Always Read The Fine Print (1/14/05)
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Wuh-oh-- is there trouble in paradise for Steve 'n' Carly? It was just one year ago that Apple and Hewlett-Packard shocked the bejeezus out the industry and Apple enthusiasts alike when both companies announced a Marvel Team-Up on digital music. Rumors that HP (like everyone else and his grandmother) was working on its own iPodalike music player and music download store got blown to smithereens when Carly Fiorina held aloft a milky-blue HP iPod prototype and proclaimed that instead of reinventing the wheel (and doing it badly), HP was instead opting to sell bona fide Apple iPods with the HP logo branded on their heinies. Couple that with an iTunes-on-every-HP-PC deal, and we had all the makings of a match made in heaven.

The partnership started out great; once the company got its iPods out the door, HP vaulted into second place for hard drive-based digital music player sales practically overnight. Okay, sure, second place was only 3.6 percent of the market (compared to Apple's 87.3 percent), but to have instantaneously leapfrogged Rio, Creative, iRiver, and the rest of those guys who'd been beating on each other for months to grab and hold the Silver Medal sales slot, well, that showed that HP had clearly made a smart decision. There's just one problem: according to AppleInsider, the honeymoon's over and the Apple-HP relationship is already experiencing a little healthy conflict. (At least, we hope it's healthy.)

So what's the tiff about? Why, money, of course-- what else? Barely four months after the debut of the "Apple iPod + hp" (which, as we said, has been wildly successful relative to the rest of the market, if not necessarily relative to Apple), Carly is reportedly in a snit because Apple "offers HP no price protection whatsoever on the two models it currently sells." That leaves HP extremely vulnerable to Apple price drops; in the event that it buys a slew of iPods from Apple to resell and then Apple drops the retail price on its own branded iPods, HP would be forced to lower its own retail price to compete and eat the full cost of the difference. Somehow the possibility of this scenario just occurred to HP recently, and when the company asked Apple for a contract amendment to include some sort of price protection policy, Apple flat-out refused... and in response, HP is reportedly withholding retail favors.

That's right, Carly hasn't ordered a single iPod from Apple since the price protection issue came up; the upshot is that HP's online store has been bone-dry of 20 GB iPods for about a week, now, 40 GB iPods are in short supply, and HP says that it does "not expect new shipments anytime soon." Supplies in the retail channel ought to dry up soon as well, and in addition, there's still no firm date for the intro of HP's co-branded iPod photo. And since sales of the HP-branded iPods accounted for a not-entirely-insignificant 7 percent of Apple's total iPod sales last quarter (315,000 iPods is nothing to sneeze at), it's probably in both companies' best interests to get past this argument and kiss and make up.

That said, we're a little surprised that this sort of thing wasn't hammered out before HP and Apple met at the altar. HP and Apple are both big companies, with big legal teams; are we meant to believe that Carly signed that pre-nup without reading it first? Maybe she was so lovestruck with the iPod (and the halo made of dollar signs floating serenely above it) that she signed without logically considering all the consequences. Or maybe she was too dizzy with Reality Distortion Field energy to see straight. After all, she's only human, and she certainly wouldn't be the first person to make an imprudent and irrational financial transaction after caressing an iPod and getting RDFed to the hilt. Here's hoping it all gets straightened out soon-- and without the need for expensive counseling.

 
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The above scene was taken from the 1/14/05 episode:

January 14, 2005: It's Virtual Friday™ here on AtAT, and Apple Japan targets 80 percent of the digital music player market as the iPod shuffle racks up more preorders than the iPod mini did. Meanwhile, Hewlett-Packard stops buying iPods because Apple refuses to grant it any price protection, and Microsoft allegedly plans to ship Longhorn in seven-- yes, seven-- different editions...

Other scenes from that episode:

  • 5138: Shuffle Your Way To Success (1/14/05)   So we keep going back and forth on the potential success of this whole "iPod shuffle" thing. On the one hand, it's cheap, slick-looking, tiny, stores more songs than the competition, and packs a bite-size portion of that inimitable iPod cachet...

  • 5140: Day-Of-The-Week Windows (1/14/05)   It's Friday somewhere in the universe, and you all know what that means: it's Wildly Off-Topic Microsoft-Bashing Day! Sure, we know that this installment is even later than usual, but hey, spite has no expiration date, so let's jump right into it before our grandkids file for Social Security, shall we?...

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