All Things Digital

We will enter Asia with the iPhone in 2008. … We will one day enter China, we’re not saying when, and we will one day enter India.”

–Apple COO Tim Cook

Here’s another brief but interesting bit of news to emerge from Apple’s annual shareholders’ meeting yesterday. When CEO Steve Jobs pledged the company would sell 10 million iPhones in 2008 did he mean 10 million phones within this calendar year, or 10 million phones between June 29, 2007 and Dec. 31, 2008? Well, according to Piper Jaffray analyst Gene Munster, it’s the former. “We confirmed with Apple that the goal is to sell 10m iPhones ‘in CY08′ alone,” Munster wrote in a note to clients, adding that the company will have no trouble hitting that target–especially once it launches the iPhone in Asia, as COO Tim Cook promised.

“We are currently modeling for 12.9m iPhones in CY08,” Munster said. “Exceeding the goal by 2.9m units or 29%. … Jobs’s reiteration of the 10 million iPhones and the iPhone in Asia by the end of the year eases some investor concerns.”

The number of iPhones bought with the intention of unlocking was significant in the quarter, but we are unsure how to reliably estimate the number. We are unsure when all the recipients will activate.”

–Apple Chief Operating Officer Timothy Cook, Jan. 22

So those “missing” iPhones? They’re not missing at all. They’re unlocked. That’s the opinion of a number of analysts who this week are looking askance at Bernstein Research analyst Toni Sacconaghi’s claim that about 1.45 million phones were “missing in action” at the end of 2007–built but not subscribed to AT&T.

“Some unknown number of iPhones are being unlocked by purchasers and some, probably a larger number, are being unlocked for resale,” said Ezra Gottheil, an analyst at Technology Business Research Inc. “Some are in inventory. Some will be returned. And some are being used for the nonphone features, as iPhone Touches, until the owners can change their wireless contracts. We don’t know the proportions.”

Piper Jaffray analyst Gene Munster offered a similar theory, noting that his recent check of Apple’s retail stores found a significant percentage of consumers to be purchasing multiple iPhones. “The majority of the people who were buying more than one phone were Asian, and they were bringing small buses of people who all buy more than one phone,” he told the New York Times. “With the value of the dollar, the cost of the phone is much less here.”

And Munster’s contention would seem to be borne out by anecdotal reports from abroad. “In my travels around the world, two out of three iPhones I’ve seen outside of the U.S. have been unlocked,” Richard Doherty, director at consultant Envisioneering Group, told BusinessWeek. “In China, nine out of 10 phones are hacked.”

We’re thrilled to report our best quarter ever, with the highest revenue and earnings in Apple’s history.”

–Apple CEO Steve Jobs

Well, the street didn’t much care for Apple’s latest financial guidance, did it? Shares of the company tumbled in after-hours trading after Apple offered a disappointing second-quarter outlook.

Though Apple posted its highest quarterly earnings and sales in history today thanks to strong sales of Macs and iPods, its second-quarter guidance fell well short of Wall Street’s expectations. Looking ahead, Apple said it expects earnings of 94 cents a share on revenue of $6.8 billion in its second quarter. Wall Street was looking for earnings of $1.09 a share on revenue of $6.99 billion.

And with concerns of an economic slowdown looming large after Intel issued a cautious outlook for 2008 last week, the market reacted with predictable knee-jerk horror, sending Apple shares down more than 11% 15% 17% in after-hours trading. “All of the numbers were fine,” Piper Jaffray analyst Gene Munster told CNBC. “They continued to gain market share. The issue is that people wanted a more confident ‘guide.’ There’s nothing wrong with the actual numbers, it’s just that people are worried there’s going to be a break.”

Or that we’re already at the beginning of one: iPod sales in the states were flat year-over-year …

When Daily Variety broke the news that Pixar had hired writers for the pitch that became the 2007 release ‘Ratatouille,’ Steve Jobs tracked the reporter down at the Sundance Film Festival, demanding to know her sources and threatening to fire the film’s writers. He called her on the private line of a rented condo–a number she had not given out to anyone. She still doesn’t know how he found it.”
–Daily Variety, June 18, 2006

Apple’s long-running war with the Fourth Estate–well, the Black Bag ops portion of it, anyway–has finally claimed its first victim. Think Secret, a Mac rumor site Apple sued for misappropriation of trade secrets back in 2005 after it pre-announced the Mac mini and the iLife ’05 software suite, has agreed to cease publication as part of its settlement with the company. “Apple and Think Secret have settled their lawsuit, reaching an agreement that results in a positive solution for both sides,” Think Secret said in a statement. “As part of the confidential settlement, no sources were revealed and Think Secret will no longer be published.”

A bit of an about-face for Think Secret and its 21-year-old publisher Nicholas Ciarelli, who up until this point had fought the suit tooth-and-nail, painting it as an effort to chill free speech and Apple as the tech industry’s version of the Nixon-era White House for filing it. “Apple’s lawsuit is an affront to the First Amendment and an attempt to use Apple’s economic power to intimidate small journalists,” Think Secret said in a 2005 Anti-SLAPP filing. “If a publication such as the New York Times had published such information, it would be called good journalism; Apple never would have considered a lawsuit.”

Probably not. And it would never consider a suit against analyst Gene Munster, who’s essentially Piper Jaffray’s version of Think Secret. So why settle? We may never know, though in his statement, Ciarelli seemed to suggest he simply wanted to get on with his life without the specter of Apple legal hanging over him. “I’m pleased to have reached this amicable settlement,” he said. “[I] will now be able to move forward with my college studies and broader journalistic pursuits.”

UPDATE: The Think Secret camp describes the settlement as a loss for Apple. “It’s clear that Apple filed the lawsuit with such fanfare, but then stopped the entire litigation because they thought they were going to lose, and that they’d end up paying [Nick] a lot of money for it,” Ciarelli’s lawyer, Terry Gross of Gross & Belsky LLP, told Computerworld. “This shows that lawsuits like Apple’s can be stopped dead. … Other companies are going to realize that if they try something like this, there will be an uproar, and groups like EFF will do what it takes [to represent defendants]. … I would have loved for Apple to go forward on this. Apple would have caved, which they should have in the beginning.”