MacRumors

Apple today released an update to its Mac mini line, bringing Intel's Sandy Bridge platform to the diminutive desktop computer along with new support for the Thunderbolt connectivity standard being pushed by Apple and Intel. The new Mac mini lineup consists of two standard stock configurations alongside a "server" model. Notably, all models drop the optical disc in favor of an optional external SuperDrive.

Standard models
- 2.3 GHz Intel Core i5, 500 GB hard drive, 2 GB RAM: $599
- 2.5 GHz Intel Core i5, 500 GB hard drive, 4 GB RAM: $799

Server model
- 2.0 GHz, dual 500 GB hard drives, 4 GB RAM: $999

Additional build-to-order options include an upgrade to 8 GB of RAM, up to 750 GB hard drives, and an external SuperDrive. The high-end standard model and the server model can also be configured with one (standard) or two (server) 256 GB solid-state drives.

The new Mac mini delivers up to twice the processor and graphics performance of the previous generation in the same amazingly compact and efficient aluminum design.* Starting at just $599 (US), the new Mac mini is available for order today and in stores tomorrow.

“Mac mini delivers the speed and expandability that makes it perfect for the desktop, living room or office,” said Philip Schiller, Apple’s senior vice president of Worldwide Product Marketing. “With faster processors, more powerful graphics and Thunderbolt in an incredibly compact, aluminum design, the new Mac mini is more versatile than ever.”

All Mac mini models ship with OS X Lion pre-installed.

Alongside the new Mac mini models, Apple also announced a new Apple Thunderbolt Display. Appearing nearly identical to the previous 27-inch LED Cinema Display, the primary upgrade to Apple's sole standalone display offering is Thunderbolt compatibility, enabling the device to be used within daisy-chained configurations of the new high-speed data and display connectivity standard. With the new standard, users can for the first time run two displays off of a single Thunderbolt port on Macs offering enough graphics horsepower to support the pixel load.

The upgrade to Thunderbolt also allows Apple to turn the display into an "ultimate docking station", with the new display now offering a built-in FaceTime HD camera, 2.1 speaker system, three USB ports, one Firewire 800 port, one Gigabit Ethernet port, and a second Thunderbolt port to enable daisy chaining. An integrated MagSafe cable for powering connected notebook computers also continues to be offered.

“The Apple Thunderbolt Display is the ultimate docking station for your Mac notebook,” said Philip Schiller, Apple’s senior vice president of Worldwide Product Marketing.” With just one cable, users can dock with their new display and connect to high performance peripherals, network connections and audio devices.”

Images of the new Thunderbolt-enabled LED Cinema Display leaked on Apple's site late last week, foreshadowing their arrival alongside the Mac minis that do not ship with an included display. The new LED Cinema Display will be available within the next 60 days and is priced at $999.

Alongside today's launch of OS X Lion, Apple has also released updated MacBook Air models covering both the 11.6-inch and 13.3-inch sizes. As had been previously rumored, the new models are based on Intel's Sandy Bridge platform, sport Thunderbolt connectivity for peripherals, and see the return of backlit keyboards. The new MacBook Airs are offered in the following configurations:

11.6-inch
- 1.6 GHz, 64 GB SSD, 2 GB RAM: $999
- 1.6 GHz, 128 GB SSD, 4 GB RAM: $1199

13.3-inch
- 1.7 GHz, 128 GB SSD, 4 GB RAM: $1299
- 1.7 GHz, 256 GB SSD, 4 GB RAM: $1599

Build-to-order customers can also choose to upgrade to a 1.8 GHz processor and additional solid-state storage.

With up to twice the performance of the previous generation, flash storage for instant-on responsiveness and a compact design so portable you can take it everywhere,* the MacBook Air starts at $999 (US) and is available for order today and in stores tomorrow.

“Portable, affordable and powerful, MacBook Air is the ultimate everyday notebook,” said Philip Schiller, Apple’s senior vice president of Worldwide Product Marketing. “MacBook Air features our most advanced technology and is an ideal match for Lion, especially with its new Multi-Touch gestures, full-screen apps, Mission Control and Mac App Store.”

The new MacBook Air models are available for order today and will be available in stores tomorrow. All models ship with OS X Lion preinstalled.

As officially announced just yesterday, Apple today has launched OS X Lion, which is now available [App Store] exclusively via the Mac App Store. Priced at $29.99, OS X Lion is Apple's next-generation operating system for the Mac platform. OS X Lion Server [App Store] is also available as a $49.99 add-on to the basic Lion install.

OS X Lion brings a number of new features to the Mac, including an iOS-like application launch screen known as Launchpad, full-screen apps, a new combined interface for Dashboard, Expose, and Spaces known as Mission Control, enhanced Multi-Touch gestures, and improvements to a number of core applications such as Mail.

Some of the amazing features in Lion include: new Multi-Touch® gestures; system-wide support for full screen apps; Mission Control, an innovative view of everything running on your Mac; the Mac App Store, the best place to find and explore great software, built right into the OS; Launchpad, a new home for all your apps; and a completely redesigned Mail app.

“Lion is the best version of OS X yet, and we’re thrilled that users around the world can download it starting today,” said Philip Schiller, Apple’s senior vice president of Worldwide Product Marketing. “Lion makes upgrading a Mac easier than ever before; just launch the Mac App Store, buy Lion with your iTunes account, and the download and install process will begin automatically.”

Apple previewed OS X Lion for developers several times over the last nine months, and has been seeding developers with Lion builds since early this year. Apple announced at its Worldwide Developers Conference early last month that Lion would ship sometime during the month of July, and the company seeded the golden master version to developers on July 1st.

As noted by Macworld, Adobe has finally dipped its toe into the Mac App Store for the first time, releasing a slightly scaled-down version of its consumer Photoshop Elements software, Adobe Photoshop Elements 9 Editor [Mac App Store]. Priced at $79.99, Photoshop Elements 9 Editor drops the Adobe Elements Organizer functionality found in the retail version of the software, but is also discounted by $20 off the retail list price.

The omission of the Elements Organizer, a tool for managing images, will not affect users who depend on iPhoto to manage their image library, and is in fact designed to be used alongside iPhoto for more advanced editing features than iPhoto offers.

The Mac App Store version of Elements 9 includes the same editing tools that made the full version popular, including content aware-fill, Group Shot, Panorama, and Style Match Photomerge tools. The novice-friendly application offers guided edit modes that walk users though adding effects and cleaning up photos.

Apple has of course been pushing its Mac App Store as the future of software delivery for the Mac platform, going so far as to distribute its new OS X Lion exclusively through the store beginning tomorrow. While a number of other developers have embraced the Mac App Store for its ease of software distribution and consumer convenience, observers have been waiting for some of the software heavyweights like Adobe and Microsoft to make their presences felt in the marketplace.

Microsoft has also dabbled in the Mac App Store with its free Windows Phone 7 Connector, and while it may be quite some time before the software giants release their flagship Creative Suite and Office software through the Mac App Store, if they ever choose to do so, it is encouraging to see them making their first efforts at distributing content through Apple's preferred software marketplace.

In his introductory statement during the Q3 earnings call today, Apple CFO Peter Oppenheimer disclosed that OS X Lion will be released on the Mac App Store tomorrow, July 20.

Promotional materials have already begun appearing in a few third-party retailers around the world, and Apple's own retail stores have received hard drives containing OS X Lion so that they can update their own machines.

Apple today announced financial results for the second calendar quarter and third fiscal quarter of 2011. For the quarter, Apple posted revenue of $28.57 billion and net quarterly profit of $7.31 billion, or $7.79 per diluted share, compared to revenue of $15.7 billion and net quarterly profit of $3.25 billion, or $3.51 per diluted share, in the year-ago quarter. Gross margin was 41.7 percent, compared to 39.1 percent in the year-ago quarter, and international sales accounted for 62 percent of the quarter's revenue. Apple's quarterly profit and revenue were both company records.

Apple shipped 3.95 million Macintosh computers during the quarter, a unit increase of 14 percent over the year-ago quarter. Quarterly iPhone unit sales reached 20.34 million, up 142 percent from the year-ago quarter, and the company also sold 7.54 million iPods during the quarter, representing 20 percent unit decline over the year-ago quarter. Apple also sold 9.25 million iPads during the quarter, up 183 percent over the year-ago quarter.

"We're thrilled to deliver our best quarter ever, with revenue up 82 percent and profits up 125 percent," said Steve Jobs, Apple's CEO. "Right now, we're very focused and excited about bringing iOS 5 and iCloud to our users this fall."

Apple's guidance for the fourth quarter of fiscal 2011 includes expected revenue of $25 billion and earnings per diluted share of $5.50.

Apple will provide live streaming of its Q3 2011 financial results conference call at 2:00 PM Pacific, and MacRumors will update this story with coverage of the conference call highlights.

Conference Call Highlights:

- Highest quarterly revenue and profits. Record iPhone and iPad sales and highest June quarter Mac sales ever.
- Operating margin was a record high.
- 57% year-over-year Mac growth in Pacific segment.
- OS X Lion launching tomorrow
- iPod/iTunes continue to lead market. iTunes revenue up 36% year-over-year.
- Over 225 million accounts, leading music retailer.
- Thrilled to sell record 20.3 million iPhones. 142% growth, more than double IDC's estimate of overall smartphone market.
- Asia Pacific sales almost quadrupled over last year.
- Ended quarter with 5.9 million in channel inventory, up about 700,000 over last quarter.
- 91% of Fortune 500 testing or deploying iPhone; 57% of Global 500.
- iPad sales up 183%, sold every iPad we could make.
- Launched iPad 2 in 36 new countries, now in total of 64 countries.
- 1.05 million iPads in channel inventory, up about 200,000...well below target range.
- Over 222 million cumulative iOS device sales
- In June, we previewed iOS 5 and iCloud. Both launching this fall.
- App Store booming...425,000 apps, 15 billion downloads. $2.5 billion paid out to developers.
- Retail stores: $3.5 billion, up 36% year-over-year. 50% of Mac purchasers new to Mac.
- 327 total stores, with four opened during the quarter
- 73.7 million visitors, up from 60.5 million year-ago quarter.
- 30 new store openings in September quarter, for a total of 40 in fiscal 2011. 28 outside of U.S.
- Cash and marketable securities up $10 billion sequentially to $76.2 billion.
- Now deferring revenue recognition for Lion sales, recognized over period of three years. Same with iCloud. As of June 6th, Apple is deferring $22 of revenue from each Mac sold to be recognized over a period of four years. Also deferring $16 of revenue from each iPhone/iPad and $11 from iPod touch to be recognized over two years.
- Extremely pleased with record revenue and earnings and customer response to our products.

Q&A:

Q: 12% downtick in revenue guidance is more than usual. Why?
A: Let me start with the units. For education buying season, September is weighted toward higher education, and we expect increases there. We also expect increases in iPhone, etc. There is also a future product transition that we are not going to talk about today. Those factors are already in our guidance. Confident in our pipeline. Tim Cook talking about some cannibalization of Mac by iPad. But also cannibalizing Windows. Very happy with 14% growth in Mac.

Q: What about importance of China?
A: We consider greater China to be Mainland China + Hong Kong + Taiwan. Sales 6x year-over-year. This quarter, revenue $3.8b from Greater China. $8.8b over last 3 quarters from Greater China. "We believe this is a substantial opportunity for Apple and we're just scratching the surface."

Q: What about margin predictions?
A: Most components in a very positive pricing situation. HD supply currently constrained but LCD/NAND Flash pricing falling.

Q: Patent disputes, how to put in context with Apple's IP strategy?
A: Tim Cook: "We have a very simple view here. That view is we love competition, we think it's great for us and for everyone, but we want people to invent their own stuff. We're going to make sure we defend our portfolio appropriately."

Q: What drove iPhone strength in the quarter?
A: Tim: We did add 42 new carriers and 15 new countries in the quarter. We continued our expansion efforts to get out beyond the 225 carrier number and above 100 countries. This occurred throughout the quarter and the real sequential improvement was frankly due to emerging and developed markets. China, Latin America driven by Brazil and Mexico was a big part and the Middle East was a big part of it. It's great for Apple because these are markets that Apple historically has not been as strong in, we're really beginning to see the fruits of our labor in these markets.

Q: Milestones hoping to hit over the next quarter for iPhone?
A: It's something that is of great focus to us, we want to do business with great partners and there are great partners for us to do business with. We're always working on new relationships.

Q: Any thoughts in terms of Android activation numbers relative to Apple?
A: Android activation number is a difficult one to get our hands around. Unlike our numbers which we can go to our data sheet and add our iPhone and iPad and make a reasonable approximation of iPod touch, you can quickly see in the June quarter we sold 33 million iOS devices. Across time, we're now over 222 million cumulative iOS devices. We think this is incredible. Our numbers are very straightforward, transparent and reported quarterly.

iPhone is 142% YoY growth. This is 2x the rate of growth of the Smartphone market. We think this is incredible. We sold every iPad 2 in the quarter we could make. There was no shortage of demand. Gaining traction in enterprise. Our intention is not to getting test and pilot programs. We are turning to penetration.

App store is largest by far, if you look at iPad specific apps we're looking at more than 100,000. You'll be hard pressed to find more than a few hundred on other platforms. Other tablets aren't getting any traction to speak of. We've paid $2.5 billion to developers and it's a great business proposition to them. Well over 15 billion apps downloaded, so customers love it too. Confident with products, app store, developers, customer satisfaction ranks iPhone number 1, so confident with customer reception and confident with our roadmap.

Q: Apple TV and connected TV market?
A: Apple TV continues to do well but I don't want to mislead. We still call it a "hobby" and we do that because we don't want anyone to conclude that it's another "leg of the stool" because it's not in the size market that the iPhone, Mac, iPad or iPod is in. We and customers love the product. We really got it right with the new Apple TV but right now it's still a "hobby status". We're continuing to invest in it because we think there's something there.

Q: Diversify contract manufacturing base and non-Apple Retail channel?
A: Tim: Regarding non-Apple retail channel, looking at iPhone for example, we have 115,000 points of sale. Incredibly diversified, selling through carriers, through retail, through our online store, direct sales forces to enterprise -- channel is extremely well diversified. Still countries where we're building the channel, so the journey is not complete. But in mature markets, the channel is in good shape. Not something we're worried about.

Regarding suppliers, we don't want to get into this in any detail. It's part of the magic and part of the things that we have some 'secret sauce' in, and we'd prefer not to share it.

"Are we too centralized in one place?" The people here involved in supply chain always ask that question, I think we always make the right decision for Apple.

Q: How is manufacturing yield on iPhone and iPad coming?
A: Supply of iPad improved through the quarter but we aren't going to comment on specific yield numbers. Further improvements in supply in initial weeks of July and we're in supply demand balance in some countries. Feel very good about progress in that area.

Q: iPhone growth is extraordinary. How can Apple sustain that growth? Approaching saturation -- make changes or keep the business model?
A: Apple doesn't set tariff/plan pricing. At a macro level, if you talk to folks around the world, virtually every carrier desires having more customers with smartphones using data. This is a way for them to expand their ARPUs. We believe there is no better device than the iPhone. The ease of use is unparalleled and we believe there is good alignment in that area.

Key driver in our sequential results in iPhone units are emerging and developing markets. We're putting more energy in these markets that are a big more difficult to do well in than the established countries. We have a very good focus here, we can compete with anyone.

Q: Including prepaid, indirect distribution markets?
A: Looking at emerging markets in the aggregate, most of those are prepaid. We believe postpaid is better in the long term for customer, carrier and Apple. In general we are playing in the prepaid market -- not avoiding that market, we know we need to play there in order to have the types of volumes we'd like to have.

Expanding our channels is obviously on our to-do list.

Q: Mac growth was 5% sequential, notebook sequential was below that. Past few years have been 17-18%. Was this quarter cannibalization? Anticipation of Lion?
A: Tim: Look at YoY than sequential on the Mac. Prouder of the numbers that we achieved -- to grow at 14% when the market is growing at 2.6%, doing 5x the rate of growth, is certainly something to be proud of. Why is the number not higher than 14%? No matter how high it is we would focus on that.

Three things that are the primary factors: First, some cannibalization of new Macs by iPads. Shipped 9.2m iPads during the quarter, 2x the number of Macs shipped. Some customers chose to purchase an iPad instead of a new Mac. But more customers chose to buy an iPad than a Windows PC.

Second, some customers have delayed purchases until Lion becomes available. We are looking forward to getting Lion out. Guys working very hard on it, it's a fantastic product. Revolutionary change.

Third, in the year-ago quarter, we launched new MacBook Pros. In this quarter, we launched new iMacs. Both products were well received, however the MBP makes up the majority of the units that we sell in the Mac segment.

If you change the MBP and its well received, it's going to make the YoY comp more difficult to compare to. Those are the three things impacting Mac growth, but it's already 5x the industry and this is the 21st consecutive quarter that we've beat the market.

Q: What's the growth look like after this quarter for iPads?
A: We don't predict unit sales, we aggregate into guidance. Peter said earlier that we think iPads will grow "significantly" year over year. We'll leave the rest of it to [analysts] to conclude. We'll be happy to report in October how you did.

Q: What are the issues for iPad ramping up production to higher levels? When will we be at equilibrium from production and supply?
A: This is a good sort of problem per se. Demand is fantastic, so there's not something that we would point to on the supply-side that's a huge issue. To talk about this month, the first weeks of July, supply has further improved since we ended our June quarter. That further improvement have led some SKUs in some countries to be in supply/demand balance.

We won't predict on other countries, but we're working very hard to get as many units to customers as we can. We've included that thinking in our guidance.

Q: Anything you're doing different investing in enterprise sales force or going to market on enterprise side?
A: We have a dual prong strategy with enterprise on both iPad and iPhone. We work with carrier sales forces, and they have large ones, many enterprises want devices connected to the carriers. We train and provide help to carriers on that. We do some sales directly or act as an overlay sales force to a channel that sells to enterprise.

Still building it out, and we do a bit better each quarter. Very, very happy with numbers on interest and taking customers to pilot and deployment stages. Now we're working on penetration and getting on the standards lists on those accounts.

To be this far into enterprise with a product that's been shipping for 15 months is incredible. Enterprise is typically much more conservative and takes a long time to evaluate products. People are moving faster than I've seen.

K-12 takes a long time for new product categories but last quarter we sold more iPads in K-12 than we sold Macs. To do that after just 5 quarters is shocking. We would never have predicted this. We feel very good about iPad. It's clear that it has a universal appeal across many different markets: consumer, enterprise, education, government and so on.

Q: How is iCloud going to drive more purchases and a halo effect across other devices?
A: Can't wait to get iCloud and iOS 5 into the hands of customers. We think we've done it right with iCloud -- seamless integrated experience that they're going to love.

Q: Do you have a lead over competitors to instantly mirror content across device?
A: We're very, very good with the Internet, with telecommunications and delivering content. We've proven that for a decade over iTunes, App Store and big developer payments. Probably have things to learn but we have a lot of skills and are excited to get iCloud to customers.

Q: China Mobile has lots of iPhones on its network but it doesn't sell the phone. Sounds like lots of prepaid and unlocked phones on their network. Apple's channel in China is prepaid -- how significant is prepaid in China and other emerging markets? What lessons have you learned?
A: Prepaid or unlocked phones (phones sold without a contract) are very key in China and in a number of emerging markets where the credit systems are not as well established as they are in Western countries.

iPhone volume for the first 3 quarters of the fiscal year was up 5x YoY. iPhone is the key contributor to Greater China having a cumulative revenue of $8.8b for the first 3 quarters. I'm not saying that we have figured out precisely how to play perfectly in the environment -- we haven't. We have more to do and more to learn but I feel very good about our progress there. If any of us had been told a year ago that we'd do $3.8 billion in Greater China in a quarter, we wouldn't have believed it and you wouldn't have believed it.

We're taking our learnings and applying it to other markets as well.

Q: Worldwide market share data is consistent and irrefutable with the iPhone being a share gainer. Market data from a few markets suggests iPhone has lost share. Most of market share data suggests phones over $300 are going to grow much slower than sub-$300. Where do you fit?
A: Share gain is important. Any time we're going the wrong way, we are working hard to change that. Regarding multiple price points, we do offer the 3GS which is $49 with a contract in the US. In prepaid markets, it is affected by the channel and taxes so it varies market-to-market but it's clearly a different price than the iPhone 4 is.

Our philosophy is the same as it always has been. We will only make products that we're proud of and are the best in the world. If we can do that, and the price ends up lower, then we're great with that.

An example of that is the iPod Shuffle. It started at a different price point and now it's $49. It's a great product and a lot of people love it.

We'll only make products we're proud of and we want to know, regardless of price-band analysis. It's up to use to convince people to spend a little more for a materially better product. People will do that if the product is great and the message is appropriate.

Q: What have you learned about media consumption on the iPad?
A: If you talk to 10 people you'll get 10 reasons why they love it. That's why it's doing so well across people and geographies.

Q: Why don't we have more movie titles on iTunes at this point?
A: Broad library of movies and TV shows particularly in the US. Adding more content internationally each quarter. Look for more content later this quarter across the various stores. We have some neat stuff coming.

That's a wrap!

The Wall Street Journal reports that some members of Apple's board of directors have informally been exploring possibilities for CEO succession should Steve Jobs permanently step down from his position.

Jobs has taken several medical leaves of absence over the past few years, the most recent of which began in January and has continued indefinitely. Jobs has however, made several public appearances at Apple media events to introduce new products.

Since Steve Jobs went on medical leave this winter, some members of Apple Inc.'s board have discussed CEO succession with executive recruiters and at least one head of a high-profile technology company, according to people familiar with the matter.

The conversations weren't explicitly aimed at recruiting a new chief executive and were more of an informal exploration of the company's options, said these people. The directors don't appear to have been acting on behalf of the full board, some of these people said.

The report notes that Apple's directors have long taken executive succession plans seriously, routinely holding private sessions at every board meeting to discuss the topic and update plans.

Apple's independent directors take succession planning seriously, said a person familiar with the board's thinking. This person said Apple's independent board members discuss management succession in private sessions without Mr. Jobs held at every board meeting for the past 12 years.

"It's best practice,'' this person noted. "Everybody in the room is sworn to secrecy as to what it [the succession] plan is."

Apple Chief Operating Officer Tim Cook, who has been in charge of Apple's day-to-day operations in Jobs' absence, is still considered to be a top candidate for the job, but directors are understandably exploring all options and reaching out to multiple channels in order to help make the most informed decision possible.

The report suggests that at least some of the external discussions have been initiated by recruiters themselves, although the talks are said to have progressed beyond the routine contact directors normally have with such firms. Jobs has of course given no indication that he plans to step down permanently, and so discussions appear to so far be informal and preparatory in nature should the situation change.

While Apple declined to comment for the report, Jobs reportedly responded via email, saying "I think it's hogwash." Consequently, the Journal suggests that Jobs may have been unaware of the discussions.

Concord Securities analyst Ming-Chi Kuo today reported to AppleInsider that Apple may be on the verge of phasing out its white MacBook, the company's longtime entry-level notebook. In particular, Kuo notes that internal shipment forecasts show build plans for the MacBook "suspiciously" tailing off next month with no signs of a replacement.

Analyst Ming-Chi Kuo of Concord Securities shared with AppleInsider Tuesday that industry checks show that Apple's internal shipment forecast for the white MacBook suspiciously drops-off in August of this year, which leads him to believe that the notebook may go "end of life" around the same time.

As noted in our Buyer's Guide, the MacBook hasn't been updated since May 2010, a period of 427 days. With supplies tightening late last month, speculation regarding a potential refresh or a discontinuation began to circulate.

Signs of life sparked again last week when it was claimed that leaked part numbers for an upcoming hardware update included a new MacBook model. That interpretation was incorrect, however, as the part number in question turned out to be for an as-yet unreleased LED Cinema Display with Thunderbolt that leaked on Apple's own site late last week.

Kuo argues that with Apple's MacBook Air line now beginning at the same $999 price point as the MacBook, Apple may feel that it can discontinue the plastic notebook and direct consumers to the thinner and lighter MacBook Air line. Apple's MacBook shipments have reportedly fallen to just 80,000-100,000 per month so far this year, representing less than 10% of Apple's Mac sales.

With Apple rumored to be boosting the MacBook Air to a minimum of 128 GB of solid state storage, even the base model may be sufficient for many users. The MacBook Air does not, however, feature an optical drive, and entry-level consumers who still wish to have optical drive capabilities will have to either take advantage of the Remote Disc capabilities through an optical drive on another computer or purchase an external MacBook Air SuperDrive for an additional $79.

ZDNet Asia reports on comments from Google Chairman Eric Schmidt regarding the recent flurry of lawsuits between Apple and Android-based smartphone manufacturers such as HTC and Samsung. Schmidt's comments, which came at Google's Mobile Revolution conference in Tokyo, reveal that he is "not too worried" about the lawsuits as he takes a shot at Apple (and others such as Oracle and Microsoft) for suing when it "cannot respond through innovations".

Quizzed on the issue [of lawsuits targeting Android], Schmidt replied that this "legal fun" stems from its successes.

"We have seen an explosion of Android devices entering the market and, because of our successes, competitors are responding with lawsuits as they cannot respond through innovations," he said. "I'm not too worried about this."

In reference to a recent preliminary victory for Apple in its infringement claims against HTC, Schmidt noted that Google will "make sure" that HTC doesn't lose the case, suggesting that Google is putting significant muscle into HTC's defense.

Asked if Google would help foot HTC's legal bills should they lose, he said: "We will make sure they don't lose, then." He added that the search giant will continue to support its Taiwanese partner in this legal skirmish but declined to go into details.

Despite having been introduced to the public over a year after the launch of the original iPhone, Google's Android has seen rapid adoption as dozens of manufacturers have embraced the mobile operating system and introduced hundreds of handsets utilizing it. For the time being at least, Apple and Google are locked in a battle for smartphone supremacy, with Google having sprinted out to a lead due in large part to the variety of devices available across a host of carriers.

But with smartphones representing an increasing convergence of phones, computers, cameras, and many other technologies, they have become a battleground for patent lawsuits that have threatened to consume enormous resources as companies stake out their positions in the rapidly-expanding market.