The Apple of everyone’s eye... (Continued)

21 MILLION IPODS ADD UP TO APPLE'S BEST QUARTERLY PROFIT, REVENUE

Apple -- maker of the wildly popular iPod -- just had its best quarter ever, reporting record revenue of $7.1 billion, and record profit of $1.0 billion, or $1.14 a share, for its first fiscal quarter.

Apple said it shipped more than 21 million of the digital music and video players in the three months that ended Dec. 30, up 50 percent from a year earlier. Shipments of Macintosh computers, meanwhile, were up 28 percent to more than 1.6 million. Profit was up 78 percent from a year earlier, while sales were up 24 percent.

''We've just kicked off what is going to be a very strong new product year for Apple by launching Apple TV and the revolutionary iPhone,'' Apple Chief Executive Steve Jobs said in a statement announcing the results.

Apple's shares were falling in extended trading, after closing at $94.95, down $2.15, or 2.2 percent. However, the Cupertino company's stock is trading near its all-time high of $97.80, set this month when Jobs introduced plans for the all-in-one cell phone/iPod/pocket computer iPhone and the Apple TV device, which will allow you to use your big-screen television to watch content stored on your iPod or computer.

BUT!

Earnings reports are usually staid affairs, but Apple's financial update today could have a bit of drama. Among investors and analysts, there's already excitement about how the company did during the just-completed holiday season. And many are eager for Apple's take on what its new iPhone will mean for the company's earnings. But another issue of note could spice up the proceedings. The U.S. Attorney's Office announced Friday that it has launched a criminal investigation into Apple's past stock-option grants. Apple's conference call today will mark the first chance for analysts to query the company over the government's investigation and its response. Many investors would like the issue to go away. But that doesn't mean they're not thinking about it. Apple's stock is now a more risky bet thanks to the federal investigation, said Darren Chervitz, director of research at mutual-fund company Jacob Asset Management, which owns Apple shares. The risk to Apple is that the investigation could lead to Chief Executive Steve Jobs' resignation, just as similar problems at other companies have led to the resignations of their CEOs, he noted. ''Clearly, this is a small cloud,'' Chervitz said. ''Jobs is one of the few CEOs who would have a pretty significant impact on the stock price if he had to leave.''

Why is Apple not seen in Asia as much?

Every time somebody asks them why the iTunes Store won't sell songs or movies to consumers in Asia, all we hear are vague and mumbled remarks about "the issues that still need to be resolved." This is invariably followed by another sentence saying they are not authorized to say more.

Here is what your marketing director for Asia told the Agence France-Presse in Hong Kong when you launched your movie service in the United States in September.

"We cannot comment on the specifics but it is true that iTunes is not available in Asia. That goes for music and movies."

Is that any way to talk to your customers?

I asked your company's visiting fireman from Singapore—we only see him whenever Apple introduces new products here in the Philippines—how long it's been since the iTunes Store opened for business in the United States.

Five years, he said. Does that mean that a company as innovative as Apple has been unable to resolve those issues in half a decade?

So I asked the guy: Where are Asian iPod buyers supposed to get their music? Limewire? Other file-sharing sites?

"For Asia, we recommend that consumers rip their music from their audio CDs or download any of the thousands of free podcasts," he said.

So, I asked, we can do anything with our iPods except buy songs and movies from the iTunes Store? That's correct, he said.

Now Apple will not say how many of the 60 million iPods out there are in Asia, but officials have told the Mac News Network (http://www.macnn.com/) that the iPod doesn't enjoy the same market leadership here as it does in the United States, Japan or Australia. Yet in the same article, your chief financial officer, Peter Oppenheimer, is quoted as saying that Apple sees the rest of Asia as an opportunity to increase market penetration.

Here's an idea. Start treating buyers here with the same respect that you give your customers elsewhere in the world. Stop redlining Asia with vague talk about piracy. If you have a piracy problem in this region, why not at least say so and level with us?

Let's speak plainly.

Intended or not, Apple's decision to withhold the online sale of music and movies in this part of the world is an insult to people who buy its products. The red line tells us you think of us all as digital pirates, unworthy of trust. This is the stark truth that your people dance around whenever we ask them why Apple doesn't sell music here.

So, is Apple worried that piracy syndicates in this part of the world will start downloading songs for 99 cents apiece and start selling them for 10 cents or burn them on CDs to sell in Third World markets? But that's happening already, even without iTunes.

Or maybe it's the music publishers who won't let you sell their songs in Asia for the same reasons. But if this is so, why not just say so instead of taking the heat for their fears?

Let's look at some figures. Apple claims to have sold 1.5 billion songs to date through its iTunes Stores, with its online catalog of 3.5 million songs. Sales in Europe, a market Apple opened in 2004, have shot up from 50 million to 200 million songs. Not bad.

But the International Federation of the Phonographic Industry (IFPI) estimates that almost 20 billion songs were illegally downloaded in 2005 alone—and this was based on consumer research in 10 music markets including the United States, the United Kingdom and Germany, countries where the iTunes Stores already operate. Canada, where iTunes operates, was estimated to account for one billion of the songs illegally downloaded last year.

So, when your folks here tell us they can't sell us songs because of piracy, something just doesn't wash.

Ironically, by not selling to large swaths of Asia, Apple is indirectly encouraging piracy because iPod owners wouldn't be able to buy songs online even if they wanted to.

What consumer wouldn't want to own a legitimate product over a pirated one, as long as the price is right? When the prices of legitimate VCD and DVD movies dropped here, sales went up, despite the availability of cheaper pirated versions.

Oh, one more thing. Why take our word for it? Even the IFPI says one way to fight piracy is to promote legal services.

Courtesy:

www.manilastandardtoday.com, www. macworld.com, www.siliconvalley.com, www.wsj.com, www.apple.com, www.zdnetasia.com, www.ft.com, www.wordpress.com, www.cnn.com, www.tectonic.co.za, www.marketwatch.com

~~
Varun Nagpal,
Corporate Study Team,
IMERT, Pune