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Hey everybody. Tim Cook is on stage.

This room, the Town Hall, has quite a history at Apple. Just 10 years ago, we launched the original iPod here, and it went on to revolutionize music. Just one year ago, we launched the new MacBook Air, which has fundamentally changed the way people think about notebook computers. Today will remind you of the uniqueness of this company, as we announce innovations from our mobile operating system to applications to services to hardware—and, more importantly, the integration of all of these into a powerful, integrated experience. It’s an extraordinary time to be at Apple.

A few updates: Apple has enormous momentum, evident no place more than retail stores. Just last weekend opened two stores in China: Hong Kong and Shanghai. Both are amazing and both have set new records. The Shanghai store is largest in Asia. Set a record for welcoming 100,000 visitors for opening weekend. By comparison, top store in LA did 100,000 visitors in one month, and they thought that was good. Amazing momentum here.

First store in Hong Kong.

One of the best opening days of our retail history. Tim showed a short video, illustrating the energy. “I think I’ve watched that 100 times.” Now six stores in China and are going to do lots more. Total is 357 stores in 11 countries and will continue to invest in more and more stores and raise the bar in retail.

“Our products are at the core of everything we do and responsible for the momentum we have.”

The Mac: Can’t talk about the Mac without talking about Lion. Walt Mossberg said it’s the best computer opearting system out there. “I don’t think I could have said it better.” For the first time, Lion was digital download only. Incredible. Results have been staggering: over 6 million copies of Lion have been downloaded. 80% more than Snow Leopard. Another metric, user adoption. Percentage of people that upgrade to new software. Took Windows 7 about 20 weeks to reach 10 percent of their installed base. Lion did it in two weeks—one tenth of the time.

At the same they announced Lion, they announced the new MacBook Air. Customers love it and competitors have been trying to copy it, but finding it’s not so simple. Wired magazine said “After years of hoping and searching, I’ve finally found laptop nirvana.”

MacBook Air is just a portion of line-up of Macintoshes, the best they’ve ever shipped. Customers have really responded. MacBook Pro and iMac are the #1 best-selling notebook and desktop in the U.S. Momentum is not limited to a model. Year-over-year growth for the PC industry, Mac outgrew PC market by almost 6 times. (23% to 4%). Every single quarter for 5 years, the Mac has outgrown the PC market. Now approaching 60 million users around the world (they have 58 million).

Market share has steadily increased, and in US retail, Macs now sell roughly 1 out of 4 PCs sold in store. For those who’ve followed Apple for a while, this number was in the mid-single digits a while ago. But, still 77% of people buying something else. Incredibly high ceiling, and a lot of room to go. That’s the Mac. Very very pleased with how it’s going.

Music. iTunes+iPod. Only 10 years ago that iPod launched, and it not only revolutionized the way people listened to music, but also the whole music industry. Reminded all of us how much we love music. Became a part of our lives. Across that period of time, iPod became the #1 music player in the world. Market share has been above 70% for a very long time. Over that time, have cumulatively sold over 300 million iPods around the world. To put it in context, it took Sony 30 years to sell 220,000 Walkman.

Now the MP3 market is a mature market. But iPod is still a large and important market for Apple. Have sold 45 million iPods in the last year, ending in June. What’s more encouraging, is that half of them are going to people who are buying their first iPod. Many are going to people who are just being introduced to Apple through the iPod. This remains a very important business for us.

Can’t talk about music without talking about iTunes. Started about 8 years ago. Started with 200,000 songs, now have 100 times that many. 20 million songs for sale. Features of the store are absolutely incredible. Nobody could dream of this back in 2003. Number one music store in the world, and have now had more than 16 billion downloads. Mind-boggling, says Tim. That’s our music business. Very happy.

iPhone. “This could be a reason why the room is full today.” iPhone 4 in a very short period of time has sold over half of the total iPhones sold the entire time Apple’s been making them. #1 smartphone in the world. That momentum continued in the second calendar quarter, far outpacing the industry (125% growth vs 74% for smartphones). Not just in one type of markets. 93% of Fortune 500 companies are testing or deploying the iPhone. More important is that customers love iPhone. Consistently rated #1 in every customer satisfaction rating. Not #1 by a small amount; “in fact, the iPhone is pummeling the competition.” If you include satisfied AND very satisfied, iPhone goes to 96%.

Also, JD Powers has rated iPhone #1 in customer satisfaction number one for six consecutive times. Despite all this, iPhone has 5% share of worldwide handsets—not smartphones. Look at overall handset market because they believe that over time all phones will become smartphones. Enormous opportunity for Apple. That’s the iPhone. “More coming up on iPhone.”

Next up is youngest product category: iPad. People have been thrilled with original iPad and iPad 2 announced earlier this year. Customer satisfaction rating show a lot of love. 95% score in most recent survey. Showing up everywhere: iPads in schools help kids learn in amazing new ways. Believe iPads can change the way teachers teach and kids learn. Many educators agree. In fact, every state in the US now has an iPad pilot program or deployment in place today or going in place. Almost 1000 K12 schools have a 1:1 program so a kid can enjoy the iPad for the entire day. Not just in K12. Higher ed is also doing this. About 1000 universities in the US, including Stanford, Notre Dame, UPenn, U Chicago, all have iPads. In the cockpit, pilots are replacing 40 lb. flight bags with paper manuals and logbooks and nav charts and checklists, making the pilot more efficient and the plane more fuel efficient. “Yes, it’s true!”

Also showing up in hospitals, where medical professionals are using them to access patient records, review images, administer bedside care. Over 80 percent of the top hospitals in US are testing or piloting iPads.

From the boardroom to the backroom and everywhere in between, iPad is showing up. And at this point—and this is a stunning number—92% of the Fortune 500 are testing iPad. 3 out of four tablets sold are iPads. All Things D: “Consumers don’t want tablets, they want iPads.”

Scott Forstall: iOS accounts for 61% of mobile web market. iOS users love the Web and apps. Already more than 500,000 apps in the App Store, and more than 140,000 are made specifically for the iPad.

Customers have downloaded more than 18 billion apps. Customers are downloading apps at more than 1 billion a month. Apple has already paid more than $3 billion to developers on the App Store. Apple makes its own apps on the App Store. Here’s one brand new one: Cards.

Now you can create and mail beautiful cards from your iPhone or iPod touch. They can print it out on high quality paper and you can see the quality of the letterpress cards. 21 different designs in 6 different categories. All you do is create the card on your iPhone, and Apple will do the rest: print out card, put it an envelope, and mail it for you. If you mail it to an address in US, Apple will print US postal code on bottom, so you can get a push notification on the day it’s delivered. They’ll put Apple-designed postage on it. Mail it anywhere in the US and it’s $2.99 for the whoel shebang, and only $4.99 anywhere in the world. Cards will be a free download on Oct. 12.

Cards joins Apple’s other apps and more than half million other apps in App Store.

Now, on to iOS 5. It was just a few months ago that Apple introduced iOS 5 and have already seeded more than 100,00 developers. Such positive feedback that they can’t wait to get it in everybody’s new hands. Here’s a quick recap of the top 10 features.

1) Notifications: Notifications don’t block you. They come up at the top of the screen. Notifications show up on lock screen; swipe any it’ll take you directly to the app.

2) iMessage: New messaging service between iOS users. Supports iPhone, iPad, and iPod touch. Delivery and optional read receipts. Messages securely encrypted end-to-end.

3) Reminders. Location-based reminders: sets up a geo-fence for when you arrive at or leave places. All reminders sync with Exchange and iCloud.

4) Twitter integration: Have integrated Twitter deeply in the OS. Go into Settings and enter your Twitter login, and that’s the only time you have to do it. Integrated with Photos, Safari, YouTube, Maps, and more.

5) Newsstand. Makes it even better to experience newspapers and magazines on your iPad. Especially subscriptions. New Yorker, Martha Stewart Living, Esquaire, GQ, and more. Newspapers like the New York Times. New location in App Store that gathers all of the subscriptions together, so it’s easy to find them. Single location on your Home screen. And new issues are downloaded in the background. Icon gets set to new cover page, and it’s ready for you to read.

6) Camera. The camera on the iPhone is popular, so they’re making it even better. Now if you double-click on Home button, and if you tap on that you’re taken directly to Camera app. And you can use the Volume-up button to take the photo. Add optional grid lines, pinch to zoom, put your finger down and hold it on a given location and it’ll set auto-exposure/auto-focus lock. Once you’ve taken a photo, you can edit them on iOS device as well. There’s red-eye removal and one-tap enhance, which should make your photo look better.

7) Game Center. Already have more than 67 million people signed up using Game Center. Adding photos to see your friends, achievements points, friend recommendations, and game recommendations.

8) Safari. Showed you the stats earlier on how popular Safari is. New features: Reader. Reformats web page you’re on to work perfectly for device. Everything nice and easy for you to read. If you don’t have time to read the story right now, there’s the Reading List, which syncs between devices. Also, full-tabbed browsing to the iPad. Quickly switch between websites.

9) Mail. Added rich-text formatting, control indenatation, drag addresses, full-text search, flag messages, and for iPad you can swipe to get to inbox in portrait orientation.

10) PC Free. Used to have to own a computer to own an iOS devices. But customers want to use iOS device as their only device. Take it out of box, set it up, and you’re good to go. Gone beyond that to add support for wireless software updates. Do it all wirelessly.

Those are just 10 of the more than 200 new features that comes with iOS 5. Supports iPhone 3GS, iPhone 4, iPad and iPad 2, third- and fourth-generation iPod touch. Available on October 12, next week, and it’s a free update.

To walk you through iCloud, here’s Eddy Cue.

So, iCloud stores your content and wirelessly pushes it to all your devices. Integrated into apps so everything happens automatically. Take a picture on your iPhone, iCloud saves it to your cloud and automatically pushes it to all your devices. And iCloud is free.

iTunes in the Cloud: Over a third of the music sold on iTunes Store is purchased directly on iOS devices. Music is now on multiple devices. Keeping it sync can be frustrating. By album on iPad, but at the same time it also downloads to iPhone and iTunes on Mac and PC. No syncing, it’s that simple.

What if you want to listen to song on iPhone that’s not on that device? New Purchased area gives you a list of all albums and songs you’ve already downloaded. Tap a few buttons and you can download them at no additional cost. Works for TV shows too, and works on Apple TV.

Photo Stream: A lot of us are taking all of our photos on our iPhone. Photos are on Camera Roll, but you wish they were on all your devices. Take photo on your iPhone and it’s pushed to all your devices. Built right into Photos app in a new album called Photo Stream. And it downloads to iPhoto on my Mac, and see it on Apple TV.

Documents in the Cloud: iOS revolutionized documents because we don’t have to manage them. Now when you create new document in Pages on your iPad, it shows up on iPhone automatically. Documents updated across devices. Also a set of APIs so apps can store their own documents in the cloud. Pages, Numbers, and Keynote integrate this feature, as a free update. Available October 12th.

Books do the same things.

At a Glance
  • Apple iPhone 4S family

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