The company still plans to be in Europe in the fourth calendar quarter of this year and continues to plan to be in Asia in 2008.

In terms of distribution in the US with the iPhone, will it be exclusive with AT&T Cingular and Apple or will other Cingular partners be distributing the products such as Best Buy or RadioShack?

It will be sold through Cingular stores, the cingular.com, apple.com and Apple retail stores.

What percent of industry music sales was digital in the quarter? Last quarter it was around 11% or 12%. Is there any influence to the royalty rates you pay to the music companies?

The most recent quarter’s digital percent of total sales is going up. In the United States the market share of legally purchased and downloaded music is over 85% and the company is seeing strong growth on the iTunes music store

Japan has been flat three quarters in a row. What is going on there and what are you going to do to address it?

Japan is a challenging market. The Japan PC market according to IDC would contract by 2% last quarter. That’s identical to what the company did in terms of iPod and the MP3 market. Apple has maintained over 50% share for some time and however, the MP3 market itself isn’t growing and so the company’s units as a consequence are growing very small single digits. That coupled with an ASP decline in iPod produces a negative revenue compared year-over-year.

There are a number of things going with the channels on merchandising. The company is running Macintosh, the Mac PC ad on television, so there are a series of things that are being done at the only major market in the world that Apple is not doing well.

It looks like Mac channel inventory levels were down versus the last quarter. Can you quantify the impact of that inventory reduction on Mac unit sales during the quarter?

Apple started the quarter in the 3 to 4 week range and ended in the 3 to 4 week range and the absolute number of units were very similar from beginning to end.

Is there a good number to use in terms of a tax rate on the hardware?

The management is not able to make any comments beyond what was said about the relationship with AT&T. Apple also plans to sell accessories with the iPhone as it does with iPods.

Are you going to take pre-orders for iPhone?

The company is currently not taking them. The date at which Apple will begin taking orders will be announced later.

On the Apple TV subscription agreement, is this a prelude to moving to a subscription model per se to the end user? Is that why you are setting the stage for subscription accounting on the TV product at this point?

The reason that the company is going to also account for Apple TV on a subscription basis is that the company wants to provide periodically to customers, software updates. Apple has a number of ideas for Apple TV and it’ll provide those to customers as they become available and that’s why the company is doing this.

On subscription accounting, at a high level of fees, if the price points are taken, you have initially indicated about $500, and take the 24 month straight line and if you were to receive the entire hardware value of that, that’s about $21 a month. Is that the right number to assume per unit or $60 a quarter or how much higher or lower do you assume for the hardware and the service?

On the iPhone hand set, the company is going to ship two models, one at 499, and one at 599. The company is going to sell some direct and sell some indirect. The company will sell accessories and it expects to receivepayments from ATT Cingular and the company will report those each quarter on a data summary.

Could you comment on the potential for push outs of iPod in front of the iPhone launch as people try to decide between one product to the other. What do you think about the impact the delay in Leopard might have on Mac sales in the June and September quarters?

On the iPod question, in the data last quarter there was no obvious affect from iPhone on iPod. In terms of Leopard, the company is shipping the best Macs shipped. The upgrade to Leopard is very simple and straight to do, but the company is not sure whether customers will relay or not.