Welcome to Apple Computer, Inc.
So by now you all know what happened. No new Mac hardware and hardly a mention of Leopard at the Keynote. Demos of iLife '06 at the Apple Booth '07. All eyes on a cell phone, and some on a set-top box for televisions. And gone is the word "computer" from the company name.

So what's the future for our favorite computer company of the past 30 years? Media. Selling media and selling the hardware and software to play media. Distribution deals with big media companies. Partnerships with infrastructure companies to get the media to you in new, more portable ways. In many ways Apple's core business is now the iTunes Music Store: iPods, iPhones, Apple TV, even Macs to some extent (let's face it, there is an iPod Halo Effect) all exist to serve those two billion purchased songs and the videos and films next to them on the virtual shelves.

None of this means that Apple is getting out of the computer business. On the contrary, Apple is in the computer business more than ever. It's just that computers are everywhere, and consumer electronics have become sophisticated multipurpose computers edging closer and closer to full-on "PC" status. And Apple's nothing if not savvy about business and marketing: The past three years have proven that consumer electronics and portable media are a big business that Apple can dominate like they've never dreamed of dominating the personal computer market. So why not reinvent - and rename - the company to reflect your strengths? Apple Computer, Inc. made personal computers. Apple, Inc. makes all manner of computer-driven products and distributes media to enjoy on them.

With that in mind, here's my take on Apple's offerings at MacWorld 2007, starting with the new Crown Prince of Cupertino:

iPhone
Few were surprised by the existence of an Apple phone, nor by the fact that Apple's newest product has their signature drop dead gorgeous industrial design and user interface. But everyone's jaws still dropped when they actually saw the thing. iPhone (if it winds up being called that once Cisco's lawyers have their say) is literally unlike any other cell phone on the market in terms of look and feel.

I've been covering the cellular industry for about eight months now and let me tell you, it's a mess. Why nobody can make a full-featured, easy to use multimedia phone is beyond me. Nokia is doing all they can to market their N-Series as "multimedia computers," and their huge tent at CES showed off a pretty impressive vision of an end-to-end user experience including a slew of devices each with a slightly different focus (imaging, music, etc.) and a growing fleet of Web partnerships supporting photo blogging, video blogging, music buying and more. Their new N95 is incredibly impressive, and its specs blow iPhone out of the water. And yet iPhone appears to just do it all so differently - and with so much sex appeal and user friendliness - it's impossible to imagine the average Jack or Jill rushing out for an N95 without checking out iPhone first.

That being said, it's unclear whether or not iPhone will be a runaway hit. $499/599 plus a two year Cingular contract is a lot to ask of the average cell phone buyer (the contract has been confirmed as mandatory, and not just a way to get a better price on the phone). And iPhone is not a true smartphone because it doesn't support user-installable applications; as of right now Apple is saying that iPhone's version of OS X will not allow for third-party application development. Beyond that, typing on a touchscreen is never any good -- Apple's predictive text system looks quite good, but heavy SMS/IM/Email users (i.e. BlackBerry Addicts) won't stand for anything less than actual buttons with decent tactile feedback. So Apple and Cingular need to convince power users to give up their BlackBerry and Treo keyboards in exchange for iPhone's sexy and convince the average user pass up that $99 handset in favor of a better piece of technology that costs five times as much.

(Pictured left: Nokia N95) So who will buy the thing? Well, that was my question when the first iPods came out and we all know how that wound up. iPod catapulted Apple products to status symbol status (pardon the awkward turn of phrase), so more eyes are on iPhone now than were on the first iPods then. No doubt, the number of iPhone first adopters will be sizable. But remember, this is just the first iPhone - Jobs has already said Apple is working on more phones, and the evolution of the iPod family (iPod, Photo, shuffle, nano, iPod w/video) has shown Apple's skill at starting out big and expensive, generating demand, and then unleashing a slew of lower-cost spinoffs within a product family.

Six months is a lifetime to wait in today's consumer electronics market, so I wouldn't be shocked if iPhone ships in June with better specs at the same price points announced Tuesday. 4 and 8 GB of internal memory could become 8 and 16; EDGE data could become high-speed HSPDA data (especially as Cingular's rollout of HSDPA continues); A two megapixel camera could become 3.2 (especially since 2 MP is "last year" in the high-end cellular market - the N95 packs a 5 MP autofocus camera with flash). After that? A lower cost iPhone "shuffle"? A slightly stripped-down iPhone "nano"? It's hard to say, but I'm sure Apple's got a few spinoff models well into development already, just waiting to see how the market responds to the iPhone launch come June.

(Pictured left: Sony Ericsson w950) Still, the writing was clearly on the wall Tuesday morning in San Francisco: Apple is at least as interested in developing new platforms for selling iTunes Music Store content as they are in developing new Macs. iTMS has been big business - to the tune of two billion song downloads - for Apple, and they'd be fools not to grow that business as much as they can. iPhone is a logical step in that direction - the worldwide cellular marketplace is huge, and network providers are just now starting to push cellular entertainment in the US (look up a company called MediaFlo in reference to CES 2007 if you want to know more). Music on cell phones started to catch on last year, and cell-based music purchases and mobile TV are poised to be even bigger this year.

Apple's already got the infrastructure and business model in place to sell downloadable media of all sorts from a wide range of music, TV, and movie's heavy hitters. Everyone has been waiting for the wireless iPod as Apple's next step in the evolution of their portable music player and as another means for consumers to preview, purchase, and download content from iTMS. iPhone is a step in that direction and a foray into a market potentially much, much more lucrative than the mp3 player market. Apple's first phone looks jaw-droppingly impressive in demos and behind glass. We won't really know how good it is or isn't until Apple and Cingular get it into people's hands in June. By then it might even have a sibling alongside of it, you never know. What we do know, however, is that OS X is about much more than Macs, and Apple's experience with computers is proving invaluable in arenas well beyond desktop productivity. Welcome to Apple, Inc., the consumer electronics, media, and personal computing company.

Read Part Two focusing on Apple TV.