Heinen was charged at a federal level by the SEC last year over the backdating scandal that came to light in late 2006. The former general counsel to Apple has also agreed to refrain from serving as a officer or director of any public company for five years, and be suspended from appearing or practicing as an attorney before the Commission for three years.

The SEC said that company records pertaining to a grant of 4.8 million options to Apple’s senior executive team in February of 2001, and a grant of 7.5 million shares made to CEO Steve Jobs in December of 2001 had been altered to conceal what it called a fraud. The result was that Apple underreported its stock-related expenses by nearly $40 million.

The SEC previously settled with former Apple CFO Fred Anderson and the commission has formally cleared Steve Jobs of any wrong doing.

According to Alley Insider Jobs billed Apple for $550,000 in expenses in the last three months of 2007, that cost then reportedly dropped to $30,000 in the first few months of 2008 and now an SEC filing reveals that Jobs racked up $102,000 in expenses during the June quarter.

In the past many investors have noted that increased use of Jobs’ private jet means exciting prospects are ahead as the Apple CEO does his dealings around the world face-to-face.

But according to the New York Times, Jobs has confirmed to several people that he is doing well and that after his initial surgery is completely cancer free.

The publication adds that Mr. Jobs has stated to people close to him that he had a surgical procedure this year to address a problem that was contributing to a loss of weight.

The comment came after concerns that Apple predicted gross margins of just 30% down from 34.8% in the June quarter. According to Apple a future product transition will cause a drop in gross margins.

The chief was short on details but did explain that price will be a significant driving factor. He continued that Apple often introduces products with new technology at a high price, but seeks to drive the price lower over time.

When referring to the unnamed product the CFO described the product as having “technologies and features that others can’t match”.

In today’s press release Steve Jobs spoke of “several more wonderful new products”.

Apple is widely expected to be revising the MacBook Pro and MacBook in the coming quarter. In addition the company is rumoured to introducing a multi-touch tablet sometime in the future.

Apple also held a conference call covering the details of the quarter as well as answering questions from analysts.

Notes from Conference Call

• Highest June quarter earnings in Apple’s history
• Highest quarterly Mac shipments in Apple’s history
• 38% growth in revenue year-over-year
• 11 million iPods sold, up 12% year-over-year
• iPhone 3G off to great start, 1 millionth iPhone sold in just 3 days, available in 22 countries
• Over 900 applications on App Store, 20% free, 90% under $10. Over 25 million apps downloaded so far
• iTunes now offers 8 million songs, 20,000 TV shows, and 2,200 movies, with 450 of those movies offered in HD
• 476,000 Macs sold via retail stores, over half sold to customers new to Mac
• 216 retails stores around the world at the end of quarter, stores coming to Switzerland and Germany in coming months
• Expect to sell more iPhones in Q408 than any other quarter
• Gross Margin expected to be down to 31% in September quarter, in part because of new product introduction, no further details available

Question and Answer Session Highlights

• Beijing Apple store doing very well already
• 170 Best Buy stores added in quarter. Total of 570 currently, 600 by the end of the Summer
• Steve Jobs has no plans to leave Apple and his health is a private matter
• Apple continues to invest in Apple TV, even though it remains a “hobby”
• iPhone 3G sold out due to overwhelming demand. Pleased with production ramp, trying to catch the demand by shipping units as fast as they can
• iPhone 3G launching in additional 20 countries on August 22
• Reiterated that Apple will introduce state of the art new product at prices their competitors can’t match
• App store not a huge revenue generator, instead makes the iPhone and iPod touch more attractive

Apple shipped 2,496,000 Macintosh computers during the quarter, representing 41 percent unit growth and 43 percent revenue growth over the year-ago quarter. The Company sold 11,011,000 iPods during the quarter, representing 12 percent unit growth and seven percent revenue growth over the year-ago quarter. Quarterly iPhone units sold were 717,000 compared to 270,000 in the year-ago-quarter.

“We’re proud to report the best June quarter for both revenue and earnings in Apple’s history,” said Steve Jobs, Apple’s CEO. “We set a new record for Mac sales, we think we have a real winner with our new iPhone 3G, and we’re busy finishing several more wonderful new products to launch in the coming months.”

“We’re extremely pleased with the growth of our business and the generation of almost $5.4 billion in cash in the first three quarters of fiscal 2008,” said Peter Oppenheimer, Apple’s CFO. “Looking ahead to the fourth quarter of fiscal 2008, we expect revenue of about $7.8 billion and earnings per diluted share of about $1.00.”

Apple will be live streaming its Q3 2008 financial results. The live webcast will begin at 2:00 p.m. PDT on Monday, July 21, 2008 at www.apple.com/quicktime/qtv/earningsq308/

On average analysts appear to be reporting that Apple will earn $1.07 a share on $7.36 billion in sales, up from 92 cents a share on $5.41 billion in revenue during the same period a year ago. Apple itself has said it expects to earn $1 a share on $7.2 billion in revenue.

Gene Munster of Piper Jaffray has recently stated in a research note that Mac sales will be “the key to the quarter,” and that he expects Apple to report Mac sales of 2.35 million units during the quarter.

Andy Zaky of Bullish Cross, a blog on Apple’s financial dealings expects Apple to report $1.20 in EPS on $7.720 billion in revenue along with sales of 2.54 million Macs, 10.5 million iPods and 700,000 iPhones in the quarter.

The live audio webcast will be accessible through Apple’s website at here.

According to a report today, Apple has decided not to adjust the pricing on the UK iTunes store.

“The announcement was that we would match the UK price to that of other lower priced European countries”, an Apple spokesman said. “This is no longer necessary as exchange rates have effectively done it for us”.

At the time of the decision the exchange rate would have meant that a song costing 0.99 euros would be 74p, but as the Euro has risen against the pound in the last few months a 0.99 euro purchase now equals 0.79 pounds.

Last year Apple had the high profile case against the company dismissed after both the US Securities and Exchange Commission and an internal investigation.

Apple shareholders Kenneth Mahoney and Martin Vogel last week filed a new lawsuit that accuses co-founder Steve Jobs, other executives, and board members with damaging the company’s share value through backdating, causing a 14 percent drop in the company’s stock value during 2006 that wiped out about $7 billion of Apple’s worth on the market in just two weeks.

According to the claim executives dated stocks that weren’t revealed to shareholders and also falsified records.

Item 8.01. Other Events

Apple assumes no obligation to update any of the statements in this Form 8-K regarding the iPhone, iPhone 3G and iPhone 2.0 software.

On Thursday AAPL closed $2 down from its opening and has since recovered in Friday trading.

During Apple’s second fiscal quarter which ended March 29th the company experienced a 51-percent rise in Mac unit sales compared to the same quarter in the previous year. According to todays filing this steep increase was mainly thanks to sales of the MacBook Air which was announced in January and the iMac which was refreshed in August 2007.

Apple also attributed a $228 million net sales rise on “music related products and services” at its iTunes Store to “heightened consumer interest in downloading third-party digital content, as well as the expansion of third-party audio and video content.”

As of the end of September 2007 the company’s total future minimum lease payments under noncancelable operating leases were $1.4 billion, of which $1.1 billion related to leases for retail space. As of March 29th 2008 this increased $192 million to $1.3 billion, and Apple Retail as a whole employed approximately 12,000 full-time equivalent employees.

In the quarterly filing Apple also noted that Research and Development increased by 59-percent or $90 million to $273 million in its second fiscal quarter, and increased 41 percent or $152 million to $519 million during the first six months of 2008 compared to the same period in 2007.

The company attributed the rise to an increase in R&D headcount for the current year to support expanded R&D activities and higher stock-based compensation expenses.

“Although total R&D expense increased 49 percent, it remained relatively flat as a percentage of net sales given the 43 percent and 38 percent increases in revenue in the second quarter and first six months of 2008 compared to the same periods in 2007,” Apple noted. “[Apple] continues to believe that focused investments in R&D are critical to its future growth and competitive position in the marketplace and are directly related to timely development of new and enhanced products that are central to the Company’s core business strategy. As such, the Company expects to make further investments in R&D to remain competitive.”

World of Apple will offer highlights from the call in this story.

• Call starting, speaking today Peter Oppeinheimer and Tim Cook.
• Higher revenue from iPod, iTunes and iPhone
• Apple performed “exceptionally well”
• 40% US growth, 47% intl, 74% in retail stores
• 50% of CPUs sold in retail stores are to new Mac users
• Ended quarter with 3 to 4 weeks of Mac channel inventory
• Good customer response on iPod touch
• iPod shuffle sales down, Feb. 19th price drop caused acceleration
• iPods have 73% of MP3 player market in US
• iTunes Store largest music retailer in US, 85% of legal music downloads
• Movie rental service well received by customers
• 200,000 downloads of iPhone SDK, 1/3rd of Fortune 500 companies have contacted Apple about iPhone development
• Looking to open new retail stores in Australia, China and Swizterland in “coming months”

The Company posted revenue of $7.51 billion and net quarterly profit of $1.05 billion, or $1.16 per diluted share. These results compare to revenue of $5.26 billion and net quarterly profit of $770 million, or $.87 per diluted share, in the year-ago quarter. Gross margin was 32.9 percent, down from 35.1 percent in the year-ago quarter. International sales accounted for 44 percent of the quarter’s revenue.

Apple shipped 2,289,000 Macintosh computers during the quarter, representing 51 percent unit growth and 54 percent revenue growth over the year-ago quarter. The Company sold 10,644,000 iPods during the quarter, representing one percent unit growth and eight percent revenue growth over the year-ago quarter. Quarterly iPhone sales were 1,703,000.

“We’re delighted to report 43 percent revenue growth and the strongest March quarter revenue and earnings in Apple’s history,” said Steve Jobs, Apple’s CEO. “With over $17 billion in revenue for the first half of our fiscal year, we have strong momentum to launch some terrific new products in the coming quarters.”

“We’re thrilled to have generated $4 billion in cash flow from operations in the first half of fiscal 2008, yielding an ending cash balance of $19.4 billion,” said Peter Oppenheimer, Apple’s CFO. “Looking ahead to the third quarter of fiscal 2008, we expect revenue of about $7.2 billion and earnings per diluted share of about $1.00.”

“Apple buys smaller technology companies from time to time, and we generally do not comment on our purposes and plans,” said Apple spokesman Steve Dowling. Although Apple refused to state the cost of the purchase it is estimated by those familiar with the deal that Apple bought the company for $278 million.

The decision to center the iPhone design around a chip that Apple could own marks a significant strategic choice by Apple Chief Executive Steve Jobs, and is aimed at ensuring Apple can continue to differentiate its flagship phone as a raft of competitors flood the market. According to a source affiliated with the chip company, Jobs and Senior Vice President Tony Fadell led the tiny group of executives who spearheaded the acquisition, which included negotiations that took place in Jobs’ home.

Rumours have previously circulated that Apple would use Intel’s Atom platform for future iPhones but the acquisition of PA Semi suggests otherwise.

Apple is expected to outperform the Street’s expectations and is also expected to severely outperform its guidance that it offered during the Q108 conference call in January.

Apple shocked the Street somewhat by offering very conservative figures for Q208 predicting 94 cents per share, nearly 15% below the Street’s average estimate of $1.09.

The average street consensus is that Apple is set to announce results of $1.07 per share on $6.95 billion in sales. Mac sales of 2.1 million, 10 million iPods and 1.5 million iPhones.

Analysts are positive that Apple will report a reasonable Q208 and have the following targets:

• AmTech - $175 (Neutral)
• Piper Jaffray - $250 (Buy)
• Needham - $235 (Strong Buy)
• Lehman Bros. - $195 (Overweight)
• CitiGroup - $212 (Buy)
• RBC Capital - $190 (Outperform)
• Merrill Lynch - $180 (Buy)
• Morgan Stanley - $185 (Overweight)
• Goldman Sachs - $185 (Buy)
• Caris & Co. - $170 (Above Average)

The executives were forced to address the restricted stock units that had recently vested and were set to expire according to SEC documents.

Each executive decided to surrender 113,659 shares at $139.53 each, they all retained the remaining 136,341 shares.

Apple’s Senior Vice President of the iPod Division, Tony Fadell also converted some 100,000 restricted stock units to shares. The executive then disposed of 45,750 at $139.53 for tax payments and kept the remaining 54,250.

Apple Chief Operating Officer Tim Cook converted 300,000 restricted stock units to shares and sold all of them on the open market for prices between $133.79 and $140.76 per share.

Chief Financial Officer Peter Oppenheimer and Senior Vice President of Industrial Design Jonathan Ive converted 250,000 and 200,000 restricted stock units to shares, respectively. Both used a portion to pay tax charges and then opted to sell the remaining shares on the open market.

Ive sold 109,216 shares at prices between $138 and $140 for a profit of $15.2 million.

Oppenheimer also sold his shares on the open market, the exec shifted 136,341 at prices between $138.74 and $139.79 for a profit of $19 million.

The domain http://www.ipodair.com current points to http://www.apple.com/itunes.

The WHOIS information on the the domain shows that a one Arthur Mitchell registered the domain with GoDaddy on the 15th of January this year.

WHOIS details attached to www.ipodair.com:

Registrant:
Arthur Mitchell
3613 W 85th Ave
Westminster, Colorado 80031
United States

Administrative Contact:
Mitchell, Arthur artmeusmaxim@yahoo.com
3613 W 85th Ave
Westminster, Colorado 80031
United States
(303) 744-9483

Al Gore Gains 10,000 Options

Former US Vice President and Apple board member Al Gore has been granted an option to buy 10,000 Apple shares.

The opportunity to purchase shares expires in 10 years and allows the board member to purchase shares at $129.67, Apple’s closing price on March 19.

Gore, who joined Apple’s board in 2003 also advises Google Inc. and venture capital- firm Kleiner Perkins Caufield & Byers. He also co-founded Current Media Inc., a San Francisco-based cable channel that plans to raise $100 million in an initial public offering this year.

During the meeting CEO Steve Jobs field questions on buy back shares, dividends and a successor to his position.

Since the beginning of 2008 Apple’s share price has plummeted 37 percent but Jobs said that the company has no plans to buy back shares or introduce a dividend.

“At this time, we have no plans to do either,” said Jobs.

The company CEO also reiterated Apple’s plan to sell 10 million iPhones during 2008 also repeating that the iPhone will find its way to Asia later this year.

Chief Operating Officer Tim Cook declined to comment when asked what date the iPhone would go on sale in China and India except to say that it will be in those Countries “one day.”

Jobs also spoke about successors to his CEO position; “We’ve got great talent, and I think the board would have a few really good choices.”

“We talk about that a lot.” Candidates include Cook and Chief Financial Officer Peter Oppenheimer, he said.

Shareholders also re-elected the entire board of directors.

When questioned about a pay proposal that was approved Jobs jokingly said “I’m hoping the say on pay proposal will help with my $1 a year,”

The proposal had been opposed by the board of directors. It urged the board to put up to shareholders a nonbinding resolution each year regarding pay of top executives. Reports Reuters.

Apple Chief Operating Officer Tim Cook

The session is available for listening on Apple’s website.

The first interesting piece of information that Cook exposed was Apple’s reasoning behind a locked iPhone. The COO explained that it was difficult to please all users on all networks from the outset, conditions in the US make it impractical due to having to release a CDMA and GSM version of the device to suit all carriers.

He went on to say that the model could change with time but the plan is to provide the best possible experience, the partnership with Apple and AT&T allows for a large amount of coverage and a simple experience for consumers.

“We’re not married to any business model,” Cook stated. “What we’re married to is shipping the best phones in the world.”

Cook also reiterated that Apple is committed to hitting the 10 million iPhones shipped in 2008 target.

On the subject of unlocked iPhones the COO stated that the large number of hacked iPhones around the world was a good problem. The officer stated that he “look[s] at this ‘problem’ with a little bit of a smile. Having people stepping over each other for the phone isn’t a bad thing.”

Cook also touched on the following…

• Apple TV remains a “nichey” product but has “enormous opportunity.”
• The iPod shuffle saw a price cut due to sales dropping 17% globally last quarter.
• The iPhone price cut was to grow the user base and attract developers.
• The upcoming iPhone SDK would let programmers “only be limited by [their] imagination.”
• No further details on the SDK were offered to keep “the element of surprise” for next weeks event.

Steve Jobs attached this stock performance chart onto his private internal email

“Wow… what a remarkable last few days,” he wrote in an email to employees. “Our stock is being buffeted around by factors a lot larger than ourselves.”

“As you can see, we have outperformed many other blue-chip tech companies, including Google,” he wrote, attaching a stock performance comparison chart for illustration. “I continue to believe that our fundamentals - our remarkable people, our clear and focused strategy, our new product pipeline, our 200+ retail stores, our $18 billion of cash in the bank with no debt, etc., will serve us well in the coming months and years.”

At the end of the email Jobs expressed his confidence that those who remain loyal to their positions in Apple would reap the benefits in the long run.

“I believe that investors who stay with us will be rewarded as the market’s confidence is restored over time,” he wrote. “Hang in there.”

Apple’s stock which hovered around $200 towards the end of 2007 has dropped as low as $130 recently.

Steve Jobs continues to be paid a $1 salary and received no stock options during 2007. The CEO does however own 5.5 million shares in AAPL and is yet to sell any since rejoining Apple in 2007.

Chief Operation Office Tim Cook was paid $700,014 in salary, earned a $700,000 bonus and received $6.943 million in stock awards. With other compensation (a $13,750 401K contribution and $250 iPhone credit), Cook earned $8,357,190 in 2007.

Chief Financial Officer Peter Oppenheimer was paid $600,012 in salary, earned a $600,000 bonus and received $4.946 million in stock awards. With other compensation (a $13,750 401K contribution, $250 iPhone credit, and $584,973 reimbursement for tax liabitity), Opppenheimer earned $6,745,345 in 2007.

Senior Vice President of Retail Ron Johnson was paid $600,012 in salary, earned a $600,000 bonus and received $4.946 million in stock awards. With other compensation ($379 iPhone credit), Johnson earned $6,147,001 in 2007.

The final executive officer to be detailed in the report is Tony Fadell, Senior Vice President of the iPod Division who earned $500,009 in salary, received a $500,000 bonus and was awarded $3.706 million in stock. With other compensation ($6,750 in patent bonus, $13,500 in 401K, $379 iPhone credit, $73 iPod credit), Fadell earned $5,355,171 in 2007

Gross margin was 34.7 percent, up from 31.2 percent in the year-ago quarter. International sales accounted for 45 percent of the quarter’s revenue.

Apple shipped 2,319,000 Macs, representing 44 percent unit growth and 47 percent revenue growth over the year-ago quarter. Apple also sold 22,121,000 iPods during the quarter, representing five percent unit growth and 17 percent revenue growth over the year-ago quarter. Quarterly iPhone sales were 2,315,000.

“We’re thrilled to report our best quarter ever, with the highest revenue and earnings in Apple’s history,” said Steve Jobs, Apple’s CEO. “We have an incredibly strong new product pipeline for 2008, starting with MacBook Air, Mac Pro and iTunes Movie Rentals in the first two weeks.”

“Apple’s revenue grew 35 percent year-over-year to $9.6 billion, an increase of almost $2.5 billion over the previous December quarter’s record-breaking results,” said Peter Oppenheimer, Apple’s CFO. “Our strong results produced cash flow from operations of over $2.7 billion during the quarter, yielding an ending cash balance of over $18.4 billion. Looking ahead to the second quarter of fiscal 2008, we expect revenue of about $6.8 billion and earnings per diluted share of about $.94.”

The webcast will begin at 2:00pm PT/5:00pm ET/10.00pm GMT.

Apple is expected to outperform its guidance of iMac and iPod sales for the quarter.

The street is widely expecting Apple to deliver sales of 23.2 million iPods, 2.2 million Macs and earnings of $1.53 per share on $9.3 billion. Apple offered guidance earnings of $1.42 in per share earnings on sales of $9.2 billion.

“Mr Key says 200,000 iPhones should have be sold in Britain by early January - in line with his expectations since its November 9 launch, although some analysts claim his target is conservative. Gartner, the research firm, says sales of up to 400,000 should be possible,” Parker reports.

The FT.com reporter wrote that “A 3G version of the iPhone will be launched by Apple next year; Mr Key is confident that O 2 will also have an exclusive deal for the mark two device.”

“O2 has signed a multi-year deal with Apple for the iPhone, and Mr Key insists Vodafone, for example, could not muscle in and take the 3G iPhone in the UK.”

“About 60 per cent of iPhone customers are sending or receiving more than 25 megabytes of data per month, which is the equivalent of sending 7,500 e-mails. By comparison, only 1.8 per cent of O2 ’s other mobile customers on monthly contracts are consuming more than 25MB per month,” Parker reports. “The O2 research suggests that, after years of dashed hopes for the operators, customers are on the verge of surfing the web on their mobiles in significant numbers.”

The report reveals the company’s concerns over new suppliers, component supply concerns, major retail expansion and rising rewards for executives.

The report goes into detail about Apple’s record-breaking year as well as warning that CEO Steve Jobs may see his annual compensation rise.

“Because Mr Jobs’s continued leadership is critical to Apple, the Compensation Committee is considering additional compensation arrangements for him,” the filing states.

Jobs’ private jet worth $46 million

Jobs is famously paid a $1 salary but Apple also pays for the maintenance and running costs of his private Gulfstream Jet which was gifted to him in 1999. Apple paid out $776,000 in maintenance on the jet in the financial year, up from $202,000 in 2006 and down on the $1.1 million spent in 2005.

Also of note, Steve Jobs did not received a free iPhone from the company unlike every other Apple employee, the chief did receive an iPod but it is unknown whether it was a gift or reward.

Steve Jobs remains Apple’s second largest share holder with 5.5 million shares, the report states that Jobs has never sold any of them.

Jobs took advantage of a 30,000 share grant provided to him shortly after his return in 1997, but appeared to only do so as the grant expiry date was approaching. The surge in Apple’s share numbers and stock value since the options were granted a decade ago gave the executive 120,000 new shares worth more than $14.6 million.

At the end of Apple’s fiscal 2007 year it had opened a total of 197 Apple Retail Stores across the US, UK, Canada, Japan and Italy.

Apple’s employee base also shot up by around 4,000 employees; jumping from 17,787 to 21,600, most of the new hires in the retail operation.

The company’s hold on the flash memory market remains strong, the report reveals. Apple paid its flash suppliers a $1.25bn advance in 2006, but as of 29 September 2007, just $208m of the advance had been spent - despite the growing demand for flash.

Apple generated $24b in revenue for 2007, returning $3.5bn in net profit. It generated $19.3bn in revenue and $2bn in profit in 2006.

The report also confirms the company invested $782 million in research and development and $467 million on advertising during the 2007 financial year.

“The phone had sold ‘in the tens of thousands’ since its launch on Friday,” he said in an interview with the paper.

When speaking to Thomson Financial Erskine declined to reveal how many iPhones it has sold, as the exclusive mobile network for the handset.

“He said early sales had been in line with its original expectations and customers had found the new handsets easy to use,” Thomson Financial reports.

According to files made at the Securities and Exchange Commission the retail chief exercised the 700,000 options at $23.72 apiece on Friday, October 26 and then turned around sold the shares on the open market from $185 to $185.21 each.

Just over 606,000 of the shares which were acquired under Apple’s 1997 Employee Stock Option Plan were sold for $185, the remaining were sold at various intervals with Apple’s share price ranging from $185.01 to $185.21.

Johnson’s estimated net profit on the options is approximately $113 million before taxes.

During Apple’s Financial Results Conference Call the following information was garnered:

• Highest September Quarter revenue in Apple’s history
• Record quarterly Mac sales
• 32-percent growth in Desktop Mac segment
• 37-percent growth over previous quarter in Notebook sales
• 10.2 Million iPods shipped in the quarter, 17-percent growth year-over-year
• iTunes Store has sold 3 billion songs and 100 million TV shows
• iTunes Store continues to be third largest distrubtor of music in U.S. behind Wal-Mart and Best Buy
• 1.1 Million iPhones moved in fourth quarter
• iPhone has a positive user reaction with 95-percent saying they’d recommend the device to others
• Retail stores generated record quarterly revenue of $1.25 billion, 42-percent growth year-over-year
• As of the end of fourth quarter Apple had opened 197 stores, exiting the quarter with 12 new stores
• Average revenue per store is $6.6 million
• Apple noted that it will open 40 more stores in the coming year
• New stores in New York, Boston, and for the first time in China.
• For the December quarter Apple is targeting revenue of $9.2 billion with gross margin at 31 percent

Question and Answer highlights - Courtesy Blogging Stocks

• UBS asks. In regard to guidance, they seem more conservative. What are they seeing that makes Apple so confident with that $9.2 billion. Apple replies that with the best products shipping, just eclipsed Mac sales record, iPod sales have accelerated after the transition, and the iPhone is doing well. Apple exited the Sep. quarter really well.
• Piper Jaffrey “congratulations.” Gene Munster is asking about iPhone revenue share. Apple recognizes revenue from handset sales over 24 month period of time on a daily basis. Revenue from iPhone was $118 million in the quarter. Won’t get into detail about carrier agreement.
• Best Buy stores, how many are up and running? 230 operating at the end of Sep. quarter. 270 expected by end of Dec. quarter. The impact it’s had: Apple is pleased, good results, looking forward to expanding.
• Gartner of Citigroup is asking about channel inventory. Likes how low it is.
• David Bailey of Goldman Sachs. What about the pricing strategy in Europe as it goes up as the dollar weakens? Apple says they set the price when they announced, it includes VAT and other duties. Direct sales were 57% of revenue, up from the previous quarter.
• Morgan Stanley: Europe outgrew the US. What’s up there? Apple, year over year Europe has been doing well. It’s 4 times the IDC expected gain.
• Shannon Cross asks about revenue again, and what the biggest drivers quarter over quarter are. Mac, or iPod. Apple replies: the holiday quarter is the big quarter for iPods, and Apple is shipping the best for the December quarter. Apple thinks sales accelerated after the iPhone price reduction, selling 1.1 million, for a total of 1.4 million.
• Bear Stearns: when are we going to hit 3 million iPhones sold? Apple: we’re selling these things faster than iPods, and we’re in Europe, and we’re going to be hitting Asia in ‘08.
• What about Japan, which has been lagging for some time? Japan continues to be Apple’s most challenging market. The only market they’re not growing in. However Mac sales are doing well, best year over year in 7 quarters. iPod had a difficult compare due to a large sale to a telecom company there.
• Lehman Brothers asks about the rebate issue with the iPhone. In regards to the $100 credit it will be accounted when the customers redeem, and charge it to costs of goods sold. Most are expected to be redeemed by the end of December.
• Stanford Bernstein asks about price elasticity in regards to the iPhone rebate. How did the price cut impact sales? Apple: happy with elasticity. Enabled Apple to surpass the 1 million end of quarter goal. Some have been sold to people with intention to unlock, guess that 250,000 of the 1.4 million sold that intend to unlock, many of those after the price cut.
• Apple: saw an acceleration once the price cut happened.
• RBC Capital Markets: can you talk about Mac momentum and shifters? Apple: had an incredible record, breaking record by 400,000 units, and twice as many macs as done in ‘04. Best macs being shipped in history, and incredible reception in the new iMac. Third, 120 million iPods sent mostly to Windows users. Over 50% of Macs sold are to new Mac users. All these lead to momentum that gives 11 quarters of the last 12 that Apple has grown faster than the market.
• iPods shipping to Windows drives Mac sales. In Europe will iPhone and iPod sales help boost Mac sales? Apple: we’ll see. Would point out that European business in the Mac area grew 47%.
• Bank of Montreal: how does Apple think about increasing its sales via channels? Apple: Asia/Pacific is the fastest growing region. Have added over 2,000 retail points.
• 2g versus 3g phone in going into Asia. Apple won’t say anything.
• Pacific West Securities asks about video content on iTunes and whether it’s changed due to the increasing amounts of content out there. Apple: we have the largest library of content available to customers, over 5 million songs, 500 movies, hundreds of TV shows.

Apple shipped 2,164,000 Macintosh® computers, representing 34 percent growth over the year-ago quarter and exceeding the previous quarterly record for Mac® shipments by 400,000. The Company sold 10,200,000 iPods during the quarter, representing 17 percent growth over the year-ago quarter. Quarterly iPhone™ sales were 1,119,000, bringing cumulative fiscal 2007 sales to 1,389,000.

“We are very pleased to have generated over $24 billion in revenue and $3.5 billion in net income in fiscal 2007,” said Steve Jobs, Apple’s CEO. “We’re looking forward to a strong December quarter as we enter the holiday season with Apple’s best products ever.”

“Apple ended the fiscal year with $15.4 billion in cash and no debt,” said Peter Oppenheimer, Apple’s CFO. “Looking ahead to the first quarter of fiscal 2008, we expect revenue of about $9.2 billion and earnings per diluted share of about $1.42.”

The audio webcast which can be listened to online will begin at 2:00 p.m PT / 5:00 p.m. ET (10.00 p.m. BST)

Apple is widely expected to reports of 93 cents per share with sales of iPod being between 9 and 11 million units for the quarter. Mac shipments of 2 million, iPhone shipments are also estimated to be around 1 million for the quarter.

The computer company reportedly lobbied Congress on legislation designed to update the United States patent system. Trade groups for high-tech industries favor legislation that would help weed out bad patents by allowing companies to re-evaluate them after they are granted. The groups say this could help companies avoid financial burden of defending patents in lengthy court cases.

Apple also supported bills that would increase funding for technology in education and provide tax breaks for companies spending funds on research and development.

Jobs purchased the additional shares on Monday for $5.75 each, making the total purchased worth around $15 million.

Following the transaction, Jobs stake in Apple included 5,546,451 shares. Those shares, as of Monday, were valued at over $700 million.

Call Notes

• Another record breaking quarter in Apple history
• Highest revenue in June quarter ever
• Highest Mac sales in a quarter ever
• Mac business represents ~60% of Quarterly revenue. 33% Growth year-over-year growth.
• Sales of Mac notebooks grew 42% year-over-year.
• Music Business represents ~40% of Quarterly revenue.
• iTunes is reported to be third largest music retailer in US
• Apple says it sold 270,000 iPhones in first 30 hours of sales
• AT&T had iPhone activation problems at first but all is well now
• Based on surveys, people love their iPhones. 90% of iPhone owners were Extremely or Very satisfied with their phone. 85% Extremely or Very Likely to recommend the iPhone to others
• Apple intends to sell 1 million iPhones by end of 4th quarter (September 29)
• iPhone coming to “select” European countries in Q4
• Apple’s goal is to sell 10 million iPhones in calendar 2008
• Plan on incorporating new Software and Features into iPhone over time.
• Will begin to receive payments from AT&T in the future quarters.
• Subscription accounting on iPhone and Apple TV sales.

Questions and Answers

Q: More details on iPhone sales?
A: We’ve gotten off to a great start. Focus is not on initial sales, but instead a long term business. Our perspective is measured in years, not months. Reward is huge. Apple has the skill that makes us confident to succeed. iPhone in Europe next quarter in a few select countries. It took Apple almost 2 years to sell one million iPods, we expect to sell one million iPhones in the first full quarter.

Q: See any shortages in iPhone components?
A: Almost all AT&T and Apple Retail stores have the iPhone in stock and we are shipping units off of Apple.com in 1-2 days. We’ve included our expectations of long term supply/demand in our projections.

Q: You mentioned no payment from AT&T this quarter, can you clarify that comment?
A: We can’t go beyond it and won’t discuss the terms of the agreement. We will recognize revenue eared from AT&T over time.

Q: How to model AT&T revenue share?
A: Can’t comment on it.

Q: In the near term, how do you think about the initial wave of iPhone sales.
A: 270,000 in the 30 hours laster quarter. What we’ve seen so far gives us a lot of confidence we can sell 10 million iPhones in 2008.

Q: In addition to payments from AT&T are you getting any other payments for placement of applications on the iPhone?
A: We don’t discuss it.

Q: How’s the Best Buy rollout? Did it contribute to Mac sales?
A: Around 50 stores at the beginning last quarter, around 75 at the end. Over 200 by end of this quarter. 300 by end of calendar year.

Q: iPhone price points? Should we assume we’ll have a family of Phones?
A: We believe the iPhone offers tremendous value that customers couldn’t even imagine before. It’s 3 products in one.

Q: Any seasonality in the iPod and Mac?
A: June quarter begins education buying season. June -> September seasonality has been mixed. In terms of the iPod, we’ve learned that what drives the product is innovative new features and holiday seasonality.

Q: You see any slowdown in sales prior to Leopard?
A: We’ll have to see, but last quarter we sold more Macs than ever.

Q: iPod cannibalization from iPhone?
A: Haven’t seen any in the June quarter, but will monitor it.

Q: Are there thoughts about addressing corporate email on the iPhone?
A: We think that the iPhone is a breakthrough product for all customers including business customers. With very little help from the IT department, it will work.

Q: Store Openings?
A: We expect to open 12 stores in the September Quarter to end the year with 197 stores. We’ve not set a target for 2008 openings.

Q: Apple TV Units?
A: We don’t announce that level of product detail.

Q: Is there any high level commentary with regard to the learning experiences with launching the iPhone?
A: We’ve only been at this a few weeks. We’re very much beginners at this, so every day there’s something to learn. We’re interested in building the business to the next level.

The results compare to revenue of $4.37 billion and net quarterly profit of $472 million, or $.54 per diluted share, in the year-ago quarter. Gross margin was 36.9 percent, up from 30.3 percent in the year-ago quarter. International sales accounted for 40 percent of the quarter’s revenue.

“We are very pleased to report strong financial results including cash flow from operations exceeding $1.2 billion for the quarter,” said Apple chief executive Peter Oppenheimer. “Looking ahead to the fourth fiscal quarter of 2007, we expect revenue of about $5.7 billion and earnings per diluted share of about $.65.”

During the quarter APple shifted 1,764,000 Macs representing a 33 percent increase year on year. Apple also sold 9,815,000 iPods during the quarter representing a 21 percent growth over the year-ago quarter.

“We’re thrilled to report the highest June quarter revenue and profit in Apple’s history, along with the highest quarterly Mac sales ever,” said Apple chief executive Steve Jobs. “iPhone is off to a great start — we hope to sell our one- millionth iPhone by the end of its first full quarter of sales — and our new product pipeline is very strong.”

It is important to note that yesterdays announcement from AT&T was based on just 30 hours of sales due to AT&T’s financial quarter ending the day after iPhone sales began.

In an interview following AT&T’s conference call AT&T Chief Financial Officer Rick Lindner said that “Apple will report a larger number than 146,000 for iPhone sales.”

Apple shares fell 6.1 percent yesterday, after analysts said demand was slowing.

Investors may have overreacted, said James Grossman, a fund manager at Thrivent Financial for Lutherans in Appleton, Wisconsin. “I watched firsthand the complete hysteria early on,” said Grossman, who helps manage $65 billion including Apple stock, and waited in line for an iPhone himself. “I find the 146,000 to be shockingly low given what I saw. I don’t think that reflects the sales.”

Apple may have sold 200,000 phones in the quarter, Piper Jaffray analyst Gene Munster said yesterday. That’s in line with his initial estimates and compares with the 500,000 projected by some analysts after weeks of anticipation, said Munster. RBC Capital Markets said today that the AT&T figures may be misleading and Apple may have sold as many as 450,000.

It is widely expected for Apple to announce earnings of $654 million or 72 cents per share, this is up from $472 million or 54 cents per share a year ago. Sales are predicted to increase 22 percent to $5.32 billion.

Apple is being said to have shipped around 1.7 million Macs, but iPod sales are expected to drop to 9.6 million units down from 10.5 million in the second quarter of 2007.

The call will take place at 2:00 p.m. PDT/5:00 p.m. EDT/10.00 p.m. BST.

In the broadcast Apple will announce the results of its third financial quarter of 2007 which runs from April 1st to June 30. Most will note that the iPhone was only on sale for 1 day of the quarter and therefore it is unknown how much Apple will disclose about sales.

The conference call will be available via webcast.

World of Apple will provide analytical coverage before the conference call on July 25, we will also be offering live coverage during the conference call.

Jay Westerdal of Name Intelligence has written on his blog that Apple has purchased iPhone.com from domain owner Michael Kovatch for what could be “at least a million dollar sale.”

Kovatch reportedly bought the domain in 1995 but in recent years has used it for an online mobile phone store called “The Internet Phone Company,” thus giving him the legal write to use the domain and refuse any offers Apple made.

Since January and the inception of the iPhone, traffic to iPhone.com has reportedly skyrocketed.

“That domain was so valuable that Apple just had to own it,” Westerdal wrote on his blog. “The headaches would have just compounded had they not owned the domain.”

Although the exact details of the deal are unknown the domain currently points to Apple’s servers.