MacRumors

With numerous reports in recent weeks of new hardware releases from Apple and low stocks of a number of current-generation models, Apple watchers have been waiting on edge for new products to make their appearance. Attention has naturally focused on Tuesdays, a frequent day of the week for Apple to release new products, so speculation has been on the increase again today.

Earlier today, Newsweek's Dan Lyons issued a teaser post on his "Fake Steve Jobs" blog claiming that Apple is planning a product release tomorrow and poking fun at Daring Fireball's John Gruber, who has occasionally had accurate inside information just prior to product announcements.

Can't tell you what, obviously. But there's something brewing. Gruber doesn't know about it, but the people we care about are being briefed in advance. Stay close to your Mac or iPhone, and have your credit card ready.

Gruber later responded with a brief post carrying a very lengthy headline listing a multitude of new products possibly on the table for release tomorrow:

- Redesigned plastic MacBooks
- Redesigned "impressive" iMacs
- Mac mini updates, including one based on Mac OS X Server
- Multi-touch "Magic Mouse"
- A multi-touch "trackpad gadget" for desktop Macs

MacRumors has similarly heard whispers over the past few days of new iMacs, MacBooks, and possibly Mac minis scheduled for release tomorrow, but we have been unable to confirm any of the reports.

Apple today announced financial results for the fourth fiscal quarter (third calendar quarter) of 2009. Apple posted revenue of $9.87 billion and net quarterly profit of $1.67 billion, or $1.82 per diluted share, compared to revenue of $7.9 billion and net quarterly profit of $1.14 billion, or $1.26 per diluted share, in the year-ago quarter. Gross margin was 36.6 percent, compared to 34.7 percent in the year-ago quarter, and international sales accounted for 46 percent of the quarter's revenue. The numbers represent the most profitable quarter in Apple's history and include record-breaking Mac and iPhone quarterly sales.

Using non-GAAP data, which eliminates subscription-based accounting for the iPhone and Apple TV, Apple would have had $12.25 billion revenue and $2.85 billion of net income. The subscription-based accounting used for Apple's official results parcels out income from iPhone and Apple TV sales over a 24-month period from the date of sale, whereas the non-GAAP results count the entire revenue from these sales in the quarter they were made.

Apple shipped 3.05 million Macintosh computers during the quarter, a unit increase of 17 percent over the year-ago quarter. The company also sold 10.2 million iPods during the quarter, representing 8 percent unit decline over the year-ago quarter. Quarterly iPhone unit sales reached 7.4 million, up 7 percent from the year-ago quarter.

"We are thrilled to have sold more Macs and iPhones than in any previous quarter," said Steve Jobs, Apple's CEO. "We've got a very strong lineup for the holiday season and some really great new products in the pipeline for 2010."

Apple's guidance for the first quarter of fiscal 2010 includes expected revenue of $11.3 billion to $11.6 billion and earnings per diluted share of $1.70 to $1.78.

Apple will provide live streaming of its Q4 2009 financial results conference call at 2:00 PM Pacific, and MacRumors will update this story with coverage of the conference call highlights.

Conference Call Notes- CFO Peter Oppenheimer, COO Tim Cook, and Treasurer Gary Wipfler present
- Thrilled with record-breaking results, particularly given economic conditions
- Second-highest revenue ever, highest profit ever
- Macs: Record Mac sales by over 440,000
- Sales growing faster than overall market in 19 of last 20 quarters
- Portable sales up 35% year over year, 74% of Mac product mix
- Back to school performance strong: highest sales ever for U.S. education segment
- Response to Snow Leopard has been tremendous
- Total iPod sales down slightly, but 50% of iPod customers buying first iPod
- iPod touch sales up 100% year-over-year
- MP3 player market share still over 70%
- Strong sales at iTunes Store, customers loving iTunes 9
- iPhone sales: almost 7.4 million in quarter, a new record
- Pleased that iPhone tops J.D. Power business and consumer satisfaction surveys
- iPhone in China begins later this month, great opportunity
- Expanding carrier relationships in U.K. and Canada
- Retail stores: highest revenue, margin, and Mac sales ever
- Retail store revenue $1.87 billion, up from $1.72 billion
- 50% of retail store sales to first-time Mac owners
- Opened or remodeled ~100 stores over the past year
- Total gross margin up to 36.2%: Due to solid Snow Leopard sales, lower iPod transition costs than expected, smaller than expected component costs rise
- Cash and short-term marketable securities total $34 billion
- New accounting standards will allow adjusting revenue recognition for iPhone
- Only the value of the future software updates will be deferred, not entire hardware amount
- Don't yet know what portion of revenue will be able to be immediately recognized
- Must begin new accounting by first quarter of fiscal 2011, but is a complicated transition and we are not prepared to adjust our reporting standards yet
- Thrilled with results: For the 2009 fiscal year, $36.5 billion revenue, $5.7 billion profit
- Looking forward to new products in 2010

Q&A

Q: Factors involved in guidance for next quarter. Why is sequential jump so far below previous years? Why gross margin low?
A: Gross margin will decline for the following reasons: 1) New products have lower gross margins, with greater value to customers, 2) More lower-margin iPod sales in holiday quarter, 3) More air freight costs, 4) Higher component costs.

Q: Channel inventory for iPhone? Any supply constraints?
A: iPhone 3GS was low in inventory in most countries, did improve markedly in September and balance reached in most countries by September or early October. Have 2.4 million units in channel, up 585,000 from previous quarter. We'd like to have had more.

Q: Any thoughts on China iPhone expectations?
A: Thrilled to be launching on October 30th. About 1,000 points of sale, and will expand. Prices and plans already announced, with a wide range, including free phones at high plan price points. There were a lot of 2G and 3G iPhones that went into China, so there's obviously a large market there. No predictions on sales volumes though.

Q: Any thoughts on the economy?
A: We focus on Apple, and leave everything else to economists.

Q: How does iPhone pricing changes in countries that go from exclusive to non-exclusive?
A: Pricing is confidential, but we don't expect wholesale price changes when shifting to non-exclusive, although final customer pricing may changes.

Q: Forecasts of seasonality in iPhone sales? Why is tax rate projected to increase?
A: Very few September-to-December quarters to look at for the iPhone, so difficult to say. We're new at this. We've been surprised by iPhone 3GS demand. 64 countries right now, with plans for a few more: China, hopefully Korea, new carriers in UK and Canada. Tax rate was lower than expected this quarter due to high foreign sales. We expect it to come back in line with usual rates.

Q: Increased competitive intensity for iPhone in the holiday season...how do you maintain momentum and differentiation?
A: We feel great with how we concluded the year. Almost 21 million iPhones total for fiscal year. 85,000 apps in the App Store. Strong product pipeline. We feel very confident. People are still trying to catch up to the original iPhone, and we've long since moved past that.

Q: Mix of iPhone 3GS versus 3G?
A: Demand for 3GS did exceed expectations, so we did adjust our component orders accordingly. Obviously an intense appetite for Apple's latest technology.

Q: Mac business channel inventory and product mix?
A: Last quarter was the "quarter of the portable", up 35% over year-ago quarter. A result of the new line-up introduced in June, strong back-to-school sales, and Snow Leopard push. Channel inventory around 3-4 weeks, similar to beginning of quarter. Inventory changed less than 15,000 units over the course of the quarter.

Q: Snow Leopard installed base?
A: Snow Leopard upgrades were more than double those of Leopard over the first five weeks. We were pleasantly surprised.

Q: Any comments on long-term gross margin trend?
A: For the December quarter, we're guiding to about 34%. Don't want to forecast further out than that. Component costs are rising. We're committed to cutting-edge technology at price points our competitors can't match.

Q: If wholesale iPhone prices between exclusive and non-exclusive arrangements are the same, what are the benefits of iPhone exclusive agreements?
A: Level of innovation is easier with single carriers in some cases. Visual voicemail is an example. Also, exclusive carriers can be more motivated to make certain changes and enhancements to support the devices.

Q: Thoughts on retail store initiatives? International growth?
A: Strong results from remodeled stores...72 stores were remodeled this fiscal year and customers like the improvements. International stores seeing excellent performance.

Q: Will research and development costs rise due to expected 2010 product introductions?
A: Don't want to say too much. We've been investing in our future right along and have managed operating costs very well. We're being careful with money, making good choices, but continuing to invest confidently.

Q: Very strong average selling prices (ASPs) in iPhone and Mac. Usually down in this quarter due to back-to-school promos, so what's going on?
A: iPhone ASP just over $600 comes from high sales of 3GS and rebalancing channel inventory to support that demand. On Mac side, ASPs were up on the portables side. Very strong sales of the MacBook Pro line. Best back-to-school sales ever. Sequentially a small benefit to performance of the U.S. dollar as well.

Q: iPhone supply issues due simply to supply and demand or also component constraints? More air freight costs?
A: Demand outstripped supply, so that was the primary driver. That's a nice problem to have. But because of that, it did create some component shortages. Silicon is usually hardest to come by, but we were able to solve the bulk of these issues. Air freight issues not necessarily due to iPhone, but due to rushing products for holiday seasonality. Can't be specific about the products driving the increased cost this year though.

Q: Mac retail points of sale and performance?
A: Just under 13,000 worldwide channel outlets. Mac grew much stronger internationally than domestically this quarter, particularly in Europe. Spain very strong, Germany, France, Switzerland, Italy 30-40+% growth.

Q: Any more details on capital expenditures?
A: In fiscal, we spent a little under $400 million on retail stores, $1.1 billion in total. Spending capital on facilities, infrastructure, and manufacturing. We've not been terribly capital intensive.

Q: Mac unit sales expected to be flat sequentially?
A: We don't give product-specific forecasts, but September quarter saw 50,000 education units from the state of Maine and strong educational promotions in general. Also Snow Leopard, and with every new OS, there is some pent-up demand. Also, demand for the new portables got the quarter off to a strong start.

Q: Can you forecast what iPhone sales would have been if you had been able to meet demand?
A: Hard to say. We were short just about everywhere throughout much of the quarter, but it's tough to say what would have happened.

Q: Still on track for 80 countries for iPhone by end of year?
A: Over 80 for the iPhone 3G, and we're at 64 for the 3GS. We expect to be in over 80 for the 3GS by the end of the year.

Q: Any thoughts on consumer versus enterprise for iPhone? Effect of Exchange support in Snow Leopard on the Mac side in the enterprise?
A: Enterprise sales very strong for iPhone. iPhone being deployed or piloted in well over 50% of Fortune 100. Similar results in Europe and the Financial Times 100. Over 350 higher education institutions have approved iPhones for their faculty, staff, and students. Also happy with government sales. As for Snow Leopard, I don't have any stats, as it's still very early. It clearly makes it very simple for Windows users.

Q: Updates on large government agencies using iPhone?
A: No specific updates, but we're very happy.

Q: Any thoughts on Mac education sales? You've been cautious about state budget issues, so what drove sales?
A: Individual student sales really helped our sales. On the institutional side, we're still worried about state funding issues. Little stimulus funding happening. Institutional increase of 12% was due to the order from the state of Maine.

Q: Projected air freight increase: what's driving that?
A: I can't be more specific than working to move units into position for the holidays.

- End of Call

Just weeks after attacking AT&T's 3G network and indirectly the iPhone with a "There's a map for that" ad campaign, Verizon has rolled out a new campaign for a yet-to-be-introduced device from Motorola known as the "Droid", focusing on what it perceives as deficiencies in the iPhone. The new television commercial, introduced yesterday, features iPhone-like fonts and music listing things the iPhone "doesn't do" and ends with a teaser asking users to sign up at DroidDoes.com for more information.

While no official information on the device has been made available, Boy Genius Report publishes a brief hands-on preview of the Droid and calls it "the Android device to beat, and easily the most impressive." Google reportedly played a major role in the design of the Droid, "almost dictating every move Motorola made when designing and making the phone."

The Droid runs Android 2.0 with reportedly excellent performance, and offers both a large capacitive touchscreen and a slide-out physical keyboard. The report also notes that it is the thinnest slider phone in memory, only slightly thicker than the iPhone, and that the device will come with a cradle/charging station that turns it into a "multimedia station" while docked.

As The New York Times notes, Verizon's increasingly aggressive commercials focusing on the iPhone make it hard to believe that the company will begin offering the iPhone any time in the near future, despite the fact that Apple and Verizon have reportedly been in discussions about bringing the iPhone to Verizon when AT&T's exclusivity arrangement apparently expires next year.

This nasty name-calling does not bode well for the prospects of the iPhone coming to Verizon in 2010, talks for which were said to have begun earlier this year.

Steve Jobs, Apple's chief, has a notoriously long memory, and Ivan Seidenberg, chief executive of Verizon, must know this. So it seems the companies are settling in to their status as long-term rivals.

World of Apple reports that Apple has seeded a new version of Mac OS X 10.6.2, termed Build 10C527f, to developers. The new build comes one week after the previous seed of Build 10C519f.

Apple today gave developers the latest built of Mac OS X 10.6.2, 10C527f which contains only one known issues is said to include two sets of release notes, an indicative sign of a possible release candidate. The build is 483.5MB in size.

Build 10C527f reportedly contains a number of fixes to QuickTime Player, Image Capture, iChat, and a host of other areas and includes one documented known issue related to scanning in Image Capture.

The update also appears to address an issue in which users have reported their user data disappearing due to a glitch with Guest accounts.

Apple's Safari for Windows browser has received some attention today due to a proposal from Microsoft to use a "browser ballot" system to allow users to select Internet browsers for use on their Windows PCs in Europe, where the company has faced significant scrutiny over its historical anti-competitive integration of Internet Explorer with Windows.

Microsoft proposes featuring a "ballot" of the five most popular Internet browsers from which users can select their desired browser. Additional browsers would be available for selection, although they would be featured much less prominently. In ordering the selection of featured browsers, Microsoft has chosen to place them in alphabetical order by vendor from left to right, giving Apple's Safari the prime first position. Safari would be followed by Google's Chrome, Microsoft's Internet Explorer, Mozilla's Firefox, and Opera.

As Firefox designer Jenny Boriss notes on her personal blog not affiliated with Mozilla, the arrangement has raised some eyebrows for the apparent advantage it gives to Safari, which currently holds a very small percentage of Windows browser share.

This ordering is about the worst option possible, both for user choice and the web as a whole. Microsoft wrote in their proposal that "nothing in the design and implementation of the Ballot Screen and the presentation of competing web browsers will express a bias for a Microsoft web browser or any other web browser," but this is exactly what the current design does. Windows users presented with the current design will tend to make only two choices: IE because they are familiar with it, or Safari because it is the first item.

Boriss, who understandably would like to see Firefox, the second most-popular Windows Internet browser behind Internet Explorer, featured more prominently, cites studies of election results that show that minor party candidates listed first on a ballot frequently receive up to a 50% boost in their vote totals simply due to their placement on the ballot.

In order to address that issue, she suggests several alternative arrangements, including randomizing the order of the five featured browsers on each load of the ballot screen, ordering the list of browsers based on market share with Internet Explorer being placed last, or a combination of the two in which the probability of a given browser appearing first in the list is weighted by its market share.

While the current design of the ballot screen is not final, the European Commission gave its approval last week to begin market testing of the feature.

Over the past several days, a number of analysts have raised the possibility that Apple may have some trouble meeting expectations for quarterly iPhone sales, currently pegged at about 7 million, at its earnings report scheduled for next Monday.

Yesterday, Piper Jaffray analyst Gene Munster noted that supply constraints on the iPhone 3GS may have hindered Apple's ability to meet customer demand. Apple had noted during its July earnings conference call that supplies of the iPhone 3GS were constrained due to robust demand, and major shortages of the device were seen in several countries well into the quarter. Ever the Apple optimist, however, Munster still expects Apple to have shipped 7.5 million iPhones during the quarter, ahead of consensus estimates.

Today's story comes from Oppenheimer & Co. analyst Yair Reiner, who claims that Apple will have a difficult time meeting iPhone sales expectations after the company implied partial quarterly sales of only 3.5 million iPhones at its "It's Only Rock and Roll" media event just three weeks before the end of the quarter.

"The first hint of trouble," he writes, "surfaced during the iPod event on Sept. 9, when Apple implied that ~3.5M phones had been sold with only 21 days left in the quarter. Subsequent checks showed the iPhone 3GS sold out in many markets. Something was clearly preventing Apple from shipping to demand Consensus estimates imply that 3.5M phones flowed out to customers in the final weeks of 4Q09, which may be too aggressive."

Reiner's estimate of 3.5 million iPhones sold, however, appears to be based on Apple CEO Steve Jobs' announcement at the event that the company had sold a total of 30 million iPhones since its initial launch in 2007, subtracting from that number the approximately 26.4 million iPhones recorded in Apple's earnings reports for previous quarters. But a key unknown in that calculation is the accuracy of the "30 million" number given by Jobs.

Apple is known for promoting its sales milestones and flashing round numbers on its slides during presentations for maximum visual impact. Apple could very well have sold 31 million or more iPhones, but announced only 30 million for an easy-to-remember presentation visual. In addition, Apple may have purposely understated its sales numbers at the event as part of its usual strategy of underselling its performance to investors and analysts in order to temper expectations enough that the company can easily beat expectations at its quarterly earnings releases, generating continued enthusiasm and publicity for the company's stock.

Reiner notes, however, that even if Apple struggles to meet iPhone sales expectations due to supply issues, consumer demand remains robust. Consequently, any dip in Apple's stock price that would likely accompany an unexpectedly low number of reported iPhone sales for the quarter could be seen as a buying opportunity for investors looking ahead to greater iPhone sales for the current quarter as supplies finally catch up with demand.

Apple has just sent out an e-mail to registered iPhone developers informing them that In App Purchasing, previously restricted to paid applications, is now also permitted in free applications. The change also permits developers to create a single version of an application to be sold for free with limited accessibility that can then be unlocked for full functionality via In App Purchases, eliminating the need for developers to create separate free "lite" versions of paid apps if they wish to offer such products.

In App Purchase is being rapidly adopted by developers in their paid apps. Now you can use In App Purchase in your free apps to sell content, subscriptions, and digital services.

You can also simplify your development by creating a single version of your app that uses In App Purchase to unlock additional functionality, eliminating the need to create Lite versions of your app. Using In App Purchase in your app can also help combat some of the problems of software piracy by allowing you to verify In App Purchases.

Visit the App Store Resource Center for more details about how you can add In App Purchases to your free apps.

Apple today issued a media alert announcing details for the October 19th release of its financial results for the fourth fiscal quarter (third calendar quarter) of 2009. The results will cover sales from June 27th, 2009 through September 26th, 2009, and will be released after the close of trading on Monday at approximately 4:30 PM Eastern / 1:30 PM Pacific. Apple's conference call discussing the results will follow at 2:00 PM Pacific and will be available via a live audio webcast. MacRumors will provide running coverage of the conference call highlights.

Apple did not have any major Mac product releases during the quarter, with the company having updated its notebook line at its Worldwide Developers Conference just prior to the quarter and users still awaiting much-rumored updates to the iMac and Mac mini. The iPhone 3GS launched alongside a price drop on the iPhone 3G just a week before the quarter began, and should offer significant contributions to Apple's revenue during the quarter. Finally, Apple updated its entire iPod line late in the quarter, likely spurring demand for that segment of Apple's business.

For the quarter, analysts are predicting net earnings of $1.42 per share on revenue of $9.19 billion, above Apple's guidance of $1.18-$1.23 profit on $8.7-$8.9 billion of revenue. Apple's year-ago results for the fourth fiscal quarter of 2008 included net earnings of $1.26 per share on revenue of $7.9 billion. A number of research firms and analysts are seeing evidence of strong Mac and iPhone sales based on recent data, suggesting that Apple may yet again have another strong financial quarter.

Recent changes to accounting standards may have an effect on Apple's guidance for this quarter if the company elects to adjust its reporting for the new fiscal year. Apple has in recent years offered two sets of financial numbers in order to provide a more accurate picture of the company's cash flow in light of accounting regulations that previously required Apple to defer revenue for iPhone and Apple TV sales, parceling out such revenue over a two-year period from the date of sale. As a result, Apple's official financial numbers have been significantly lower than its true performance. The recent accounting rule change will allow Apple to officially recognize a much greater percentage of hardware revenue for those devices at the moment of sale.

In a brief report, AppleInsider notes that it has received unconfirmed information from several sources indicating several changes from information offered in a previous report issued late last month regarding Apple's next iMac revision, which is expected in the very near future. According to the new information, the next-generation iMac may be the first to offer quad-core processors in the form of Core i7 "Clarksfield" mobile processors from Intel. Additionally, previously rumored Blu-ray support may not be included in the new models.

More specifically, people close to the Cupertino-based company have picked up on chatter suggesting that earlier plans to offer Blu-ray technology on the new all-in-one desktops may have been pulled back just before the systems went into product last month.

While inconsistent with AppleInsider's earlier report, the claim of quad-core processors does agree with information offered by Mac4Ever late last month, and the rumor of no Blu-ray support echoes a claim made earlier this month by Daring Fireball's John Gruber, who also had previously heard that such support would be included.

BusinessWeek reports that Apple is expected to begin an advertising push in the near future designed to lure Windows customers considering purchasing new computers due to the launch of Windows 7 on October 22nd. In an interview, Apple senior vice president Phil Schiller notes that the Microsoft launch "presents a very good opportunity" for Apple.

In the coming weeks, Apple is expected to hit those computer buyers with advertising aimed at luring them to its Macs. It will likely make the case that Macs are less susceptible to viruses and are best suited to its popular iPods and iPhones. And look for it to poke fun at Microsoft for making XP owners go through an arduous process to upgrade to Windows 7 -- one that includes backing up all their files to an external drive, reformatting their PC, and then reinstalling all of their old programs, assuming they still have the CDs. "Any user that reads all those steps is probably going to freak out. If you have to go through all that, why not just buy a Mac?" says Schiller.

The launch of Windows 7 is expected to bring a surge in new computer sales, with many customers having continued using their old hardware rather than upgrading to the much-maligned Windows Vista. Apple, which has recently lowered price points on a number of its computers and introduced Mac OS X Snow Leopard just seven weeks ago, sees itself positioned to attract some of those consumers once again thinking about purchasing new hardware.

That's Apple -- calm, cool, and confident that the tech world is marching in its direction. "We've been through these transitions before, and no matter how you look at it -- it's still Windows," says Schiller. "When all is said and done, the Mac picks up share a bit at a time."