iPod Lifts Apple

The iPod is being very good to Apple Computer.

Apple sold 860,000 iPods in its third fiscal quarter ended June 30, more than twice the 336,000 it sold in the same period in 2003. During the same quarter, iPods outsold Mac computers by 24,000 units, helped by improved supplies of the new iPod Mini for the US market and by the introduction of the player into the global market. Approximately 6% of iPods sold were Hewlett-Packard branded devices. Counting business done by Apple's iTunes Music Store, music products now account for 27% of the company's revenue, almost five times last year's level. By comparison, revenue for Mac computers grew only 2.6% over the past year.

Apple so dominates the digital music market that "iPod" and "iTunes" are almost generic names for portable players and downloadable music. The company owns 61% of the market share in portable music players, according to statistics cited by research firm NPD Group, Inc.

For its fourth fiscal quarter, ended September 25, revenue was up 37%, with net profits more than double the level of the same period a year earlier, the Cupertino, CA–based computer company reported in mid-October. Net income for the quarter was $106 million on revenue of $2.35 billion, compared with $44 million on revenue of $1.72 billion a year earlier. Apple CFO Peter Oppenheimer told the financial press that he expects the company to see revenue of $2.8 billion to $2.9 billion in the current quarter, ending in late December, boosted in part by the rollout of new Apple mini-stores, six of which opened in California, Washington, and New Jersey in October. The stores average only 750 sq. ft. compared to 4000 sq. ft. for Apple's typical stores. Apple now has 86 stores in the US and Japan, with three more scheduled to open by year's end.

Apple's success isn't without a downside, however. The company is being sued by several resellers who have charged that Apple gives preferential pricing and support to its own stores. According to reports from London, it could also be facing a $35.65 million settlement with Apple Corps, the Beatles' record label, in a dispute launched in July 2003 over use of the name with regard to music products. Reportedly named for co-founder Steve Jobs' favorite musical group, Apple Computer has twice settled with Apple Corps over use of the name, first in 1981 and again in 1991. In those cases, settled for $80,000 and $26.5 million respectively, the two companies defined the arenas where the "Apple" moniker could be applied: the music industry for the record label, and the computer industry for the computer company.

The current dispute has been delayed while Apple engaged new legal representation. Apple's new law firm is Freshfields Bruckhaus Deringer, according to a report in Mac World. A separate report speculates that Apple could be exonerated from charges relating to violating its trademark agreement with Apple Corps, because the 1991 agreement defined music products as physical commodities such as CDs, not as digital files.

Meanwhile, Jobs is dickering with the city of Woodside, CA over the fate of his 17,000 sq. ft. home. Jobs is seeking to demolish the 1920 building over the objections of local preservationists who claim it has historical value as an excellent example of Mission Revival architecture, according to the Palo Alto Daily News. We should all have such problems.

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