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Apple to Wall St.: Unlocked iPhones Good for Apple Sales

Apple execs say large number of unlocked iPhones are just evidence of the phone's popularity.

"We're confident on hitting the 10 million for the year," said Cook.

He said that iPhone shortages in the quarter were likely caused by shoppers buying iPhones with the intention of unlocking them and that the Cupertino, Calif.-based company expected iPhone sales to decline more than they did in the quarter.

"At this point both inventory in our stores and our channel inventories are currently low," Cook said. "We believe the reason is that there are more phones being bought out there with the intention of unlocking, which remains a significant number."

Cook would not say how many unlocked iPhones Apple believes are out there, but did say that the company thinks they're evidence that its on the right track and that there is global demand for the iPhone.

"It's very difficult to come up with a very precise estimate of it, but we do believe the number continues to be significant. Our view continues to be that this is a proxy for the world-wide demand for the phone and our focus is very much on rolling out to more [geographies] and we're on target to roll out into more countries in Europe and to enter Asia later in the year," Cook said. Sales of the iPhone hit 1.7 million for the quarter, and Cook said Apple's expansion into European and Asian countries will help it hit its target.

Apple sold almost 2.3 million Macintosh computers in the quarter, up 51 percent over the same quarter last year. About 10.65 million iPods were sold with higher unit price leading to revenue growth even though units sold declined. "We believe the introduction of the SDK will broaden appeal of iPod touch as applications are developed," said Apple's CFO Peter Oppenheimer.

Sales of Apple's notebook computers were up 61 percent year-over-year, with the introduction of the MacBook Air and a refresh of its MacBook and MacBook Pro lines. "MacBook Air represents a new portable category for Apple and customers have responded very well to its breakthrough design and ultra-portability," Oppenheimer said.

Analysts also asked about Apple's most recent acquisition.

"We occasionally buy smaller technology companies from time to time and we don't have a practice of commenting on our plans," Oppenheimer said in response to an analyst's question on its purchase of microchip maker P. A. Semi, which the company confirmed the day before its earnings announcement.

Apple made $1.05 billion on $7.51 billion in sales, bringing investors $1.16 per diluted share, up 36 percent from the prior year. Last year in the second quarter Apple made $770 million, or 87 cents per diluted share, on $5.26 billion in revenue.

Even though the company beat analysts' expectations of $6.96 billion in revenue and earnings of $1.07 per diluted share, Wall Street was disappointed with the company's forecast for the next quarter. In after-hours trading Apple's stock fell about 1.5% to $160.33.

Apple said it expects to earn $1 per diluted share on $7.2 billion in revenue next quarter, but Wall Street was expecting $1.11 per share on $7.17 billion in revenue, according to Reuters estimates.

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