APPLE'S EARNINGS JUMP 50 PERCENT

Apple first-quarter 2010 earnings soared past Wall Street expectations Monday, with the company reporting a profit of $3.37 billion, or $3.74 per share.

That's up 50 percent from the same quarter a year ago, when profits reached $2.26 billion, or $2.54 per share.

Revenue for the quarter was $15.6 billion, up 32 percent from the same quarter a year ago. Wall Street was expecting between $11.21 billion and $12.6 billion in revenue on earnings of $2.07 per share. And Apple always gives an overly conservative estimate; last quarter, Apple said it was anticipating earnings between $1.70 per share and $1.78 per share, and revenue of between $11.3 billion and $11.6 billion.

In short, it was Apple's best quarter in company history. One of the reasons the numbers were so far ahead of what many had been anticipating is the company's decision to adopt the new accounting principles laid out by the Financial Accounting Standards Board last fall for the first quarter of 2010, which ended on December 26, 2009. That means that revenue from the iPhone and Apple TV can be recognized the same quarter that the sales are made, rather than over a two-year period, as had previously been Apple's practice.

As with the previous two quarters, there was good news on the Mac and iPhone fronts, with iPod sales lagging once again. Apple sold 3.36 million Macs, up 33 percent from a year ago, 8.7 million iPhones, a 100 percent gain over the last year, and 21 million iPods, 8 percent fewer.

In a statement, Apple CEO Steve Jobs called it "surprising" that Apple is now a $50 billion company, and he hinted at Wednesday's event, saying there will be a "major new product that we're really excited about." It's widely assumed that the new product will be a tablet computer.

Apple Chief Financial Officer Peter Oppenheimer said Apple's retail stores did their best business ever during October, November, and December of last year. Sales totaled $1.97 billion, up 13 percent from the same holiday shopping period a year ago, but Mac sales did particularly well. Together the 283 Apple Stores worldwide sold 689,000 Macs, a record for them. And half of them were to first-time Mac customers, Oppenheimer said. Foot traffic to the stores was also the highest ever: Apple says 50.9 million people went through their doors for the most recent quarter.

AT&T and Verizon
Oppenheimer handled the bulk of the earnings call. Chief Operating Officer Tim Cook stayed silent until it was time to respond to questions from investors. And when he did speak, he revealed some interesting tidbits. Notably, Cook came to the defense of AT&T, the exclusive iPhone carrier that has gotten battered on the public relations and customer service front for the past few months.

"AT&T is a great partner. We've been working with them since well before we announced the first iPhone. They had more mobile broadband usage than any other carrier in the world...In the vast majority of locations we think iPhone customers are having a great experience. As you know, AT&T has acknowledged they're having issues in a few cities," and are working on a plan to correct them, Cook said. "We have personally viewed these plans and we have high confidence that they'll make significant progress in addressing them."

Though he appeared to be standing by AT&T, it wasn't what potential and current iPhone users who hope to see the iPhone on Verizon soon probably wanted to hear. However, Cook didn't rule out new or additional carrier partners in the future. As with most things in Apple's future, he was vague. In response to a question from an analyst about iPhone growth in countries where additional carriers had been recently added, Cook said this:

"We've seen in the countries where we had (added carriers) the sales are largely incremental as we add carriers."

He said it was true for the U.K., France, and Scandinavian countries, and he expected it to be the same for Canada.

He added: "However, we've also selected in most cases countries that we thought that would happen in. I don't want to imply that would happen in every market or that we are headed that way in every market."

Waiting for Wednesday
But despite the record-breaking quarter, most investors and analysts are more curious about the future than the past. Several analysts tried to ask questions about the impending Apple tablet and were rebuffed. Oppenheimer flat-out refused to answer a question about whether the guidance for the next quarter included any unannounced products, and Cook told another analyst, "I wouldn't want to take away your joy of surprise when we reveal our latest creation on Wednesday."

Looking ahead to the next quarter, Apple again stayed conservative, saying it expects revenue between $11 billion and $11.4 billion, and earnings per share from $2.06 to $2.18.

GOOGLE USES MOBILE WEB TO BYPASS APPLE'S APP BLOCK

FRANCISCO – Google Inc. is trying to make its Voice application easier to use on the iPhone, whether Apple Inc. likes it or not.

In an upgrade announced Tuesday, Google revised the mobile Web site for Voice so that it's easier to display the service's most popular features on the iPhone's latest operating system.

Among other things, Voice offers an alternative dialing pad, voice mail and international calling discounts.

Apple has refused to allow the Voice program to be distributed through the iPhone's applications store since last summer on grounds that it would duplicate or alter important iPhone features. To get around that roadblock, Google is trying to entice iPhone users to rely on a mobile Web browser to access Voice.

Google says the overhaul will make the Web browser experience more like what users would get if Google were allowed to offer a downloadable app that could be installed on the iPhone.

Google already offers downloadable Voice apps for Research In Motion Ltd.'s BlackBerry phones and devices running on Android, an operating system developed by Google. The upgrade to the mobile Web site also makes Voice simpler to use on devices that run on Palm Inc.'s operating system.

The jousting over the Voice application underscores the rising tensions between Google and Apple, the two most valuable companies in Silicon Valley.

Apple's rebuff of Google's Voice application triggered a Federal Communications Commission inquiry into whether Apple and AT&T Inc., the iPhone's exclusive U.S. service provider, were trying to stifle potential competition.

Apple told the FCC that it hasn't rejected the Voice application outright, but Google says it still hasn't heard anything further on its attempts to make the program available for iPhone downloading. AT&T says it didn't take part in Apple's review of the Voice application.

Google's Voice service had 1.4 million users as of October, according to a company disclosure to the FCC.

APPLE TABLET COULD STIR UP VIDEO GAME BUSINESS

NEW YORK - When Apple introduced the iPhone,it took up the cell phone business but it also changed the way people play video games. About a quarter of the 100,000 applications that you can download to the iPhone are games, ranging from the simple "Doodle Jump" to a version of "Grand Theft Auto."

Now, with the looming launch of a tablet-style computer — already nicknamed the "iPhone on steroids," with a bigger screen that might have a place in the living room — Apple could pose an even tougher challenge to established players in the video game business.

That assumes, however, that potential buyers aren't scared off by a price that might be more than the cost of a Wii, a PlayStation 3 and an Xbox 360 combined. Apple isn't commenting on its unveiling Wednesday.

Apple's iPhone and the similar iPod Touch brought a new look to games because they have an accelerometer inside that lets people control the action by turning or tilting the device. With a touch screen and the computing horsepower for high-quality graphics, the iPhone lends itself to pared-down versions of console games like "Assassin's Creed" and "The Sims 3." Its size, meanwhile, makes it easy to consume addictive puzzles in 5-minute increments while waiting for the dentist or riding the subway.

Now the iPhone, which costs $99, $199 or $299 plus a monthly service plan, rivals gadgets such as the Nintendo DS ($130-$170) or PlayStation Portable ($170-$250), known as the PSP, which were created solely for playing games on the go. It's unclear whether Apple has taken substantial market share away, but the iPhone likely introduced people to mobile games who wouldn't have played otherwise.

"We've seen the iPhone and iPod Touch as kind of a starter kit for video games," says John Koller, director of hardware marketing at Sony Computer Entertainment America. "When those customers are ready to graduate into a deeper experience, the PSP is there for them."

Soon a tablet may be there for them, too. A touch-screen gadget that is bigger than an iPhone could provide a larger playing field for gamers and give game developers a new way to push the limits of their creativity.

"Any game where there are multiple moving objects on the screen, or a map to explore, will especially be a better experience," says Ian Lynch Smith, the president of Freeverse, a developer of iPhone and Mac games. "Also the more high end, cinematic games will benefit directly from the more immersive screen size."

Apple profits from games because it takes a cut of apps that are sold on the iPhone, where games generally cost between 99 cents and $9.99. Last year the company hired Graeme Devine, a developer with 25 years of experience and games such as "Halo Wars" and "Quake 3" under his belt, to work on "iPhone gaming technologies."

Of course, the tablet is likely to be about much more than gaming, but the same increasingly can be said about video game consoles. Makers of home video game systems are trying to sell their products as all-in-one entertainment devices.

Microsoft Corp.'s Xbox 360 (starting at $200) and Sony Corp.'s PlayStation 3 (starting at $300) both offer streaming movies from Netflix, for example, and Nintendo Co.'s Wii ($200) is set to start in the spring. Sony markets the PS3 as the "most fully loaded console," one that "only does everything," including Blu-ray movies, Facebook updates or Web browsing.

Given that Apple will have to persuade people they need another gadget in their lives, the company is also likely to bill the tablet as a do-everything device, a way for people to manage music, video, games, communication and Web browsing. And while it will be portable in a way game consoles are not, "it makes sense that it would be connected to the TV eventually," says Peter Relan, chairman of Aurora Feint, the developer of a large social game network for the iPhone.

Smith thinks hard-core gamers will still own a console and use it as the primary gaming platform at home "for some years to come."

"But I can see the tablet taking almost all of the casual to moderate gamer market," he says.

The challenge for console makers will be to respond with innovation. One avenue could be in increasingly sophisticated motion controls, such as Microsoft's upcoming "Project Natal," which lets people manipulate on-screen avatars using their bodies. Natal is set to debut on the Xbox this holiday season.

"Games have become the killer pursuit on all new devices," says Mark Pincus, founder and CEO of Zynga, the company behind popular Facebook games such as "FarmVille" and "Mafia Wars." "They are the reason people buy major new hardware from the Xbox to the iPhone."

GOOGLE RELEASES NEW GOOGLE VOICE FOR IPHONE

SAN FRANCISCO - Google Inc unveiled a new version of its Internet phone service on Tuesday in its latest effort to bypass Apple Inc's gatekeepers and make Google Voice a popular service on the iPhone.

The new version of Google Voice can only be accessed through a smartphone's Web browser, unlike the so-called native apps that can be downloaded directly onto an iPhone.

In July, Google said that Apple had turned down its application to offer Google Voice as a native iPhone app. The rare public spat underscored the growing competition between the two tech giants and prompted the U.S. Federal Communications Commission to request more information from the companies on the matter.

Apple responded at the time that the Google Voice app had not been rejected, but that it was under review.

Google Voice allows users to make cheap long-distance calls and to forward calls from a single phone number to multiple phones, among other things.

The disagreement over Google Voice comes as Google, the world's No. 1 search engine, and Apple are increasingly encroaching into each other's markets. Earlier this month, Google began selling the Nexus One smartphone directly to consumers, and Google is developing an operating system for PCs that could compete with Apple's line of Mac PCs.

In August, Google CEO Eric Schmidt resigned from Apple's board of directors.

Google already had a version of Google Voice available through mobile Web browsers.

But Google described the new version of Google Voice as a "Web app," noting that it is much more interactive than the previous browser-based version of the service, with the ability to listen to voice mails directly from within the browser and to dial phone numbers on an interactive on-screen keypad.

Google said the new version of Google Voice is designed for iPhone 3.0 and higher and Palm Inc Web OS smartphones.

A Google spokeswoman said the company had not received any updates from Apple regarding offering a native app version of Google Voice on the iPhone. An Apple representative could not be reached for comment.

GOOGLE TESTS LOYALTIES OOF CHINA'S WIRED GENERATION

When Google threw down the gauntlet to China's Internet censors, it also challenged the loyalties of the nation's wired generation.

These tech-savvy Chinese in their 20s and 30s grew up in far greater affluence and openness than their parents. Many are pulled between patriotic pride and a yearning for more say over their own lives, even if they accept Communist Party control.

The Google dispute may become a telling test of how they balance loyalties to their country with their desire for unfettered expression and access to information, and this response could shape how Beijing handles the dispute.

"The special feature of the Internet is that companies like Google see that expanding their profits is tied to expanding their freedom," said Chen Yongmiao, a Chinese activist whose own website has been restricted by authorities.

"It's a test. How much you support Google in China shows how much you want more freedom in China, even if you know Google is ultimately about profits."

The world's biggest search engine said last week it could pull back from China and shut its Chinese Google.cn website over complaints of hacking and censorship.

Chinese officials have avoided directly taking on Google, but made plain they expect Internet companies in the country to enforce the laws, including censorship.

The centre of the resulting tug-of-war in attitudes is the Zhongguancun area in northwest Beijing, an area dense with university campuses, malls of high-tech goods and computer labs, and also home to Google's China headquarters.

Students, job-seekers and high-tech professionals in Zhongguancun saw Google's stance through a prism of admiration and wariness that has echoed in online forums.

"I think it's admirable for a company to sacrifice profits for the sake of an idea," said Liu Wei, a 29-year-old accountant with heavy Clark Kent-style spectacles and neatly cropped hair.

"Why can't we criticize our own government if we want to? Why can't we choose what we read on the Internet?"

"That's because China's different!" interrupted his girlfriend Sun Jingying, a slight 26-year-old studying to become a chartered accountant.

"There are some things about this country we just have to accept," she added, nonetheless stressing she would be sad if Google quit China. "I'd love to work for them," she said.

The Obama administration has shown it wants to court this emerging generation of connected Chinese. China's latest survey of Internet use found 60.4 percent of the nation's online population of 384 million was aged 10 to 29.

During his visit to China last November, President Barack Obama used a web-cast meeting with Chinese youth to amplify that message, telling them he was a "big supporter of not restricting Internet use".

U.S. Secretary of State Hillary Clinton is set to take on China and other authoritarian governments over Internet restrictions in a speech on Thursday.

Despite censorship, China's Internet can be a potent public forum, with bloggers and amorphous online groups hectoring the government over pollution and corruption.

Last year, the government abruptly abandoned a plan to force all new personal computers to come with a copy of "Green Dam" Internet-filtering software that had been derided by online critics as intrusive and ineffective.

But China's youth can also bristle at what they see as Western bullying. The ruling Communist Party could seek to channel that volatile sentiment to blunt foreign pressure over control of the Internet.

"There are some who feel increasingly restricted and unfree, the ones who tend to support Google. But there are also many who have been heavily shaped by the official media and see the U.S. government behind Google's actions," Li Yonggang, an expert on society and the Internet at Nanjing University in east China, said of the nation's "post-80" generation.

"If this becomes a more open fight between the Chinese and U.S. governments, this nationalism could come to dominate if the government turns harder line."

FROM BACKLOT TO HIGH-TECH HUB

Chengfu Street in Zhongguancun, where Google has its China headquarters, is testament to the country's economic upheaval.

A little over a decade ago, this was a gritty neighbourhood of low brick homes and cheap restaurants near retreating farmland.

Now it bristles with high-tech offices and cafes and restaurants catering to office workers and students. Google's office sits in steel and glass towers that also house a Deutsche Bank office, a gym and "Wall Street English" classrooms.

The students on nearby campuses who fill many high-tech jobs in this area, however, are also products of an education that prizes pride in the nation's achievements, obedience to the Communist Party, and vigilance against foreign pressure.

Many of them had scant understanding that Google has said China was the source of sophisticated hacking -- China's state-run media has reported little on that complaint -- and others scoffed that Google would leave the country over the issue.

"If they can't handle hackers and censorship, that's their own problem," said one Chinese computer hardware technician heading for a gym workout near the Google office. He gave his English name, Derek Huang.

"Each country has its own Internet restrictions, so it's natural for us to have our own, and if we want to change them, that's our own business," he said.

Recent opinion surveys show that while Chinese in their 20s and 30s are more critical of their government than older cohorts and want more freedom, they tend to be strongly patriotic and cautious about political change. The United States attracts both admiration and disdain.

The Internet was crucial in spreading Chinese anger about Western protests over Tibet before the Beijing Olympic Games in 2008. In past years, too, the Internet has been a conduit of nationalist Chinese ire over Japan.

"Google was just acting out of commercial interests," said Su Xin, a 25-year-old graduate student of aeronautic engineering. "I think we've got to accept some restrictions [on the Internet] for the sake of stability."

But even some students who said they had little interest in politics said they felt jolted by the idea that Google could quit China over censorship complaints.

"If it leaves, I'll feel it's a big loss," said Guo Xin, a 19-year-old student with a spike of hair dyed neon-orange. He said he used the Internet, and Google, to hunt down information about online games and movies.

"It's not good restricting us too much. It cuts us off from the information you need in modern life," he said.

MICROSOFT BACKS AT&T,SUES TIVO OVER TV TECHNOLOGY

Microsoft is backing AT&T in a patent lawsuit that TiVo has filed against the phone company. Microsoft's tactic: Filing a lawsuit of its own against TiVo.

Microsoft is suing TiVo for allegedly infringing on patents that cover an on-screen TV guide and a technology for letting viewers order and view shows. This comes in response to TiVo's lawsuit against AT&T last year for allegedly infringing on a technology that lets viewers pause and rewind live TV.

Microsoft's Mediaroom software is used in AT&T's set-top boxes and the company could be held financially liable if TiVo prevails.

TiVo has also sued Verizon over the same patents and won a string of court victories against Dish Network. That case is being appealed.

MICROSOFT TO ISSUE 'GOOGLE ATTACK' BROWSER PATCH

Microsoft Corp said it will issue a patch to fix the old version of its Internet Explorer browser that allowed recent attacks on Google Inc's network in China.

The patch, due out on Thursday, "addresses the vulnerability related to recent attacks against Google and a small subset of corporations," said Jerry Bryant, senior security program manager at Microsoft. "Once applied, customers are protected against the known attacks that have been widely publicized."

Google said last week it had been the target of sophisticated cyber-attacks in China, along with more than 20 other companies. Microsoft acknowledged that the hackers took advantage of a weakness in Internet Explorer 6 to mount the attacks.

Microsoft said it continues to see some attacks, with the only successful attacks against Internet Explorer 6. The most recent version of the software is Internet Explorer 8.