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Riding Apple's Coattails
 

When Apple speaks, industry listens. While millions of iPod fans are thrilled about the upcoming iPhone, companies that make up the $1 billion accessories market greeted the news as a new challenge -- and opportunity.
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Along with scores of consumers, investors, and gadget lovers worldwide, the unveiling of Apple's highly anticipated iPhone was closely watched by a much smaller group with a lot on the line -- iPod accessories makers.

For them, the Jan. 9 declaration by Apple (NASDAQ:AAPL) CEO Steve Jobs at the Macworld Expo in San Francisco -- that the company would revolutionize the cell-phone industry -- opened a slim five-month window in which to redesign docking stations, carrying cases, speakers, and other off-shoot products before the new iPod-cell phone hybrid begins shipping in June.

The iPod accessories market is now estimated at close to $1 billion annually. Apple itself has sold more than 70 million units since launching the device five years ago, with sales rising 29 percent in the fourth quarter of 2006 to a year-end total of more than $1.5 billion.

While Apple does carry its own line of cases and other add-ons, it has largely ceded the market to dozens of third-party accessory makers, many of which are young upstart companies born out of the iPod's success.

Yet, in an industry where success often hinges on being first to market, many are now worried they'll have too much time on their hands, leading competitors to flood the market with offerings.

"It's more advance notice than we've ever had from Apple," said Andrew Green, vice president of marketing and design at San Francisco-based Digital Lifestyle Outfitters, or DLO, an early iPod case and docking system manufacturer. "Our speed was always an advantage, and since Apple is spreading this out, it's going to be more challenging."    

Over the holidays, DLO developed a new docking system for the recently revamped iPod Shuffle in just over two weeks, Green added.

He said the company will use the extra time in the months ahead to add new features.

DLO and other accessory makers were also able to anticipate many of the new features Jobs touted about the iPhone this week -- what Green called "the worst kept secrets in the industry" -- such as the widescreen and touch-screen controls. As a result, most had already begun working out design and development ideas months ago.

"We're not privy to the specs," said Scott Huskinson, the CEO of iFrogz, a Logan, Utah-based iPod-case manufacturer. "But the rumors were out there about the touch screen and bigger display. The important thing is to get the specs right."

When the iPod Nano debuted in 2005, Apple immediately posted the design specs on its website, enabling accessory designers to tailor-make finished products long before it hit the market, Huskinson said. "The worst case scenario is we don't have the final specs until we actually have one in our hands," he added.

Whatever the outcome, iFrogz, like DLO, can typically turn around a new product from design to the store shelves in just two weeks, Huskinson said. "We're a small operation, so we can react very quickly," he said.

Other firms are now reaping the benefits of past moves. Wingspan, the Campbell, Calif.-based makers of iLoad, a portable device that transfers CDs to iPods without the need for a computer or Internet connection, anticipated Apple's move from Firewire to USB connections years ago. As such, iLoad can focus its upcoming iPhone efforts on marketing and promotion, rather than research and development, said company spokesman Charles Orlando.

"We were watching where Apple was heading," Orlando said, "during our own development stage."

Last updated: Jan 12, 2007




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