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Notes from Apple’s Q2 2010 earnings conference call

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During Apple’s Second Quarter 2010 Financial Results Conference Call, Apple CFO Peter Oppenheimer and Apple COO Tim Cook made several comments concerning its media-related products, including the iPod, iPhone, iPad, and Apple TV. In his opening statements, Oppenheimer said that sales of the iPod touch were up 63% year-over-year, with overall iPod revenue growing 12%, the strongest growth seen in the last two years. According to NPD, the iPod has retained over 70% market share, and continues to gain market share year-over-year in every country tracked, including the U.K. and Japan.

The iTunes Store had its strongest quarter ever, with sales of $1.1 billion, and now offers 12 million songs. Oppenheimer said the App Store now offers 185,000 apps, with four billion downloads to date across 90 countries; the store also now offers 3,500 apps for the iPad. Speaking about the iPhone, Oppenheimer said year-over-year iPhone sales growth was three times IDC’s published estimate for overall smartphone market, and accounted for $5.45 billion in revenue, compared to $2.43 billion in the year-ago quarter. Average Selling Price for the iPhone was about $600, and is based on the sales value of the iPhone, not accessories, and not carrier payments. The device is now available on 151 countries in 88 countries, and is seeing very strong year-over-year growth worldwide, particularly in Asia. Oppenheimer referred to the iPad’s pricing as “very aggressive,” and said the company thinks the market will be large, and wants to capitalize on its “first mover advantage.” The CFO also referred to a “future product transition” that would impact numbers in the upcoming third quarter.

During the Q&A session, Tim Cook said that the company saw “no obvious impact” on Mac or iPod sales from the iPad announcement, although he admitted that the company doesn’t really have enough experience to come to a judgment of possible Mac cannibalization by the iPad. Cook also said that initial iPad sales have “far exceeded” the company’s expectations, and said that it was too early to tell what the mix would be of Wi-Fi versus Wi-Fi + 3G iPad units, as the company has only been selling the Wi-Fi version in stores, and needs to sell them side-by-side in an “unconstrained” environment to get an idea about possible consumer preference for one model or the other.

Regarding iPad production capacity, Cook said the company has “done very well” versus planned capacity, so there’s not exactly a production problem; instead, demand in the U.S. is “much, much stronger” than the company expected, which led them to push the international launch back. Cook said the company is adding production capacity, and will “see where this thing goes,” but said that the level of initial demand had “shocked” the company. The pair declined to say whether Apple will be deferring iPad revenue or instead charging for software updates, stating that the company would discuss that in July on the Q3 conference call, but Cook did say that he was “already personally addicted to mine and couldn’t live without it.” Apple will report the iPad as a line item in its data summary, similar to how it handles the iPhone, including revenue for iPad units and iPad-specific accessories.

Speaking on the company’s record-setting iPhone sales, Cook said that channel inventory was essentially flat, but the company saw “staggering” year-over-year growth rates in Japan (183%), Europe (133%), and Asia (470%), some of which can be attributed to adding new carriers, as well as strong performance from existing carrier partners. China, in particular, saw strong growth, with mainland China, Hong Kong, and Taiwan seeing iPhone unit growth of 9x, with 800 distribution points added, and has accounted for $1.3 billion in revenue through the first half of Apple’s fiscal 2010, up roughly 200% year-over-year.

Cook also said that AT&T continues to work “very hard” and has made big strides towards improving its network, something that Apple expects to continue. He did note, however, that the U.S. is one of only three main countries where Apple has a contractual exclusive relationship with the iPhone’s carrier, and that the company has seen unit sales and market share improve everywhere they’ve moved from an exclusive to non-exclusive arrangement, although he also said that’s not proof that moving to a non-exclusive arrangement would work everywhere. In response to a questioner who noted that average iPhone sales per operator were 58,000, Cook responded that the number isn’t meaningful because some carriers do a few million units while others do very low numbers, but overall the company can drive those numbers up through product innovation, including software and hardware, as well as through new products, new carriers, new distribution points, geographic expansion, and great marketing. Another questioner noted that Cook had not mentioned price, to which he responded that sales of the iPhone 3GS at a higher price point than the iPhone 3G demonstrated that consumers were willing to pay more for innovative products containing the sort of hardware and software Apple has developed. The response suggested that price was not a critical issue from Apple’s perspective at this point in time.

On the Apple TV, Cook said that unit sales for the second quarter were up 34% year-over-year, but added that the absolute number of units is still small, and the company still classifies it as a “hobby.” Cook went on to point out the large markets for the Mac (300 million units/year), iPhone (1.2 billion units/year), and iPod (100 million units/year), all “enormous markets.” The market for the Apple TV is not nearly as large yet, but he said that the company continues to think there’s something interesting there and is continuing to invest in it.

Apple Q2 2010: 10.89m iPods, 8.75 million iPhones sold

Reporting its second quarter financial results today, Apple said it sold 10.89 million iPods during the quarter, compared to sales of 11.01 million iPods in the year-ago quarter, and down 48 percent from the previous quarter. Apple also sold 8.75 million iPhones in the quarter, a 131 percent increase year-over-year, and up from 8.7 million units in the prior quarter. The company posted revenue of $13.5 billion and net quarterly profit of $3.07 billion, or $3.33 per diluted share, compared with revenue of $9.08 billion and net quarterly profit of $1.62 billion, or $1.79 per diluted share in Q2 2009. International sales accounted for 58 percent of the quarter’s revenue. Sales of Other Music Related Products + Services were up 27% from the year-ago quarter, and 14% from Q1 2010, to $1.3 billion total. That category includes iTunes Store sales, iPod services, and revenues from Apple and third-party iPod accessories.

Notably, the numbers from Q2 2009 are different from those originally reported due to Apple’s change in accounting rules that sees the company now recognize “substantially all of the revenue and product costs from the sales of iPhone and Apple TV at the time of sale,” instead of accounting for the sales over a 24-month period.

“We’re thrilled to report our best non-holiday quarter ever, with revenues up 49 percent and profits up 90 percent,” said Steve Jobs, Apple’s CEO. “We’ve launched our revolutionary new iPad and users are loving it, and we have several more extraordinary products in the pipeline for this year.”

“Looking ahead to the third fiscal quarter of 2010, we expect revenue in the range of about $13.0 billion to $13.4 billion and we expect diluted earnings per share in the range of about $2.28 to $2.39,” said Peter Oppenheimer, Apple’s CFO.

Apple releases iPhone OS SDK 4 beta 2

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Apple has released the second beta version of the iPhone OS 4 Software Development Kit for the iPhone and iPod touch. As with the prior beta release, a main Xcode and SDK beta is available for download, as are pre-release builds of the iPhone OS 4 software for the iPhone 3G and 3GS, as well as the second- and third-generation iPod touch. Both the new SDK and pre-release builds are available now for download by registered iPhone developers from the iPhone Dev Center.

Sena Cases rolls out four cases for iPad

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Sena Cases has introduced a quartet of new cases for the Apple iPad. The Executive Sleeve is a pouch-style case featuring a leather exterior, a padded protective middle layer, accent stitching, velvet inner lining and a top flap with magnetic closure. It sells for $80, as does the Folio, a vertical flip-open case offering the ability to use the iPad while in the case, a leather exterior, an integrated stand, cut-outs for access to ports and controls, interior pockets for cards and checkbooks, a transparent pocket for an ID card, velvet lining, and a snap closure.

The Zipbook is a clamshell-style case with an integrated stand, leather exterior, leather lining with shock absorbent padding, flexible straps to hold the iPad in place, and a zippered closure. It is also priced at $80. Finally, the Ultraslim is a slim sleeve-style case offering a leather exterior and velvet lining. It sells for $51; all of Sena’s new cases for the iPad are available for pre-order now.

Princeton identifies iPad networking issue

  • April 20, 2010
  • iPad,

Princeton University has published a document outlining the iPad’s wireless networking issue that has led the school to block several of the devices from its network. According to the document, the iPad sometimes fails to release its IP address within the time allotted by the school’s Dynamic Host Configuration Protocol (DHCP) server, posing a potential problem for other devices that are assigned the same IP address by the server once the iPad’s lease has expired. Specifically, the problem is reproducible by allowing the iPad to lock its screen before its DHCP lease renewal time, and allowing it to remain in that state until after the lease has expired. The university is currently working with Apple to provide technical data which may be used to resolve the issue; it is also working with individual iPad owners, pointing them to a workaround for the issue. To date, Princeton has blocked only nine iPads from its network, some of which have since been unblocked; of the 41 iPads on the campus network, 25 have exhibited the issue.

Apple posts two new iPhone 3GS TV ads

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Apple has posted two new iPhone 3GS TV advertisements online. Both new spots continue Apple’s recent trend of iPhone advertisements that are more testimonial in nature, while featuring a single iPhone using a variety of apps in front of a white background. “Dog Lover” features a female narrator talking about searching local dog shelters to find a new pet, taking and sharing photos, finding nearby dog parks, and checking a monitor video feed while away. “Backpacker” features a male narrator talking about a trip to Spain, during which he checked for hostels, shared pictures, and downloaded and used a translation app. Both advertisements are available for viewing now on Apple’s website.

Apple ships iPad Camera Connection Kit

Apple has begun to ship its iPad Camera Connection Kit to customers who pre-ordered the accessory. Unlike other Apple iPad accessories, the Camera Connection Kit wasn’t available for pre-order until March 29, and was listed as shipping in “late April;” a shipment notification received by iLounge claims the dongle set will arrive by April 22. The iPad Camera Connection Kit includes two separate 30-pin connectors, one with an SD card slot, and the other with a USB port that can be used to attach most digital cameras. A recent report claimed that the USB-to-iPad connector may also provide support for USB audio devices, although this has yet to be confirmed. For more information on the Apple iPad Camera Connection Kit, see our First Look article.

iPad Wi-Fi + 3G to arrive on April 30

  • April 20, 2010
  • iPad,

Apple has announced that iPad Wi-Fi + 3G models will be delivered to U.S. customers who pre-ordered in time for “late April” delivery on April 30. The new models will also be available at Apple retail stores the same day beginning at 5:00 p.m. As with the iPad Wi-Fi, Apple retail stores will offer a free Personal Setup service to each customer who buys an iPad Wi-Fi + 3G at the store, including helping them to setup email and load apps. Apart from selling for $130 more than their Wi-Fi-only counterparts, the iPad Wi-Fi + 3G models are also 0.1 pounds heavier, feature a prominent black strip at the top of back plate for antenna access, offer up to nine hours of web surfing over 3G, and are slightly larger than the Wi-Fi-only models.

Apple sued over iPhone moisture sensors (Updated)

Apple has been sued by a California woman over what she claims are false-positive readings on the iPhone’s moisture sensors. InformationWeek reports that Charlene Gallion of San Francisco claims to have had two separate iPhone units fail within six months of each other, and was denied warranty coverage due to triggered sensors. Gallion claims that neither of the units was ever subjected to water damage. The suit itself states, “As a result of Apple’s improper application of the Liquid-Damage Exclusion, Apple sells [devices] with the intent to exclude them from the warranty coverage Apple promises consumers it will provide—even when consumers pay extra for Extended Warranty coverage—simply because their Liquid Submersion Indicator has been triggered, without any attempt by Apple to verify whether the Class Devices actually have been damaged as a result of submersion or immersion in liquid.” Overly-sensitive moisture sensors have been a problem for some iPhone customers in the past; a report from September 2009 claimed that Apple’s company protocol when responding to a customer with a unit that has had its external sensors triggered is to say the warranty is now void and turn the customer away.

Update: Upon obtaining a copy the actual filing, iLounge has learned that Gallion has filed a class action suit, and is seeking both actual and punitive damages.

Apple launches replacement program for Headphones with Remote

Apple has launched a new Apple Headphones with Remote Replacement Program for units included with certain third-generation iPod shuffle models. According to the program’s page, “Apple has determined that the Apple Headphones with Remote included with the iPod shuffle (3rd gen) may fail under certain conditions.” The page claims that a “very small percentage” of iPod shuffle owners had experienced the issue, and that the headphones were distributed with iPod shuffles made between February 2009 and February 2010. “If your headphones stop working or work intermittently as described below, Apple will replace them, free of charge, for two years from date of purchase,” the page states.

Apple lists several symptoms for failing headphones, including non-responsive or intermittently working controls, unexpected volume changes, and unexpected voice feedback. According to the program page, the serial number ranges for the iPod shuffle units with covered headphones are xx909xxxxxx to xx952xxxxxx and xx001xxxxxx to xx004xxxxxx. Notably, the page also states that Apple’s In-Ear Headphones with Remote and Mic and the company’s Earphones with Remote and Mic are also eligible for coverage under the program if they exhibit the listed symptoms. Failing iPod shuffle headphones have been the source of customer complaints since the third-generation model was released last year; Apple was sued in a class-action lawsuit over the issues in March. [via TUAW]

Likely iPhone 4G prototype found, disassembled

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A supposed fourth-generation iPhone has been found in the wild, and has since been photographed and disassembled. Gizmodo reports that the unit was found in a bar in Redwood City, CA, in a case that made it appear to be an iPhone 3G or 3GS. While it will display a connect to iTunes screen, and is recognized by Xcode and iTunes as an iPhone — with different product identifiers than any current iPhone model — it appears the device was remotely wiped by Apple prior to Gizmodo receiving the unit, and since there is no build of the iPhone OS publicly available for this model, it is currently non-functional. The unit features a drastically different design than current iPhone models, with a thinner body, rounded corners, nearly flat aluminum sides, and a flat back plate that appears to be made of either glass or ceramic.

Notable features include a front-facing camera, a larger rear camera lens with flash, a micro-SIM slot, now mounted on the side, what appears to be a secondary microphone near the headphone jack, possibly for noise cancellation, individual volume up/down buttons, a slightly smaller, but seemingly higher resolution screen than the iPhone 3GS, and a 16% larger battery. Upon disassembly, Apple-labeled internal components were found, as well as a much smaller logic board. While it is possible that this will be the final design of the fourth-generation iPhone, it is also possible that this is simply a prototype unit; in any case, many of the new features and the overall design are expected to carry over to the final device.

New iPad 3G pre-orders being pushed to May 7

  • April 19, 2010
  • iPad,

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According to Apple’s online store, new pre-orders of the iPad 3G will not ship by the end of April. The store’s iPad page lists new Wi-Fi + 3G orders as shipping by May 7, while the already-released Wi-Fi models are shipping in 5-7 business days. Apple has been accepting pre-orders for the iPad 3G since it opened orders on March 12, but up until this point, all 3G pre-orders had been expected to ship later this month. Apple recently began emailing customers who pre-ordered an iPad 3G, confirming that their devices would ship in “late April.”

Apple files countersuit, ITC complaint against Kodak

Apple has filed a lawsuit against Kodak in California Northern District Court claiming patent infringement. In conjunction with the lawsuit, Apple has also filed a complaint against Kodak with the U.S. International Trade Commission (ITC). According to the ITC Law Blog, the technologies in the Apple patents Kodak is allegedly infringing “relate generally to advancements and innovations in the fields of image processing, power management, and memory architectures in portable digital devices.” Apple is claiming a number of Kodak products infringe on its patents, including the Kodak Z series, M series, and C series of cameras, as well as the company’s Zi6, Zi8, Zxl, and Zx3 video cameras. Kodak filed a lawsuit and ITC complaint against both Apple and BlackBerry-maker RIM in January, claiming that the iPhone and some BlackBerry models infringe on a patent covering technology for previewing photos; the ITC later said it would consider Kodak’s claim against the two companies, but has yet to announce a decision.

NHL releases free official iPhone app

The National Hockey League has released an official iPhone app for hockey fans. NHL Ice Time 2010 allows iPhone and iPod touch users to track live game scores, player profiles, player and team statistics and schedules for upcoming games directly on their devices. Users can view live scores and in-game stats for ongoing games, access a full season schedule, view standing by division and even view game photos. The application also provides a unique Ice Tracker feature that allows fans to view locations of goals, hits and saves for live games on a virtual hockey rink. NHL Ice Time 2010 Free is available from the U.S. App Store as a free download. It is not presently available outside of the U.S.

Apple confirms late April iPad 3G delivery

  • April 19, 2010
  • iPad,

Apple has started sending out emails to customers with iPad 3G pre-orders, reassuring them that their device will ship later this month. The email reads, “Thank you for your recent order of the magical and revolutionary iPad 3G. We would like to confirm that your order will be shipped in late April as communicated at the time you placed your order. You will receive a confirmation notice when your order has shipped.” Notably, this is the first time Apple has openly referred to the 3G-equipped model as the “iPad 3G” instead of the “iPad with Wi-Fi + 3G;” it is unclear whether Apple will begin using this new name in a broader sense.

Enter the Yamaha Earphone Giveaway today

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If you haven’t yet entered our Yamaha Earphone Giveaway, there’s still time to do so. In our Giveaway of the Month for April, iLounge and Yamaha are giving away 20 pairs of Yamaha EPH-30 Earphones. To enter, simply fill out and submit the form on the giveaway page—the giveaway will end on April 30, 2010 at 11:59PM Pacific Time. Good luck!

Stranded Norwegian PM using iPad to govern

  • April 16, 2010
  • iPad,

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Norwegian prime minister Jens Stoltenberg has been using an iPad to manage the situation in his home country as he is currently stuck in New York, due to the volcanic cloud from an Icelandic volcano that has grounded many flights into and out of Europe. “There are good means of communication, I have close contacts with my office all the times, and there are a lot of activities in Norway where we try to reduce the consequences of the volcano in Norway,” Stoltenberg told CNN. “It’s very normal for a PM to travel abroad so this is not different from the other travels, it’s just lasts some days more than expected. We have the internet, the mobile phone. I also use an iPad, which is excellent.” [Photo via Flickr]

Some colleges rejecting iPad due to network, security concerns

  • April 16, 2010
  • iPad,

Some US universities are rejecting the iPad from their campus networks due to connection and security issues. The Wall Street Journal reports that both George Washington University and Princeton University have disallowed usage of the iPad due to security issues. GWU said its wireless network’s security features don’t allow the iPad, iPhone, or iPod touch to connect to its network, while Princeton said it has proactively blocked about 20% of the devices after noticing malfunctions that could cause problems for the entire system. In addition, Cornell University has reportedly seen connectivity issues and is also worried about heavy bandwidth usage. Cornell’s information technology director, Steve Schuster, told the WSJ that the school is “working to ensure the iPad does not have devastating consequences to our network,” adding that when the iPhone arrived on campus it overwhelmed the network’s bandwidth capabilities. Despite these challenges, at least two schools — Seton Hill University in Pennsylvania and George Fox University in Oregon — plan on giving every incoming student either an iPad and a MacBook or a choice between the two when they arrive on the campuses this fall.

Sprint touts 4G Case for iPad + Overdrive hotspot

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US wireless carrier Sprint is now offering a specialized iPad case made to carry both the tablet computer and a wireless hotspot. Available in either a flap-top folio or sleeve design, the 4G Case offers a padded main compartment for the iPad, as well as a dedicated pocket for the Sprint Overdrive 3G/4G Mobile Hotspot, which allows up to five Wi-Fi enabled devices to simultaneously connect to the company’s wireless data networks. Sprint’s 4G Case for the iPad and Overdrive is free for a limited time with an Overdrive purchase at participating Best Buy locations.

Art Authority creates a virtual art museum on the iPad

Open Door Networks has released the iPad version of its Art Authority application. Expanding upon the iPhone version released in February, Art Authority for the iPad takes advantage of the larger screen and enhanced UI of the iPad to provide an impressive interactive virtual museum experience. Works are displayed within the app framed and hung on textured walls accompanied by titles, dates, and other information. Tapping on a work provides a pop-over for users to access additional details on the selected work or artist or view other related items from the period and artists’ influences. As with the original iPhone version, a customizable full-screen slideshow is also available with images presented in higher resolutions appropriate for the iPad. Works can also be saved to the iPad photo library to be used as home screen or lock screen wallpapers or shared with others. The application provides access to an online database of over 40,000 paintings and sculptures and over 1,000 western artists across all historical periods. Art Authority for the iPad is available from the App Store for $10.

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