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Notes from Q1 2008 Apple Conference Call

During Apple’s Financial Results Conference Call, Apple CFO Peter Oppenheimer and Apple COO Tim Cook made several comments concerning its music-related products, which accounted for 50% of the company’s total revenue in the first fiscal quarter. The average sale price of the iPod during the quarter was $181, up 17 percent year-over-year, largely due to the launch of the iPod touch, which the execs enthusiastically described as a success. More specifically, the iPod touch was described as a product that “has the potential to grow the iPod beyond being just a music player, into the first mainstream Wi-Fi mobile platform for all kinds of new mobile applications.” Although iPod unit sales were flat year-over-year in the U.S., the company saw the highest revenue growth for iPod in a year, thanks to the iPod touch, which was also a “big hit” in Japan. iPod market share was roughly flat compared with a year ago according to numbers from NPD, but was up internationally.

The Apple TV and iPhone accounted for $1.44 billion in deferred revenue, and total iPhone revenue booked during the quarter came to $241 million. Apple said that although it saw no evidence of the iPhone cannibalizing iPod sales in the UK, France, or Germany, it did admit that the phone “could have been a factor” in the relatively small year-over-year iPod unit growth in the U.S. Additionally, it said that a “significant” amount of iPhones were sold during the quarter with the intent to unlock, but that it doesn’t have a precise number, and considers it “indicative of very strong interest in iPhone globally.” Finally, the company reiterated its intentions to expand the iPhone to more European markets and to Asia in 2008, and that it remains “very confident” in its ability to hit the goal of 10 million iPhones sold by the end of 2008.

Apple sells more than 22 million iPods during Q1

Reporting its first quarter financial results today, Apple said it sold 22.1 million iPods during the holiday quarter — a 5 percent increase compared to the same quarter last year, and a new single-quarter record for iPod sales. It also sold 2.315 million iPhones in the quarter, bringing the total number of units sold up to around 3.7 million. The company posted revenue of $9.6 billion and net quarterly profit of $1.58 billion, or $1.76 per diluted share, compared with revenue of $7.1 billion and net quarterly profit of $1 billion, or $1.14 per diluted share in Q1 2007. These results best analysts’ predictions, which called for revenue of $9.5 billion and earnings of $1.5 billion, or $1.62 per share. Sales of Other Music Related Products + Services were up 27% over the year-ago quarter, and up 34% from Q4 2007, to $808 million total. That category includes iTunes Store sales, iPod services, and revenues from Apple and third-party iPod accessories.

“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.”

Full transcript of Apple’s ‘08 Keynote Address

Continue reading a full play-by-play transcript of Apple CEO Steve Jobs’ keynote address from the 2008 Macworld Conference and Expo. Most of the announcements found in this transcript are explained in further detail in separate news articles; photos from the event can be found here.

Complete Macworld Expo iPod/iPhone exhibitor guide posted

You asked, we delivered. Our massive guide to what’s new at Macworld Expo, and what was shown at CES now covers announcements from over 75 different vendors, after 10 major updates. Be sure to check out the article to see what’s coming soon for the iPod, iPhone, and iTunes; we’ll be updating it throughout the show.

Massive MWSF08 Flickr photoset posted, more coming

We’ve spent the entire morning and afternoon adding a massive collection of Macworld Expo show photos to our Flickr account for your enjoyment. You can currently see pictures from all across the show floor, including new hardware and software from major iPod, iPhone, Mac, and iTunes vendors; new pictures are constantly being added, so keep checking.

Apple TV 2.0, iPod touch, iPhone 1.1.3 videos posted, details

We’ve just posted videos of the Apple TV 2.0 software, iPod touch, and iPhone 1.1.3 software to our YouTube account. They’re now available for viewing. Enjoy!

Apple TV: The biggest changes of the day were reserved for the Apple TV, which saw a comprehensive interface overhaul with movie rentals, movie and music purchasing, Flickr photo browsing, and new iTunes Store search features for all forms of media, including podcasting. The software is officially labelled version 2.0, and will be available in two weeks. In our quick tests on the show floor, everything worked as expected, though the new dual-pane menu interface requires a bit more thought to navigate than the prior Apple TV 1.0 menu system. Apple has also streamlined the device’s settings into multiple contextual menus, and added a few little settings that can be seen in our video, such as new photo transitions, expanded parental controls, and new HDMI output modes.

iPhone: All of the new iPhone 1.1.3 features described in our news story, and previously leaked, work as expected. Location finder on Google Maps pinpoints your current location within a roughly one block or so radius—at least in our quick show floor test—and hybrid view overlaps satellite and drawn road maps on top of each other. Webclip enables extremely easy web page bookmark addition to the iPhone’s main page, and the icon rearrangement feature works exactly as expected—hitting the Home button stops the icons from wiggling and being dragged.

iPod touch: Apple representatives on the show floor have confirmed that pre-MWSF08 iPod touch owners who are looking to add the iPhone applications Mail, Stocks, Weather, Notes, and Maps will be paying the $20 fee regardless of whether they recently purchased the touch, or bought it on day one. Those who have purchased in the past 14 days have the option to return and repurchase the touch from a retail Apple Store, however, the 10% restocking fee will apply, costing a minimum of $29.90 for the touch. Our attempt at testing the location finder feature of Maps did not work on the iPod touch, though it worked properly on the iPhone. Otherwise, the new features worked the same on the iPhone as they did on the touch. These applications are not part of the iPod touch 1.1.3 update currently available through iTunes.

Live from MWSF08, starting 9AM PT today [updated x2]

Updated! iLounge’s editors have arrived in San Francisco, California to provide live coverage of the 2008 Macworld Expo, which kicks off Tuesday morning at 9:00AM Pacific Time with a keynote speech from Apple CEO Steve Jobs. The Expo, which traditionally sees the introduction of new Apple and third-party hardware and software, is expected to include substantial upgrades to iTunes, the iPhone, and Apple TV, and other Apple wireless products, as well as a number of new third-party accessory announcements.

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Visit the iLounge.com homepage for our live coverage starting at 9AM; we will have a special page set up to handle live keynote coverage, and will be updating very frequently throughout the Expo.

New: Follow the keynote on our Flickr pages. Pictures are already being posted!

Apple ‘something in the air’ banners spotted

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Work crews have begun preparing the Moscone Center for next week’s Macworld Conference and Expo, and as is traditionally the case, pictures of the banners hung inside the complex have made their way online. A number of the banners read, “2008. There’s something in the air.” This text is printed on a black background, and in a lighter font weight than Apple traditionally uses for its marketing materials, adding an “airy” quality to the signage. Although no product image or name appears on the banners, the phrase does suggest that Apple will make wireless technology a major theme of the show, and will introduce new wireless products and/or software next week.

Apple sued over lack of WMA support

A new antitrust lawsuit filed against Apple on Dec. 31 claims the company has an illegal monopoly on the digital music market. The plaintiff, Stacie Somers, and her representation claim that Apple is dominating the market for online video and music sales, as well as the digital music player market, and that its position is a violation of the Sherman Antitrust Act. “Apple has engaged in tying and monopolizing behavior, placing unneeded and unjustifiable technological restrictions on its most popular products in an effort to restrict consumer choice, and to restrain what little remains of its competition in the digital music markets,” the complaint states. More specifically, the complaint takes issue with Apple’s refusal to support Microsoft’s proprietary Windows Media Audio format. “Apple’s iPod is alone among mass-market Digital Music Players in not supporting the WMA format,” the complaint says, while listing several competing music services that support protected WMA files. This specific complaint is based on the idea that the music labels “are generally unwilling to license their music for online sale except in protected formats,” a statement that seems to lack credibility in light of recent moves into DRM-free sales by industry heavyweights EMI, Warner Music Group, and Universal Music Group.

Apple planning iPhone-based transaction system?

  • December 27, 2007
  • Apple

A new Apple patent application suggests that the company is working on a wireless transaction system for devices such as the iPhone and iPod touch that would allow customers to order quick service items like coffee and fast food directly from their device, and to receive notification when their order was ready. According to the patent, the goal is to avoid an “annoying wait in a long queue if the purchaser arrives before completion of the order.” The application also describes a way to keep tabs on customers’ shopping preferences and favorite orders. Forbes says that the patent puts the Apple/Starbucks partnership “in a new light,” stating that the technology could move Apple “from the business of simply selling gadgets and music and movies that can be played on those devices into an intermediary in all kinds of exchanges.”

Apple patent points to multi-touch games

A newly-published Apple patent application covering “techniques for providing input to interactive and multitasking applications” also hints at the possibility of games for the iPhone and iPod touch. The patent describes a multi-touch control scheme that would present users with two applications at once: one being the game itself, the second being some other type of application. Specific regions on the screen would be assigned to each application, allowing the user to control both depending on what part of the screen they touch. The patent specifically mentions a “game input area” and a “game scene,” and also mentions how the technology might be used for in-game control: “Input can be provided in a simple and more intuitive manner by effectively allowing the user to interact with the input area in a way that mimics or approximates a desired action (e.g., moving a ball or bat around by inputting a rotational movement). Examples of such interaction include positional, directional (e.g., rotational), press or pressure input (or movement) which can easily be provided by a thumb or a finger, for example, on a touch screen.” Despite the seemingly direct mentions of multi-touch gaming found in the patent, it is still uncertain whether Apple will leverage this technology to offer games on the iPhone and iPod touch. [via Infinite Loop]

Apple donates iPods to students who lost homes

Apple has quietly donated more than 100 iPods to students in the Poway school district, near San Diego, CA, who lost their homes during the October wildfires. Poway resident Steve Boyack asked Apple for the donation, thinking about the high school students who were affected. “The idea came up because of our experience in the past, helping with fire relief,” said Boyack. “It seemed like the high school kids were being left out. Having four boys, I thought what would be nice for the kids, and I thought iPods are an accessory most kids like and can’t live without.” Boyack said that Apple now plans to expand the program to the entire county, and that it didn’t want any publicity. “It was strictly from the heart and just wanting to help,” he said.

Apple’s Joswiak talks iPod, iPhone

  • November 26, 2007
  • Apple

In a recent interview with Fortune, Apple’s vice president of Hardware Product Marketing Greg Joswiak spoke about the current state of the iPod, how the marketing of the devce has changed over the years, the iPod touch and iPhone SDK, the potential for growth in some international markets, and more. Responding to a question on how to handle an open iPod and iPhone, Joswiak said, “One of the things Steve talked about in his open letter is something Nokia’s doing, which is requiring a digital signature. That way if there’s something wrong with an application, you have a way to track it back to where it came from. So one of the things we want to do, again, is create a development environment that is going to maintain the security and reliability of the iPhone yet at the same time offer developers some really cool things that we can do.”

Speaking about the changes in iPod marketing that have been made over the years, Joswiak said, “I think what has changed over time is certainly early on, people had to understand what an iPod was about. You had to understand the whole message of a thousand songs in your pocket. So some of the early advertisements had to set up some of that foundation. In a market like the U.S., where we have 77 percent market share, that’s really not required. People understand what the iPod is – it’s become a cultural phenomenon here. So we can change the way that it’s marketed.”

He continued, “But when we went into Europe a couple of years ago with advertisements, when France was in single-digit market share and Germany was in single-digit market share, we again had to establish the ‘thousand songs in your pocket.’ We ran advertisements that were more foundational than the silhouette ads that we’ve done. And we saw market share rise pretty significantly — again, our latest French and German market share is about 28 percent each. That’s a pretty significant rise over a two-year period.” Joswiak went on to say that he sees a “significant opportunity” in international markets where the iPod’s market share is below 30 percent, due to the lack of a major name-brand competitor.

Finally, in discussing how Apple plans for future models, Joswiak explained, “We try to understand as we develop our product road map, what’s going to be exciting in the future. And that’s one of the advantages we have over our competitors. Our competitors tend to put the cross hairs on where we are now, and by the time they come up with a product that tries to match where we are now, we’re beyond them. We’re one or two generations beyond, moving faster than they are.”

Warner’s Bronfman praises Apple, iPhone

  • November 14, 2007
  • Apple

Speaking at the GMSA Mobile Asia Congress, Warner Music CEO Edgar Bronfman Jr. praised Apple’s efforts to build a seamless music and media purchasing experience through iTunes, as he warned mobile operators against making mistakes that have his own company facing hard times. “We used to fool ourselves,” he said. “We used to think our content was perfect just exactly as it was. We expected our business would remain blissfully unaffected even as the world of interactivity, constant connection and file sharing was exploding. And of course we were wrong. How were we wrong? By standing still or moving at a glacial pace, we inadvertently went to war with consumers by denying them what they wanted and could otherwise find and as a result of course, consumers won.”

Although previously critical of Apple and some of its policies, particularly Apple CEO Steve Jobs’ stance on DRM, Bronfman used Apple as an example of how to cater to consumers’ wants and desires. “For years now, Warner Music has been offering a choice to consumers at Apple’s iTunes store the option to purchase something more than just single tracks, which constitute the mainstay of that store’s sales,” he explained. “By packaging a full album into a bundle of music with ringtones, videos and other combinations and variation we found products that consumers demonstrably valued and were willing to purchase at premium prices. And guess what? We’ve sold tons of them. And with Apple’s co-operation to make discovering, accessing and purchasing these products even more seamless and intuitive, we’ll be offering many, many more of these products going forward.”

Speaking about Apple’s mobile efforts, Bronfman continued, “You need to look no further than Apple’s iPhone to see how fast brilliantly written software presented on a beautifully designed device with a spectacular user interface will throw all the accepted notions about pricing, billing platforms and brand loyalty right out the window. And let me remind you, the genesis of the iPhone is the iPod and iTunes - a music device and music service that consumers love.”

Apple QuickTime 7.3 adds iTunes 7.5, further iPhone content support

Apple today released QuickTime 7.3 for Mac and Windows, which features support for iTunes 7.5, and updated support for creating iPhone-compatible web content. According to update documentation, the release also addresses critical security issues, features updated JavaScript support in the QuickTime Web Plug-In, and contains numerous bug fixes. QuickTime 7.3 is available through Apple’s Software Update utility or as a download from apple.com/quicktime.

Apple sells 10.2 million iPods, 1.1 million iPhones during Q4

Reporting its fourth quarter financial results today, Apple said it sold 10.2 million iPods during the quarter — a 17 percent increase compared to the same quarter last year. It also sold 1.119 million iPhones in the quarter, bringing the total number of units sold up to nearly 1.4 million. The company posted revenue of $6.22 billion and net quarterly profit of $904 million, or $1.01 per diluted share, compared with revenue of $4.84 billion and net quarterly profit of $542 million, or $.62 per diluted share in Q4 2006. Sales of Other Music Related Products + Services were up 33% over the year-ago quarter, but down slightly from Q3 2007, to $601 million total. That category includes iTunes Store sales, iPod services, and revenues from Apple and third-party iPod accessories.

“We are very pleased to have generated over $24 billion in revenue and $3.5 billion in net income in fiscal 2007,” said Apple CEO Steve Jobs. “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.”

Apple, Nike named in suit over Nike+iPod Sport Kit

Leaper Footwear, owners of a 1998 patent covering “Performance measuring footwear”, has filed a lawsuit naming both Apple and Nike, claiming the companies’ Nike+iPod Sport Kit infringes on Leaper’s patent. In the complaint, Leaper claims that it contacted Nike in 2000, sending the footwear giant a copy of the patent and encouraging it to license and incorporate the technology into its running shoes; Nike reportedly responded by stating it had “no interest” in the technology. Leaper is seeking damages and a permanent injunction barring Apple and Nike from further infringement. Nike and Apple were previously named in a lawsuit filed by PhatRat Technology, also alleging patent infringement over the Nike+iPod Sport Kit.

Apple UK holding ‘Mum is no longer the word’ press event

  • September 13, 2007
  • Apple

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Apple UK has sent out an email invitation to select media outlets announcing a press event to be held at the Apple Store, Regent Street in London on September 18 at 10:00 a.m. The invitation reads simply, “Mum is no longer the word.”, and includes directions to the store. The event could likely be used to introduce the European version of the iPhone; however, no confirmation of such an announcement has yet been given by Apple, or by the phone’s likely European service providers.

Apple eyeing bid on wireless spectrum

  • September 10, 2007
  • Apple

Apple has studied the possibility of joining an auction for the rights to use a highly-coveted wireless spectrum, according to BusinessWeek sources. The 700Mhz spectrum currently occupied by analog TV broadcasts will be given back to the government in 2009, and the Federal Communications Commission will hold an auction for usage rights on Jan. 16. According to rules set in place by the FCC, the winning bidder must allow any device or application to run, which means the winning bidder must also make sure the network supports competitors’ devices. The minimum bid required by the government is $4.6 billion; it’s expected that the winning bid will be around $9 billion. Labeled “beachfront property” by the FCC, signals at the spectrum could provide far faster Internet access than current cellular or Wi-Fi networks, and could be used by Apple to provide its own wireless service for devices such as the iPhone, iPod touch, and Macs.

Jobs on NBC Uni dispute, iPhone price drop

  • September 6, 2007
  • Apple

In two separate interviews yesterday, Apple CEO Steve Jobs made comments regarding both the company’s recent dispute with NBC Universal and yesterday’s announcement of a $200 price drop on the iPhone. Speaking about NBC, Jobs said, “We hope they’ll reconsider their decisions over time and maybe find out that iTunes and iPods are a great way to digitally distribute their content to tens or maybe hundreds of millions of customers around the world.”

In an interview with USA Today‘s Jefferson Graham and Edward C. Baig, Jobs was asked, “What do you say to customers who just bought a new iPhone for $599? Sorry?” He responded, “That’s technology. If they bought it this morning, they should go back to where they bought it and talk to them. If they bought it a month ago, well, that’s what happens in technology.” He also responded to a question regarding iPhone manufacturing costs relative to the price drop, saying, “We’re in high-volume manufacturing, and we’re pretty good on the costs side. We’re also willing to be more aggressive… The product’s been extremely well accepted; we want to put the pedal to the metal. A holiday season is approaching; we’d have to wait another year for another one.”

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