has not been enough to slow sales of the iPad one iota, it is an area where Samsung, RIM, and Apple’s other tablet competitors have a legitimate differentiator.

Cross-Platform Development

Flash allows cross-platform development. PC, phone, tablet (including RIM’s PlayBook), and even some connected television platforms. Apple wants developers to specifically target its own platforms. There is some consumer justification for this beyond the obvious desire to increase the number of apps that are available for Apple devices and Apple devices alone. Applications developed for cross-platform use typically do not take advantage of platform-specific hardware features (like the gyroscope in the iPhone 4) and are built around user interface standards that can be radically different from the native platform. It is fair to make the case that the consumer experience on a cross-platform app might be compromised relative to a native app.

Still, Apple recently backtracked on its prohibition against using non-Apple development tools, opening the door to apps written using Adobe tools and then compiled for the iPhone (Apple is still not supporting Flash in the browser and will not provide a Flash runtime environment on the iPhone). Apple’s official explanation for the reversal was that it had, “listened to our developers and taken much of their feedback to heart.” Apple did not take “all” of the feedback to heart, just “much” of it, so it is safe to assume that getting the EU to drop its investigation into Apple uncompetitive practices may have also been part of its motivation.

Apple is dealing from a position of strength in apps and may have been reluctant to allow cross-platform apps, but its competitors are willing to get apps any which way they can. When RIM launched its QNX Neutrino–based Tablet OS this week, it noted that there will be an SDK for native applications, but then immediately gave developers other options: a web apps framework, BlackBerry OS 6 (Java) apps, Adobe Flash and Adobe AIR.

Next Steps

Adobe must end its self-destructive attempt to convince Apple that it’s wrong. That is a battle Adobe cannot win, and in the process of aiming its message at Apple, Adobe is losing consumers and developers. If the ability of Adobe to convince Steve Jobs to change his mind is a stretch, convincing consumers to stay away from Apple products is downright laughable. Adobe needs to promote an extremely simple message, and it must be aimed at Adobe’s actual customers: developers. The message needs to be that Adobe builds the best tools for creating multimedia content. That’s it. Adobe’s mantra should be if you are building anything with visual content for distribution on nearly any platform, you should be using Adobe tools. If you’re building Flash, you need CS5. If you’re building HTML 5, you need CS5. If you’re building content for distribution via both Flash and HTML 5 or something else entirely, you need CS5. If you are building content libraries for the web, phones, tablets, PCs, televisions… did we mention you need CS5?

Of course, Adobe has to ensure that this message is believable, because if it isn’t, its entire business model is in trouble. Adobe also has to stop denigrating HTML5 (one session at Adobe’s upcoming developer conference is titled, “HTML5: Half-baked, Baked, or Ready for the Table?”); instead of identifying holes in the feature set, Adobe should be filling in those holes with tools and services. Similarly, Adobe needs to fix the lingering problems with Flash (such as SEO — Google’s index spiders don’t know how to parse Flash content and largely ignore it.). As for Apple, I’d like to see Flash in the browser for the iPad. Oh, I know that’s not going to happen, but I’d like it just the same.

First, a bit of background: Whenever I’ve gone to Nokia’s headquarters in Espoo, Finland (which looks like what would happen if you crossed an IKEA with an Apple store), I’ve been impressed by how humble, competitive, and damned smart the people are. Finland has some of the highest labor rates in the world, yet Nokia somehow manages to effectively compete with Chinese vendors on cost. Nokia is not just the largest handset vendor in the world, in most of the world the company retains a premium brand image – and in some areas Nokia has staggeringly high market share.

Nokia got this way by riding the GSM wave in Europe with durable, stylish phones that had wonderfully simple user interfaces. Nokia then built a supply chain and manufacturing capabilities second to none, and it pushed hard into emerging markets such as India, China, and Africa, where it maintains distribution advantages that rivals still have a tough time matching. Ever-conscious of creating economies of scale, Nokia split its line into three basic platforms: S30 for basic voice, S40 for mid-tier feature phones, and S60 for smartphones. However, with the strategy set, Nokia seemingly put its designers on auto-pilot.

Over the past ten years, Nokia has stood by while an entire generation of new form factors has passed it by; Nokia missed the clamshell, the thin trend, QWERTY messaging phones, and touchscreens. In each instance, Nokia half-heartedly introduced its own take on these designs a few years late, just in time to miss what’s next. The touchscreen feature phone has been around so long that, after dozens of iterations, LG actually has a uniform touchscreen UI, and Samsung decided to turn its RTOS (Real Time OS) into a smartphone platform. In contrast, the interface on the new X3 is just touch-enabled S40 without the benefit of a virtual or physical QWERTY keyboard. Nokia calls this “Touch & Type,” but that is misleading, as no typing is involved.

Nokia’s research indicates that consumers want to use their phones with just a single hand. That undoubtedly is what Nokia’s research subjects say when they are asked, but it does not necessarily translate to sales purchase behavior; touchscreen and QWERTY phones are strong sellers in nearly every market where they are introduced. Besides, I’ve been an analyst long enough to have seen this play out before; single-handed use was also Nokia’s rationale for disregarding clamshells back in 2002. Nokia has not learned from its mistakes, so it is doomed to repeat them.

The X3’s physical keyboard is another case of Nokia moving around buttons and using oddly shaped keys and then claiming that consumers will not notice. (The worst example of this was the 3650, which had a circular key layout. At the time, Nokia’s product manager explained that user testing did not indicate that this was a problem. Riiiiight.) Nokia did make the right decision to use hard SEND and END keys on the X3 Touch and Type, and including dedicated messaging and music buttons is also welcome. The X3 Touch and Type’s saving grace is its style and cost structure; most touchscreen phones are priced above its EUR 125 price point, and it is commendably thin with a metal (as opposed to plastic) back plate. The X3 Touch and Type further differentiates itself with a 5MP camera. In price-sensitive markets where Nokia’s brand alone is worth a premium and Nokia has significant distribution advantages, the phone should sell well despite its flaws.

However, it is disconcerting to see that Nokia’s troubles are not relegated only to smartphones, where the company acknowledges that it fell behind. After I had submitted this column, Nokia announced the 5250 – a full touchscreen Symbian ^1 smartphone due out later this year for just EUR 115 – less than the X3 Touch and Type. The user experience on resistive Symbian touchscreens is lousy, but the price is right, and it will put serious pressure on Samsung’s Bada, which thus far has only been used with premium hardware.

Nokia’s annual launch/developer event, Nokia World, is coming up next month, and I expect we’ll see Nokia announcing its first MeeGo device there, aimed at high end smartphones from Apple and Android licensees. It is not clear whether Nokia’s high/low approach in smartphones will be enough, but Nokia is behind the competition in mid-tier feature phones, too, and the X3 Touch and Type is not enough to catch up.

Handset vendors choosing an operating system have the same choice as you do when you’re deciding whether to cook dinner or order take-out: build vs. buy. Building an OS from scratch not only requires technical expertise to compete with the best offerings on the market, but also the ability to galvanize developers to support the platform. Understandably, most manufacturers choose to source their OS from someone else. Android is the licensed OS of the moment, largely because the other options didn’t innovate fast enough – Microsoft had to abandon Windows Mobile and start fresh with Windows Phone 7 and Symbian ought to be doing the same thing.

Android has a lot to recommend it in any case. It’s backed by Google, which has a strong consumer brand. Android still provides the best integration with Google’s services and its non-obtrusive notification system is the envy of annoyed iOS users everywhere. Google has also done a terrific job of creating an easy to use and widely adopted development environment. Android Market is growing quickly along with the installed base as there are now Android devices in a variety of form factors from many vendors at multiple carriers. It’s free, sort of (vendors typically still need to pay for ancillary IP before they can ship a phone), and it’s open source, sort of (Google tightly manages changes to the OS and only releases the source code at intervals it chooses).

There are plenty of weaknesses, too. The user interface is relatively complicated and appeals to those with a higher technical comfort level than iOS; the iPhone’s deliberately simple operation still has the broadest appeal, ranging from simplicity-seekers to power users. Android offers limited social network integration out of the box, lacks any sort of PC client for storage and synchronization, and Google provides no consumer-friendly options for getting movies or TV shows onto the device.

The downside to choosing to “buy” Android rather than “building” your own OS is that you must then compete with all the other Android phones on the market. The question then becomes how to differentiate your Android phone from everyone else’s. I have identified six different factors that vendors are using: price, hardware specifications, software customization, industrial design, availability, and carrier backing. I have a lot of analysis on each of these points, but here’s a SlashGear summary:

Price – It is an axiom of business school textbooks that while you cannot always compete on price profitably, you can nearly always try. That is not necessarily the case for smartphones in heavily subsidized postpaid markets like the U.S. and the UK. Carrier subsidies and standard pricing levels (such as $99 and $199) obscure the actual price of the device, taking it out of the end consumer’s buying decision.

Hardware specifications – Differentiating based on unique hardware specifications can certainly be done, but the windows of time when a product is truly unique is shrinking because vendors generally all have access to the same components. That should not detract from the obvious: Android is much more competitive when using high-end hardware, and with the improved specs, Android has closed the hardware gap with Apple. Apple upped the screen resolution on the iPhone 4 to an incredible 640 x 960, but its screen size is stuck at 3.5”. In practice, the iPhone 4 is better for reading text, and the larger Android phones are better for watching movies – assuming you can figure out how to get a movie on there in the first place.

Software customization – Early on, it was fairly easy to create a uniquely compelling software layer on top of Android because the stock interface was rather rudimentary. The most recent editions finally feel like a complete OS without requiring vendor embellishments; 2.2 fixes a key usability issue by placing the phone call icon on the static ribbon bar, enabling users to quickly dial the phone without first having to search for it. However, there are still some areas where Android needs help: social network integration, media, and gaming.

Industrial design – Most touchscreen phones today all share the same basic look (a thin slab dominated by a huge screen); the details differ, but all are reasonably attractive. As such, good industrial design is a requirement, but not enough to drive purchase decisions on its own. As the smartphone category matures there is room to segment the market with non-standard form factors, but these are not likely to be the volume sellers.

Availability – Lately, it seems that any phone you want to buy is already sold out. The reasons for the inventory problems differ by product, but vendors who can control their supply chain have a decided competitive advantage.

Carrier backing – In the US, carriers rule, and getting a piece of carrier shelf space is a prerequisite for volume sales. Every attempt to circumvent or break carrier control over handset distribution has failed, including efforts by Nokia, Sony Ericsson, and Google. Even Apple, which may be the only vendor with the brand and physical retail store network to actually pull it off, chose to work with carriers from the outset, and capitulated to the dominant subsidy model after just a single year. US carriers are also among the largest advertisers in the world – up there with beer brands and Coke. As such, carrier lineups and priorities matter as much as all the other factors combined. That does not mean carriers are monolithic. Some carriers need Android more than others, some are creating their own sub-brands, and each carrier wants to customize or lock down Android to various degrees.

The Wii portion of the press conference was confined to new exclusive titles; Nintendo has a tremendous amount of positive sales wind at its back and it doesn’t feel the need to change the hardware at all. Short term I agree with them; over the past six months the Wii outsold Microsoft and Sony combined, and the $199 Wii has a decisive price advantage over the Xbox 360 plus Kinect (likely at least $299 for the Arcade version, and possibly more) and Sony PlayStation 3 plus Move controllers (at least $379). Nintendo doesn’t need to do anything to the Wii this year, but it will need to overhaul the Wii in 2011 or 2012 to remain relevant as a majority of households have HDTVs and Microsoft can further cost reduce the Xbox and Kinect.

While Nintendo is leaving its console alone, it is making significant advances in 3D portable gaming. The 3DS extends Nintendo’s leading portable franchise by adding a glasses-free 3D screen in addition to the 2D touchscreen on today’s version. The 3D effect was excellent, though it does not work off-angle and it can be adjusted or turned off entirely. In my brief look, 3D did appear to significantly enhance gameplay, and the top screen can also be used to watch 3D content from Hollywood. Dual 3D cameras around back can be used to take 3D pictures, and the 3DS has been upgraded with an accelerometer and gyroscope to enable iPhone-style games. The 3DS still lacks cellular data connections, but its WiFi capabilities will include background connectivity to enhance gaming with interactivity and enable content downloads without user intervention.

I was extremely impressed with the 3DS; by providing a unique gaming experience it exemplifies how to compete against multifunction gadgets with a single-purpose device. The problem with the 3DS is simple: timing. Nintendo did not announce pricing or availability, though it did say it expects to ship the 3DS by the end of the fiscal year, or March of 2011. That would miss the critical holiday 2010 sales season, and gives Apple a chance to steal sales forward with the iPod touch, which is already a big hit among younger gamers. Worse, Apple is expected to upgrade the iPod touch line this fall, and a camera, gyroscope, and retina screen could all be part of that offering. Still, while Apple may erode Nintendo’s total available market, there should still be room in the market for a general purpose multimedia device and one dedicated to unique gaming experiences.

During the Analyst Q&A session, I was fascinated by the parallels between Nintendo and Apple. Both have fairly rigid product development approaches, and rarely alter their plans in response to competitors. They both focus less on a piece of hardware than on creating a compelling and cohesive user experience thanks to a combination of software and hardware that are developed at the same time (surprisingly, this approach is actually quite rare in consumer electronics). In the games business, hardware and software are typically developed by separate companies, but Nintendo is fully willing to compete with its third party software developers and its own titles are the most significant part of its business model.

Of course, there are differences, too. Apple’s reach is far more expansive, touching on computing, telephony, music, movies, and web services, while Nintendo has a laser focused on gaming. Apple is building multi-purpose devices and is now extremely dependent on its third party developer community for iOS apps. Nintendo’s devices tend to be more focused (not quite single-purpose, but close) and while Nintendo pointed out that the 3DS has the best third party support it has ever seen for one of its platforms, that’s an anomaly, not the rule. Both companies are extremely profitable, and while the first question of the day (mine) was around 3DS launch timetables, the second question was one that Apple frequently gets from the financial analyst community: what does Nintendo intend to do with all of its cash?

However, they did launch Google TV, which is based on four technologies: Android 2.1, the Chrome browser, Adobe’s Flash, and an Intel processor. Google TV isn’t a single product, it’s a platform that can be built as a standalone box or integrated into other devices. Logitech has signed up to build a dedicated Google TV device, Sony promises to have embedded Google TV in some of its TVs and Blu-ray players in time for the holidays, and DISH Network will have a settop box with Google TV in it at some point. Best Buy has agreed to sell these things.

Google TV allows consumers to browse the web on their TV, watch YouTube on the TV, and search for content to watch. Searches return results with both traditional broadcast and cable results mixed with Internet video content. It wasn’t clear what Internet content will be included; when I asked Google if Netflix Watch Instantly shows would be included in search results, they told me to ask Netflix. (At that point I didn’t bother asking about Hulu, which actively blocks its content from Google TV alternatives such as Boxee’s upcoming Box being built by D-Link.)

Since it’s based on Android and supports Flash, Google hopes that developers write apps for Google TV, and the company is extending the Android Market to Google TV to make it easy to find apps. This is far from the first app store concept we’ve seen – even for televisions – but the potential for unique apps is one of the more compelling aspects to the announcement. On the flip side, Google TV doesn’t necessarily have a tuner (unless it’s built into a TV or satellite set top box) and there’s no storage as part of the spec, so there is some setup required to get Google TV to talk to your TV, cable box, or DVR if you actually want to watch or record the traditional TV content you found in your search.

I like Google TV as a platform, but find the initial execution lackluster. The problem is simple: consumers are not willing to attach another device to their TV unless it offers a clear value proposition. For example, game consoles play games and optical disc players play movies and the Roku is an inexpensive way to stream content from Netflix. The Google TV value proposition – search-based directory and viewing Internet content on the TV – does not justify the expense of an integrated solution or the cost and complexity of an external box. (At least Google isn’t also asking for subscription fees – its investment will be repaid with advertising).

But Roku was only successful once the cost of the box dropped below $100, and Google’s Intel-based solution is bound to be more expensive than that. Google needs to get the price down and then either convince cable operators to embed Google TV into the cable boxes they already rent to consumers, or get a much bigger coalition of TV manufacturers to embed it into their sets. Today’s piecemeal approach doesn’t offer consumers enough value and won’t get Google a large enough footprint in the home.

The U.S. cellular market is constantly evolving, but the majority of phones sold in this country today are still featurephones bought subsidized for $0 – $50 after rebate with a two year contract from a carrier store. In the past, phones like these were sold with voice plans. Carriers introduced in-network calling circles and family plans to reduce churn (i.e., make it less likely for customers to switch to another carrier) and when text messaging proved to be extremely popular, they jacked up rates on individual messages while introducing unlimited text plans, a combination that encouraged heavier messaging use and guaranteed a consistent monthly data component (text messaging counts as “data” as far as Wall Street is concerned, and investors love consistency). However, most consumers found little reason to buy a separate data plan; carriers offered a limited subset of the Internet (“walled gardens”) that provided a pretty lousy user experience, and the consumers who really valued email, web surfing, and apps gravitated to smartphones.

Today, according to the CTIA, U.S. cellphone penetration is above 90%, which indicates that pretty much everyone who wants a phone has one. Some have two (otherwise, you can’t approach 100% as most children still don’t have their own phones. Yet). This also means that carriers are now in a zero sum game – to grow, they can’t just find new customers, they have to steal market share from each other. In a free market, this often leads to price competition, and we started seeing that a few years ago with declining voice rates. Carriers kept their monthly price tiers the same but added more minutes into each plan tier. That worked for a while, but recently the national carriers have had to respond to budget regional carriers such as MetroPCS and Cricket who introduced budget unlimited plans. That forced the nationals to do likewise and offer their own unlimited voice plans, and then – gasp – actually cut the prices on those plans.

Charging less money for more minutes is not a recipe for good earnings reports, so carriers are trying to make up for the loss of voice revenue by increasing data income. One way to do that is to flood the market with QWERTY messaging phones because carriers found that if it is easier for people to text, they do it more. Another method is to super-subsidize smartphones with rich email and web capabilities; even after the subsidies, a $30 per month data plan makes a smartphone customer a profitable customer. But the boldest move is to simply make data a mandatory component of featurephone plans in addition to optional text messaging plans.

That has meant that some national carriers now offer three tiers of phones, each with a different amount of mandatory data. At the bottom level, there are still phones with no specific data plan requirements (and when those devices include a QWERTY keyboard, they are often the best selling devices in the store). In the middle are devices with $10 – 20 data plans, and at the top of the food chain, there are smartphones with $30 data plans. The problem is convincing consumers that there is a reason to step up to the middle tier of devices with a required data plan. One approach is to move all the QWERTY and touchscreen featurephones to that tier; consumers who cannot afford a full smartphone data plan can get something that looks like a smartphone with lower monthly payments than a smartphone requires. Another approach would be to provide a genuine need for a data plan, and this is where Microsoft’s Kin comes in: the social connectivity and continuous cloud backup it features obviously require some sort of data plan.

Microsoft Kin One and Kin Two hands-on:

But how much will the Kin cost? Hardware pricing is not the issue. The Kin One and Kin Two are essentially Zune HD units with a cellular radio, high resolution camera, slider mechanism, extra buttons, and less flash memory. After subsidies, the Kin One should be in the same pricing neighborhood as Samsung and LG’s featurephone line at Verizon Wireless (currently $79 – $99), and the Kin Two might be a bit more.

The data plan will be key. If Verizon Wireless uses the Kin’s unique capabilities as a justification for stepping up to a $10/month data plan plus a mandatory $20/month text messaging plan, it will be a smash hit. The Kin’s target market already considers unlimited text messaging mandatory, and the Kin is far more capable than other mid-data-tier devices like Samsung’s Reality or LG’s enV touch. If the carrier requires a $20/month plan plus $20 for text messaging, the Kin will still have appeal, but only as a niche device, similar to T-Mobile’s Sidekick (which was often a more visible brand than sales champ). However, if Verizon Wireless requires a full $30/month data plan for the Kin, it will be a disaster. The Kin is a limited-function device in an era of smartphones, and for those willing to pay full smartphone data rates, there are already some Incredible choices available.

CTIA Day -1: Arrive in Las Vegas a full day and a half early, as the day before the show is often full of trade shows and meetings. Not this year. I looked into moving to a later flight and spending another day with my family, but the flights were all overbooked. Discover that there are people coming to this town for vacations. Really? Who knew. Car rental place promises eternal damnation if I don’t take the extra insurance. Don’t take the extra insurance anyway.

Park in my usual spot in the Hilton’s North parking garage. Yes, I’m here often enough to have a usual spot. Strikes me that this is really sad. Laugh at the couple walking hand-in-hand trying to figure out what entertainment the Hilton offers (answer: none. They killed the Star Trek Experience and even Barry Manilow pulled up shop to moved to a rival venue). Check into hotel and start writing a report under embargo on Palm’s Pre Plus and Pixi Plus coming to AT&T. Make mistake of turning on TV, get nowhere on the report.

CTIA Day 0: Spend most of the day holed up in the hotel catching up on email and non-CTIA-related reports. Shut down in late afternoon to head to the Bellagio for a Motorola dinner. Walk about a mile inside the hotel (literally) trying to find the right ballroom. Discover later that there was a much shorter route – and I’ve been to the ballrooms in this hotel at least a dozen times before. The dinner was basically an informal way to introduce the Motorola i1 Android phone for Sprint’s iDEN (Nextel) network. The i1 could be mistaken for the CLIQ XT at T-Mobile – I had one on hand for comparison – though it has been ruggedized somewhat. Pouring water on it did no damage, but I was asked to refrain from dunking it in the water cup (take a note: analysts make terrible dinner companions). The i1 should do fairly well; there are still a lot of people on the iDEN network who are looking for something other than the single RIM BlackBerry Sprint offers.

Left the dinner early to head to the Renaissance for ShowStoppers. Discover I missed meeting Dirty Jobs’ Mike Rowe at Motorola. Oh well. Showstoppers is one of two evening events geared towards press and analysts; it’s a large room with vendor tables staffed by senior PR execs and product managers, and can be the best way to see a lot of products and build relationships with the companies. Unfortunately, building relationships was all I did at this particular event, as there wasn’t much new to see.

From there I drove over to the Venetian and followed the giant deceptive billboards to the Tao (it’s just a regular nightclub; I have yet to see the bare-backed woman in the ads) for Verizon Wireless’ low key party. At the Fall CTIA party I had a terrific conversation with Verizon CEO Lowell McAdams without any PR handlers around, but this time I spent most of my time talking to the PR handlers themselves.

Back to the hotel and a few more minutes of writing the Palm report before heading to bed.

CTIA Day 1: With my staff attending the keynotes, I headed straight to carrier meetings and press conferences at the convention center. After meetings at one end of the convention center, walked to the other end of the convention for Samsung’s gala Galaxy S launch. I can’t describe how happy I was to find that the wacky dance troupe from Barcelona was not back for an encore; instead, a troupe put on a multimedia play showing a day in the life of a Galaxy S user that was surprisingly effective. The Galaxy S has an amazing screen, but perhaps more amazing is that the software Samsung is adding to Android 2.1 actually appears to enhance the overall user experience, something I can’t say for TouchWiz on the Behold II. After getting some hands-on time with a unit and coming away impressed, I walked to the other end of the convention for a T-Mobile presentation on its HDPA+ network.

T-Mobile had a small room and no chairs because analysts and journalists like walking and standing all day. T-Mobile claims that its HSPA+ network will be able to download files as fast as rivals’ 4G networks, and it is just a software upgrade for its existing base stations, unlike WiMAX or LTE. They showed off a nice little data stick and a Dell netbook with HSPA+ capabilities. I have two problems with T-Mobile’s message here: 1) it’s great that HSPA+ is just a software upgrade, but just like its competitors, it hasn’t been broadly deployed yet and there are no handsets that take advantage of it, 2) I get the feeling that consumers aren’t going to buy a marketing message that goes, “our 3G network is faster than their 4G network for file downloads” because 4 is a bigger number than 3, and who really cares about file downloads? Are people really downloading files all day to their phones?

I then walked all the way back to the other end of the convention center again for Sprint’s big press conference. First thing you notice: no chairs here, either. Then the music hits ear-splitting levels because event people seem to believe this will pump you up and make you more receptive to the message to come. In actual fact, it makes it harder to hear the message to come because you have been temporarily been rendered deaf. Sprint’s message was worth hearing, and boiled down to, “our 4G network is faster than their 3G network, and we’ve got an insane phone, HTC’s EVO 4G, that can use the network to do cool things, like watching YouTube in HD.” (Of course, if you want to download files for some reason, you can do that, too.) Sprint did a great job showing how the combination of high end hardware and a fast network can create a unique user experience, and the EVO 4G launch was clearly the high point of the show.

However, the show was not yet over, and it was time to walk halfway back to the other end of the convention center again, this time for a quick meeting with an OS vendor and then on to moderate a panel discussion about why we have a dozen mobile operating systems. Goes well.

Out for a quick dinner, and on to Pepcom’s Mobile Focus, which is a lot like Showstoppers only with more handset vendors. I had missed a Kyocera analyst event while I was doing the panel, so I stopped by their table for some quick hands on time with the new Zio (an undifferentiated Android phone, but one that could cause RIM some trouble in the prepaid market). I then moved to Dell’s table where an Aero was sitting on the table next to Dell’s new Android phones for Brazil and China. Unfortunately, Dell wouldn’t allow the Aero to be powered up, so here’s what I know: It’s a thin, plastic device running Android [unknown] version with an [unknown] user interface overlay with [unknown] features and is coming to AT&T at [unknown] date at [unknown] price. When a client asked what my analytical option was, I replied with [unknown] insights.

At HTC’s table, they confirm that an HD2 is on the way to my house. That’s great, but I could really have used it at the show – it comes preloaded with the Transformers movie, which I have not seen but it has to be better than the terrible drama Continental is showing on the West-to-East route on the way home. At Sony Ericsson’s table, get hands on time with all the phones launched last month at Mobile World Congress in Barcelona; I missed the launch event there because Samsung scheduled its Wave press insanity at the same time. I already have an XPERIA X10, so it was a bit of a shock to see the X10 mini. This isn’t a smaller version of the X10, it’s a Honey-I-Shrunk-The-Phone version of the X10. I wonder if any of the X10’s user experience can translate to such a small form factor. Even the full size phones aren’t necessarily that big – the Vivaz is a wisp of a phone that does not look like it is big enough to have HD video recording capabilities.

I skipped further evening festivities to return to my room, attempt to write that Palm report again, and pass out.

CTIA Day 2: I skipped a breakfast meeting where Samsung talked LTE and instead actually finished the Palm report, then started writing up the EVO 4G before heading over to the convention center for late morning meetings. The first one was with a silicon vendor in the meeting room area, which is at the absolute back of Central Hall. Next, it was halfway back to the North Hall for AT&T’s annual press and analyst lunch. You know what’s great about lunch meetings? No, not the food – I keep strictly kosher and don’t eat at most of these events – but you’re pretty much guaranteed to have chairs. AT&T switches things up and doesn’t talk about the speed of its network at all, focusing instead on devices: it has the highest smartphone penetration rate of any carrier in the world, and the rest of its lineup has been overtaken by “QMDs,” which sounds like a weapon stockpiled by dictators, but is actually AT&T’s term for QWERTY featurephones. AT&T also showed off a tablet not made by Apple, and AT&T is making a serious push into connecting every device you can buy at Best Buy. Seriously, that’s Glen Lurie’s goal for his next performance review. Good luck, Glen!

Unfortunately, I had to leave early to make my next meeting with a handset vendor whose booth is way in the front of Central Hall. While walking the half mile or so, AGAIN, it occurs to me that this is the first time I have set foot on in the Expo at all. I didn’t actually have a chance to see any of the booths at that point because that meeting was followed by two others with a regional U.S. carrier and a distributor. On my way out to get dinner I was waylaid by representatives from two clients; we catch up, they ask for a recap of the show so far, and we tell funny stories to each other until my brain points out that if I get dinner I will not collapse from hunger. And, as a bonus, I will get to sit down.

After dinner, it’s off to a 3 hour Nokia strategy event for analysts where Nokia does a credible job of explaining its Symbian roadmap but doesn’t inspire confidence that the company will be a force in North America any time soon.

After this, several members of my team head to AT&T’s party, but I go back to the hotel to do more writing and pack up for the return flight.

CTIA Day 3: Scramble to edit staff reports on Samsung’s Galaxy S and Kyocera’s Zio before heading to the convention center for one last meeting. Look at my automatically-generated boarding pass and realize that my flight boarding time has been pushed up, so I cancel my morning vendor meeting. Then Continental delays the flight. The meeting is back on, but I don’t want to risk missing the flight in case the delay is reduced, so I run the entire way to the convention center and back. Get to the airport fairly quickly (if you use I-15 and ignore the signs to the airport, you can cut the drive to the rental car return area significantly) and encounter no hassles returning the car, which is mildly miraculous. Security lines are long, but I’m through with plenty of time to sit for hours with Eric Zeman of Phonescoop while Continental finds a plane that flies properly. The 4:50 flight boards before our 2:20 flight. Once on board, the flight attendant asks us to turn off all BlackBerries, blueberries, strawberries, boisenberries, and Halle Berries. Cute. I tweet, “Cue Sheryl Crow – I’m Leaving Las Vegas” and shut down.

Microsoft wasn’t the only new OS being pitched at the show. Nokia and Intel are combining their respective mobile Linux efforts, Maemo and Moblin, to form MeeGo, a name apparently chosen because “Nokia Intel Maemo Moblin Series” would have been even more ridiculous. Once Nokia and Intel’s engineers hash out which pieces of code stay and which go, MeeGo will face the same challenges that Maemo had: a user interface unsuitable for mainstream users and few mainstream apps.

The most outrageous OS launch at Mobile World Congress belonged to Samsung. Samsung staged a press conference for the first Bada phone (the “Wave”) that borrowed equally from infomercials, Cirque du Soleil, and some Korean marketing insanity that didn’t quite make it across the cultural divide. I certainly didn’t get it: a television personality-type hyped the product while attendees were subjected to 360 degree surfing visuals, Samsung’s version of the Solid Gold dancers, and a floating Blue Fairy. It was bizarre.

Samsung’s stated goal with its new Bada mobile OS is to “democratize smartphones at all price points in all geographies,” which presumably means that it expects to ship the Bada OS on mid-tier featurephone hardware in emerging markets. It is taking an “intentionally operator-friendly approach,” though it has not defined what that means in practical terms. This is an intelligent vision; most smartphone vendors are locked in a war with Apple to provide the richest connected computing experience, which all but guarantees that the devices will require expensive high end hardware, and will be sold primarily in developed markets to consumers who can afford $600 devices or the data plans that subsidize them down to $200. The only company targeting emerging markets with entry-level smartphones is Nokia, and Samsung wants a big piece of that business.

The Wave itself is an impressive piece of hardware, highlighted by an 800×480 “Super AMOLED with mDINe” screen that demands superlatives: it is the best display I have ever seen. Holding the Wave next to my iPhone made the iPhone looked washed out and grainy, and even the AMOLED display on my Google Nexus One – cranked to full brightness – was visibly inferior next to the Wave. The Wave also runs a Samsung 1 GHz processor with intense graphics capabilities, has 8 GB of memory, a 5 MP AF camera, and can record HD video. Although I encountered numerous bugs even in the short time I had with the unit, performance was exceptionally snappy, and the Wave not only features the latest iteration of TouchWiz, but also a lot of the social network integration and unified messaging functionality found in devices from HTC with Sense or Palm’s webOS with Synergy.

That’s the good news. The problem is that the world does not need another mobile OS. Besides, Samsung’s Bada phone does not match its vision at all. The Wave – with its incredible screen and high-powered processor – is a product designed to compete with the iPhone or HTC Desire. Assuming that the Wave is priced in line with its bill of materials, no one in developing markets can afford one outside of the elite, who have plenty of high end smartphone choices already. The Wave would be quite competitive with those products in developed markets if it were based on a viable OS. Can Bada actually run on the low-end hardware that is required to bring the price down to featurephone levels? Can Samsung, which is best known for hardware components and design, deliver an SDK with intelligently designed APIs, rich developer tools, and build an effective developer relations program with global reach? While they work all this out, I have one request: Samsung, can I please have a Wave with Android 2.1? I want one pretty bad. Pretty please?

Expectations vs. Reality

Some expectations for the iPad were unrealistic, and some went well beyond that into the realm of fantasy. Many mainstream journalists wrote stories quoting “analysts briefed on the matter” which fueled these expectations. I can assure you with absolute certainty that, with the (possible) exception of its own board of directors, Apple briefed no one ahead of the launch. Nobody.

With expectations so high, the fact that the iPad is based on a familiar platform was perceived by some as a negative. I’ve heard a variation this from several people: “Sure, Apple introduced a tablet, but there was no new user interface technology or radical shift in capabilities. Sure, Steve called it “magical,” but where’s the magic? It’s a giant iPod touch!” I’ll concede that it’s a giant iPod touch. However, I would argue that a successful tablet platform is more than magical – it’s nearly miraculous, given the history of failures in this space.

Another reason many of the most technically sophisticated people (you know, like SlashGear readers) have reacted negatively because the iPad is a closed system geared towards mainstream users, and this crowd was really hoping for more of a PC experience, only Apple-ized. With the iPad, Apple isn’t even trying to provide a full computing experience; instead it is building on the iPhone and iPod touch, adding eBooks, and hoping that application developers will fill in the gaps.

Hands-On Experience

Most of the critics have not actually used an iPad and are really commenting on the spec sheet, not the product. I got a bit of time on four different iPad prototypes, and that informs my opinion. The screen appears to be higher resolution than it actually is – movies were stunning. The iPad is also ridiculously responsive. Apple has always been good with user interface smoke and mirrors, such as displaying a graphic while an app is loading so that the user knows something is going on. But the iPad is really that fast by itself – apps that usually require a second or two to load, didn’t. Some of the demo apps were quite compelling, and there should be thousands of iPad-specific apps at launch: any developer who is regularly updating their iPhone app will likely take a stab at creating a new version that they can sell to you all over again. You really get the sense for the device’s potential when you use it.

That said, there are negatives, too. The iPad felt awfully heavy in my hand (a Kindle is much lighter), there is no comfortable typing angle, and typing on glass just isn’t comfortable for long even if it’s propped up somehow.

It’s a 1.0 Product

Some of the criticism is fully justified – at least for now. The iPad is supposed to be the best possible web surfing device and it is intended as a media consumption device, yet it does not support Adobe Flash. That means an awful lot of web sites don’t work properly, including Hulu, travel sites, and newspapers. I don’t know if this is a philosophical decision by Apple (i.e., it’s waiting for HTML 5 to kill Flash) or a timing decision (it’s waiting until March to announce Flash support and get us all excited again ahead of availability), but Flash needs to be on there.

My other big problem with the iPad software is the lack of third party application multi-tasking. Oh, sure, I’d love cameras on the front and back, and any number of the rumored TV and cloud-based music services Apple was supposed to have introduced. But the key reasons for buying the iPad are web surfing, movie watching, eBook reading, and running apps. Again, this may be something Apple is planning to spring on us later as part of its annual iPhone update. I sure hope so, because running more than one app at a time is crucial for an app-centric device and is an area where Apple is seriously behind companies like Palm.

Finally, given that it’s basically a giant iPod touch, it is a bit pricey. $499 may be half of what CNN reported it would cost, but that’s still a lot of money for a device that by design does not replace your phone or your PC. (For comparison, $499 buys you a pretty nice 42” HDTV. Or a washing machine.) Still, as long as the iPad can find an audience at $499 without Flash and multitasking, Apple should be able to invest in adding capabilities and reducing the cost over time. That is exactly the pattern Apple established with the iPod (originally $399, now $149), the iPhone (originally $599, now starting at $99), and the iPod touch ($299, now $199). I think the iPad will easily clear that hurdle at launch; an oversized iPod touch is actually pretty cool and there will be plenty of app support. As Apple adds features and reduces cost over time, sales will explode, and we will have the first successful tablet platform.

Looking for a second opinion?  Check out Michael Gartenberg’s column, Apple Redefines A Market and SlashGear’s hands-on video with the Apple iPad.

The first “product” on the list works across the iPhone 3G, iPhone 3GS, and iPod touch: Apple’s App Store. The hardware upgrades to the iPhone and iPod touch in 2009 were less impressive than the price drop on the iPhone 3G and the greatly expanded capabilities that application developers were given for writing for the iPlatform. The developer community responded with tens of thousands of new apps that turn an iPhone or iPod touch into a portable game console, heart monitor, prayer book, GPS navigator, eBook reader, and myriad other possibilities. Other platforms also rolled out app stores this year, but Apple retains an enormous lead in both the number and quality of options.

Palm reinvented itself this year with Palm webOS which offers unique capabilities (visually rich multitasking, integrated social networking) married to an exceptionally polished and well conceived user interface. The first two webOS smartphones (Palm’s Pre and Pixi at Sprint) can be slow and have Lilliputian keyboards, but the OS itself sets a new standard for personal productivity.

Motorola was another company facing a do-or-die year, and it has tied its future to Google’s Android OS. The CLIQ with BLUR is interesting, but the real hit is Motorola’s DROID ($199 with contract). The DROID is distinguished both by its hardware – incorporating a large, high resolution screen over a sliding QWERTY keyboard in a slim package – and its software – it is still the only phone running Android 2.0. Also onboard is Google’s new Navigation app, which has some unique features, generally works almost as well as other turn-by-turn options, and has the added benefit of being free (though the mounting arm for your car is a strongly recommended $30 option). Some reviewers have panned the DROID’s physical QWERTY keyboard; while it isn’t great, I still find myself using it often. The DROID was so heavily promoted by Verizon Wireless – and there is such great pent-up demand for a good iPhone-like smartphone at the carrier – that it would probably have done well even if it was awful. Fortunately, it lives up to the hype.

HTC has been the manufacturer behind the scenes building Windows Mobile and Android phones for years. In 2009, HTC evolved its animated interfaces beyond just eye candy, and its HTC Sense phones go well beyond what their native operating system offer, combining rich home page environments, contact-centric messaging, and social network integration. Sense can be found on Android phones in the U.S. today (the Hero at Sprint, $179 with contract, and DROID ERIS at Verizon Wireless, $99 with contract), and Windows Mobile gets Sense when the HD2 (current available in Europe) arrives at a U.S. carrier early next year.

Microsoft seems to have focused all its promotional activity on Windows 7, and the lack of hype around the Microsoft Zune HD ($219/16 GB, $289/32 GB) is really a shame – the Zune HD is really an extraordinary music player. The hardware is terrific (AMOLED capacitive touchscreen running on an NVIDIA Tegra processor) and the user interface is smooth, gorgeous, and well designed. A new QuickPlay menu makes it easy to find what you were doing last or designate content for repeat consumption, and the Zune HD finds photos, discography, bios and related artist information for your music automatically, creating a more immersive and interactive music experience without the need to purchase special “LP” albums. A Zune Pass subscription makes the experience better but isn’t strictly necessary, and HD radio is thrown in regardless. Apple has redefined mobile media players as mobile applications platforms, a feat that the Zune HD is not yet trying to pull off, and Microsoft has little hope of upending the iPod, no matter how good the Zune HD might be. But for the music enthusiast, the Zune HD is the best music playback device on the market.

For whole house music without the expense of custom installation, nothing works better than a Sonos system. Sonos brings its own wireless mesh network (which is more reliable than regular WiFi in my experience) and can pull music from a PC acting as a server or streaming Internet services like Rhapsody with no PC required. However, until recently, even Sonos required users to bring their own speakers in each room. The new Sonos ZonePlayer S5 ($399) is Sonos’ first single box (per room) solution that sounds good, looks terrific, and is actually less expensive than its previous ZonePlayer-speaker combinations. Sonos sells dedicated controllers to manage your music, but the S5 is being marketed as an iPhone companion, so if you have an iPhone or iPod touch, the whole system can be controlled with a free app. Either way, the control interface is simple and attractive and anyone can use it, no manual required.

Logitech has long had a competing streaming audio system, Squeezebox. It is not as easy to install or use as Sonos, and I have run into problems getting some services to synchronize properly as a multi-room system (in contrast, Sonos is basically bulletproof). However, a new member of the Squeezebox family has me impressed: the Logitech Squeezebox Radio ($149). The Squeezebox Radio includes everything you need to stream Internet radio and several third party services such as Slacker. A color screen, oversized navigation wheel, and pre-built “station lists” makes finding just what you want simple.

Logitech improved its nearly perfect travel mouse – 2007’s VX nano – by giving the Logitech Anywhere MX mouse ($79) the ability to track on glass, which I have found is a surprisingly common desk surface at hotels. Like its predecessor, the MX comes with a super tiny USB transmitter that can stay put in your laptop (or netbook) at all times. This means you can leave the adapter in and close your laptop, put the laptop in a bag, take it out later, and go again without having to wait for drivers to load, or figuring out which side of the little USB thingie is up when you insert it over and over again. The MX works on PCs and Macs, has a battery-saving on/off switch, and power is automatically cut if you hide the transmitter inside the mouse itself. It takes regular batteries which can be replaced at the hotel gift shop, though it won’t require battery changes all that often. The MX also features Logitech’s “engine” – the same technology in Logitech’s bigger, more expensive MX Revolution mouse – that changes the way the scroll wheel works depending on what application you’re in. You can use free spin for zipping smoothly up and down Word documents or web pages, and the traditional ratchet-click mode which is better for things like moving cell by cell through a spreadsheet.

The only trick the MX can’t do is work completely dongle-free via Bluetooth. I don’t have a good PC Bluetooth travel mouse recommendation, but for the Mac, Apple’s Magic Mouse ($69) is a huge improvement over the disappointing Mighty Mouse. The Magic Mouse’s shape still isn’t ergonomically ideal, but the touch controls work extremely well. The Magic Mouse is compact enough to serve as a travel mouse, and while it lacks a case, it has an on/off switch. While we’re talking about input peripherals, if you don’t like mice at all, Kensington’s SlimBlade TrackBall is my favorite mouse alternative. A low profile and huge ball help justify a huge price point ($149).

This year brought another way to bring connectivity to your devices: Novatel’s MiFi ($49 with contract). While inexplicably available only at CDMA carriers (Sprint and Verizon Wireless in the U.S.), the MiFi is a modem the size of several stacked credit cards that converts a 3G data signal to WiFi for up to five devices. Not only is it a good alternative to a USB 3G data modem, it’s perfect for small workgroups and families, too: there are a lot of WiFi-enabled mobile devices out there beyond laptops, such as the Sony PSP, Nintendo DSi, and Apple iPod touch.

Flip video pioneered the category of super-simple digital camcorders and the new Flip minoHD ($199) keeps the company on top with a carefully balanced combination of performance, style, and software. It’s this last aspect that really sets Flip products apart even as the competition intensified from traditional camcorder vendors and new entrants like Apple’s video-capable nano – it is much easier to find, edit, and share Flip videos than on any other product.

The Nokia Booklet 3G ($599 or $199 with contract) is an overpriced netbook with terrible performance. Yet, for the road warrior who prioritizes battery life, connectivity, and style, there isn’t anything on the market that is comparable. The aluminum design looks like a shrunken Apple MacBook Pro – in a good way – and the keyboard and trackpad are good enough for email and Word documents. Performance beyond web browsing and Office work is awful: initial startup is slow, HD video stutters (despite an HDMI output), and you do not want to use a Booklet 3G for photo editing or gaming. I would prefer a VGA output (for presentations) instead of HDMI. However, slip in a SIM card from an AT&T smartphone, and you’ve got connectivity without signing up for a separate data plan. I got well over eight hours of real world battery life with the WiFi and 3G radios turned on so you can leave the (small!) power brick back in your room. That also makes the Booklet 3G the ideal netbook for long flights. (Fellow SlashGear columnist Michael Gartenberg also found four things to like.)

Honorable mentions:

• Beatles Rock Band ($59 – $249). Rock Band, plus Beatles songs. What could be better?

• Roku expanded its lineup to three products: SD ($79), HD ($99), and HDxr ($129) and added a new channel “store” for content. Other than Major League Baseball and Pandora, the new content isn’t all that impressive yet, but Roku remains an inexpensive way to add streaming movies from Netflix or Amazon, and it is dead-simple to use.

• Generic inductive charging pads still have a ways to go – I’m expecting significant improvements at the upcoming CES show in a few weeks – but for Palm Pre or Pixi owners, Palm’s Touchstone ($79) is the ideal way to charge your phone without first performing a mating dance between it and a directional microUSB connector. Like other charging cradles or pads, the Touchstone also means you’ll always know where you put your phone.

• SugarSync ($49 – $249/year) itself wasn’t introduced in 2009, but the clients for the iPhone and Android were launched this year, and the service (which synchronizes and backs up all your data across multiple devices) became much more useful this year as consumers adopted netbooks and smartphones.

• There are plenty of PC speakers that do a decent job for music and gaming, but the AudioEngine A2 ($199) is more like a set of miniaturized studio monitors. Due to their size they lack bass – AudioEngine has larger models which should perform better in this respect – and they absolutely require burn-in (“breaking them in” by playing music or white noise for a day or two before they sound their best). However, the sound is almost completely neutral and they can play ridiculously loud without distortion.

Full disclosure: I have extensively used all products listed. The products listed above were selected solely due to their performance; no payments were made for inclusion in the list above and Current Analysis clients received no preferential treatment. As an analyst, I rarely pay for products I evaluate, and I return most products that I am sent. In some cases, I keep products for long term loans; these are typically products which are expected to gain functionality via software upgrades or where the return shipping charges exceed the product’s depreciated value.

Despite shortcomings in Symbian S60 (where apps and settings are located appears to have been chosen at random) and a wildly inconsistent touch experience, the 5800 and N97 have sold over 10 million units. Nokia has sold well over 100 million Symbian S60 phones overall, which puts it in a classic case of what Clayton Christensen calls the Innovator’s Dilemma: Nokia’s existing customers are happy with S60, so Nokia has resisted cannibalizing it. However, the iPhone may have launched without 3G or corporate email, but Apple keeps adding features with each new version, so when S60 users are ready to buy a new phone, they are increasingly picking one from Apple or one of Apple’s competitors. (It is also worth noting that arguments against cannibalizing S60 can only be made for Europe – in the U.S., S60 has never had any traction whatsoever.)

The solution to the Innovator’s Dilemma is to fund skunkworks development or a spin-off that attacks the new technology on its own terms. While initially planned as a way to get Nokia’s feet wet in open source software, Nokia does have another OS, Maemo Linux, that it has been quietly using for its line of Internet tablets (770, N800, and N810). At Nokia World in early September, Nokia announced Maemo 5 and the N900, the first Maemo phone. When I first saw Maemo 5 demonstrated just ahead of Nokia World, my first reaction was to question why Nokia would limit Maemo to pricey, high end devices. After all, S60 isn’t competitive, and Maemo looks really, really cool. Why not just kill S60 and switch to Maemo?

After playing with a production N900 for the past couple of weeks, I have discovered the answer: Maemo is nowhere near ready for mainstream consumers.

There was reason for my initial optimism: the OS has power to spare; it is basically a desktop Linux system in a tiny package. Maemo can handle multiple live apps minimized to little cards (similar to Palm’s webOS); the browser is unadulterated Mozilla code and includes support for a full implementation of Flash 9. The N900 has a high resolution 800×480 screen, TI OMAP3 (Cortex A8) processor, 32 GB flash storage plus an empty microSD card slot, forward facing VGA camera, and 5 MP camera on the rear with dual LED flashes and Carl Zeiss branding. There is a sliding physical QWERTY keyboard, and, for watching media, a pull out kickstand. The N900 has WiFi, quadband GSM and Triband HSPA 900/1700/2100, making it perfect for T-Mobile’s 3G network in the U.S.

Unfortunately, the whole is much less than the sum of its parts. The user interface is maddeningly inconsistent and opaque, and while you can learn to live with its quirks after a while, why should you have to? Nearly every mobile OS does a better job of making it easy to navigate; the iPhone is the easiest (at the expense of efficiency) and Palm’s webOS is the most elegant. Nokia needs to add hard buttons or dedicated screen real estate for navigating and launching options menus. For example, touching the top left corner is usually the “go back” area. Except when touching the blank space in between app tiles backs you out. Except when you’re in a web browser, and a link is occupying the top left, then there’s really no way to get back at all without first minimizing the view. The resistive touchscreen is another problem – even when you push in the right spot, it doesn’t always register. I find myself repeatedly pulling out the stylus, and that should simply never happen on a modern smartphone.

There are no SEND or END keys (Motorola’s DROID has this problem, too), and there is no permanent place for the soft keys – depending where you are in the UI, it can be awfully hard just to find the dialer. This is the first phone I have used in a while where making a phone call isn’t just a secondary use case, but is barely a use case at all.

Web browsing is good, though navigating around a web page is not as smooth as Apple’s Safari. Still, this is one area where the N900 can do things no other phone on the market can do, at least until Adobe rolls out Flash 10 support broadly next year. YouTube videos play smoothly, and navigating around Flash-heavy sites is possible. (Theoretically, you should even be able to watch Hulu on the N900. Practically, it doesn’t work, even over WiFi – the video loads, slowly, then… stops.)

While I encountered system messages that would terrify non-technical users (do you want to update your phone’s SSL sockets? Who knows?), the N900 is better than previous Maemo Linux devices. For example, downloading and installing applications is a simple process now. But there aren’t that many apps yet, and Nokia’s Ovi Store still has a “Coming Soon” banner. Nokia is providing for cross platform (Symbian and Maemo) development with upcoming versions of its QT tools, but Nokia’s focus with developers is still on Symbian.

This leaves Nokia with some tortured market positioning: Nokia told me it is firmly committed to Symbian as its smartphone platform of choice, while Maemo will be relegated to high end devices and aimed at consumers who want more of a computer and less of a phone. The latter description fits every iPhone, Android, and webOS user (and those handsets start at just $100 after carrier subsidies). Nokia needs something better than S60 with touch. Maemo Linux could be that thing, but it isn’t yet, and it doesn’t look like Nokia really wants it to succeed broadly.

However, market analysts like me (and fellow SlashGear columnist Michael Gartenberg) rarely talk about specific products before they’re launched. Often, that’s because I can’t: vendors frequently tell me what they are working on ahead of time under non-disclosure agreements. Another reason that I don’t make specific predictions is that I simply hate being wrong: my job depends on my being both trustworthy and generally accurate, and I’m not about to jeopardize that for a bit of extra attention in the press.

However, for my first SlashGear column I thought I’d make an exception, since there is one question I get asked more often than any other, by clients, journalists, at birthday parties, dinner parties, at the supermarket, and even when I’m trying to pray in the synagogue: when is Apple going to bring the iPhone to Verizon Wireless?

Apple has a contractual exclusive with AT&T that expires… at some point in the future. The exact contract length was never made public, but at the time the iPhone was first launched in 2007, journalists were quoting unnamed sources that it was a five year exclusive, which would keep the iPhone an AT&T exclusive through 2012. More recent articles have said that it is actually a three year exclusive, without even quoting “people familiar with the matter.” I have my own sources, but I don’t think it matters when the exclusive ends – the contract isn’t the only thing keeping the iPhone an AT&T exclusive.

Thanks to U.S. regulatory environment and frequency allocation issues stretching back to the Reagan/Bush administration (and on through the Clinton and W Bush eras), every national U.S. carrier runs a different mix of technologies, often on different frequencies. AT&T runs a GSM/HSPA network while Verizon Wireless runs a CDMA/EV-DO network. The technologies are not compatible, so the iPhone quite literally will not function on Verizon Wireless’ network; this is not a matter of SIM locks or contractual exclusives – it just won’t work. Now you can certainly create a phone that has multiple radios in it to talk to whatever network you want to use, and HTC, RIM, and Samsung (among others) have done so, typically for phones aimed at business travelers. However, Apple is not likely to reengineer the iPhone to work on CDMA. Apple is a software company that delivers its user experience in hardware packages. Apple focuses on user interface simplicity and design, putting a lot of energy and effort behind just a few hardware platforms, and then sells them as broadly as possible. (By contrast, RIM is an engineering-driven company that brags about writing its own radio firmware to eke out potential performance gains.)

AT&T’s underlying GSM/HSPA technology is used broadly throughout the world, fitting Apple’s business model nicely, while CDMA/EV-DO is used primarily in North America and South Korea. CDMA is also a technology without a long term roadmap at this point; for 4G deployments, Verizon Wireless is moving to LTE, while the other big CDMA carrier, Sprint is already rolling out a competing (and incompatible) technology, WiMAX, with its partner Clearwire. Happily, AT&T is also moving to LTE, as are many European operators, so at some point there will almost certainly be an LTE iPhone and that iPhone will work on Verizon Wireless’ LTE network. It’s worth noting that the 700 MHz spectrum that Verizon Wireless is using for its LTE network was purchased with open access requirements built in – in other words, the carrier will not be able to lock LTE devices to its network.

So the question now hinges on when Verizon Wireless will have its LTE network up and running. Verizon Wireless is planning a 2010 rollout – hey, that’s just next year! Not so fast. It will take several years before Verizon Wireless has completed its rollout. After all, if you’re interested in Verizon Wireless for the quality of its network, you aren’t going to want a phone that only works in a dozen cities and doesn’t have the same coverage that Verizon Wireless’ CDMA network is known for. We also need to wait for the LTE chipsets to mature enough for Apple to bet on them. The first chips for any new technology are buggy or power hungry or both. It’s not just the chips; the antennas for prototype LTE phones using 700 MHz (the frequency Verizon Wireless and AT&T will be using) are currently almost as thick as the iPhone itself. The chips and antenna technologies will certainly improve I the future, but in the meantime, can you imagine Steve Jobs approving an iPhone with an external antenna? I can’t.

Based on my discussions with Verizon Wireless, with chipset providers, and with Apple, my best guess for when all these stars will align is somewhere around 2013 or 2014. At that time you should be able to buy an LTE iPhone that will work on either AT&T or Verizon Wireless.

But not Sprint.