This morning, Apple CEO Steve Jobs gave his keynote address for Macworld 2007, which is taking place right now in San Francisco.  At the event, he announced two new products from Apple, that will headline its product lineup for the year 2007.  The first was the immediate availability of the Apple TV, the product formally known as iTV.  It’s a set top box, that will allow you to enjoy all of your iTunes content on your big screen TV.  But the second product it announced was what really stole the show; a new device that combines a widescreen iPod, a mobile phone, and an Internet communicator into a new device called an iPhone. But that’s not the real story of this Apple Macworld keynote.  The real story is what it did not announce, and what it implies for the future of Apple.

First, let’s focus on what Apple did announce.  After the customary bragging and Windows-bashing that Steve Jobs always does at his keynotes these days, he started things off by announcing the imminent availability of the Apple TV device.  This device is designed to pull all the iTunes content off of your computer, and play it on your big screen high definition TV.  It does this over a wireless connection (it supports wireless B, G and N) to your iTunes computer, whether Mac or PC.  Every time you update content on your iTunes computer, it will automatically synchronize it with the Apple TV, where the content will be stored on its internal 40 GB hard drive.  The Apple TV will connect to your high definition TV using an HDMI or component cable, and will use a Front Row-like menu system to give you quick access to all of your media.

The Apple TV isn’t very new; Apple announced this back in September during its Showtime event, and aside from the storage to the hard drive and streaming from multiple computers, we already knew everything there was to know about this device.  This represents Apple’s attempt to stake out a position in the living room, riding off the success of iTunes and the iPod.  But given the inroads some of its competitors are making into the digital download space, it’s a little odd that Apple hasn’t announced any new features in iTunes or the iTunes store.  For example, the nascent Xbox Live Video Download store is meeting with great success, due in large part to the fact that it’s the only video download service that offers high definition videos direct to your television screen.  So it’s somewhat surprising that Apple isn’t going after this market, by offering high definition downloads from the iTunes store.  Even when the iTunes store begins offering high definition movies, the Apple TV will be ill-equipped to handle those, because of its small hard drive (even iPods come with larger hard drives these days) and its reliance on wireless transmission, though it does support Ethernet.  No doubt it will begin offering a new Apple TV device when it finally decides to go after the high definition market, but where does that leave those who buy the Apple TV now.

But there is one market Apple has decided to go after with a vengeance, and that’s the smartphone market.  Yes, ladies and gentlemen, the much fabled iPhone is real, and it will change the mobile phone as you know it.  The iPhone was the star of this morning’s presentation for good reason; it is an absolutely gorgeous device, and is well beyond any other device of its class in terms of ease of use, technology, and desirability.  What it isn’t, is revolutionary.  The iPhone is an evolution of the smartphones we already know about, such as BlackBerry, Treo, and Windows Mobile.  But what an evolution it is!

The iPhone dispenses with all the physical UI elements that other smartphones carry, such as QWERTY keyboards, “soft” buttons, jog dials or trackballs, replacing them all with a gorgeous, 3.5 inch touch screen that dominates the face of the unit.  The only physical UI elements left are a home button under the screen, volume controls and a mute button on the side of the unit, and a sleep/wake button on top of the unit.  The touchscreen is where all the magic happens.  Apple calls it “multi touch”, and instead of requiring a stylus or other special pointing device, it simply accepts finger input.  It recognizes taps, drags, and even recognizes two finger input which allows you to do some crazy things such as “pinching” a picture to make it bigger or smaller on the screen.

The iPhone combines three devices into one unit; it includes music and video playback capability similar to that of the iPod, it has an integrated GSM + EDGE quad-band phone, and it has a suite of applications that leverages Internet capability to let you access important personal information on the go.  That’s a really pedestrian way to describe the features that this phone has, because the way this phone integrates all of those features is quite astounding.  But you can find out for yourself by visiting apple.com and seeing the features.

One of the features you will see on this phone is its support for Wi-Fi for Internet access.  It also supports Bluetooth 2.0 EDR which allows it to support Bluetooth headsets and other devices.  But the real story here is what it doesn’t support.  Unlike other devices on the marketplace, notably the Zune, the iPhone doesn’t allow you to share your songs with other iPhone users, not even unprotected songs you may have ripped or created yourself.  It doesn’t allow you to buy songs from iTunes while on the go, nor does it allow you to sync your songs wirelessly from your computer.  It doesn’t allow you to remotely access your computer from a hot spot to synchronize the music, files, or e-mail you may have on your computer.  And it doesn’t allow you to listen to online radio stations while you’re on the go via WiFi.  With devices like the Zune and the Stiletto from Sirius on the market, both of which allow you to receive music wirelessly, it looks like Apple is either ignoring or postponing its chance to compete in this space.

In addition Jobs made a big deal of the fact that this phone runs OS X, but it only runs the applications that Apple has developed for it.  There was no mention made, either in the keynote or on Apple.com, about any sort of API for developers to use to put their own software on the iPhone.  Just imagining the kinds of applications that developers could make for this thing makes my head spin, but apparently Apple isn’t interested in enabling that kind of support.  There’s no way to put individual files on this thing either, so it can’t be used to transport your files around.  But I may be wrong on that last point.

Despite those missing features, the iPhone is a stunning, stunning achievement.  People are going to buy this thing in droves, despite its inflated price.  Apple definitely has another hit on its hands.  But, and this to me is quite important, this new hit has nothing to do with its computer business, the Mac.  Neither does the Apple TV, for that matter.  Steve Jobs said it himself, that the show was not about the Mac and there were absolutely no new Mac features, neither software nor hardware, announced at this keynote.  No new Macs, no new iLife or iWork applications, no new features in iTunes, not even an update on Leopard, Apple’s upcoming new version of Mac OS X.  Both of the products featured work on either Macs or PCs running iTunes, and both rely on iTunes being installed to do their jobs.  It’s clear that iTunes has become the most important part of Apple’s business, so much so that Apple changed its name, dropping “computer” from the name “Apple Computer Inc.”

Whether this is a long-term strategy shift or just a temporary realignment of focus remains to be seen, but some of the Mac faithful are already crying foul, and I can’t say they are completely unjustified.  The Mac still languishes in niche land despite the iPod’s success, and while by no means has Apple abandoned the Mac, it’s easy to worry that they are giving up hope of ever clawing back significant market share from the Windows/X86 hegemony, despite Steve Jobs’ boisterous gloating about the superiority of the Mac.

In any case, it’s clear that Apple sees its future lies in finding ways to affect more of your life away from the computer.  It has already won the battle to manage your music and other digital entertainment, but now it wants to take over the only pocket it doesn’t yet control, the pocket that contains your phone.  Its strategy is simple, as always: create a device that emphasizes form as well as function, and make it so easy your grandma could do it.  And it doesn’t care if you use a PC or Mac.  That is the real story of this keynote address.