Reporting its first quarter financial results today, Apple said it sold 19.45 million iPods during the holiday quarter — a seven percent decrease compared to the same quarter last year. Despite the drop in unit sales, revenue from iPod sales actually increased one percent year-over-year, to $3.425 billion. Apple also sold 16.24 million iPhones in the quarter, an 86 percent increase year-over-year, and up from 14.1 million units in the prior quarter. Apple also sold 7.33 million iPads during the quarter, up from 4.19 million units in the fourth quarter of 2010. The units sales of iPhones, iPods, and iPads bring the cumulative unit sales for the three device categories to 89.9 million, 298 million, and 14.79 million, respectively. The company posted revenue of $26.74 billion and net quarterly profit of $6 billion, or $6.43 per diluted share, representing all-time revenue and profit highs, compared with revenue of $15.68 billion and net quarterly profit of $3.38 billion, or $3.67 per diluted share in Q1 2010. Sales of Other Music Related Products + Services were up 23% over the year-ago quarter, and up 15% from Q4 2010, to $1.431 billion total. That category includes iTunes Store sales, iPod services, and revenues from Apple and third-party iPod accessories. International sales accounted for 62 percent of the quarter’s revenue, up from 58 percent in the year-ago quarter.
“We had a phenomenal holiday quarter with record Mac, iPhone and iPad sales,” said Steve Jobs, Apple’s CEO. “We are firing on all cylinders and we’ve got some exciting things in the pipeline for this year including iPhone 4 on Verizon which customers can’t wait to get their hands on.”
“We couldn’t be happier with the performance of our business, generating $9.8 billion in cash flow from operations during the December quarter,” said Peter Oppenheimer, Apple’s CFO. “Looking ahead to the second fiscal quarter of 2011, we expect revenue of about $22 billion and we expect diluted earnings per share of about $4.90.”
We’ll be providing live play-by-play coverage of Apple’s first-quarter 2011 financial results conference call today, expected to feature Apple COO Tim Cook and CFO Peter Oppenheimer discussing gangbuster results from October through December 31, 2010. Key points from the call include the revelation that the company has signed a new, multi-year, non-exclusivity deal with AT&T (5:35PM), the fact that over 160 million iOS devices have been sold—meaning that 55 iPod touch units have been sold (5:08PM), that the ASP of the iPhone is expected to hold steady next quarter despite the recent price drop on the iPhone 3GS, suggesting that interest in the iPhone 4 far exceeds that of the 3GS (5:35PM), and that the company targeted the Chinese market as a growth opportunity, and has seen revenue from that region jump 4x from the prior quarter (5:18PM). Continue reading to see more information about these and a host of other topics.
This story will be updated in reverse chronological order as the call proceeds starting at 5:00PM ET/2:00PM PT; refresh it for regular updates.
6:01PM: End of call.
5:58PM: Q: Consumerization of enterprise technology is taking place; are there still barriers to developer training at corporate level or other issues to work through to get more penetration in enterprise? A: It’s a megatrend that’s occurring, most forward-looking CIOs are realizing that enabling creativity of employees is materially more important than everyone using the same thing. Ability to write apps easily for a phone is incredibly powerful, you can run an entire business from the iPhone. So the numbers are already incredible—iPad shipped in April and now in 80% of largest companies deploying or piloting, which is unheard of, as enterprise is generally much slower and more cautious. To everyone’s credit, they’ve seen value of this from productivity/creativity point of view and are really moving fast. In terms of inhibitors, iPad has huge advantage because as you can recall with iOS releases, we always put in a huge chunk of enterprise features, and this isn’t something we just started working on—we started with the first iPhone. So there’s a huge place here for us.
5:56PM: Q: Peter, more insight on iPad gross margins going forward? Should we assume Apple will improve feature set and hold pricing stable? A: Can’t answer that question. In terms of what we’re shipping today, we’re always looking to lower our costs and have a good track record of doing so. We feel very, very good about performance of our products and costing of our products. Q: MacBook Air - given initial success and momentum, how are you looking at it now, premium tablet or notebook? A: The Mac of the future shipping today. It was a phenomenal part of the growth of the Mac last quarter. Customers love the precision, thinness, weight, instant on. We’re really happy with how it’s doing. We’ve only been shipping it for less than 90 days, just gotten going on it.
Apple has released an email sent by CEO Steve Jobs to all company employees, stating that he will be taking his second medical leave in the last two years.
At my request, the board of directors has granted me a medical leave of absence so I can focus on my health. I will continue as CEO and be involved in major strategic decisions for the company.
I have asked Tim Cook to be responsible for all of Apple’s day to day operations. I have great confidence that Tim and the rest of the executive management team will do a terrific job executing the exciting plans we have in place for 2011.
I love Apple so much and hope to be back as soon as I can. In the meantime, my family and I would deeply appreciate respect for our privacy.
Jobs took a medical leave from the company just over two years ago today, during which he received a liver transplant. It is unclear whether the cause of the current leave is a recurrence of or side effect from his prior bout with pancreatic cancer, or some unrelated issue.
According to a pair of reports out of Europe, Apple has changed its rules regarding how print publishers are allowed to let users access their content from within iOS applications. de Volkskrant reports (Translated Link) that Apple has told publishers it will no longer allow periodicals to bundle free access to the iPad version of the publication with print or online subscriptions. NRC adds (Translated Link) that Apple has given publishers until March 31 to comply with the new rules or risk having their apps removed from the App Store. Both reports note that Apple wants its 30 percent cut of the subscription price, which it does not receive when all payments are handled outside the App Store. Notably, Apple is reportedly working on a new subscription platform for the iPad (and likely other iOS devices as well) which will allow users to sign up for a subscription to a magazine or newspaper and have new content automatically delivered to their device. Apple CEO Steve Jobs is expected to appear on stage with News Corp. Chairman Rupert Murdoch in the coming weeks to announce the new subscription offering alongside News Corp.‘s upcoming iPad-based newspaper The Daily. [via AppleInsider]
Apple has launched a new 10 Billion App Countdown promotion to celebrate the downloading of the ten billionth app from the App Store. “As of today, nearly 10 billion apps have been downloaded from the App Store worldwide,” reads the promotion’s web page. “Which is almost as amazing as the apps themselves. So we want to say thanks. Download the 10 billionth app, and you could win a US $10,000 iTunes Gift Card. Just visit the App Store, and download what could be your best app yet.” Customers are limited to 25 entries per day, and Apple is providing a free entry form for those who would like to enter without making a purchase or performing a download. The promotion will end after the download of the 10 billionth app; for more information, see Apple’s official rules.
News Corp. and Apple have delayed the debut of the former’s new iPad newspaper, The Daily, in order to polish the new subscription platform that will be used to deliver the paper. Citing people familiar with the matter, the Wall Street Journal reports that the digital newspaper was supposed to be unveiled next Wednesday by News Corp. Chairman Rupert Murdoch and Apple CEO Steve Jobs at a special event at the San Francisco Museum of Modern Art; the launch has been delayed by weeks, and not months, according to the report. “The app and the service work, it’s just getting them to talk to each other that needs more time,” said a person familiar with the matter. News Corp. confirmed the delay but declined to comment beyond that. Once released, Apple’s new subscription platform will allow customers to sign up for a subscription to a periodical via the App Store and get the publication delivered automatically to their iPad each time a new issue is published, instead of needing to purchase each issue individually either as a separate app or through in-app purchases.
Apple has released iOS 4.3 beta 1, the first beta version of its next major point release for iOS, to its paid developers. According to notes accompanying the release, the beta includes a pre-release version of future Apple TV Software so that developers can test AirPlay functionality with their 4.3 apps, meaning that users should be able to send video from apps or websites to the Apple TV under the new software. A prior report also indicated that the Personal Hotspot Internet sharing feature debuting on the Verizon iPhone 4 will make its way to other models under iOS 4.3, although it is unclear whether the functionality is included in this update. Separate beta versions of iOS 4.3 for the iPad, iPhone 4, iPhone 3GS, third-, and fourth-generation iPod touch are available as downloads for paid iOS developers from Apple’s iOS Dev Center.
Update: TUAW reports that the new beta also includes support for new four- and five-finger gestures on the iPad. “This beta release contains a preview of new Multi-Touch gestures for iPad,” reads Apple’s developer page for iOS 4.3. “You can use four or five fingers to pinch to the Home Screen; swipe up to reveal the multitasking bar; and swipe left or right between apps. We are providing this preview before releasing them to the public to understand how these gestures work with your apps. Test them and give us your feedback on the Apple Developer Forums.”
Update x2: Mac Rumors notes that the new beta also offers an option in the Settings app to choose whether the iPad’s side switch acts as a screen rotation lock or as a mute switch. The iPad originally shipped with the switch acting as a screen rotation lock, but Apple changed its behavior in iOS 4.2.
Microsoft has confirmed that it is attempting to block Apple’s trademark application for the phrase “App Store.” BBC News reports that Microsoft has asked the US Patent and Trademark Office to reject the application on the basis that it is too broad. “An ‘app store’ is an ‘app store’,” said Russell Pangborn, Microsoft’s associate general counsel. “Like ‘shoe store’ or ‘toy store’, it is a generic term that is commonly used by companies, governments and individuals that offer apps. The term ‘app store’ should continue to be available for use by all without fear of reprisal by Apple.” Apple first filed for the trademark in 2008, and this week launched its second application store—the Mac App Store—alongside the release of Mac OS X 10.6.6.
Speaking with AllThingsD at yesterday’s Verizon iPhone press event, Apple’s senior vice president of Worldwide Product Marketing Phil Schiller made several comments about the development of the CDMA iPhone. “It was a lot of work,” Schiller said of the two-year process, which involved months of testing and more than 1,000 prototypes. Schiller also commented on the new model’s Personal Hotspot feature, saying, “A big part of it is the software, I’d say the biggest part. It uses the hardware in different ways.” Schiller also admitted that the feature would be a boon to Wi-Fi only iPad owners looking for a way to access the Internet away from traditional Wi-Fi, saying, “It’s a good way to do it.” Verizon will launch the CDMA iPhone on its network February 10.
Apple is planning to produce a CDMA-compliant version of the iPad for use on Verizon Wireless, according to a new report. Citing Francis Shammo, CFO of Verizon Communications—Verizon Wireless’ parent company—Bloomberg reports that the new offering will pose a further challenge to AT&T, which lost its iPhone exclusivity with today’s announcement of a CDMA iPhone 4 for Verizon. The report states that Shammo declined to say when the product may become available, but given the fact that the current-generation iPad was revealed almost a year ago, it seems likely that any CDMA version may appear as a second-generation product. Verizon currently sells Wi-Fi-only iPad units—bundled with MiFi mobile hotspots for data access—at its stores.
Verizon Wireless and Apple have officially announced a CDMA variant of the iPhone 4. The design of the CDMA handset is similar to that of the GSM model, but features a revised antenna design with a noticeable black line above the ring/silent switch, as well as a Personal Hotspot feature that allows it to provide wireless Internet access to up to five devices at a time. Apart from CDMA and the Personal Hotspot, the phone’s feature set appears to have remained the same, with a five megapixel rear video camera, 720p HD video recording, the Retina Display, a front-facing camera, and A4 chip. Notably, due to the limitations of Verizon’s CDMA network, the device will be unable to handle simultaneous voice and data connections; neither will the CDMA version of the iPhone be exclusive to Verizon Wireless. The CDMA iPhone 4 will be available for pre-order to existing Verizon customers beginning February 3, while all other customers will be able to order starting February 10, the official launch date. Pricing is set at $199 for the 16GB model and $299 for the 32GB model with a new two year customer agreement.
“We are pleased to introduce millions of wireless users to the industry leading iPhone 4 on the nation’s most reliable network,” said Lowell McAdam, president and chief operating officer of Verizon. “This is an important step for the industry as two great companies join forces to give wireless customers one of the most important technological additions to the mobile landscape this century.”
“Verizon Wireless customers have told us they can’t wait to get their hands on iPhone 4, and we think they are going to love it,” said Tim Cook, Apple’s chief operating officer. “We have enormous respect for the company Verizon has built and the loyalty they have earned from their customers.”
For analysis of the Verizon iPhone announcement, see our Backstage article.
Following in the footsteps of its retail partners, Apple has officially dropped the price on the 8GB iPhone 3GS, while a new report suggests the company its dropping its standard restocking fee. The 8GB iPhone 3GS is now available for $49 directly from Apple with a two-year contract; the move was widely expected, as retailers such as AT&T, Radio Shack, and Best Buy were already offering a similar discount on the device. In addition, 9 to 5 Mac reports that Apple is dropping its standard 10% restocking fee beginning tomorrow. While the report indicates that the 14 day return policy will remain in place, the absence of the restocking fee will allow potential iPhone customers to purchase both the AT&T and Verizon versions of the device and test them during the return window to see which works best for them, then return the unwanted version without penalty.
Apple has released an update to its Keynote Remote application for the iPhone and iPod touch adding support for iOS 4 multitasking features and Retina Display graphics on the iPhone 4 and fourth-generation iPod touch. The update also improves the handling of push notifications received while controlling a presentation and fixes several issues with network connectivity and connecting to Keynote ‘09. Keynote Remote 1.2 requires iOS 4.2 or later and is available from the App Store for $1.
Two European standards bodies have released the final specs for a new universal cell phone charging standard based on Micro-USB. In a European Commission press release, the CEN-CENELEC and ETSI announced that the “harmonised standards needed for the manufacture of data-enabled mobile phones compatible with a new common charger” are now available. “I am very happy that the European Standardisation Bodies have met our request to develop within a short space of time the technical standards necessary for a common mobile phone charger based on the work done by industry,” said European Commission Vice-President Antonio Tajani, Commissioner for Industry and Entrepreneurship. “Now it is time for industry to show its commitment to sell mobile phones for the new charger. The common charger will make life easier for consumers, reduce waste and benefit businesses. It is a true win-win situation.”
In June, Apple, along with Nokia, Sony Ericsson, Motorola, LG, NEC, Qualcomm, RIM, Samsung, and Texas Instruments, signed an agreement aimed at standardizing all data-enabled cell phone chargers beginning in 2011; although Micro-USB has been chosen as the standard connector, the agreement allows Apple to bundle some form of Dock Connector to Micro-USB charging adapter with the iPhone in the EU, instead of adding a separate Micro-USB port to the device or abandoning the Dock Connector in favor of the new standard. Given the continued popularity of full-sized USB ports and Apple’s use of the same cables for non-mobile phone products including the iPod and iPad, this adapter most likely will take the form of a USB to Micro-USB adapter for current cables, rather than a redesigned Dock Connector to Micro-USB cable. [via Mac Rumors]
Sales of iPad-formatted versions of print magazines dropped towards the end of 2010, according to a new report. Citing figures from the Audit Bureau of Circulations, WWDMedia reports that Vanity Fair sold only 8,700 digital editions in November, down from an average of 10,500 for August, September, and October; Glamour, which sold 4,301 digital issues in September, saw sales drop 20 percent in October and another 20 percent to just 2,775 in November. GQ‘s November sales were the worst since April, when the iPad was released, and Wired saw sales of 22,000 and 23,000 in October and November, respectively, after averaging 31,000 digital sales between July in September, down from sales of over 100,000 in June. While the report notes that publishers are hopeful the sales of new iPads over the holidays will increase sales, it should be mentioned that most digital editions are priced at or above the newsstand price for print editions, with no subscription model currently available. A report from earlier this month indicated that talks between Apple and magazine publishers over the terms of a potential iTunes subscription model were at a standstill, with the two sides unable to agree on revenue and subscriber information sharing issues.
Microsoft co-founder Paul Allen’s company Interval Research Corp. has filed an expanded version of its lawsuit against Apple, Google, AOL, eBay, Facebook, Netflix, Office Depot, OfficeMax, Staples, Yahoo, and Google’s YouTube subsidiary, providing more details in its attempt to prove patent infringement. Originally filed in August, the suit was dismissed by a federal judge in Seattle earlier this month for being too vague. The patents in question cover automatic suggestions for shopping sites, automatic location of related stories on a news site, and the presentation of information such as ads, stock quotes, news updates, or videos on a computer screen, in the periphery of the user’s main activity. The amended complaint includes more details of how the companies supposedly infringed, along with 40 exhibits, which according to the Seattle Times are largely screenshots of websites and services with specific areas highlighted. The exhibit submitted to illustrate Apple’s violations includes the top portion of an iTunes Store album listing, including the track listing and preview buttons, the buy button, a top songs and albums section for the artist, and recommendations based on what listeners of that album have purchased.
Speaking in an interview with Tech N’ Marketing, Peter Vesterbacka, CEO of Angry Birds-maker Rovio, had several complimentary things to say about Apple and its mobile gaming ecosystem. “Apple will be the number one platform for a long time from a developer perspective, they have gotten so many things right,” Vesterbacka said. “And they know what they are doing and they call the shots. Android is growing, but it’s also growing complexity at the same time. Device fragmentation not the issue, but rather the fragmentation of the ecosystem. So many different shops, so many different models. The carriers messing with the experience again. Open but not really open, a very Google centric ecosystem. And paid content just doesn’t work on Android.” He went on to say that Apple CEO Steve Jobs was “absolutely right” when he said there were more challenges for developers working with Android, adding that “[n]obody else will be able to build what Apple has built, there just isn’t that kind of market power out there.” [via MacDailyNews]
Apple and a handful of app developers have been sued—not once, but twice—over the collection and sharing of user data with outside companies. Both suits—Lalo v. Apple and Freeman v. Apple—were filed in the Northern District of California; the former was first reported by Bloomberg while the latter was spotted by Wired. Both suits appear to be heavily based on research compiled and published by the Wall Street Journal, which showed that some apps send age, gender, location, and phone identifier information to ad networks without notifying the user.
“Some apps are also selling additional information to ad networks, including users’ location, age, gender, income, ethnicity, sexual orientation and political views,” reads the Lalo suit. The Freeman suit claims that “[d]efendant Apple, by exercising significant control over App developers and sharing profits with them, has created a ‘community of interest’ with the other Defendants to render them joint venturers, who are responsible for each other’s torts. Defendant Apple has also aided and abetted the remaining Defendants in the commission of their legal wrongs against Plaintiffs and the proposed class.” In addition to Apple, Pandora, Paper Toss, the Weather Channel, Dictionary.com, Toss It, Text4Plus, Talking Tom Cat, and Pimple Popper Lite were all named in either one or both the suits; both are seeking class action status.
Apple has updated its Investor Relations page to indicate that it will announce its financial results for the first fiscal quarter of 2011 on Tuesday, January 18, and will conduct a conference call to discuss the results at 2:00 p.m. PT that day. As always, iLounge will be covering the conference call, and will post any relevant notes from the discussion. Apple’s quarterly results are highly anticipated as an indicator of the relative strength of the iPod, iPhone, and iPad product lines. Though the company saw a noteworthy decrease in iPod unit sales from Q1 2009 to Q1 2010, iPhone unit sales doubled, foreshadowing a year of rapidly increasing demand for the company’s touchscreen products. The results will also include sales numbers from the iPad’s first holiday quarter, expected to be spectacular, and will complete the company’s first calendar year sales numbers for the device, which stood at 7.46 million as of September 25.
Apple has started to sell Beatles-themed iTunes Gift Cards in stores. Spotted by iLounge, one card, with a value of $149, features an image of the band members in front of a white background, with the text “The Beatles Box Set” at the top. The Beatles’ digital Box Set includes remastered versions of all the band’s studio albums in iTunes LP format, as well Past Masters Vols. 1 & 2, a series of Mini Documentaries, and a film of the band’s performance at the Washington Coliseum from 1964. Another card, with a value of $50, features an image of the four band members walking down the street, but doesn’t specifically mention the band by name. The cards represent yet another extension of the partnership between Apple and the Beatles that has included prominent placement on Apple’s home page as well as a series of television commercials.