Equity News:

Why Bill Ackman Bought Citigroup Stake



Last week we detailed a summary of investment ideas from various hedge fund managers at the Ira Sohn Conference. Pershing Square's Bill Ackman was one of the many speakers and though he ran out of time in his presentation, he did briefly mention he had purchased 150 million shares of Citigroup (C). Ackman was then recently interviewed by Yahoo TechTicker to talk about Christine Richard's new book which he is the subject of, Confidence Game: How a Hedge Fund Manager Called Wall Street's Bluff. However, TechTicker also had the chance to ask him about his new purchase.

Ackman was actually surprised when he took this stake because back in the throngs of the crisis he could never see himself owning a financial company only twelve months later. Keep in mind that the U.S. government recently announced the sale of 1.5 billion shares of Citigroup and it has plenty more to sell. This fact has acted as somewhat of an overhang on the stock. But Ackman certainly isn't bashful and dove right in.

While Ackman fully admits that Citigroup is still working through its problems, he sees it as one of the "best capitalized banks" out there currently due to the conversion of the government's preferred stake. Elaborating on this thesis, Ackman thinks the zero rate interest policy is benefiting the bank as it is earning very attractive spreads. Lastly, he loves Citigroup's solid balance sheet backed by a huge deposit base. So, it definitely sounds as though he believes he's buying a proven franchise in recovery mode. For the rest of Ackman's investments, we've detailed Pershing Square's portfolio.

Ackman isn't the only prominent hedgie who recently bought shares either. Phil Falcone's Harbinger Capital Partners recently disclosed a new massive stake in Citigroup. Not to mention, John Paulson's hedge fund owns a large position as well. At the same time though, we also saw Dan Loeb's Third Point exit C in the first quarter, Lee Ainslie's Maverick Capital dump its position and Andreas Halvorsen's Viking Global also sold out, so not everyone out there is bullish on Citi. David Tepper's Appaloosa Management trimmed over half of its stake in C, but it is still one of its largest equity positions. Overall though, Citigroup is still one of the most important stocks to hedge funds as determined by Goldman Sachs' VIP list.

Shifting back to Ackman's thoughts on the market overall he said,

Look at large-cap, very high quality businesses today [and] they seem pretty cheap to me.


http://seekingalpha.com/article/207957-why-bill-ackman-bought-citigroup-stake

via bloomberg

June 7 (Bloomberg) -- Fidelity Investments’ Contrafund
and
Growth
Company Fund are alone among the 10 largest U.S. stock
mutual funds in beating their benchmarks this year, as Vanguard
Group Inc. and Capital Group Cos. offerings trailed their
indexes.
The $63 billion Contrafund, managed by Boston-based Will
Danoff, gained
0.3 percent this year through June 3, beating the
Standard
& Poor’s 500 Index by 56 basis points during that
period, according to data compiled by Bloomberg. The $32 billion
Fidelity Growth Company Fund rose 2.5 percent, beating its
benchmark, the Russell
3000 Growth Index, by 2.6 percentage
points. The $37 billion Vanguard
Windsor II Fund fell 2.2
percent, trailing its benchmark by the widest margin.
U.S. stock pickers have struggled to beat their indexes
this year as the debt crisis in Europe spurred volatility and
triggered a slump in equities after last year’s rebound. The
underperformance by the biggest mutual funds undercuts efforts
to reverse three years of withdrawals. Investors pulled $239
billion from domestic stock funds between 2007 and 2009,
according to the Investment Company Institute.




I personally think this reveals the fact that there is too much cash still sitting on the sideline. According to the Value Line Investment Survey, the average P/E in the stock market today lingers around 13 and 14, hardly signaling an overpriced bull market. At the same time, stocks have rallied a lot since March of last year, making potential investors cautious about a big market correction. The many troubles, oil spill, euro, etc, added intensity to the atmosphere. As a consequence, many long-only fund managers today are following what's called the "Plan B": keeping a balance between equity and cash instead of staying fully invested. Managers want to have certain amount of cash on hand, but at the same time they cannot afford to stand out of the market because of the opportunity costs (and the career risks involved). They are putting cash to work every month just to bring stocks and equity into balance with each other. This might a reason why funds are behind the benchmarks: a neutral portfolio (50% cash 50% equity) cannot dream of beating the always-fully-invested SPX as the rally continues.

gaoyi0915 wrote:

via bloomberg

June 7 (Bloomberg) -- Fidelity Investments’ Contrafund
and
Growth
Company Fund are alone among the 10 largest U.S. stock
mutual funds in beating their benchmarks this year, as Vanguard
Group Inc. and Capital Group Cos. offerings trailed their
indexes.
The $63 billion Contrafund, managed by Boston-based Will
Danoff, gained
0.3 percent this year through June 3, beating the
Standard
& Poor’s 500 Index by 56 basis points during that
period, according to data compiled by Bloomberg. The $32 billion
Fidelity Growth Company Fund rose 2.5 percent, beating its
benchmark, the Russell
3000 Growth Index, by 2.6 percentage
points. The $37 billion Vanguard
Windsor II Fund fell 2.2
percent, trailing its benchmark by the widest margin.
U.S. stock pickers have struggled to beat their indexes
this year as the debt crisis in Europe spurred volatility and
triggered a slump in equities after last year’s rebound. The
underperformance by the biggest mutual funds undercuts efforts
to reverse three years of withdrawals. Investors pulled $239
billion from domestic stock funds between 2007 and 2009,
according to the Investment Company Institute.




I personally think this reveals the fact that there is too much cash still sitting on the sideline. According to the Value Line Investment Survey, the average P/E in the stock market today lingers around 13 and 14, hardly signaling an overpriced bull market. At the same time, stocks have rallied a lot since March of last year, making potential investors cautious about a big market correction. The many troubles, oil spill, euro, etc, added intensity to the atmosphere. As a consequence, many long-only fund managers today are following what's called the "Plan B": keeping a balance between equity and cash instead of staying fully invested. Managers want to have certain amount of cash on hand, but at the same time they cannot afford to stand out of the market because of the opportunity costs (and the career risks involved). They are putting cash to work every month just to bring stocks and equity into balance with each other. This might a reason why funds are behind the benchmarks: a neutral portfolio (50% cash 50% equity) cannot dream of beating the always-fully-invested SPX as the rally continues.

How has he volume been Snapman?

Batman wrote:

gaoyi0915 wrote:

via bloomberg

June 7 (Bloomberg) -- Fidelity Investments’ Contrafund
and
Growth
Company Fund are alone among the 10 largest U.S. stock
mutual funds in beating their benchmarks this year, as Vanguard
Group Inc. and Capital Group Cos. offerings trailed their
indexes.
The $63 billion Contrafund, managed by Boston-based Will
Danoff, gained
0.3 percent this year through June 3, beating the
Standard
& Poor’s 500 Index by 56 basis points during that
period, according to data compiled by Bloomberg. The $32 billion
Fidelity Growth Company Fund rose 2.5 percent, beating its
benchmark, the Russell
3000 Growth Index, by 2.6 percentage
points. The $37 billion Vanguard
Windsor II Fund fell 2.2
percent, trailing its benchmark by the widest margin.
U.S. stock pickers have struggled to beat their indexes
this year as the debt crisis in Europe spurred volatility and
triggered a slump in equities after last year’s rebound. The
underperformance by the biggest mutual funds undercuts efforts
to reverse three years of withdrawals. Investors pulled $239
billion from domestic stock funds between 2007 and 2009,
according to the Investment Company Institute.




I personally think this reveals the fact that there is too much cash still sitting on the sideline. According to the Value Line Investment Survey, the average P/E in the stock market today lingers around 13 and 14, hardly signaling an overpriced bull market. At the same time, stocks have rallied a lot since March of last year, making potential investors cautious about a big market correction. The many troubles, oil spill, euro, etc, added intensity to the atmosphere. As a consequence, many long-only fund managers today are following what's called the "Plan B": keeping a balance between equity and cash instead of staying fully invested. Managers want to have certain amount of cash on hand, but at the same time they cannot afford to stand out of the market because of the opportunity costs (and the career risks involved). They are putting cash to work every month just to bring stocks and equity into balance with each other. This might a reason why funds are behind the benchmarks: a neutral portfolio (50% cash 50% equity) cannot dream of beating the always-fully-invested SPX as the rally continues.

How has he volume been Snapman?

huh?

Snapman wrote:

Why Bill Ackman Bought Citigroup Stake



Last week we detailed a summary of investment ideas from various hedge fund managers at the Ira Sohn Conference. Pershing Square's Bill Ackman was one of the many speakers and though he ran out of time in his presentation, he did briefly mention he had purchased 150 million shares of Citigroup (C). Ackman was then recently interviewed by Yahoo TechTicker to talk about Christine Richard's new book which he is the subject of, Confidence Game: How a Hedge Fund Manager Called Wall Street's Bluff. However, TechTicker also had the chance to ask him about his new purchase.

Ackman was actually surprised when he took this stake because back in the throngs of the crisis he could never see himself owning a financial company only twelve months later. Keep in mind that the U.S. government recently announced the sale of 1.5 billion shares of Citigroup and it has plenty more to sell. This fact has acted as somewhat of an overhang on the stock. But Ackman certainly isn't bashful and dove right in.

While Ackman fully admits that Citigroup is still working through its problems, he sees it as one of the "best capitalized banks" out there currently due to the conversion of the government's preferred stake. Elaborating on this thesis, Ackman thinks the zero rate interest policy is benefiting the bank as it is earning very attractive spreads. Lastly, he loves Citigroup's solid balance sheet backed by a huge deposit base. So, it definitely sounds as though he believes he's buying a proven franchise in recovery mode. For the rest of Ackman's investments, we've detailed Pershing Square's portfolio.

Ackman isn't the only prominent hedgie who recently bought shares either. Phil Falcone's Harbinger Capital Partners recently disclosed a new massive stake in Citigroup. Not to mention, John Paulson's hedge fund owns a large position as well. At the same time though, we also saw Dan Loeb's Third Point exit C in the first quarter, Lee Ainslie's Maverick Capital dump its position and Andreas Halvorsen's Viking Global also sold out, so not everyone out there is bullish on Citi. David Tepper's Appaloosa Management trimmed over half of its stake in C, but it is still one of its largest equity positions. Overall though, Citigroup is still one of the most important stocks to hedge funds as determined by Goldman Sachs' VIP list.

Shifting back to Ackman's thoughts on the market overall he said,

Look at large-cap, very high quality businesses today [and] they seem pretty cheap to me.


http://seekingalpha.com/article/207957-why-bill-ackman-bought-citigroup-stake

We must be on to something with C if all these guys see the same thing. Snapman, once again I have thank you for blessing me with the opportunity to read Hedge Hunters, it has allowed me to become more familiar with some of the top players in the game. When I was in borders 2 days ago I picked up the confidence game for about 10-15 min. It was a good read from the sample I scanned. The only thing that held me back was the price tag. We should definitely look to add it to our library at some point.

gaoyi0915 wrote:

Batman wrote:

gaoyi0915 wrote:

via bloomberg

June 7 (Bloomberg) -- Fidelity Investments’ Contrafund
and
Growth
Company Fund are alone among the 10 largest U.S. stock
mutual funds in beating their benchmarks this year, as Vanguard
Group Inc. and Capital Group Cos. offerings trailed their
indexes.
The $63 billion Contrafund, managed by Boston-based Will
Danoff, gained
0.3 percent this year through June 3, beating the
Standard
& Poor’s 500 Index by 56 basis points during that
period, according to data compiled by Bloomberg. The $32 billion
Fidelity Growth Company Fund rose 2.5 percent, beating its
benchmark, the Russell
3000 Growth Index, by 2.6 percentage
points. The $37 billion Vanguard
Windsor II Fund fell 2.2
percent, trailing its benchmark by the widest margin.
U.S. stock pickers have struggled to beat their indexes
this year as the debt crisis in Europe spurred volatility and
triggered a slump in equities after last year’s rebound. The
underperformance by the biggest mutual funds undercuts efforts
to reverse three years of withdrawals. Investors pulled $239
billion from domestic stock funds between 2007 and 2009,
according to the Investment Company Institute.




I personally think this reveals the fact that there is too much cash still sitting on the sideline. According to the Value Line Investment Survey, the average P/E in the stock market today lingers around 13 and 14, hardly signaling an overpriced bull market. At the same time, stocks have rallied a lot since March of last year, making potential investors cautious about a big market correction. The many troubles, oil spill, euro, etc, added intensity to the atmosphere. As a consequence, many long-only fund managers today are following what's called the "Plan B": keeping a balance between equity and cash instead of staying fully invested. Managers want to have certain amount of cash on hand, but at the same time they cannot afford to stand out of the market because of the opportunity costs (and the career risks involved). They are putting cash to work every month just to bring stocks and equity into balance with each other. This might a reason why funds are behind the benchmarks: a neutral portfolio (50% cash 50% equity) cannot dream of beating the always-fully-invested SPX as the rally continues.

How has he volume been Snapman?

huh?

I am curious to here Snapman's sentiments on the recent trading volume on the SPX.

Batman wrote:

gaoyi0915 wrote:

via bloomberg

June 7 (Bloomberg) -- Fidelity Investments’ Contrafund
and
Growth
Company Fund are alone among the 10 largest U.S. stock
mutual funds in beating their benchmarks this year, as Vanguard
Group Inc. and Capital Group Cos. offerings trailed their
indexes.
The $63 billion Contrafund, managed by Boston-based Will
Danoff, gained
0.3 percent this year through June 3, beating the
Standard
& Poor’s 500 Index by 56 basis points during that
period, according to data compiled by Bloomberg. The $32 billion
Fidelity Growth Company Fund rose 2.5 percent, beating its
benchmark, the Russell
3000 Growth Index, by 2.6 percentage
points. The $37 billion Vanguard
Windsor II Fund fell 2.2
percent, trailing its benchmark by the widest margin.
U.S. stock pickers have struggled to beat their indexes
this year as the debt crisis in Europe spurred volatility and
triggered a slump in equities after last year’s rebound. The
underperformance by the biggest mutual funds undercuts efforts
to reverse three years of withdrawals. Investors pulled $239
billion from domestic stock funds between 2007 and 2009,
according to the Investment Company Institute.




I personally think this reveals the fact that there is too much cash still sitting on the sideline. According to the Value Line Investment Survey, the average P/E in the stock market today lingers around 13 and 14, hardly signaling an overpriced bull market. At the same time, stocks have rallied a lot since March of last year, making potential investors cautious about a big market correction. The many troubles, oil spill, euro, etc, added intensity to the atmosphere. As a consequence, many long-only fund managers today are following what's called the "Plan B": keeping a balance between equity and cash instead of staying fully invested. Managers want to have certain amount of cash on hand, but at the same time they cannot afford to stand out of the market because of the opportunity costs (and the career risks involved). They are putting cash to work every month just to bring stocks and equity into balance with each other. This might a reason why funds are behind the benchmarks: a neutral portfolio (50% cash 50% equity) cannot dream of beating the always-fully-invested SPX as the rally continues.

How has he volume been Snapman?

To be honest the charts won't show you the volume for the mutual fund, though I will say this, it looks exactly like the SPX. This guy has a very very high beta, I wouldn't be suprised to see a corr of .99 or so. You might as well just look at the spx. The only minor difference maybe has been these past weeks as the SPX drop is more exagerated than contra's

Not sure how this indicates lots of cash on the sidelines?

Via HFN:

Citi Raising Money for Hedge Funds, Private Equity

Citigroup's funds-of-funds arm is planning on raising about $3.25 billion for its hedge fund and private equity funds. The fundraising by Citi Capital Advisors is expected to break down $750 million for hedge funds and $1.5 billion for private equity, according to someone familiar with the bank's plans.

Citi's plans are going forward, despite the possibility that the financial reform proposals in Congress would force banks to spin off their proprietary trading desks or to restrict their ownership in hedge fund or private equity firms. It's unclear, however, if the rules would apply to situations where the bank is acting as an asset manager on behalf of clients.

A spokesman for Citi said in a statement, "Regardless of the ultimate outcome of financial reform, our priority will always be protecting the interests of our clients, who have selected us to be the fiduciary manager of their assets, and ensuring the soundness of the CCA platform moving forward." Earlier this year, Citi sold a $4.2 billion funds-of-funds unit to SkyBridge Capital.

Miners, banks drive FTSE rally to fourth day

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Stocks

Antofagasta PLC
ANTO.L
910.50p
+24.50+2.77%
8:47am EDT

Alcoa Inc.
AA.N
$10.85
-0.09-0.82%
8:47am EDT

Lloyds Banking Group PLC
LLOY.L
62.26p
+0.55+0.89%
8:46am EDT
Fri Jul 9, 2010 12:01pm EDT
* FTSE up 0.5 pct, best week in a year

* Miners firmer, fuelled by improving demand outlook

* Defensives weaker as risk appetite grows

By Simon Falush

LONDON, July 9 (Reuters) - Gains from miners and banks pushed Britain's top share index higher for a fourth day by Friday's close as recovering risk appetite helped it post its strongest weekly gain in a year.

The FTSE 100 .FTSE index ended up 27.49 points, or 0.5 percent, at 5,132.94, having closed higher for a third consecutive day on Thursday, bringing its weekly gains to 6.1 percent.

Miners provided much of the upside on the FTSE 100, tracking firmer base metal prices.

The demand outlook for raw materials improved after data on Thursday showed a fall in new weekly U.S. claims for unemployment benefits, offering cautious hope for the economic recovery that had been showing signs of fatigue.

Antofagasta (ANTO.L) was the top performer, up 4.1 percent, helped by a Citigroup upgrade to "buy" from "hold".

Despite this week's gains, the index is still down 11.9 percent since mid April when fears about euro zone sovereign debt and the prospects of a double-dip recession began to spook markets.

"We were feeling massively undersold, we are seeing more orders and reasonable confidence from industrials companies, so far from being a double-dip, it might be that we will see a more sustainable recovery," said Tim Rees, fund manager at insight Investment.

Volumes were light with the index trading less around 70 percent of its 90-day average volume as many investors chose to sit on the sidelines ahead of the second-quarter reporting season from the U.S., which kicks off next week with Alcoa (AA.N).

"Next week should be a interesting week for the market," said Jimmy Yates, head of equities at CMC Markets.

"When those earnings start coming in we'll get a clearer sense of direction and whether clients feel that we can push on from here."

FINANCIALS FIRMER

Banks and insurers which tend to benefit from increased appetite for risk were big gainers on the FTSE 100.

Part-nationalised lender Lloyds Banking Group (LLOY.L) was 1.7 percent higher, continuing to respond well to Thursday reports that two senior banking figures have joined forces to back a new bid vehicle which will list on the London stock market and look to purchase British banking assets. [ID:nLDE6670LD]

Peers HSBC (HSBA.L) and Standard Chartered (STAN.L) rose 0.6 and 1.4 percent respectively.

Other financials also featured on the upside, with Legal and General (LGEN.L) up 2.7 percent and Prudential (PRU.L) 3.7 percent higher.

Stocks seen as defensive were among the blue-chip fallers as investors' risk appetite partly remained, with National Grid (NG.L) and industrial property company Segro (SGRO.L) off 1.4 and 1.6 percent respectively.

BP (BP.L) was a heavy weight on the index, down 1.4 percent as traders booked profits following a 20 percent rise since June 29.

The stock, however, remains down over 44 percent since its major oil spill began in the Gulf of Mexico in late April.

British factory gate inflation slowed more than expected to a three-month low in June but Britain's trade gap for goods and services unexpectedly hit its widest since July 2008, official data showed on Friday. [ID:nAHL8IE63T] (Additional reporting by David Brett; Editing by Jon Loades-Carter)

I Love M&A battles....

==================

(Bloomberg)--Potash Corp. of Saskatchewan Inc. sued BHP Billiton Ltd., the world’s largest mining company, in Chicago federal court to prevent it from acquiring the fertilizer maker with a $40 billion hostile offer. BHP sought to improve its chances of acquiring Saskatoon- based Potash Corp. “on the cheap” by seeking to “drive down” its share price prior to the Aug. 17 offer, Potash Corp. said today in the complaint. Potash Corp., the world’s largest producer of its namesake crop nutrient, rejected Melbourne-based BHP’s $130-a-share offer as too low. Potash Corp. shares have advanced 31 percent since Aug. 16, the last trading day before BHP made its proposal, and are trading above the bid price, indicating investors expect a higher offer.

“The suit is a defensive mechanism, but also an offensive tool because it attempts to point out why the stock is relatively inexpensive on a stand-alone, no-transaction basis,” Louis Meyer, an analyst at Oscar Gruss & Son Inc. in New York, said in a telephone interview. “The rationale is that the best defense is a good offense.” The lawsuit is “entirely without merit,” BHP said today in an e-mailed statement, adding that it does not expect the court filing to interfere with or delay its all-cash offer.

“We strongly believe that Potash Corp.’s shareholders should have the opportunity to decide on the merits of our offer,” BHP said.

Kloppers in Ottawa

Potash Corp. fell 51 cents, or 0.4 percent, to $147.01 at 1:07 p.m. in New York Stock Exchange composite trading. BHP climbed 41 pence, or 2.1 percent, to 2,000 pence in London. BHP Chief Executive Officer Marius Kloppers is scheduled to meet with lawmakers in Ottawa today. Potash Corp. alleges BHP made “false and misleading” statements about the offer. BHP allegedly sought to depress the value of Potash shares to make an acquisition possible by pledging to develop its Jansen project in Saskatchewan and to “run its new mine flat out, flooding the market with potash,” according to the court filing.

BHP’s announcements were “designed to raise the specter that BHP was the 800-pound gorilla about to become a major competitor” to Potash Corp., the Canadian company said in the filing. BHP also failed to inform Potash Corp. shareholders that it was “reasonably likely” that BHP investors would have to vote on the takeover, Potash Corp. said. Under U.K. listing rules, a vote is mandatory if the value of an acquisition matches or exceeds 25 percent of the acquirer’s market value.

‘Demand Spike’

BHP’s offer came “before an expected spike in worldwide potash demand that would surely lead to increases” in Potash Corp.’s stock price and require a BHP shareholder vote, Potash Corp. said. Potash is seeking a court order barring BHP from taking further steps to consummate its tender offer or acquire shares and directing the prospective purchaser to make “complete corrective disclosure” to Potash shareholders about prior allegedly misleading statements.

The Canadian company is also seeking a 60-day freeze on BHP taking any further steps to acquire it, until “misleading statements to the market have dissipated and shareholders have had the opportunity to review and consider the corrective disclosures,” according to the lawsuit. The case is Potash Corp. of Saskatchewan v. BHP Billiton, 10-06024, U.S. District Court for the Northern District of Illinois (Chicago).

To contact the reporters on this story: Christopher Donville in Vancouver at cjdonville@bloomberg.net; Andrew M. Harris in Chicago federal court at aharris16@bloomberg.net.

http://www.computerworld.com/s/article/9192178/Apple_s_Lion_A_marriage_of_iOS_and_OS_X?taxonomyId=123&pageNumber=1

Apple has lots of new goodies on the way.



-------

Apple's Lion: A marriage of iOS and OS X
Is incorporating iPad features into Macs a good thing? Maybe.
Ryan Faas


October 21, 2010 (Computerworld)

Apple's Back to the Mac event yesterday was preceded by plenty of speculation. Some of it was dead on -- such as predictions of revamped MacBook Air models -- while some of it missed the mark a bit: Apple didn't unveil a touch-screen iMac (in fact, CEO Steve Jobs referred to the idea as "ergonomically horrible") and, while FaceTime is coming to the Mac, it is as a standalone application, not as part of iChat.

Without a doubt, the biggest news was the preview of the next version of Mac OS X, known as Lion (which leaves very few big cats left for future releases). There has been speculation for months that Apple might begin bundling iOS features into the Mac; some even suggested that Apple would replace Mac OS X with iOS. While the latter certainly didn't happen, we learned yesterday that Lion will incorporate some key iOS functionality, for better or worse.

Let's take a look at the major themes and announcements first, then dig into what Lion may mean for Mac users going forward. Finally, we'll close with some thoughts on iLife '11, which also made its debut yesterday.

The Mac is still important to Apple

With all the recent focus on the iPad, iPhone 4, fourth-generation iPod touch and Apple TV, the Mac has started to seem like Apple's redheaded stepchild. However, Apple COO Tim Cook made it very clear that the Mac is still a key part of Apple's business, having accounted for a third of Apple's revenue in the company's recently closed fiscal year. There are nearly 50 million Mac users worldwide, he said, and Mac sales are three times as large as they were just five years ago -- largely owing to Apple's retail stores.

Cook also highlighted that there are currently 600,000 registered Mac developers and that the company is adding an average of 30,000 developers each month. I can't help but think that this incredible upswing in registered developers is related to Apple's decision to reduce the individual membership in its Mac developer program (which comes with a slate of training, documentation and resources for developers) from its previous $499/year price tag to just $99/year.

Clearly, despite the success of iOS and Apple's business as a music, movie/TV, and e-book reseller, the company still sees the Mac as a core part of its business.

FaceTime gets ready for its close-up

Many users have been hoping Apple would make FaceTime video calling available to a wider audience than just iPhone 4 and fourth-generation iPod touch owners. While most commentators surmised that Apple would build FaceTime into iChat, it turns out that FaceTime will be a separate application (for now, anyway). Given that most Macs include a built-in camera for video chat and taking photos, this is a natural way to extend FaceTime to a larger audience.

In beta now, FaceTime is available for download from Apple's site. It has potential both for keeping up with friends and family and for conducting virtual business meetings. It will be interesting to see if Apple keeps FaceTime limited to two-party calls or expands it to the multi-party calls that iChat supports.

It will also be interesting to see if Apple bundles FaceTime into the next generation of Mac OS X Server; current and previous releases include a free IM/voice/video chat feature based on the open source Jabber protocol dubbed iChat Server. As Snow Leopard Server and the Mac Mini server hardware provide a simple and very low-cost server solution for small business or workgroups in a larger organization, FaceTime could become a powerful selling point for the platform.

It's worth noting that despite Apple's attempt to push the FaceTime protocol as an open standard that could have compatible apps for Windows 7 and/or Android devices, FaceTime remains an Apple-only technology, while competing products such as Tango and Yahoo Messenger offer broader video calling capability: iOS to Android in the case of Tango and iOS to Android or desktops in the case of Yahoo Messenger.

An interesting side note is that Apple's slides and details about the new MacBook Air refer to the built-in camera as a FaceTime camera instead of the iSight moniker that Apple has used up to this point.

The new MacBook Airs

As expected, Apple introduced two new MacBook Air models that feature several weight-reduction design elements borrowed from the iPad. With 13.3-in. and 11.6-in. displays, both models weigh less than three pounds (2.9 and 2.3 pounds, respectively) and measure less than an inch thick (0.68 in. at their thickest point and 0.11 in. at the thinnest). Eschewing both optical drives and HDD drives, they use only SSD flash storage, which is built right onto the board rather than fitted into a hard drive slot.

Although there's no iPad-style touch screen, the new models do sport a full-size glass track pad (already found on other MacBook models) that supports multi-touch gestures (swiping with varying finger combinations, rotating content, pinch to zoom, etc.) as well as a full-size keyboard. They ship with 2GB of RAM, the Nvidia GeForce 320m graphics chipset and an Intel Core 2 Duo processor (1.4GHz in the 11.6-in. model and 1.86GHz in the 13.3-in. model).

Prices range from $999 for an 11.6-in. model with 64GB of storage to $1,599 for the 13.3-in. model with 256GB of storage.

Jobs has repeatedly said that Apple wouldn't launch a netbook, but the size, weight and battery life of the new Airs (Apple claims 7 hours for the 13.3-in. model and 5 hours for the 11.6-in.) will draw inevitable comparisons to netbooks. While the new Airs aren't likely to win any speed tests against other Mac notebooks (or indeed many PC laptops), their specs do put them ahead of mainstream netbooks when it comes to power and performance.

The 11.6-in. model in particular gives Apple an entry into the sub-notebook space at a much lower entry price than the previous generation of MacBook Airs. It will be interesting to see how these fare in the market compared to iPads.

Enter the Lion

The big news, of course, was Mac OS X 10.7, a.k.a. Lion. Slated for a release next summer, Apple's preview of its new desktop OS focused mostly on features borrowed from the company's iOS devices:

More advanced use of multi-touch gestures
A Mac App Store
The ability for apps to auto-save work and auto-resume to their last-used point when relaunched
Apps that operate in full-screen mode rather than in windows
A feature called Launchpad with functionality similar to an iPad's home screen
A feature called Mission Control that combines elements of Exposé, Dashboard, Spaces and full-screen apps
Judging from tweets sent during the event, I'm not the only one who had some misgivings when Jobs said that part of the meaning of "Back to the Mac" was bringing iOS components into Mac OS X. The rest of the demo left me feeling somewhat confident that Apple is doing this in a smart way, although I'll hold off any further endorsement until I can spend some serious time with these features.

Multi-touch gestures

Apple believes that users don't want to interact with their desktop and notebook computers via a touch-screen as they do an iPhone. It's not ergonomic, Jobs said, and most desktop applications are simply not built for that kind of input.

Instead, the company is focusing on the multi-touch interfaces it already makes for Macs: the larger glass trackpad in MacBooks, the year-old Magic Mouse that blends a touch interface with a traditional computer mouse, and the more recent Magic Trackpad. I think this makes a lot of sense; Apple's proven that it can incorporate multi-touch effectively using these types of devices.

My concern is that multi-touch gestures (as well as some of the other interface changes planned for Lion, which I'll get to shortly) may seem overly complicated to new Mac users. If the new users come with experience using an iPhone or iPad, they shouldn't have problems, but I'm worried about less tech-savvy individuals who buy a Mac thinking it's just easier than Windows (and who can blame them, given that this has been Apple's marketing stance for some time now?). Admittedly, Apple's retail stores are great at user education and may be able to absorb some of the challenge.

I'm also concerned how multi-touch gestures will play out with users who prefer non-Apple input devices, as well as for those who use older MacBooks that don't include the current large multi-touch trackpad. (Apple continued to sell such notebooks into 2009.) If significant multi-touch features in Lion won't be supported on these systems, it could certainly add fuel to the fire for those who complain that Apple creates closed ecosystems that force upgrades.

The Mac App Store

Like the existing App Store for iOS devices, Apple's announced Mac App Store will offer one-click downloads and installation, and licensing will apply to all Macs that a user owns (though I can't help but wonder if there will be a limit). Developers whose software is sold through the Mac App Store will receive the same 70/30 revenue split as with the iOS App Store. Although touted as a feature of Lion, Apple has promised that the Mac App Store will launch within 90 days.

It isn't surprising that Apple would choose to introduce the App Store concept for Mac software. The model has done well for Apple, and the company borrowed from it in designing its Safari Extensions Gallery. Apple has also maintained a library of information about Mac software on its Web site for years now.

This model makes sense for end users too because it simplifies the purchase and installation process: No waiting for a store to open or a package to be delivered, and no relying on installation media or having to delete .DMG files (the most common download format for Mac software) after installation. It also makes it a lot easier to maintain updates.

The Mac App Store may also help smaller developers get noticed. It's hard not to assume Apple has been planning the Mac App Store for quite some time and that it was part of the reason for dropping the price on the Mac developer program membership.

On the plus side, the Mac App Store will not be the only option for finding and purchasing Mac software. I think this was one of the biggest concerns that Mac users and developers might have had over the concept. Downloads from the Web and traditional installation media will remain supported. From the demo today, it looks as if both iPad-style full-screen apps as well as more traditional applications will be supported.

There are, however, a couple of major concerns that I have about introducing this model:

Will users be forced to upgrade or be able to downgrade applications? This is a problem with the iOS App Store. Once an update is downloaded/installed, it can't be reverted to an earlier release, as you can if you have the install media or original installer files of a desktop application. Several iOS app updates have introduced bugs or performance problems; when this occurs, there's no option but to wait for a developer to fix it. With the more complex environment of full-fledged computers with specific configurations and peripherals, testing for across-the-board compatibility would be largely impossible.

What about volume and site licensing? The App Store approach is great for home users, but I can't see it playing out well in schools or businesses where a base configuration and set of apps needs to be made available to a large number of computers. This is already a challenge when deploying iPhones and iPads in bulk, and has been since the App Store launched over two years ago. While iOS 4 addressed many enterprise concerns, it left a gaping hole in terms of mass deployment of apps. Apple could resolve this challenge by including an app management and license server feature in Lion Server.

Auto-save and auto-resume

I like the concept of Apple building the ability to auto-save files into Lion so that every developer can easily include it in their applications -- so long as it doesn't lead to file system challenges like those on iOS devices (where there is no central access to a file system) and it doesn't mean that traditional Open and Save dialogs and methods are going away (which I doubt). Let's face it; we've all lost work because we forgot to hit Save often enough, so this is a big plus.

It would be nice to see this feature tied into some form of revision history. I'm thinking particularly about the ability of Google Docs and Dropbox to find previous versions of a file if you decide you don't want to keep the changes that you (or someone else) made to it. Given that this feature exists in a somewhat limited form with Apple's Time Machine, I don't see it being a big challenge to create, and it is a natural extension of the auto-save concept.

Auto-resume is something I'm less enthusiastic about. It works well for mobile devices that display only one application at a time because you have to switch in and out of apps frequently. I'm not sure I want or need that in my desktop apps. Most of the time when I launch Word, for example, I want to start a new document rather than automatically seeing the last document I had open; otherwise I'd have double-clicked the document I wanted. So I'm hoping this will be an optional feature that users can enable or disable as whole or, better yet, on an app-specific basis.

Launchpad and app home screens

I wish I was excited by the demo of Launchpad, a feature that displays all installed applications as an overlay on the desktop similar to the iOS home screen, but I wasn't. The idea is to have all applications (presumably from the Mac App Store as well as other sources) available with one click -- and perhaps some swiping to see more app screens if they can't all fit onscreen at once. (You can get a similar effect by dragging your Mac's Applications folder into the Dock as I've done on each of my Macs.) The concept isn't a bad one, but it's too easy to go from a good idea to a bad experience with it.

Any longtime Mac user might remember that Apple has tried this concept a few times over the years, first in managed workgroup and multi-user products such as At Ease and Mac Manager, and as an option in classic MacOS releases. In some cases, the MacOS Finder was completely replaced by a button-style view of installed or allowed applications. In others, a button view was introduced as an alternative. Perhaps the most commonly known and best-designed implementation was the Launcher. It should be telling that none of these solutions exists today.

Launchpad does seem an improvement over past attempts at streamlining and access restriction. (I imagine Apple will integrate it with parental controls and client management via Mac OS X Server and/or third-party Active Directory solutions.) But it could be just as confusing to some users as having to locate applications in the Applications folder and its subfolders.

I'm particularly put off by the idea of iOS-style folders in Launchpad. This seems to increase the potential for confusion and onscreen clutter, particularly if more traditional ways of launching applications remain: drilling down through folders, opening a specific document, keeping applications in the Dock and using Stacks in the Dock to browse through your Applications folder or other folders -- not to mention applications stored on removable media such as external hard drives, DVDs and network shares. Adding to all of those options, Launchpad with its various screens of apps and iOS-style folders seems to make application management more complex by the sheer number of choices rather than simplifying the process.

On the other hand, it also allows individual users to work in whatever environment they feel most comfortable. I think the key here is going to be how Apple ultimately delivers Launchpad as part of the OS. It should still be clear, at least to power users, where the applications are stored in the file system. Apple needs to give users complete preference in how they work with applications, regardless of whether they're installed from the Mac App Store, downloaded from another source, bundled with Lion or, in the case of users who upgrade to Lion, already exist on the computer from a prior version of OS X.

Mission Control

When I first saw the combination of features (Exposé, Dashboard, Spaces and full-screen apps) that Apple pulled together to create Mission Control, I was afraid that it could work out very badly. Having had a glimpse at the result, I think Apple did a pretty good, though not perfect, job.

I absolutely love the idea of swiping to move between screens (or Spaces); it's an effective solution for both full-screen apps and traditional windowed applications. I like that Exposé is incorporated, letting you see previews of individual windows and Spaces and switch among them quickly. I can see this combination working brilliantly. I also like that it's a completely natural carry-over from iOS. Unlike with Launchpad, I think Apple nailed this marriage of features from Mac OS X and iOS, making a really useful new form of navigation.

The one thing that I don't get is making Dashboard a separate screen instead of having it appear on top of the current screen. To me, one of the big advantages of Dashboard is that I don't have to leave what I'm doing to check the weather, verify someone's phone number, control iTunes, make short notes to myself or do some quick adding/subtracting using the calculator. (And that's just a few of the built-in widgets; there are plenty of useful third-party ones as well.) I hope the fact that it was displayed in its own screen was just part of the demo -- or that Apple will change it back to its traditional mode before next summer.

The bottom line on Lion

Longtime Mac users (and even some new Mac users or Windows users thinking about making the switch) may be wary of some of the interface changes in Lion. A hesitation about them at this point is a perfectly valid. Apple clearly has some great ideas, but it will come down to how they're implemented to determine if they'll be reasons to celebrate or vilify Mac OS X Lion. And that's something we won't be able to judge for a while yet.

iLife '11: Evolutionary, not revolutionary

The release of iLife '11 has been anticipated for months now. While many expected to see iDVD (the suite's DVD layout and burning tool) bundled into iMovie or removed completely, the iDVD icon was still in multiple slides during the presentation and doesn't look to be going anywhere.

Yesterday's presentation focused on just three iLife apps: iPhoto, iMovie and Garage Band, all of which had notable updates. With the exception of iMovie, most of these updates seemed evolutionary, made in response to customer feedback and feature requests.

IPhoto offers additional options for printed photo books and cards (including a new pressed or embossed card option). The new book creation interface offers some nice tweaks such as live previews of different book styles with your selected photos and auto-grouping of pictures taken around the same time or on the same day. Other welcome additions are full-screen mode, the new projects view (reminiscent of the library view in the iBooks app for the iPad and iPhone) and the new albums view, which borrows from the Photos app on the iPad.

Some tweaks to slideshows allow for unique viewing options such as a slideshow based on real-time map data for geocoded photos. Slideshows also now include features such as animated backgrounds and 3D visual effects.

Probably the biggest iPhoto update is significantly better integration with social networking -- namely Flickr and Facebook. Users can now see their photo albums from both sites, even if the photos in them haven't been loaded into their iPhoto library. More importantly, when sharing photos with these sites, users can see comments and likes from other users of each service in an expanded Info panel.

Garage Band's update focuses on cleaning up recorded music with a feature called Groove Matching; if, say, the guitar and bass tracks are out of sync with the drums, you can auto-adjust the tracks to match the drum's rhythm. Another feature called Flex Time makes it easy to adjust the timing of individual sections of recordings (either elongating or compressing specific notes or sounds).

The Learn to Play feature that offers virtual piano and guitar lessons got additional lessons in specific forms including blues and rock guitar and classical piano. More useful is a new How Did I Play? feature that highlights your note or timing errors and tracks progress over successive practice sessions.

Of the three iLife apps demoed, iMovie offers the big-money update. The ability to adjust audio within a clip or project (including raising or lowering sounds and fading between clips or segments) has been reinstated -- a big feature request since Apple removed it when it redesigned iMovie from the ground up for iLife '08. The new version also lets users easily add effects such as instant replay or flash and hold (which displays a quick flash and then a still version of the previous frame).

On a similar front, Apple introduced the ability to create movie trailers for projects. This feature includes a variety of themes and soundtracks recorded by the London Symphony Orchestra at the iconic Abbey Road studios. The feature uses predesigned storyboards and effects to get users started and makes use of a new People Finder feature that can identify individuals or groups as well as action-style and close-up shots. It looks like a really fun feature, and the ease of it may encourage people to jump in and use iMovie more.

Apple also updated the ways you can share movies from iMovie, adding Facebook, Vimeo and even CNN's iReport Web site as options alongside YouTube and Apple's MobileMe. No mention was made of further integration with the iMovie app for the iPhone 4 and fourth-generation iPod touch (another big feature request from users of those devices).

Additional themes and templates, including news and sports themes, have also been added to iMovie. All in all, iMovie makes its remarkably easy to compile and share a very polished and professional-looking project in a short amount of time.

ILife '11 is bundled with new Macs for free; it's $49 to upgrade from earlier versions of iLife.

Conclusions

Between yesterday's event and Monday's earnings call, Apple has certainly managed to stay in the news this week. While iLife might be an evolutionary update and the jury is still out on many Lion features, the company's emphasis on the Mac, the preview of Lion and the new MacBook Air show that Apple remains committed to its vision of an innovative future -- and it has the cash, talent and marketing savvy to make that vision a reality. Whether you love that vision or hate it (or fall somewhere in between), it's clear that Apple still has what it takes to captivate its large and, by all appearances, increasingly loyal audience.

Ryan Faas is a freelance writer and technology consultant specializing in Mac and multiplatform network issues. He has been a Computerworld columnist since 2003 and is a frequent contributor to Peachpit.com. Faas is also the author of iPhone for Work (Apress 2009). You can find out more about him at www.ryanfaas.com and follow him on Twitter (@ryanfaas).