MacRumors

Morgan Stanley analyst Katy Huberty released an extensive new report today offering a look at how Apple's base of 500 million iTunes/App Store customers fits in with other services and how Apple can leverage that user base to drive future sales and revenue growth.

Huberty notes that Apple's account base is second only to Facebook's one billion accounts among technology companies seeking to build out e-commerce or subscription services, easily topping third-place Amazon's 200 million accounts. Apple's 55% growth in 2012 also led the field by a comfortable margin, while its users also generate the most revenue per account. With Apple also scoring well in iCloud/iTunes Match adoption and user loyalty, the company is primed to take further advantage of its massive ecosystem with new services. Huberty outlines three possibilities for these new services:

1. Mobile payments. With hundreds of millions of credit card numbers on file, Apple could easily turn iTunes/App Store accounts into a payment service. With rumors of fingerprint recognition and perhaps near-field communication (NFC) coming to future Apple hardware, the company already has a number of pieces nearly in place for such a service.

2. Streaming music. Apple is rumored to be introducing its "iRadio" streaming service next week at its Worldwide Developers Conference, and Huberty suggests that Apple could generate $1 billion per year in revenue from such a service. Huberty's numbers do, however, include both subscription and display ad revenue, while recent rumors have indicated that Apple's service would be free to users with no mention of paid tiers.

3. Ad exchange. Earlier this week, it was reported by a source in the ad industry that Apple is looking to launch its own ad exchange, leveraging its existing iAd business and its massive ecosystem of users and devices to provide targeted advertising.

Developers could potentially charge higher rates than ad impressions on other devices, as Apple could offer better targeting given its insight into the user from information gathered from the hardware (GPS, accelerometer, gyroscope and digital compass), the software (operating system and some applications), iTunes and app stores, user profiles and cloud storage. Of course, some of the data will be stored anonymously and Apple will need to clearly disclose what data is gathered and how it is used.

Apple CEO Tim Cook has been playing up the potential of services, repeatedly referring to the "magic" happening at the interaction of hardware, software, and services. At his D11 interview last week, Cook touted iMessage, the iTunes Store, and FaceTime as examples of how Apple's services are tying Apple's ecosystem together, and acknowledged that the company is working hard on improvements to its services.

Late last year, Apple introduced the iPad mini alongside an update to the full-size iPad lineup, with many observers believing that Apple would continue to update the two lines simultaneously going forward.

A new report from Digitimes claims, however, that the next-generation iPad may appear as much as several months before the next version of the iPad mini.

Volume production of a new-generation 9.7-inch iPad will begin in July-August with shipments in the third quarter estimated at five million units. Meanwhile, a second-generation iPad mini may see its volume production postponed from September to November, according to Taiwan-based supply chain makers.

The updated full-size iPad is widely expected to see a significant redesign that will take design cues from the iPad mini and be roughly 15% thinner and 25-33% lighter than the current models.

Digitimes believes that Apple may be pushing back the next iPad mini launch in part to give more focus to the redesigned full-size iPad in the face of the iPad mini's popularity, but also due to mass production issues with the iPad mini, which has been rumored to be gaining a Retina display. Today's claims from Digitimes are not necessarily new, but they do provide a fresh direct comparison between Apple's potential plans for the two iPad lines.

Reliable KGI Securities analyst Ming-Chi Kuo had previously reported that technical challenges would likely see the next iPad mini pushed back from Apple's original internal timeline, with an introduction likely coming in the September-November timeframe rather than earlier as some had thought. Digitimes' claim today suggests that the launch could be at the end of that timeframe, bumping up against the holiday shopping season.

The Apple Online Store recently added a "Ship to Store" option for refurbished products, allowing customers to pick up refurbished items at their local Apple Retail Store. Ship to Store is a service that Apple first began offering in 2011.

Currently, Apple offers the Ship to Store option for the majority of its refurbished items, with the exception of the fourth generation iPod touch, which was discontinued last week with the introduction of the new low cost 5th generation iPod touch.

At the end of the checkout cycle for a refurbished product, customers can now choose whether they wish to pick up the item at a local store, or have it shipped to a home or business.

Ship to Store delivery times are similar to home delivery times, so while the option does not eliminate wait times, it does allow Apple customers to avoid home delivery.

Update: A number of MacRumors readers have reported that the in-store pickup option for refurbished items is not new, although there seem to have been some issues over the past several weeks with in-store pickup not being available for orders through the Apple online store.

Apple's iAd engineers and sales personnel are preparing to handle new advertising duties to support Apple's new streaming music service nicknamed iRadio, Bloomberg reports. Apple hopes to launch the major new advertising-supported initiative next week at WWDC.

In an extensive report, citing 'people familiar with the changes', Bloomberg reports that the company has been negotiating with major advertising companies to line up exclusive launch advertisers, similar to when it launched iAd in 2010.

Apple intends to make its new radio service free to users and supported by advertising, similar to how Pandora’s mobile app works, people familiar with the plans said. The new service will be different from Apple’s iTunes in that the songs played won’t be limited to what a user has purchased, and listeners won’t own the songs they stream for free.

The shift in iAd’s focus to buttress the music service is being made by Eddy Cue, the senior vice president who oversees iTunes, App Store and iAd, as well as Todd Teresi, whom Apple hired last year from Adobe Systems Inc. to lead the company’s advertising business.

When iAd launched, it was envisioned mainly as a way to help developers earn money on the iOS platform. With the expansion to audio ads for iRadio, iAd is going into new territory for the company. As it stands, iAd revenue remains a drop in the bucket for the company.

Bloomberg says that Apple has enticed advertisers to iAd by mentioning the data it holds for targeting users, including purchased movies, music, apps, books and more.

The site also says the iRadio service will launch later this year alongside the public release of iOS 7, much the same way that iTunes Match was announced at WWDC but was released months later.

In a Manhattan courtroom this morning, the U.S. Department of Justice presented its opening arguments in USA v Apple Inc, the antitrust e-book price fixing trial. The DoJ filed suit last April and Apple has consistently defended itself and has said the accusations are "simply not true".

According to AllThingsD, Justice Department attorney Lawrence Buterman presented the government's case this morning, using a slideshow filled with email and phone record evidence that the government says shows Apple colluded with book publishers to drive up the cost of e-books ahead of the launch of the iBookstore.

For its part, Apple's lead attorney claims the company was using the same strategies that worked when the company was building the iTunes Music Store to get contracts with the major book publishers. From Apple 2.0:

Apple's opening statement […] tried to pull the rug out from under everything the DOJ had just presented. [Apple SVP Eddy] Cue, Snyder claims, was just trying to break into a crowded e-book market (one dominated by Amazon) using precisely the same approach he used when he got the company into the music market with iTunes and the applications market with the App Store. Those innovation poured billions of dollars into the U.S. economy, he said. "Apple should be applauded, not condemned."

Eddy Cue -- Apple's senior vice president for Internet Software and Services, and one of its chief negotiators -- sits squarely at the middle of the DoJ's case and was responsible for much of the email and phone traffic mentioned in the government's opening argument. He is expected to take the stand on June 13th.

The Department of Justice has settled with all of the book publishers initially accused, while Apple remains the main target of the suit.

As part of a shift to lower repair costs, Apple has begun replacing iPhone 5 screens at its retail locations. The new display replacement service is priced at $149 and can be purchased with or without AppleCare+.

Changes to Apple's repair policies first surfaced last month, where a town hall session revealed that Apple would begin in-house repairs of displays in June in an effort to save approximately $1 billion per year.

MacRumors heard from a tipster this morning that the new repair policy had been implemented and the changes have since been confirmed in a forum post from iPhone repair site Quick iFix. The repairs are available for cracked displays as well as screens that experience multitouch issues.

Quick iFix notes that Apple's $149 repair cost is competitive, causing the site to change its own repair costs. Quick iFix charged $174.99 for a display replacement in early May, but began offering repairs for $139.99 a few days later.

Apple's new display repairs are in line with AppleCare+ pricing, which costs $99 up front and then $49 for each replacement. The repair service is a more affordable alternative for iPhone users who opted not to purchase AppleCare+, as iPhone replacement previously cost $229.

Apple is expected to roll out additional in-house repair options in July, offering repairs of the iPhone's camera, sleep/wake buttons, and logic boards. Additional changes to AppleCare are also reportedly in the works, with Apple rumored to be switching to a subscription based plan tied to customers rather than individual devices.

It's been reported for several months that Jony Ive is overseeing a redesign of the user interface in iOS 7, removing signs of skeuomorphism and gloss in favor of a 'flat design'.

iDownloadBlog has posted what may be the new home screen in iOS 7. While the authenticity of poor-quality photo can not be confirmed, 9to5Mac seems to believe that it is likely legitimate but of an early iOS 7 alpha. The site tweeted its own version of the same image, claiming that "things have changed a lot since this was taken".

When you look at the current state of stock apps icons, it seems that all of them were designed by different teams. Most of them have a different look. They don’t have unified features that tie them all up together. Some of them have a gloss effect. Some of them don’t. Some of them have borders. Some of them don’t, etc…

From what we’ve seen, we believe Jony Ive’s touch on iOS 7 will homogenize the look of Apple’s stock apps icons.

As with many things Apple does, the WWDC iOS app released earlier today is being closely examined for changes. TechCrunch noted that the app is 'flatter' than past versions.

What started out with textures meant to mimic 3D effects, more use of contrasting colors and shaded buttons, has now become a much flatter design. The changes are mostly subtle, but from what we’ve heard recently, that’s what’s in store for iOS 7, too; sweeping, system-wide changes, but ones that tweak the interfaces rather than overhaul them completely.

The new iOS 7 is expected to be unveiled at Apple's Worldwide Developers Conference next week.

9to5Mac reports that it has received an initial set of leaked model numbers for products expected to be released at next week's Worldwide Developers Conference.

The first series of codes that we have received are:

MD711LL/A — Better — USA

MD712LL/A — Best – USA

MD760LL/A — Better – USA

MD761LL/A — Best – USA

While the identities of the products corresponding to the four model numbers is unknown, the pattern showing two sets of two models suggests that they may be either MacBook Air or Retina MacBook Pro models at two different screen sizes, corresponding to Apple's current stock configurations. Apple's non-Retina MacBook Pro is currently offered in only a single stock configuration at the larger 15-inch size, suggesting that these model numbers may not represent that line.

A second set of model numbers have also leaked, but it is unclear to what products they refer:

ME177LL/A — Better — USA

ME182LL/A — Best — USA

ME918LL/A — Good — USA

A notebook refresh is expected to the hardware highlight of WWDC, although Apple is likely to introduce a number of new products once accessories and configuration options are accounted for.

9to5Mac also notes that, beyond the notebooks, supplies of the Mac Pro and Mac mini are also somewhat constrained, although not to the same level as seen for notebooks. As a result, desktop updates may come somewhat later in the year.

One week ahead of the start of its Worldwide Developers Conference in San Francisco, Apple today launched a new WWDC iOS app to help attendees stay on top of the latest news and events going on at the conference.

New this year is video integration, with all Registered Apple Developers able to watch session videos from the conference as they are posted daily. Apple has been posting session videos increasingly quickly after WWDC, and for the first time the company will this year be making videos available during the conference.

Make the most of the Apple Worldwide Developers Conference with the WWDC app. Even if you can’t join us in San Francisco, you can still follow along each day — session videos are just a tap away for all Registered Apple Developers.

- Browse times, locations, and descriptions for sessions, labs, and special events
- Mark schedule items as favorites with a simple double-tap
- Watch session videos, available daily
- Start watching on one iOS device, and pick up where you left off on another
- Keep up with the latest news, get important notifications, and see daily snapshots
- View maps to find your way around Moscone West
- Provide feedback on session content and speakers within the session details view
- Add your attendee information to Passbook for speedier on-site registration

WWDC 2013 kicks off with Apple's traditional keynote at 10:00 AM Pacific Time next Monday, June 10. Apple's WWDC app is available free of charge from the App Store. [Direct Link]

Yesterday, Apple.pro shared a pair of photos that had appeared on Chinese microblogging site Sina Weibo, purportedly showing the rear of Apple's rumored plastic low-cost iPhone with a Lightning cable plugged into the bottom. The two pictures show a glossy curved shell and have been picked up by numerous sites today.

Our first thought upon seeing the photos was that it is likely simply an iPhone 5 in a plastic case. A lack of an Apple logo or discernible text on the back of the device is unlike many Apple prototypes, and the Lightning cable looked to us to be plugging into a recessed case rather than a flush port on a device.

French site NowhereElse.fr apparently had similar thoughts [Google translation] and performed some analysis of one of the images. Adjusting exposure and contrast on the photo better reveals the bottom of the device, and it certainly does appear that the Lightning cable is plugged into a hole in a case rather directly into a device. Other features along the bottom of the device are also consistent with the iPhone 5: speaker, microphone, and headphone jack.

As a result, we believe these photos are almost certainly an iPhone 5 in a nondescript plastic case rather than an actual low-cost plastic iPhone or a rear shell from such a device.

According to 9to5Mac, Apple is internally testing versions of iOS 7 that include AirDrop drag-and-drop file sharing capabilities.

First introduced with OS X Lion, AirDrop is a Finder function that allows Mac users to share files with other Mac users without the need for a Wi-Fi network or storage device. AirDrop for iOS is said to work in the same way, allowing files to be quickly shared between two different users.

Sources say that the AirDrop functionality is currently integrated into the standard iOS share menu. AirDrop will work between two iOS devices and potentially between an iOS device and a Mac. The feature will make it easier than ever to transfer, for example, a photograph or document from one person's iPhone to another person's iPad.

While iCloud synchronization works well for sharing photos and documents between two iOS devices owned by the same person, the AirDrop feature will allow seamless individual file exchanges between iOS devices belonging to different people.

Along with AirDrop file sharing, iOS 7 is also expected to feature a major redesign and enhanced social network integration, which includes support for both Flickr and Vimeo. As noted by 9to5Mac, beta features that are in testing, like AirDrop, may or may not make it into the final version of the operating system.

iOS 7 will debut at the keynote of Apple's annual Worldwide Developers Conference, which is scheduled to take place on June 10.

The New York Times reports that Apple is still hoping to launch its much-rumored streaming music service at its Worldwide Developers Conference (WWDC) next week, pressing to complete deals with record labels that would allow the company to announce the service.

Apple’s service, a Pandora-like feature that would tailor streams of music to each user’s taste, has been planned since at least last summer. But Apple has made little progress with record labels and music publishers, which have been seeking higher royalty rates and guaranteed minimum payments, according to these people, who spoke anonymously about the private talks.

While it is still at odds with some music companies over deal terms, Apple is said to be eager to get the licenses in time to unveil the service — nicknamed iRadio by the technology press — at its annual developers conference, which begins June 10 in San Francisco.

Two weeks ago, The Verge reported that Apple might be unable to launch the service at WWDC due to continued difficulties with the negotiations, but it seems that Apple may be making a strong last-minute effort to meet that goal.

Apple had previously signed a deal with Universal Music, the world's largest record label, and the Times indicates that Apple signed a deal with Warner Music Group this weekend. Negotiations with other labels and publishers are continuing.

Apple's streaming music service is said to be a free, ad-supported offering, with the labels reportedly seeking similar revenue rates to that seen from Pandora, although Apple is seeking more extensive licenses to provide more flexibility for users.

Update 7:08 PM: The Wall Street Journal has more on Apple's deal with Warner:

Under the deal, Apple will give Warner Music Group’s publishing arm 10% of ad revenue — more than twice what Internet radio giant Pandora Media Inc. pays major music publishers. Warner’s terms with Apple could pave the way for other major publishing deals to follow.

Apple has indicated to people involved in the negotiations that the service could be announced at its annual developers conference, which begins June 10 in San Francisco.

KGI Securities analyst Ming-Chi Kuo, who has proven to have relatively reliable information over the past several years, released a new research note last week highlighting his expectations for changes to Apple's notebook lineup at next week's Worldwide Developers Conference (WWDC). With Intel preparing to launch its latest Haswell processors this week, Apple will be able to make significant upgrades to at least part of its notebook lineup, but additional changes appear to be in store as well.

Among the most interesting predictions from Kuo is word that the 13-inch Retina MacBook Pro will see a slightly slimmer design, as well as an improved camera. Kuo had indicated as long ago as January that Apple would be tweaking the design of the Retina MacBook Pro this year, despite having just introduced the form factor last year.

We expect the 13” Retina MacBook Pro will have a slightly slimmer form factor for increasing its portability. Also, we think the camera spec will be upgraded from HD to full HD. This will improve Facetime and video conference quality in the high resolution Retina display.

Kuo also now believes that Apple will not be upgrading the non-Retina MacBook Pro, instead simply continuing to sell the current Ivy Bridge-based models as it seeks to phase out the non-Retina line. Kuo had originally believed that Apple would discontinue the non-Retina line at this year's WWDC, but adjusted his predictions earlier this year based on the belief that continued strong sales of the machines would drive Apple to continue selling them.

On the MacBook Air, Kuo believes that the line will see a shift to dual built-in microphones, as was introduced on the Retina MacBook Pro last year.

We forecast that this year’s new MacBook Air model will also have dual built-in microphones as a result of positive feedback on this feature in Retina MacBook Pro, which delivers clear voice quality on Facetime and VoIP service.

Overall, Kuo expects that improvements to the Retina MacBook Pro and MacBook Air, along with stagnation of the non-Retina MacBook Pro line, will continue Apple's shift toward solid-state storage in its notebooks. Kuo's predictions see Apple putting solid-state storage in 64% of its notebook shipments this year, up from 45% last year when the company began transitioning the MacBook Pro line.

Despite Apple's updates, Kuo believes that the company will see a 10-20% decline in notebook shipments for 2013, with a slow overall PC market and cannibalization by the iPad contributing to lower sales. The company's predicted strategic move to lower the appeal of the non-Retina MacBook Pro would likely also contribute to declining sales unless pricing on Retina models can be lowered.

With Apple's new 16 GB iPod touch becoming available today, the teardown experts at iFixit have taken the device apart in an effort to determine how it differs internally from its larger-capacity siblings. The 16 GB model lacks the rear camera and support for Apple's Loop wrist strap, so iFixit wanted to see how those changes affected the layout of the device's components.

In the area of where the rear camera would be, the new iPod touch has a small void, while some of the flex cables have also been rerouted slightly. In addition, with the microphone no longer needing to be on the back of the device near a camera, it has been moved to the top edge of the device. Otherwise, the layout of components is the same as in other fifth-generation iPod touch models.

The logic board also appears nearly identical to the ones in the larger-capacity iPod touch models, housing all of the same chips with the exception of 16 GB of flash memory rather than 32 GB or 64 GB. The logic board also has a blank spot where the connector for the rear camera cable would have been.

With the exception of the flash memory, it appears that the ICs on the 16 GB model’s logic board are the same as those found on the 32 and 64 GB models:

- Apple A5 dual-core processor, with 4 Gb (512 MB) of Mobile DDR2 RAM.
- Toshiba THGBX2G7B2JLA01 128 Gb (16 GB) NAND flash
- Apple 3381064 dialog power management IC (similar to the Apple 338S1131)
- Murata 339S0171 Wi-Fi module
- Broadcom BCM5976 touchscreen controller
- STMicroelectronics low-power, three-axis gyroscope (AGD3/2229/E5GEK)
- Apple 338S1116 and 338S1077 Cirrus Audio Codec

Finally, at the bottom of the device, the new iPod touch similarly contains a void where the post for attaching the Loop wrist strap would be. Apple has used the same speaker design as in the larger-capacity models, carrying a curved edge that wraps around the Loop post in those models.

Apple's new 16 GB iPod touch is priced at $229, with the addition allowing Apple to discontinue the fourth-generation iPod touch models it had continued selling at $199 (16 GB) and $249 (32 GB) alongside the more expensive fifth-generation models introduced late last year.