Only one bite got Apple Inc. hooked on the consumer electronics market. With last week's successful launch of the iPhone and its previous domination of the digital music player sector through the iPod, Apple has shown it will be a major force in consumer electronics.

Apple's success with the iPod is remarkable. Between 2002, when it first launched the iPod, and 2006, the company sold 68 million units. Now it wants to duplicate that record with the iPhone, which reportedly sold 500,000 units the first day it went on sale at AT&T. And that was only in the United States.

Hold the applause, though. Apple might have sneaked into the consumer market with its launch of the iPod, and the early success of the iPhone gives it high scores in design and marketing. But the company has the likes of Nokia, Motorola, Samsung and Sony Ericsson aiming their biggest guns at Apple.

These rivals in wireless communications--and OEMs in other consumer areas that Apple might yet enter--will be fighting for their corporate survival against a company that they once considered a computer maker but that overnight morphed into a major contender for their most treasured businesses.

The one-two iPod and iPhone punch now means Apple's future is tied to consumer electronics--a segment so virulently competitive that it is often characterized by giddy success or equally incredibly failures. That market will define the company's fortunes in the intermediate term, just as its past had been defined by the first Macintosh computer.

Control, option, Apple, reboot

While IBM exited the PC market by selling its computer unit to Lenovo Corp., Apple is executing a less dramatic strategy that might one day cause a similar transformation.

That process is already under way. Apple's revenue and product mix are today healthier because of the company's foray into the consumer market, whether through the iPod or its iTunes music marketplace. The company's revenue grew to $19.3 billion in the fiscal year ended Sept. 30, 2006, from $8.3 billion in fiscal 2004 and is expected to surge 23 percent in 2007, to $23.7 billion, and almost hit $30 billion by 2008. The greater portion of that expansion is seen coming from the sales of consumer products like the iPhone.

Although Apple is unlikely to get out of the computer business immediately, it is moving away from that heritage. Even now, anyone who still thinks of Apple as a computer company must be on another planet.

Here's why. In its fiscal year ended Sept. 30, 2004, sales of Macintosh desktop and notebook computers accounted for almost 60 percent of the company's revenue; iPods contributed only 16 percent during that same period.

Page 2: Did you know?: Consumer electronics at Apple's core
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