Timothy D. Cook: The SMB market is difficult to measure. However, in terms of what we can see operating out of our online stores and out of our retail stores, we are doing well there and growing. In terms of iPhone, we are providing a solution in iPhone that many businesses love. It gives the people a desktop class e-mail, which is very unusual for a phone and is an unprecedented Internet device. Clearly there are some businesses buying them and very much enjoying them.

Shannon Cross (Cross Research): Are you working with Salesforce.com on their initiative to modify their software for iPhone?

Timothy D. Cook: Yes.

Andrew Neff (Bear Stearns): When you are going to ship the three-millionth iPhone?

Timothy D. Cook: We are not predicting. I would reiterate that we are very confident with shipping 10 million in the calendar year of next year. We are very happy to ship our one-millionth. We’ve very focused on going into the U.K. and Germany on early, in early November and then in France in late November and we’re on target to enter Asia in calendar 2008.

Andrew Neff (Bear Stearns): Could you comment about Japan, which on the Mac side has been lagging for some time?

Timothy D. Cook: It’s fair to say that Japan continues to be our most challenging major market. It is the only major market that we’re not growing significantly in. However, for this past quarter, we were very encouraged with the Macintosh results. The iMac was very well-received and the overall Macintosh had its best year-over-year performance in Japan in seven quarters, with units up 14% year over year and that compared to an IDC estimate of the market in Japan contracting an additional 2%. Iit’s a tough market.

Harry Blount (Lehman Brothers): Could you provide a benchmark on the number of Mac distribution locations and the number of iPod locations?

Timothy D. Cook: We’re over 40,000 on iPod and within the last year, we’ve added about 2,000 Mac locations, to around 8,700 currently.

Toni Sacconaghi (Sanford Bernstein): Can you give us a sense of what the trajectory of daily sales volumes was from the iPhone immediately following the price cut and then how that ended 22 days later at the end of the quarter? Was it relatively constant? Did it get better as the word leaked out?

Timothy D. Cook: We were very happy with the elasticity that we saw. It enabled us to far surpass our expectation of hitting around a million units cumulatively by the end of the quarter. Some number of these were sold to people that have an intention to unlock and where we don’t know precisely how many people are doing that, our current guess is there is probably 250,000 of the 1.4 million that we sold where people had bought them with the intention of doing that. Many of those happened after the price cut. We’re not going to project precise numbers, but we remain very confident with hitting 10 million units in calendar year 2008.

Bill Fearnley (FTN Midwest): Are there any updates on the pilot with Circuit City? Are you seeing any cannibalization with the iPhone versus the iPod?

Timothy D. Cook: We’re not doing a pilot with Circuit City. We are focusing on expanding with Best Buy. We ended with 230 Best Buy stores and expect to be north of 270 by the end of the quarter. All the iPhone customers are reporting incredible customer satisfaction and we’ve achieved 95% of those who’ve said that they would recommend the phone to others. These numbers are unprecedented in our history.

We saw no obvious cannibalization prior to the new iPod announcement. Post the new iPod announcement, we don’t have enough data to comment yet. We will report again in January.

Bill Fearnley (FTN Midwest): In the pro segment, could you provide any update on what you’ve seen in terms of uplift from CS3 or some of the other new products that have gone universal binary?

Timothy D. Cook: We’ve seen an incredible growth in our video business, driven by Final Cut Studio. We’ve seen an incredible growth in our audio business, driven by the new Logic software that we just put out. The D&P space is slow, as buyers evaluate changing to both CS3 and Leopard.

Rob Semple (Credit Suisse): What was the CapEx number for the quarter?

Peter Oppenheimer: In the quarter, it was $292 million and it would have then been 822 for fiscal 2007.

Rob Semple (Credit Suisse): What do you estimate the size of the Mac installed base right now? What percentage of that installed base is on Tiger?

Timothy D. Cook: The vast majority of Macs shipped in the last four years are able to run Leopard. Specifically, this number is about 21 million. When we announced Tiger, there were 15 million units that were eligible to run Tiger and we did $100 million of revenue on Tiger in the first quarter of launch.