5:06: Peter is up. Strong financial results, best March quarter. 5.26 billion, 26% growth. Strong demand for macs and good ipod sales. Operating margin was strong.

Net income was $770 million. Earnings per share of 87 cents.

5:06: 56% of quarterly revenue from mac sales. Growth ahead of expectations. Macbook and Macbook pros are strong.

5:07: Music products and services. 10.55 million ipods were solid. Shuffle was particularly popular. iTunes sales also grew. Lionsgate and Paramount movies among others added. 85% of US market of online music are iTunes.

5:08: opened 7 new stores. With 172 sales open with a revenue of $5 million.

5:09: plan to open Sydney and Glasgow international sales, and a third store in Manhattan in meat packing disctrict.

5:10: Over 50% of customers buying macs are new Mac owners. 10,000 customers per store per week!

5:10: Stores getting ready for iPhone launch. Talking about solid gross margins being higher than expected.

5:11: A little iPhone and Apple TV strategy:

Believe iPhone is revolutionary, years ahead of competition (thanks to visual voicemail, and browsing, and ipod/phone integration).

Plan to build on this foundation by creating new applications and features and folding them into iPhone. Want to get them these new features at no additional charge.

Since Apple will doing this they'll be doing subscription based accounting and amortizing iPhone sales into 24 month cycle. It iwll have no impact on cash flow.

5:12: Result should surprise people. iPhone and AT&T revenue will be broken out seperately. Apple TV revenue will used similarly.

5:14: looking ahead to June quarter:

$5.1 billion targeted revenue
gross margin of 32%
eps of 66 cents

In closing, very pleased with results. Mac and iPod shipments up. 100 millionth iPod shipped. Now opening call to questions.

5:15: Bear Sterns asks: wants to know about options and board and any commentary, and asks about Apple TV numbers.

Peter: board put out it's statement to express confidence in what was said and done, and that Steve cooperated fully with independent and government investigation of options backdating. Board is confident in Steve's integrity.

Tim Cook: Apple TV, incredible reviews have come in. It's off to a very good start, going to continue investing in it. Not releasing unit shipments.

5:18: Cross Research asks: explain again the subscription model for Apple TV?

Tim Cook: we can create innovative software that gives us a big advantage. We're doing this so we can do what we do best. We beleive we can surprise and delight iPhone customers doing this.

Cross: staffing and the delay on Leopard?

Tim: we have no issue hiring great people. This is simply a matter that we have a very revolutionary product, and we want to use Mac OS resources to complete the iPhone, it's taking more time and resource than thought, and we made a choice to delay.

5:19: Credit Suisse: can you walk us through the decline in gross margin?

Answer: prices are guiding up, and display line was repriced.

CS: payments from AT&T, are you getting subsidies or a percentage of the monthly bill?

Answer: will recognize payments from them as revenue -Peter
Tim Cook: this quarter we see commodities moving up, nanflash and memory going up.

5:21: Piper Jaffrey: component pricing question, if you maintain pricing will your margins be consistent with the 35% level.

Answer: 32% for June gross margin, high 20s for a longer term basis. Don't count on these margins staying where they are.

5:24: June quarter is more dominated by K-12, which buys lower margin products, which will effect Apple's margin.

Piper Jaffrey: what will initial iPhone shipments look like.

Answer: anecdotally we have stories of strong demand, but we don't know until we ship. A million people have signed up as interested.

5:25: Lehman Brothers, with subscription pricing, what are we looking at a month on iPhone.

Answer: will sell some direct, indirect, and have two different priced models and have accesories, and AT&T payments. Those will be provided each quarter. Won't provide more detail on AT&T payments.

5:27: what will Apple do with all the cash (12.6 billion in cash)?

Answer: will retain the cash for flexibility and investment. Do discuss share buyback, though.

5:28: Goldman Sachs: how should we think about iPod vs iPhone cannibilization. What impact will Leopard delay have on mac sales?

Tim Cook: data last quarter no effect on iPod from iPhone. We'll have to see. In terms of Leopard, we're shipping the best macs. We're not sure if customers will delay or not.

5:30: EBS: pre orders for the iPhone? No, announce later order date.

Retail doesn't know what's coming, with the iPhone are Apple store retailers getting ready with training? Usually products are secret, which limits training. Since iPhone was announced in January a lot of energy in planning is going on.

Customer support on backend at Apple for iPhone? We have award winning support, and going at the iPhone at the same way.

Any Best Buy/Circuit City info or other retail distribution stories? Excited to expand Best Buy to 200, going to do some cool stuff there. Not sure what is going with the Circuit City pilot and will be making a decision. Overall Mac point of sales have moved from 5800 to 8000 on a year to year basis.

Has Adobe CS3 upticked the pro customers? Apple believes creative pros have been stalling. Still thinks is too early to tell. However with CS3 shipping and Final Cut Studio announcement and 8 core Mac Pro there is a great lineup for pros.

5:34: Question about q2-q3 revenues are flat, Apple is guiding them down, can Apple talk about this more?

Peter: we're guiding it down for a few factors. Expect decline in iPod (though happy with marketshare). Beginning of education buying season. Since March was so strong, March to June will not be flat.

R&D expense has been flat, but revenues are growing, will Apple be growing that to match sales? Apple is confident with Apple TV and iPhone and OS-X. Going to invest, and spending will go up.

5:39: Citigroup: passing component prices onto consumers if favorable. Why isn't Apple doing it right now? Or has it been that they expected it to go right back up? Tim believes they're very well priced. We great 36%, versus 4% for IDC computer growth. 9th of the last 10 quarters that Mac has grown that well.

5:41: Merril Lynch: are there any other factors in iPod that could cause gross margins to change outside components. Apple: can't answer, won't talk about that.

5:42: JP Morgan: were there any changes in HDD vs flash iPods? Apple doesn't get into that level of product detail, but they're relatively flat.

DRM free music, will increase in price change margin in iTunes? Philosophy has been to run iTunes store at just over break even helps move iPods.

5:44: FTN Midwest, anything you can say on direct vs indirect sales? Direct sales were 50% and close to expectations. On the iPod, revenue outside the US, how did it do? And how did Mac do? Answer, the Mac POV, growing in US and Asia/Pacific (up 89% Year over Year). Essentially in every major area outside Japan Mac is growing at a multiple of the market for multiple quarters. Now outside of Intel transition, at 3X market. On the iPod, like the Mac, doing well outside the US. Over 60% in Australia and Canada. Over 50% in Hong Kong. 40-50 in parts of Western Europe. Everywhere year to year good progress.

One more Mac question, will Mac Pro have a good effect on ASPs? Apple, won't forecast, but is excited about new Mac Pro.

5:47: March to June slower with Macs and iPods, June is a slow time (again, Apple explaining that decline in some expectations is a seasonality issue, still happy with everything).

Question about iTunes, how many downloads to date? Nothing new to share.

5:49: J&P Securities asks for update on iPhone outside of the US. Europe in 4th quarter, Asia in 2008. AT&T/Cingular only, and will AT&T partners get in on it. Apple: in Cingular and AT&T and Apple stores.

5:50: Cleveland Research asks more about internal design strategy and how component prices affect that. Apple won't comment on future product plans. What percent of industry sales are digital? Apple won't talk about agreements with music companies. Not seen the most recent quarter's digital percent of total sales, but the trend is going up. Here in the US we're 85% of digitally downloaded music.

5:54: American Technology asks about Japan lagging? It's a challenging market, and the market is IDC planned to contract 2%. Have some things going in the channels, running the Mac/PC ads running over there and some others to try and turn things around. It's frustrating, only place in the world they're not growing.

What kinds of iPhone extras are being planned that Apple is investing in?

5:55: Duetsche bank: channel inventories were down, how did that inventory reduction impact sales and why are they being taken down? Answer, they were similar from start to end. Second question, cash margins on iPhone, will they have higher cash margins. Apple won't make financial projections on an individual product line.

You can get your hands on this data right here. It's also going to be up on the iTunes store.