Peter Oppenheimer: Most of AT & T stores were stocked out during the initial launch. However, there would have been some inventory in transit to AT&T at the end of the quarter.

Richard Farmer (Merrill Lynch): Should we assume that over time you will have a broader line and lower price points and a family of phones to choose from?

Peter Oppenheimer: The iPhone offers tremendous value as it is three products in one a mobile phone, an iPod, and Internet.

Rob Semple (Credit Suisse):Can you walk us through seasonality in both the iPod and the Mac businesses for September?

Peter Oppenheimer: For the Mac, sequential seasonality from June to September has been mixed. What drives the iPod market is innovative product launches and seasonal buying in the December quarter.

Rob Semple (Credit Suisse): Any evidence of iPod cannibalization from iPhone?

Peter Oppenheimer: There was no evidence during the June quarter but we are monitoring the situation.

Andrew Neff (Bear Stearns): What are your views on the iPhone addressing corporate email?

Peter Oppenheimer: With assistance from the corporate IT department, the iPhone can be set up to work with corporate email and a number of corporate clients are piloting the iPhone in their enterprises.

Andrew Neff (Bear Stearns): What are you putting in the deferred revenues going forward?

Gary Wipfler: It is related to the hardware from the iPhone and from Apple TV, so there were no accessories revenue included or payments from AT&T.
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Keith Bachman (Banc of America): What caused retail to standout this quarter?

Peter Oppenheimer: The stores have benefited from all three of our product areas and are seeing very strong traffic interest.

Keith Bachman (Banc of America): Any update on store opening expectations going forward?

Peter Oppenheimer: We expect to open 12 stores in the September quarter to end of year with 197stores.

Harry Blount (Lehman Brothers): How much of the iPhone launch expenses were within the OpEx line?

Peter Oppenheimer: We are taking the operating expense related to iPhone as period expense while recognizing the revenue over 24 months.

Katie Huberty (Morgan Stanley): How will you leverage the prepaid NAND Flash on your balance sheet as that market becomes tighter in the back half of the year?

Peter Oppenheimer: That was a very strategic investment as we begin to use more and more flash in all of our products, including the iPhone.

Katie Huberty (Morgan Stanley): Did you see good acceleration on the commercial side of the business post the April product announcement?

Peter Oppenheimer: The education market was excellent and the pro business had an uptick as we shipped a new version of Final Cut Studio and Adobe shipped Creative Suite 3.