An early view of Apple’s 3Q results.

Well, Apple’s press release for 3Q results is out, and it mentions no specific iPhone sales numbers:

““We’re thrilled to report the highest June quarter revenue and profit in Apple’s history, along with the highest quarterly Mac sales ever,” said Steve Jobs, Apple’s CEO. “iPhone is off to a great start—we hope to sell our one-millionth iPhone by the end of its first full quarter of sales—and our new product pipeline is very strong.””

The numbers are amazing. Earnings per diluted share of $0.92 blows past any estimate I saw (most were in the .70-.75 range). Selling 1.764M Macs with no new models (just refreshed laptop models) and no seasonal trend this quarter. No wonder Apple felt they could wait to introduce new iMacs! Same with iPods; 9.815M sold and the top of the line hasn’t been changed in nearly two years.Not sure what to make of no specific iPhone numbers. In terms of these results it’s irrelevant because 30 hours of sales (only 1/24 of which they recognize as revenue anyway) would have zero impact. However, for analysts who thought as many as 700,000 were sold in the first weekend, learning that Apple’s goal is 1M by the end of September may not make them happy.I’m sure more details will come in from the conference call. We’ll see what’s reported then.[UPDATE:] Macworld is reporting the following from the earnings call:

“Apple only sold iPhones during the final 30 hours of the quarter … but Apple CFO Peter Oppenheimer revealed that the company sold 270,000 iPhones through its stores and AT&T stores during those 30 hours.”

That looks pretty darn good to me. I wonder what they did on Sunday (7/1)? Either way, that’s a stellar product debut. We also get this:

“Cook said that based on the demand the company has seen thus far, Apple is confident it will sell 10 million iPhones by the end of 2008.”

Great 3Q numbers exceeding expectations, over a quarter million iPhones sold in the first 30 hours (the only hours in this quarter), and a vote of confidence they they’ll hit their published iPhone targets. What more could you want? Still, I’m sure some analysts will wail…

Rumored interface for 6G iPod.

Many sites have published links to a video with the alleged new interface for the 6G video iPod (here is MacDailyNews’). The video doesn’t necessarily remind one of the iPhone, though clearly elements have been borrowed.

I’ve gone on record stating the 6G iPod would have the iPod interface from the iPhone, or something very close (for example, the iPod might add a virtual scroll wheel for games).

What does Apple gain by making the interfaces different? Don’t they just open the door to iPhone or iPod owners thinking they got the “lesser” interface? In that case I believe the iPod must have the “better” one (after all, it’s the dedicated media device), but then what would that say about the iPhone? According to Jobs it’s “The greatest iPod we’ve ever made,” but it lasted only a few months?

I like the iPhone music interface, and while I feel that with 80GB instead of eight some sort of search is mandatory, I otherwise prefer it to the existing 5.5G iPod.

I believe the new iPod is coming relatively soon, despite some reports of a January release. They need the 6G in plenty of time for Christmas, so I don’t see how it could be later than October. Rumors that it will be sooner seem believable to me. This rumored interface, however, I’m questioning.

Of course, guessing what Apple will do, and why, is a crap shoot. The video may well be legit and, since it’s short, there’s more to it than that. Further, I can see that the cascading menus might be considered necessary for the same reason I believe search is (i.e., 10 times the amount of data storage). With that much data to go through simply scrolling is not enough. In other words, the iPod would be a superset of the iPhone interface, with the extras owing to the far greater amounts of data it will hold.

The good news for iPhone users is that perhaps that device would just be a software update away from having those same interface improvements. I mean, if their respective initial interfaces have significant differences, Apple’s longer-term plans may be to unify them. This assumes the iPod will become an OS X device (why port the same interface two places?), but I already believe that will happen.

Unlike the iPhone, I won’t get a 6G iPod when it comes out (I’m very happy with my 5.5G 80GB), but it will be interesting to see what interface it includes, and if Apple works to make both devices work the same in handling media.

The widescreen, Wifi, Internet-in-your-pocket iPod.

There are several stories surfacing (for example, here and here) about how to kill the AT&T service and just use the WiFi functionality of the iPhone along with the coolest iPod Apple’s ever made.

This is an interesting intellectual exercise, and its kind of fun to see what can be done and what you can get away with. Deep down perhaps all of us like to see how we can “cheat the system,” as it were.

Still, this immediately brings a few things to my mind:

  • Will Apple try to stop this? Ultimately they may have to, due to contractual obligations with AT&T. Otherwise, I wonder how much they’d care. After all, hardware sales are what it’s all about. Of course, if Apple is getting a piece of the AT&T contract then Apple suffers. I wonder how far Apple can go to lock this down?
  • Will AT&T try to stop this? Well, certainly, but other than complain to Apple I wonder what they can do.
  • No EDGE, only WiFi. Critics of EDGE tend to blow off WiFi, saying that it’s not available in enough locations, yet here is a portable device that’s WiFi only, and apparently enough for some people. As I said in a previous article : “Just as people who bought SUVs as they rose in popularity may have talked about ‘off-roading,’ but never took it off the road, the fact is the iPhone is going to be used in Starbuck’s a lot more often than the jungle.”
  • What’s the usefulness of this thing? I mean, now you have to carry a separate phone. So you paid $600 for an internet device and an iPod. Is the Internet and new iPod interface worth that much to you? Especially since the new interface is almost certainly coming to the iPod soon (see next entry).
  • That is one expensive iPod! I’m sure the Sixth Generation (6G) iPod will have the touchscreen interface, and also sure it will contain a hard drive. You’d get the great interface and lots of storage (though probably no internet) for less money. The 6G iPod will likely be released in the September/October timeframe (in plenty of time for Christmas).
  • And speaking of expense, since you still presumably have a separate cell phone and plan, aren’t you really only saving the $20 each month for the unlimited data plan? I don’t exactly burn $20 bills, but that’s not really a whole lot a month for someone who can spend the initial $600 for this (plus a separate phone!) in the first place.

This whole exercise is interesting, if only to show it can be done, but I wonder how many people will actually do it? It may be that Apple and AT&T realize the number will be insignificant (though I’m sure it’s all the press will talk about) and not worth the trouble or expense to stop it any further. I’m just not sure how many people will buy three devices in one, and then immediately disable one of those devices so they can carry it separately. I’m curious to see if a significant number of iPhone users cancel their accounts without returning their phones.

The other question, of course, is if you can activate the phone’s functionality via another carrier’s SIM card. I think Apple’s tried to lock this one down. But even if you could, so you wouldn’t be carrying a separate phone, some questions still remain. On another carrier you’re only saving the $20 per month for unlimited data, and you lose visual voice-mail in the process. Do you hate AT&T that much? Remember, if it was up to Verizon we’d have an iPhone nothing like the cool one we have now. I can see if you live in an area with no AT&T coverage, but beyond that it seems an extreme exercise to “cheat” one of the two companies that actually made the iPhone happen.

InformationWeek Uses LALA to Take Shots at Apple’s iPod

In the guise of documenting the outage of LALA on its first day, Information Weak (the publication’s more realistic name) writer Alexander Wolfe takes shots at Apple’s iPod in this article, while also begging, groveling, and pleading with somebody, anybody, to join him in his love affair with the failed music rental model.

It starts in the first paragraph, after quickly mentioning LALA was down, he types this garbage:

“No matter; the idea of a service which combines the worst features of the defunct mp3.com business model with a lock-in to Steve Jobs’s proprietary (yep, that’s the word for it) iPod platform isn’t the service from which I want to be getting my dinosaur rock tunes.”

Well, yeah, “proprietary” is the word for it. Apple is most definitely the proprietor (i.e., owner) of the iPod platform. So what? Of course, what Alex was trying to get a shot at was the mythical iPod “lock-in”. But that’s been discussed to death, even by Steve Jobs, and is a non-starter. The only dinosaurs around are the ones who still shovel this drivel.

Then he displays further lack of research (or ignorance, take your pick) with this beauty:

“Still, it’s the site’s iPod lock-in which really sticks in my craw. As my three regular readers know, I’m a huge fan of both the Samsung YP-Z5 MP3 player and the Microsoft-MTV URGE music service.”

Well, at least he used the term “lock in” this time. Meanwhile, Alex, did you known that the Samsung YP-Z5 MP3 player and the Microsoft-MTV URGE music service are proprietary? Next time at least have a dictionary handy when you write.

The real kicker at this point is that he’s wrong: LALA isn’t locked in to the iPod at all! A review of their site makes this clear. Sure, they can take your iPod library and make that music (if they have it) available from the web on PC or Mac. But they can also do that with your My Library folder.

Their site says they’re “iPod friendly”. Well, why wouldn’t they tout iPod compatibility as a major thing? It doesn’t mean it’s exclusive to that player, and it sure doesn’t mean you can’t use LALA without an iPod or iTunes. It’s not hard to discover this, and Alex would have if he’d wanted to write a LALA article, but this was really just a hatchet job on Apple so why bother?

After getting the purpose of LALA all wrong, and being wrong about their “lock-in”, the article gets even better:

“The reason? It’s the subscription model, stupid. Why pay even a paltry 99 cents to own a tune (regardless of whether it’s with DRM or without) when you can listen to anything and everything you want, and load it onto your player, for $14.95 per month> That’s a much better deal than iTunes’s pay-as-you-go model.”

Poor Alex! The music subscription model? The one that’s failed everywhere it’s been tried? That model?

“Interestingly, URGE and the other viable music subscription services (notably, Rhapsody and Napster) are all aimed away from iPods and towards the Windows-oriented MP3 players, which constitute such a miniscule percentage of the market.”

“Interestingly”? Do you not know why this is the case? It’s because they use exploding DRM. More specifically, they use Microsoft’s exploding media DRM. Of course they’re all “aimed away from iPods”; iPods never used exploding media. What’s funny is that even Microsoft has abandoned this particular technology, having cut loose from URGE and all its PlaysForSure partners! Microsoft still loves exploding media, though, and simply tweaked their DRM so it only works with the Zune.

Oh, and Alex, Zune and the Zune store are also proprietary. Just wanted to make sure you got that.

Let’s summarize so far: Alex doesn’t know what proprietary means; he believes in the mythical iPod “lock in”; he wrongly states LALA is specific to the iPod; he loves the failed rental subscription model; and he’s a huge fan of a player and service that are proprietary and have been abandoned by Microsoft. So, are you all caught up? Good, let’s continue.

“Steve Jobs has rejected any suggestions that he take up the subscription model. Clearly, that’s because he’d lose a whole heck of a lot of revenue.”

Alex, you should not be allowed to write such articles again. You simply don’t understand. Really, you don’t.

It’s pretty well-known that iTunes’ store revenue is not what keeps Apple going. The vast majority of it (around 70%) goes to the labels, leaving Apple with 30% from which they must also cover the operational and advertising costs. It’s all about selling iPods.

Selling tracks is not about huge profits. In fact, if the big profits in digital music were in selling tracks, why would every other digital store on the planet — as well as the major labels — fall all over themselves in worship of the rental model? The reason is all the money it’d make for them if they could ever get anyone to agree to it.

The rental model’s recurring monthly revenue is what has the stores and labels drooling. If they could just get people to sign up, they’d make millions. But they can’t get enough people to sign up. People don’t want to rent their music, and have voted on this with their wallets time and again, but the stores and labels keep trying because they so desperately want that recurring revenue!

Meanwhile, Apple never tried the rental model because Jobs believes people want to buy their music, not rent it. Guess what? He’s right! Everything that has transpired in the last few years proves that he’s right. All the failed or nearly-failed subscription services prove he’s right. All empirical observation would force anyone to conclude that he’s right. In fact, the only other measurably successful digital music store is eMusic, which also sells music; no rentals. And yet, there are some, like Alexaurus Rex, who still do not get it.

“Still, the dirty little secret is that most high-school and college kids don’t pay for their music from iTunes or anywhere else. They get it illicitly from the surviving peer-to-peer services–mainly Limewire.Which is why online music subscription services, with their reasonable costs, are a more sensible option for an industry trying to stanch piracy than lawsuits will ever be.”

Kids aren’t paying for their music? Thanks for the news flash, Alex; got any updates on the Hindenburg?

Having revealed this “secret”, he holds up subscription services as the cure for piracy. Oh please. You cannot swap a DRM’ed subscription track anymore than you can one that you bought. The kids swapping files will not use a subscription model for that very reason. Any kids not swapping tracks don’t have to worry, and they want to own their music.

I don’t know why Alex is one of the few who like renting music. What I do know is that the minute he stops making his monthly payments, for all intents and purposes his music is GONE! For those of us who actually, you know, love music, and don’t just use it for Apple-bashing column fodder, that fact is critical.

People bought 78s, they bought 45s, they bought LPs, they bought 8-tracks, they bought cassettes, they bought (and still buy) CDs, and they are buying digital files. They are not renting them.

Finally, in a vain attempt to act as if the article was really about LALA, and not just a shot at Apple to generate page-hits for Information Weak, Alex posts an update to state that LALA set him strait on their alleged iPod “lock-in”. He doesn’t apologize for not having done any fact-checking, nor does he even remove “iPod-only” from the article headline, but then again why would he? The article was never about LALA anyway.

Why the 6G iPod will share the iPhone interface.

I would have thought it understood that the next generation video (a.k.a. 6G) iPod will share the iPhone’s touch interface. If not an exact copy, certainly most of the primary elements, including of course the touch screen and MultiTouch technology. However, given an article on The Unofficial Apple Weblog, I guess there are those who doubt this.

It’s a fairly short article, and the gist of it is that Apple somehow must reserve the iPhone’s cool interface exclusively for that device. If not, they cannibalize iPhone sales. It argues that since potential iPhone sales are far greater than the iPod (because the cell phone market is so large), they would never risk that cannibalization:

“Now, keeping in mind these numbers, a sales pie the likes you’ve never seen barreling straight for your revenue stream and investors practically wetting themselves while dreaming of iPhone-shaped dollar signs at night, are you really going to cannibalize the profits off your most anticipated device of all time by yanking out a key component (the phone) and selling it for $200 or $300 less? Before you skip what little is left of this post to try and answer that question, let me save you the trouble: the correct answer is no, no you wouldn’t – under penalty of death.”

So what’s wrong with the article? Well, it doesn’t say squat about what the 6G iPod will be like. In fact, the article doesn’t even consider the next generation iPod beyond saying it won’t be iPhone-like. But you can’t argue what the next iPod won’t be without also presenting what it will be. Why? Because that very discussion leads one to specific conclusions about what really makes sense. The article fails in this.

So, with that in mind we should consider the following.

  • What will the next iPod be like, if not the iPhone? In his interview with Walt Mossberg at the All Things Digital conference, Steve jobs said Apple is working on the best iPods they’ve ever made. This expression really struck me, because that’s what he claims the iPhone to be!
  • I don’t believe it can be argued the iPod doesn’t need a new revision. The current revision (5.5G) is nine months old, and itself was only a refresh of the 5G model from eleven months before. Clearly a resilient design, but long in the tooth, and people are itching for the next real generation. It’s been a foregone conclusion for a long time that it will at least be a wide screen model.
  • It makes sense not to release the 6G before the iPhone, since iPhone users should get the first crack at the cool new interface. Of course, this assumes the interfaces will be similar. But if the 6G isn’t going to implement that interface there was no reason to wait! So why has Apple held off? What other reason is there to wait on the 6G if not because Apple wants their first MultiTouch device to be the iPhone, with iPods following suit?
  • Even if we assume the iPod will not sport the iPhone’s interface, then what will it have? I don’t believe the interface can stay the same, expectations are too high and it will not be construed as a “true” update (a 5.9G won’t fly, people want a 6G). IPod sales in the last quarter were down slightly from the quarter before, perhaps its age is finally catching up. Even the mighty iPod needs a little infusion with excitement now and then. Apple is well aware of this.
  • Why exert any effort developing a new interface for 6G when you have this fabulous MultiTouch technology? If you did develop something new, whether it’s “better” or “worse” than the iPhone people are going to feel cheated on one device or the other. The resulting bad press will hurt sales for whichever device people feel got slighted.
  • Apple spent all this time and money on MultiTouch, and will use it only in one device family? That makes no sense. The 6G iPod will use it for numerous reasons: 1) No expense necessary to develop an alternative iPod interface; 2) Cost savings from ordering more of the same screens, etc., and support training for both devices; 3) Each device serves as advertising for MultiTouch (and for each other); and 4) Keeping MultiTouch exclusive would hurt Apple far more than help. It could give the impression that it’s too device-specific, and not easily applicable to other devices.

Reason #3 above I can expand with the scenario that many people a bit skeptical of the touch interface would now get to see it in action (on the iPod), presumably love it, and be far less concerned about it in the iPhone. In my opinion, the more people’s hands into which Apple puts MultiTouch, the better.

In short, the TUAW article offers no plausible explanation (indeed, doesn’t even discuss) what the next — and much anticipated — generation iPod will be. When one takes that into consideration, it’s hard to imagine something that isn’t very close to the iPod capabilities taken from the iPhone, MultiTouch and all.