Three things that will define Apple in 2011

What should we expect to see from the geniuses in Cupertino?

This year is already shaping up as a wild ride for Apple. So what's in store for the biggest tech company on the planet? What should we expect to see from the geniuses in Cupertino? Here are three things to keep an eye on:

1. Hunting for Sales Overseas

On the first Monday of the new year, Apple surpassed $300 billion in market cap. As you'll recall, Apple blew past Microsoft in market cap last summer and became the world's largest tech company. Analyst Chris Whitmore of Deutsche Bank said in a research note this week that holiday-shopping channel checks showed Apple had better-than-expected demand for the iPad and Mac.

Just how much better? We won't know that until Apple announces its earnings later this month -- but it's likely it'll be another record-breaking quarter.

So will Apple be able to keep up the momentum for the rest of this year? Last year, Apple ignited the tech world with its iPad. Don't expect another breakthrough moment, according to Piper Jaffray. Apple will probably not enter new product categories this year, instead retrenching with improvements to its iPhone, iPad and Mac offerings.

This means we expect to see the arrival of a Verizon iPhone soon, hopefully next month after Verizon's 30-day return policy from holiday sales passes. We're also predicting Apple does more of what it started last year - that is, driving deeper in countries such as China.

"Apple's key weaknesses are AT&T and overseas sales," says tech analyst Rob Enderle. "If I were them, I'd focus there."

2. Apple Wins the Smartphone Race... Sort Of

Android OS devices dramatically outsold iPhones for the first time in the third quarter of 2010, cutting deeply into Apple's leading smartphone market share. Results of the latest Nielsen survey this week show that the iPhone holds a slim lead in overall market share at 28.6 percent, compared to BlackBerry (26.1 percent), which continues to bleed market share, and Android (25.8 percent), which continues to grow market share.

Bottom line: This year will showcase a super-tight race in the all-important smartphone market.

How will Apple fare? A Verizon iPhone should stem Android's momentum, but the fact is that Android's many handset makers will collectively drive a greater volume of units sold. Meanwhile, RIM faces massive challenges, and its Co-CEO Mike Lazaridis didn't appear up to the task judging from his poor showing at AllThingsD's mobile conference last month.

But Android's higher volume only tells part of the story. "I expect Apple will have higher profits than any other hardware or software company in this segment by a considerable margin throughout the year," Enderle says. "Numbers give you bragging rights, but cash pays the bills. As long as Apple makes more money, my opinion is they are the winner regardless of whether they sell the most phones."

3. iPad Imitators - Fail!

Since its arrival in April, the iPad has sent scores of consumers to Apple Stores, taken the air out of the high-flying netbook market, made surprising inroads into the enterprise, and now threatens to shake up the venerable PC market. It's clear that the iPad is no fad.

The iPad's early success has stirred giant tech vendors to follow suit. Tablets are expected to be all the rage this week at the Computer Electronics Show, or CES, in Las Vegas. CES will spark what will be known as the great tablet war of 2011.

While Apple will be a no-show at CES, other major vendors will show off their tablet prototypes. Android Honeycomb products and Hewlett Packard's Palm products represent the biggest threats to the iPad, according to Enderle. He adds that Android partners Samsung and Vizio are executing strategies and lining up products that make them look a lot like Apple copycats.

Can the iPad withstand the onslaught of competition? First, let's be clear: Not only does Apple have a big head start in terms of market share and apps, much of the new class of tablets that will be unveiled at CES won't come out until later this year, probably around the time of the iPad 2 release -- and that's the tablet they'll do battle with.

Rumors have begun that the iPad 2 will have cameras, FaceTime, and Apple's high-resolution "retina" screen. Industry watchers are pegging the iPad 2 release sometime in April, a year after the original iPad release. While rumors swirl, one thing is for certain: Apple's marketing machine will make sure the buzz is hitting a crescendo when the iPad 2 is finally released.

Pity tablet competitors that release their wares in the deafening drum beat of the iPad 2. "Odds favor Apple," Enderle says, "because none of the other vendors have shown the ability to generate demand or capture applications at a level Apple has."

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Tom Kaneshige

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