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2:47 Dan Moren: Cook: So, yes, somebody could come in and jack the rate plans way up and subsidize, but I'm not so sure that people are really going to want another contract. Right now, thrilled with our position.

2:47 Dan Moren: Next question: Charles Wolff, Needham and Company.

2:48 Dan Moren: Q: In the past, iPhone software developers not about App Store rules, but about the fact that they are arbitrary. Has Apple done anything about this?

2:48 Dan Moren: Peter: We are always looking to make our developers happy. Over 225,000 apps with over 5 billlion downloads, thrilled to have crossed $1 billion in payments to developers, and have just launched iAds. Care deeply about our developers and want to have many many great apps for iOS products, and success that we've had to date is unparalleled.

2:48 [Comment From Lex] Is Dan Moren the fastest typist on the planet? And are rumors that he's typing this transcription on an iPad with one hand behind his back true?

2:49 Jason Snell: 1. No, I am. 2. Actually he has six fingers on each hand, so he has an unfair advantage over the rest of us.

2:49 Dan Moren: Cook: Vast majority of apps are approved within 7 days of their submission. Many of those unapproved have bugs and are resubmiitted and approved. All of us want to insure that porn and graphic scenes don't make their way to the platform. Not 100% of us will agree, but many of us would like to keep it that way.

2:49 Dan Moren: Q: Do you think concern of developers is misplaced?

2:49 MacJournals.com: My name is Inigo Montoyo. You transcribed my father. Prepare to type.

2:49 Dan Moren: Cook: We value the input of every developer and very much listen to them and modify our programs when we can. Very open to any kind of feedback.

2:50 Dan Moren: Next question: Shaw Wu, Kaufman Brothers.

2:50 Dan Moren: Q: Normally Mac is up sequentially from March to June, any color you can share there?

2:50 MacJournals.com: Now THAT, ladies and gentlemen, is what ducking a question is about. Cook turned the clearly arbitrary App Store rejection rules into something about filtering "bugs" and "porn." Absolutely no attempt to address the substance of the question.

2:50 Jason Snell: Yes, Apple is still playing the pornography card as its rationale for App Store rejection policies.

2:50 Dan Moren: Cook: A little bit of yin and yang when we announce new portables, you'll see a substantial move to portables when there's no new desktop announce at same time. Clearly a move to mobility, and you'll see portables grow in the long long long run.

2:51 Dan Moren: Q: On FaceTime, you talked about how you wanted to turn that into an industry standard. How do you plan to roll that out? Available on Windows? On the Mac? Any color?

2:51 Dan Moren: Cook: We want to make sure we get to all financial questions. Punt that one for another day.

2:51 Dan Moren: (Ouch.)

2:51 [Comment From Glenn Fleishman ] Wish Apple would stop trotting out porno/graphic violence as reason for app rejection, when that's not what anyone's complaining about in terms of inconsistent approval process.

2:51 Dan Moren: Next question: Katy Huberty, Morgan Stanely.

2:51 [Comment From Neven] That was a remarkably lame answer to the question about App Store rules and how they are applied. The question was about the cases where the rules are inconsistently applied (or not even known), the answer was about iAds and apps which break obviously known rules.

2:51 [Comment From kishba] Wow, great questions on behalf of developers...if only Apple could provide a better answer.

2:52 [Comment From MPH] Didn't really answer the question on the app store transparency.... it's not the rules on bugs or porn, it's the random new rules they invent as they go along.

2:52 Dan Moren: Q: iPhone revenue units in Asia, Europe, and Japan. Why not North America? Law of large numbers? Anything to reaccelrate growth in domestic market?

2:52 [Comment From KBeat] It's been a while since I've read a report of an arbitrary app store rejection. Seems to have cleared up some. You guys aware of any in the past month or so?

2:52 [Comment From Humbledaisy ] I am a developer. I give feedback. Hello? Not rejected for bugs our porn! Frustrated, saddened and tired...

2:53 Dan Moren: Cook: Not law of large numbers. Phone market will increasingly come a smartphone market, as Steve said long ago. We've seen that that forecast has come true as the smartphone market has grown at multiples of basic handset market, which is shrinking. Lot of opportunity domestically and in other parts of America. Peter's comment was more that our growth as a company, whether you look at Mac, iPhone,iPod, we're growing faster internationally than domestically. Can see that in revenues as well. Revenues in America are growing over 40 percent, though.

2:53 Dan Moren: Cook: It's just that the international numbers are absolutely killer.

2:53 Dan Moren: Q: On the global basis, lot of the growth has come from broadening growth, new carriers and countries. Opportunity to broaden markets you're already in? India and China? Prepaid markets?

2:54 Dan Moren: Cook: Both on the Mac and the iPhone and later the iPad as we roll it out to more places, still extraordinary opportunity left. Look at the Mac as an example.

2:54 Dan Moren: Cook: In Asia Pacific, Macs grew 73% year over year. This is phenomenal that we could grow this month. In China, we grew 144%, in Korea, 184%, in Hong Kong we almost doubled. Even in Spain, with difficult economy, Mac grew 59%.

2:54 [Comment From Humbledaisy ] Our app SonicPics was rejected (thrice) for something Apple explicitly told us was ok! Sure, they approve after being confronted, but it takes more that a week often!

2:55 Dan Moren: Cook: Very extraordinary numbers. In iPhone space, we are doing well in all of the key markets, and so in terms of expanding that, learning what we've learned with the exclusive deals, and continuing to look market by market, we've elected to open Spain up, will go from exclusive carrier market to having 3 carriers. That's one example.

2:55 MacJournals.com: Not wanting to let App Store policy take over the chat, but wanted to show that lots of you think this is an important issue, just as many of you think it probably is not.

2:55 Dan Moren: Cook: There are still countries left, and market penetration (enterprise and consumer) and move in marketplace from basic phone to smartphone, all of this is in iPhone favor. Enormous amount of opportunity. Our biggest challenge is to decide which to deploy resources against.

2:56 Dan Moren: Next question: J.P. Morgan, Mark Moskowitz.

2:56 Dan Moren: Q: Coming back to the iPad for a second, speculation about potential cannibalization down the road? Reverse effect where people buy iPad, and buy more devices? Data shown that? See someone buy iPad and then buy MacBook or iMac or iPhone?

2:57 Dan Moren: Cook: That's a very good question. Internally we focused on the synergy between, both technically and from a demand point of view.

2:57 MacJournals.com: They're likely going to wrap up the call very soon. If this isn't the last question, the next one or two will be.

2:58 Dan Moren: Cook: All of the people here thought the iPod created a halo for the Mac, you saw a takeoff for Mac sales. Could that happen on iPhone and iPad? We'll see, I don't want to predict it. I do think that with Mac outgrowing market 17 straight quarters, however the Mac share is still low. Still a huge opportunity for the Mac, so the more people we can introduce in the market via iPhone, iPad, iPod, then there may be synergy there. That's the way that we look at internally.

2:58 Dan Moren: Cook: Everboyd's more focused on the negative (i.e. cannibalization). This is where it's great to have a lower share, because if the iPad cannibalizes PCs, because there's a lot of PCs to cannibalize, it's still a big market.

2:58 Dan Moren: [That's ZOMBIE talk, Tim!]

2:59 Dan Moren: Q: If the sub-contractors you work with have to put in significant wage hikes, how does that affect you?

2:59 Dan Moren: Cook: We don't want to get into the terms of commercial agreements. We hold these to be competitive advantages and don't want to release these.

2:59 [Comment From Ukflo ] Did I miss it or was there no question re. iPhone coming to Verizon

2:59 Dan Moren: Christ Witmore, Deustche Bank

2:59 Jason Snell: here it is!

2:59 Dan Moren: Q: Plenty of headroom with AT&T or looking to expand?

2:59 Jason Snell: @Ukflo, great timing.

3:00 Dan Moren: Cook: Very happy to be partnered with AT&T. Have really pioneered the smartphone growth from a network point of view in the U.S. That's all I have to say about that.

3:00 [Comment From bc] Mac still growing, outgrowing overall market 17 straight quarters? hardly seems like Mac is of no interest to Apple, as some pundits seem to say these days...

3:00 Jason Snell: Right on, @bc.

3:00 MacJournals.com: There was no specific Verizon question because they all know Apple won't answer it; it just wastes their time to ask questions. This more vague question is about as close as anyone will probably get.

3:00 Dan Moren: Q: Gross margin question. iPhone margins down quarter on quarter? Provide a little more color on which components are driving that, seems to contradict third-party estimates?

3:00 MacJournals.com: BC: We've pointed out (sporadically) that since Mac sales are growing DESPITE Apple not pouring significant "excitement" into the platform, it's a strong indicator that they don't need to take huge risks to get huge rewards.

3:01 Dan Moren: Peter: Don't put a lot of credence into third-party reports that you see. Always seems that things don't make it into those reports. With iPhone 4, we've been very aggressive here. Best iPhone we've ever shipped and it has a higher cost structure and I don't want to comment on its specific gross margin.

3:01 Dan Moren: Q: Ballpark size of supply/demand gap for iPhone/iPad. Couple million iPhone units short of demand and 500,000 units short? Is that the kind of gap we're talking about?

3:02 Dan Moren: Cook: That's very difficult to answer. The way you find out is that you have enough supply to serve the demand and then you figure out what the gap is. We have taken bets internally and we have rolled those into the guidance. We're pretty confident with being able to pick up the supply.

3:02 MacJournals.com: Apple will put an audio file of this in the quarterly results podcast on iTunes, but download it SOON, because they're usually removed after about 3 weeks and never made available again.

3:02 Dan Moren: Annnnnnd that's the show.

3:02 [Comment From Moltz] No question about Jobs' health? Who replaced our regular analysts with human beings?

3:02 Jason Snell: And that's the show. Pick up the podcast available on iTunes. Collect them all!

3:02 Dan Moren: That's because they kept asking about cannibals, Johnny boy.

3:02 MacJournals.com: Also, seekingalpha.com will have an automatically-produced transcript up later tonight, if history is any indicator

3:03 Jason Snell: We'll have more later on Macworld.com, as always. Snazzy graphs. Searing analysis. Teary anecdotes.

3:03 [Comment From KBeat] Great job as always guys.

3:03 [Comment From Alex Brooks] Thanks again guys. Fantastic coverage as always.

3:03 Dan Moren: I miss my new analyst friends already.

3:03 Jason Snell: Charlie would like to have a word with all of us.

3:03 Dan Moren: See you in 3 months, everybody.

3:03 MacJournals.com: I think they're finally getting used to what questions they're not going to get answered.

3:03 Dan Moren: It only took how many years, Matt?

3:03 Jason Snell: See, even financial analysts can be trained!

3:04 MacJournals.com: 14?

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