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.
Apple plans to introduce two cell phone models which the company could launch at Macworld Expo in January, according to a report by Prudential Equity Group analyst Jesse Tortora. The analyst said “recent checks” indicate that Apple will begin selling a slim, iPod-based phone and a more advanced smartphone model with added features. Tortora said at least one of the phones will include wireless connectivity, but that both will be manufactured first in small numbers. Tortora is the second analyst that recently said that Apple is readying a cell phone. In releated news, Apple has reportedly filed for a trademark on the term “iPhone.” The filing, made last month with a Far Eastern trademark office, describes the iPhone as “handheld and mobile digital electronic devices for the sending and receiving of telephone calls, faxes, electronic mail, and other digital data; MP3 and other digital format audio players.”
Apple will report its fourth-quarter financial results on Wednesday after the markets close. Analysts surveyed by Thomson First Call are expecting earnings, on average, of 50 cents a share, up from 38 cents a share a year ago. Revenue for the quarter is expected to be $4.4 billion, up from $3.69 billion last year, on strong iPod and MacBook demand. Marketwatch notes that it will be the first Apple financial report since the company said that it will restate some past earnings because an internal probe found evidence of employee stock option grant irregularities.
Following an independent investigation into the company’s past stock option granting practices, Apple Computer today confirmed that grants made on 15 dates appeared to have been improperly pre-dated, skirting proper accounting principles and potentially violating Securities and Exchange Commission (SEC) regulations. During periods of stock value appreciation, pre-dated grants enable recipients to collect compensation greater than what they were actually entitled to receive. According to the company, the grants in question were made between 1997 and January 2002, with no findings of misconduct by any member of Apple’s current management team. In “a few instances,” Apple CEO Steve Jobs was said to have been aware of the dates, but was neither aware of the accounting implications of the pre-dating nor the recipient of any benefits from the grants.
In a statement, Jobs apologized for the problems, calling them “completely out of character for Apple,” and promised “to ensure that this never happens again.” The company simultaneously announced that former Apple Chief Financial Officer Fred Anderson has resigned from the company’s Board of Directors, and noted that it was providing “all details” regarding the actions of “two former officers” to the SEC regarding their actions in connection with the grant problems.
Famous for creating DeCSS software to remove encryption on Macrovision protected DVDs, Jon Lech Johansen (aka DVD Jon) has reportedly reverse-engineered Apple’s FairPlay DRM (Digital Rights Management) software, and is licensing it to any company that wants it. Using the reverse-engineered code, a company can purchase a license and make their content (music or videos) play on Apple’s iTunes and iPod products. According to the report, Johansen set up a meeting with Apple’s CEO Steve Jobs, who, not knowing that Jon would later decide offer the FairPlay license to companies, warned that while Apple was not a litigious company, other tech firms might not take kindly to whatever he might be up to. [via GigaOM]
Piper Jaffray analyst Gene Munster believes that Apple’s long-rumored iPhone needs to be priced around $300 to gain significant traction. In his latest research report, Munster estimates the average price of music enabled phones currently available in the U.S. to be $317, and notes that now is the time for Apple to release such a product. The analyst also offers survey data from Apple Expo in Paris, which finds that 74% of European Apple customers would be highly likely to buy an iPhone that holds 1,000 songs. “Price is clearly a consideration, however, and many customers indicated that they feel that an iPhone has the same value as Apple’s high capacity iPods,” Munster said. Specifically, the consumers said, on average, they would pay $285 for such a product. Munster expects Apple will announce an iPhone sometime in the next 3-6 months.
Apple’s pricing of the new iPod models shows the company is looking for better profit margins and not market share gains, according to analysts at market researcher Gartner. The analysts said the second-generation iPod shuffle could have been priced closer to $49, since the cost of materials amounts to around $30. Similarly, Apple could have also priced its new iPod nano models cheaper, according to the analysts. They claim the 8GB model has $130 in materials, the 4GB has $90 worth of materials, and the 2GB version has only $70 in materials. “Apple is in a secure position atop the portable media player market and has decided to strategically focus on its margin this time,” the analysts said.
During his feature presentation at Apple’s special “Showtime” event yesterday, Apple CEO Steve Jobs provided various sales figures, market share data, and other numerical information:
- 450,000 Nike+iPod Sport Kits sold in less than 90 days
- 70% of 2007 model year automobiles to offer iPod connectivity
- 10 million iPod shuffles sold since its introduction in Jan. 2005
- iTunes Store now accounts for 88% of all legal US downloads
- Over 1.5 billion songs have been sold from the iTunes Store
- iTunes Store No. 1 in all 21 countries with iTunes Store
- 45 million TV shows purchased from iTunes Store in less than a year
- Over 220 TV Shows from over 40 networks now available
Apple has now posted a streaming QuickTime video of today’s “It’s Showtime” event, where Apple CEO Steve Jobs introduced updated iPods, the second-generation iPod nano, and an all-new iPod shuffle. Jobs also debuted iTunes 7, showed an iTV device, and offered various updates on sales and other company information. See all of our current coverage from the event here.
During today’s Showtime event in San Francisco, Apple CEO Steve Jobs offered an unexpected “sneak peek” at the company’s media router, tentatively titled iTV. The device, which is slightly larger than a Mac mini computer dimensionally, is planned for release in the first quarter of 2007 at a price of $299, and enables any iTunes 7-equipped Mac or PC to spool media content to a current-generation television set. iTV includes component video, HDMI, optical audio and RCA-style stereo audio ports, plus an Ethernet port, 802.11 wireless connectivity, and a power cable; the power supply is inside the unit. Videos, music, photos, podcasts, and movie trailers from Apple can all be performed on your home TV/AV system with the unit, which connects either directly to your TV or a set top box. Additional details to come.
While he doesn’t expect Apple to introduce a cell phone at tomorrow’s special event, Piper Jaffray analyst Gene Munster continues to expect the company will ship an “iPhone” within the next 4-6 months. Despite admitting that his firm “has not seen any concrete evidence that the product is near completion or launch,” Munster says Apple could ship between 8-12 million phones next year. “Assuming Apple ships its iPhone early in 2007, at Macworld-07 or a special event, we expect the company will sell 8-12 million iPhones in the full calendar year,” Munster says. “We believe the most likely iPhone buyers would be those who have previously owned a higher average selling price HDD iPod.”
Apple today confirmed that it will hold a special event on Tuesday, September 12th at the Yerba Buena Center for the Arts Theater in San Francisco, California. An invitation sent to select media, including iLounge, features Hollywood premiere-style spotlights and reads simply, “It’s Showtime.” The event will kick off at 10:00 a.m. PT.
Reports of a September 12th press event first surfaced last week after the hosts of the Your Mac Life radio show and European Apple enthusiast websites claimed to have knowledge of the event. Apple’s date choice appears to be intentional, as the event will overlap with the opening day of this year’s Apple Expo in Paris, France, an international Mac and iPod show the company declined to grace with a keynote.
Analysts have speculated that Apple will use a September event to launch numerous product and service offerings, ranging from new iPod nano and video models to a 23-inch iMac, new iPod-inspired phone and a movie download service. Such speculation rarely proves entirely accurate, however, as few people know Apple’s plans for certain until the event actually takes place. As always, iLounge will be on hand with updates.
Based on reports from European Apple enthusiast websites and last night’s YourMacLife radio broadcast, Apple is in the process of inviting members of the press to a special event for new products, to be held on September 12, 2006. According to these reports, the invitation is unspecific as to the type of products to be shown and will be held at an as-yet-undisclosed location in Northern California, despite the fact that the event will fall on the same day as the opening of Apple Expo in Paris, France, an event the company publicly declined to open with a keynote speech. European journalists will reportedly attend a teleconference in London of the live California event. Analysts and Apple watchers have long predicted that new iPods, full-length iTunes movie downloads, and possibly even an “iPhone” would be introduced this fall.
Apple today announced that Google CEO Eric Schmidt has been elected to Apple’s board of directors. “Eric is obviously doing a terrific job as CEO of Google, and we look forward to his contributions as a member of Apple’s board of directors,” said Apple CEO Steve Jobs. “Like Apple, Google is very focused on innovation and we think Eric’s insights and experience will be very valuable in helping to guide Apple in the years ahead.” “Apple is one of the companies in the world that I most admire,” Schmidt said. “I’m really looking forward to working with Steve and Apple’s board to help with all of the amazing things Apple is doing.” Apple’s board now includes eight members, including Jobs, former U.S. vice president Al Gore, former Apple CFO Fred Anderson, Intuit chairman Bill Campbell, J. Crew CEO Millard Drexler, Genentech CEO Arthur Levinson, and Harwinton Captial CEO Jerry York.
Apple’s $100 million settlement with Creative Technology is only a “drop in the bucket” for Apple and removes potential future headaches for the company, according to one Wall Street analyst. “If Creative had been able to win any favorable rulings in the five outstanding lawsuits, Apple could have faced headaches including: further appeals, product injunctions, future and historical royalty payments,” said Piper Jaffray analyst Gene Munster. “Considering $100m represents 1.1% of Apple’s $9.2 billion in cash (at the end of the June quarter), we believe the settlement will prove to be the right course of action.”
Apple and Creative Technology today announced a broad settlement to end all legal disputes between the two companies. Apple said it will pay Creative $100 million for a license to use Creative’s recently awarded patent in all Apple products. The companies also announced that Creative has joined Apple’s “Made for iPod” program and will be announcing their own iPod accessories later this year. Creative sued Apple in May, claiming that the iPod’s interface is infringing on its “Zen Patent.” Following the company’s legal actions, Apple countersued Creative.
“Creative is very fortunate to have been granted this early patent,” said Apple CEO Steve Jobs. “This settlement resolves all of our differences with Creative, including the five lawsuits currently pending between the companies, and removes the uncertainty and distraction of prolonged litigation.”
“We’re very pleased to have reached an amicable settlement with Apple and to have opened up significant new opportunities for Creative,” said Sim Wong Hoo, chairman and CEO of Creative. “Apple has built a huge ecosystem for its iPod and with our upcoming participation in the Made for iPod program we are very excited about this new market opportunity for our speaker systems, our just-introduced line of earphones and headphones, and our future family of X-Fi audio enhancement products.”
Apple’s report of labor conditions at the Foxconn iPod plant in China has been criticized by a leading international trade union organization for not being independently verified. Janek Kuczkiewicz, director of human and trade union rights at the International Confederation of Free Trade Unions (ICFTU), said he was not impressed by Apple’s audit. “We are not impressed either by the report or by the findings of Apple,” Kuczkiewicz told BBc News. “Apple interviewed just 100 people out of the estimated 30,000 iPod workers. We do not know the conditions in which the interviews were held. We have serious reservations about the report.”
Apple Expo Paris will not host a keynote presentation this year, according to show organizers Reed Expositions. “Apple CEO Steve Jobs has traditionally popped across the Atlantic to visit Europe once a year for the show,” reports Macworld UK. “Jobs was replaced by Apple VP Phil Schiller in 2004, as he was recovering from life-saving surgery at that time. Jobs also failed to deliver a keynote speech at last year’s Paris show, though he did visit the event to speak with journalists and introduce to the iPod nano.” Europe’s largest Mac-focused event, Apple Expo Paris will run September 12 through the 16.