Identity theft: More costly to victims

Identity theft may be far more costly to victims than previously believed.

A study released Monday by Utica College's Center for Identify Management and Information Protection (CIMIP) found that the median actual dollar loss for identity theft victims was $31,356.

This figure is based on 470 cases out of 517 where loss data was available to Utica College researchers.

The CIMIP study is significant because it's the first time the U.S. Secret Service has allowed researchers to review its closed case files on identity theft and fraud. It is intended to provide empirical evidence that law enforcement agencies can use to combat identity theft.

A 2007 study by the Javelin Strategy and Research cited an average (not median) fraud amount of $5,720 per victim that year. A 2003 Privacy & American Business survey put the average cost per victim at $740.

One reason for the cost discrepancy between the CIMIP study and past ones may be that the previous cost figures focused on consumer losses.

But the CIMIP study shows that identity theft affects companies as well as individuals: "The findings show that the financial services industry was just as likely to be victimized as an individual," the report states.

"Most studies have focused on the individual victim," explained Gary R. Gordon, executive director of CIMIP and professor of economic crime at Utica College, in a phone interview. "In this case, we're seeing a wider range of victimization.

Because the cases examined by CIMIP were investigated by the Secret Service, the loss amounts involved are likely to be large; the Secret Service simply doesn't get involved in minor scams.

"What we're trying to do here is challenge some of the convention wisdom and provide empirical evidence rather than anecdotal evidence in looking at identity theft crimes," said Gordon.

CIMIP works with corporate, government, and academic institutions to research identity management, information sharing, and data protection. Its corporate partners includeIBM (NYSE: IBM), LexisNexis, TransUnion; its federal partners include U.S. Secret Service, Federal Bureau of Investigation, and the U.S. Marshals Service; and its academic partners include Carnegie Mellon University Software Engineering Institute, Indiana University's Center for Applied Cybersecurity Research, and Syracuse University's CASE Center.

One of the study's most surprising findings is that while the Internet may be helpful for identity thieves, it's not necessary.

"Analysis of the methods employed by the offenders showed that Internet and/or other technological devices were used in approximately half of the cases," the report says. "In some cases, the offenders began with a non-technological act, such as mail theft, to obtain the personal identifying information, but then used devices such as digital cameras, computers, scanners, laminators, and cell phones to produce and distribute fraudulent documents. While the use of the Internet as a criminal tool had a presence, it did not appear to be a necessity for most offenders to reach their goals."

Among the 517 cases analyzed, 102 included the use of the Internet. Nontechnological means of identity theft -- mail theft, mail rerouting, and Dumpster diving -- occurred in 106 cases.

Another unexpected finding is that in half of the identity theft cases analyzed, the crime began in a business. In 274 cases where a point of compromise could be identified, businesses accounted for 50% (137) of the breaches.

"There are a lot of cases where businesses provide the points of compromise," said Gordon.

While about two-thirds of the cases did not involve insiders, one third did. "A third of the cases involved identity theft through employment," said Gordon. "Those numbers we think are significant."

Of the 176 cases where the point of vulnerability was the offender's place of employment, 77 involved the retail industry, more than twice as many as occurred private companies, banks, or government agencies.

The report also suggests that the demographics of identity theft offenders don't conform to the conventional wisdom. "While some of the findings about the offenders may not be surprising, others seem to contradict the image that, in some ways, has been formed by default: that identity thieves are usually white males," the report says. "The results show that identity theft is a crime that minorities are just as apt to commit as whites."

According to the report, "The majority of the offenders were black: 53.8% (467). White offenders accounted for 38.3% (332); 4.8% (42) of the offenders were Hispanic and 3.1% (27) were Asian. The race for 65 of the offenders was not made available."

"We don't have an explanation; we're just reporting on the data set," said Gordon.

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Generation Y

Members of Generation Y -- roughly, the group born between the early 1980s and the late 1990s -- are arriving on the job market armed with up-to-the-minute technology skills, but they're lacking in other areas, such as business communication skills, employers say. Moreover, many are wary of IT as a viable career choice.

Tech lifestyle or tech career?

Certainly, when it comes to considering a career in technology, Generation Y is more jaded than generations past. The number of freshmen pursuing a computer science track has fallen by 70% since 2000, according to the Computing Research Association. The reasons are myriad.

Would-be technologists are turned off by the tech crash of the early '00s, the shift of jobs overseas to outsourcing providers, and an overall perception of IT as a go-nowhere, nuts-and-bolts profession, observers say.

And the up-and-coming generation puts a premium on work/life balance, having seen firsthand the toll working around-the-clock took on its parents. As a result, they tend to shy away from jobs that demand the 40-hour-plus workweeks typical of IT.

This is the group that simultaneously IMs, blogs, surfs the Web and downloads podcasts. In the end, ironically, it might be this extreme comfort with technology that most deters these young people from pursuing IT as a favorable, even desirable, career.

"To another generation, IT was cool because no one else knew much about it," notes Kate Kaiser, associate professor of IT (and one of Lee's instructors) at Marquette. "This generation is so familiar with technology, they see it as an expected part of life" -- and therefore not worthy of consideration as a full-time career.

When she's not teaching, Kaiser is an academic liaison with and charter member of the Society for Information Management (SIM). One of her responsibilities there is to work with other universities, technology companies and IT professionals to try to alter the perceptions today's youth have of technology careers.

Another of Kaiser's responsibilities is to work with other SIM members and peer professors to modify the IT curriculum nationwide. The goal is to reflect the need for up-and-comers to have stronger business, communication and project management skills -- all areas where this latest generation comes up short. "People in IT today have to be more well rounded -- they can't just have technical expertise," Kaiser says.

Web-ready collaborators

Technical proficiency is an area where newbies certainly aren't lacking. While they may not possess the tech skills of old -- expertise in outdated areas like NetWare, Cobol, even ColdFusion programming -- this new generation packs a punch with mastery of things like HTML programming and a complete comfort level with business basics like Microsoft PowerPoint and Excel, not to mention Web 2.0 advances like blogging and social networking.

Today's young workers are far more likely than their older counterparts to try using these new social and Web-based tools to solve old business problems, and they have a strong team orientation, which lends itself to the virtual collaboration so vital for today's global economy.

"By and large, this generation is very fluent with technology and with a networked world," notes James Ware, executive producer at The Work Design Collaborative LLC, a Berkeley, Calif., consortium exploring workplace values and the future of the workforce. "They're comfortable working with people in remote locations, they're comfortable multitasking, and they're not afraid to go looking for stuff. They have a sense of all things possible."

IM-speak in an IT world

Communication and basic math and writing skills, on the other hand, are not Gen Y's strong suit. According to a survey of 100 human resource professionals by outplacement firm Challenger, Gray & Christmas Inc., although only 5% of college graduates overall were judged to be lacking in basic technical skills, more than half of entry-level workers possessed deficient writing skills and 27% were underperforming in critical thinking.

Some managers and academics attribute the skills gap to this generation's proclivity for cell-phone- and instant-messaging-induced "textspeak," regardless of whether it's for business or personal communication.

Other industry watchers view Generation Y's preference for virtual interaction in the digital world as a hindrance to developing face-to-face communications skills, a critical asset for a modern IT career. (See this article for more on what today's managers say are the hottest skills right now.)

"Part of the IT job is to teach others how to use technology, and the patience level of this generation is less than that of other workers," says Stephen Pickett, a longtime IT executive and current chairman of the SIM Foundation, a philanthropic organization dedicated to promoting IT as a career option. "We need to teach them how to talk to a leader -- how to relate to someone who's not as technically savvy as they happen to be. But all of that is learned behavior that can be changed."

Marquette's Kaiser has experienced Gen Y's communication shortcomings firsthand. She says some of her technology students often hand in work that isn't written in complete sentences, and their inclination to give an instantaneous response means they're less interested developing in writing and presentation skills.

"I'm not sure a lot of the technology things kids are doing promote their listening skills -- with IM or even Facebook, it's cryptic one-liners where they respond right away," Kaiser says. "And when you're writing with all this Web 2.0 stuff, no one cares how well you spell a word. It's a very different way of communication."

Chris Dodge is one student who certainly has his tech credentials in line. Thanks to his parents, both of whom worked in the tech sector, Dodge has been exposed to PCs since birth and knows enough to design and launch a blog, produce a podcast, or shoot, edit and post a YouTube video.

Dodge, now a sophomore at Georgetown University majoring in international politics at the School of Foreign Service, doesn't deny that his generation spends hours online in chat rooms or e-mailing and texting. But he takes exception to the suggestion that his generation's communication skills are compromised.

"Five minutes after [students] write their one-line text messages, they go to class and take five pages of notes or go back to their rooms and write 10-page research papers," he says. "I think the world is absolutely valuing speed over quality, but that doesn't mean we're incapable of appropriately expressing ourselves."

Worker Bee 2.0

The Generation Y crowd also has a different take on what it means to be an employee. While their parents may be company loyalists willing to put in long hours or pack up and move for the good of the business, not so for Generation Y.

These young people have seen firsthand the physical and emotional damage that working long hours can have on family life and health, say human resource experts. They also came of age witnessing the trauma of corporate downsizing and the outsourcing of technology-oriented positions to low-cost labor regions like India.

The new generation, therefore, is a lot less willing to bend to corporate politics and policies and has a certain air of entitlement when it comes to employment.

Generation Y, for instance, expects to be handed state-of-the-art technology (read: smart phone, laptop and wireless) as soon as they come on board, and they are less willing to start at the bottom rung and work their way up the corporate ladder.

"Generation Y is interested in wrangling their way through an organization, testing the waters and moving here or there if it so suits them," explains Jeff Alderton, principal for human capital at Deloitte Consulting LLC. "They're eventually going to get where they want to go, but in their way, not in the traditional fashion."

The new generation is also far bolder in asking for entitlements, whether it's a pay raise, training on the company's dime or simply time off. "They ask questions I never would have asked," says Mark Banks, vice president of human resources at Sciele Pharma Inc., an Atlanta-based pharmaceuticals company. "It's not about what they can do for you, but what as a company can you do to develop them."

One of the primary concerns of Generation Y is a flexible schedule and healthy work/life balance. This is a generation raised in the era of 24/7 connectivity, of wireless access and of being able to work wherever and whenever it suits them. The idea of trading in that flexibility for a structured workplace doesn't sit well with them.

Technology, they reason, is the enabler for letting people get their work done independently, without having to be in a certain place for a certain period of time.

"We have different expectations about what a work environment should be like," says Dodge. "I think a lot of us hope the age of the daily commute, the 9-to-5 workday and the cubicle farm are in the past. Certainly, with new technology, there is less of a need for the centralization of work production in an office, so long as the work gets done."

The SIM Foundation's Pickett isn't the only IT executive to say that kind of thinking is much too optimistic, if not downright deluded. Anyone looking to eventually reach a high-level management job in IT or finance -- or nearly any field, for that matter -- needs to be in the office, Pickett says. A lot.

"You can't develop relationships from afar or show leadership from afar. If you want to learn about the business, you pretty much have to be there," Pickett says. "To develop relationships with key executives, you've got to be in front of them. And you can't learn leadership skills unless you're watching how others lead."

Still, smart companies are aware of the misalignment and, where possible, are beginning to implement new policies and procedures to bring their work environments more in line with Generation Y's expectations.

Give 'Em What They Want

That's not to say companies should kowtow to the unreasonable demands of a new generation. Rather, they need to be open to embracing new work styles and finding some sort of middle ground.

"Large organizations that simply try to maintain their way of doing things in a monolithic fashion and which don't listen to and learn from younger folks are going to have problems attracting, retaining and motivating talent," says The Work Design Collaborative's Ware. "Companies have to change a bit."

Sciele Pharma is taking that message to heart. The company, where the average worker is in his mid-20s, equips its employees with state-of-the-art laptops and cell phones and has also implemented a variety of flexible work programs.

For instance, employees can adopt an alternative schedule, if approved by Banks and their managers, where they can work from home one day a week or come in between the hours of 6 a.m. and 9 a.m. and leave as early or late as they want, provided their work is done. Employees work 36.5-hour weeks, the company closes at 4 p.m. on Fridays, and workers are able to leave at noon the day before a holiday.

IT people in particular have the option of working from home. Those who have operational-type responsibilities -- monitoring and troubleshooting systems or doing EDI work, for example -- are encouraged to work at home a day or so a week and are given the equipment to make that happen, says David Bennett, IT director at Sciele Pharma. Those with development jobs are eligible to take advantage of flextime as well.

"Any job that lends itself to routine operations or where there is a need for a lot of solitary time to dig into a problem, [those employees] can work from home as long as it doesn't interfere with any planned meetings," Bennett says. "It creates benefits for the employee and the environment and makes for a better quality of life."

With quantifiable kinds of roles, Sciele can easily measure employees' results and hold them accountable, which in turn helps the company monitor whether its flextime arrangement is working, Bennett explains.

As progressive as Sciele Pharma may be, all of its work/life balance programs have essentially kept it in the hiring game but not necessarily given it an edge. "Employees today come in with these expectations," Banks says. "This has helped us retain our workforce, not attract a new workforce."

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Apple iphone and mac sales

Apple Inc. today announced it had sold 1.1 million iPhones and 2.2 million Macintosh computers in the quarter that ended Sept. 29, with the Mac numbers setting a new record for the company.

Mac sales were up 34% over the same quarter last years, enough to break the previous best by 400,000 machines. Apple sold 817,000 desktop machines and 1.35 million notebooks during July, August and September, a stretch during which Apple ran its usual back-to-school promotion and rolled out a refresh of its iMac desktop lineup.

Apple's data noted that sales of Mac computers had surged 46% in Europe over last year, and 52% in the Asia Pacific region, which includes China but excludes Japan. Although the numbers of systems sold in the latter remained small -- just 155,000 for the three months -- Apple sold nearly half a million machines in Europe, slightly more than the company sold in all its retail stores.

The exchange rate played a part in those sales, said Gottheil, but the weakness of the dollar against other currencies, especially the euro, wasn't the only reason.

Price cut pays off big

The iPhone, meanwhile, reached total sales of 1.4 million since its late-June launch. Its impact to the bottom line, however, was minimal, since Apple spreads iPhone revenue earnings over the 24 months of the life of the AT&T contract customers sign. Apple refused to get specific about payments it receives from its wireless partner, however, even though during the previous quarter's call in July, executives hinted that they would be more forthcoming.

For the record, the Cupertino, Calif. posted earnings of $904 million, up from $542 million a year ago, one revenues of $6.22 billion, compared with $4.84 billion a year earlier. In July, Apple had forecast revenues of $5.7 billion, and said it expected profit margin to drop from 36.9% to 29.5% to fund what it called "product transition."

Apple's actual margin for the quarter was 33.6%, considerably higher than the company projected even after it revamped both the iPod and iMac lines and lowered the price of the iPhone. Apple ascribed the less-than-anticipated drop in profit margin to greater-than-expected sales.

iPod sales were also brisk, said Apple, which claimed it sold 10.2 million of the digital music players during the quarter, an increase of 17% in units over the same quarter last year, but only a 4% boost in revenues. The most expensive model in the new line, the iPod touch, missed all but a few days of the quarter with its late-September launch. Apple, however, said it expected the touch to play a bigger part in iPod revenues going forward.

For the October-December run toward year's end, Apple has pegged revenue at $9.2 billion, said Peter Oppenheimer, the company's chief financial officer. If that carries through, the revenue goal would be about 28% above the same quarter last year, when Apple raked in approximately $7.2 billion.

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Is Apple a monopoly?

Ten years ago, Microsoft was the company everyone loved to hate.

The most vociferous Microsoft haters slammed the company for being a greedy industry bully that used its monopolistic, clunky, copycat operating system to force software on users and coerce partners into unfair licensing deals.

But the role of the industry's biggest bully is increasingly played by Apple, not Microsoft. Here's a look at how Apple has shoved Microsoft aside as the company with the worst reputation as a monopolist, copycat and a bully.

Apple the monopolist

The core complaint about Microsoft in the 1990s was that its Windows market share gave it monopoly power, which it abused in multiple ways. Attorneys General and others zeroed in on the "bundling" of the Internet Explorer Web browser, which they claimed was forced on users because Microsoft offered it as part of Windows.

People love iPods . But iPods come bundled with iTunes. Want to buy music from Apple? Guess what? You must install iTunes. Want an Apple cell phone from AT&T? Yep! ITunes is required even if you want only to make phone calls. Want to buy ringtones for your Apple phone? ITunes.

Apple not only "bundles" iTunes with multiple products, it forces you to use it. At least with Internet Explorer, you could always just download a competitor and ignore IE.

Any hardware device that syncs data with a PC as part of its core functionality has software to facilitate that syncing. True enough. But operating systems have browsers as part of core functionality, too. Doesn't Mac OS X come with Safari? Doesn't the iPhone?

And "bundling" works. Steve Jobs bragged this week that Apple has distributed 600 million copies of iTunes to date. The overwhelming majority of those copies were iTunes for Windows. And iTunes for Windows' popularity isn't driven by software product quality.

At least with Windows, you could reformat your PC and install Linux or any number of other PC-compatible operating systems. Can I reformat my iPod and install something else? Can I uninstall iTunes but keep using the iTunes store and my iPods? Apple strongly discourages all that, claiming that the iPod, the iPod software and iTunes are three components of the same product. But that's what Microsoft said about Windows and IE.

Sorry, dad

Here's a scenario for you. A consumer walks into a local retail outlet to buy a Christmas present for dad. The Apple iPod "section" of the store dwarfs the section where all the also-ran players are displayed. IPod is clearly the trusted standard. The consumer buys a shiny new "Fatty" iPod nano with video.

Dad opens the present and is excited. He follows the directions, installs iTunes and immediately splurges on a few dozen songs at the iTunes store. He loves it, and is an instant convert to portable digital music.

The only downside is that he works out every day at the gym, where cardio machines face TVs that broadcast sound over FM radio. Six months later, when his iPod is stolen, he goes to buy another player -- this time, he hopes, with an FM radio in it. Several competitors offer this feature, but not iPods. He's about to choose a new player with an FM radio when it hits him: None of his files -- now totaling 300 songs and 50 movies -- will play on the new player. He bought and paid for all this content, but it only works with iPods and iTunes.

Apple has an iPod customer for life. Microsoft never had this kind of monopoly power. Sorry, dad. I should have bought you a tie.

Sticker shock

Another clue that a company has monopoly power is when you find yourself suffering sticker shock. How many times have you stood in line at the theater megaplex and marveled at the chutzpah required to charge $4.50 for a soft drink, when the same beverage is one-third the price at the quickie mart 50 feet outside the theater doors? But -- so sorry! -- no outside food or beverages are allowed in the theater. The theater has a monopoly on soft drink sales, and you'll pay what they charge.

That same shock rippled through the iPhone enthusiast community yesterday when Jobs announced with a straight face that iPhone ringtones based on iTunes songs would cost the full price of the song, plus 99 cents extra. What? The full song costs 99 cents! How on Earth can Apple seriously charge the same amount again for the ability to hear just 30 seconds of the song -- the same length as the free iTunes "samples"?

Apple fully understands the power of monopoly pricing. The company has sold the 8GB iPhone for two prices in its short, three months of existence: $599 and, now, $399. When the iPhone was the only way to get the whole multitouch, big-screen, Wi-Fi iPod experience -- when the product had no alternatives -- the price was $599. One analyst estimated Apple's cost to build an iPhone is $245.83. I don't know if that's true but, if so, more than half the user cost was profit. That's theater soda pricing. But as soon as Apple introduced an alternative to the iPhone -- the iPod Touch -- Apple dropped the price by one-third.

Imagine if another company were allowed to compete in the OS X media player market. These players would all drop to below $300. Don't hold your breath, though; it'll never happen. Apple has the power to exclude all others from software than runs on its media players. Microsoft could only dream of such power.

Apple the copycat

Ten years ago, Microsoft haters complained that Windows followed the Mac OS to market as a graphical user interface, copying the Mac's features such as folders, trash cans, resizable windows and other elements. That complaint was repeated with each new version of Windows -- Apple was the innovator in the operating system space, and got there first with a host of key features. Microsoft just came along later, duplicated features that Apple pioneered, and reaped the benefit because of its monopoly power.

But who's innovating now? The LG KE850 was winning awards for its full-screen, touch-screen, on-screen keyboard before Jobs even announced the iPhone.

The best thing about the iPhone and iPod Touch -- the warm-and-fuzzy multitouch UI with gestures -- wasn't new, either. Various labs have been demonstrating similar UIs for more than a decade, and even Microsoft demonstrated a fully realized 3G UI in May, well before Apple shipped the iPhone. Microsoft will ship its tabletop UI, called Microsoft Surface, in November, and Apple will likely enter this space with a 3G UI months or years after Microsoft does.

And Wi-Fi in a media player? Ha! Microsoft's funky Zune had that almost a year before Apple did and SanDisk's Sansa Connect with Wi-Fi was released last June. Apple even stole the name for its iPod Touch product, according to HTC, which sells a touch-screen smart phone called the HTC Touch.

Don't get me wrong. I think Apple's execution of these features is far better than its competitors'. And it would be horrible decision-making to not build the iPhone simply because others pioneered key features. But that's not what I'm talking about. I'm talking about Apple doing what Microsoft did: dominating the market with features other companies had first. If it was fair to slam Microsoft over Windows, it's fair to slam Apple over the iPhone and iPod Touch.

Apple the bully

Microsoft used to be the big bully, pushing everyone around and dictating terms to partners. Microsoft has lost its edge in this regard -- most of Microsoft's major resellers brazenly hawk Linux. Even Intel -- the "tel" part of "Wintel" -- is powering Macs these days. Microsoft is still profitable, but it has lost control -- and has lost its reputation as the bully nobody can say no to.

Meanwhile, Jobs has suddenly become the most feared man in Hollywood, bragging yesterday about Apple's scary dominance in digital media sales. Apple has sold more than 3 billion songs and 95 million TV shows via iTunes. While music CD sales crash and burn, almost one-third of all music sales are now digital. As Jobs euphemistically said yesterday, "iTunes is leading the way."

Although full details haven't been revealed, NBC apparently wanted more "flexibility" to charge higher prices for its TV shows on iTunes. Apple said no, and NBC was sent packing. NBC now plans to sell shows on alternative locations, such as its own Web site and on Amazon.com. Prediction: NBC will come crawling back to Apple and beg the company for inclusion, and on Apple's terms. Why? Because iTunes is increasingly becoming the only venue in which media companies can succeed selling music and TV show.

Jobs rules like Bill Gates never did. If you want to succeed in the digital music or downloadable TV business, you'll do things his way.

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Growing trend of ipod

Any talk these days of Apple and the future of mobile computing quickly turns to the iPhone. The company is on its way to selling a million iPhones in the first three months of what Apple says is a multiyear strategy to enter the mobile phone market.

But Apple makes another mobile device. It's called the iPod. And if the persistent rumors are fulfilled Wednesday during the latest episode of The Steve Jobs Show (a product presentation at San Francisco's Moscone Center), the iPod is about to get a whole lot more powerful.

A wide-screen iPod that looks an awful lot like an iPhone seems like the most likely bet for the sixth generation of Apple's ubiquitous music and video player line. It also seems very likely that those new iPods will run the same stripped-down version of Mac OS X found on the iPhone, something even Jobs himself hinted at during a meeting with Apple employees on the eve of the iPhone launch.

You don't need a sophisticated operating system to play songs and TV shows, so at that point, the iPod stops being just a gadget. So, then, what exactly is it? Like the iPhone, it becomes something in between a gadget and a PC, which has been treacherous ground for the PC industry.

The tech industry appears to be at another one of those pesky crossroads. The PC is, well, dated. We all need one, and we all use one, but we just don't get excited about buying a new one anymore.

As a result, the PC industry has been scrambling to find the next big thing. Tablet PCs? Nope. Home media centers? Maybe, but not yet. Digital televisions? Still the domain of the consumer electronics industry.

An iPod with a more powerful operating system and a touch screen could suddenly become an intriguing little device for those who like the iPhone, but don't want to spend 600 bucks or hook up with AT&T.

Apple found its next big thing six years ago when it released the iPod. It wasn't the first company to figure out that people wanted to carry all those Napsterized songs in their pocket, but it has certainly made the most of it. More than 70 percent of people in the U.S. who want a portable digital music player buy an iPod.

But the iPod really does just one thing. It does it well--and yes, you can also store contacts, appointments and play games that would have looked lame 10 years ago--but nobody buys an iPod to make sure they remember that doctor's appointment.

After Wednesday, that might be different. An iPod with a more powerful operating system and a touch screen could suddenly become an intriguing little device for those who like the iPhone, but don't want to spend 600 bucks or hook up with AT&T.

It wouldn't be hard to imagine some of those people put off by the iPhone's price and wireless carrier would shell out $349--the current price for the 80GB iPod--for an iPod that can do far more than just play videos or music.

That is, assuming Apple doesn't overlook what's really needed in a mobile computer. There's no point in putting a sophisticated operating system in an iPod if you wall that device off from the Internet. Apple has resisted adding Wi-Fi to the iPod thus far, but it broke that barrier with the iPhone and perhaps it has figured out a way to add Wi-Fi without killing battery life.

And it would really need to be a phone-less iPhone, with applications like Safari, YouTube and Google Maps. Ideally, it needs third-party applications, such as games or GPS navigation. But it might take Apple awhile to admit that, given that its approach to application development on the iPhone was to limit developers to Web-based applications.

The entire combination could make the $349 iPod more attractive. Apple's revenue growth from iPods has stalled, even though the unit growth is still above 20 percent year over year. That implies that iPod buyers are opting for the less expensive $199 4GB Nano or the $249 30GB iPod.

It's quite possible that Apple doesn't want to make that dramatic a leap just yet. Jobs prizes simplicity and aesthetics, and a large part of the iPod's appeal has been that it does one thing (or a couple), and does it (or them) well.

But a Mac OS X-based iPod could be a compelling device as the industry and its customers try to figure out how mobile computers should evolve. It would avoid the early mistakes of the UMPC, which runs a battery-sapping PC operating system, doesn't fit in a pocket, and at around $1,000, has been met with lukewarm--at best--interest from consumers.

There are other devices out there, like Sony's PSP and video players from Archos, that are trying to do the same thing. But with sales of more than 10 million iPods a quarter--and a whopping 21 million last holiday season--Apple has established the iPod as one of the most widely used handheld gadgets on the planet.
What if it were a computer, too?

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