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.

Are there any updates with regard to the Best Buy relationship? They are thre any more distribution partners you would like to talk about or any progress you’d like to update on?

The company started with Best Buy with half a dozen of the stores, it then took it to over 50 and the company has just announced taking it over to 200, which will take place by the fall. In terms of overall Mac point of sales, the comp-any has been working on this worldwide and the Mac point of sales had moved from 5,800 to 8,000 on a year-over-year basis.

Have you seen any up tick in the creative professional segment yet from Adobe CS3 or is that still coming?

The company believes that its pro customers have been stalling and delaying purchase and one key reason is the Creative Suite. With the Creative Suite shipping and the announcements that were made at NAB with Final Cut Studio and the announcements made with the 8-core Mac Pro, the company believes that it has got line-up for its pro customers.

Typically your revenues from Q2 to Q3 are flat to up. You are guiding for them to be down despite enthusiasm for the phone for your Mac line-up and your confidence in the iPod line. Could you talk about some of the puts and takes for revenue on your revenue guidance for next quarter?

The company is guiding revenue down, sequentially as a result of a couple of factors. First, last year, iPod sales declined sequentially from the March to June quarters despite supply being constrained at the beginning of the March quarter. This year the company is not in good supply and demand balance in the March quarter. The company sees this as a market seasonality issue and not an iPod specific issue. Second, with the beginning of the education buying season, the company sees higher purchases, in the June quarter and at lower ASPs.

Is there any difference from normal seasonality though in the sense that you don’t always see that and accordingly for comparing this quarter versus previous quarters. Why would that be any notably different?

That is true. What you are seeing is that the June quarter is not as strong from the consumer perspective. The company had a strong March quarter. There is more pronounced effect this year going from March to June in part upon what seen from the consumer sales and March and heading into the education buying season.

You have qualitatively discussed about margins between relative categories in your business. Specifically on a qualitative basis, could you help understand if the hardware portion iPod was higher than your Mac hardware margins this quarter?

The company has a long-standing practice of not releasing specific gross margins, however the corporate gross margin was over 35%, which exceeded guidance. iPod was key in achieving that result.