We’re also waiting on any further color that comes from Verizon’s wireless business on the number of iPhone 4S units sold so far. AT&T revealed that it had sold one million as of Tuesday. Verizon provided indication of how well its iPhone 4S sales are going, but said it sold two million older iPhones during the quarter. All that and more you can find in my notes from the conference call, below:

5:27 am: So I never thought I would miss the annoying light-FM music that plays before other earnings calls. But I am. I’m hearing Verizon Wireless radio ads instead.

Anyway, good morning from New York. The conference call is due to start in less than two minutes.

Here are a few things I’m pulling from the slide presentation. Verizon sold 5.6 million smartphones in the quarter. No word yet on the iPhone versus Android versus BlackBerry mix. Perhaps there will be some color on that during the call.

Also, 1.4 million LTE devices were sold, and 39 percent of its subscriber base uses smartphones.

All that explains the 20 percent surge in data revenue.

Okay, the call is under way.

5:33 am: Some other things from the presentation: FiOS amounts to 59 percent of consumer revenue. There are now four million FiOS subscribers, up by 131,000 subscribers.

5:34 am: Here’s the result: 49 cents per share EPS, a doubling of EPS over the year ago.

And now we have CFO Fran Shammo. Solid execution and earnings performance. Would have been better had it not been for the hurricane and that strike. Tough quarter.

A 2.6 percent dividend increase pushes it to $2 a share. It’s the fifth consecutive year the board has authorized a dividend boost.

Increasing customer demand for smartphones, tablets and Internet devices. (Tell me something I didn’t know.)

Shammo: Naming off some enterprise customers and mentioning Terremark and CloudSwitch, two companies it acquired in recent months.

Hurricane caused severe troubles in wireless business. That and the strike created a severe backlog in the FiOS business. This hurt the EBITDA margin by 250 basis points. Still, the overall wireline revenue mix increased.

5:39 am: $27.9 billion in consolidated revenue.

49 cents in EPS includes seven cents of adjustments from the storms and strikes.

Cash flow: FCF up $1.9 billion to $5.1 billion. Capex was $3.6 billion slower sequentially. $1.8 billion of that was in wireless.

Second-half spending will be lower than in the first half. 4G service is in 165 markets.

186 million 4G pops.

Wireless business: An impressive quarter. Highest retail service revenue growth since 2009, up 6.9 percent. $17.7 billion, up 9 percent year on year. Retail up 6.9 percent.

Total data revenue was 6.1 billion, and amounts to 40 percent of wireless revenue.

Retail wireless customer growth up 8.6 percent.

$50 unlimited plan will help retail prepaid presence.

Again with blaming anticipation of the iPhone 4S for slower than expected customer adds.

Churn metrics .94 percent. (That’s lower than AT&T, for sure.)

Two million iPhones sold during the quarter.

Sold 1.4 million 4G LTE phones.

Internet device ARPU is $49. (What do you know — that’s exactly what I pay every month for my Mi-Fi service.)

I missed a key metric from a little earlier: Shammo said that about half of smartphones were Android phones.

Margins in wireless are going up. EBITDA margin was 48.7 percent, up from 45.4 percent.

Now on to the wireline business.

Total wireline revenue was steady at $10.1 billion. Down slightly, both year on year and sequentially.

5:50 am: Storms and strike cost $250 million in the quarter on the top line. Consumer was $3.4 billion.

FiOS Internet subscribers to 4.6 million, 35 percent penetration of homes open for sale. 8.6 million broadband connections.

Addition of Terremark, the hosting company Verizon bought earlier this year, added $100 million in revenue.

Some changes in pricing to voice packages on the wireline business affected revenue by about $90 million year over year.

Summing up and getting ready for Q&A section.

5:55 am: And here’s the Q&A.

Question about subscriber adds on the retail side in wireless, and then margin pressure in the wireline business.

Shammo: The retail service revenue and the retail post paid from 6.2 to 7.2. I said we were on a glide path to accelerate our ARPU growth, and I continue to see that. We had a $61 million decline. It had to do with AllTel traffic moving off our networks.

Shammo: When you consider the storms and the backlog that we have on the FiOS side and the enterprise side, we will increase the margin. There will be an echo effect in booking that revenue. Terremark had an outstanding quarter. That will flow into the fourth quarter. We started to recover from the storm in the final weeks of the third quarter. Starting to eat into the backlog. It’s about how quickly we can get there.

Question from UBS: Give us more detail on five cents of storm-related costs. More expenses in Q4?

Shammo: As you know, this was an unprecedented storm. There was damage to network facilities. We had 4,000 poles down, damaged countless cables, 820,000 more dispatches in our core, 254 (?) central offices running on generators. The team has done a great job getting this back to normal. We recovered late in the quarter, but there will be a trickle into fourth quarter.

Question from J.P. Morgan: With wireline margins dragging a bit and wireless margins probably down in the fourth quarter, what to expect? Also, what are you seeing from customers, given the economy?

Shammo: Overall, from an economic perspective, we are seeing some impact. The start-ups have not been created from an economic standpoint. In the enterprise, first and second quarter, we showed growth without Terremark. I think we’ll improve in the fourth quarter; from an overall enterprise perspective, it’s all about cloud services. Overall on EPS, given this event in Q3, we will hit our guidance.

Question from Morgan Stanley: Update on labor negotiations? What might impact be on fourth quarter, given that?

Shammo: We continue to speak to the union. We said this would be a marathon, not a quick negotiation. We need cost-structural change. It is not sustainable with 100 percent benefits and 100 percent pensions. On the fourth-quarter charge, it’s too early to tell.

6:05 am: Question from Wells Fargo: We’ve all seen iPhone 4S from AT&T. But as we look at the next generation of the device, you have a clear opportunity for upgrades.

Shammo: We’re extremely pleased. We ran out the first day. We continue to be on allocation from Apple. Not going to get into volumes. (No number!) The ratio of upgrade and new has not changed pre- and post-launch. Third-quarter performance will continue. From an overall device perspective, the lead we have in LTE is unsurpassed by any competitor. More 4G this quarter than last quarter. If you look at Internet devices, 95 percent are 4G LTE. High-end users are moving to 4G.

6:11 am: Question from Bank of America: Are you able to comment at this stage of the game on any impact stemming from this intercarrier compensation refresh? Second: You called out the AllTel roaming impact. What’s your impact from Sprint?

Shammo: We are fully supportive of the regulatory change the FCC is heading up. Complete overhaul of universal service subsidy, we are all in favor of that. We have been a leader in the intercarrier comp; from a benefit standpoint, we are a net payer, but there will also be some put-and-takes in our portfolio. We’ll share them later.

The impact of Sprint is now near the numbers being reported. Our revenue from Sprint for roaming is not material.

6:17 am: Question from Nomura: AT&T is out with iPhone 3GS for free and lower-priced iPhone 4. Any comment about competitive landscape with that? What is the behavior of those customers with the iPhone 4?

Shammo: As we have said, when we compete, we outperform the industry. When we compete head to head, we win that competition. The other thing is that when you look at the net adds, as far as 4 and 4S, the 4 can be upgraded to 95 percent of the features.

Question from Piper Jaffray about upgrade rates. And another about prepaid versus postpaid.

Shammo: The upgrade rate is steady, but was down in anticipation of the new iPhone. We eliminated the New Every Two program, but we haven’t seen much of a benefit yet. We’ll see that financial benefit next year.

6:22 am: Question from Credit Suisse: Are we looking for $9.6 billion in Capex this year? And where does that go? He’s specifically asking about wireless Capex.

Shammo: The plan for wireless is $8.9 billion on wireless. Nothing on next year.

6:25 am: One more question: BMO Capital asks about FiOS scaling.

Shammo: From an overall perspective, the biggest cost of FiOS is content. The profitability increased. The operating efficiency of FiOS is there. The issue for FiOS is to move people off copper to FiOS.

And that concludes the conference call.

The world’s largest cell-phone company by volume posted a net loss of €68 million ($93.6 million), beating Wall Street expectations of a €321 million loss. Sales dropped 13% to €8.98 billion.

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HTC’s strong results reflect rising demand for smartphones as consumers continue to switch from traditional cellphones to gadgets that allow them to browse the Internet, write emails and watch videos.

The Taiwan-based smartphone maker, which is best known for making phones using Google Inc.’s operating system, has been growing at a rapid clip and is neck-and neck with Nokia Corp. in terms of market capitalization.

Read the rest of this post on the original site »

Aghast at the U.S. International Trade Commission’s ruling on its first complaint against Apple, Nokia has filed a second, accusing Apple of infringing its patents “in virtually all of its mobile phones, portable music players, tablets, and computers.”

At issue in the complaint are seven patents that Nokia argues “are now being used by Apple to create key features in its products in the areas of multi-tasking operating systems, data synchronization, positioning, call quality and the use of Bluetooth accessories.” Taken together with the IP cited in Nokia’s previous ITC complaint and related cases in the U.S., U.K., Germany and The Netherlands, the company has nearly four dozen patents in play in its suit against Apple.

“Our latest ITC filing means we now have 46 Nokia patents in suit against Apple, many filed more than 10 years before Apple made its first iPhone,” Paul Melin, Nokia’s VP of intellectual property said in a statement. “Nokia is a leading innovator in technologies needed to build great mobile products and Apple must stop building its products using Nokia’s proprietary innovation.”

Almost sounds like Nokia’s saying it invented the iPhone, doesn’t it? Which is ironic, considering the company is on the record professing its fondness for Apple’s handset.

Asked once about the striking similarities between a touchscreen device it was designing and the iPhone, Anssi Vanjoki, Nokia’s head of multimedia devices at the time, replied, “If there is something good in the world then we copy with pride.”

PREVIOUSLY:

• Nokia Sues Apple
• Did Nokia Sue Apple Before Apple Could Sue Nokia?
• Nokia’s New Focus Is Mobile Services? Sure It’s Not Lawsuits Against Apple?
• Apple Countersues Nokia for Copying iPhone (Plus Disputed Patents and Full Text of Counterclaim)
• ITC Investigating Nokia Over Apple Patent Complaints and Vice Versa
• Nokia Accuses Apple of “Legal Alchemy.” Stops Short of “Chymistry” and “Heresy.”
• Apple Vs. Nokia: The Battle of Britain
• Apple Vs. Nokia: The Battle of Britain II
• ITC: Apple Did Not Infringe Nokia Patents

Nokia has already announced the key piece of its strategy–a shift to Windows Phone for future smartphones. Now the company is set to talk about the financial implications of that and go through the rest of its strategy, which includes a mix of Symbian and even a dash of MeeGo.

The investor event is scheduled to start shortly and due to run until about 2 pm London time. Mobilized will have live coverage, providing our battery holds out. I’ll try to mention only the high points, however. Mobilized loves numbers, but it is awfully early for a whole lot of financial speak, especially for the U.S. insomniacs tuning in.

12:02 pm: Still waiting for things to get going. But if you really want something to do, we have plenty of earlier coverage, including the press conference and the YouTube video of Microsoft CEO Steve Ballmer and Nokia CEO Stephen Elop, as well as a chat with Elop on how he made his big decision.

12:05 pm: Okay, things are getting going as Elop takes the stage (the same one as the earlier press conference.

12:06 pm: Elop is reviewing things. Lots of talk of both challenges and gems. If you read his memo, or anything else he’s said recently, you have heard this.

Battle of devices to war of ecosystems, etc. Mobilized has this part memorized.

12:09 pm: Smartphone strategy is just one piece.

Reviewing the three alternatives that Elop considered–MeeGo, Android or some partnership with Microsoft.

As for Google, Elop says it is the case there are some advantages for that approach.

“There’s something happening there. There’s no denying that.”

However, Elop says the company was worried it would be late and be just one of many, and was not sure how it could leverage assets like its Navteq location-based services.

“Our sense was differentiation could be a pretty big challenge,” Elop says. “The risk for commoditization would increase dramatically.”

Feels profit would have eventually moved to Google, with handsets becoming a commodity.

“It felt a little bit like giving up and not enough like fighting back,” Elop says.

12:12 pm: As for Microsoft, Elop says both companies are bringing something to the table.

As expected, Elop is characterizing this as more strategic than just taking a license to Windows Phone. Talking about Nokia services like mapping, local advertising and other things that Nokia can bring to the table.

“It’s far more interesting than a simple licensing deal,” Elop says. This was the only strategy that makes it a three horse race with Google and Apple.

Elop says he is convinced that Nokia will be able to differentiate within the Windows Phone ecosystem on a sustainable basis.

12:15 pm: There were some challenges and potential disadvantages, he acknowledges.

Top among these is the fact that Windows Phone 7 is new on the market.

“It’s early,” he says. “Will it succeed?”

12:17 pm: Also, there is the issue of being locked in or a lack of control. Elop does not disclose terms but says the company has flexibility and “substantial control” over the future of the ecosystem.

“This is not your mother’s OEM deal with Microsoft,” Elop says.

12:17 pm: Elop says the deal is at the “term sheet” stage, noting that the companies have yet to sign the “definitive agreement.”

12:18 pm: Already the engineers are working through, and Elop says this deal will allow Nokia to move far faster than it has in recent years.

12:18 pm: He’s also making the cost-saving argument, saying Nokia can focus its investment, which he acknowledges hasn’t been getting the return it should.

Elop earlier acknowledged that the company expects significant cost savings from the move as well as substantial workforce reductions.

“Bottom line: Products that are more competitive,” he says.

12:22 pm: Operators are excited by a third viable option, Elop says.

“A two-horse race is not a satisfactory [situation] for operators,” Elop says.

Elop says that Microsoft-Nokia will be operator-friendly, as compared with Google and Apple.

12:24 pm: Elop talking about differentiation–a key concern of analysts and investors.

Elop talks about Windows Phone as offering differentiation form Apple and Google, but also insisting that Nokia has the assets and business terms it needs to stand out from other Windows Phones. He focuses on camera technologies and “unique relationship.”

Stresses again that this is not a standard handset maker agreement. But he also says that just because Nokia can change lots of things within Windows Phone, doesn’t mean it should.

Nokia, he says, must “resist the temptation to customize just for the sake of customization.”

12:27 pm: Now talking about Symbian. For those that missed it, Elop reiterates this is a transition strategy, but adds that the company still expects to sell 150 million more Symbian devices before that transition is complete.

12:29 pm: Strategy is more than just smartphones. He wants the company to be a leading force in connecting the next billion people to the Internet via phones in emerging markets. “The market for feature phones is pushing down the price curve and that is an opportunity for Nokia.”

Nokia will do incremental work in that area–things like Nokia Money for people that don’t have a bank account or telephone. Another, Nokia Life Tools, helps connect, say, farmers to market information.

This area is still a target for innovation, he says, but it also faces competition from Chinese-made phones based on MediaTek chipsets.

Elop says that the company must also plan for the future so that it can be disruptive down the road. “As they say in Finland, it is time to shoot ahead of the duck,” he says.

That’s where MeeGo comes in–the mobile version of Linux that until recently was seen as Nokia’s future. Nokia said that team will ship a phone later this year and then see where the future is headed.

12:35 pm: Want to point out this New York Times article that said both Google and Microsoft were offering hundreds of millions of dollars in engineering and marketing support in order to woo Nokia.

12:36 pm: Elop now talking about cost cuts, including significant job reductions.

“We are not announcing how many and in what country,” Elop says, but adds that the company wants to move quickly on that front.

He says that he has made changes to the business to ensure speed, including leadership structure changes aimed at ensuring accountability. “If things go well today, I’ll be the CEO.”

Of note, the two of the three business unit leaders are women–Mary McDowell, who will lead lower-end phones, and Jo Harlow, who will head the smartphone business.

12:40 pm: Nokia looking for a new leader for its services and developer division. The acting head is Tero Ojanpera, but he will soon be looking for other opportunities within Nokia, Elop says.

Also of note, Louise Pentland, who is head of the legal and intellectual property unit, is being elevated to the top leadership team.

“We have one of the strongest patent portfolios out there” he says, adding that he would encourage all players to take a license to said patents. (hear that, Apple?)

New leader of North American sales unit to be named in coming days.

“We are creating a different industry,” Elop says in closing his introductory remarks.

12:44 pm: Elop Brings on CFO Timo Ihamuotila to go through the numbers.

12:46 pm: Ihamuotila acknowledged Nokia didn’t meet the targets it had set out to achieve at its last financial analyst day.

“Our execution did not cut it.” he says.

12:49 pm: Ah, Now on to the good stuff. CFO talking financial impact from Microsoft deal. Says should be good over the long term.

Slide shows royalty payments to Microsoft causing lower gross margins, but says sales and marketing support from Microsoft should lower operating expenses.

“We will receive substantial go-to market support from Microsoft,” he says, without giving numbers.

12:52 pm: Ihamuotila talking now about the company’s long-term targets for devices and services period “after the transition period.”

Device sales to grow faster than the market, with operating margins of 10 percent or more–but this is only after the transition period, which the company has said could last this year and next.

Significant uncertainties in this period.

Ihamuotila shows a slide showing Symbian sales slowly giving way to Windows Phone with lower-end mobile phones remaining about half of sales.

12:57 pm: Ihamuotila shows chart of how it expects to cut R&D with the company investing less in services, more in entry-level phones and far less on MeeGo, though still some. The investment in Symbian will be replaced by a far lower investment in Windows Phone R&D. Overall, R&D should be a fraction of what it was.

1:02 pm: Over long term, Ihamuotila says that the Microsoft deal should help significantly boost the company’s Navteq navigation business.

“We think this new strategy is the best way to maximize long-term value, both to our shareholders and to other stakeholders,” Ihamuotila says.

On to Q&A for financial analysts.

1:03 pm: Question on how Nokia will keep employees motivated, something else and when to expect the first Windows Phone.

“Thanks for the one question” Elop quips, before addressing them in turn.

Elop says that the key is on focused innovation so they see the fresh opportunities (at least for the ones who don’t get cut by the large workforce reductions also promised).

He also pointed to his sharply worded memo, which he said was designed to convey the message that “Here is the truth, we’re making decisions and we’re moving forward.”

Won’t give date on first Windows Phone, but says again that the move will allow a substantially faster pace than the company was on with Symbian.

1:07 pm: Elop is asked about some of the challenges with Microsoft and Nokia each responsible for different pieces of software and services, as opposed to Google and Apple, where things are more integrated.

“We wanted to drive operational simplicity,” Elop says, adding that the companies talked about other arrangements, though not a full-on acquisition. The companies, Elop says, decided not to go with the operational complexity of a joint venture.

1:10 pm: Elop says Nokia has opportunities to differentiate from other Windows Phone devices, but adds it is in Nokia’s interest for there to be other strong handset players supporting Windows Phone.

“We’ve got to make Windows Phone successful,” he says.

Nokia’s mapping technology, he says, will benefit rivals like Samsung and HTC. “We’re willing to make those trades,” Elop says.

1:11 pm: Elop is asked why he feels comfortable with a “bet the farm” strategy on Microsoft, a company he clearly knows well.

Elop points out that it was harder to see how Microsoft would rapidly be successful without someone like Nokia.

“But this is now different,” he says, adding that this is now an ecosystem that Microsoft and Nokia are jointly helping to build.

Mapping and local advertising were not part of the ecosystem before the Nokia-Microsoft partnership.

As for impact of the transition, it’s hard to say, Elop says. Symbian is strong in some places where Apple and Google are present today.

1:14 pm: Asked whether Nokia will remain profitable during the transition. “It’s hard to say financially, and I am not going to provide any further specific guidance.”

1:17 pm: Elop won’t say when the first Windows Phone will ship, but lots and lots by next year at various price points.

“We’ll be shipping in volume in 2012,” he says.

1:20 pm: Another two-parter! 1) Why will Symbian be supported if it is transitioning away? 2) Why does Nokia think it will be able to have double-digit operating margins using someone else’s platform?

Elop: They recognize Symbian is key to Nokia being able to transition, but he agrees that consumers will have to want the Symbian phones Nokia builds. CFO also notes that less than half of Symbian phones are sold through carriers.

As for question on margins, CFO says the company has opportunities for higher margins around services and advertising.

1:23 pm: Asked about how the company is confident Windows Phone can get to lower prices, Elop says that was a key consideration, down to which chipsets will be supported, etc.

Between the two companies there was a lot of work to get a high degree of confidence.

“That was a critical evaluation,” he says.

That said, Elop agrees there is a smartphone market below Windows Phone that Nokia will manage with an evolution of today’s Series 30 and Series 40 operating systems.

1:31 pm: Elop: Some of the hardware designs that would have run MeeGo or Symbian will be repurposed for Windows Phone. Some devices may come out with similar models for both Windows Phone and Symbian.

1:32 pm: Question again on who pays whom in Microsoft-Nokia. Is there a lump payment from Microsoft?

Elop doesn’t answer and instead refers to slide that shows opportunities on both sides. Saying value going both ways. As for Microsoft’s payments, “That is a significant part of the conversation,” Elop says.

1:35 pm: Two good questions: Can Windows Phone be put on any current devices? What happens to QT development layer that Nokia bought and had sought to unify developer approach?

Elop: It’s not as simple as plugging in and downloading on to current phones, though some technologies can be repurposed.

QT continues to be the development for Symbian and lone MeeGo device. Also could have a role on low-end devices.

However, Elop says, “We are not proposing a QT on Windows Phone” approach. Adding another development environment could fork the ecosystem, which is not good for Nokia or Windows Phone, he says. Development environment for Windows Phone will be Silverlight and XNA–Microsoft’s current tools.

1:38 pm: Asked about branding, he says in some cases you will see both Microsoft and Nokia brands. Examples could include Nokia Search powered by Bing or Bing maps powered by Nokia, though he says those are examples and not final choices.

1:39 pm: Asking about tablets, questioner points out that Nokia had an early lead in tablets, but Apple “stole the show.”

“We are not announcing today a specific tablet strategy,” he reiterates, saying that Microsoft creates opportunities.

Elop notes that there are rumors of Windows Phone and Windows that could power tablets.

“We could do that,” he says. “We might do that.”

Also an opportunity for Nokia to step back into the game using its own software.

1:41 pm: Elop wrapping up.

“We have set a new course for Nokia,” he says, adding that despite what has been written, Nokia is still an incredibly powerful company, though perhaps not in North America. “Today we are diving forward” he says. “We have a strong partner in Microsoft who is incented as are we in making this successful.”

Investor guy closes by reminding there were forward-looking statements. He’s still going as people leave the room.

COMPLETE COVERAGE:

• Nokia’s Stephen Elop Talks to Mobilized About the Big Microsoft Deal (Video)
• Massive Layoffs Expected at Nokia
• Nokia’s Microsoft Partnership: Does the New Strategy Add Up?
• Live From the Nokia-Microsoft Press Conference: It’s a Windows Phone World After All
• More From Nokia: Forecast Gets Cloudy, Plus Expected Executive Changes
• Nokia-Microsoft: What Steve Ballmer and Stephen Elop Have to Say in Their Joint Letter
• Nokia Confirms Microsoft Partnership With YouTube Video
• R&D Spending: Nokia Vs. Apple Shows Size Doesn’t Matter
• Not Seeing Much Return on That Massive R&D Spend, Are You, Nokia?
• Nokia: Big and Slow

Nokia spends about five times as much on mobile R&D as Apple. In fact, Nokia has nearly as many engineers working on its smartphone software platforms as Apple does for its entire product line. Says Dediu, “Symbian alone may cost twice as much to develop than the iPhone (including the hardware).”

A shocking metric, if correct. And a pretty dismal return on investment–unless there’s another version of Symbian in the pipeline that will best iOS.

PREVIOUSLY:

• Not Seeing Much Return on That Massive R&D Spend, Are You, Nokia?
• Nokia: Big and Slow

Hamstrung by institutional inefficiencies and the complexity of its legacy platforms, Nokia is spending a lot of money to gain traction in markets in which its handset lineup is clearly uncompetitive, and with little success. Instead it’s suffering steeper share losses at the high end of the market and margin erosion across its entire portfolio. And it’s spending about 4 times as much on R&D as Apple, which has recast the smartphone space from its own vision.

As Bernstein analyst Pierre Ferragu observes, Nokia’s business appears to be melting like an ice cube. “At this stage, we believe that even a good success of Symbian^3 would barely stabilize the business,” he says. “A real comeback will need much more effort … and a lot more time, unlikely to happen in the next couple of years, in our view.”

So what can be done? Though some observers argue Nokia should scrap Symbian, Ferragu says that’s impossible given the number of assets the company has that depend on it. The company can’t really make a big move to Android, either. That would undermine its current service strategy and alienate partners, European carriers looking for an alternative to iOS and Android, and Nokia’s developer community.

What it should do, he says, is redouble its efforts on MeeGo and make it a viable competitor to Android and iOS in markets like North America, while continuing to push Symbian to the rest of the world. And then it should integrate the two through QT, its cross-platform application and UI framework. Says Ferragu, “By migrating all UI developments of Symbian on QT, the company can generate significant cost savings, progressively drive the platform towards a single UI between MeeGo and Symbian and a single development environment for applications.”

What’s left to do after that?

Hope for the best.

As CEO Stephen Elop said during the company’s last earnings call, “Nokia must compete on ecosystem to ecosystem basis. In addition to great device experiences we must build, catalyse or join a competitive ecosystem. And the ecosystem approach we select must be comprehensive and cover a wide range of utilities and services that customers expect today and anticipate in the future.”

“Whatever the strategy is we outline on Feb. 11, we very clearly ensuring that it will give us the opportunity to reopen markets such as the U.S. and some others, where we have not recently been present.”

A data-service pricing document leaked to Engadget suggests Verizon has scrapped its $15-for-150MB plan, leaving a mandatory $30-per-month unlimited data plan as the sole option for “feature phones and 3G smartphones” like the iPhone. Note the specificity of that designation–it excludes upcoming LTE handsets, which will presumably debut with higher, tiered data-pricing plans.

Meanwhile, rival AT&T continues to offer the iPhone with two capped data plans–200MB for $15 a month, and 2GB for $25.

[Image Credit: Engadget]

That’s changing starting today, as the company begins to stick “pre-roll” ads in front of several thousand of its clips, including a new set of music videos that hasn’t been available for YouTube mobile until now.

YouTube will start running videos from Vevo, the “Hulu for Music” joint venture that it works with. And it will run ads with those clips, as well as a few thousand other clips, primarily from its network of semi-pro “partners.”

The caveats: The music clips will run only on Google’s Android handsets, and not on Apple’s iPhone or any other competitors’ phones. And the clips will be limited to whatever Vevo has available in its catalog. Which means, most notably, that Google won’t be able to show clips from Warner Music Group, since the company still hasn’t come to terms with Vevo.

That doesn’t mean iPhone users have to go without music videos, of course: There’s a Vevo iPhone app, if you’re so inclined, and there’s plenty of other ways to get music videos on your phone if you want or need to. It’s just that Google won’t make any money when you watch them.

The big picture is that YouTube says it is now generating 200 million video views a day from mobile devices (that number includes both phones and tablets like the iPad), up 3x from last year. And now it wants start turning those views into dollars, or at least pennies.

Worth noting that while YouTube has been most aggressive about putting “overlay” ads on the clips it runs on the Web, it’s not doing so here.

That makes sense, because the format would be particularly annoying on a small screen, where the real estate it eats up would be even more noticeable. And because the point of overlay ads is to get a user to click on them, which opens up a new site. That works fine on the Web, but, again, it seems like a very tough sell on a handset.

Skype did not confirm the price, which was rumored to be about $100 million, according to BusinessInsider.com.

Skype said Qik has 60 employees, headquartered in Redwood City, Calif., and has an office in Moscow, Russia, and that it expects to close the transaction later this month.

Qik runs on more than 200 mobile phones, including Android, iOS, Symbian, BlackBerry OS and Windows Mobile. It also comes preloaded on a wide variety of mobile handsets through valuable ç it has inked with handset manufacturers and wireless carriers. The partnerships helped rocket Qik’s growth. At the beginning of 2010, Qik had 600,000 users, and it ended the year with five million.

Qik has been trying to position itself as the alternative to Apple’s FaceTime application, which allows people to make video-conferencing calls from their iPhone 4. However, one of the biggest complaints about Qik is lack of integration into a users’ phone book. Presumably, Skype could bring some of that functionality to the table since many users already have built up their address book within their interface.

Skype also mentioned it plans to take advantage of Qik’s engineering expertise for optimizing video transmission over wireless networks. One cool feature that Qik has, and Skype doesn’t, is that it allows people to share videos in real time, and also record and store them to view later.

As I noted yesterday, there are lots of reasons for Qualcomm to want Atheros, not the least of which is its extensive customer list.

Qualcomm’s specialty has always been in CDMA technology, the flavor of mobile phone technology favored by Verizon Wireless and Sprint, and it collects considerable royalties around its patent portfolio there. It has struggled to penetrate other markets, and last year shuttered its FloTV operation amid minimal demand. The good news was that it sold its FloTV spectrum to AT&T for $1.93 billion, which is no doubt offsetting the cost of this deal. Add that to the $10.3 billion in cash and short-term investments on its balance sheet as of Sept. 26 and this is an easy deal to do.

It’s also the biggest deal in Qualcomm’s history and the first significant one under CEO Paul Jacobs, who is the son of founder Irwin Jacobs.

Atheros shareholders have plenty of reasons to smile today as well. The company’s stock price surged by 19 percent yesterday. At $45 a share, Qualcomm is paying more than Atheros has ever been worth in its entire history as a publicly held company. As Shira Ovide over at Deal Journal notes, its highest price before yesterday was $43.90. Happy New Year, indeed.

I caught up with Qualcomm Executive Vice President Steve Mollenkopf and Atheros CEO Craig Barratt to talk about the deal.

NewEnterprise: Steve, let’s start with you. What got Qualcomm interested in Atheros?

Mollenkopf: Historically Qualcomm has been focused on the cellular phone, though recently we’ve done much more than that. We had some integration relationships with some companies that allow us to deliver a platform to our customers. They’re essentially technical relationships, and one of those companies was Atheros. So we were familiar with them. But the real reason, the why Atheros and why now question comes down to this. We think the industry is moving to a place where a lot of the technology and use cases that are being created as part of the shift to smartphones will be used outside of just phones, and will move into many adjacent spaces. The requirement of technology and different customers overlap a lot with Atheros. They’re a leader in their space, we’re a leader in ours and we want to go into markets that will require the expertise from both of us. It seemed natural, actually.

Craig, the idea for the acquisition seems to have grown out of an existing partnership. When did the talk turn from being Qualcomm’s partner to becoming part of Qualcomm?

Barratt: The partnership has gone on for about five years, where we’ve cooperated on joint reference and designs and software and feature integration. Over the years we’ve broadened out from Wi-Fi, Bluetooth, GPS, powerline and optical networking. We do have a much more horizontal business. Qualcomm has a very strong vertical business. Through our partnership we saw the teams had a good cultural fit, the engineering teams really respect each other. When we looked at our own strategic imperatives over the long term, we saw that cellular technologies are going to be applied in a much broader markets over time, beyond just smartphones and tablets. There’s an intersection between the Qualcomm technology and our technology, and that’s only going to increase. You’ve probably heard that set-top boxes and things like that are going to start to run Android. So a lot of these mobile technologies are going to start showing up in things like the connected home. Strategically it all started to make sense.

And what will your new job be at Qualcomm?

Barratt: After the acquisition closes, which should be in the first half of 2011, my role will be president of Qualcomm Networking and Connectivity, reporting to Steve.

Steve, if I’m not mistaken, this is the biggest deal that Qualcomm has ever done.

Mollenkopf: You’re correct. For us on the Qualcomm side this is a big step toward expanding our business beyond our traditional platform business and we’re doing it in a way that is in line with how the industry is changing. A lot of the things we’ve been doing with Atheros are things we’ve already been doing as part of our relationship, so this is a natural next step.

UPDATE: Sirius now confirms the deal. It doesn’t offer up any new details except for this one: The company will now have the ability to transmit Stern’s show to mobile devices. Which would make the company’s mobile apps for, say, Apple’s iPhone and Google’s Android handsets much more attractive, and that’s a valuable deal point.

Press release:

Howard Stern Signs New Five-Year Contract With SIRIUS XM
Agreement Includes Rights for SIRIUS XM to Transmit Howard Stern’s Programming to Mobile Devices

NEW YORK, Dec. 9, 2010 /PRNewswire-FirstCall/ — Howard Stern and SIRIUS XM Radio (Nasdaq: SIRI) today announced a new five-year agreement. The news was first reported by Howard during his show this morning.

“On my first day in satellite radio SIRIUS had approximately 600,000 subscribers. Today, the two companies have 20 million; and, in my view, we have just scratched the surface of how many people will get on board,” said Howard Stern. “I am especially excited that my show will now be heard through SIRIUS XM on mobile devices. Access to my show on mobile devices will open up additional opportunities for my fans to hear me wherever they are.”

“Howard is a great talent and we are thrilled that he will continue to provoke, engage and entertain on SIRIUS XM. Our agreement is good news on all fronts — it is good for SIRIUS XM subscribers and good for SIRIUS XM stockholders. Howard forever changed radio and was instrumental in putting SIRIUS on the map when he first launched on satellite radio. He is one of the few ‘one-name’ entertainers in the country and our 20 million subscribers are lucky to have him,” said Mel Karmazin, Chief Executive Officer, SIRIUS XM.

The world-renowned Stern is credited with revolutionizing the talk radio format. Known for his large and extremely loyal fan base and for his unequalled ability to migrate fans to other media, Stern has embarked on numerous highly successful ventures over the years. Stern has written two best-selling books — Private Parts, which was Simon & Schuster’s fastest-selling book ever, and Miss America, the fastest-selling book in publishing history. He later starred in the highly successful motion picture adaptation of Private Parts, orchestrated one of the fastest-selling soundtracks in motion picture history and has starred in one of the most watched entertainment pay-per-view special of all time.

Howard’s new contract will run through December 31, 2015. Under the terms of the new contract, SIRIUS XM will now have the right to transmit Howard’s exclusive programming to mobile devices. Additional terms of the contract will not be disclosed.

A small but brilliant acquisition that should give RIM some much-needed UI design heft as it further polishes its PlayBook tablet and whatever other next-gen QNX-based smartphones it has in the pipeline. For RIM, whose devices have seemed perpetually a generation behind the latest iPhone and Android handsets, TAT’s acumen could be just the thing to strengthen its competitive position and further the efforts of Don Lindsay, its new VP of User Experience (a former Microsoft and Apple hire)–assuming RIM’s willing to take some guidance.

According to October 2010 figures from research company Nielsen, the iPhone is now tied with the BlackBerry as the most popular smartphone in the U.S. with 27 percent of the market each (Android devices claim nearly 23 percent and Windows Mobile 14 percent). But the iPhone is also the most desired device among likely smartphone upgraders in the U.S., ahead of Android. Among users planning to buy a new smartphone, 35 percent chose the iPhone, while 28 percent chose Android.

One last interesting data point: Nielsen found that men prefer Android over iOS (33 percent vs. 29 percent), while women tend to gravitate toward iOS (31 percent vs. 23 percent).

Insert your own stereotype-based jokes here.

State-owned China Mobile, which had about 570 million subscriber accounts as of September, has long been China’s preferred carrier. But the company’s subscriber growth has slowed as the government has rolled out efforts to restructure the industry and make it more competitive.

The most recent move may provide a boost for China’s two other carriers, which are also state-owned: China Unicom, which had about 160 million subscriber accounts as of September, and China Telecom, which had about 86 million mobile subscriber accounts as of October. China Unicom has been hoping to make the most of some competitive advantages, including its license to operate a mobile network using WCDMA third-generation technology, which is compatible with in-demand handsets like Apple’s iPhone.

Read the rest of this post on the original site

For the three months ended in September, Reasearch in Motion’s BlackBerry remained the leader in the U.S. with 37.3 percent of the smartphone market. But that share was down 2.6 percent from the previous period. Apple followed RIM with a 24.3 percent share, unchanged from its last ranking. Microsoft’s share fell to 10 percent from 12.8 percent and HP/Palm’s to 4.2 percent from 4.7.

Meanwhile, Android gained 6.5 percentage points to capture 21.4 percent of the market, which means Google’s mobile OS now reaches one in five U.S. smartphone subscribers.

Clearly, Google’s strategy of flooding the market with multiple handsets on multiple carriers at a wide range of price points continues to pay off.

The consumer research group says that Google’s software was installed on 44 percent of mobile handsets sold in Q3, up 11 points since Q2. While that data may rile up Apple fans, Android’s gain seems to be primarily fueled by BlackBerry’s loss: Research in Motion lost six points in the last quarter, falling to 22 percent, while Apple’s iOS moved up one point, to 23 percent.

The year-over-year data is more dramatic: It shows BlackBerry’s market share dropping dramatically, and Apple’s less so.

The consolation prize for Apple and RIM is that they had the most-popular individual phone models in the quarter: NPD says the iPhone 4 and the Curve 8500 took the number one and two spots, respectively.

So how did Android gain share? Because it’s on so many other new phones. Canned quote from NPD’s Ross Rubin: “The HTC EVO 4G, Motorola Droid X, and other new high-end Android devices have been gaining momentum at carriers that traditionally have been strong RIM distributors, and the recent introduction of the BlackBerry Torch has done little to stem the tide.”

“Google’s alarming admission last week–confirming it collected entire emails and passwords–only heightened our concerns about how and why this data was collected,” Blumenthal said, adding that he’d rather not “rely on Google’s explanations and assurances…to confirm the facts about how this happened and how consumers will be protected going forward.”

A wise move, I think, particularly given the way Google’s narrative for this particular cock-up has evolved over the past few months, from an outright denial in April to a backpedaling, embarrassing admission in May and finally an apology in October.

In April, an outright denial:

Writing in Google’s European Public Policy blog, Peter Fleischer, the company’s global privacy counsel, denies there was a privacy issue with Google’s Wi-Fi data collection practices. “Google does not store or collect payload data,” he says.

Google product manager Raphael Leiteritz reiterates this assertion in the company’s Submission to Data Protection Authorities that same day. “All data payload from data frames are discarded, so Google never collects the content of any communications,” he writes.

In an interview with the New York Times a few days later, Google spokesman Kay Oberbeck dismisses the privacy concerns of German officials, saying: “What we are doing is totally legal and is being done by other companies around the world….We did not mention the WLAN project during our discussions with data protection officials because it is not related to Street View.”

In May, an embarrassing admission…

Writing in Google’s official blog two weeks later, Google SVP Alan Eustace reveals that the company actually had been collecting payload data. “It’s now clear that we have been mistakenly collecting samples of payload data from open (i.e., non-password-protected) Wi-Fi networks,” he explains. “So how did this happen? Quite simply, it was a mistake.” Then there was this from Peter Barron, Google’s director of communications for Northern and Central Europe: “We didn’t want to collect this data in the first place and we would like to destroy it as soon as possible.”

…followed by some aggressive damage control and a downplaying of the issue:

Speaking at Google’s annual Zeitgeist Europe forum, Google CEO Eric Schmidt describes the payload data collected as inconsequential and excuses the company for its misstep, saying, “There was no harm, no foul.”

In June, an unsettling hypothesis:

Apologizing for the company’s mistaken collection of user data, a Google New Zealand spokesperson tells the Otago Daily Times that the information the company’s Street View cars intercepted might not have been as inconsequential as Schmidt claimed. “Our in-car WiFi equipment automatically changes channels five times a second,” she says. “That said, it’s possible that the fragments of data we collected could contain entire emails or other content if a user broadcast personal information over an open network at that moment.”

In October, some hard evidence, another embarrassing admission and a change of tack…

A few months pass, and then a Canadian Privacy Commissioner’s investigation reveals “that Google did capture personal information–and, in some cases, highly sensitive personal information such as complete emails.” Interestingly, in its report on the matter, the Canadian Privacy Commissioner’s office notes that while Google “does not intend to resume collection of Wi-Fi data through its Street View cars…[it does intend to] rely on its users’ handsets to collect the information on the location of Wi-Fi networks that it needs for its location-based services database.”

And then the Schmidtstorm:

Appearing on CNN’s “Parker Spitzer,” Google CEO Schmidt cavalierly suggests that folks worried about Google Street View invading their privacy should “just move.” Ironically, he says this on the very day that Google admits those cars captured more than just fragments of personal payload data and says it is “mortified by what happened.”

Schmidt apologizes for his remark the next day:

“As you can see from the unedited interview, my comments were made during a fairly long back and forth on privacy,” he says. “I clearly misspoke. If you are worried about Street View and want your house removed please contact Google and we will remove it.”

And a day later the FTC announces that it has concluded its inquiry into Google Street View, saying the improvements Google has made to its internal privacy practices have alleviated its concerns for consumer safety.

Meanwhile, Blumenthal’s investigation continues.

That’s the word from developers who are building apps for Google’s new store-to-be, which is supposed to work like iTunes, but for Web-based applications instead of ones designed for mobile handsets.

Then again, Chrome app developers I’ve talked to don’t feel confident about any date they’re hearing from Google at this point. That’s because the store, which Google previewed back in May, has missed several launch dates already.

But for now, at least, most developers expect to see a public beta launch on the week of December 6, though a few are holding out hope for a mid-November launch.

Google, for its part, will say only that it promised to have the app store up by the end of the year, and that it’s still on schedule.

Why should you care? If you’re an average consumer, you probably won’t: The app store will work on any Web browser, but it is optimized for Google’s Chrome browser, which has a relatively small market share. But the bigger issue is convincing consumers  to purchase a Web-based app, period.

But the notion of a browser-based store does appeal to some developers, who are interested in melding the performance of mobile phone apps with the connected nature and flexibility of the Web. And some content companies are interested in the idea of selling their stuff in a store that everyone can access, but which isn’t controlled by Apple.

Which is the pitch that Google is making as it reaches out to TV networks and big magazine and newspaper publishers, and tries to persuade them to build for the store. It’s saying, for instance, that it got Time Warner’s Sports Illustrated to demo a version of its magazine when it previewed the app store last spring.

In some cases, I’m told, Google is offering up substantial technical resources to help content makers get apps ready for a launch. And I know that some small developers have received cash, as well–one developer I talked to cashed a $15,000 check–to persuade them to build apps. Should be interesting to see who has built what when the store finally opens.

Here’s that SI demo, with a voiceover from editor Terry McDonell:

And here’s Google’s general introduction to the app store concept:

For the music industry, the mobile phone, not the Internet, is becoming a huge driver of sales as India’s 670 million wireless subscribers slowly become accustomed to using their handsets for more than just calls. Mobile phones aren’t as susceptible to digital piracy as PCs, because wireless carriers can tightly control what content they sell.

Sales of ringtones and songs on phones already make up about 30 percent of the Indian music industry’s 7.5 billion rupees ($168 million) in total revenue and are expected to account for two-thirds of an 18.7 billion rupee market in 2012, according to PricewaterhouseCoopers. At that time, Internet music will still only be a 400 million rupee market, or about $9 million. The rise of mobile music sales is happening as sales of CDs and cassettes are declining sharply year after year.

Read the rest of this post on the original site

But while it beat revenue and earnings targets, its wireless subscriber growth fell short of forecasts. Verizon added 584,000 new postpaid wireless customers, well below the 625,000 to 665,000 the Street had been hoping for. A bit of a disappointment for the nation’s largest wireless carrier, particularly since archrival AT&T added 745,000 postpaid wireless customers during the same period. That divergence means Verizon ended the quarter with a base of 93.2 million wireless customers–nearly even with AT&T’s base of 92.8 million.

Interesting, since this quarter saw the launch of some high-profile Android handsets on Verizon–the Droid 2 and Droid X, for example. Evidently, while “Droid Does,” it doesn’t do quite enough….

But Japan’s KDDI Corp. is embracing Skype nonetheless. By teaming up with Luxemburg-based Skype Technologies S.A., Japan’s second largest mobile carrier plans to make the Skype software available on many of its handsets released from now on, starting with its smartphones.

So how does a Skype partnership make sense?

For one thing, Japanese people are no longer making many calls on mobile handsets. To offset lower voice traffic, carriers are seeking ways to boost revenue from data traffic. If Skype can get people to buy smartphones and sign up for expensive data service plans, that could more than compensate for dwindling revenue from traditional phone calls.

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Great fun to listen to for Apple watchers. But not that meaningful, really–mostly positioning and spin. There was at least one important nugget, though: Apple has a specific shopping list, with some very big-ticket items on it.

Jobs wouldn’t lay those out, of course. But when asked if he planned on spending any of Apple’s $51 billion (!) in cash via a dividend or stock buyback, he explained that he had something else in mind. From my notes, a combination of direct quotes and paraphrase:

“We strongly believe that one or more very strategic opportunities may come along that we’re in unique opportunity to take advantage of because of our cash,” and we want to keep our powder dry “because we feel that there are one or more” opportunities in the future.

M&A guys, start your engines!

The “what will Apple do with all its cash” speculation story is a time-honored tradition–I seem to remember writing one four or five years ago, when Apple had $6 billion or so lying around, and discussing whether it made sense for Jobs to buy a music company like Universal.

But I don’t remember Jobs every signaling his desire to go shopping quite as openly as this before (feel free to correct me in comments if I have this one wrong). Two caveats:

• Jobs is famous for saying one thing and doing…something else. So don’t get too riled up about this.
• Just because Jobs is talking about spending money on “opportunities” doesn’t mean he’s talking about buying a company. He could be talking about big, hairy capital expenditures, like the billion-dollar server farm Apple is finishing up in North Carolina.

Still. It’s hard not to read or hear that quote and not think that he’s thinking about some very big buys. Like what?

A lot of folks will assume that Jobs is talking about buying a big content producer. Music doesn’t make any sense, because there’s little value left in that business. But if Jobs wants to make headway in the TV business, perhaps it makes sense for him to snag a big broadcaster or programmer to give him the leverage he needs with the Comcasts, Viacoms and Time Warners of the world.

Or you could make the same argument for other content makers, like game studios. The biggest one, Electronic Arts, has a market cap of a mere $5.21 billion. Jobs could give ERTS shareholders a hefty premium and still have plenty of walking-around money.

Or perhaps it makes zero sense for Apple to be in the content business, because it’s done just fine not being in the content business to date.

So then what?

Feel free to throw your own guesses in, but I’ll kick off with my own: It’s a company that has yet to compete with or brush up against Apple in any significant way. And it’s one that Apple seems unlikely to be able to move aside, even if it wanted to. And it’s one that’s already competing directly with Google, which has to make Jobs like it even more.

And, if you believe this L.A. Times report, Jobs is already strolling around Palo Alto with its CEO: What do you think of Apple buying Facebook? Discuss….

Earlier

Apple investors who got their first look at the company’s earnings numbers don’t like them–AAPL is trading down seven percent after hours. Let’s see if Apple executives can soothe their concerns during the earnings call.

You can listen in for yourself via this link, or follow along in my liveblog below:

Live Blog

Apple or Apple’s IR company trying some very, very mellow string and piano stuff while we wait.

CFO Peter Oppenheimer kicks off. “Outstanding results” for September quarter. Highest quarterly revenue, earnings.

Mac products and services: 3.9 mm Macs. Record quarter. 27% y/y growth. Double market growth for Q.

IMac, Macbook, Macbook Pro all good. Asia/Pacific performing best.

IPods: 9.1 million.

ITunes revenue more than $1 billion.

IPhone. “Extremely pleased” with 14.4 million unit sales; basically doubled y/y.

$8.6 billion in sales value of iPhones alone.

Heaping praise on iPhone 4 (justified) and stressing iPhone’s move into corporate market, rattling off blue-chip customers.

IPad. “Thrilled” with momentum. “Great enthusiasm” from customers.

65% of Fortune 100 deploying or piloting iPad. Lists some of them.

125 million iOS device sales last month.

200,000 registered iOS developers.

“Very happy” with results of iAd so far.

On to Apple stores. More records here.

Expects to open 40-50 stores next year, 50% of them outside U.S.

IPhone sales mix “better than expected”–boosted overall margin.

$51 billion cash hoard. [Deep, longing sigh from everyone in media, tech business.]

For the year: 5x revenue and 10x earnings compared with five years ago.

“Very enthusiastic” about lineup, “extremely confident” in new product pipeline.

Rare appearance from Steve Jobs!

Had to drop by for first $20 billion quarter.

“We’ve now passed RIM, and I don’t see them catching up to us in the foreseeable future.”

They have to move into software/platform development, and I don’t think they can.

So what about Google?

Apple is activating 275,000 iOS devices per day on average over the past 30 days; peaked at 300k iOS devices some days. 300,000 apps in app store.

Unfortunately, there is no solid data on how many Android handsets sold each quarter.

Google loves to characterize Android as open, Apple as closed. “We find this a bit disingenuous.”

Windows is “open.” But Android is “very fragmented.” OEMs like Motorola install own stuff to make their phones stand out. We don’t do that.

Shout out to “Twitterdeck” ( I think he means Tweetdeck) and their challenges running 100 versions of Android client. “Compare this to iPhone, where there are two versions of the software…to test against.”

Meanwhile, at least four app stores on Android. “This is going to be a mess for both users and developers.”

Apple’s app store has 3x apps compared with Google marketplace.

“Even if Google were right, and the real issue was closed vs. open, it’s important to remember that open systems don’t always win.”

For instance: Microsoft’s [miserable] “PlaysForSure” strategy, RIP.

Google’s “open” argument is a “smokescreen.” Real issue is what’s best for customer–”fragmented vs. integrated.”

Integrated is a huge advantage for us, because it’s better for customers, and better for developers. “We are very committed to the integrated approach no matter how many times Google tries to characterize it as closed.”

Now! On to our tablet competitors:

First of all, only a few credible competitors.

Second, most of them are pushing 7.5″ screen. That means they are just at 45% size of our 10″ screen. “You heard that right….This size isn’t sufficient to create great tablet apps.”

Extolling features of iPad size vs. teeny tiny tablet competitors: They’re “tweeners”–too small to compete with iPad, too big to compete with smartphones.

IPad has 35,000 apps. New crop of tablets will have “near zero.”

Competitors having a hard time coming close to iPad pricing, even with their puny screens. We make our own everything, and this results in an “incredible product, at a great price.” Our competitors will “likely offer less, for more.” They’ll be “DOA. Dead on arrival.”

Questions and Answers

Supply constraints on iPad?

COO Tim Cook: We’ve got a handle on it. And note that we’re expanding distribution in the U.S. and internationally, with more countries to come.

Question about margins I didn’t quite catch.

Oppenheimer: Sold more iPhones than planned, and commodity prices came down, so that helped.

Q for Steve. Please talk about “iPad opportunity.” Size of business, etc., two years or more down the road?

Jobs: “The iPad is clearly going to affect notebook computers. The iPad proves it’s not a question of if, it’s a question of when.” Already seeing “tremendous” interest from education and “much to my surprise, from business.”

“The more time that passes, the more I am convinced that we’ve got a tiger by the tail here.” We’ve trained tens of millions of people on this OS via the iPhone. “I see it as really general purpose, and I see it as very big.”

Could it be the second biggest business after the iPhone?

“I try not to predict, I try to report.” We’re selling more iPads than Macs.

What about Flash? Any update?

“Flash memory? We love flash memory” [hohoho]

A question on iPhone demand, which I missed.

Q: Steve, “You are the tablet market.” Do you see tablet competitors cutting into your market in the same way you cut into RIM’s market? Won’t that fragment the market?

“I have a hard time imagining what those strategies…are.” Pricing won’t work. “Flash hasn’t presented any problem at all; as you know, most video on the Web is now presented in HTML5.” The iTunes store is dominant and “we’re not done” working on stuff for the future.

Q: Smartphones–”Do you see that as a zero-sum game?”

Jobs: As you know, most phones in the world aren’t smartphones. They’ll convert over time, so there will be room for multiple competitors, but “eventually it will turn into a zero-sum game, or close to that.”

Q: For Oppenheimer: Another margins question.

A: We do see a small sequential decline. Higher-than-expected mix of new iPods and new iPads. We’ve been very aggressive on pricing there, and that’s what’s pushing down margins.

Q: Steve, how’s your Apple TV “hobby” coming? And what’s up with streaming media?

Jobs: We don’t talk about unannounced products, but I’m happy to tell you what we know about Apple TV. We have moved to streaming. It’s all streaming. Everything is rented, and/or soon to be streamed from iPad or iPhone.

So far we’ve sold 250,000 new Apple TVs. “I’m thrilled with that.” And with Airplay set up, “it will give people another big reason to buy it.”

Another margin/guidance question. Seems to be the same one repeated each time, with the same answer.

Q for Steve: Key risks for company?

The goal is to make the best devices in the world. “It’s not to be the biggest. As you know, Nokia’s the biggest… but we don’t aspire to be like them.”

Android is the biggest competitor. Outshipped us in June quarter as we transitioned. We’re waiting to find out what happened in this quarter. “I don’t know how we’ll find out” though.

Our approach is to create products that “just work” and “their approach is very different from that.”

Questions for Steve and Tim: Aspirations for iPhone and iPad. In Mac, you didn’t aspire to high market share; in iPod, it was the opposite–you own that market. In the past, Tim you’ve described iPhone business as closer to the iPod model. Steve, you sort of said something different. Please resolve that difference: Biggest, or best?

Jobs: “Nokia makes $50 handsets. We don’t know how to make a great handset for $50.” We want to make “breakthrough, best products,” and “drive costs down” while making them better through “relentless improvement.”

We have a very low share in the phone market. Single digits. And a very high share in tablets. But we don’t think about it that way.

The reason we won’t make a seven-inch tablet isn’t because of price point, “it’s because we don’t think you can make a great tablet with a seven-inch screen.” And as a software company, we think of software first. Developers don’t want to build for all these different platforms and devices, and on this small screen. “It’s not about cost, it’s about value, when you factor in the software.”

Q: Okay, but if the market moves toward lower-functionality smartphones and “dramatically lower price points,” then you’ll cede share, right?

Jobs: “You’re looking at it wrong.” You’re looking at it as a hardware guy who doesn’t really know about software. You assume that software “can come alive on this product that you’re dreaming of. But it won’t” because developers want to build for better products, with faster processors and better screens.

Q: You have about $50 billion in cash. What are you going to do with that? Why not return it to shareholders?

Jobs: “We strongly believe that one or more very strategic opportunities may come along that we’re in unique opportunity to take advantage of because of our cash” and want to keep our powder dry “because we feel that there are one or more” opportunities in the future.

Missing next question about iPhone and iPad penetration into corporate market.

[Market not sold on Apple's story yet, btw: Stock still down 5.84%.]

Question for Oppenheimer. Guess what? It’s about gross margins. Any change in manufacturing, etc? Any color at all?

Oppenheimer: Don’t provide product-specific gross margins. Always trying to lower costs, though. “We were happy” with gross margins for quarter. Down slightly because of product mix, as I’ve said over and over.

Q: Talk about demand from carriers to pick up iPhone 4.

Cook: The pressure I’m feeling is about supply. That’s the problem. At the country level, we have 166 relationships in 89 countries. In many countries, we went to more than one carrier. Latest one of those is Germany.

IPhone 4 in 85 of 89 countries. Will be in all 89 by end of year.

What happens to margins and subsidy when you go nonexclusive?

We don’t give information out on specific markets, but you can see that our ASPs have stayed above $600.

For Steve: Why do you have advantage in price on iPad, as opposed to PC?

Jobs: We engineer so much of it ourselves. Everything from chip to battery to enclosures. We’ve learned so much. We’ve learned a lot, developed a lot of our own components, where competitors have to go through middlemen. “This is a product we’ve been training for for the last decade.”

Call is over. You can hear the whole thing on a podcast later this evening.

Turns out “personal reasons” was actually a euphemism for “I’m joining Palm.”

Sources close to the company tell me that Jaaksi has been hired on as senior vice president of webOS at Hewlett-Packard’s Palm division. He’s to start in November, after relocating to the Bay Area, and when he does, he’ll lead Palm’s webOS engineering team.

Jaaksi is already a big fan, as evidenced by this observation on his blog back in May: “I used to use a Palm Pre a lot. What a great device. What an astounding software. I was so disappointed to see it not getting the traction it deserves. I really hope that now that it has found a new home @ HP it will rise again! And by the way, I have an extra sweet spot for Pre. It shares a lot of stuff with Maemo and N900.”

And Jaaksi isn’t Palm’s only new high-profile hire. Victoria Coleman, who recently headed up Samsung’s R&D Center in San Jose, is joining the company as well. Her task: To oversee platform and application development for next-generation versions of webOS.

Palm has also managed to pull some talent from within HP. Steven McArthur, the SVP of the company’s consumer applications business, is now heading up product marketing for Palm. Joining him are Enrique Lores, SVP of PSG worldwide sales, who is leading the Palm sales organization. Steve Manser, SVP of product development, oversees product management.

Quite the lineup, and one that bodes well for Palm’s webOS devices and its future at HP.

Jaaksi, who says he’s stepping down for personal reasons, will leave Nokia (NOK) in a couple of weeks. His departure follows those of Anssi Vanjoki, head of Nokia Mobile Solutions, and former CEO Olli-Pekka Kallasvuo.

How will this affect the launch of the first Nokia devices powered by MeeGo, the next-generation mobile OS the company is developing in partnership with Intel (INTC)? Not at all, says Nokia, which tells Engadget that an “update on MeeGo” will be announced before next year. Of course, as the gadget site aptly notes, there’s a hell of a lot of wiggle room in that phrase, and there are rumors circulating that the latest MeeGo build leaves a lot to be desired.