2nd Half

You tell me.

First, we have Alan Krueger, the President's new choice as chairman of the White House Council of Economic Advisers.

My wife and I were discussing the recent Supreme Court decision where they rejected a California law that restricts the sale of violent video games to minors.

We often hear the small bits of news on the radio or read a headline about things like this. And I sometimes wonder about the nuts and bolts and facts about how Supreme Court decisions are reached. So, tonight, after returning home from the Marin County Fair, I decided to download the decision text and read the whole thing.

It was a 7-2 decision, delivered by Justice Antonin Scalia, with Justices Clarence Thomas and Stephen Breyer both filing dissenting opinions. And while concurring with the decision, Justice Samuel Alito (joined by Chief Justice John Roberts) wrote about concerns regarding the differences between the technology of video games and that of books and movies and the need to raise caution about where the technology will go in the future.

The majority opinion focused most of its energy around a First Amendment argument, noting that there are only a few special cases where speech can be controlled. Specifically, they noted that these include: obscenity, incitement, and fighting words. I won't go into those, but needless to say, they seem to be backed up by references to earlier cases.

What struck me most in the entire document was this piece that appears near the end of Justice Breyer's dissent writing. I found it very compelling and came away feeling that the Supreme Court erred on this decision. For those interested in reading the decision, you can download the pdf here.

"...a State can prohibit the sale to minors of depictions of nudity; today the Court makes clear that a State cannot prohibit the sale to minors of the most vio­ lent interactive video games. But what sense does it make to forbid selling to a 13-year-old boy a magazine with an image of a nude woman, while protecting a sale to that 13­ year-old of an interactive video game in which he actively, but virtually, binds and gags the woman, then tortures and kills her? What kind of First Amendment would permit the government to protect children by restrict- ing sales of that extremely violent video game only when the woman—bound, gagged, tortured, and killed—is also topless?"

Featuring, in pairs, from left to right:

• Early Girl - 50 Days (Hybrid)
• Husky Cherry Red (Hybrid)
• Cherokee Purple (Heirloom)
• Red Beefsteak (Heirloom)

I had the "opportunity" to be near an Apple store in Corte Madera, CA today (not far from home). So, my wife and I decided to drive down to the Apple Store and see how long the line would be. I figured that if it's not too bad, she can shop in the other stores while I wait in line.

We arrived at the mall at about 4:15pm, with the iPad 2 scheduled to go on sale at the store at 5:00pm. According to one of the Apple employees walking the line, there were about 150 people ahead of me. And while she was unable to share how many iPad 2s they had, she said that people in our area of the line might be able to buy one today. With that info, I was somewhat encouraged.

I'd never waited in line for an Apple product before, and since the weather was cooperating, I thought "what the heck!"

I talked with Rob, the guy in front of me during most of the wait. He had his cute young son with him who was playing games and watching things on an iPod Touch.

So the line begins to move and people start to get excited. From time to time, Apple employees come down the line to get people more excited. They walk by with a camera to get reactions and are generally upbeat. They tell us that as we get close to the store, there will be someone handing out tickets. And that we need to know what model we want to buy. Then the ticket person will give us a ticket for that particular model. It seems they've got exactly 1 ticket available for every unit that they have in stock today. Great idea as it will really keep things moving along.

So, I'm talking to Rob in front of me and we spent a bit of time discussing the 3G or WiFi-only options. We both want a 64GB device and we both want black ones. I'm wanting the 3G (AT&T) model, but am willing to go without the AT&T 3G if they don't have it when I get up there.

Then an Apple employee comes along to tell everyone that there are no more AT&T 3G units in any color or at any memory capacity. I think "ok, I'll go with black, WiFi-only, and 64GB." This is the same unit that Rob (directly in front of me wants). We get closer and closer...close enough to begin to see Katie, the Apple employee with the compartmentalized box of magical tickets.

Oooh, oooh! We're getting closer!

We're there! We're right in front of Katie with the box and another Apple employee. And then we hear the guy in front of Rob request a Black, WiFi-only, 64GB unit. Katie scans the compartmentalized box and lifts the ticket out of the box, hands it to the man, and says "that's the last one of those." Rob and I look at each other in amazement. We both just spent about 90 minutes in line and there's no more of what we want.

Ok, that's the bad news. I go on to ask Katie how often they'll be getting shipments. She says that they'll get some every day, but they don't know what models they'll be. "Every day? I say." She says "yes" and I say "great, I'll be back in the next few days." Rob and his son decide to head home for dinner and I ask if I can just go into the store and play around with the iPad 2. They let me in, I fiddle with one of them for a while, I leave the store, call my wife and we head home.

All in all, it was a neat and fortunately only 90-minute experience. I'd guess that they're going to sell a boatload of these things over the weekend.

A very shiny Apple indeed!

First, I am both an Apple stockholder and an Apple product user. We're a 3-person household. 3 iPhones. 3 MacBook laptops, 2 Mac Pros, iPods of varying generations (too many to count/find).

Second, my thoughts and prayers go out to Steve Jobs and his family for a quick recovery.

Over the last several years, I've thoroughly enjoyed listening to Apple's earnings conference calls. And I have to say that what drove me to write this post was that this one was so incredibly chock full of what I can only call "growth and opportunity out the ying yang."

I'm just going to list some of my favorite highlights from the call. I'll start with the basics that all the analysts understand.

• Revenue: $26.74 billion (vs. $15.68 billion year ago qtr)
• Gross Margin: 38.5% (vs. 40.9% year ago qtr)
• Net Income: $6 billion (vs. $3.38 billion year ago qtr)
• EPS: $6.43 per diluted share (vs. $3.67 year ago qtr)
• Mac units: 4.13 million
• iPhone units: 16.24 million
• iPad units: 7.33 million
• iPod units: 19.45 million

Insane, I know.

Now for the "Growth and Opportunity Out the Ying Yang" stuff...

Mac

• 19 consecutive quarters of growing faster than the market
  • Worldwide growth: 23% year over year vs. 3% growth in the overall PC market; almost 8x the market
  • Asia Pacific: 67% year over year growth; almost 10x the overall market
  • Japan: 56% year over year growth; 6x the market
  • Eu & US: double-digit growth, compared to a contracting overall market
  • And the Mac share is small relative to the market
• MacBook Air was a "phenomenal part of the Mac growth in the December quarter" per Tim Cook

iPhone

• 16.2 million units vs. 8.7 million units year over year; 86% growth
• Average Selling Price is $625
• 185 carriers in 90 countries
• Asia Pacific/Japan grew more than 2x over last year
• 88 of the Fortune 100 are testing or deploying
• Still has a low share of the 1 billion+ handset market
• Paraphrasing Tim Cook: "we still have a sizable backlog and I can't tell you when supply will meet demand"

iPod

• iPod Touch represents more than 50% of all iPod shipments
• iPod Touch has had 27% year over year growth
•  

iPad

• 7.3 million units vs. 3 million in the prior quarter
• Shipping to 46 countries (20 were added in the December quarter, 15 more added in January)
• 80+% of the Fortune 100 are testing or deploying (up from 65% in the September quarter)
• Average Selling Price is $600
• 15 million units sold in the 1st 3 quarters
• IDC estimates that the market will grow by 4x over the next 2 years

iTunes

• 400,000 television episodes rented/purchased per day
• 150,000 movies rented/purchased per day

Retail

• 323 stores exist; 87 are outside the U.S.
• $3.85 billion vs. 1.97 billion year over year; 95% growth!!!
• 851,000 Macs vs. 689,000 Macs year over year, 24% growth
• About half of Mac buyers are new to the Mac
• Average Store Volume: International is higher than the U.S.
• Revenue per Store: $12 million vs. $7.1 million year over year, 69% growth!!!

 Asia - THE REAL STORY

• Several years ago, Apple decided to make China a priority
• Greater China: Hong Kong, Taiwan, Mainland China
• $2.6 billion in revenue in December quarter, a 4x increase over the prior quarter!!!
• 2 years ago, Apple did $3 billion for the entire fiscal year
• Japan: up 83% year over year; per Tim Cook "stunning"

As Steve Jobs was quoted saying in the earnings release, "We're firing on all cylinders and we've got some exciting things in the pipeline for this year..."

I, for one, can't wait to see how they'll top this.

I'll close with my favorite Tim Cook line of the entire call

"Excellence has become a habit."