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Notes from Q1 2007 Apple Conference Call

In its first-quarter 2007 Quarterly Results Conference Call, Apple Inc. executives provided additional insights into the domestic and international sales of iPods, growth of the iTunes Store, and the potential of both Apple TV and the upcoming iPhone. During his introductory remarks, Apple CFO Peter Oppenheimer noted that music products, including iPod, represented 57% of Apple’s total revenue, versus 59% in the preceding year’s quarter. The company maintained its MP3 leadership share in the U.S. market, boasting a 72% marketshare in December, according to NPD data, and extended its lead in every international territory for which it has market data. Very strong sales through the iTunes Store helped the company’s performance: “other music revenue” grew 29% over the same quarter last year, buoyed by doubled sales of iTunes Gift Cards. iTunes now accounts for 85% of the U.S. market for legal digital music downloads, according to Nielsen Soundscan.

Additional notes from the Conference Call, including Apple TV as the “DVD player of the 21st Century” and potential changes to iPhone before release, are now available below.

Apple ships over 21 million iPods during holiday quarter

Along with its quarterly financial results, Apple today announced that it shipped over 21 million iPods during the busy holiday shopping quarter. Specifically, Apple said it shipped 21,066,000 iPods during the quarter, a 28 percent growth in iPods over last year’s results, bringing the total number of shipped iPods to over 90 million. Apple’s net profit for the fiscal first quarter was a record $1.0 billion, or $1.14 cents per share, on $7.1 billion in revenue.

“We are incredibly pleased to report record quarterly revenue of over $7 billion and record earnings of $1 billion,” said Steve Jobs, Apple’s CEO. “We’ve just kicked off what is going to be a very strong new product year for Apple by launching Apple TV and the revolutionary iPhone.”

iFrogz offers up multiple iPod products

iFrogz recently announced several new iPod accessory offerings, all of which should be available by the end of January. 

The company is now offering its customizable silicone iPod cases in new multi-packs that provide iPod owners with 30 different case styles in one package. These include one Wrapz, three Bandz and 10 removable Screenz grouped around a particular theme, such as “Urban,” “Girlie” or “Hippie.” iFrogz is also now bundling its Tadpole iPod 5G case for kids with child-size headphones (shown right).

iFrogz also rolled out a rugged silicone case for the 5G iPod called the Bullfrog. It’s available in a wide array of variations. Joining it are Shuffle Bandz (silicone and come in multiple colors with raised contrasting stripes) and Shuffle Strapz (made of leather and comes in three colors) cases for the new iPod shuffle as well as the Rana, an unconstructed leather pouch for the iPod and other personal electronic devices which has snap fasteners to secure devices, an internal pull-tab for removal of devices and a soft interior.

Apple planning Beatles-iTunes commercial during Super Bowl?

Apple could announce the availability of the Beatles on the iTunes Store in a commercial to air during next month’s Super Bowl. According to a report by the Toronto Sun, Apple is planning a special announcement in a Super Bowl ad on February 4th. The newspaper reports that music from the Beatles could be available through iTunes as soon as next month, with Apple being given an “exclusive three-month, restricted deal” allowing iTunes to offer remastered Beatles songs online. A report by a Beatles fan website yesterday said that at least one Beatles album will be available on Valentine’s Day next month.

Report: Apple to open up FairPlay DRM to accessory makers claims that Apple will open up its FairPlay copy-protection technology to licensed iPod accessory makers. Apple is “expected to make two announcements this week—the first will be to allow streaming of protected AAC content via USB; the second will be to licence its Fairplay DRM to the company’s Made For iPod licensees,” the article says. “This will have the effect of enabling you to play songs bought from the iTunes Store through third party devices like hi-fis using digital connections. It may also mean that devices like iPod docks will be able to display more information—artwork and other track info, for example—which is stored alongside the protected audio.”

Mix: The Beatles, Netflix, Perooz, AAPL

According to a report, music from the Beatles may be on the iTunes Store as soon as Valentine’s Day next month. Beatles fan website Abbeyrd claims that a deal between Apple and Apple Corps. has been struck, and that their latest album, “Love,” will be made available through iTunes.

Online DVD rental service Netflix has officially announced its online movie service, which allows subscribers to stream and watch about 1,000 movies and TV shows on their PC at no additional charge. The Windows-only service will roll out in small numbers to Netflix members each week through June.

Perooz is a new online service that lets users download mobile magazines for iPods, PSPs, and other devices. “Now you can enjoy your favorite magazines on the go with our exclusive content partners including Maxim, Stuff, Blender, Car & Driver, Road & Track, and more.”

Strong holiday sales will boost Apple’s fiscal first quarter numbers, which are due tomorrow after the markets close. Analysts, on average, expect earnings of 78 cents per share on sales of $6.42 billion, according to a Thomson Financial poll.

LG considers lawsuit over iPhone design

LG Electronics is considering whether it will file a lawsuit against Apple, claiming that the iPhone design is a clone of the unreleased LG KE850 “Prada” mobile phone. The LG phone shares some similarities with the iPhone, including a rounded, black design, touch-sensitive controls and a full-screen interface. “At first glance, we recognized the iPhone shares many form factors with the Prada phone. We are flattered that other makers follow our design policy,” LG spokesman Lee Hyoung-kun said. “We can’t say at the moment whether or not we will file a lawsuit against Apple regarding this. It’s too early to make remarks on the issues.”

iPod margins slipping as nano, shuffle sales rise

Despite soaring iPod sales, analysts believe that the popularity of lower-cost nanos and shuffles will result in Apple’s first year-over-year decline in iPod revenue. Bernstein Research analyst Toni Sacconaghi estimates that Apple sold 17.5 million iPods during the holiday quarter, a 25 percent increase compared with last year, but likely at lower prices. “We believe the first ever y/y decline in iPod revenues may be unexpected for some investors,” the analyst wrote in a research note Friday. Sacconaghi estimates that the average sales price declined 22 percent, to $161 from $207, in the quarter compared with a year ago. Apple’s $79 shuffle accounted for 21 percent of all U.S. iPod sales in November, according to the NPD Group. The nano made up 51 percent of iPod sales during the month.

Mix: SNL Steve, AAPL Q1 results, Windows Mobile, Fat fingers

“Apple CEO Steve Jobs” appeared on NBC’s Saturday Night Live over the weekend, showing off the new iPhone. Over 2 billion songs and 150 kabillion contacts, in your pocket.

Apple will announce its fiscal first quarter financial results on Wednesday, January 17th, at 5:00 p.m. ET. Along with its earnings, Apple will reveal how many iPods it sold during the busy holiday quarter.

Apple’s legal team is cracking down on websites and online forums that link to newly created software that turns the Windows Mobile operating system into an iPhone lookalike.

Concerned that his “working man hands” won’t work too well with the iPhone’s virtual keyboard, Jason Santa Maria has mocked up a photo of how the keyboard might look in landscape orientation.

RCA rolls out iPod clock radio, shelf system

RCA has introduced two new “Made for iPod” audio products—the RCA RP5500i Dual Wake Clock Radio and RCA RS2130i Bookshelf system.

imageThe RP5500i Dual Wake Clock Radio ($80; May) features a slide-out drawer with universal iPod dock, USB connectivity, and AM/FM radio. The unit also offers an automatic time set feature, two separate alarm settings, RCA’s Graduwake and SmartSnooze features, adjustable brightness control, and built-in battery backup.

imageThe RS2130i Bookshelf Audio System ($170; May) features an external iPod dock, a 160-watt digital amplifier, and a five-disc CD changer that reads CDs and CD-R/RW discs with MP3 and WMA files. The system also offers RCA’s “Rip&Go” feature, which records music directly to an MP3 player via a built-in USB port.

Klipsch debuts RoomGroove iPod audio system

In addition to its iGroove SXT, Klipsch has also introduced the iPod-specific RoomGroove speaker system. Part of the new KlipschCast family, the RoomGroove is a transceiver system—it can receive CD-quality wireless audio from the Klipsch CS-700 DVD Entertainment System as well as transmit audio to other RoomGrooves.

The RoomGroove utilizes dual 2.5-inch high-output woofers in a ported enclosure, premium crossover networks and dual MicroTractrix Horn-loaded tweeters. It features a hidden dock that accepts and charges all dockable iPods. The RoomGroove also has an auxiliary input and comes with wall mounting hardware and an IR remote control. The system will ship in April for $349.

Macworld 2007 keynote now available as podcast

Delivered by Apple CEO Steve Jobs, this year’s keynote address from Macworld Expo is now available as a free downloadable podcast from the iTunes Store. Despite the fact that it clocks in at a feature film-length 1 hour and 45 minutes, Jobs’ keynote is unquestionably the most engaging public speech iLounge’s editors have ever seen, introducing the company’s new iPhone with a level of oratorical mastery that deserves academic study. The download is 1.21GB, and well worth the transfer time.

Cisco lost rights to iPhone trademark last year?

According to trademark law experts, Cisco may not be the owner of the iPhone name as it claims in the lawsuit filed this week against Apple. The iPhone trademark, owned by Cisco since 2000, was apparently abandoned in late 2005/early 2006 because the company was not actively selling a product under the iPhone name.

Cisco filed a Declaration of Use with the US Patent and Trademark office days before the trademark’s expiration in May 2006, following a six month grace period, but only provided a photo of one of its previously existing products—the Linksys CIT200 Cordless Internet Telephony Kit—with an “iPhone” sticker affixed over the product’s name.

“If Cisco didn’t launch a product using the iPhone name, their trademark registration would be canceled and they would have no bargaining chips with Apple,” says attorney Jay Behmke. “So in order to keep the trademark active, they had to file the Declaration of Use, and start selling a product under that trademark.”

“It is possible that the Declaration of Use is defective, as there was no continuous use, and the sample that Cisco submitted was for a product not released until 7 months later,” Behmke says. “The fact that the Declaration of Use was submitted only days before the deadline expires gives me the impression that they were scrambling to get a product to market, and had to file the Declaration before the product was ready.”

Mophie shows first iPhone case and other design winners

Celebrating the close of its Illuminator case design contest at Macworld Expo today, Mophie unexpectedly announced that three separate product concepts had won, with each item turned into physical prototype form and planned for release by the company in the near future. One of the winners, Schlep ($30), is a flip-open design that will be produced in two versions - one for iPhone (June), one for iPod 5G (April), adding credit card sleeves and a zippered storage pocket, and suitable for mounting on a bag strap. Bevy ($15, March) is a shuffle-fitting keychain holder-slash-bottle opener, with integrated iPod headphone cable management around its edge. Montage (price and date TBD) is a multi-function digital photo frame with a user-positionable iPod dock. Additional pictures of all three designs can be seen at the company’s Illuminator contest mini-site.

Analysts see iPhone suit settled fast; Apple changing phone’s name?

Some financial analysts and legal experts believe Cisco’s lawsuit over the iPhone trademark won’t stop Apple from using the name, noting that the case will likely be settled long before the June ship date. At least one analyst, however, believes Apple will change the device’s name to “Apple Phone.”

“We expect an amicable resolution,” Prudential Securities analyst Inder Singh said. “The most likely outcome, in our opinion, is for Cisco to be a net recipient of financial payment from Apple for use of the name.” Apple “has until May to sort this out and then ramp up marketing, so there is time,” said Gene Munster, an analyst with Piper Jaffray.

Citing sources close to the iPhone situation, Trip Chowdhry of Global Equities Research said he expects Apple to change the name of the iPhone to “Apple Phone” in time for the product’s release in June. Of note, Apple this week renamed its previously codenamed iTV living room device the “Apple TV.”

Tunewear debuts Prie Tunewallet micro for iPod nanos

Tunewear has announced its Prie Tunewallet micro for both iPod nano generations. The nappa leather case features a card pocket which can hold 15-20 business cards or credit cards and cash. The $30 case comes with a Tunefilm screen and click wheel transparent protector, and has an eyelet hole for using a wallet chain (not included). The Prie Tunewallet micro is available in four models—B/R (black leather/red stitch), B/W (black leather/white stitch), W/W (white leather/white stitch), and Sienna (brown leather/yellow stitch).

Sundance Film Festival Short Films to be offered on iTunes

Sundance Institute and Sundance Channel today announced that they will offer narrative, documentary and animation shorts from the 2007 Sundance Film Festival on the iTunes Store. A selection of short films from the 2007 festival will be available for download at $1.99 each on the iTunes Store beginning January 22, 2007.

“The films available on iTunes are drawn from the 71 Sundance Film Festival short films, representing 19 countries and 4445 submissions from American and international filmmakers,” says the organizers. “Also available on the iTunes Store will be free podcasts that take you behind the scenes of the Sundance Film Festival including engaging panels with filmmakers, journalists and industry representatives direct from Prospector Square and live performances straight from the Music CafA(C) in Park City.”

Cingular to rebrand as AT&T next week

AT&T will rebrand its Cingular service with the AT&T name starting Monday. AT&T took full control of Cingular, the exclusive carrier of Apple’s iPhone, with its $85.8 billion purchase of BellSouth last month.

“The new name is a step back in time for Cingular, which bought the old AT&T Wireless in 2004 and eventually dropped the AT&T name altogether,” reports the Wall Street Journal. “AT&T executives hope a sole brand will signal to consumers that the company is a one-stop shop for myriad services including wireless, TV and land-line phone. But the coming months may be confusing for some Cingular customers who not long ago were absorbed from the old AT&T Wireless.”

Ads, customer bills and other items will have both Cingular and AT&T logos at the beginning of the transition, with the AT&T name to takeover solely months from now.

Apple’s Jobs: ‘You don’t want your phone to be like a PC’

Apple CEO Steve Jobs says consumers can expect more mobile applications for the iPhone by the time the device ships in June—but that Apple will control what applications make it onto the iPhone, much like it has done with every iPod.

“We define everything that is on the phone,” Jobs told the New York Times. “You don’t want your phone to be like a PC. The last thing you want is to have loaded three apps on your phone and then you go to make a call and it doesn’t work anymore. These are more like iPods than they are like computers.” Jobs told Newsweek something similar. “You don’t want your phone to be an open platform,” he said. “You need it to work when you need it to work. Cingular doesn’t want to see their West Coast network go down because some application messed up.”

“These are devices that need to work, and you can’t do that if you load any software on them,” Jobs continued. “That doesn’t mean there’s not going to be software to buy that you can load on them coming from us. It doesn’t mean we have to write it all, but it means it has to be more of a controlled environment.”

During the unveiling of the iPhone, which runs a scaled down version of Mac OS X, Jobs showed off applications for email, web browsing, photos, SMS text messaging, and Google Maps, as well as widgets for weather and stocks. Other icons on the iPhone prototype include Calendar, Camera, Calculator, Notes, Clock, and Settings.

Choose Your Own Adventure comes to iPod

Choose Your Own Adventure has announced its first interactive children’s book for the iPod. “Unlike the typical ‘one way only’ story in a narrated audiobook, the CYOA download goes in countless directions as ‘you’ in the role of main character click on links to select the story’s direction,” explains the company. “The video screen allows the user to view full color illustrations, albeit in miniature. R. A. Montgomery, CYOA author and founder, narrates the story in which ‘you’ are a skilled mountain climber on an expedition through the Himalayas in search of the elusive Yeti. Sound effects like the whirl of a helicopter or howling winds enhance the sense of immersion.” Choose Your Own Adventure #1 - “The Abominable Snowman” audiobook is available as a free download until January 25, 2007.

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