MacRumors

The Travis County Commissioners Court has just given official approval for a package of tax incentives designed to secure Apple's commitment to expand its Austin, Texas campus and add over 3,600 new jobs at the site. The approval comes after development officials expressed concern last week that the deal was "in peril" as concerns over loopholes in the contract delayed approval by the county.

Prior to today's meeting of the Commissioners Court, the Austin American-Statesman reported on some of the tweaks to the contract, including language requiring Apple to pay the lowest-salaried 10% of its new employees at the site an average of $35,000 per year. Contractors, which may comprise up to 25% of the new hires, will be paid a minimum of $11 per hour.

Apple governmental affairs representative Jason Lundgaard was on hand for the session and answered several questions for the county commissioners.

Travis County is the final governmental entity to approve its portion of the total tax incentive plan, which is estimated to yield $35-36 million for Apple in exchange for adding the jobs and facilities. The State of Texas and the City of Austin previously approved their pieces of the deal.

Antivirus firm Symantec has published a new blog post examining how the Flashback malware affecting hundreds of thousand of Macs has been generating revenue for its authors by hijacking users' ad clicks. According to the report, the widespread nature of the infection means that malware authors could have been generating up to $10,000 per day from the scheme at its peak based on previous analysis of malware click redirection.

The Flashback ad-clicking component is loaded into Chrome, Firefox, and Safari where it can intercept all GET and POST requests from the browser. Flashback specifically targets search queries made on Google and, depending on the search query, may redirect users to another page of the attacker's choosing, where they receive revenue from the click . (Google never receives the intended ad click.)

Symantec's work on the ad-click hijacking aspect of Flashback comes after Russian firm Dr. Web, which was responsible for the initial publicity about the malware, published its own report examining some of the early data on infected computers seeking to connect to command-and-control servers.

The report looks at nearly 100,000 connections that came in on April 13, finding that close to two-thirds of the infected machines identified themselves as running Mac OS X Snow Leopard, which was the last version of OS X to ship with Java enabled by default. OS X Lion does not include Java by default, and thus was responsible for only 11% of infections seen during the survey period.

As noted by Computerworld, OS X Lion represents nearly 40% of OS X copies currently in use, suggesting that Apple's decision to remove Java from the default Lion install is indeed helping to limit infections on Apple's newest machines.

[W]hile Snow Leopard's and Leopard's infection rates are higher than their usage shares, the opposite's true of OS X 10.7, or Lion. The 2011 OS accounted for 39.6% of all copies of OS X used last month, yet represented only 11.2% of the Flashback-compromised Macs.

Dr. Web's data on OS kernel versions being reported from infected Macs also demonstrates that many Mac users do not keep their systems up-to-date, with roughly 25% of Snow Leopard and Lion systems seen in the survey reporting themselves as at least one version behind Apple's most recent updates (10.6.8 for Snow Leopard and 10.7.3 for Lion).

Research firm IDC today released its estimates of global mobile phone and smartphone shipments for the first quarter 2012, revealing that Apple set a record high in taking 8.8% of the overall mobile phone market. The performance just barely topped Apple's 8.7% share in the previous quarter, which was the launch quarter for the iPhone 4S.

Apple's year-over-year growth of 88% in an overall market which shrank by 1.5% enabled the iPhone maker to solidify its hold on third place in the overall mobile phone market behind Samsung and Nokia. Nokia had been the market leader for well over a decade, but Samsung surged into the lead for the first time during the quarter.

Looking at the narrower smartphone market, which now comprises 36% of the global mobile phone market, IDC pegs Apple in second place, with its 88% year-over-year growth easily topping the overall segment's growth of 42.5%. But Apple's growth was easily overshadowed by Samsung, which rode the strength of its portfolio of Android-based devices to year-over-year growth of 267% and the top spot in the smartphone rankings.

"The race between Apple and Samsung remained tight during the quarter, even as both companies posted growth in key areas," said Ramon Llamas, senior research analyst with IDC's Mobile Phone Technology and Trends program. "Apple launched its popular iPhone 4S in additional key markets, most notably in China, and Samsung experienced continued success from its Galaxy Note smartphone/tablet and other Galaxy smartphones. With other companies in the midst of major strategic transitions, the contest between Apple and Samsung will bear close observation as hotly-anticipated new models are launched."

Samsung's shipment numbers suffer from significant uncertainty, however, as the company no longer releases official data on its sales for competitive reasons. Consequently, analysts have had to resort to rough estimates for Samsung's numbers, and IDC believes that Samsung registered 42.2 million smartphone shipments to easily top Apple's publicly-released number of 35.1 million units.

Research firm Strategy Analytics last week offered a similar estimate of Samsung's shipments at 44.5 million units for the quarter, but IHS iSuppli painted a very different picture with its estimate of only 32 million smartphone units for Samsung, which would have left Apple atop the rankings for the quarter.

Apple today sent out an email encouraging Mac developers to sign up for the company's Developer ID program so that their apps can be properly signed ahead of the launch of OS X Mountain Lion later this year. Mountain Lion's Gatekeeper feature gives users the ability to set limits on app installation, with the new "Developer ID" program providing a middle ground of security by which developers can certify that they are the developer behind a given application package.

Should the developer be found to behave maliciously, Apple will be able to revoke the Developer ID associated with that developer, preventing applications signed with the ID from running and causing further harm to users.

The Mac App Store is the safest place for users to get software for their Mac, but we also want to protect users when they get applications from other places. Gatekeeper is a new feature in OS X Mountain Lion that helps protect users from downloading and installing malicious software. Signing your applications, plug-ins, and installer packages with a Developer ID certificate lets Gatekeeper verify that they are not known malware and have not been tampered with.

This marks the second such mass emailing to encourage adoption of Developer ID among the Mac developer community, as Apple sent out a similar mailing back in late February following its announcement of OS X Mountain Lion. The next major operating system is due for public launch in "late summer" and will undoubtedly be a featured topic at Apple's sold-out Worldwide Developers Conference in early June.

MacRumors has begun receiving reports that iTunes Match has started going live in several new countries today. So far we have heard from users in Austria, Greece, and Italy, with some users reporting that they have been required to agree to updated iTunes Store terms and conditions addressing the service while others have even been able to sign up for the service.

It remains unclear just how broad this latest round of debuts is, as Apple has yet to update its support document outlining availability of iTunes in the Cloud and iTunes Match, but signs of activity in various international iTunes Stores suggest that iTunes Match may also be going live in Bulgaria, Portugal, and Slovenia.

As part of the new rollout of Apple's paid iTunes Match service, users in these countries should also be receiving access to the free iTunes in the Cloud services for music and music video, which allow users to re-download purchased content any number of times to devices associated with their iTunes Store accounts.

Earlier this year, Apple began revealing more information about its Mastered for iTunes program, requesting that music professionals supply Apple with higher-quality recordings as source material for the compressed tracks made available for sale through the iTunes Store. The higher-quality source material, processed according to Apple's guidelines, is being requested to allow Apple to create better-sounding tracks in the 256 kbps AAC format used for the iTunes Store.

Ars Technica takes a thorough look at the Mastered for iTunes program and whether it truly does make a difference to consumers. While the whole article is an interesting read on some of the technical details of audio formats and mastering and the varying perspectives of several music industry professionals, Ars' conclusion is that the Mastered for iTunes program can make a difference in quality of iTunes Store music.

We enlisted Chicago Mastering Service engineers Jason Ward and Bob Weston to help us out, both of whom were somewhat skeptical that any knob tweaking could result in a better iTunes experience. We came away from the process learning that it absolutely is possible to improve the quality of compressed iTunes Plus tracks with a little bit of work, that Apple's improved compression process does result in a better sound, and that 24/96 files aren't a good format for consumers.

Ars worked with a number of audio engineers on test projects comparing various combinations of original 24-bit, 96 kHz master recordings, uncompressed WAV files ripped from CDs, standard iTunes Store tracks, and tracks created by applying Apple's Mastered for iTunes process to the master recordings. In one example, a standard iTunes Store track sounded "boxy" or "muffled" compared to the original CD master WAV file, but after processing through Mastered for iTunes tools, the resulting track sounded significantly better and more "alive" on a subjective basis.

Part of the difficulty in assessing sound quality comes from the emotional response involved in how sounds register to human ears. Some differences in sound quality can be quantified using various tools to analyze the waveforms generated by different audio files, but the ultimate measure of sound quality lies with the human ears receiving and interpreting the sounds.

Nevertheless, Apple markets the Mastered for iTunes program as providing a path for musicians and music professionals to have iTunes Store content more closely match "music as the artist and sound engineer intended", and more and more musicians are taking advantage of the program in attempting to improve the quality of their music available through the world's most popular music vendor.

Microsoft and Barnes & Noble today announced the formation of a new Barnes & Noble subsidiary focused around the existing Nook digital e-reader and e-book business, as well as Barnes & Noble's college business. Microsoft will make a $300 million investment in the subsidiary, which is preliminarily being called Newco until an official name is chosen, and receive 17.6% ownership of the business.

One of the first benefits for customers will be a NOOK application for Windows 8, which will extend the reach of Barnes & Noble’s digital bookstore by providing one of the world’s largest digital catalogues of e-Books, magazines and newspapers to hundreds of millions of Windows customers in the U.S. and internationally.

The inclusion of Barnes & Noble’s College business is an important component of Newco’s strategic vision. Through the newly formed Newco, Barnes & Noble’s industry leading NOOK Study software will provide students and educators the preeminent technology platform for the distribution and management of digital education materials in the market.

As part of the deal, Microsoft and Barnes & Noble have also settled their patent dispute, which saw Microsoft suing for infringement by the Nook reader in a move Barnes & Noble had positioned as an attack on all Android-based systems. The new deal will see Barnes & Noble and Newco holding a royalty-bearing license on the Microsoft patents in question.

The Microsoft/Barnes & Noble venture seeks to increase competition in the e-book market, taking on both Amazon's dominant position and Apple's upstart status that has seen the iPad become a popular e-reading option for consumers but much lower adoption of iBookstore content. Barnes & Noble has had some success with Nook, but its momentum has slowed recently and recent antitrust suits against Apple and book publishers breaking down the new agency model for e-book distribution have raised concerns that the industry will quickly return to a near-monopoly for Amazon.

In the latest installment of its "iEconomy" series, The New York Times takes a look at how Apple minimizes its corporate tax burden, taking advantage of a number of legal maneuvers and loopholes around the world. Apple's strategies are of course fully legal and used by many other corporations, but with a spotlight on Apple as it has rapidly risen to become the world's most valuable publicly-traded company with record-setting profits, it has obviously attracted much attention about how it handles its money.

Apple, for instance, was among the first tech companies to designate overseas salespeople in high-tax countries in a manner that allowed them to sell on behalf of low-tax subsidiaries on other continents, sidestepping income taxes, according to former executives. Apple was a pioneer of an accounting technique known as the “Double Irish With a Dutch Sandwich,” which reduces taxes by routing profits through Irish subsidiaries and the Netherlands and then to the Caribbean. Today, that tactic is used by hundreds of other corporations — some of which directly imitated Apple’s methods, say accountants at those companies.

Among the tactics used by Apple:

- Setting up subsidiaries in low-tax locations such as Nevada, Ireland, Netherlands, Luxembourg, and the British Virgin Islands, routing as much revenue as possible through these locations. By routing much of its U.S. revenue through its Braeburn Capital subsidiary in tax-free Reno, Nevada, Apple is able to avoid California's corporate tax rate of 8.84%, while also reducing its tax burden on money earned in other states.

- Apple's iTunes S.à r.l. subsidiary in Luxembourg consists mainly of a mailbox and a few dozen employees, but records $1 billion per year in revenue as the entity responsible for all iTunes Store transactions throughout Europe, Africa, and the Middle East. With the iTunes Store offering strictly downloadable goods, Apple is able to take advantage of favorable tax treatment available in Luxembourg as part of the country's efforts to attract businesses.

- Apple has substantial operations in Ireland, but the report notes that one of the main benefits of locating there is that Apple is able to internally transfer its patent royalty earnings to a subsidiary there, with the money being subjected to a 12.5% tax rate rather than the 35% tax rate found in the United States. More than one-third of Apple's worldwide revenue is booked through its Irish subsidiaries.

- Apple records 70% of its revenue overseas, even though much of the product value would normally be considered to derive from their design, which occurs in the United States.

Overall, Apple paid $3.3 billion in corporate taxes in 2011 on earnings of $34.2 billion in profits, an effective tax rate of 9.8%, which is considered low by corporate standards. But with the company's tactics relying on a complex and disjointed system of tax laws throughout the world, it is difficult for the United States to single-handedly require Apple to book more of its revenue in its home country, which currently has the highest corporate tax rates in the world when federal and average state rates are included.

Apple has provided an official response to The New York Times, highlighting its role in job creation in the United States, the tax payments it does make, and its charitable giving. The company also notes that its business practices are in full compliance with all laws and accounting rules.

Update: As noted by Forbes, The New York Times is reporting an incorrect calculation of Apple's effective tax rate for 2011 of 9.8%, simply reusing numbers released several weeks earlier by the Greenlining Institute. Forbes points out that Apple's $3.3 billion in taxes paid during 2011 come from its quarterly estimated tax payments made during the year, but that federal tax guidelines instruct taxpayers to base their calculations on the previous year's earnings.

Consequently, Apple's 2011 quarterly tax payments are actually based on 2010's earnings, with the correct amount of tax for 2011 not being settled until Apple files its final taxes in 2012. And given Apple's strong growth rate, the incorrect assumption that Apple's 2011 tax payments were based on 2011's earnings grossly understates Apple's tax rate.

As outlined in his previous piece debunking the Greenlining Institute's claim, Tim Worstall notes that Apple reports its effective tax rate in its annual 10-K filings with the Securities and Exchange Commission, and that rate came in at 24.2% for 2011, much more in line with industry norms.

Reuters reports that Apple has been negotiating with movie streaming service EPIX for the rights to stream content to the Apple TV set-top box. According to sources, the deal would also extend to future streaming devices such as the much-rumored Apple television set.

Apple, which now sells a $99 set-top box that hooks up to a television set and lets users stream online content from Netflix and the MLB channel, opened discussions with three-year-old EPIX, created by Lions Gate Entertainment Corp, MGM and Viacom's Paramount Pictures.

One of the sources told Reuters that any discussions would apply to its set-top box and also to upcoming devices that stream content.

Sources note that talks between Apple and EPIX remain preliminary and that no deal is expected in the near future. Still, the rumors suggest that Apple is continuing to push forward in its attempts to secure content as it seeks to build a bigger footprint in the living room.

EPIX has an exclusive streaming agreement with Netflix that extends through September, so it seems unlikely that any agreement with Apple could go into effect before that time, but it also remains unclear how the financial situation would shake out for EPIX in adding Apple while Netflix loses its exclusivity.