When pressed as to why Apple wasn’t prepared to produce more iPad 2s for launch when during the holiday quarter Apple sold more than 7 million, the response was that product “transitions are never simple.” Nonetheless, Apple executives are proud of the “progress on production,” asserting that it was better than with the original iPad. To that end, the company plans on expanding the number of countries next week, and add more during the quarter. If that seems contradictory, well, it is, and no time frame was given on when supply and demand equilibrium would be reached, except that Apple executives are “confident we’ll produce a very large number” this quarter.

Those like myself thinking Apple might add another iPad model this year, perhaps even an iPad 3, can forget it. If the product transition is this difficult for the iPad, it’s nearly impossible to imagine Apple attempting another transition during the holiday quarter.

Besides the iPad, there were only a few points of interest during the call, including:

• Apple Retail will have its tenth anniversary and one billionth visitor next month, and, as has been the case for a while now, “about half” of people buying Macs in stores are new to the platform.
• On Steve Jobs, executives see him on a regular basis. He’s involved in major strategic decisions, and wants to be back as soon as he can.
• China now accounts for a tenth of Apple revenue.
• Demand for the MacBook Air remains strong, while consumer response to the new MacBook Pros has been “excellent,” and the Mac has outgrown the PC market for 20 straight quarters.
• iPhone growth is “off the charts” in two places, the U.S. and China, up 155 percent and 250 percent, respectively.
• Don’t expect an LTE iPhone anytime soon, as Apple is “not going to make” the kind of design compromises the first generation chipsets require.
• The iPod touch continues to account for more than half of iPod sales.
• On the recent patent lawsuit with Samsung, Samsung “crossed the line,” so Apple went to the courts after trying to resolve the issue.

Finally, when pressed on the analogy of the Android being like Windows PCs in the 90′s and the iPhone the Mac during the same period, Apple executives sidestepped. Citing the iOS platform as a whole, app counts, the value of and integrated versus “fragmented” platform, Apple executives “feel good about where we are.”

That answer was typical of the call, which was short on real information, but short on genuinely interesting questions, too. Nary a white iPhone or Apple TV question was heard, despite recent talk swirling around both. Hopefully, Steve Jobs will be back for some trash talking of the PlayBook come July.

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With quarterly revenue growth of 83 percent and profit growth of 95 percent, we’re firing on all cylinders. We will continue to innovate on all fronts throughout the remainder of the year.

However, there was nothing “magical” about the iPad, and the “also sold” in Apple’s press release really tells it all. Whether it’s constrained supplies or lack of interest, the number for iPads may result in recalculations of estimates of upward of 30 million iPads for 2011. However, the iPad is only one of four major product segments, and the news is much better for the Mac.

Mac sales increased 28 percent from last year, with 3.76 million sold, sharply contrasting with aggregate PC sales. Both IDC and Gartner have reported single-digit declines for PCs, and arguably those declines are at least partially attributable to the iPad. That cannibalization of traditional computer sales has not impacted the Mac. In fact, we are likely seeing the third-generation of  ”halo effect,” where first the iPod, then the iPhone, and now the iPad increase Mac sales by affection.

As to which Macs are selling, the refreshed MacBook Pros, likely combined with continued strong sales of the MacBook Air, pushed laptop sales to new highs. Apple sold 2.75 million laptops, compared to 1.01 million desktops, with laptops accounting for 73 percent of Mac sales for the quarter. By the end of the calendar year, it’s likely three out of four Macs sold will be portables. The inexorable trend towards niche status for desktops continues.

Another inescapable conclusion seems to await the iPod: stagnation. Apple sold 9.01 million iPods in the quarter, compared to 10.89 million last year, down 17 percent. Overall, iPod sales have been down or flat since 2008, as the dedicated media player market reached saturation. However, even as overall sales went flat, the iPod touch continues to see growth. Apple has reported the iPod touch now accounts for about half of iPods sold, which is a big boost for the iOS platform.

Another boost to the iOS platform, the Verizon iPhone helped to propel sales to a new record of 18.65 million sold. That’s more than double the number sold for the same period last year, and also beats the previous record set during the holiday quarter of 2010. While we don’t know the exact number of Verizon iPhones sold yet, we do know AT&T sold 3.6 million. Expect Verizon iPhone sales to meet or exceed that.

As for the iPad, the best-case scenario is that supply constraints and damage to parts production from the earthquake in Japan impeded Apple’s ability to get devices into consumer hands, as Apple sold 4.69 million units for the quarter. That compares poorly to over 7 million units last quarter, which admittedly was the holiday quarter. However, that number barely exceeds the quarter prior to that, which was 4.18 million. Apple will need to do some explaining at the conference call on those iPad numbers.

Hopefully, that will be done by Steve Jobs. It’s hard to imagine Steve Jobs not showing up to trash talk the PlayBook at today’s conference call. Jobs was absent for the call in January, but made the iPad 2 event in March. Whether or not Steve Jobs is at the today’s call, TheAppleBlog will be providing highlights immediately following.

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Mac sales are expected to be between 3.5 and 4 million units, up from 2.9 million last year. More interesting, IDC is reporting ten percent growth year-over-year for Mac sales in the U.S., and while Toshiba also saw growth, HP, Dell, and Acer saw declines of 2.4, 11.8, and a CEO-firing 42.1 percent, respectively. According to IDC, “media tablets” like the iPad could be one factor in those declines. However, the reverse appears to be true for Apple, with the iPad having yet another “halo effect” on Mac sales. This ensures the Mac will remain a major focus for Apple, good news for Mac users, but which Macs will receive Apple’s attention in the future?

While Apple doesn’t break out numbers on individuals models, 70 percent of Macs sold last quarter were laptops, with the redesigned MacBook Air likely leading sales. Analysts expect the trend towards portability to continue, even though desktop sales are actually increasing. Nonetheless, the continued decline in market share likely means less focus on Mac Pros, Mac minis, and even the iMac. The Xserve, of course, is no longer part of the picture at all, having been discontinued.

Also in decline, or at the least stagnating, are iPod sales, likely to be between 9.5 and 10 million units, compared to 10.9 million last year. Sales of iPods have been slowly declining since 2008, but that decline is tempered by the increased average selling price of iPod units. That is attributed to the iPod touch, which accounted for half of all iPod sales in the holiday quarter last year. That’s great for the iOS platform, far more important to the future than Apple controlling 70 percent of the declining market for media players. The interesting question will be whether, despite alleged e-mails from Steve Jobs to the contrary, the iPod classic will be phased out. For that matter, merging the iPod nano and shuffle into a single device starting at $99 doesn’t seem like an impossibility, either.

For the iPhone, the opposite might happen with the introduction of news models and price points. Sales for last quarter will likely be between 16 and 20 million units, but it’s hard to be too optimistic because of the uncertainty over Verizon iPhone sales. Apple, never shy about being self congratulatory, has been silent on sales, though Verizon has said the iPhone 4 was the “largest retail launch” in company history. But even if Apple sold 20 million iPhones last quarter, that would be ten million fewer than Google is reporting for Android activations. Those numbers are likely the reason Tim Cook was hinting about the iPhone being “not just for the rich” earlier this year. A low-priced, current generation of iPhone would definitely help keep the iPhone from being relegated to niche status in an Android world.

As for Android doing to the iPad what was done to the iPhone, it hasn’t happened so far, though estimates on iPad sales are all over the place, anywhere between 5 and 10 million. Arguably, if iPad sales are near the holiday quarter’s 7.3 million, that will put the iPad on track for 30 to 35 million units sold this calendar year. That kind of success took years for both the iPod and iPhone to achieve, but let’s hope Apple isn’t getting fat on margins and lazy. Competitors like Samsung and beleaguered Acer are finally bringing tablets to market with lower price points than the iPad. Price will be the challenge for the iPad in the second half of the year, a challenged that could be met with another iPad 2.

In summary, my predictions for next week are:

• Revenue, EPS: $24.9 billion, $5.05
• Macs: 3.75 million
• iPods: 9.95 million
• iPhones: 17.55 million
• iPads: 7.05 million

What are your estimates for Q2 2011?

And don’t forget TheAppleBlog will provide highlights of the earnings report and the conference call, including any trash talking from any Apple execs on RIM’s Playbook.

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Analysts point to several causes. JMP Securities’ Alex Gauna downgraded Apple on Wednesday because of concerns over slowing growth at Apple’s main supplier, Hon Hai Precision Industry (also known as Foxconn), as Android’s huge success starts chipping away at iPhone sales.

Gauna is among the few naysayers who doubt Apple can continue to outperform the market. But Asian firm CSLA counters that the JMP analysis ignores the fact that Apple doesn’t represent a significant portion of Hon Hai’s sales (Apple accounted for about 24 percent of Hon Hai’s total 2010 revenue, according to CSLA). If so, that’s definitely not enough to infer a direct one-to-one relationship between the fortunes of the two companies.

CSLA offers a second, more convincing reason behind Apple’s recent slump. CSLA firm analysts Chitra Gopal and Steve Fox argue (and, to be fair, Gauna also mentions this) that Apple’s heavy reliance on Japanese components is causing investor jitters in light of last week’s earthquake and tsunami. Here’s an excerpt from their full note on the subject (via SAI):

A4 /A5 CPUs are made by Ibiden, and ACF films for displays are 100% sourced from Japan (Sony Chemical and Hitachi). This will affect practically all manufacturing, not just Apple plays. Apple related stocks are getting hit today — I guess one reason could be Apple historically has operated a lean supply chain (carries much lower inventory vs. other consumer electronics/PC makers) — so concerns are the Apple’s shipments could be worse hit.

The Japanese market represents about a 6 percent share of Apple’s overall sales. Obviously, Apple’s sales in the country will be affected following the disaster, and the iPad 2′s launch in that country has been delayed indefinitely. But here’s the rub: The disaster’s fallout is hardly limited to Apple, and it’s hard to see how Apple could possibly be more affected than the majority of its competitors in the consumer electronics and computing market.

So what else could be behind the stock slide? Michael Shulman of InvestorPlace offers four other reasons. Maybe his most salient point is that many simply believe that Apple’s growth will inevitably slow, so why not now? Shulman, for one, isn’t buying it. He points out that Apple owns a fraction of the worldwide cell phone and personal computer market share, giving it plenty of room to expand its business, something it could easily accomplish if it continues its trend of bringing lower-priced offerings to market.

Apple’s stock is up about 2 or 3 percent today as of Thursday morning. Overall, tech stocks are trading low (down half a percent today) as a result of concerns of market instability following the earthquake in Japan. If anything, the clear evidence of Apple’s success with iPad 2, combined with what I think is an undervaluation based on JMP’s downgrading make this a perfect time to buy Apple stock if you’ve been looking for the opportunity.

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1. The Steve Work Ethic

Considering the turbulence Apple faced Monday and Tuesday, it’s difficult to imagine that every analyst would choose to not ask questions about the impact Jobs’ medical leave of absence would have on the company, yet none did, at least not directly. However, one question was posed about “long-term planning” about products.

“In my view, Apple’s doing the best work ever,” said COO Tim Cook, adding that the company was “very happy” with the product pipeline, and then he said this:

“The team has an unparalleled breadth and depth of talent and innovation that Steve has driven in the company, and excellence has become a habit, and so we feel very confident about the future of the company.”

Present or not, the influence of Steve Jobs still guides Apple.

2. Apple and the Dragon

When queried about how Apple can manage to sustain the insane growth of the present and the past, the answer that came up repeatedly was Asia, specifically China. The company stated that years ago Apple identified China among emerging as its “top priority” and the results are “absolutely staggering.” China, Hong Kong, and Taiwan generated some $2.6 billion in revenue for the quarter, quadrupling performance over last year. The number of visitors and sales at Chinese Apple Stores exceeded those of every other store, including flagship stores in the U.S. and Europe.

Besides China, sales in Japan were up 83 percent year over year, with strong growth for the Mac: up 56 percent. Korea was also singled out as being very receptive to the iPhone, and Japan was mentioned as well, but clearly, China is the focus of new markets for Apple going forward.

3. The Mac Is Back

Actually, it never left. For a jaw-dropping 19 consecutive quarters, the Mac has grown faster than rest of the PC market. For the most recent quarter, the Mac achieved 23 percent growth, compared to a meager three percent for the rest of the industry. Apple sold more than 850,000 Macs in retail Apple Stores, and once again, for nearly 10 years, “about half” of those purchasing Macs were doing so for the first time.

As to what people were buying, the biggest sellers were the MacBook Pro and the new MacBook Air. Apple executives described the Mac as a “phenomenal” part of their growth. That growth included 2.9 million laptops sold, representing 70 percent of Macs sold during the quarter. Consumers loved new features like “instant on” and the speed of solid-state drives according to Apple. Look for SSDs to migrate to other Mac portables soon, most likely with faster CPUs from Intel.

4. The Unstoppable iPhone

After selling more than 14 million iPhones from July through September, Apple topped that by selling more than 16 million iPhones during the holiday quarter, and they could have sold more. More than six months after launch, the iPhone 4 is still supply-constrained, and Apple executives have no idea when supply and demand equilibrium will be reached.

It almost certainly won’t be this quarter, with the launch of the Verizon iPhone. In fact, a question regarding expanding sales of CDMA iPhones to countries like China was only partially deflected. While Apple is “always looking for opportunities,” it was implied that current iPhone supplies preclude any major expansion in the short term. For the first time, Apple may be looking at an iPhone that sells out across the model year.

5. Other Tablets Still Suck

Trash-talkin’ Steve Jobs may not have been there to put the smackdown on competing tablets, but Tim Cook filled those shoes admirably. According to Cook, competing tablets currently fall into one of three categories:

1. Window tablets that are “big, heavy, expensive, and have poor battery life,”and that require input devices like a stylus. Consumers are simply “not interested.”
2. Android tablets that, by Google’s own admission, run an OS not designed for tablets in sizes that are “less than reasonable,” failing to provide a “real tablet experience.” They are “scaled-up smartphones” and Apple is ”not concerned” about  them. I wouldn’t expect a 7-inch iPad this year.
3. Vapor. That would be tablets previewed at CES or earlier, and possibly the BlackBerry PlayBook, though RIM was never mentioned.

6. 160 Million iOS Devices Sold

To put that number in perspective, the number of iOS devices passed 100 million last June. In September, that number was 120 million, and now it’s 160 million. By the time the next iPhone launches in June or July, it will be at least 200 million, perhaps as many as 250,000 million.

That’s the takeaway from this quarter’s conference call: six facts worth remembering.

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We had a phenomenal holiday quarter with record Mac, iPhone and iPad sales. We are firing on all cylinders and we’ve got some exciting things in the pipeline for this year including iPhone 4 on Verizon which customers can’t wait to get their hands on.

The resurgent Mac also set a new sales record: 4.13 million units, breaking last quarter’s record of 3.9 million, and more than 750,000 Macs than the company sold a year ago. To put that number into even greater perspective, Apple sold 4.5 million Macs during all of 2005. Nine months after the launch of the iPad, it appears concerns of Mac cannibalization are groundless, though concern for desktop Macs might be warranted.

In 2010, two out of three Macs sold were laptops. For the first quarter of this fiscal year, Mac laptops represented 70 percent of sales. Mac desktop sales were actually down year-over-year, from 1.23 million to 1.28 million, while laptops surged to 2.9 million during the holiday quarter. While Apple doesn’t break out sales by individual model, the new MacBook Air appears to be having an impact. Apple has indeed become the “mobile devices company” Steve Jobs described last January during the iPad introduction, and the iPod remains the best-selling of Apple’s mobile devices.

Apple sold 19.4 million iPods in the first quarter, compared to nearly 21 million last year, a decrease of 7 percent. For the last four years, Apple has regularly sold between 20 and 25 million iPods during the holidays, indicating the iPod may have reached market saturation. Revenue, which had been increasing despite decreasing sales, is now flat, up just 1 percent. While Apple also doesn’t break out iPods by model, it’s been thought that increasing sales of the higher-priced iPod touch were offsetting an overall iPod sales decline. The change in revenue may indicate that the combination of the iPhone and the iPad are negatively impacting iPod touch sales.

As for the iPhone, after selling 14.1 million units during the first full quarter of iPhone 4 availability (July through September), Apple sold 16.2 million iPhones during the holidays. That’s up an astonishing 86 percent year-over-year, and since 2008, iPhone sales have approximately doubled during each subsequent year’s first quarter. The iPhone earned nearly $10.5 billion for Apple, some 40 percent of all revenue.

Looking forward to next quarter, it’s hard to imagine Apple beating sales for the last two quarters, especially since the next iPhone isn’t expected to arrive until June or July. However, Apple will have the Verizon iPhone, and could finally manage to ship the white iPhone, so another record quarter is possible.

Another sequential record quarter is a little harder to imagine for the iPad. Launched just over nine months ago, the iPad sold 7.33 million units during the holiday quarter, up from 4.19 million the previous quarter. It appears the iPad, like the iPod, has great seasonal cache as a Christmas present. That makes one wonder if the yearly launch may at some point be moved from spring to fall, when new iPods are traditionally unveiled.

That question may come up during Apple’s conference call today, along with the expected queries about Steve Jobs and his medical leave of absence. As always, TheAppleBlog will have highlights and commentary immediately following the call.

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Three of the top U.S. carriers announced yesterday a plan to work together to enter the mobile payments realm, where they’ll go toe-to-toe with tech giants like Google and Apple. Sparks are bound to fly, but what does Apple bring to the fight?

As Ryan Kim notes at GigaOM, “AT&T, Verizon Wireless and T-Mobile USA said they are banding together to create a new mobile commerce network, called Isis, that utilizes near field communications.” The new Isis system being worked on by the U.S. carrier conglomerate will allow device owners to use their handsets as credit cards. It will launch with Discover and Barclaycard as credit partners. Discover is far behind Visa and MasterCard in terms of U.S. consumer use, and Barclaycard really doesn’t have much of an American presence.

So are network providers are actually ahead of the curve here? Plans for Isis could bear fruit just in time to run up against similar efforts being made by Apple and Google to bring near field communications (NFC) to their mobile devices, the first step in making smartphones true electronic wallets. NFC will allow the iPhone and other handsets to communicate directly with each other and with other NFC equipped devices when in proximity to one another, without the need for a shared network connection. Apple will be able to guarantee NFC inclusion in its hardware for all customers, while Google and the carriers will have to depend on OEMs including the tech in their handsets.

The actual relationship with the customer is an important aspect as well. With Apple, a mobile payment system tied to your iTunes Store account is going to be a hard deal to match, in terms of ease of use, simplicity, and cost, since the infrastructure is already largely in place. Users are also accustomed to using Apple’s system to buy things (with well over 125 million active credit cards tied to accounts at this point), and they can tie it to a payment method of their choice.

Also, there’s the question of platform access. Apple will likely allow a mobile payment app from AT&T (or any other provider, should it end its exclusivity) on the iPhone. But the next iteration of the iPhone could very well have its own payment hardware and software baked right into the OS, and it will be carrier agnostic and won’t require any additional downloads.

On the carrier side, Isis also isn’t set to be widely available to the public for another 18 months, while Apple could introduce mobile payments as soon as June 2011 when it releases its next iPhone revision. Although carriers have people’s credit card info, and an existing billing relationship with customers, Apple does too. Apple’s system will involve far fewer steps and could be available earlier, and that gives it the advantage. Given the choice between Apple-backed iTunes, which is already widely used, and Isis, which is brand new, even with the backing of established telcos, many will probably choose the most familiar route.

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Last week, TheAppleBlog discussed Apple’s climb to number two in the global smartphone battle. In a report released yesterday by research firm IDC, we learned Apple is moving up the ladder in the broader cellphone category worldwide, too.

Kevin Restivo, senior research analyst with IDC, says “The entrance of Apple to the top 5 vendor ranking underscores the increased importance of smartphones to the overall market. Moreover, the mobile phone makers that are delivering popular smartphone models are among the fastest growing firms…Vendors that aren’t developing a strong portfolio of smartphones will be challenged to maintain and grow market share in the future.”

Don’t forget that Apple has only been manufacturing phones since 2007 and, in that time, has achieved market dominance with only one or two models on sale at once. With the iPhone’s release in 17 different countries in the past quarter alone, it’s set to push that progress even further. Nokia still has a huge lead, but it is eroding.

According to IDC, Nokia dropped over 4 percentage points to 32.4 percent market-share, and LG electronics missed its shipment goal by double digits. Samsung is the only company  ahead of Apple that experienced growth during the quarter.

Reception issues that spurred a product-wide free case program not only weren’t enough to slow down iPhone 4 sales, but seem to be a minor blip looked at from the vantage point of today. Apple continues to be the leader of the pack in design and product growth, despite occasional flaws and constant challenges from other strong contenders.

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Apple made more than Microsoft during the last calendar quarter with a $20.34 billion quarter, as it announced last week, while Microsoft announced its total of only $16.20 billion just today. It’s still a record quarter for Microsoft, up 25 percent from last year, and Microsoft  has higher profit margins because it remains a software-focused company, but the achievement is noteworthy nonetheless.

It’s the first time since Steve Jobs’ return to the company that Apple has beaten Microsoft in revenue, so I’m sure Ballmer and Co. are taking note. The margin by which Apple won is a big one, too, and though many predicted Cupertino would make more than Redmond at some point this year, few anticipated such a large gap so early.

Will new products like Windows Phone 7 and Xbox Kinect help Microsoft regain some of that ground? Time will tell, but Apple’s lead may already be insurmountable.

UPDATE: This article originally stated that it was the first time Apple beat Microsoft in its history. In fact, Apple’s revenue exceeded that of Microsoft until around the mid-90s.

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Apple made its annual regulatory filing with the Securities and Exchange Commission Wednesday. It said gross margins will fall again in 2011, just as they did in 2010, “due to a higher mix of new and innovative products,” and predictions of higher prices for components and other production-related costs.

It said much the same thing last year; 2010 brought the introduction of the iPad, possibly Apple’s biggest gamble of the past decade when viewed from the vantage point of Dec. 2009. No wonder they expected gross margins to fall.

This time around, what might account for the same worry? The iPad is a winner, as will be its successor, and one would assume that the next iteration will be evolutionary, not revolutionary, so margins should go down. Same with the iPhone and its next iteration, though Apple might shake things up in that arena to get rid of the stigma of the antenna problems that plagued its latest smartphone release.

The redesigned MacBook Air, which will affect Apple’s 2011 financial year, could account for some of those narrower margins, but I think Apple has even more up its sleeve if it sees the gross margin percentage dropping below levels of a year when it launched a brand new product category. Maybe we’ll see changes as dramatic as the MacBook Air’s new internals come to the rest of the notebook line, or another new device category to extend the reach of iOS further still.

One other noteworthy element of the filing is Apple’s prediction regarding capital expenditure. The company plans to spend $4 billion in 2011, with $600 million of that earmarked for new brick-and-mortar retail. Plans for new stores include between 40 and 50 new locations, more than half of which will be located outside the U.S.

While 2010 is a tough act to follow, the next year should be another big one for Apple, especially as the Android-iOS battle heats up. What do you see it planning for 2011?

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Issued by OpenTrust, a software security provider that was tasked with creating a secure network for the devices, the report doesn’t reveal which pharmaceutical company is bringing in the Apple hardware. It does note that the new customer has a large international presence, spanning more than 100 countries, and claiming more than 100,000 employees worldwide. That’s right around Pfizer and GlaxoSmithKline territory, in case you were wondering.

Apple touted its presence within top companies last Wednesday, when Jobs noted during the conference call that the iPhone is being piloted or deployed by 80 percent of Fortune 100 companies, while the iPad has presence at 66 percent.

The OpenTrust announcement reveals some interesting usage information about how iOS devices are operating in corporate IT, too. The company’s focus seems to have been on enabling secure remote access for distributed employees dialing in from abroad. If remote workforces are pushing the enterprise drive toward iOS adoption, then that’s promising news for Apple, as the number of employees who commute virtually is on the rise.

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The report assures readers that the data center, located in Maiden, a town of about 4,000 residents, is ready to “ramp up production.” The 500,000 square foot facility won’t actually be producing anything, but will instead operate as a server farm. The specific purpose of those servers isn’t yet known. During Apple’s recent conference call, Apple CFO Peter Oppenheimer said only that the data center was on schedule, with an expected completion (and usage) date of late 2010.

Apple’s plans for the facility must indeed be big, since aerial footage (see video below) seems to confirm the recent Digital Daily assertion that Apple was indeed thinking about doubling the size of the center, adding another 500,000 square feet to its already considerable footprint.

The site will be at least five times the size of Apple’s largest current server facility, located in Newark, California. Size alone suggests more than just an evolutionary upgrade in Apple’s server capacity. So why the sudden, massive capacity increase?

Apple TV: Well, most obviously, Apple just announced that it sold 250,000 Apple TVs in that device’s first three months on market. Since the new Apple TV is a streaming only product, offering on demand streams of video, that should translate into a much greater strain on Apple’s servers. But reports seem to indicate that iTunes rental service streaming to Apple TV has been largely without issue to date, which would suggest that capacity isn’t an issue yet. Taken alone, the Apple TV’s streaming demands can’t account for the need for a new data center this big, even if Apple had massively undersold its own expectations for the device, which doesn’t appear to be the case.

MobileMe: Apple also has MobileMe, its own cloud-based services including email, contact, bookmark and note syncing, and virtual cloud storage. The service allows subscribers to keep their information up-to-date and synchronized across multiple Macs and iOS devices. I doubt the MobileMe subscriber base is expanding exponentially, or we would’ve heard about it at the conference call, but there is another possibility: Apple is planning to open up the service to all Apple device owners. If Apple introduced a tiered system, with limited access for free users, it would be a huge incentive for prospective hardware buyers.

iTunes in the Cloud: Finally, there’s the old chestnut of Apple’s plans to bring iTunes to the cloud. A streaming music subscription service has often been rumored, but hasn’t yet materialized. Maybe Apple was simply lacking the infrastructure, and didn’t want to launch a service before quality could be assured.

Whatever the case with music, media streaming and cloud services seem to be written in stone for the future of computing, so Apple’s North Carolina data center, even at one million square feet, makes a lot of sense. And given Oppenheimer’s schedule for facility to become operational, we’ll see what Apple has planned for the site sooner rather than later.

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However, it wasn’t really a terrible loss for RIM, as the entire smartphone market grew 78 percent overall. Though Apple did surpass RIM in sales volume (and seems poised to ship even more in the future, since supply constraints provided a choke point in 2010), it still has a long way to go before it approaches Nokia, the reigning king of the smartphone hill.

Nokia shipped 26.5 million devices during the three-month period. Apple, by contrast, shipped only 14.5 million, almost half as much as its biggest rival. Nokia benefits from a much greater presence in Asia and Europe, and will be hard to shake from its lofty perch, though it’s losing ground. It held 34.4 percent of the market in this latest scan, down from 37.8 percent from the same period the previous year.

Apple’s market share grew from 17.0 to 18.3 percent over the year. The BlackBerry’s take dropped as much as Nokia’s, falling from 19.6 to 16.1 percent; RIM shipped 12.3 million devices during the quarter. The Canadian company is missing out in large part due to “a limited presence in the high-growth touchscreen segment” according to Strategy Analytics.

According to analysts from Canacord Genuity, a firm 0perating in RIM’s own backyard, Apple’s lead in the smartphone market may be insurmountable at this point, even for Google.

Following Monday’s conference call, the firm raised its target price on Apple stock to $421 and called Apple “unbeatable.” Analyst Micheal Walkley said simply, “We agree with his views,” referring to Jobs’ claim that “we’ve now passed RIM and I don’t see them catching up with us in the foreseeable future.” Analysts also agreed that Android was too fragmented, and argued that the App Store’s head start in terms of its software library is a market-defining advantage.

Unbeatable is a strong word to use in a sector as prone to transformative change as mobile tech, but Apple is currently occupying a position in the market that almost no one would’ve predicted five years ago, so perhaps in this case, it’s merited.

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By not paying out dividends or using the money to buy back company stock, Apple is making sure it’s uniquely positioned to make acquisitions to defend or augment its place in the market. That cash can instead go back into R&D, but more importantly, it can be used to acquire companies whose IP and resources might strengthen Apple’s business, or help it expand to new areas.

But what does Apple want to buy, and how big will it go? While it isn’t easy to say, it does appear that Apple’s acquisitions are very much situation-dependent, and that the limit of what it’s willing to spend is on the rise.

Apple only started buying up other companies three years ago (its coffers were significantly more full following the introduction of the iPhone) and since then, it’s made more purchases every year. The size of the deals varies, but the number of acquisitions consistently rises. So as Apple’s money pile grows, its aversion to the risks associated with acquisition decreases considerably.

Stacey Higginbotham wrote yesterday about the Big 11 tech acquirers, as identified by Deutsche Bank. You’ll recognize all the names on the list, and probably won’t be surprised to find Apple up there alongside its major competitors in both the PC and smartphone markets. The way tech is headed, acquisitions are quickly becoming the best way to gain competitive advantage. It’s how Apple developed the A4 chip, the component that’s probably made the most difference in terms of production costs for Apple’s iOS devices.

There are a wealth of choices for future acquisitions with $50 billion in the bank. Google only has $30 billion, by comparison, and Microsoft only slightly more with $31 billion. In a very real sense, that means that Apple has more buying power than its competition. It also means something like Facebook could even be on the table. The best guesses say the social network is worth anywhere between $10 and $33 billion, which could potentially put it beyond the reach of anyone other than Apple.

But Apple won’t be buying Facebook, despite meetings between Zuckerberg and Jobs, and what Peter Kafka at All Things D thinks. Not only would it take a huge chunk out of Apple’s cash pile, but it would prove a massive distraction from Apple’s main lines of business, and its contribution to Cupertino’s core interests would be negligible. I can see Jobs wanting to acquire some social networking IP to bolster its efforts with Ping, but buying Facebook to accomplish that would be like swatting a fly with a nuclear bomb.

No, Apple’s acquisitions will be focused on providing its mobile products with key competitive differentiators. That means battery, streaming, and radio tech. We’ll see buys that provide RFID expertise, ways around the battery crunch that’s fast becoming the major barrier in mobile tech, and speedy and dependable methods of streaming content to and from smartphones and tablets. This is where the fight on the horizon is in the mobile sector, and this is where Apple’s many guns will be pointed when the battle comes.

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Jobs began the Apple earnings conference call today by going on a tear against two of his biggest competitors, Google and RIM. Apple “handily beat RIM,” with 14.1 million iPhones sold last quarter, versus 12.1 million BlackBerry devices, and Jobs doesn’t “see them catching up.” According to Jobs, RIM must move from its “comfort zone” of the enterprise, and woo both the average consumer and developers, and it will be a “challenge.”

Regarding Google, Jobs once again challenged the search giant on Android sales data. Not only did he question the reliability of Google’s claim of activating 200,000 Android devices a day, but he also countered that in the last 30 days Apple was selling an average of 275,000 iOS devices, with a peak of 300,000.

Fragmented vs. Integrated Platforms

In terms of platform philosophy, Jobs went after Google for calling Android open and iOS closed, arguing the difference was between a fragmented and an integrated approach. He complained about “proprietary interfaces” added by companies like Motorola and HTC.

He contrasted iOS as a development platform with only two versions, with Android which has more than 100 on more than 200 handsets. Jobs contends that customers and developers want devices that “just work,” and he’s confident that his “integrated” platform will triumph over a “fragmented” one.

Quality Control

Jobs also took a shot at Nokia, saying Apple doesn’t “know how to make a great smartphone for $50.” Apple approaches product design from what’s best for the consumer, not necessarily what will sell the most, though Jobs pointed out that Apple did both with the iPod.

On tablets, Jobs adamantly defended the 10-inch form factor, arguing that a 7-inch screen just “isn’t sufficient to create great tablet apps.” According to Jobs, “10 inches is the minimum size for a great tablet,” which notably does not rule out larger displays.

Jobs further argues that competitors can’t match Apple on pricing, have zero apps for their tablets, and may end up abandoning the 7-inch model next year, leaving customers with “orphaned product.” He summed up his thoughts on the tablet platform succinctly: “We’re out to win this one.”

Apple TV

Breaking with three years of tradition on refusing to report sales of the Apple TV, Steve Jobs announced Apple has sold 250,000 since the device went on sale at the beginning of the month. If those kinds of numbers persist, it’s hard to imagine Apple not introducing an App Store for the Apple TV.

Everything Else

Another high point in Jobs’ performance: When asked about his feeling on Flash, he replied, “Flash memory? We love flash memory.”

Here are some other highlights that aren’t quite as theatrical, but are impressive nonetheless:

• Macs are more than doubling the growth of the PC industry average of 22 percent thanks to strong iMac, MacBook and MacBook Pro sales.
• Despite decreasing sales, the iPod continues to represent about 70 percent of the media player market in the U.S., and is the top-selling device internationally in most markets.
• The iPhone had a blowout quarter with more than 14.1 million units sold, up 92 percent year over year, compared to 64 percent for the industry average. It’s now available in 89 countries, and being piloted or deployed by 80 percent of Fortune 100 companies. While there’s still a “sizable backlog” of orders, supply/demand equilibrium is getting closer.
• The iPad is being met with “great enthusiasm” in 26 countries and 66 percent of Fortune 100 companies. Supply channel inventory is now 3 to 4 weeks, less than the 4 to 6 desired, but enough so that additional partners and countries can start to sell iPads.
• Sometime in September, the 125th million iOS device was sold, up from 100 million in June, meaning Apple is now tracking at 100 million iOS devices sold per year and growing.
• Retail saw nearly 75 million visitors, up from 50 million a year ago. 874,000 Macs were sold at 317 Apple Stores worldwide, “about half” to those new to the platform. The company plans to open between 40 and 50 new stores in 2011.

Finally, Apple has $50 billion in the bank, up $5 billion from last quarter. Rather than return the money to shareholders as dividends, Jobs said Apple plans to “keep our powder dry” for “one or two” possible strategic acquisitions in the future. Nintendo looks quite ripe, doesn’t it?

As conference calls go, this one was just about the best ever. Check out the audio for yourself if you don’t believe me.

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“We’re blown away to report over $20 billion in revenue and over $4 billion in after-tax earnings — both all-time records for Apple,” said Steve Jobs, Apple’s CEO. “iPhone sales of 14.1 million were up 91 percent year-over-year, handily beating the 12.1 million phones RIM sold in their most recent quarter. We still have a few surprises left for the remainder of this calendar year.”

For those owning Apple kit instead of stock, your investment in the platform has never been safer, with record sales of Macs, iPhones and iPads. The iPad, with 4.19 million sold so far, has now definitely sold more than the combined sales of all Windows tablet and slate PCs for the entire year, and while the iPad appears to be negatively impacting netbook sales, it doesn’t appear to be cannibalizing the Mac.

Apple sold a record 3.89 million Macs in the fourth quarter, up 27 percent from 3.053 million a year ago, and more than double the seven million sold just three years ago. For FY 2010, Apple sold 13.66 million Macs, besting the sales record of 10.4 million last year.

Once again, notebook sales continue to outperform desktop sales by a wide margin. For Q4, Apple sold 2.64 million laptops and 1.24 million desktops. Expect this trend towards portability to accelerate with Apple introducing a new 11.6-inch laptop this Wednesday. Clearly, the trend is towards mobility. Could we be without an Apple consumer desktop, by say, 2015 or 2020?

Speaking of trends, if there’s any bad news in this report it’s for the iPod. Apple sold 9.05 million iPods in the fourth quarter, down from 10.2 million year over year, a drop of 11 percent. For FY 2010, Apple sold 50.31 million iPods, compared to just over 54 million sold in 2009 and 2008, and 2010 better compares to 2007, when Apple sold 51.5 million iPods.

As for fourth quarter 2010, it appears the new nano and shuffle introduced in September were not the kind of breakout hits that might have reversed the downward trend. Revenue from the higher-priced iPod touch was apparently not enough to lift overall iPod revenue. It’s possible the iPad is cannibalizing iPod sales instead of affecting the Mac’s performance.

The iPhone is clearly the iOS flagship. Fourth quarter 2010 was the best quarter ever for the iPhone, thanks to the iPhone 4. Despite being supply constrained for months, Apple sold 14.1 million iPhones, a new all-time record, and up a shocking 91 percent year-over-year. For fiscal year 2010, Apple sold just under 40 million iPhones, compared to 20.76 million in 2009. With shipping time down to 3-5 days in the U.S., supply and demand have at last reached equilibrium. No white iPhone in sight, but maybe that’s one of the surprises hinted at by Jobs.

Finally, there’s the iPad. Apple sold 4.19 million iPads in the fourth quarter, compared to 3.27 million in the third quarter, for a total of 7.46 million units in fiscal year 2010.

To put those sales in a business perspective, the iPad revenue has already surpassed the iPod, which sold approximately 10 million units and has been around for years, compared to just six months for the iPad. If this trend continues, it’s very likely that 2011 will see the iPad pass the Mac in terms of revenue.

Expect more information on the Apple numbers and products following the conference call. TheAppleBlog is listening, so you don’t have to.

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