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Apple sells 11.05 million iPods, 6.89 million iPhones in Q4

Reporting its fourth-quarter financial results today, Apple said it sold 11.05 million iPods during the quarter — more than an eight percent increase compared to the same quarter last year, and slightly more than the 11.011 million sold in Q3. It also sold 6.89 million iPhones in the quarter, up from 1.119 million in the year-ago quarter and an artificially-low 717,000 in Q3 2008. The company posted revenue of $7.9 billion and net quarterly profit of $1.14 billion, or $1.26 per diluted share, compared with revenue of $6.22 billion and net quarterly profit of $904 million, or $1.01 per diluted share in Q4 2007. Sales of Other Music Related Products + Services were $832 milllion in Q4, up from $601 million in the year-ago quarter and $819 million in Q3. That category includes iTunes Store sales, iPod services, and revenues from Apple and third-party iPod accessories.

“Apple just reported one of the best quarters in its history, with a spectacular performance by the iPhone—we sold more phones than RIM,” said Steve Jobs, Apple’s CEO. “We don’t yet know how this economic downturn will affect Apple. But we’re armed with the strongest product line in our history, the most talented employees and the best customers in our industry. And $25 billion of cash safely in the bank with zero debt.”

“We’re very pleased to have grown revenue 35 percent and to have generated $9.1 billion in cash in fiscal 2008,” said Peter Oppenheimer, Apple’s CFO. “Looking ahead, visibility is low and forecasting is challenging, and as a result we are going to be prudent in predicting the December quarter. We are providing a wide range for our guidance, targeting revenue of $9.0 to $10.0 billion and earnings per diluted share between $1.06 and $1.35.”

Highlights from Apple’s ‘Let’s Rock’ special event [updated]

Aside from major product upgrades, Apple today also revealed an update to the iPod classic, announced iPhone Software 2.1, and made several remarks regarding the performance of the iTunes Store and iPod sales.

iPod classic: Apple today updated its iPod classic line, removing both the 80GB and 160GB models and replacing them with a single, thin-bodied 120GB model, which will sell for $249. The new iPod classic offers on-device Genius playlist creation, and compatibility with the newly-announced Apple headphones.

iPod shuffle: Not mentioned during the event, Apple today quietly updated the iPod shuffle, replacing the current colors with more vibrant hues of blue, green, pink, and red (pictured). The silver model remains unchanged, as does the pricing: $49 for 1GB models and $69 for 2GB models. We had previously heard that there were electronic changes being made to the iPod shuffle for this revision; it is currently unclear whether this will result in a different sound profile for the shuffle, or what other changes might have been made.

iPhone: Apple will release iPhone Software 2.1, which debuts on the second-generation iPod touch, as a free update to all iPhone users this Friday. According to Apple, the update fixes lots of bugs, reduces call drops, significantly improves battery life, fixes problems caused by installing lots of apps on the phone, and provides faster backups in iTunes.

iPod: According to Apple, the latest data shows the iPod at 73.4% marketshare in United States. #2 is “other” at 15.4%, followed by Sandisk, and then Microsoft, which holds 2.6% of the market. Over 5,000 iPod accessories are now available, and 90% of all cars in the U.S. offer iPod integration. Cumulative iPod sales are now over 160 million units.

iTunes: The iTunes Store now offers 8.5 million songs, 125,000 podcasts, and 30,000 episodes of TV shows, and boasts 65,000,000 unique accounts.

Apple preps site of ‘Let’s Rock’ event

Apple has begun on-site preparations for tomorrow’s “Let’s Rock” special event. The event, scheduled to begin at 10:00 a.m. Pacific Time, is being held at the Yerba Buena Center for the Arts in San Francisco. According to Cult of Mac, the building has already been covered on one side by a large silhouette iPod poster matching the image seen on the event invitation, and Apple security guards have been spotted watching over each of the center’s doors. iLounge will be providing live coverage of the event.

Report: iPod, iPhone failures due to common part issues

Published today, a report by EETimes traces numerous iPod and iPhone hardware problems to a lack of “attention to the basics” of product design, including “component placement, sealing, USB protection and connector quality, along with batteries and LCDs.” The report spotlights the findings of Rapid Repair, a company specializing in media device repairs, as it has worked through problems with both iPod and iPhone models over the past five years. Amongst the highlights:

* The use of polymer batteries rather than lithium ion and lithium polymer batteries would lead to fewer leakages, while laminated glass is a superior option to both crackable glass and scratchable plastic for covering displays. Fifty percent of the failures Rapid Repair encounters are LCD- or battery-related, with after-market batteries causing more problems than the ones installed initially in the devices.

* Connectors, including headphone jacks and internal sockets for screens and other parts, fail or disconnect over time; internal disconnections can lead to expensive repairs just to reconnect cables. Apple’s contract manufacturers, including Foxconn, may be responsible for choosing the less impressive parts that cause problems.

* According to the company, “many USB power modules fail” in iPods, and units also stop working due to “poorly designed after-market car chargers, liquid intrusion, and hard-drive failures” caused by dropping.

The report recommends the use of superior connectors, recessed displays, and better protection for both the display and storage media, noting that hard drives will continue to remain viable for five years due to improvements in capacity and physical size.

Apple sends out invites for Sept. 9 special event

Apple has begun sending out notices to various members of the media inviting them to a special event on September 9, one week from today. The invitation, entitled “Let’s Rock,” looks like an iPod Now Playing screen, with the album art replaced by one of Apple’s common silhouette iPod dancers, and the track information replaced by the event details. The “Let’s Rock” event will be held at the Yerba Buena Center for the Performing Arts in San Francisco, and is scheduled to begin at 10:00 a.m. Pacific Time. iLounge will be on hand at the event to provide coverage.

Apple adds 60 days to MobileMe extension

Apple has sent out an email to MobileMe members announcing a 60-day extension to their subscriptions, which will be added to previously announced 30-day extensions. The email reads: “We have already made many improvements to MobileMe, but we still have many more to make. To recognize our users’ patience, we are giving every MobileMe subscriber as of today a free 60 day extension. This is in addition to the one month extension most subscribers have already received. We are working very hard to make MobileMe a great service we can all be proud of. We know that MobileMe’s launch has not been our finest hour, and we truly appreciate your patience as we turn this around.” The extension applies to all MobileMe subscribers whose account was active as of midnight Pacific Time, August 19.

Columnist: Apple’s silence on flaws is tarnishing image

Apple is widely known for its refusal to talk about future products, notes a recent Washington Post article, but its recent silence in the wake of widespread service problems with existing products such as MobileMe and iPhone may be hurting its relationship with its customers. Technology columnist Rob Pegoraro writes, “Poor communication can sink any gadget, but it’s worse on a Web service such as MobileMe. When these things malfunction, they often do so for reasons beyond our control or even comprehension…. So the companies running these services need to speak up, promptly and with sufficient detail to give users cause for optimism. ‘Trust me’ and ‘We’ll do better’ won’t do—not when users paying $99 a year can see the providers of competing, free services offering far more information to their users.” Pegoraro notes that while Apple’s secrecy on future products is a sound business strategy — one preferable to pre-announcing “vaporware” products that either arrive with significant delay or not at all — the company’s “don’t-look-behind-the-curtain tactics don’t work when customers just want to know that their purchase will work as advertised, or when would-be customers want reassurance that they’re not buying into a failed experiment.”

Works With iPhone doesn’t Work With iPhone 3G?

A recent statement from a third-party iPod and iPhone accessory manufacturer has raised questions regarding the scope and nature of Apple’s Works With iPhone certification, which was until now understood to guarantee that an accessory would be compatible with current and upcoming iPhone hardware. In a press release issued today, however, Altec Lansing announced that its T612 Digital Speaker System for iPhone and iPod has “passed ‘Works with iPhone’ iPhone 3G test requirements for use with Apple’s latest generation iPhone,” noting that the system received certification for the original iPhone in January 2008.

According to Apple, Works With iPhone certification is supposed to be issued only after special radio interference and electrical testing have been conducted by an independent lab, and the company requires developers to purchase and integrate a special Apple authentication chip into their devices. However, readers and iLounge editors have confirmed that the iPhone 3G triggers Apple’s “This accessory is not made to work with iPhone” nag screen when used with at least two previously WWi-certified products, a screen that should not appear when connecting to any WWi accessory. One of these products, the iHome iP99 Alarm Clock Radio, displays the nag screen but otherwise continues to operate as noted in our earlier review, the other, XtremeMac’s InCharge Auto, also displays the screen yet continues to charge the iPhone 3G. Additional WWi accessories we have tested from JBL, Altec Lansing, and Belkin continue to work as they did with the original iPhone.

There have also been a number of products released with the Works With iPhone badge despite deviations from the radio or electrical standards originally understood to be required for certification. It remains unclear what, if any, changes Apple has made to the certification program for the iPhone 3G, or how many previously released WWi products may be incompatible with the iPhone 3G.

Notes from Apple’s Q3 2008 Conference Call

In its third-quarter 2008 Quarterly Results Conference Call, Apple Inc. executives CFO Peter Oppenheimer and COO Tim Cook made several comments concerning its music-related products, which accounted for 33% of the company’s total revenue growth in the third fiscal quarter. iPod sales grew 10 percent in the U.S. during the quarter, and 15 percent internationally. The iTunes Movie Rental service now offers over 2200 films — 450 in HD — and the App Store is up to 25 million downloads and 900 applications, with 20 percent free to download, and 90 percent priced at less than $10.

Both Cook and Oppenheimer repeatedly made reference to a future product transition, expected to take place in the September quarter, which will bring down the company’s average margin to 31.5 percent; the pair also said Apple would be “delivering state-of-the-art new products at prices our competitors can’t match.” It was not revealed whether the product transition in question will be iPod or Mac related. Speaking on iPhone production capability and recent sellouts, Cook said that the company was shipping units as fast as it can, adding that “[w]e are confident enough about the production ramp that we will be launching in about 20 additional countries on August 22,” bringing the total number of countries where the iPhone is available to over 40, a number which Apple has stated will grow to at least 70 by the end of the year.

Apple sells 11.01 million iPods during Q3

Reporting its third quarter financial results today, Apple said it sold 11.011 million iPods during the quarter — a 12 percent increase in units and seven percent revenue growth compared to the same quarter last year. In addition, it sold 717,000 iPhones in the quarter despite limited stock, compared to 270,000 in Q3 2007. The company posted revenue of $7.46 billion and net quarterly profit of $1.07 billion, or $1.19 per diluted share, compared with revenue of $5.41 billion and net quarterly profit of $818 million, or $.92 per diluted share in Q3 2007.

Sales of Other Music Related Products + Services were up 35% over last year’s quarter and down slightly from the second quarter of 2008, to $819 million total. That category includes iTunes Store sales, iPod services, and revenues from Apple and third-party iPod accessories. Following plans it outlined in its Q2 2008 Conference Call, Apple is deferring all iPhone revenue until after the launch date of iPhone Software 2.0, which was released after the quarter’s end.

“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.”

Motorola sues current Apple exec over non-compete agreement

Motorola has filed suit against a former executive for allegedly violating a no-compete agreement and threatening to reveal its trade secrets by taking a job with Apple as vice president of global iPhone sales. According to the suit, Michael Fenger accepted “millions of dollars in cash, restricted stock units, and stock options” in exchange for agreeing not to join a competitor for two years following his departure from Motorola. The suit also states that Fenger hired away two high-level Motorola employees who have knowledge of the company’s trade secrets and customer relationships. Fenger, who oversaw mobile devices in Europe, the Middle East, and Africa for Motorola, joined Apple less than a month after leaving Motorola, said the lawsuit. Motorola is asking the court to stop Fenger from working for Apple for two years and to bar him from soliciting or hiring Motorola employees or disclosing Motorola’s confidential information, and is also demanding damages and repayment of stock options given to Fenger in exchange for the non-compete agreement.

Justice Department ends Apple options probe

The U.S. Department of Justice has ended its two-year criminal investigation into backdated stock options at Apple, and has decided not to bring charges against the company, or any current or former executives, according to a Wall Street Journal report. Lawyers representing two subjects of the investigation said they had been notified that the criminal inquiry is over. “We were always confident that after a full and fair review of the facts, there could be no other outcome,” said Cris Arguedas, a lawyer for Apple’s former general counsel, Nancy Heinen. Heinen is still involved in a civil case brought against her and former Apple CFO Fred Anderson by the Securities and Exchange Commission over stock options awarded to CEO Steve Jobs. Anderson settled his civil case last year, and paid about $3.5 million in fees without admitting to any wrongdoing.

Segway CTO to become VP of Product Design at Apple

According to a report on the SegwayChat forums, Doug Field, Segway’s Chief Technology Officer and Vice President of Design and Engineering, is leaving the company to accept a position as Apple’s Vice President of Product Design. At Segway, Field and his team were wholly responsible for the development of the Segway Personal Transporter as well as all the research and development of future Segway products. Curiously, Apple CEO Steve Jobs was highly critical of the Segway’s early design, which was created largely by Field and his colleague Scott Waters. [via Engadget]

Apple patents outline further multi-touch research

A number of Apple patent applications focusing on multi-touch research have been recently published by the United States Patent and Trademark Office. Mac Rumors notes that a majority of the applications protect research done by Wayne Westerman, the former cofounder of Fingerworks. One of the applications, titled “Gesture Learning,” outlines methods to teach more advanced multi-finger gestures to users through the use of visible feedback and interactive games that help users learn the movements. Another application titled “Multi-event Input System” describes the use of both a finger and a second, non-capacitive surface, such as a fingernail or other tapping instrument, to control advanced operations such as text selection, copy/paste, and other secondary functionality. This system would rely on a next-generation touchscreen capable of sensing different types of input. Interestingly, several of the illustrations accompanying the second patent show an iPod classic-like scroll wheel-equipped device with a small antenna protruding out the top. As with all Apple patents, these filings do not necessarily represent any future product releases from Apple, but offer evidence of the company’s research in these areas.

Apple, Jobs, execs re-sued for fraud [updated]

Apple, Inc., CEO Steve Jobs, and a number of company executives have been re-accused of fraud in a new lawsuit filed in California last week. Along with former Apple CFO Fred Anderson, former General Counsel Nancy Heinen, and board members William V. Campbell, Millard S. Drexler, Arthur D. Levinson and Jerome P. York, Jobs and Apple are accused of knowingly defrauding shareholders with stock option backdating, a scandal which resulted in federal U.S. Securities and Exchange Commission charges against Anderson and Heinen, but no prosecution of Jobs. The civil complaint claims all the named parties were aware of the illegal nature of the backdating, stating: “The defendants knew that options were not granted on the dates that were disclosed to shareholders and falsified the company’s records to create the appearance of illegality, and thus bear direct responsibility for their actions.” [via Macworld UK]

Updated: The new filing, by plaintiffs Martin Vogel and Kenneth Mahoney, is a re-initiation of a previous attempt at a class action lawsuit against Apple, Jobs, and the company’s executives and directors. Vogel’s prior suit, known as Vogel v. Jobs et al., was previously dismissed with prejudice, and awaiting the filing of an amended consolidated class action complaint.

Apple files fraud, trademark suit against iPod Mechanic

Apple has filed a lawsuit against Nicholas Woodhams of iPod Mechanic, claiming he misused Apple’s “iPod” trademark through the name of the business and its accompanying website. Apple claims Woodhams did not have permission to use the trademark and was asked to cease using it in his business’ name in 2006. Woodhams reportedly agreed to stop using the name, and reached an agreement with Apple that would see him drop the iPod Mechanic name by January of 2007, and then park the domain name ipodmechanic.com by that March. Apple claims that neither of these conditions were met, however, the domain name now redirects to imechanic.com, although the iPod Mechanic name is still being used at the new domain.

In addition, the suit accuses Woodhams of knowingly defrauding Apple by convincing it to send him free components. According to the suit, Woodhams took advantage of Apple’s iPod shuffle Advance Replacement Program in 2007, by filling out an online form for customers that saw Apple ship him “replacement” iPod shuffle units, with a credit card kept on file in case the broken shuffle was never returned. Apple claims that Woodhams used a credit card he knew could be authorized for a potential charge, but would immediately decline any actual charges made by Apple should the broken shuffles fail to appear. Woodhams eventually sold the iPods at a heavy discount, according to the suit. The company claims Woodhams’ scheme cost them over $75,000. He is also accused of swapping out the back plates of out-of-warranty iPods for those of still-covered models in an effort to avoid paying repair and parts charges. As all three offenses are being viewed as deliberate, Apple is seeking triple damages in addition to forcing Woodhams to discontinue use of the iPod Mechanic name and website.

Starbucks confirms CD cutbacks, iTunes partnership

Following a report claiming that Starbucks will cut back in-store CD sales and end sales of iTunes Gift Cards and other iTunes-based promotions, Starbucks has confirmed to iLounge that while CD floor space and selection will be reduced, its relationship with Apple will continue. Starbucks spokesman Doug Cavarocchi told iLounge, “By focusing our CD offerings to a hand-selected group of no more than four titles at a time we will be able to build on our trusted curatorial voice and tell a story with each title we recommend to our customers. To that end the CD floor fixture currently deployed in more than 6,500 Starbucks company operated locations in the U.S. and Canada will be removed in September, 2008, and our music CD selections will be concentrated to four positions at point of sale.” Cavarocchi also responded to concerns about the future of Apple-related products in Starbucks stores, saying, “Our partnership with Apple will proceed and we will continue to offer innovative products from iTunes in our Company-operated locations in the U.S.”

New Greenpeace report downgrades Apple

Greenpeace has released its latest Guide to Greener Electronics, which ranks the 18 top manufacturers of personal computers, mobile phones, TV’s and games consoles according to their policies on toxic chemicals and recycling. The report lists Apple in 11th position scoring 4.1 points out of ten, down from 6 points in the last guide. Greenpeace lauded the company for its “millions of iPods [that] now have bromine-free enclosures and printed circuit board laminates,” and its free recycling of iPods and mobile phones, but said it “scores poorly on most e-waste criteria,” and “does only slightly better on energy criteria.” It also praised the company’s iPod and iPhone power adapters, which not only exceed the Energy Star standard, but also already meet California’s stricter efficiency regulations that take effect on July 1. A more complete explanation of Apple’s results and Greenpeace’s methods can be found here (PDF link).

Apple, iPhone named in broad touch patent lawsuit

Apple has been added to a patent infringement lawsuit by Typhoon Touch Technologies, which claims that Apple’s iPhone violated two Typhoon touch-based computing patents. The patents, issued in 1995 and 1997, refer to any touchscreen device capable of collecting information, and are focused on in-field situations such as police stops. Despite this, AppleInsider reports, the patents are so broadly worded that nearly every company manufacturing a touch screen tablet computer or smartphone may have violated some parts of both patents, which are claimed exclusive to a company listed as Nova Mobility. While the complaint originally named only Dell, whose Latitude XT tablet PC was the primary catalyst for the lawsuit, other companies such as Fujitsu, HTC, Lenovo, LG, Nokia, Palm, Panasonic, Samsung, and Toshiba have been added in addition to Apple. Typhoon hopes to be awarded both financial damages and an injunction against the products involved, which would last until the companies agree to pay a “reasonable royalty” every three months.

Apple patent points to plastic touch screens

A newly-published Apple patent application outlines a new process for creating plastic-based touch screen panels that would provide benefits over existing plastic and glass touch screen panel technologies. Originally filed on June 13, 2007, the application for a “PET-based touch pad” describes a touchscreen comprised of two layers of polyethylene terephthalate (PET), a plastic that could help the company make thinner and cheaper touch-sensitive displays than their existing glass and plastic counterparts.

Images filed with the application show the panel used in both an iPhone-like mobile telephone and an iPod classic-like digital media player, suggesting that Apple could add the panels to a more traditional iPod, as well as possible future iPhone and iPod touch models. As with all Apple patents, this filing does not necessarily represent any future product releases from Apple, but offers evidence of the company’s research in this area. [via Electronista]

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