Shannon Cross - Cross Research

Thank you.

Nancy Paxton

Thanks, Shannon. Could we have the next question, please?

Operator

Your next question will come from Gene Munster with Piper Jaffray.

Gene Munster - Piper Jaffray

Thanks for providing the non-GAAP results. That’s helpful and really points to the power that the iPhone is having and clearly you are off to a phenomenal start there but Steve, can you talk about the bigger picture for the iPhone in 2009 when the field is starting to get more cluttered with iPhone wanna-bes? And how do you just big picture think about your roadmap for ’09 and the phone?

Steven P. Jobs

Well, I think we have to be the best and I think we have to not leave a price umbrella underneath us, and we are working very hard to fulfill both of those goals. And I think we are way out ahead of anybody else right now and we are investing a lot with the most talented people in the world to stay that way. We have a great partner in AT&T and together I think we are both very committed to making the iPhone a great value for customers, so we’ll be focused on all those things next year and beyond.

Gene Munster - Piper Jaffray

Okay. Can you give any sort of split in terms of phones sold in U.S. versus international?

Timothy D. Cook

Not specifically, Gene, but I would tell you that there was a significant percentage international.

Gene Munster - Piper Jaffray

Okay, and then just a final question, Peter, last quarter you talked about the margin impact and the potential for these new products and it seems like margins once again were phenomenal and can you just help us understand, should we still be waiting for something or have we seen what happened and just the pricing environment was much more favorable than you had expected? How do we reconcile your comments last quarter versus what we are seeing right now?

Peter Oppenheimer

Gene really the latter, we’ve introduced stunning new iPods and notebooks. They cost more and that’s why our margin declined sequentially. As I told you 90 days ago, we don’t talk about new products so it was hard to make the comments that I did and be clear, but you’ve now seen what we’ve done and I have provided guidance for 30% to 31% this quarter and we are going to continue to work to get down the cost curves over time on these great products.

Gene Munster - Piper Jaffray

Okay. I guess one final question is did you actually see a deceleration in your business? I know that there was some anticipation on the new Macs but did you see any sort of deceleration towards the end of September or is the guidance just purely trying to be as conservative as possible?