e.Digital Corporation (fka EDIG)

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A must read..The Guts of a New Machine

Published: November 30, 2003

http://www.nytimes.com/2003/11/30/magazine/30IPOD.html?pagewanted=5&ei=5062&en=6cc3b984324f9...

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PortalPlayer was founded a little more than four years ago with an eye toward creating basic designs for digital computer peripherals, music players in particular. Specifically, the company wanted to build an architecture around tiny hard disks. Most early MP3 players did not use hard disks because they were physically too large. Rather, they used another type of storage technology (referred to as a ''flash'' chip) that took up little space but held less data -- that is, fewer songs. PortalPlayer's setup includes both a hard disk and a smaller memory chip, which is actually the thing that's active when you're listening to music; songs are cleverly parceled into this from the hard disk in small groups, a scheme that keeps the energy-hog hard disk from wearing down the battery. More recently, PortalPlayer's work has formed the guts of new players released by Samsung and Philips. A trade journal called Electronics Design Chain described PortalPlayer as having developed a ''base platform'' that Apple at least used as a starting point and indicated that PortalPlayer picked other members of the iPod ''design chain'' and helped manage the process.

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Interestingly, the legal section in the first version of the iPod used to include another copyright notice on behalf of a company called Pixo, which is reported to have created the original operating system for the iPod. Pixo has since been bought by Sun Microsystems, and the credit has disappeared from both newer iPods and even more recent software upgrades for the original model.

Apple won't comment on any of this, and the nondisclosure agreements it has in place with its suppliers and collaborators are described as unusually restrictive. Presumably this is because the company prefers the image of a product that sprang forth whole from the corporate godhead -- which was certainly the impression the iPod created when it seemed to appear out of nowhere two years ago. But the point here is not to undercut Apple's role: the iPod came together in somewhere between six and nine months, from concept to market, and its coherence as a product given the time frame and the number of variables is astonishing. Jobs and company are still correct when they point to that coherence as key to the iPod's appeal; and the reality of technical innovation today is that assembling the right specialists is critical to speed, and speed is critical to success.

Still, in the world of technology products, guts have traditionally mattered quite a bit; the PC boom viewed from one angle was nothing but an endless series of announcements about bits and megahertz and RAM. That 1.8-inch hard disk, and the amount of data storage it offered in such a small space, isn't the only key to the iPod, but it's a big deal. Apple apparently cornered the market for the Toshiba disks for a while. But now there is, inevitably, an alternative. Hitachi now makes a disk that size, and it has at least one major buyer: Dell.

The System

y visit to Cupertino happened to coincide with the publication of a pessimistic installment of The Wall Street Journal's Heard on the Street column pointing out that Apple's famous online music store generates little profit. The more interesting point, noted in the back half of the column, is that Apple doesn't expect it to generate much profit -- it's a ''Trojan horse'' whose real function is to help sell more iPods. Given that the store was widely seen as a pivotal moment in the tortuous process of creating a legitimate digital music source that at least some paying consumers are willing to use, this is an amazing notion: Apple, in a sense, was willing to try and reinvent the entire music business in order to move iPods.

The column also noted that some on Wall Street were waiting to see what would happen to the iPod once Dell came out with its combination of music store and music player. (The Dell DJ is slightly bigger than the iPod but claims a longer battery life, which the company says is what its consumer research indicated people wanted; it costs $250 for a 15-gigabyte version, $300 for 20 gigabytes, or nearly 5,000 songs.) Napster's name has been bought by another company that has launched a pay service with a hardware partner, Samsung. But it was Dell that one investor quoted in the Journal article held out as the rival with the greatest chance of success: ''No one markets as well as Dell does.'' This was causing some eye-rolling in Cupertino; Dell is not a marketer at all. Dell has no aura; there is no Cult of Dell. Dell is a merchandiser, a shiller of gigs-per-dollar. A follower. Dell had not released its product when I met Jobs, but he still dismissed it as ''not any good.''