Apple smashes Street views, shares soar

Sales of its iconic products far outpaced forecasts, helping drive a near-doubling of revenue in the fiscal third quarter. Its shares leapt to a high of $405 after a brief after-hours trading suspension.

Apple sold 20.34 million iPhones during the quarter versus an expected 17 million to 18 million, which analysts say helped it vault past Nokia and Samsung Electronics to become the world's biggest smartphone maker.

That "figure may indeed make them the largest smartphone maker by volume, which is somewhat ironic in a quarter that many thought would be about the Mac," said CCS Insight analyst John Jackson. "That they accomplished this without a new model speaks volumes about both their strength and the relative challenges facing competitors."

Apple's earnings beat was spectacular even by its own lofty track record. Its quarterly EPS beat the average forecast by 33 percent, versus beats of about 20 percent in the past two quarters.

The stellar results came as concern over iPad 2 supply constraints eased, with Chief Financial Officer Peter Oppenheimer saying more than 1 million iPads remained in stock at the end of June but demand was still overstripping supply in some markets.

Oppenheimer hinted at an upcoming product launch, saying it would impact the September quarter, but he gave no details.

In coming months, Apple is expected to roll out a new iPhone, which is likely to give the world's most valuable technology company another shot in the arm and offer a stiff challenge to rivals such as Google Inc and Research in Motion.

"They never cease to amaze me, these guys," YCMNET Advisors Chief Executive Michael Yoshikami said. "The numbers are obviously very strong and they seem to be accelerating earnings on all fronts."

ASIA ON FIRE

The Cupertino, California company said its fiscal third-quarter revenue climbed 82 percent to $28.57 billion, trouncing the average analyst estimate of $24.99 billion, according to Thomson Reuters I/B/E/S.

The company posted net income for the fiscal third quarter ended June 25 of $7.31 billion, or $7.79 per share, up from $3.25 billion, or $3.51 per share. Analysts on average had expected Apple to report $5.85 per share, according to Thomson Reuters I/B/E/S.

Oppenheimer attributed the big margin boost to higher sales of the iPhone, particularly in Asia. International sales accounted for 62 percent of the quarter's revenue.

Shares in Apple's Asian suppliers including Taiwan's Hon Hai Precision and Largan Precision jumped 2.6 percent and 3.2 percent respectively, while Japan's Foster Electric, which makes headphones for smartphones, rose 1.7 percent by 0015 GMT.

In Korea, top chipmaker Samsung Electronics Co rose 2.9 percent, while LG Display jumped 4.1 percent, and Hynix Semiconductor were up 2.8 percent by 0015 GMT.

"Apple is doing well, but this does not mean other tech companies are doing well. Tech shares are rising after their recent sharp falls and on expectations that their earnings may not be as bad as previously concerned," said Lee Seon-yeob, an analyst at Shinhan Investment Corp in Seoul.

Apple Chief Executive Tim Cook told analysts they were particularly optimistic about Greater China, which includes mainland China, Hong Kong and Taiwan, where Apple's year-over-year revenue was up sixfold at $3.8 billion. Overall, Asia Pacific revenue more than tripled to $6.3 billion in the quarter.

"I firmly believe that we are just scratching the surface right now," Cook said of China. "I think there is an incredible opportunity for Apple there."

Cooks also remarked on Apple TV, one of the few Apple products that has not really connected with consumers, saying it still had a "hobby status" within the company.

Apple sold 9.25 million iPads and 3.95 million Mac computers. Gross margin for the quarter came to 41.7 percent.

Shares of Apple have emerged from the limbo they had fallen into after Chief Executive Steve Jobs took leave last January for unspecified medical reasons.

Based on a price of $400, Apple would have a market capitalization of $369.90 billion, putting it close to Exxon Mobil, the largest company in the Standard & Poor's 500 index, which has a $411.97 billion market value.

The stock has gained 16.8 percent so far this year and has had only two "down" years in the last 10: in 2002, when it lost 35 percent, and in 2008, when it dropped 57 percent.

On Tuesday, Jobs' health again came to the forefront after the Wall Street Journal reported that several Apple board members had discussed a successor to the Silicon Valley icon, and talked it over with at least one head of a high-profile tech company.

Succession planning at Apple has been a hot topic since Jobs announced his medical leave, with many not expecting him to return to lead the company he founded in 1976.

The fate of Apple is tied to how the iPhone and iPad maker handles the eventual departure of its iconic chief. Chief Operating Officer Tim Cook is overseeing day-to-day operations.

Shareholders representing almost a third of Apple's stock voted in February in favor of a proposal to disclose a succession plan for Jobs, underscoring worries over who will replace the visionary leader at the helm.

Apple, notorious for its conservative forecasts, estimated earnings for the September quarter of $5.50 a share on revenue of $25 billion, below analysts' average estimate of $6.45 a share on revenue of $27.7 billion.

Debt ceiling: Just do it

Warnings from all three credit ratings agencies didn't do it. Seven weeks of talks among lawmakers didn't do it. Maybe President Obama's talks with Capitol Hill brass will do it.

But as of now, there's still no debt-reduction deal. And many lawmakers are still demanding one in exchange for their vote to increase the debt ceiling.

Here's an idea: Even if they can't come up with a deal by Aug. 2, lawmakers should raise the debt ceiling anyway. Then they should make a pot of coffee and go back to hammering out a debt-reduction plan.

Fiscal responsibility isn't a one-off proposition; it's an ongoing process.

If Congress fails to raise the debt ceiling by Aug. 2 -- the day when the Treasury Department estimates it will no longer be able to pay all the country's bills -- any number of damaging and utterly preventable scenarios could occur.

Deadbeat nation: For starters, the United States would look ridiculous. The debt ceiling needs to be raised because of obligations that Congresses past and present chose to incur.

Not raising the ceiling would signal to the world that Americans are willfully choosing not to pay their bills. The message won't be "We can't pay." It will be "We could pay, but we've decided not to. Sorry."

Market mayhem: To date, investors have been trading on the assumption -- the rock-solid belief, actually -- that there is just no way Congress would fail to raise the debt ceiling in time.

If Congress dashes those expectations, no one can know exactly how the markets will react. But most think markets will react, and not well.

Some bond experts expect that contrary to popular belief, Treasury rates won't rise but stocks may tank. In other words, there will be a move out of risk-based assets and a flight to safety in bonds.

Bond experts to Congress: Don't mess it up

So interest rates may stay low, but Americans' investments get whacked.

Or, Treasury yields could become volatile and start to climb as investors smell political instability in Washington. That would push the cost of U.S. debt higher.

Hopping mad republic: If Treasury is technically and legally able to prioritize the payment of interest to bond investors, the country may avoid the kind of default that would trigger rating downgrades.

A growing number of lawmakers say that it's OK not to raise the debt ceiling as long as Treasury continues to make payments to bondholders.

But that doesn't mean there wouldn't be seriously negative consequences.

"Someone -- perhaps millions of someones -- won't be paid on time. Contractors, federal workers, program beneficiaries, or state and local governments will suddenly find themselves short on their cash flow," former Congressional Budget Office Donald Marron wrote in a recent op-ed in the Christian Science Monitor.

That could hurt the economy, which is still trying to find its sea legs, and won't do much for the country's mood.

Damaged reputation: Even if bond investors continue to be paid, investors and credit rating agencies won't take it lightly when Treasury has to delay payments to others.

Such delayed payments -- and the public anger that would result -- could cause investors to worry that even if they're getting paid today, tomorrow may be another story. And they could trade on that concern, even if it's unfounded. That, in turn, could cause interest rates to rise.

Fitch Ratings Agency said it would put the country on "Ratings Watch Negative" in such a scenario.

"Extensive payment arrears to suppliers of goods and services to the government ... would damage perceptions of U.S. sovereign creditworthiness and signal growing financial distress," the agency said in a recent report.

The S&P already has already downgraded its credit outlook on the United States to "negative" from "stable." And Moody's is considering doing the same.

Downright default: This is the very worst and still least likely of outcomes, because most believe that there's no way the U.S. government would not pay its bondholders.

But if they don't raise the ceiling, lawmakers would raise the chance that those bondholders don't get paid over time.

Debt ceiling: What you need to know

That could theoretically happen if the Treasury a) is somehow not able to prioritize payments to bondholders; or b) has to pay out more to bondholders than it has coming in on any given day.

On some days Treasury brings in more money than it has to pay out. And on some days it doesn't. But on average, the United States comes up short by about $125 billion every month.

To cut that much spending or raise that much extra in tax revenue overnight would hobble the U.S. economy and very likely de-stabilize world markets.

A U.S. default would be catastrophic, influential bond investor Mohamed El-Erian said Sunday on CNN's "Fareed Zakaria GPS."

His advice to Congress? Raise the ceiling, even if you can't complete a debt-reduction deal in time.

"If ... you're going to kick the can down the road, kick the can rather than face something that could be catastrophic in terms of legal contracts being triggered," said El-Erian, CEO of PIMCO

Apple might be readying Mini iPhone

We are all looking forward to Apple’s next generation iPhone ie the iPhone 5. But now it seems that Apple is more busy preparing a Mini iPhone.

We’ve heard of such rumours ever since the launch of the iPhone 2G when people said Apple will announce a smaller device like they did for the iPod line.

This time though it seems Apple is really thinking of producing a smaller and cheaper variant of their popular iPhone to combat Google which seems to be slowly making it’s way on to devices of all price ranges.

A source has reportedly seen a prototype version of the mini iPhone firsthand. The phone is said to be around two thirds the size of the iPhone 4 and lacks a Home button.

The phone is planned to be launched in mid 2011 and it’s information is only shared among a few Apple employees. The price is said to be 200 US$ without the obligation to sign a 2 year contract.

The device will be cheaper as it will be using nearly the same components as the iPhone 4 rather than the new components of the iPhone 4 successor.

The source also said that though Apple is currently planning to launch it in mid 2011, it might even be delayed or cancelled finally since Apple often works on products that don’t get released.

WWDC 2011: Apple iCloud will be free, iTunes Match replaces pirated songs

Ever since it was announced last week that Apple CEO Steve Jobs would present iCloud at WWDC 2011, there has been a deluge of rumors and guesses as to what it might be. Now, we have the answers.

Jobs noted at the keynote that the cloud has “demoted” the PC and Mac to just mere devices, and iCloud will step in as the “center of your digital life” and digital hub. Those are some lofty goals, but that is where Apple thinks computing is headed these days.



MobileMe, which Jobs noted was not Apple’s “finest hour” (to say the least), is basically being reworked from the ground up and turned into iCloud. Actually, it doesn’t really even exist anymore (at least in Jobs’ memory).

The idea behind iCloud is simple: iCloud stores content and then pushes it wirelessly to all of a user’s devices. That goes for contacts, calendars, new emails, etc. Basically almost everything you sync in iTunes via USB can be done via the cloud now. Users can only backup data using Wi-Fi connections, which might seem limiting but it should save anyone from outrageous data costs.

The big focus on iCloud centered around music. For days, weeks, whatever - everyone has been wondering what Apple was going to announce regarding a cloud-based music streaming service. However, we didn’t get what most people expected.

The first surprise was that there will be no charge for multiple downloads to multiple devices. The key word is “multiple,” not unlimited. Users can just hit a “Purchased” button in iTunes on their various devices and push what is already purchased and downloaded to nine other iCloud-enabled gadgets.

Secondly, iTunes for iCloud isn’t actually a competitor for Google Music, Amazon’s music service or anything else like that. There isn’t a subscription-based model involved here, but rather the usual purchase model that already exists. The only difference now is that users can just push the songs to multiple devices wirelessly and much easier.

The closest it gets to the streaming service is the new iTunes Match. Users who have pirated MP3s on their computers can try to go back to the honest and good side of things by using this software that scans the hard drive and then matches the titles to 256Kbps AAC, DRM-free tracks. (That must be where Apple’s latest deal with the music industry came in.) Jobs promised this scan would take only “minutes” and that it costs $24.99 per year “regardless” of the amount of songs.



Some of the other tidbits included in iCloud include a @me.com account, a no-ads promise, and a new feature in the App Store that shows the user its previous purchases (i.e. mobile apps, iBookstore items, etc.) that are waiting to be pushed down to other devices.

Apple also appears to be targeting a more business-minded bunch with the new Documents in the Cloud function. This feature incorporates the iWork suite (Pages, Numbers, and Keynote) and follows the idea of the cloud: users can work on projects using one of these apps using an iPad and then pick up where one left off using a PC. iCloud will also sync up the Camera library among multiple devices using Photo Stream, which pushes the last 1,000 photos taken on any of the iCloud-enabled devices to the rest. These images will be stored to their own album, but they’ll only be kept there for 30 days. If a user wants to keep them, then the selected images must be moved to a different, specified album.

Although it was widely rumored that Apple would charge $25 per year for iCloud usage (versus the $99 MobileMe yearly subscription fee), Jobs said that iCloud will be free. Yes, free - except for that whole iTunes Match fee if you opt into it.



Like iOS 5, the developer preview will be available starting today, and the full version will launch this fall. iCloud will offer 5GB of storage space, but purchased music, e-books and photos don’t count towards that total.

Apple announces iTunes Match, no-upload cloud-based music locker (updated 3x)

Apple used today’s WWDC keynote address to announce a brand new service called iTunes Match - which was also referred to as “iTunes on the cloud.”

iTunes Match will scan your iTunes Library and match songs to an upgraded, 256kbps AAC DRM-free file on Apple’s iCloud server. The service will cost $24.99 per year but it remains to be seen what will happen if you stop paying the annual subscription fee.

Apple touted ‘Match as a huge advantage over competing services from Google and Amazon, because while they can take “weeks” to upload your library, iTunes Match takes “just minutes.”


Apple also touted the service as having the “same benefits as music purchased from iTunes.” Presumably this means that you’ll be able to re-download tracks and see your music history on all of your devices.

Update: Apple has updated its iTunes Terms and Conditions — presumably to address all the new cloud features.


Update2: Apple has posted it’s iCloud features page.

Update3: Sadly, iTunes in the Cloud doesn’t allow streaming of music to your devices, like Google and Amazon do. Deal breaker?

Apple's iCloud like 'new iTunes'

Apple is set to launch its iCloud service which will allow the users stream data stored on Apple servers to their devices including iPhones, iPads and iPods. Don’t think of iCloud as the new MobileMe, think of iCloud as the new iTunes.


The service will be directly competing against similar services launched by Google and Amazon. Cloud computing is going to prove crucial because the mobile devices battle is no more a battle between devices.

What is Cloud Computing?

Let’s say you’re an executive at a large corporation. Your particular responsibilities include making sure that all of your employees have the right hardware and software they need to do their jobs. Buying computers for everyone isn’t enough you also have to purchase software or software licenses to give employees the tools they require.

Whenever you have a new hire, you have to buy more software or make sure your current software license allows another user. It’s so stressful that you find it difficult to go to sleep on your huge pile of money every night.

Soon, there may be an alternative for executives like you. Instead of installing a suite of software for each computer, you’d only have to load one application. That application would allow workers to log into a Web-based service which hosts all the programs the user would need for his or her job.

Remote machines owned by another company would run everything from e-mail to word processing to complex data analysis programs. It’s called cloud computing, and it could change the entire computer industry.



The iCloud has the potential of changing the very basic pattern of media consumption, which in turn may increase demand for more Apple devices among the masses. The iCloud itself may not be something revolutionary, but the forthcoming gadgets designed around it may indeed turn out to be a million dollar opportunity for Apple.

At a time, when Google and Amazon went ahead and launched their cloud services without taking music labels into confidence, Apple took a different route and successfully negotiated with the major music labels. The iCloud service from Apple, however, is much more than just music based service. Users can store almost any type of data in the cloud and access it from almost all of their Apple devices including iPhone and iPad.



It’s not the first foray of Apple in the cloud. It’s earlier web based service, MobileMe — a platform for online services and software from Apple – did not exactly take off at the start, and the service had several breakdowns in its life. Despite its shortcomings, MobileMe in the end ramped up three million users, not bad indeed, but it still is just a fraction of the total number of users iCloud is expected to bring to the Apple.

Apple’s iCloud agreement with major US labels worth $100M+ in upfront cash payments

The New York Post is reporting that Apple will pay more than $100M in up-front payments to the four major music labels (Sony, Universal, EMI and Warner) in a licensing deal for their new iCloud service. Apple has confirmed the announcement of their iCloud service will be made at their Worldwide Developer’s Conference on June 6.

The labels get between $25-50M each, with the variations coming from how many tracks from each label users are storing with Apple’s service. Apple has more than $60B in cash reserves, so a $100M+ investment for a service that could conceivably sell more iPads and iPhones seems to be a no-brainer.



The upfront fees were a major issue stalling the Google negotiations. Now that Apple has set a precedent, Google could realistically have a similar licensing agreement implemented by September.

Apple is expected to implement the cloud service for free, with plans to change to paid subscriptions in the future; seemingly once users are sufficiently hooked. The Cupertino tech giant’s cut of future subscription fees will be 18 percent. 12 percent will go to publishers and the remainder given to the labels. The LA Times also reports that Apple will also subsidize the cost of implementing the service with advertising.