Sanford Bernstein, Toni Sacconaghi: Provide some kind of gross margin bridge sequentially. Last quarter you had an impact for China warranty, but if you adjust for that gross margin was down, but mix of products relatively similar. Given that you're also riding the experience curve in these products, I was surprised given the mix, that gross margins were down as much as they were. Can you explain what happened?
Peter: Let me say, we're very please with the gross margin in the quarter, with 36.9, at the high end of the range. Sequential decline not a surprise to us. We understood the warranty effects in March, and as I said on last quarters call, I expected margins to be down for two reasons: lower sequential revenue and a different product mix, and as you can see, we reported very near the top end of it, and that seemed good.
Sacconaghi: Second thing was iPhone ASPs, down about 5 percent sequentially, down 10 percent over last two quarters. Presumably down to higher mix of 4s and 4Ss, but can you comment?
Peter: We're down 4% year over year in iPhone ASP, about $27. Primarily due to the mix of the product that we're selling and headwinds. As we anticipated, iPhone 4 has accelerated as we offer more affordable pricing in emerging markets. Sequentially down about $32, driven by mix as well, in part iPhone 4. Tim?
Tim: From an iPhone point of view, with the moves that we made on 4 and iPhone 5 continuing to be the most popular model, we saw very strong sales in prepaid markets.
macjournals: If iPhone ASPs are down 4% and that's about $27, it suggests Apple's calculation of ASP for iPhones is around $675.
macjournals: That's interesting to me because if you divide the revenue by unit numbers in Apple's data, you get $581 per iPhone. That, in turn, suggests segment revenue includes some options and services other than just phones.
macjournals: Got it: iPhone number “Includes deferrals and amortization of related non-software services and software upgrade rights.”
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