Apple defends Jobs as profits surge

Board expresses "complete confidence" in "Steve's integrity" in wake of fresh options claims...

By Tom Krazit

Published: Thursday 26 April 2007

Apple yesterday reported financial results far ahead of Wall Street's expectations, and the company's board of directors defended CEO Steve Jobs' role in Apple's stock options backdating scandal.
Revenue for Apple's second quarter, which ended 31 March, was $5.26bn, up 21 per cent compared with revenue of $4.36bn in the same quarter last year. Profit was up nearly 88 per cent at $770m, or 87 cents per share, compared with profit of $410m, or 47 cents per share, last year.
Wall Street analysts surveyed by Thomson First Call had been expecting revenue of $5.17bn and profits per share of 64 cents.
Peter Oppenheimer, Apple's chief financial officer, said during a conference call following the release of the numbers: "We are pleased to report strong financial results and the best March quarter in Apple's history."
Before revealing its financial performance, Apple's board of directors issued a statement confirming its support for Jobs in the wake of allegations made by Fred Anderson, the former chief financial officer at Apple.
Anderson issued a press release saying he warned Jobs that selecting options grant dates other than the actual date the board of directors approved the grant could force Apple to record an expense. Federal authorities and the company have conducted investigations into Apple's stock options practices and the Securities and Exchange Commission (SEC) filed suit against Anderson and former general counsel Nancy Heinen earlier this week, for their roles in the options scandal.
The statement said: "We are not going to enter into a public debate with Fred Anderson or his lawyer. Steve Jobs co-operated fully with Apple's independent investigation and with the government's investigation of stock options grants at Apple. The SEC investigated the matter thoroughly and its complaint speaks for itself, in terms of what it says, what it does not say, who it charges, and who it does not charge. We have complete confidence in the conclusions of Apple's independent investigation, and in Steve's integrity and his ability to lead Apple."
It was attributed to Bill Campbell, Millard Drexler, Albert Gore Jr, Arthur Levinson, Eric Schmidt and Jerry York, Apple's directors other than Jobs, who is the chairman of the board.
As was expected, Oppenheimer steered clear of questions about Jobs, the board's statement and the stock options mess during the conference call, preferring to focus on sales of Macs and iPods during the quarter. Mac shipments were up 36 per cent to 1.5 million units, and iPod sales rose 24 per cent to 10.5 million compared with the previous year.
The sharp rise in profits was attributed to great deals during the quarter on commodities such as memory and chips, Oppenheimer said. Apple doesn't expect the favourable pricing environment to last the whole year, however.
MacBook and MacBook Pro shipments were the primary engine behind Mac sales, with unit shipments up 79 per cent compared with last year, and revenue up 83 per cent. More than 50 per cent of people who bought a Mac in Apple's retail stores were new Mac buyers, Oppenheimer said. The stores themselves continued to help Apple's overall sales, with revenue through the stores up 34 per cent.
Apple predicted that its third-quarter revenue would be $5.1bn, lower than Wall Street forecasts for the next quarter. The company does tend to subscribe to the "under-promise, over-deliver" school of guidance theory, however. And investors seemed unconcerned about the lower-than-expected outlook, driving the company's stock up 6.45 per cent, or $6.15, to $101.54 in after-hours trading on the profit news.
Tom Krazit writes for CNET News.com
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source:http://hardware.silicon.com/desktops/0,39024645,39166895,00.htm

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Apple CEO: iTunes subscriptions unlikely

Ahead of final negotiations with the big four music labels, Apple CEO Steve Jobs on Wednesday said that he is unlikely to give in to calls from the music industry to add a subscription-based model to Apple's iTunes store, despite comments by analysts to the contrary. "Never say never, but customers don't seem to be interested in it," Jobs told Reuters in an interview after Apple reported record March quarter profits of $770 million. "The subscription model has failed so far.... People want to own their music."

The industry leading online music destination has sold more than 2.5 billion songs since it was launched and continues to expand its film offerings. During the conference call yesterday, iTunes said that has over 5 million songs, 350 television shows, and 500 movies and that iTunes accounts for over 85 percent of legal music downloads in the United States (Nielsen SoundScan numbers).

A recent revolutionary agreement with EMI for DRM-free music -- which will be available at premium in May -- puts the other labels at a disadvantage, according to previous reports. "EMI struck a deal that puts all of us at a disadvantage," said an anonymous music executive. EMI, however, defended its position, saying that consumers were frustrated with DRM protection.

The remaining labels -- Sony BMG, Universal, and Warner -- are expected to drive contract renewal negotiations with Apple toward variable song pricing, a subscription service for iTunes, and bundling more music alongside other features into digital packages.

Last week, industry executives and analysts told Reuters that they expect Jobs, following his open letter calling for DRM-free music, to push for further concessions from record companies on selling music without copy-protection.

"There are a lot of people in the other music companies who are very intrigued by it," Jobs said in the interview. "They're thinking very hard about it right now.... We've said by the end of this year, over half of the songs we offer on iTunes we believe will be in DRM-free versions," Jobs said. "I think we're going to achieve that."

source: http://www.macnn.com/articles/07/04/26/no.itunes.subscriptions/

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