Timothy D. Cook: We create products that we hope will appeal to all types of people and we think that the MacBook Air will appeal to travelers, to professors, to all different kinds of people who want to access the computer quickly wherever they are. It is leading edge, it is a superior combination of size, weight and performance and form factor, while being competitively priced if you look at what other people are charging for these, and so we think it is a great segment for us and a great new product.

Keith Bachman (Bank of Montreal): Could you talk about Leopard?

Peter Oppenheimer: Leopard is off to a great start. Customer and reviewer response has just been off the chart and about 19% as of the end of the quarter of the Mac OS 10 installed base is already enjoying Leopard. Our sales going back to Tiger in its first quarter were $100 million, or about $100 million and in its second quarter were about $35 million. Leopard sales in its first quarter were 170.

Keith Bachman (Bank of Montreal): Would you expect a similar trajectory over the course of the March quarter?

Peter Oppenheimer: Customer response has been strong. Sales will be down sequentially in the March quarter and I do not know if it is going to follow the same trend that Tiger did. Your sales in the first quarter for consumer software titles are always the best but Tiger is doing incredibly well and the installed base is bigger today than what it was when we first shipped Tiger.

Keith Bachman (Bank of Montreal): Japan had a bounce back. Was that easy compares or was leading the charge in Japan?

Timothy D. Cook: We have struggled there for several quarters and one data point does not make a trend but what happened was that the reception to iMac has been tremendous, our desktop chair moved from 6% to 10% year over year. The reaction to iPod Touch was overwhelming, which helped the iPod business have a much stronger revenue growth rate year over year, and so those two things together drove Japan’s performance.

Charles Wolf (Needham & Company): Orange in France is selling the iPhone for EUR399 with a two-year subscription, but it is selling it for EUR749 unlocked. Does Apple share in the incremental revenues that Orange gets on an unlocked phone?

Peter Oppenheimer: We are not discussing the terms of our agreements with the carriers so I can not specifically answer that.

Charles Wolf (Needham & Company): What is the division between direct and indirect sales worldwide?

Peter Oppenheimer: Direct sales in the quarter were 46% and that compared to 44% in the year-ago quarter.

Gene Munster (Piper Jaffray): What is the time set for the iPhone rollout internationally?

Timothy D. Cook: We still plan to enter Asia in 2008 and we also plan to roll out additional European countries during 2008.

Gene Munster (Piper Jaffray): Is there anything specific relative to the China market?

Timothy D. Cook: There is nothing specific to announce today.

Gene Munster (Piper Jaffray): What will take for Apple TV to become more of an actual business that can move the needle?

Timothy D. Cook: Many companies have tried in this space and missed. We are back with Apple TV take two with movie rentals directly from iTunes and we think we have it right this time.

Andrew Neff (Bear Stearns): When you talked about the U.S. iPods being flat, are you talking year over year?

Timothy D. Cook: Unit sales year over year were flat in the U.S.

Andrew Neff (Bear Stearns): With all this traffic coming in, what were you seeing in terms of consumer behavior in terms of proclivity to spend?