Richard Gardner - Citigroup
Okay. Thank you. Peter, I was just hoping you could talk a little bit about the factors in forming your guidance for the following quarter, specifically, why the sequential jump in revenue is so far below what you''ve experienced for the last couple of years and also, why gross margin should be down as much as you''ve guided sequentially, the main factors there. Thank you.
Peter Oppenheimer
Let me start with gross margin. I''ll come back to revenue. We expect gross margins to decline sequentially about 34%, primarily as a result of four factors. First, for the new products that we have and will announce, we are delivering greater value to our customers and these products have lower gross margins than their predecessors. Second, and as expected, we will see a seasonally higher mix of iPods and expect Snow Leopard box sales to be less in their second quarter. And third, we''ll incur significantly more air freight. And fourth, we expect component costs to be higher than what we saw in the September quarter.
Regarding our revenue, as you know, the education and back-to-school seasons have largely concluded and the December quarter has been typically driven by holiday purchases in the second half of the quarter. Our guidance this quarter includes double-digit revenue growth from last year, which was the best quarter from a revenue perspective in Apple''s history. We''re also seeing lower ASPs this year, but we remain very confident in our business. We''re shipping the best products that we ever have in Apple''s history and customers have clearly responded.
Nancy Paxton
Thank you, Rich. Yes, next question, please?
Operator
From Barclays Capital, Ben Reitzes.
Ben Reitzes - Barclays Capital
Yeah, thanks a lot. Could you discuss, I have two questions, one on iPhone, can you discuss channel inventory, what it was ending the quarter and what the supply situation is, if there are any supply constraints during the quarter? We noticed lack of availability overseas and then that looked alleviated towards the end of the quarter and it would seem like there''s pent up demand heading into December. So, if you could discuss that, that would be great.
Tim Cook
Yes, hi, Ben. Tim. For much of the quarter, most of the countries where we''re selling the iPhone 3GS was very low in inventory as demand outstripped the supply. We did improve supply markedly in September and supply and demand converged in the vast majority of countries, either in September or in early October. In terms of your channel inventory question, we now have about 2.4 million units in the channel and that''s an additional 585,000 from the previous quarter end.
Ben Reitzes - Barclays Capital
And are you comfortable with that, given that you have China launching and maybe even a few other [GOs]?
Tim Cook
I would have liked to have had more, honestly, because we were still short in some countries at quarter end. And as indicated, it was early October before we were able to get supply/demand balanced in some countries.
Ben Reitzes - Barclays Capital
I know you don''t want to quantify China maybe, but is there any certain levels of excitement you have and any limitations in terms of Apps and iTunes that may limit the sales and out of the gate or anything else you could say qualitatively around that launch that gives us an idea of the velocity of units?
Tim Cook
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