MacRumors

Apple yesterday released its 2013 Supplier Responsibility Report (PDF), disclosing the results of its audit program for 2012 and revealing that it had fired one of its suppliers after finding evidence of 74 underage workers at one facility.

In January 2012, for example, we audited a supplier, Guangdong Real Faith Pingzhou Electronics Co., Ltd. (PZ) that produces a standard circuit board component used by many other companies in many industries. Our auditors were dismayed to discover 74 cases of workers under age 16—a core violation of our Code of Conduct. As a result, we terminated our business relationship with PZ.

Apple's investigation determined that many of PZ's underage workers had been provided by a local labor agency that had conspired with families to forge age verification documents. As a result, Apple reported the agency to authorities, who fined suspended the business license of the agency while requiring PZ to pay the expenses to return the children to their families.

Apple's report touts a number of other achievements for 2012, including a 72% increase in the number of audits performed compared to 2011, worker empowerment training for 1.3 million employees, and increased compliance with working-hour limitations.

We've previously covered Apple's regular updates on working-hour compliance, noting that the rate had fallen in the September-November period as part of Apple's allowance for voluntary overtime during periods of high demand. Apple's new report reveals that compliance with the standard returned to near its highs in December, with Apple's audits showing 92% compliance for the entire year across more than one million tracked workers.

As noted by Tech News Daily, a new federal policy in the United States is set to go into effect this Saturday that will make it illegal for certain mobile phone owners to unlock their devices for use on other carriers unless specifically authorized by their carriers. The policy applies to newly purchased devices beginning on Saturday, but not to legacy devices purchased prior to that date.

In October 2012, the Librarian of Congress, who determines exemptions to a strict anti-hacking law called the Digital Millennium Copyright Act (DMCA), decided that unlocking mobile phones would no longer be allowed. But the librarian provided a 90-day window during which people could still buy a phone and unlock it. That window closes on January 26.

Unlocking devices allows users to take their phones to other carriers such as T-Mobile or to use SIM cards from international carriers while traveling abroad without needing to purchase expensive international roaming packages from their domestic carrier.

Users can, of course, still purchase unlocked iPhones at unsubsidized prices, and, last April, AT&T began unlocking iPhones for customers whose contract terms were completed or who had paid early termination fees to end them early. The SIM card slots on the Verizon iPhone 5 are already unlocked, while Sprint announced that it would unlock the SIM card slot on its iPhones for international usage three months after purchase.

In the decision outlined in the Federal Register, these policies were cited as reasons for not allowing an unlocking exemption to the DMCA for newly purchased devices.

The Register concluded after a review of the statutory factors that an exemption to the prohibition on circumvention of mobile phone computer programs to permit users to unlock "legacy'' phones is both warranted and unlikely to harm the market for such programs. At the same time, in light of carriers' current unlocking policies and the ready availability of new unlocked phones in the marketplace, the record did not support an exemption for newly purchased phones. Looking to precedents in copyright law, the Register recommended that the class designated by the Librarian include a 90-day transitional period to allow unlocking by those who may acquire phones shortly after the new exemption goes into effect.

Carriers such as AT&T already forbid unauthorized unlocking in their customer contracts, but the clarification of DMCA policy with respect to unlocking will now make the issue a criminal one. iPhone unlocking services have enjoyed a fair amount of popularity, and while a substantial pool of eligible legacy devices will remain, it appears that these services will be unable to legally unlock any new devices for their customers.

AT&T has released its holiday quarter earnings data, reporting that it sold a record 10.2 million smartphones -- 8.6 million of those (84%) being iPhones. AT&T reported earlier this month that the quarter was its best ever for iPhone sales. 16% of the iPhones were on accounts new to the company.

During the same holiday quarter, Verizon activated 6.2 million iPhones, some two-thirds of its total smartphone sale. AT&T's previous best quarter was 2011's fourth quarter, when it activated a total of 9.4 million smartphones and 7.6 million iPhones -- an 80% share for the Apple device.

On Twitter, Apple watcher Sammy the Walrus calculated that 74% of smartphones sold by AT&T and Verizon were iPhones, giving the device an "iPod-like share".

Update: AT&T has reached out to us to note that the 8.6 million iPhone number is activations, while the 10.2 million smartphone sales number is sales. This means the iPhone probably doesn't make up exactly 84% of smartphone sales, but it should be in the right ballpark. The activations number includes hand-me-down iPhones and the like.

Following yesterday's news that the independent film JOBS starring Ashton Kutcher as Steve Jobs will open in theaters on April 19, ETonline.com has released the first video clip from the film. The brief clip shows Kutcher as Jobs speaking with Josh Gad in the role of Steve Wozniak.

In the clip, Jobs (played by Ashton Kutcher) is raving about the operating system that Apple co-founder Steve Wozniak (played by Josh Gad) created. While Jobs is certain that this will become a ubiquitous product for mass consumption, Wozniak needs convincing.

"Nobody wants to buy a computer," says Wozniak.

"How does somebody know what they want if they've never even seen it?" Jobs replies.

In related news, management appears to have made a change to the styling of the film's title, as there had been a fair amount of confusion and criticism over the original "jOBS" styling, an homage to the "i" naming scheme for Apple's products.

But it appears that in recent weeks various official presences for the film such as a revamped teaser site, Twitter account, and Facebook page have adopted a new all-caps styling for JOBS, with the "J" appearing slightly larger than the other capitalized letters in the film's new promotional logo.

JOBS premieres tomorrow at the Sundance Film Festival ahead of the public release on April 19.

(Thanks, Joel!)

Following yesterday's record-breaking earnings numbers for the first fiscal quarter of 2013 that still fell short of analyst expectations, Apple CEO Tim Cook has sent out an email to employees (via 9to5Mac) congratulating them on the performance and announcing an employees-only town hall meeting scheduled for today.

Team,

We’ve just reported another record setting quarter, thanks to everyone’s incredible hard work and focus. We sold over 75 million iOS devices in the holiday quarter alone, which is a testament to the strength of Apple’s innovation. Please join me for an employee communications meeting tomorrow at 10 a.m. Pacific time in the auditorium of De Anza 3. We’ve created a space on AppleWeb where you can submit your questions in advance, and we’ll do our best to answer as many of them as we can during the meeting. The meeting will be broadcast live throughout Cupertino and at many other Apple locations. Please check AppleWeb for details.

Tim

Apple has held similar meetings in the past, with discussion at last year's meeting reportedly focusing on the company's philanthropy and also including an announcement of a new hardware discount program for company employees.

While talk of flatline growth dominated media responses to Apple's financial results yesterday, the massive growth of Apple's cloud-based services appeared to go largely unnoticed.

In 2012, reports iPodNN, the number of iCloud users grew from 85 million to over 250 million. iTunes subscribers have topped 500 million, generating a record $2.1 billion profit for the quarter.

iMessage has also proven to be a hugely popular service, with users sending over two billion messages a day from over 500 million devices, with the total iMessage count now having surpassed 450 billion. Apple CEO Tim Cook addressed the focus on online and web services during yesterday's conference call:

In terms of other services, we feel fantastic about how we're doing. In Notification Center, we've now sent over 4 trillion notifications, and this is mind-blowing. As Peter mentioned in his opening comment, for iMessage we've now sent over 450 billion and are currently sending those over 2 billion per day. With Game Center, we've got over 200 million registered users. We have 800,000 apps on the App Store with over 40 billion downloads. And so I feel really, really great about it. There is obviously more stuff we can do and you can bet we're thinking about all of it.

Cook has repeatedly referred to iCloud as a "strategy for the next decade" for Apple. He has also characterized the increasing reliance and trust consumers place on cloud-based storage and services as "truly profound" and "a fundamental shift" in the way content is accessed.

After reporting record-breaking quarterly revenue and profit earlier today, Apple's stock has taken a 10% tumble in after hours trading. Apple posted a $13.1 billion profit for the quarter this year compared to a $13.06 billion profit in the same quarter of last year, yielding flat growth year over year.

The flat growth, as pointed out by Apple, is largely because manufacturing costs have risen, even as revenue has risen 18%. The New York Times notes that analysts were worried that about Apple's profit margins, even after Apple warned that a significant overhaul of its product line would mean high manufacturing costs in the early lives of the products.

The results arrived with an unusual level of anticipation, even for a company as high-profile as Apple, because of anxiety among some investors about Apple’s ability to sustain its growth and create new hit products. Apple’s stock has lost about a quarter of its value since September, erasing more than $170 billion of its market value.

Business Insider notes that even though Apple's holiday quarter in 2012 had a week less than it did in 2011 that sales growth still wouldn't be at the point that it was.

Apple's 10% stock decline gives it a current market cap of $463.49 billion and a loss of nearly $50 billion in market capitalization from worried investors. Despite analysts' and investors' worries of year-over-year growth, The Wall Street Journal's Tom Gara notes that Apple's losses in market cap today were roughly equal the value of two Research in Motions and two Nokias.

During today's quarterly results call for the first fiscal quarter of 2013, Peter Oppenheimer mentioned that the company focused on establishing a new operating segment of Greater China, including Mainland China, Hong Kong, and Taiwan

"We have established a new operating segment for China, given the contribution of that region to our business," said Oppenheimer.

The company has adjusted how it reports revenue for separate geographic regions because of the significant sales of both hardware and software in China during the last couple of years. China was responsible for $6.8 billion of Apple's revenue during the last quarter. Overall revenue in China is up 67%.

While Apple experienced strong iPhone growth overall, selling 47 million iPhones compared to 37 million in the year-ago quarter, it saw the most significant growth in China, which is up more than 100% year over year. Despite a late launch of the iPad, it was also noted to be successful in the country.

In terms of the geographic distribution, we saw our highest growth in China. It was into the triple digits, which was higher than the market there. We're extremely pleased.

It is clear that China is our second largest region. And there is a lot of potential there.

Apple opened four new stores in the Greater China area during 2012, and when asked about China during the question and answer section, Cook reiterated plans to continue to expand on the 11 stores that it has in the country, saying that Apple had "many more" stores to open.

Tim Cook spent a portion of January in China, meeting with both government officials and representatives from China Mobile, the country's largest mobile carrier. During the visit, Cook was interviewed by Sina Technology, where he emphasized Apple's efforts to raise its profile in the country.

During today's Financial Results call, Apple CEO Tim Cook announced that 36 additional carriers will be providing LTE connectivity for the iPhone and the iPad next week.

"Next week," said Tim Cook, "we're adding 36 more carriers for LTE support. These carriers will be in countries that we are not currently supporting LTE."

While Cook did not name all 36 carriers that would be getting LTE, he did mention that they are in regions like Italy, Denmark, Switzerland, the Philippines, and the Middle East. Currently, 24 carriers offer LTE for the iPhone and the iPad, in countries like the United States, Australia, South Korea, the U.K., Germany, Canada, and Japan.

Apple has been slow to roll out LTE connectivity, leading to complaints over the "4G" in the third generation iPad's name when it was released. Apple later changed it to the iPad Wi-Fi + Cellular in response.

When asked if the slow pace of LTE rollouts has had an impact on iPhone sales, Cook skirted the question, but he did mention the plans to roll out LTE in the aforementioned countries during the next week, and had this to say: "We feel really good about the situation we are in, particularly with these adds next week."

During today's Q1 2013 Financial Results conference call, Apple CEO Tim Cook fielded questions about Apple's results and plans. As usual, Apple was unwilling to provide any specific details about their future plans.

Cook was asked about the importance of market share preservation and whether or not holding their smartphone marketshare was a priority in 2013:

The most important thing to Apple is to make the best products in the world. We aren't interested in revenue for revenue's sake. We could put the Apple brand on a lot of things and sell a lot more stuff. We only want to make the best products. We've been able to build market share and have a great track record with iPod of doing different products at different price points. I wouldn't view those as mutually exclusive as some might. We're focused on making great products that enrich lives.

As for Apple's plans for 2013, Cook, as usual, acknowledges that Apple is working on a number of new products and he shares his optimism on those:

We're working on some incredible stuff. The pipeline is chock full. We feel great about what we've got in store.

With regard to the Apple TV, Cook reiterated it was an area that they had intense interest in:

This is an area of intense interest for us and remains that. I tend to believe that there is a lot we can contribute in this space and we continue to pull the string and see where it leads us. Don't want to be more specific.

Cook also revealed that the Apple TV had sold over 2 million units this past quarter -- 60% year over year.

Finally, Cook emphasized that they felt that the "halo" effect was still in full force. As customers buy one Apple product, they tend to buy more.

"The other thing for us, maybe not for others, if somebody buys an iPad mini and it's their first Apple product, we have great experience through the years — if someone buys their first Apple product, these people buy another Apple product. It's the halo effect, as we termed it, that we saw with the iPod and the Mac — we've seen some of that with the iPad as well. I see it as a huge opportunity."

Tim Cook broadly addressed recent rumors that Apple may have cut iPhone 5 orders on weak demand. That particular rumor gained significant attention, resulting in a notable dip in Apple's stock price.

Cook was careful not to address any particular rumor, but warned against trying to interpret single data points, even if they happened to be accurate:

Months of rumors about order cuts and so forth, so let me take a moment to comment on these. No comment on any particular rumor.

I suggest its good to question the accuracy of any kind of rumor about build plans. Even if a particular data point were factual, it would be impossible to interpret that data point as to what it meant to our business. The supply chain is very complex and we have multiple sources for things. Yields can vary, supplier performance can vary. There is an inordinate long list of things that can make any single data point not a great proxy for what is going on.

Cook made the comments during today's Q1 Results conference call.