In its first-quarter 2007 Quarterly Results Conference Call, Apple Inc. executives provided additional insights into the domestic and international sales of iPods, growth of the iTunes Store, and the potential of both Apple TV and the upcoming iPhone. During his introductory remarks, Apple CFO Peter Oppenheimer noted that music products, including iPod, represented 57% of Apple’s total revenue, versus 59% in the preceding year’s quarter. The company maintained its MP3 leadership share in the U.S. market, boasting a 72% marketshare in December, according to NPD data, and extended its lead in every international territory for which it has market data. Very strong sales through the iTunes Store helped the company’s performance: “other music revenue” grew 29% over the same quarter last year, buoyed by doubled sales of iTunes Gift Cards. iTunes now accounts for 85% of the U.S. market for legal digital music downloads, according to Nielsen Soundscan.
Additional notes from the Conference Call, including Apple TV as the “DVD player of the 21st Century” and potential changes to iPhone before release, are now available below.
iLounge has just announced the winners of its Best of Show 2007 Awards:
Alpine X001 Digital Media Receiver
Altec Lansing iM600 Portable Speaker System
Belkin Bluetooth Dock Adapter for iPod
Belkin Clear Acrylic and Brushed Metal Case for iPod nano
Elgato EyeTV 2.3.3
Griffin Evolve Wireless Speaker System
Harman Kardon Drive + Play 2
iSkin Cerulean Bluetooth Earphones
Macally TunePro Flat Panel Stereo Speaker with AM/FM Alarm Clock
Power Support Silicone Jacket for iPod shuffle
Roxio Toast 8 Titanium
Congratulations to the winners! Full details are now available in this linked article.
Following the introduction of the iPhone today, Apple stock rose $7.10, or more than 8 percent, to end the trading day at $92.57 a share. Meanwhile, being negatively affected by the iPhone, shares of smartphone makers Palm and Research In Motion (RIM) fell sharply. In the wake of the announcement, investors sold off shares of RIM, maker of the Blackberry line of devices, causing the stock to fall nearly 8 percent, or more than $11. Palm, maker of the popular Treo handheld, saw its stock drop nearly 6 percent.
During his keynote presentation at Macworld Expo today, Apple CEO Steve Jobs unveiled the long-rumored iPhone to rapturous applause from the large audience in attendance. Jobs also showed off the retail version of the iTV, now called the Apple TV, and revealed other news such as a company name change and the latest iTunes sales.
• Apple unveils revolutionary iPhone
• Apple TV announced
• iTunes Store sells 2b songs, 50m TV shows, 1.3m movies
• Apple drops ‘Computer’ from company name
• Apple now fourth-largest music reseller in U.S.
• Cisco sues Apple over iPhone name
• iPhone reaction: Press, analysts, competitors and bloggers
• Apple’s Jobs: ‘You don’t want your phone to be like a PC’
• iLounge Macworld Expo flickr photos
• iLounge Apple keynote photo gallery
• Macworld Expo 2007 keynote video
Toward the end of his keynote presentation today, Apple CEO Steve Jobs announced that his company is dropping the “Computer” from its name and will now officially be known as Apple Inc. Jobs noted that of Apple’s four main product lines—the Mac, iPod, Apple TV, and now iPhone—only one was a computer. The name change was more than likely made possible by a settlement last year with The Beatles’ Apple Corps.
The Wall Street Journal is reporting that Apple will announce a mobile phone as early as tomorrow and that the company will use Cingular as its carrier of choice. The Journal reports: “Cingular Wireless is expected to provide wireless service for a new Apple Computer cellphone, people familiar with the situation say. The launch of the new phone and service is expected to be announced as early as Tuesday, these people say. The new product could give Apple access to the huge wireless business, in which nearly a billion handsets are shipped every year, dwarfing the nearly 70 million iPods Apple has sold over the past five years.” The newspaper offers no other details on the phone or service.
While not distinguishing whether his story is based on his own sources or current circulating rumors, John Markoff of the New York Times writes that Apple is set to unveil a mobile phone that may feature “a sleek ceramic case and a transparent touch screen.” Markoff says that “industry executives and competitors” believe Apple has developed “the first of a new generation of devices that are closer to personal computers in pocket form, meaning that they will easily handle music, entertainment, productivity tasks and communications on cellular and other wireless networks.” The Times tech writer notes that “Apple’s business strategy in offering an Apple phone will potentially be as intriguing as its industrial design.” He says Steve Jobs “has been rumored to have entered into an alliance with Cingular,” and that the Apple CEO recently told two associates he was “more excited about his current project than he was about the Macintosh.”
American Technology Research analyst Shaw Wu believes that Apple’s product announcements at Macworld Expo tomorrow will focus on Macs and home entertainment, but that the company could also unveil a new iPod, cell phone, or even an Apple-branded HDTV.
“There appears to be more uncertainty as to what Apple CEO Steve Jobs will announce this year than in previous years. We believe this is likely because Apple is plugging leaks better as protecting its secrecy remains a top priority for the company,” Wu says in a research note to clients today. “We therefore believe there will likely be more surprises this year. We anticipate announcements to focus on two areas—Macs and home entertainment. Our supply chain sources indicate new vPods with Bluetooth stereo headphones and cell phones near/at manufacturing stage, though we are not certain on near-term timing.”
As do many other Apple watchers, Wu expects Apple to officially release its iTV streaming media device this week. He also expects new iTunes Store movie partners, and hears whispers of an Apple big-screen TV. “We anticipate new movie content partnerships with one or more studios (Fox, Universal, Paramount, and Warner) that extend beyond Disney,” says Wu. “Furthermore, we are not certain on timing but our analysis indicates that Apple is beyond prototype on large-screen technologies (for a larger monitor or possibly Apple-branded HDTV).”
Wu says a new video iPod is definitely in the works, but is unsure of timing. “The very successful vPod has not had a major update since August 2005 when it was first announced. Our analysis in the supply chain indicates that its successor has been under development for some time and recent data indicates shifting component order dynamics,” Wu says. “We do not have high conviction on timing but see improved battery life, widescreen, and Bluetooth 2.0 stereo as the newest features.”
Wu is also unsure if the long-rumored iPod phone will be shown tomorrow. “While our analysis continues to indicate Apple’s first cell phone is technically complete, its ‘go-to-market’ strategy continues to be a mystery and likely a gating factor (MVNO vs. traditional carrier or both),” says the analyst. “Our conviction remains high that Apple’s first cell phone will be released in 2007—potentially 1H07.”
Defunct online movie provider Intertainer has filed a lawsuit against Apple, Google and Napster, alleging that the three companies are infringing on a patent that covers the commercial distribution of digital media over the Internet. “Founded in 1996, Intertainer developed technology to distribute movies on demand through cable and phone lines for viewing on televisions and personal computers. It gained investors including Intel, Microsoft, Sony, NBC and Comcast,” according to the New York Times. The company shut down in 2002, filing a suit against the Hollywood studios behind Movielink for anticompetitive actions. The studios settled the lawsuit for an undisclosed sum, and Intertainer is now considered a patent licensing business.
In its quarterly report filed with the SEC last week, Apple disclosed that it is facing a lawsuit over the Nike+iPod Sport Kit. Apple said PhatRat Technology filed a lawsuit in October alleging patent infringement. The company claims Apple’s product is infringing on several patents held by PhatRat, including: U.S. Patent number 6,499,000 entitled “System and Method for Determining Loft Time, Speed, Height and Distance,” U.S. Patent number 6,885,971 entitled “Methods and Systems for Assessing Athletics Performance,” U.S. Patent number 6,963,818 entitled “Mobile Speedometer Systems and Associated Methods,” and U.S. Patent number 7,092,846 entitled “Systems and Methods for Determining Performance Data,” as well as allowed U.S. Patent Application number 11/358,508 entitled “Shoes Employing Monitoring Devices, and Associated Methods.”
Apple has posted an intriguing new welcome message on the home page of Apple.com. The fresh graphic features a backlit Apple logo with the text, “The first 30 years were just the beginning. Welcome to 2007.” While the message could simply be a harmless New Year’s greeting, it will no doubt stir up much anticipation before Apple CEO Steve Jobs’ keynote at next week’s Macworld Expo.
Following an independent investigation into the backdating of past stock option practices, Apple today restated past earnings, but cleared current executives of misconduct. Apple said it will record a non-cash charge of $84 million to compensate for improperly handled stock option grants made between 1997 and 2002. The company said after-tax profits would be lowered by $10 million for 2004, $7 million for 2005 and $4 million for 2006.
In delayed filings with the Securities and Exchange Commission, the company said a special committee of its board found that while Apple CEO Steve Jobs and other managers recommended or were aware of certain inaccurate grant dates, they did not financially benefit from them. Apple said it has “complete confidence” in the executive team.
“The special committee, its independent counsel and forensic accountants have performed an exhaustive investigation of Apple’s stock option granting practices,” said Al Gore, chair of the special committee, and Jerome York, chair of Apple’s Audit and Finance Committee, in a joint statement. “The board of directors is confident that the company has corrected the problems that led to the restatement, and it has complete confidence in Steve Jobs and the senior management team.”
Federal prosecutors are investigating stock option documents at Apple that were reportedly falsified by company officials, according to a report by Law.com. The report also says that Apple CEO Steve Jobs has hired his own legal representation to deal with investigators from the SEC and Justice Department. The article does not say which documents were allegedly falsified, but Apple previously stated that “stock option grants made on 15 dates between 1997 and 2002 appear to have grant dates that precede the approval of those grants.”
UK-based iLounge Forums member “Doc Evils” has shared his experience in attending an award ceremony presenting Apple’s Jonathan Ive with an Honorary Doctorate of the University of the Arts London. The award is in “recognition of the outstanding contribution that an individual has made to his or her chosen field of endeavor.” Ive is the Senior Vice President of Industrial Design at Apple and is behind the company’s most lauded designs, such as the iMac and iPod.
“Doc Evils” was amongst an audience of students selected from various design courses and members of the press. After the presentation of his doctorate, the editor of British GQ magazine and former student of the college, Dylan Jones, chaired a question and answer session with Ive which lasted over two hours. During the cocktail party which followed the presentation and questions,“Doc Evils” was fortunate enough to have a conversation with Ive, which was without doubt the highlight of the event for him.
Update: In related news, Ive collected his CBE from Her Majesty the Queen in London today. The award was announced in December 2005. In a statement at the time, Apple said: “We are as proud as could be that Jonny is receiving such a prestigious commendation.”
Apple shares hit an all-time high today, helped by an upbeat analyst note about holiday iPod sales. Shares of Apple rose $1.56 to $85.61 on the Nasdaq Stock Market, reaching an all-time closing high. The stock was boosted by a report from Piper Jaffray analyst Gene Munster that said Apple could sell as many as 14 to 15 million iPods this quarter. “While it is way too early to make a call on December quarter iPod results, we have analyzed the first month of NPD data (October) for the quarter and found that it suggests iPod units of 14-15 million,” Munster said in the report.
iPod manufacturer Hon Hai Precision has secured contracts from Apple to build 12 million music-playing mobile phones, according to a Commercial Times report. Quoting industry sources, the publication says Apple will launch the long-rumored “iPhone” in the first half of next year. Taiwan’s Hon Hai Precision, which operates electronics factories under the Foxconn name, has been at the center of sweatshop claims because of reported poor working and living conditions at an iPod factory in China.
The Nasdaq stock exchange will not de-list Apple, as long as the company files its overdue 10Q quarterly report within two months, according to a filing with the SEC. “On October 24, 2006, Apple received a written notification from the staff of The Nasdaq Stock Market stating that the Nasdaq Listing Qualifications Panel has granted the Company’s request for continued listing on The Nasdaq Stock Market, subject to the condition that the Company shall file its Form 10-Q for the quarter ended July 1, 2006, and any required restatements, by December 29, 2006,” Apple said in a filing today. “If the company is unable to file the Form 10-Q by that date, it intends to seek an additional extension of time from the Nasdaq Listing Qualifications Panel.” Apple delayed filing its quarterly report as it evaluates how much it will need to restate earnings as a result of stock options dating irregularities.
Along with its quarterly financial results, Apple today announced that it shipped over 8.7 million iPods during the company’s fiscal fourth quarter of 2006. Specifically, Apple said it shipped 8,729,000 iPods during the quarter, a 35 percent growth over last year’s results.
Apple’s net profit for the quarter was $546 million, or 62 cents per share, on $4.84 billion in revenue. These results compare to revenue of $3.68 billion and a net profit of $430 million, or 50 cents per share, in the year-ago quarter. Apple said that its fourth quarter earnings were “preliminary” because they may need to be restated due to the company’s stock option troubles. “These preliminary results may be subject to significant adjustment as a result of a likely restatement of historical results,” the Apple said in a statement.
“This strong quarter caps an extraordinary year for Apple. Selling more than 39 million iPods and 5.3 million Macs while performing an incredibly complex architecture transition is something we are all very proud of,” said Steve Jobs, Apple’s CEO. “Looking forward, 2007 is likely to be one of the most exciting new product years in Apple’s history.”
Even though there are currently 150 companies undergoing stock option investigations—which have resulted in the resignations of 9 CEOs and at least 27 executives or directors—Piper Jaffray’s Gene Munster believes Steve Jobs will remain Apple’s CEO. Munster said today that Jobs should be in the clear, given that he was aware of these grant dates but was not aware of the accounting treatment and did not benefit from them. “We believe the options backdating issue is in Apple’s rearview mirror and Steve Jobs will remain Apple’s CEO,” Munster said. “Although these issues tarnish Apple’s squeaky clean image, they do not impact the company’s underlying fundamentals. As a result, we expect investors to shift their focus to CPU market share gains and strong iPod sales through the upcoming holiday season.”
In an interview with iLounge this morning, Apple Vice President of Hardware Product Marketing Greg Joswiak disclosed that the company has discovered and taken steps to fight a Windows virus found on a small number of enhanced, fifth-generation iPods sold since September 12, 2006. The virus, RavMonE.exe, affects only Windows computers, and anti-virus software included with most Windows computers should detect and remove it. According to Joswiak, “it appears that this Windows virus or worm does not directly cause any data damage, but it can lower the security of the machine.”
“We recently discovered that a small number, less than 1% of video iPods, left our contract manufacturer carrying a virus that affects only Windows computers,” explained Joswiak, who says the company has had “less than 25 reports concerning this problem.” “The iPod nano, iPod shuffle and Mac OS X are not affected, and all Video iPods now shipping are virus free. We’re upset at Windows for not being more hardy against such viruses, and even more upset at ourselves for not catching it.”
Apple’s official Support page for the virus provides links and applications to detect and remove the virus, if a Windows-installed PC lacks the ability to do so on its own, and recommends that you scan other mass-storage devices for the virus if it is detected. Though the company did not specify whether the virus’s presence was attributable to Apple’s decision to ship recent fifth-generation iPods pre-formatted for Windows PCs rather than Macintosh computers, Joswiak noted that Apple has taken steps to prevent this from happening in the future.