BusinessWeek has once again named Apple the most innovative company in the world. “For the third year in a row, the design-driven masters in Cupertino, Calif., lead the pack of creative firms on our list of the World’s Most Innovative Companies,” says the magazine. “Apple manages to dominate any would-be contenders, beating out two-time runner-up Google with more than twice as many votes.” Rounding out the top ten are Google, Toyota, General Electric, Microsoft, Proctor & Gamble, 3M, Walt Disney Co., IBM, and Sony. BusinessWeek and the Boston Consulting Group surveyed senior executives worldwide to find out which companies are the most innovative.
Although he only took $1 in salary, Apple CEO Steve Jobs was America’s highest-paid chief executive of 2006. Forbes reports that Jobs received $647 million in total compensation thanks to vested restricted stock. The next four top-paid CEOs also earned most of their pay from exercised stock options—Ray Irani of Occidental Petroleum ($322 million), Barry Diller of IAC/Interactive Corp ($295 million), William P. Foley of Fidelity National Financial ($180 million), and Terry Semel of Yahoo! ($174 million). Forbes said CEO pay in the U.S. was up a collective 38% last year, to $7.5 billion.
According to a Digitimes report, Apple is in talks with Samsung over volume pricing of NAND flash chips, to be used in iPods and iPhones from June until December. The report claims that Apple is looking to acquire between 400 and 500 million 4GB NAND chips, but industry sources say Samsung is unsure of their ability to produce that many given that the request is 10-15 percent higher than what was previously agreed upon. Apple uses NAND flash in the iPod shuffle, iPod nano, and the upcoming iPhone.
Apple is offering a new service called Personal Shopping at its retail stores. It is described by Apple as a “free service where you and a dedicated Mac Specialist explore and test-drive products to find out which ones are best for you.” This face-to-face experience is meant to provide undivided attention for customers who have more questions than the typical sales experience can answer. Personal Shopping is currently available at Apple retail stores, and appointments can be made online up to two weeks in advance.
Apple CEO Steve Jobs has written an extensive update which outlines Apple’s plans for current and future environmental efforts, entitled “A Greener Apple.” In the update, Jobs discusses topics such as the removal of toxic chemicals from Apple’s product lines, as well as plans for more aggressive recycling of old products. While discussing the removal of the chemicals Arsenic and Mercury, he also sheds some light on the company’s plans for future displays. “We plan to introduce our first Macs with LED backlight technology in 2007,” Jobs wrote.
Jobs also announced plans to expand its iPod recycling program. “All of Apple’s U.S. retail stores, which now number more than 150, take back unwanted iPods for environmentally friendly disposal free of charge,” Jobs said. “As an incentive, we even offer customers a 10% discount on a new iPod when they bring their old iPod to our stores for proper disposal. This summer we’re expanding it to Apple retail stores worldwide, and we’re also extending it to include free shipping from anywhere in the U.S. No product purchases are required for any of our free take back programs. In a few months, we think we’ll have ‘best of breed’ iPod recycling programs in the U.S., and we plan to continue to expand our free iPod recycling programs globally in the future.”
Apple will reportedly open its third Manhattan-area retail store in the city’s trendy Meatpacking district. The store, which could possibly be Apple’s largest yet, will be located at 401 W. 14th Street, according to the New York Post.
“Apple is leasing more than 32,000 feet on the cellar, ground and second floor of the 60,000-square-foot, low-rise structure,” the Post reports. “The former home to a Western Beef grocery store and Belgian restaurant Markt, the building where the new store will open is being completely renovated and getting a new 9,000-square-foot penthouse along with 2,500 feet of terraces overlooking the triangular intersection of Ninth Avenue, Hudson Street and 14th Street. High-end retailers Stella McCartney, Jeffrey and Alexander McQueen are among Apple’s neighboring retailers.”
Apple’s new subscription accounting policy for the iPhone and Apple TV could be a sign of things to come for the company, according to one analyst. Shaw Wu of American Technology Research told clients today that he envisions Apple offering subscription services for music, TV, movies, and video games. “We believe Apple is in the midst of building a more serious effort in the subscription business where it could enter the ‘rental’ space with video games and music, TV, and movie content,” Wu said. “We would not be surprised to see Apple compete with the likes of Netflix and Blockbuster in a bigger way.” These services would make Apple the “only vertically integrated play and one stop shop for hardware, software, and services for the digital lifestyle,” according to Wu.
Following better than expected quarterly earnings, shares of Apple soared above $100 to hit a new all-time high. As reported late yesterday, Apple saw second quarter earnings come in at $770 million, or 87 cents a share, compared to earnings of $410 million, or 47 cents a share, last year. Analysts were expecting, on average, earnings of 64 cents a share on revenue of $5.17 billion for the quarter. During the quarter, Apple shipped more than 10.5 million iPods and more than 1.5 million Mac computers.
Reporting its second quarter financial results today, Apple said it shipped 10.549 million iPods during the quarter—slightly below some analyst predictions, but a 24 percent increase compared to the same quarter last year. The company posted revenue of $5.26 billion and net quarterly profit of $770 million, or $.87 per diluted share, compared with revenue of $4.36 billion and net quarterly profit of $410 million, or $.47 per diluted share in Q2 2006. Sales of Other Music Related Products + Services were up 35% over last year’s quarter and 3% over the last quarter of 2007, to $653 million total. That category includes iTunes Store sales, iPod services, and revenues from Apple and third-party iPod accessories.
“The Mac is clearly gaining market share, with sales growing 36 percent—more than three times the industry growth rate,” said Steve Jobs, Apple’s CEO. “We’re very excited about the upcoming launch of iPhone in late June, and are also hard at work on some other amazing new products in our pipeline.”
“We are very pleased to report the most profitable March quarter in Apple’s history,” said Peter Oppenheimer, Apple’s CFO. “Looking ahead to the third fiscal quarter of 2007, we expect revenue of about $5.1 billion and earnings per diluted share of about $.66.”
Analysis of the company’s figures showed significant double-digit year-versus-year growth in all regions in which Apple operates, except for Japan, which experienced single-digit declines versus the year-ago quarter, and a modest decrease in revenue relative to the prior 2007 quarter.
Updated: During Apple’s Financial Results Conference Call, Apple revealed that iTunes controls 85% of the U.S. market based on the latest data from Nielsen Soundscan. Peter Oppenheimer, Apple CFO, added: “iPods accounted for 44% of total revenue during the quarter… iPod shuffle was especially popular” based on the release of four new colored shuffles in early 2007. Apple also reaffirmed the timing of iPhone outside the US. Europe will see it in the fourth calendar quarter of 2007, and Asia in 2008.
The U.S. Securities and Exchange Commission has filed a federal lawsuit against two former Apple officers, charging that they helped to illegally backdate company stock options. Former Apple general counsel Nancy Heinen and former Apple chief financial officer Fred Anderson were both named for their roles in backdating going back to 2001. Heinen’s case will proceed, while Anderson has settled for $3.5 million in fines and penalties.
“Apple’s shareholders relied on Heinen and Anderson, as respected legal and accounting professionals, to ensure the accurate reporting of the company’s executive compensation,” the associate regional director of the SEC’s San Francisco office said in a statement. “Instead, they failed in their duties as gatekeepers and caused Apple to conceal millions of dollars in stock option expenses.”
In an unexpected statement, Anderson partially blamed Apple CEO Steve Jobs for the backdating complaint against him. “Fred was told by Steve Jobs in late January 2001 that Mr. Jobs had the agreement of the Board of Directors for the Executive Team grant on January 2, 2001,” Anderson said. “At the time Mr. Jobs provided Fred this assurance, Fred cautioned Mr. Jobs that the Executive Team grant would have to be priced based on the date of the actual Board agreement or there could be an accounting charge. He further advised Mr. Jobs that the Board would have to confirm its prior approval in a legally satisfactory method. He was told by Mr. Jobs that the Board had given its prior approval and the Board would verify it. Fred relied on these statements by Mr. Jobs and from them concluded the grant was being properly handled.”
The SEC said it will not pursue any further action against Apple itself, citing the company’s “extraordinary” cooperation. “Apple’s cooperation consisted of, among other things, prompt self-reporting, an independent internal investigation, the sharing of the results of that investigation with the government, and the implementation of new controls designed to prevent the recurrence of fraudulent conduct,” the SEC said in a statement.
Steve Jobs and Jonathan Ive are both in the race for Time Magazine‘s 2007 list of the 100 most influential people in the world. Picking the list has traditionally been the duty of the magazine’s editors, but this year the process is also open to online voting. As of this writing, Steven Colbert was ranked number one, with Jobs sitting at number eight, and Ive at number ten.
The San Jose Mercury News reports that Apple CEO Steve Jobs will likely be cleared in the federal investigation of stock options backdating at Apple. “A Mercury News examination of a massive 2001 stock-options grant to Jobs that was backdated through bogus documentation—the central focus of the federal probe—shows there is scant evidence, if any, to support criminal charges against the Silicon Valley icon,” reports the newspaper. “Despite Apple’s disclosure that Jobs approved widespread backdating at Apple, there is no evidence he directed the backdating of his own grant or covered it up afterward, based on a review of regulatory filings and interviews with lawyers intimately familiar with the grant who asked not to be identified. Without such proof, federal prosecutors do not have the type of egregious misconduct they’ve targeted in the blossoming options scandal.”
Apple CEO Steve Jobs again took a salary of only $1 in 2006, according to an Apple filing with the Securities and Exchange Commission. “The majority of Jobs’ compensation is paid through an equity grant, though he received no new grant in 2006,” reports CNN/Money. “During the year, a 2003 stock grant fully vested, giving him Apple stock now worth nearly $1 billion.”
Other Apple executives also fared well. Apple Chief Financial Officer Peter Oppenheimer realized $56 million in value from stock options during 2006, in addition to a $615,000 salary, a $450,000 bonus and restricted stock valued at $14 million. Apple Chief Operating Officer Tim Cook received a salary of $697,000, a $525,000 bonus, and restricted stock valued at $22 million in 2006.
Following last week’s introduction of a $38 million “iPod bill” in Michigan, a report has surfaced claiming that two of the lawmakers backing the bill made a trip to California to meet with Apple — at least partially on Apple’s dime. According to the Detroit Free Press, Rep. Matt Gillard and House Speaker Andy Dillon, among others, made the trip to San Francisco. Dillon has issued a statement defending the trip, saying he was “one of several lawmakers to take this trip, and I am more convinced than ever that the future for our children lies in education. As we move to the technology age and the knowledge-based economy, it would be irresponsible to separate technology from our K-12 system.” They did not identify the other lawmakers who went on the trip, and Apple has not made their Lansing, MI lobbyist available for comment.
Greenpeace International has Apple placed last in its recent rankings for environmental friendliness among major electronics companies. A spokesperson for Greenpeace claims Apple failed to stop using several types of harmful chemicals in its manufacturing processes, and has yet to make a plan for stopping their use. Apple, meanwhile, is rejecting the rankings, claiming its products are among the “greenest” in the world.
“We disagree with Greenpeace’s rating and the criteria they chose,” Apple spokeswoman Sheryl Seitz said, reading a prepared statement. “Apple has a strong environmental track record and has led the industry in restricting and banning toxic substances such as mercury, cadmium and hexavalent chromium, as well as many BFRs (brominated flame retardants).”
Following Apple being named to Fortune’s list of most admired companies, the magazine has published an interesting article on the beginning of Apple’s retail store effort. “I started to get scared,” said Apple CEO Steve Jobs about depending on large retailers to sell Macs before Apple’s first retail store was opened. “It was like, ‘We have to do something, or we’re going to be a victim of the plate tectonics. And we have to think different about this. We have to innovate here.’” Apple’s 174 stores, which each attract 13,800 visitors a week on average, now produce sales of $1 billion a quarter for the company. The average Apple Store generates sales of $4,032 per square foot a year—more than Saks, Best Buy, and Tiffany & Co.
Jobs told Fortune how he helped kick off the retail effort. “We looked at it and said, ‘You know, this is probably really hard, and really easy for us to get our head handed to us.’ So we did a few things. No. 1, I started asking who was the best retail executive at the time. Everybody said Mickey Drexler, who was running the Gap.” Jobs then went after Ron Johnson, then a Target executive, to run the retail store operations. “One of the best pieces of advice Mickey ever gave us was to go rent a warehouse and build a prototype of a store, and not, you know, just design it, go build 20 of them, then discover it didn’t work,” said Jobs. Interestingly, the first Apple Store prototype was scrapped, delaying the launch of the first store by 6-9 months.
Another interesting detail in the article is that the Apple Store Genius Bar was conceived after the majority of a focus group told Johnson that the best service experience they’d ever gotten was from a hotel concierge. “When we launched retail, I got this group together, people from a variety of walks of life,” says Johnson. “As an icebreaker, we said, ‘Tell us about the best service experience you’ve ever had.’” Of the 18 people, 16 said it was in a hotel. “We said, ‘Well, how do we create a store that has the friendliness of a Four Seasons Hotel?’” The answer: “Let’s put a bar in our stores. But instead of dispensing alcohol, we dispense advice.”
Apple ranks 7th on Fortune magazine’s 25th annual list of the most admired companies. “You could say that Apple has landed—not only on our street corners and in our malls but also, for the first time, on the top ten of our Most Admired Companies list,” writes the magazine. “Apple’s peers have watched it upend industries from computers to music. And now it’s become the best retailer in America. In 2004, Apple reached $1 billion in annual sales faster than any retailer in history; last year, sales reached $1 billion a quarter. And now comes the next, if not must-have, then must-see, product (iPhone).” To create the magazine’s top 20, Fortune survey partners at Hay Group asked 3,322 executives, directors, and securities analysts to select the 10 companies they admire most.
Apple CEO Steve Jobs and Microsoft Chairman Bill Gates will make a rare joint appearance at The Wall Street Journal’s D: All Things Digital conference this year. According to show organizers, they will jointly discuss “the history and future of the digital revolution in an unrehearsed, unscripted, onstage conversation.” Both executives have made multiple appearances at the conference, but this will be their first joint session at D. Jobs will also appear on his own in a separate segment at D to discuss the latest developments at Apple. The conference, which is sold out, will take place May 29-31 near San Diego, California.
Apple Inc. and The Beatles’ Apple Corps said today that they have ended their ongoing trademark dispute and have entered into a new agreement over the use of the Apple name. Under the new agreement, which replaces one from 1991, Apple Inc. will own all of the trademarks related to “Apple” and will license certain trademarks back to Apple Corps. The companies said the terms of settlement are confidential. Apple Inc. won a trademark lawsuit brought on by Apple Corps last year, with a UK judge ruling that the company could continue using its logo on the iTunes Store.
“We love the Beatles, and it has been painful being at odds with them over these trademarks,” said Apple CEO Steve Jobs. “It feels great to resolve this in a positive manner, and in a way that should remove the potential of further disagreements in the future.” Neil Aspinall, manager of Apple Corps said, “It is great to put this dispute behind us and move on. The years ahead are going to be very exciting times for us. We wish Apple Inc. every success and look forward to many years of peaceful co-operation with them.”
Update: We’ve posted an Editorial discussing the potential impact of the new agreement.
Google has again beat out Apple for the top spot in an annual global brand ranking. The survey by online branding magazine BrandChannel.com asked 3,625 branding professionals and students “Which brand had the most impact on our lives in 2006?”. Globally, the top five were Google, Apple, YouTube, Wikipedia, and Starbucks. The North American results, however, saw Apple in first place, followed by YouTube, Google, Starbucks and Wikipedia. “The poll does not take account of economic brand value, the murky science of assigning a financial value to brand, which regularly puts Coca-Cola in first place,” says Reuters. “Neither does it ask respondents to consider whether the brand’s impact is positive or negative.”