Timothy D. Cook: We have nothing to announce today.

Tavis McCourt (Morgan Keegan): The last couple of quarters, you have mentioned in relation to the guidance for gross margin, the expectation of component costs creeping back up. You did not mention that this quarter. Does your guidance presume a flat component cost environment?

Timothy D. Cook: For the current quarter, we believe both DRAM and NAND Flash memories will remain in an oversupply condition. We see LCD, hard drives, and optical markets being close to a supply/demand balance, which should result in some improvement in costs from last quarter. For most of the other components, we see the seasonally slower March quarter resulting in historic level price declines.

Shaw Wu (American Technology Research): Your desktop business was stronger than your portable business, at least on a sequential basis and even on a year-over-year basis. Why that happened?

Timothy D. Cook: The iMac announcement in August was well-received and the iMac had enormous momentum. If you look at desktops, the iMac grew faster than notes but the total of our desktops grew at 53% and that compares to an IDC projected growth rate of the desktop market of only 10%, so over five times the market rate of growth.

Shaw Wu (American Technology Research): Your guidance implies seasonality for the whole company. What do you think of iPhone seasonality at this point?

Peter Oppenheimer: This is not something that I can comment on this quarter. We have not yet been through a March quarter with iPhone so we do not have any history go by as we do with Mac and iPod, so we will report to you in April what we did for the March quarter.

Chris Whitmore (Deutsche Bank): How many retail outlets or distribution points was the Mac available during the quarter and do you have any targets for year-end?

Timothy D. Cook: We have moved the number of storefronts carrying Mac now up to 9,500 and that compares to 7,700 a year ago. We have done that because of the momentum that we see in the Macintosh business. We plan on doubling the number of Best Buy stores.

Chris Whitmore (Deutsche Bank): How many retail outlets are available within existing countries where the phone is available?

Timothy D. Cook: We have about 2,500 storefronts in Europe that carry iPhone between the U.K., France, and Germany, and we have around 2,000, 2,100 or so in the United States between our stores and the AT&T stores.

Andy Hargreaves (Pacific Crest Securities): Do you have any plans to do any new in-store displays on Apple TV or any other marketing to show what the product does, especially at third-party retailers?

Timothy D. Cook: This is something that we are looking at but have nothing specific to talk about today.

Andy Hargreaves (Pacific Crest Securities): Is there anything you are doing actively to try to promote more corporate use outside of the traditional customers in either your reseller channel or in education that you are doing?

Timothy D. Cook: The education market had a record first quarter for us. We grew about five times the IDC’s forecasted market rate of growth of 6%, and this was led by both K-12 and higher ed, and so we were doing excellent in this business. There are many examples of small business using Mac and larger businesses continue to be interested in the Macintosh as well.