All Things Digital

If there’s been a slowdown in U.S. consumer spending, nobody told Apple. This afternoon, the company reported second-quarter revenue of $7.5 billion on net income of $1.1 billion, or $1.16 per diluted share, pretty much blowing the doors off Wall Street expectations.

Apple (AAPL) shipped 2,289,000 Macs (up 51%), 10,644,000 iPods (up 1%) and 1,703,000 iPhones during the quarter.

“We’re delighted to report … the strongest March quarter revenue and earnings in Apple’s history,” said CEO Steve Jobs, recycling the soundbyte CFO Peter Oppenheimer used to describe the company’s 2007 March quarter.

Clearly, business is good in Cupertino. That said, Apple says it expects fiscal third-quarter earnings of $1 a share on revenue of $7.2 billion–a bit below analyst expectations. And the Street, which by now should be familiar with Apple’s under-promise-and-over-deliver earnings highjinks, isn’t at all happy with that forecast. The company’s shares slipped a bit in after-hours trading.

A brassy little outfit called Psystar is getting a lot of attention today for peddling Leopard-compatible desktops. These “OpenMacs,” as the company’s named them, run on Intel (INTC) chips and feature 2GB of memory, a DVD drive and whatnot. They’re built from PC parts and, if you’d like, Psystar will even outfit them with Mac OS X Leopard.

Sounds like a compelling proposition for folks who would like the Mac OS on cheap hardware. Too bad the Mac OS X EULA specifically forbids installing the OS on non-Apple computers. Apple (AAPL) legal is, no doubt, already half-finished with a cease-and-desist letter.

In the run-up to Apple’s (AAPL) World Wide Developer’s Conference in June, the Mac faithful are sifting entrails for portents of iPhones to come.

Yesterday the creators of the popular ZiPhone jailbreak discovered in the latest test firmware for iPhone developers a reference to Infineon’s (IFX) SGOLD3H chipset–a chipset that supports 3G wireless broadband of up to 7.2 Mbit/s.

Now “industry sources” cited by TG Daily are claiming that the next-gen iPhone that runs on that chip will debut at WWDC. And there’s more. The device will be slimmer than its predecessor (by about 2.5 mm) and it will be offered in least two configurations at current price points: an 8GB version for $399 and a 16GB $499.

Normally a consumer product announcement at WWDC would seem unlikely. That said, it would make sense for Apple to uncrate a next-gen iPhone at the event this year, given its recent software roadmap and SDK announcement. Wouldn’t it?

According to the results of the 2007 CoreBrand Power 100 study (PDF), Microsoft (MSFT) has suffered significant erosion of its brand power since 2004. The software giant fell to No. 59 in Corebrand’s ranking of global brands for 2007, down from No. 11 in 2004.

Why? The market research firm speculates that the decline could have something to do with Apple’s (AAPL) “Hi, I’m a Mac” ads.

“The effect of Apple’s ‘Hi, I’m a Mac’ advertising campaign may have taken its toll on Microsoft,” CoreBrand CEO James Gregory said in a statement. “The launch of a series of new products, following a long, relatively dormant period, will be closely watched to see if it will have a positive impact on the Microsoft brand.”

Yeah, Vista probably had nothing to do with it …

Remarkable. Downtrodden handset maker Palm (PALM) has somehow managed to poach another Apple (AAPL) veteran: Lynn Fox, the company’s now former director of Mac PR.

First Jon Rubinstein, former head of hardware engineering at Apple. Then Mike Bell the company’s VP of CPU software, in the Macintosh hardware division. And now Fox.

What does Palm have up its sleeve that could possibly inspire Rubinstein, Bell and Fox to leave Apple at a time like this?

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 Apple uncrates a Mac Pro that delivers “up to twice the performance of its predecessor” the week before Macworld, you know the company must be planning to roll out something damn impressive during CEO Steve Jobs’s keynote address next week.

This morning Apple announced upgrades to its Mac Pro desktops and Xserve servers. Powering the new machines: one or two of the new quad-core 45 nanometer Penryn-family processors Intel announced at CES yesterday. “The new Mac Pro is the fastest Mac we’ve ever made,” said Phil Schiller, Apple’s senior vice president of product marketing. Interestingly, the company’s new Xserve is, according to the press release, Apple’s “most powerful server ever.”

Odd that Apple would announce some of its fastest and most powerful machines the week before Macworld San Francisco. Perhaps Jobs wanted to steal a little bit of buzz from CES, as he did last year with the announcement of the iPhone. In any event, the debut of these new products would seem to make it more likely that Apple will indeed announce updated MacBook and MacBook Pro laptops next week.

Well, Apple Insider isn’t paying much mind to the sudden closure of its Mac rumor site brethren earlier this week. Citing the same sort of “people familiar with the matter” that got Think Secret into trouble, the site today reports that Apple plans to adopt Intel’s upcoming ultra-mobile Silverthorne chip in “not one but multiple products currently situated on its 2008 calendar year product roadmap.”

Silverthorne, part of Intel’s “Menlow” Mobile Internet Device platform, reportedly runs as fast as a second generation Pentium M processor, but consumes between half a watt and two watts of electrical power–about a tenth of the power consumed by a typical notebook processor. No wonder Apple’s said to be interested in the chip. It would appear to be perfect for a number of devices rumored to be secreted away in its product pipeline–the FlashBook, the multitouch Newton, the Mac tablet.

That said, we’ll likely not see it popping up in a 3G iPhone, though at first glance it would make sense there as well. “According to several iPhone teardowns, Apple is likely using the Samsung S3C6400, or some special equivalent built just for them, in the iPhone,” explains News.com’s Tom Krazit. “That chip is based on the ARM1176 core, which at 620MHz consumes just 279 milliwatts. That’s running all-out, whereas most of the time you’re actually going to be drawing much less power than that. Silverthorne, by contrast, will consume 500 milliwatts of power at minimum, and probably only when it’s doing nothing in idle mode. Those numbers just aren’t going to work in a phone, especially an Apple phone, if the company really is so concerned about power consumption that it has held off on releasing a 3G iPhone until the power consumption of that modem improves.”

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.”

Market research has uncovered yet another rift between Mac and PC users. According to the NPD Group’s Digital Music Monitor, Mac users are far more likely than PC users to pay to download music.

They’re also more likely to buy CDs. Of all Mac users surveyed by NPD, 50% paid to download music during the third quarter of 2007 compared to just 16% of PC users. During the same period, more than 32% of Mac users purchased CDs, compared to just 28% of PC users. “There’s still a cultural divide between Apple consumers and the rest of the computing world, and that’s especially apparent when it comes to the way they interact with music,” said NPD Group analyst Russ Crupnick. “Mac users are not only more active in digital music, they are also more likely to buy CDs.”

Course, they’re also “more likely” to have Apple’s iTunes digital music store pre-installed on their machines. That might have something to do with the discrepancy here as well.

In any event, it would seem that, contrary to the claims of NBC Universal Chief Executive Jeff Zucker, Apple hasn’t “destroyed the music business.” “While the market for digital music is growing, it’s growing slower than many would like it to–CD sales are still declining and digital music has not entirely replaced those lost sales,” Crupnick added. “The more consumers become comfortable paying for digital music, the more chance they will evangelize to others. And at this point in the game, it’s the growing base of Apple consumers that are the industry’s low-hanging fruit when it comes to migrating from physical CDs to digital music.”

Q: Will there be an iPhone?
Steve Jobs: One never knows. We don’t usually discuss products we haven’t announced.
Q: What do you think of the tablet PC?
Jobs: We’re not sure the tablet PC will be successful. It’s turned into a notebook that you can write on. Do you want to handwrite all your email? We have all the technology ourselves to do that–we just don’t know whether it will be successful.

–Interview with Apple CEO Steve Jobs, International Herald Tribune, September 2002

Are you passionate about providing handwriting solutions to end customers? Do you strongly believe that using a stylus and a tablet is the way to interact with computers?”

–Apple recruitment ad, Aug. 11, 2005

At a recent all-hands meeting to discuss the iPhone, Apple CEO Steve Jobs said the company has the “best Macs” ever in the new-product pipeline right now. The machines that are waiting in the wings are “off the charts,” he said. Now just what Jobs meant by that is, obviously, known only by the man himself as well as those who would never dare cross him.

But reports today suggest he might have been refering to Apple’s mythical tablet PC. Sources at Asus tell Crave the contract manufacturer is building Apple a tablet PC based on the same multitouch technology in the company’s iPhone and iPod Touch devices. “A few weeks ago we were having a civilized dinner with our friends at Asus and angling for cool stories when we were told in a very hushed manner: ‘Asus is helping Apple build a Tablet PC,’ ” Crave explains. “We checked back with our source at Asus on a different day and they confirmed that the Apple Tablet will not be based on existing Asus designs such as the R1. It will come from a completely new blueprint, possibly based on the patent Apple filed back in May 2005. We’re guessing it’ll be based on Intel Core architecture, a tweaked version of Leopard, and have all the multitouch, CoverFlow goodness we’ve seen in the iPhone and iPod Touch.”

Certainly seems plausible. Given the success of the iPhone’s multitouch platform and its speedy extension to the iPod, it doesn’t take take a leap of imagination to see multitouch making its way into a Mac tablet in the coming months. Especially since the company’s already reportedly building it into a next-generation Newton.

Still, Jobs has often dismissed rumors of an Apple tablet. “There are no plans to make a tablet,” Jobs said during a panel discussion at 2003’s All Things Digital conference. “It turns out people want keyboards. … We look at the tablet and we think it’s going to fail.”

Of course Jobs said Apple would never build a phone, either.