Peter Oppenheimer

It's Peter, I'll take that question. We are seeing strong results from our remodel stores. Ron and his team have remodeled, as I have said this year, 72 of the stores to bring them to our most updated design. And those designs are providing the best customer, customer experience in the industry bar none, whether it would be up front in the selling part of the store or certainly in the back of the store with the genius bars or the creative bars. And customers are having a great experience.

In terms of international, the growth there was quite strong in the quarter. Our average store revenue was actually up over 20% for our international stores this quarter.

Mark Moskowitz - JPMorgan

And then Peter, the other question revolves around the OpEx ratio going forward. You've talked in your prepared remarks about 2010, the new product pipeline. Can you give us any sense in terms of how should investors think about the R&D or SG&A moving up? Is it going to kind of hold steady or will there be any sort of changes regarding that pipeline?

Peter Oppenheimer

I don't want to give a specific quantitative percent. I think over the last year, we have managed operating expenses well, but we have been investing confidently for our future, especially in engineering and our distribution and our marketing and advertising. We saw the benefits in the last downturn in 2001 and 2002, of coming out of that with just an amazingly strong product pipeline and we're repeating that very positive lesson this time around. So, I think we're being careful with money. We're making good choices and -- but continuing to invest wisely and confidently in our future.

Mark Moskowitz - JPMorgan

Thank you.

Nancy Paxton

Thank you, Mark. Could we have the next question, please?

Operator

Your next question will come from Toni Sacconaghi with Sanford Bernstein.

Toni Sacconaghi - Sanford Bernstein

Yes, thank you. Couple of questions, please. You had very strong ASP performance in both Macs and iPhones. On the Mac side, you're typically down because of the back-to-school promotion because of ASPs. You were up even on the notebook side this quarter. Can you comment on that? And on the iPhone side it, does look like your ASP went up $40 or $50 sequentially on a cash basis. You had stated last quarter that 3GS was outstripping the $99 phone, so was it mix alone or is it something else around currency translation or something else that is affecting that?

Peter Oppenheimer

Hi, Toni. It's Peter. Let me start with iPhone. The iPhone ASP in the quarter was just over $600 and this reflected both a high mix of the 3GS sell through, and also the benefit of rebalancing the ending channel inventory more towards the 3GS as a result of the introduction.

On a sequential basis, yes, our ASPs were up a bit in the portable space. This was really a function of our seeing a higher mix of our new MacBook Pros. As Tim commented, very, very strong quarter after the June introduction, we had the best back-to-school season that we have ever had. And on a sequential basis, we also got a little benefit from the dollar as well. On a year-over-year basis, the dollar was a negative. But sequentially, it was a small positive.

Toni Sacconaghi - Sanford Bernstein

Okay. And then on the availability issues that you had on the phone, was that a good old fashioned demand exceeds supply issue or were there any component availability issues that constrained your supply and related to that you had also mentioned that air freight, you expected to go up next quarter as a reason for gross margins. I'm not sure if that was in relation to phones or anything else, but perhaps you can address that as well.