Two complaints about Apple’s popular aluminum iMac line — the “washed out” look of the 20-inch iMac that surfaced on Apple’s discussion boards last summer (see here) and the “millions of colors” issue that was recently settled by the company — were rolled into one class-action lawsuit filed Monday in U.S. District Court in San Jose.

The plaintiff — a Texan named Chandra Sanders — claims to represent tens of thousands of customers who purchased the smaller of the two iMacs introduced last August. She is demanding a jury trial.

At the center of her complaint is the allegation that while 24-inch iMacs are capable of displaying 16,777,216 colors on 8-bit, in-plane switching (IPS) screens, the 20-inch iMac have 6-bit twisted nematic film (TN) LCD screens that can display only 262,144 colors.

Much of the 15-page complaint is taken up repeating statements made by Steve Jobs at the product introduction and by marketing messages issued later by Apple (AAPL) that describe the two displays as if they were interchangeable.

Apple’s website, for example, says that “No matter what you like to do on your computer — watch movies, edit photos, play games, even just view a screen saver — it’s going to look stunning on an iMac.”

In fact, say the plaintiff’s representatives, “the inferior technology of the 20-inch iMac is particularly ill-suited to editing photographs because of the display’s limited color potential and the distorting effect of the color simulation processes… Apple deceptively marketed its new 20-inch iMac in a way that grossly inflated the capabilities of its monitor, which is vastly inferior to the previous generation it replaced.”

“Apple is duping its customers into thinking they’re buying ‘new and improved’ when, in fact, they’re getting stuck with ‘new and inferior,’” said Brian Kabateck of Kabateck Brown Kellner, the Los Angeles firm that is handling case. “Beneath Apple’s ‘good guy’ image is a corporation that takes advantage of its customers. Our goal is to help those customers who were deceived and make sure Apple tells the truth in the future.”

Ms. Sanders claims to have lost “money or property” as a result of Apple’s “unfair, unlawful and fraudulent” actions, although no dollar figure is provide.

It its press release, Kabateck Brown Kellner LLD describes itself as “one of the nation’s foremost consumer law firms.” The firm claims that its clients have won more than $750 million against Google (GOOG), Farmer’s Insurance, Eli Lilly (LLY) and other major corporations.

Piper Jaffray analyst Gene Munster took a lot of heat back in June 2007 when he predicted, three weeks before Apple even began selling the iPhone, that the company would be shipping them at the rate of 45 million a year by 2009.

But Munster is sticking to his guns, and on Monday released a detailed report to clients in which he lays out the steps by which he expects Apple (AAPL) to hit his target — quadrupling 2008 sales.

• By introducing a 3G iPhone within the next 3 to 6 months
• By offering a family of 2 to 3 iPhones — including lower-priced models selling for $200 to $300 — by Jan 2009 at the latest
• By entering new countries, effectively doubling the addressable market every year for the next two years.
• By adding new features, such as games (Tiger Woods Golf, played by swinging the iPhone?) and remote purchases (Starbucks lattes without the wait?) starting in June.

Conceding that most investors consider his 45 million estimate “outrageously aggressive,” Munster supports it with a somewhat mysterious chart that compares the 409% year-to-year growth rate of the iPod in its breakout years with his estimate of just over 300% for the iPhone.

What’s mysterious about this chart is that it shows sales of 35.6 million iPhones in fiscal 2009, not the 45 million Munster is projecting. The discrepancy may be due to the difference between Apple’s fiscal year and our calender year, but Munster does not explain it.

Slightly clearer is the roadmap Munster offers for Apple’s overseas expansion. He points out that iPhone has achieved roughly 3% penetration of the 153 million subscriber base in the six countries in which it is currently sold. The following chart shows how he expects Apple to double that addressable market over the next two years. Note that Japan is the only Asian country he’s counting on for 2008. China, he says, is not likely to sign on until Apple drops its insistence on revenue sharing, something he expects the company to do in 2009.

Do smartphones really need physical keys?

The folks who designed Apple’s iPhone bet that touchscreen keys would be good enough for most users, and based on a February survey of iPhone owners that found 72% “very satisfied” (versus 55% for RIM), Apple’s gamble seems to have paid off.

The complaints about the virtual keys that were so persistent when the iPhone first came out have largely gone away.

But not quite. Just as Apple (AAPL) begins manufacturing the second coming of its famous smartphone, we have two new data points suggesting that the keyboard wars are far from over.

The first comes from an open letter to Steve Jobs posted by Dan Tynan at PC World in which he lists “5 Things iPhone 2.0 Must Have.” No. 1 on his list: “Enlarge the Friggin’ Keyboard.” (link)

Tynan cites an Aug. 2007 User Centric test in which 20 veteran thumb typists were confronted with the iPhone for the first time and, not surprisingly, took twice as long to enter text and made more errors. (link)

What does Tynan suggest that Apple do about that? He likes the slide-out keyboard that HTC built for AT&T’s (T) Tilt, a solution he describes as “nifty.”

Given how hard Steve Jobs and his team worked to design the iPhone — stripping it down to bare essentials and selecting a form factor with as few moving parts as possible — they are unlikely to take kindly to Tynan’s suggestion.

The second data point comes from Engadget, which has released what it says are the first leaked photographs of the new RIM (RIMM) BlackBerry 9000. (See their gallery of photos here.) SteveJack at MacDailyNews was the first to point out the resemblance to — and the key difference with — the iPhone. He writes:

“RIM clearly seems to have tried to copy Apple’s iPhone’s exterior look, but beyond that derivative bit of attempted tomfoolery, the anachronistic physical buttons remain, taking up space whether or not they’re in use.

Also remaining is the small screen, mashed into the upper half of the device in order to make room for those tiny, slippery-looking plastic buttons festooned all over the bottom half of the device. The software’s UI has been prettied or messed up (depending on your taste), but it has none of the multi-touch goodness of Apple’s iPhone. It’s the same old, same old in an iPhone-inspired wrapper.

You can judge the distance behind and overall cluelessness of iPhone’s future roadkill by the amount they copy the iPhone’s exterior. See: LG, HTC, and now RIM, among many others. This ceaseless quest to dress up antiques in Apple veneer is pathetic and sad.”(link)

A partisan review, to be sure, and more than a bit over the top. But he may have a point.

It should be no surprise that Apple has turned to Foxconn, the trade name for Hon Hai Precision Industry Co., to build the next generation iPhone.

China’s Commercial Times reported early Friday that Foxconn was competing for the business, and the Dow Jones newswire, citing “a person familiar with the situation,” now reports that Apple (AAPL) has awarded the Taiwan-based firm the exclusive contract. (link)

Apple has chosen a supplier it knows and trusts. Although it keeps a relatively low profile in the United States, Foxconn is one of the world’s largest manufacturers of electronics and computer components. It built many of the first generation iPhones, as well as MacBook Pros, MacBook Airs, iPod nanos and Mac Minis.

It also makes motherboards for Intel (INTC), Dell (DEL) and HP (HPQ), Playstations for Sony (SNE), Wii’s for Nintendo, Xbox 360s for Microsoft (MSFT), cell phones for Motorola (MOT) and Kindles for Amazon (AMZN).

Foxconn employs nearly half a million people and does most of its manufacturing in mainland China. It was China’s largest exporter in 2007.

In 2006 the British press charged that it used abusive employment practices. Apple investigated those charges and declared them largely unfounded, although the company did find that some Foxconn employees were working longer than the 60 hours a week Apple’s Code of Conduct finds acceptable.

Ever since Steve Jobs told the British press last September that they could “expect a 3G iPhone late next year,” the question has been not “if” but “when” exactly.

Speculation grew in October when Broadcom began delivering samples of what it called a “3G Phone on a Chip” (link) and again in November when AT&T CEO Randall Stephenson promised that we’d “have it next year” at whatever price Jobs decides to set.

Now, with less than three months before Apple’s (AAPL) Worldwide Developers Conference (June 9-13), we’re getting a flurry of leaks and rumors offering fresh details about the 3G iPhone and zeroing in on a late-May to June release.

• Last Friday, Digg founder Kevin Rose, who has a mixed record on iPhone predictions, told the audience for his Diggnation podcast that the 3G iPhone would have live video-conferencing capabilities. (YouTube link)
• On Tuesday, Gartner Group analyst Ken Delaney told iPod Observer that slower than expected sales in Europe for the EDGE-based iPhone had increased pressure on Apple to release a 3G model, and that according to his Asian sources Apple had ordered “a second round of 10 million iPhones based on the 3G network.”
• On Wednesday, Digg’s Rose followed up on his Friday podcast with a Twitter post in which he reports that a high level vice president with a big company that works with Apple told him that the new iPhone “will ship in June w/3G and GPS.”
• Reflecting the newly reported 3G iPhone build plans, BMO Capital Markets’ Keith Bachman on Thursday raised his bearish 2008 estimate of 8.5 million iPhones to 9.9 million, just a hair under Apple’s own target of 10 million. Even his new estimate, he now says, may prove conservative.

Jobs’ keynote address at the WWDC that second week in June would seem a logical moment to reveal the new phone, of course. But that’s what many observers thought last year, when they predicted that Jobs would release the original iPhone at the end of his speech. Instead, Apple began selling the phone a few weeks later, on June 29.

The most detailed speculation we’ve read to date about the likely specs of the new iPhone is still Seth Weinraub’s “best guesses,” posted in mid-February in his Apple, Ink column at Computerworld.

Former vice president Al Gore, who sits on Apple’s compensation committee and supervised the company’s internal investigation of its option backdating case, has been granted options to buy 10,000 shares of Apple (AAPL) at the strike price of $129.67, according to Jonny Evans at Macworld UK.

With Apple shares closing at $140.98 Tuesday night, the options would be worth $113,100 if exercised today. Should Apple reach its 2007 high of 202.96 before the options expire in 10 years, the grant would be worth more than $730,000, not counting taxes.

Gore, who describes himself as a “recovering politician,” has won the Nobel Peace Prize and an Academy Award since leaving office. He took a seat on the Apple board in 2003 and co-founded the cable network Current TV in 2004. He also advises Google (GOOG) and venture capital firm Kleiner Perkins Caufield & Byers.

Bloomberg News reports that in January, Gore exercised options to buy 1,000 shares at $7.48, reaping a potential profit of more than $124,000.

When you’re a company as high profile and as rich as Apple, you get sued for a lot things, from patent infringement (eight cases since January alone, according to Barron’s) to “sexual harassments with Apple gadgets” (see here). But one suit that was widely derided as frivolous when it was filed last year has been quietly settled out of court, the Chicago Tribune reports.

The terms were not disclosed, and Apple as usual won’t comment, but “settled” usually means that the company paid the plaintiffs something to make their case go away.

At issue is that pull-down menu in the Mac OS that lets users choose between 256, thousands and “millions of colors.”

Here’s how we reported on the case last May (link):

The complaint — filed in a California superior court — reads like a long, angry comment thread on an Apple forum, which is largely what it is.

Two MacBook owners, Fred Greaves and Dave Gately, have filed a class action lawsuit against Apple (AAPL), charging the company with deceptive advertising, misrepresentation and unfair competition over the use of the phrase “millions of colors” to describe the capability of the LCD displays in MacBook and MacBook Pro computers.

But as Charles Jade puts it in Ars Technica Infinite Loop, the legal filing tells …

“a story … that will sound familiar to longtime Mac users. It begins with a perceived problem, the discovery that others have this problem, a refutation by Apple of that problem, and the ensuing legal action.” (link; see also Ryan Block at Engadget)

At the heart of the case is plaintiff’s claim that rather than delivering 16,777,216 colors with an 8-bit LCD, Apple chose a cheaper route, delivering the illusion of millions of colors using a 6-bit LCD and dithering.

What makes the complaint sound especially familiar to longtime Mac users, is that to buttress their case, Greaves and Gately have copied and pasted long stretches of exchanges from discussion threads on apple.com support and other online fora. They tell stories of dismissive Apple geniuses telling them they are being “too picky,” of off-the-street tests performed at Best Buy and Tekserve, of ordering replacement computers and being afraid to open the box, of exhausted phone support reps encouraging users to “take the refund.”

“I’m so tired of dealing with Apple at this point,” writes one anonymous poster, “that I don’t have the energy or time to continue even though they’ve done everything they possibly could.”

What do you do when you run into a brick wall at tech support? Greaves and Gately sued. They’ve requested a jury trial, which means a half dozen of their peers could be trying to sort out the kinds of meandering arguments we slog through every day. You want in on the case, which Techmeme has filed with a Netflix suit under the heading “from the who-to-root-for dept”? You can read the complaint as a PDF here or here at a mirror site.

Well, Greaves and Gately didn’t get their jury trial. Their lawyer told the Tribune that they weren’t able to pursue the case as a class action because it was difficult to find other people who bought Macs solely based on the “millions of colors” claim.

The plaintiffs did get the satisfaction of a hearing with Apple lawyers and a settlement — albeit one they’ve agreed not to talk about. That pull-down menu, meanwhile, still says “millions.”

Thanks to Daring Fireball for the tip.

This was a week for unsoliticited celebrity Apple (AAPL) endorsements.

First there was Charlie Rose, falling on his face to save his MacBook Air. Then Martha Stewart, posing her French bulldog Sharkey in front of the “razor-thin” machine.

And now, via Newsbusters.org, former Bush political advisor Karl Rove. Here he is, interviewed by Matthew Sheffield, talking about his iPhone and his MacBook Air:

NB: All right, I’ve got just one more quick question for you. Last time I saw you, you’d just gotten an iPhone. How’s that working out for you?

ROVE: I love it. My life has changed. I have a shred of coolness. I’ve got my 3,500 people in my addressbook on the phone, I can sync my calendar. I keep track of my modest little stock investments. I can check the weather of my house in Washington, my house in Florida, my boy at school, my hunt-lease in south Texas. I can surf the web, I’m just–I get part of my email there.

I mean it is just shocking how much better, how much more productive I am. I no longer carry around a giant address book, if I don’t have my calendar close at hand, I can quickly check it out of my– I don’t have to carry, I used to carry several notecards, now it’s just as easy to scribble on my little notepad, I can take photographs and forward them on immediately, it’s just remarkable.

NB: All right. Well it sounds like Steve Jobs should call you up as a spokesman.

ROVE: There we go, there we go. And not only that, I also have the Mac Book Air which is really cool. Even my wife is jealous of my MacBook Air.

NB: Ahh, well it sounds like you’ll have to get her one then.

ROVE: No I don’t, no I don’t. I’m the only cool one in the family with a MacBook Air.

For more of the Rove interview, including his take on left-leaning blogs (”… most of them are hate-filled, obscenity-clogged rants of anger and hatred”) click here.

Thanks to superbaka at TMO’s Apple Finance Board for the tip. Bush/Rove photo by Win McNamee / Getty via Time.com.

With less than two weeks before the end of Apple’s March quarter, Shaw Wu of American Technology Research expects the company to shake off the doldrums that are dragging down the rest of the U.S. economy.

“Our sense is that the Mac business is recession proof,” he writes in a report to clients issued Thursday morning. Based on his supply chain checks, Wu sees good news throughout Apple’s (AAPL) product line:

• Rather than the 38 percent year-to-year growth in Macintosh unit sales he had earlier predicted, he now thinks growth may be closer to 42 percent.
• After a strong start and then a lull, he sees Macbook Air sales picking up rapidly. “Customers are attracted to its super thin form factor and do not seem to mind some of its limitations.”
• He’s seeing a bump in iPod sales following the shuffle price cut, and now expects iPods to come in at the high end of his 9.5-10 million unit range (but lower than the Street’s 10.8 consensus).
• He sees a pause in iPhone sales following the well-regarded SDK announcement as customers wait for the June release of iPhone 2.0. He’s modeling 11 million iPhones for the year, slightly ahead of Apple’s 10 million target.
• Falling prices in component parts should sweeten Apple’s March report, due out April 23, and Wu is raising his estimates accordingly. He writes: “For the March quarter, we are now modeling $7 billion and $1.10 in EPS (from $6.9 billion and $1.02) vs. consensus of $6.92 billion and $1.05 and its guidance of $6.8 billion and $0.94.”

In the weeks before the iPhone was released last June, there were few analysts more reviled by Apple (AAPL) enthusiasts than Gartner’s Ken Delanay.

On June 19, ten days before the device went on sale, he gave it the information technology kiss of death. “We’re telling IT executives to not support it because Apple has no intentions of supporting (iPhone use in) the enterprise,” he told Network World’s Jon Brodkin. “This is basically a cellular iPod with some other capabilities and it’s important that it be recognized as such.” (link)

Then, on the eve of iDay, as eager buyers by the thousands camped out overnight waiting for the doors of Apple stores to open, he followed up with a research note. “General requests to support iPhone should not be fulfilled,” he recommended, and then ticked off seven reasons the iPhone was not fit for corporate enterprises. (link)

So it is with some irony that Ken Delaney is listed as the principal author of the five page report titled “Gartner Changes its iPhone Enterprise Recommendations.” It begins:

The iPhone will soon be tailored for enterprises. Gartner recommends “appliance-level” support status once firmware 2.0 and improvements are released. iPhone will become a popular tool alongside BlackBerry and Microsoft devices.

The full report is available here for $95, but there’s a summary at Computerworld.com here. It notes that although Gartner has upgraded the iPhone from the lowest level (concierge) of its three-tiered rating system to the middle (appliance), it has withheld the top rating (platform) because Apple is the only supplier that makes the device — as if licensing firmware to iPhone cloners would make it more secure.

Of course, the reason Gartner changed its tune is that Apple’s enterprise roadmap and SDK took pains to address each item in the IT wishlist. (See here.) It should be noted, however, that several of Delaney’s original seven objections remain unanswered, including “no removable battery” and “only one carrier operator (AT&T).” Full list here.

We’re still waiting for a change of signals from Forrester Research, whose 10 reasons not to support the iPhone created such a stir in December.