Week in review: Chasing iPhone

Apple turns in monster quarter, thanks to iPhone and iPod; Microsoft posts strong earnings, scores Facebook victory. Also: Saving muni Wi-Fi.

For Apple, the iPhone is turning out to be the goose that laid the golden eggs, and the treasure isn't going unnoticed by Google and Microsoft.

Apple reported its most successful quarter this week, exceeding estimates in just about every facet of its business. For the company's fourth fiscal quarter, the company reported revenue of $6.22 billion and profit of $904 million; analysts had expected Apple to report revenue of $6.1 billion.

Apple has sold 1.39 million iPhones, and 1.1 million during the quarter, the company reported. Mac shipments were up 34 percent, compared to last year, and iPod shipments were up 17 percent.

Apple is gaining share on the rest of the PC industry. Last week, IDC and Gartner had the worldwide PC market growing at about 15 percent, while Mac shipments are growing more than twice as fast.

The announcement lit up CNET News.com's message boards, with many readers debating the value of the Apple's market share versus other companies. But more than one reader expects the holiday shopping season to bring good tidings to Apple.

"With the reduced price, sexiness and shear functionality (not even including the coming 3rd party apps!) of the iPhone and the new iPods, Apple should have a blowout holiday season," forum.

Meanwhile, the hunt for the Google phone is a lot like hunting for Bigfoot. Rumors of a Google phone, or "Gphone," have circulated since late 2004 and hit a fever pitch over the last few months.

There was speculation that Google might drop some hints at its analyst day this week, but until now, Google executives and representatives have refused to comment, or even confirm, if Gphone is the name of a product many believe the search giant to be working on.

Often, where there's smoke, there's fire. And what do the smoke signals--and Google patents--say? Unlike Apple's iPhone, the Gphone probably won't be an actual hardware device. Instead, it's more likely to be a bundle of software and supporting infrastructure that allows a phone manufactured by someone else to access Google services, experts say.

But Google executives weren't budging on the Gphone topic.

"I'm on the board of Apple. I'm using the iPhone," said CEO Eric Schmidt, holding up his phone to show reporters. "We have a policy of not talking about future products."

And it doesn't appear that Microsoft will be taking direct aim at the iPhone anytime soon. Rather, the software maker is playing to its strengths, announcing a new piece of server software to help businesses manage a company's worth of smartphones.

Right now, Microsoft is focusing on its enterprise strengths. The company is announcing a new product, known as System Center Mobile Device Manager 2008, and noting that it is providing start-up funds for Enterprise Mobile, a new Boston-based service provider that will help companies manage the process of doling out smartphones to large workforces.

The new software allows businesses to push out software updates to phones over the air and also provides a VPN system for Windows Mobile devices to get secure access to corporate data, something that in the past has typically required third-party software. But even that product is some months away.

Face time for Microsoft
Microsoft may be playing catch-up in the mobile market, but it certainly got the jump on the competition in the social-networking space. Microsoft is taking a $240 million equity stake in Facebook during its next round of financing, valuing the company at a whopping $15 billion. The final deal resulted in a 1.6 percent stake in the social-networking company, notably smaller than the 5 percent to 10 percent stake that had been talked about in recent weeks.

Under the terms of the new agreement, Microsoft will be the exclusive third-party advertising partner for the Palo Alto, Calif.-based social-networking site, and the Microsoft ads will expand beyond the United States to Facebook's international presence. So far, the advertising deal does not appear to have expanded beyond its current 2011 expiration date.

Microsoft is apparently doing well right now without being a dominant player in the mobile market. Like Apple, the software giant had a blowout quarter, reporting a strong jump in first-quarter revenue and earnings as the company benefited from Windows Vista and the launch of the Halo 3 video game. The software maker said it took in $4.29 billion in profits on revenue of $13.76 billion.

As for Vista, the company said it saw double-digit growth in multiyear agreements by businesses and saw "the vast majority" of consumers opting for a premium version of the operating system. Microsoft also saw particularly strong results in the Windows client business, where revenue grew 25 percent in the quarter. And it sold 1.8 million Xbox 360 consoles in the quarter.

But Microsoft CEO Steve Ballmer clearly sees big opportunities in the mobile-software market. As millions of consumers acquire cell phones, and as cell phones become more capable, it's a natural extension of Microsoft's core business of selling PC operating systems and applications.

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