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Apple's Tight Control Over Components Keeping iPhone 5 Repair Costs High

Eric Slivka — Thu, 23 May 2013 14:38:43 GMT

MarketWatch takes a look at the state of the repair industry for the iPhone 5, noting that costs for display replacements remain very high eight months after the device's launch in the United States. The report points to Apple's tight control over components as being the major contributor to high costs, even as the device's new design makes it simpler to replace the display than on previous models.

There is a tight control on iPhone 5 components in the market, [repair firm iCracked founder AJ] Forsythe says. “Market forces determine the price,” he says. “Apple sells about 300,000 iPhones a day and, as the repair market grows, prices will get lower.”

“Apple controls everything from the manufacturing to the gear for the iPhone 5,” says Jeff Haynes, editor at deal site TechBargains.com. As the iPhone 5 is larger than the 4, the cost for replacement parts rises, he says.

The display is the most frequently cited repair item on the iPhone, given the frequency with which users break the glass front of the device, and it is also the most costly component.

For the iPhone 4S, repair firm iFixit currently sells the display assembly for $95, with users needing to follow a difficult 37-step guide to perform the repair. On the iPhone 5, iFixit is charging $200 for the corresponding part, with the white version not even available at this time. But for those who can get their hands on the part, the replacement process requires only a 23-step guide judged "moderate" in difficulty.

The report notes that many repair firms have even not yet begun offering iPhone 5 display replacements, due to both the shortage of parts in the market and the high costs. Apple itself frequently performs repairs by swapping out the user's device, then putting the damaged device through a refurbishment process and reselling it at a discounted price.

Recognizing the prevalence of accidental damage issues with its mobile devices, Apple rolled out an AppleCare+ extended warranty plan alongside the iPhone 4S in October 2011. The $99 plan extends warranty coverage to two years and includes coverage for up to two incidents of accidental damage with $49 deductibles. The plan is not, however, universally available throughout Apple's global sales footprint yet.

Apple is said to be planning to revamp its AppleCare offerings later this year, with Apple reportedly moving to perform more repairs on iPhones rather than simply swapping them out. The company is also said to be transitioning AppleCare into a subscription agreement that would cover multiple devices owned by a customer, rather than having to purchase coverage separately for each device.

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Apple's Smart Watch May Not Launch Until Late 2014, Use Biometrics and iPod Nano Technology

Eric Slivka — Wed, 22 May 2013 22:24:59 GMT

KGI Securities analyst Ming-Chi Kuo, who has on a number of occasions offered accurate information about Apple's product plans, issued a new research report this week outlining his expectations for Apple's rumored smart watch device, informally dubbed "iWatch". Despite some expectations that the device could launch later this year, Kuo believes that both hardware and software issues will result in the iWatch making its debut in the second half of 2014.

Apple may not have adequate resources to develop an iWatch version of iOS because it may require big changes to iPhone and iPad iOS this year. In addition, wearable device components aren’t mature. For these reasons, we think mass production of the iWatch is more likely to begin in 2H14, not 2H13 as the market speculates.

Sony SmartWatch (left) and Pebble e-paper watch (right)
On the hardware front, Kuo projects that the iWatch will use a 1.5-2.0 inch display and unsurprisingly believes that Apple will draw on the iPod nano when it comes to components, particularly with respect to the main processor and the touch technology.

Currently, the iPod nano uses the same GF2 touch technology as used by the iPad mini. Since the size and computing ability requirements of the iWatch are similar to those of the iPod nano, we think iWatch will use iPod nano’s GF2 touch technology and AP [application processor].

Further, Kuo believes that biometrics will be a key feature for the iWatch, allowing for increased security and opening the door to broader health-related applications. The biometric support should also aid in building out the cross-device integration many expect to see from the iWatch.

Rumors regarding Apple's smart watch project have been relatively quiet over the past few months, although a report from earlier this week claimed that Apple is testing 1.5-inch OLED displays for the device, with Foxconn said to be gearing up for a trial run of 1,000 devices.

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Corning Pits Gorilla Glass 3 Against Sapphire, Plans Reflection Reduction and Antimicrobial Technology

Eric Slivka — Wed, 22 May 2013 20:59:30 GMT

Following Apple's adoption of sapphire crystal as a strong and durable covering for the rear cameras on the iPhone 5 and fifth-generation iPod touch late last year, rumors of expanded uses for the material have gained some traction. Back in March, we covered a report suggesting that sapphire could see wider adoption as coverings for displays on mobile devices, and just last week a sketchy rumor claimed that Apple is planning to use a sapphire-covered capacitive home button with integrated fingerprint sensor for the iPhone 5S.

Amid these discussions of the potential of sapphire, Corning has published a feature outlining why its latest Gorilla Glass 3 is in fact already a better option than sapphire for mobile device displays, citing greater strength, lower weight, less energy cost in production, and significantly lower pricing. And with those features has come widespread adoption, with Corning reporting that over 1.5 billion devices have been made with Gorilla Glass.

Jeffrey W. Evenson, [Corning] senior vice president, remarked, “Discussion seems to center around sapphire as an obvious solution for a cover material. What would people say if someone invented a cover that was about half the weight, used 99 percent less energy to make, provided brighter displays, and cost less than a tenth of sapphire? I think they’d say that sapphire was in real trouble. It so happens that we at Corning already invented that cover – and it’s called Gorilla Glass.” Evenson added that the company’s tests so far indicate Gorilla Glass requires about three times more force to break than sapphire after both materials have received similar wear and tear.

Corning also discusses its latest work with Gorilla Glass, noting that the company has already trimmed the materials thickness to the point where it can be curved and shaped without losing strength. Earlier this year, The New York Times reported that Apple was working on a curved glass smart watch, a product that could potentially take advantage of Corning's latest Gorilla Glass advancements.

Going even further, Corning lays out its future plans for Gorilla Glass, sharing that the company is working hard on new versions that reduce reflections for better visibility in bright sunlight and which incorporate antimicrobial technology to minimize the germs which are prevalent on mobile devices.

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Apple Details Five Patents Violated by Samsung Galaxy S4 and Google Now

Juli Clover — Wed, 22 May 2013 17:29:24 GMT

Last week Apple told the U.S. District Court in California that it planned to add the Samsung Galaxy S4 to its patent lawsuit already underway against Samsung. As promised, Apple today filed a motion (via Foss Patents) that details five different patents that the S4 allegedly infringes on.

The filing includes two Siri-related patents violated by Google Now, Google's robust voice activated search assistant. Patents '604 and '959 cover a "universal interface for retrieval of information in a computer system."

The other three patents in the filing cover a "graphical user interface using historical lists with field classes (’502)," a "system and method for performing an action on a structure in computer-generated data ('647)." and "asynchronous data synchronization amongst devices ('414)." According to Apple, these are all claims that other Samsung devices already violate.

Apple determined that the Galaxy S4 product practices many of the same claims already asserted by Apple, and that the Galaxy S4 practices those claims in the same way as the already-accused Samsung devices.

Samsung and Apple were ordered to narrow the scope of their ongoing legal battle earlier this year and as a result, Apple has stated that it will remove one of the other 22 infringing devices from the lawsuit if it is permitted to add the Galaxy S4.

There will be a hearing to discuss Apple's newly filed motion on June 25 in San Jose and the lawsuit, which covers newly released devices that were not a part of the original dispute, is expected to go to trial in March of 2014.

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Apple Updates Look of Online Store With More Feature Images, Fewer Text Links

Eric Slivka — Wed, 22 May 2013 13:24:56 GMT

Apple today rolled out some updates to its online store, not only posting new features advertising Father's Day gift purchases but also introducing a new, cleaner look for the store. While the main page of the online store had previously consisted of a main center column with product promotions flanked by sidebars with additional links, the new look brings an all-feature design focusing more on product images.

Previously, the left sidebar had offered quick access to accessory categories for Apple's various product lines, as well as links to the company's refurbished and clearance stores. Shoppers looking for accessories must now drill down through the product categories along the top "shop" navigation bar to reach the various accessories, while links to the refurbished and clearance stores are listed at the bottom of the page.

A similar situation exists for the former right sidebar, which offered links to Apple's other stores such as for education and business, as well as store services including gift cards, financing, and returns. All of these links are now only directly accessible through the store site map links at the bottom of the page.

The change removes some redundancy on Apple's main store page, as many links had appeared both in the main body of the page and lower down in the site map section, and by removing the sidebar links Apple has been able to bring much greater prominence to product images.

Apple has made additional image-centric changes further down in the site, with the main pages for each of the company's product lines now allowing for larger images and less text, while accessory pages have seen even more dramatic changes away from simple lists and toward more featured images.

Update: As noted by Macerkopf.de [Google translation], Apple has also added the ability for users in the German online store to pay for their purchases via PayPal.

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Excerpts of Apple Executives' Senate Committee Testimony on Tax Policy

Jordan Golson — Tue, 21 May 2013 19:29:05 GMT

Three Apple executives, CEO Tim Cook, CFO Peter Oppenheimer, and head of tax operations Phillip A. Bullock, appeared in front of the U.S. Senate Permanent Subcommittee on Investigation earlier today, testifying about Apple's tax policies.

MacRumors has a rough transcript of the hearing, while the full event is viewable on C-SPAN. The full hearing was quite long, but here are some selected excerpts from our transcript.

At the beginning of the hearing, Senators are allowed to make whatever opening statements they wish. Senator Rand Paul (R-KY) gave a spirited defense of Apple, saying he was "offended" by the hearing.

"Tell me a politician who is up here and doesn't try to minimize his taxes… Tell me what Apple has done is illegal. I am offended by a government… that convenes a hearing to bully one of America's greatest success stories… If anyone should be on trial here, it should be Congress. I frankly think the committee should apologize to Apple."

Instead of Apple executives, we should have brought in a giant mirror. This problem is solely and completely caused by our tax code. This committee should look in the mirror. "I find it abominable."

We need to apologize to Apple, compliment them for the job creation they're doing, and get on with our job and redo the tax code.

Apple CEO Tim Cook and CFO Peter Oppenheimer also made opening statements. Cook noted that Apple is responsible for creating or supporting 600,000 jobs in the United States, and disclosed for the first time the the upcoming 'Made in the USA' line of Mac computers would be manufactured in Texas, with parts coming from a wide variety of states.

Much of the hearing would focus on Apple's use of Irish subsidiaries to avoid paying U.S. income taxes on revenue generated overseas from the sale of products. Senators had accused Apple of having "sham" corporate entities in Ireland that served no purpose except for avoiding tax liability. Hitting back at that accusation, Cook said that Apple's operations in Ireland were not shell corporations, but had actual functions.

Apple has real operations, in real places, with Apple employees selling real products to real customers. We not only comply with the laws but we comply with the spirit of the laws. We don't move intellectual property offshore and use it to sell products back on the U.S. Our foreign subsidiaries pull 70% of our cash because of the rapid growth of our international business. We use this money to finance construction of Apple retail stores around the world and fund production of products. It would be very expensive to bring that cash back to the United States. Unfortunately the tax code has not kept up with the digital age. We are handicapped in relation to our foreign competitors who do not have such constraints on the free movement of capital.

Senator John McCain (R-AZ), asked Cook whether Apple's actions overseas created an unfair advantage for them compared to smaller companies that operate strictly inside the US and cannot create such overseas entities.

McCain: If you look at the 35% [corporate] tax burden, that I'm sure we're in agreement is way too high, you said the purpose of AOI [an Irish subsidiary] is to ease administrative burdens. Isn't it obvious that you are not bearing the same tax burden as if you were bearing in the United States? This gives you some advantage over smaller companies located strictly in the US?

Cook: Sir, I have tremendous respect for you. I see this differently from you. Apple is earning these profits outside the US. By law and regulation, these are not taxable in the US. AOI invests that money overseas and then the interest from those investments is taxed in the US. I see this as a very complex topic and I'm glad we're having the discussion. Honestly, I don't see it as being unfair. I am not an unfair person. That's now who we are as a company and who I am as an individual. I do not see it that way.

In a moment of levity, the 76-year old McCain expressed a concern that many iPhone owners share: "I'm out of time, but why the hell do I have to keep updating the apps on my iPhone? Why can't you fix that?" Cook responded that Apple was "looking to do better all the time."

Senator Claire McCaskill (D-MO), after praising Apple and its products, asked Cook about what's keeping Apple headquartered in the United States and why the company doesn't move overseas where the fiscal climate might be more favorable.

McCaskill: What would it cost to move out of California or move entirely to Ireland or China? What keeps you from moving on a cost analysis basis?

Cook: We're an American company. We're proud to be an American company. The vast amount of our R&D is in California. We love it there.

McCaskill: It's an intangible?

Cook: It's who we are as people. We're an American company whether we're selling in China or Egypt. We're an American company. It has never entered my mind that we would move to another country. It's beyond my imagination and I have a wild imagination. It's beyond it.

One of the major reasons for Cook's appearance in front of the committee was for Apple to put forth its own plan for corporate tax reform.

For one thing, Cook said the U.S. corporate income tax rate should be in the mid-20 percent range, while repatriation tax rates for income earned outside the U.S. should be somewhere in the single digits. Cook said that Congress should take a tip from Apple and focus on simplicity.

Apple has always believed in the simple, not the complex. You can see this in our products and in the way we conduct ourselves. It is in this spirit that we recommend a dramatic simplification of the corporate tax code. We make this recommendation with our eyes wide open, fully recognizing that this would likely result in an increase in Apple's U.S. taxes. We strongly believe that such reform would be fair to all taxpayers and would keep the U.S. competitive.

Finally, in his final line of questioning to Cook and Oppenheimer, Senator Levin went on the offensive, arguing that while Apple may not be violating the letter of the law, it was certainly violating the spirit of it.

By routing most foreign earnings to an Irish subsidiary -- a subsidiary that, in Levin's view, existed solely to avoid paying U.S. income tax -- Apple was doing a disservice to the American public by not paying their fair share.

Apple does pay U.S. income tax on earnings from the Americas (Mexico, Canada and Brazil most notably), but some two-thirds of its worldwide income eventually get routed to Irish subsidiaries.

Levin: And all the profits from Mexico and Canada and Argentina are taxed in the United States. But you made a decision to shift economic value overseas and the result is that most of your profits are not taxed. You're an American company. You're proud of it, we're proud of it. The result of these arrangements is that most of your profit is now in Ireland in these companies that don't exist. Of course we have to change this system. But to change it, we have to understand what is going on. What is going on is a huge loss of revenue to the United States. We've got these corporations that are able to shift profits to places where you don't pay income tax on it. We better understand that if we're going to correct it. That's our purpose here today. To shed a light on that. I hope that purpose has been achieved. We cannot continue a system where the company, a multinational company, is phenomenally as successful as yours and can make a decision, sitting down in 2008 as to where the profits will flow.

Where the R&D is 95% in the United States. You got R&D tax credits, all the benefits of living in this country. You're sitting there, unilaterally deciding whether to continue a system where profits are shifted to a place where they are not available to the American taxman. Everyone agrees that we need to change this system. In order for us to change this system, we've got to understand what is going on. You make a unilateral decision, three Apple employees in 2008, essentially decided where these profits will be taxed or not taxed. It's not right. That is not right. To leave that decision, it seems to me, the way it is decided so unilaterally, that a company can shift its value to a tax haven -- that's what Ireland is -- I know its your intention and I applaud your view. I know its not easy to come in front of the spotlight. It's important for us to write the laws. You agreed Mr. Cook that we need to rewrite these laws. Thank you for coming.

Following the testimony of Apple's executives, representatives from the US Treasury and the IRS appeared and largely confirmed that Apple's activities appeared to be entirely legal.

Note: Due to the political nature of the discussion regarding this topic, the comment thread is located in our Politics, Religion, Social Issues forum. All MacRumors forum members and site visitors are welcome to read and follow the thread, but posting is limited to forum members with at least 100 posts.

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Apple to Expand Social Network Integration in iOS 7 with Support for Flickr and Vimeo

Juli Clover — Tue, 21 May 2013 18:53:30 GMT

Apple has been making efforts to offer deep social network integration in its mobile operating system, first offering Twitter integration in iOS 5 and then Facebook integration in iOS 6. According to 9to5Mac, Apple will expand its social network integration even further with iOS 7, including support for both photo sharing site Flickr and video sharing site Vimeo.

As with Facebook and Twitter integration, Vimeo and Flickr integration will allow users to be able to sign in to the social networks in the Settings menu. Those one-time sign-in credentials will be usable across iOS, providing comprehensive sharing options and easy integration with other downloaded apps.

With Flickr integration, iPhone, iPad, and iPod touch customers will have the ability to share photos stored and/or taken on their devices to Flickr with a single tap from the system-wide share menu. Flickr has been integrated into the paid iPhoto iOS App Store app and OS X Mountain Lion since 2012, but iOS 7 will represent the first time in which the photo sharing service has been integrated deeply into the entire iOS operating system.

Flickr is a logical addition to iOS given Apple's existing relationship with Yahoo, and popular video hosting site Vimeo is also a logical choice for iOS 7 as Apple continues to move away from Google products. Apple stopped offering YouTube as a stock iOS app with iOS 6 and also introduced its own mapping app, discontinuing its use of Google Maps.

While Apple continues to allow direct video uploads to YouTube from its camera app, Vimeo integration will give iOS 7 users an additional option for video uploads. As with Yahoo, Apple has an existing relationship with Vimeo, having offered integration with the service in OS X Mountain Lion.

As noted by 9to5Mac's unnamed source, though Flickr and Vimeo integration is currently in the works, as with all beta software, there is a risk that it could be removed before the public release of iOS 7.

Apple's upcoming operating system is expected to feature a "flatter" design to modernize the look of iOS 7 while removing many of the skeuomorphic design elements that were introduced with iOS 6. Apple is expected to debut iOS 7 at its upcoming Worldwide Developers Conference in June with a release to follow in the fall, and MacRumors has noted a surge in traffic from devices running iOS 7 suggesting that a preview is imminent.

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Microsoft Unveils Xbox One, an All-In-One Entertainment System with Revamped Kinect and Fully Integrated SmartGlass

Juli Clover — Tue, 21 May 2013 18:11:27 GMT

Microsoft today released details on its next generation console at an event hosted at its Redmond campus in Washington. Called the Xbox One, the new console is designed to be the ultimate all-in-one home entertainment system with a heavy focus on both gaming and interactive television watching.

The Xbox One recognizes individual users and presents a customized home screen filled with content like TV and movies, games, and music, along with a new Trending section that displays friend activity and a live TV system.

Xbox One utilizes voice commands, motion control via the Kinect, and a new feature called Instant Switching to allow Xbox users to switch from gaming to TV to other types of entertainment with quick commands that work as fast as swapping channels on the TV. Home screen sharing, called Snap Mode, allows users to display multiple items on the television screen. The Xbox One's comprehensive voice commands, such as "Watch CBS" or "Play Game" are what many imagined Siri integration with the Apple TV might look like.

The new Xbox sports 8GB of RAM, an 8-core CPU, a 500GB hard drive, USB 3.0 ports, and a slot-loading Blu-ray drive. It also comes equipped with a newly redesigned Kinect sensor that is far more robust for better motion sensing and an updated controller that has an updated d-pad, impulse triggers and a more ergonomic design, in addition to several other improvements.

Xbox's second-screen companion app SmartGlass, which was originally introduced last year, has been improved to allow smartphones and tablets like Apple's iPad and iPhone to connect seamlessly to the Xbox one. According to Marc Whitten, SmartGlass is "fully integrated" into the new console.

SmartGlass in its current form is designed to allow users to interact with the Xbox 360 in a number of ways, namely navigating through menus, controlling video, browsing the internet, and using the keyboard to type on the console.

A number of games were also revealed at the Xbox One event including Madden NFL 25, NBA Live 14, EA Sports UFC, FIFA 12, Forza Motorsport 5, Call of Duty: Ghosts, and Quantum Break, a new game from Remedy that aims to blend television and gaming. 15 new games will be released during the first year that Xbox One is available, with eight of those being new franchises.

Though no exact release date was given, the Xbox One will launch around the world "later this year." More information about the console and its upcoming games will be available at E3 in June.

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Apple Still Tops in Cellphone Customer Satisfaction, but Losing Ground to Samsung and Others

Juli Clover — Tue, 21 May 2013 16:42:39 GMT

The American Customer Satisfaction Index (ASCI) has today released its annual rankings of customer satisfaction for mobile phones in the United States. While Apple had the highest customer satisfaction index score for the second year in a row, its score has fallen slightly while competitors like Motorola Mobility, Nokia, and Samsung have all gained in score.

Apple is still at the top of the list when it comes to smartphone satisfaction, but this year's ranking of 81 (out of 100) is two percent below its 2012 ranking of 83. Motorola phones came in second after Apple, hitting a ranking of 77 after a 5% gain year over year.

Nokia remained high on the list with a 1% gain giving it a score of 76, and Samsung experienced the most growth at 7%, bringing it to a score of 76. HTC and LG both saw drops in satisfaction while BlackBerry remained on the bottom of the list with a score of 69.

The improvement [of Samsung] is the largest yet for any cell phone manufacturer, and earns Samsung a position even with the industry average and Nokia (+1%) and just behind second place Motorola, up 5% to 77. Nevertheless, Samsung remains well behind industry leader Apple.

Since the May 2012 customer satisfaction survey which was the first that ranked smartphones, Apple has introduced its newest phone, the iPhone 5, while Samsung has debuted several devices including its most recent Galaxy S 4.

The ACSI also ranked wireless telephone service, with Verizon and AT&T experiencing small gains in satisfaction. Verizon ranked first with a score of 73 outranking Sprint's steady 71, which earned it the top spot last year. AT&T went from 69 to 70, and T-Mobile dropped to last place with a score of 68.

The ASCI bases its customer satisfaction index on a survey of 70,000 people in the United States that asks customers about the products and services they use the most. It measures satisfaction with more than 230 companies that span 43 industries and 10 economic sectors.

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Photos of Likely 802.11ac 'Gigabit Wi-Fi' Card From Next-Generation iMac Surface

Eric Slivka — Tue, 21 May 2013 15:10:44 GMT

Tonymacx86 points (via 9to5Mac) to recently discovered photos of a Broadcom BCM94360CD Wi-Fi/Bluetooth card that supports the 802.11ac "Gigabit Wi-Fi" standard rumored to be coming to Apple's Mac lineup later this year. While the photos were posted to Chinese site VR-Zone in early March, they are only just now being noticed by those following Apple rumors.

While the reports suggest that the new card is intended for the next-generation MacBook Pro or MacBook Air models rumored for launch at next month's Worldwide Developers Conference (WWDC), a commenter on the Tonymacx86 discussion thread points out that the card is actually nearly identical in size, shape, and layout to the Wi-Fi/Bluetooth card found in the current iMac.

The BCM94360CD card, which is very likely a custom design for Apple, contains Broadcom's BCM4360 802.11ac transceiver chip, offering support for the in-process Wi-Fi standard that allows for triple the speeds of the current 802.11n standard. An apparent date code of "1240" on the part suggests that it was manufactured in early October 2012, several months before Apple was reported to have struck a deal with Broadcom to bring 802.11ac support to its 2013 Macs.

Wi-Fi/Bluetooth card from Late 2012 iMac (Source: iFixit)

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Apple CEO Tim Cook and CFO Peter Oppenheimer Testify In Front of Senate Committee on Tax Strategies [Hearing Over]

Jordan Golson — Tue, 21 May 2013 13:44:11 GMT

After jostling in competing memoranda yesterday, Apple and a group of U.S. Senators are prepared to go head-to-head in a committee hearing examining the tax avoidance strategies of Apple and other multinational corporations.

CEO Tim Cook, CFO Peter Oppenheimer, and Apple's head of tax operations Phillip A. Bullock will appear in front of the U.S. Senate Permanent Subcommittee on Investigation in the second part of a committee hearing running now.

The hearing is streaming live on the subcommittee's website and below. We will be liveblogging the hearing at the bottom of this post.

Update: iOS users can view the hearing at NBCNews.

Apple yesterday released a statement laying out some of its international operations and financial strategies, noting that it paid $6 billion in federal income tax in 2012 and that it has created hundreds of thousands of jobs in the United States.

A bipartisan group of Senators responded with a statement of its own, accusing Apple of using several offshore subsidiaries to avoid paying income taxes. Said Senator Carl Levin (D-MI), "Apple sought the Holy Grail of tax avoidance. It has created offshore entities holding tens of billions of dollars, while claiming to be tax resident nowhere."

Earlier today, the Irish government -- where a number of Apple's subsidiaries are headquartered -- said that it was not responsible for the tax rates Apple pays in other countries and that its system was transparent.

Liveblog- Senator Carl Levin (D-MI), chairman of the U.S. Senate Permanent Subcommittee on Investigation, is reading a prepared statement accusing Apple of evading billions of dollars in taxes through subsidiaries in Ireland and elsewhere. Senator Levin noted that he is an iPhone owner.

- Levin says domestic companies that are not in a position to offshore their tax burden are at a competitive disadvantage. He accuses Apple of being partially responsible for the sequester and other budget cuts because of its tax avoidance strategies.

- He says Congress should close the tax loopholes that companies like Apple use, even if they don't pass a rework of the overall corporate tax system.

- Senator John McCain (R-AZ) is now giving an opening statement. "It's important all of us make it very clear the admiration we hold for Apple." However, the company is taking advantage of a system that allows profits to be shifted and allows the company to avoid paying taxes on $44 billion in income over the past 6 years. "It's completely outrageous that Apple has avoided paying US taxes and indeed avoided paying taxes around the world with its convoluted and pernicious strategies."

- McCain: American companies cannot continue avoiding paying taxes. "Our military can not afford it, our economy can not endure it, and the American people will not tolerate it." Our tax system is broken but that is not an excuse.

- Rand Paul (R-KY) is up and saying he is "offended" by the hearing. "Tell me a politician who is up here and doesn't try to minimize his taxes… Tell me what Apple has done is illegal. I am offended by a government… that convenes a hearing to bully one of America's greatest success stories… If anyone should be on trial here, it should be Congress. I frankly think the committee should apologize to Apple."

- Instead of Apple executives, we should have brought in a giant mirror. This problem is solely and completely caused by our tax code. This committee should look in the mirror. "I find it abominable."

- Paul: I have a bill that would tax repatriated money at 5% and target that money to infrastructure. We need to apologize to Apple, compliment them for the job creation they're doing, and get on with our job and redo the tax code.

- Senator Levin is angry and fired up: Senator Paul, you can apologize if you wish but that isn't what this hearing is about. No company should be able to determine how much tax to pay and use gimmicks to pay lower taxes in this country. This subcommittee is not going to apologize to Apple. We did not drag them, they have come here willingly. We intend to hear from them and some experts.

- Tax experts from Harvard and Villanova are the first two witnesses in the hearing. Apple's executives will be the next group of witnesses.

- Professor Richard Harvey - Villanova: After reviewing their structure, I suspect… that what Apple has done is within the bounds of what is acceptable under International tax law. … However, the statement that Apple made "Apple does not use tax gimmicks…", I nearly fell off my chair when I read that. The bottom line is that Apple had a substantial amount of income recorded in Ireland and they paid essentially no tax.

- Senator Ron Johnson (R-WI) - "Who benefits from Apple's tax strategy?" Professor Harvey: The shareholders. Johnson goes on to say that corporate tax rates should be eliminated entirely and corporate income should be taxed at the shareholder level.

- Senator Paul - "Neither this panel nor anyone on the committee has said Apple has broken any laws… it would probably be malpractice for them not to do so… I don't know of anybody on this panel who tries to maximize their tax burden. Mr. Harvey, do you take any deductions on your taxes?" "No." "Do you think you're a bad person for doing that?" "Absolutely not."

- Paul - "Money goes where it's welcome… we have a 35% corporate income tax, we're chasing people away from us… we should be giving them an award today." They are obeying the law. They are doing what their shareholders have asked, which is to maximize profit. Let's not vilify American companies.

- Levin - We are trying to shine a spotlight on big companies, we are not trying to vilify them. To call this vilification misses the function of the subcommittee and misses the function of Congress. We are here to look at the functions of Government and see how they work and don't.

- Senator Claire McCaskill (D-MO) - I'm very proud of Apple as an American company. I use Apple products and I harangued my husband until he switched. I think Apple is utilizing the tax code we have given them.

CEO Tim Cook, CFO Peter Oppenheimer and Apple's head of tax operations Phillip A. Bullock are now appearing in front of the Senate panel.

- Cook: "I am proud to represent Apple today… I am often asked if Apple still is an American company… My answer is an emphatic yes… Much of our innovation takes place in one zip code… Cupertino, California…"

- "We estimate 300,000 jobs have been created in the U.S. because of the App Store." We've chosen to keep the design and development of our revolutionary products right here. Over the last decade, our workforce grew by fivefold. We have employees in all fifty states. Apple has created hundreds of thousands of jobs at small and large businesses that support us.

- iPhone components are made in Texas and Kentucky. Apple is responsible for creating or supporting 600,000 new jobs. We've invested billions in the U.S. to create even more American jobs. We're investing $100 million jobs to create a line of Macs in the U.S. later this year. This will be assembled in Texas, and rely on equipment and supplies from other states.

- We've invested a huge new data center in North Carolina, building more in Oregon and Nevada, a new campus in Texas and a brand new headquarters in Cupertino.

- Apple has 'real' operations, in 'real' places, with Apple employees selling real products to real customers. We not only comply with the laws but we comply with the spirit of the laws. We don't move intellectual property offshore and use it to sell products back on the U.S. Our foreign subsidiaries pull 70% of our cash because of the rapid growth of our international business. We use this money to finance construction of Apple retail stores around the world and fund production of products. It would be very expensive to bring that cash back to the United States. Unfortunately the tax code has not kept up with the digital age. We are handicapped in relation to our foreign competitors who do not have such constraints on the free movement of capital.

- We are a company of strong values. We believe our extraordinary success brings increased responsibilities to the communities where we live, build and sell our products. We believe in President Kennedy's phrase 'to whom much is given, much is required.' Apple is a champion of human rights, education and the environment. Our belief that innovation should serve humanity's deepest values and highest aspirations is not going to change.

- Apple has always believed in the simple, not the complex. You can see this in our products and in the way we conduct ourselves. It is in this spirit that we recommend a dramatic simplification of the corporate tax code. We make this recommendation with our eyes wide open, fully recognizing that this would likely result in an increase in Apple's U.S. taxes. We strongly believe that such reform would be fair to all taxpayers and would keep the U.S. competitive.

- Peter Oppenheimer: In the U.S., our operational structure is quite simple. We sell and support products through our retail stores and partners. Outside the U.S., we strive to provide the same sales in support as our customer expect in the U.S. Apple's presence in outside countries often takes the form of Apple-owned subsidiaries. These acquire products from other Apple subsidiaries which in turn buy product from Apple contract manufacturers.

- We are in full compliance with all laws and regulations. Virtually all of our R&D and the jobs that go with it, take place in the U.S. Apple and Apple Ireland use a cost-sharing R&D agreement to fund research. In return, Apple Ireland receives rights to sell products in Europe and Asia.

- For many years, our Irish subsidies have had thousands of employees in Ireland. The fact that our subsidiary does not pay taxes in Ireland does not affect our U.S. tax payments.

Cook/Oppenheimer/Bullock Q&A Beginning

- Subcommittee Chairman Levin quotes President Kennedy. Cook: President Kennedy and his brother are longtime heroes of mine. I don't believe deferral of tax payments is a sham in any way.

- Bullock in response to a question: Apple legally owns a number of subsidiaries in Ireland and overseas. It is "functionally managed and controlled" (an Irish legal term) in the United States. Our conclusions of Irish law addresses tax management and control if it takes place somewhere else. If it is managed and controlled in the U.S., we are not responsible for Irish taxes. Applying the Irish legal standard of central management and control, our Irish subsidiaries are managed in the U.S. 'Central management and control' is not a term under U.S. tax law.

- Cook: We have a significant number of employees in Ireland, but some of our most strategic decisions are made in the United States. They are functionally and practically managed in the United States.

- Bullock: U.S. taxes are paid by Apple, Inc. Cash that is distributed from our operating subsidiaries that come to the U.S., largely in terms of interest, is paid by Apple. The income of Apple subsidiaries is subject to tax in the local countries in which they operate. There is no U.S. tax on the transfer of balances from subsidiaries to other subsidiaries. Our companies pay the appropriate taxes in Ireland as per our agreement with the Irish government.

- Bullock: AOI has not filed an corporate income tax return on revenue earned overseas. Apple Inc. pays U.S. income tax on revenue it receives as a passthrough. AOI and AOE (Apple subsidiaries) own intellectual property rights to Apple IP overseas.

- John McCain questioning now. Calls Tim Cook a "tough guy". "Do you feel that you've been bullied or harassed by this committee or its members?" Cook: "I feel very good to be participating in the process. I would like for comprehensive tax reform to be passed this year. Any way that Apple can help, we're here to help." I feel that it's important for us to tell our story. I want people to hear that from me. I didn't get dragged here, sir.

- McCain: You have obviously, legally, taken advantage of the tax code both foreign and domestic. I think we agree that you are not paying the 35% tax rate that domestic companies are paying. Are you and Apple receiving an unfair advantage compared to domestic companies?

Cook: No, that's not the way I see it. Apple pays 30.5% of its profits in taxes in the United States. I don't know exactly where this stacks up relative to other companies. I think it stacks high on the list. I believe we are the top taxpayer in the United States. We do have a low tax rate outside the United States. This tax rate is for products we sell outside the United States. There's no shifting going on that I see at all.

McCain: Why does AOI exist? Why does AOI exist in Ireland?

Cook: AOI was created in 1980. The relationship between Apple and the Irish government still exists today. We've built up a significant skill base there of people who have a significant understanding of the European market. AOI is nothing more than a holding company. A holding company is a concept that many companies use. It's not an operating company. The dividends that go into this company have already been taxed appropriately in their local jurisdictions. AOI to me is nothing more than a company that has been set up to provide an efficient way to manage Apple's cash. From income that's already been taxed. The investment income that comes out of AOI is taxed in the United States at the full 35% rate. AOI does not reduce our US taxes at all.

McCain: Where is AOI, ASI and AOE a tax resident?

Cook: It is my understand that there is no tax resident for any of the three subsidiaries.

McCain: Does that sound logical?

Cook: ASI and AOE are paying Irish taxes. I personally don't understand the difference between a tax presence and a tax residence but I know they fill out and pay Irish taxes. AOI, because it's a holding company, it only makes investment income. All of that investment income is taxed in the US at the full 35% level.

McCain: If you look at the 35% tax burden, that I'm sure we're in agreement is way too high, you said the purpose of AOI is to ease administrative burdens. Isn't it obvious that you are not bearing the same tax burden as if you were bearing in the United States? This gives you some advantage over smaller companies located strictly in the US?

Cook: Sir, I have tremendous respect for you. I see this differently from you. Apple is earning these profits outside the US. By law and regulation, these are not taxable in the US. AOI invests that money overseas and then the interest from those investments is taxed in the US. I see this as a very complex topic and I'm glad we're having the discussion. Honestly, I don't see it as being unfair. I am not an unfair person. That's now who we are as a company and who I am as an individual. I do not see it that way.

McCain: I'm out of time, but why the hell do I have to keep updating the apps on my iPhone? Why can't you fix that?

Cook: We're looking to do better all the time.

- The panel is breaking for a short recess.

Senator McCaskill: If you don't tax plan, then you're incompetent as an American business. I hope I can understand better why the structure you've used has been embraced. You borrowed $17 billion, issued bonds to pay dividends to your shareholders. It was in the economic news because of your large cash reserves. You made a decision that it would be cheaper for you to service that debt and use the cash to pay dividends than to bring this cash back. Do you have the analysis that would show how much cheaper it would be than bringing the cash back?

Cook: The cost of capital is at an all-time low. Our weighted average cost of the borrowing was less than 2%. We were faced with a decision to go that route or pay 35% to repatriate. As we looked at that analysis, we felt strongly that in the best interests of our shareholders to secure the debt.

McCaskill: You negotiated a 2% interest rate with Ireland.

Cook: In part of recruiting Apple in 1980, we made an agreement with the country. They were trying to attract new tech companies. The skills of our 4,000 employees there are essential to servicing the European market. We have quite a strong presence there.

McCaskill: If Ireland recruited you and gave you a very good deal, how do we set tax policy? 3/4ths of net tech mobile growth will be in emerging markets? Do you agree with that?

Cook: A significant amount of growth will be in emerging markets.

McCaskill: If we simplify our tax code and get it down and clear out the underbrush, what keeps another country in these emerging markets from undercutting us like Ireland did?

Cook: The US has such enormous advantages and the barrier right now in terms of repatriating cash is that its at the 35% level. Our proposal is that we eliminate all corporate tax expenditures -- get to a very simple system and have a reasonable tax on bringing money back. Not 0%. I think if we did that, many companies would bring back capitol to invest in the US and it would be great in the United States.

McCaskill: What would it cost to move out of California or move entirely to Ireland or China? What keeps you from moving on a cost analysis basis?

Cook: We're an American company. We're proud to be an American company. The vast amount of our R&D is in California. We love it there.

McCaskill: It's an intangible?

Cook: It's who we are as people. We're an American company whether we're selling in China or Egypt. We're an American company. It has never entered my mind that we would move to another country. It's beyond my imagination and I have a wild imagination. It's beyond it.

McCaskill: On the bonds, I understand the business rationale. Do you think you should be able to deduct the interest on those? Would that be one of the corporate expenditures we do away with?

Cook: It could be. The way the tax code is written currently, my understand is that it would be deductible. It would be a very very small percentage of the overall tax rate we pay.

McCaskill: You decide where to allocate sale proceeds. Some of that is being made based on where the product is sold, but not all. How do you determine that? How much goes to the American company and how much goes to the International companies.

Cook: Everything we sell in the US is taxed in the US. For a foreign country, generally speaking, it is taxed in the local market and then if its one of the countries that are being served from Ireland, those units are generally sold by an Irish subsidiary. That income is taxed to the degree it needs to be in the local jurisdiction and then the proceeds go to an Irish subsidiary in many cases called AOI. This acts as a holding company and invests Apple's earnings. Then we pay taxes on those earnings in the United States.

McCaskill: Do any of the proceeds from my purchases actually get parked in Ireland under the aegis of intellectual property?

Bullock: No. 100% of the proceeds on any sale from a customer in the US is fully taxed in the US. There is no outbound payments going offshore.

Senator Johnson: This is complex. It has to do with how do you allocate income? What kind of transfer price is an appropriate price? I did notice that your US sales is 39% and 35% of income and international sales of 61% and 35% of income. Can you explain this?

Cook: Generally, Apple's Macintosh business is a larger percentage of its sales in the US than internationally. As we launch the iPhone, iPhone became a larger percentage of its business internationally than in the US because we had a nice base of Mac sales in the US.

iPhone has larger gross margin than Mac business. International business carries higher margins than US business.

Johnson: More profitable product mix outside the US than in the US?

Cook: Yes.

Johnson: You get a deduction for foreign taxes paid, right?

Bullock: It's a dollar for dollar credit.

Johnson: Now Apple has a lot more money and if you repatriate it, you'll tax it a lot more. The US would be a beneficiary if we can get more money repatriated?

Bullock: Yes, if its taxed and repatriated.

Johnson: Do you have IRS employees at your company full time basically? Being audited constantly?

Bullock: We are constantly under audit in many jurisdictions around the world and they are constantly looking at our numbers.

Johnson: Can you describe your shareholders in general?

Cook: Generally, Apple is widely owned because it is part of the indexes in the stock market. Across mutual funds and pension funds.

Oppenheimer: Our top 50 shareholders own half the company. Public employee retirement systems, mutual funds like Fidelity or Black Rock, and individual retail shareholders as well.

Johnson: Even the top 50 have wide fund shareholder bases. So those folks benefit that Apple can retain more of its profits by not paying taxes to foreign governments. What other taxes does Apple generate? What can you take credit for?

Oppenheimer: We paid $325m in federal employment taxes, in addition to our employees. We've paid $100 million to state and local governments in property taxes and other fees. Last year, we collected and remitted $1.3 billion in sales tax.

Johnson: $2 billion in total. When we talk about transfer pricing, we face the same dilemma between states, don't you? Between which state claiming what income?

Bullock: The income that the company generates in the US, the company generates 40% more or less, that income does get apportioned between the states amongst a slightly different system.

Johnson: What is the difference between that and allocating between different countries?

Bullock: Some states apportion based on relative sales. Some states use a multi factor test, may look to sales, property and payroll.

Johnson: Do you negotiate between the states? Do you have more of your income allocated to pay state income tax?

Bullock: It is approximately 100%. It is not double taxed.

Johnson: But that's a similar type of problem to allocating income across multiple countries, right?

Bullock: Similar, yes.

Johnson: Talk about how you pay taxes in other countries.

Bullock: In Fiscal 2012, the company paid a little over $900 million in international income taxes. We're projecting that number to be larger this year. That number is significantly larger than a few years ago. I don't have the statistics available but similar to the US there are employer contributions to payroll tax, and considerable amount of VAT and GST that is connected and remitted to various countries.

Johnson: What of your employment is based in the US and overseas?

Oppenheimer: 2/3rds of employment is in the US. Partially because of our retail stores.

Senator Kelly Ayotte (R-NH): The issue of the $102 billion that is present overseas, regarding repatriation. You'd be willing to pay some rate on repatriation. As we look on tax reform, what do you think is the rate, not just for Apple but for multinational corporations around the world, if we simplify the code, what rate should we be at to be competitive?

Cook: The rate on the US sales in my judgement from most of the studies would indicate it would need to be in the mid 20's. To incentivize a huge number of companies to repatriate, it would need to be in the single digits. Some companies would need to pay a bit more, other companies would pay less. More important than all of that, it would be great for growth in this country. That's why I am so adamant about doing this.

Ayotte: You're building a new data center here, you can't use overseas cash for that, right?

Cook: Yes, we can't use our overseas cash to make any investments in the U.S.

Ayotte: If you were in our position, how important is it that we change the tax code to make this a good place for investment? What would you do? You're not the only corporation that has significant monies overseas right now.

Cook: It's vital to do, it's great for America to do. We would have a much stronger economy if we did that. It would create jobs and investment.

Ayotte: If we create more jobs and investment, that means more taxes too, right?

Cook: That's a very excellent point. All ships rise with the tide.

Ayotte: What about an issue of a territorial rate? Hopefully we will reform the code to create a better dynamic for investment, but what about a territorial rate?

Cook: The US is advantaged if more capital moves into the country. It would strengthen our economy. I don't propose zero, but a reasonable tax on doing so. Some people refer to that as territorial and hybrid. That's how I believe it should work. We don't support a temporary tax holiday. We want comprehensive reform for a long time.

Ayotte: If we create a temporary tax holiday, does that encourage long term investment?

Cook: A permanent change is better because its predictable.

Ayotte: You talked about the advantages of being in this country. One is the IP protections in the US. You have faced significant challenges in China. What would be those challenges and thinking about IP protections in the US, how would we address this with our international partners?

Cook: We've faced more significant areas in other countries than China.

Ayotte: I've heard stories about knock off Apple Stores in China.

Cook: That has clearly been an issue. I think that the US court system is currently structured in such a way that its very difficult to get the protection a tech company needs because our cycles are very fast. The court system is very long, and the foreign competitors in the US can quickly take IP and use it and ship products with it and they're on to the next product as well. I would love to see conversations between countries and see protections between IP globally. For us, our intellectual property is so important, I would love the system to be strengthened in order to protect it.

Senator Rob Portman (R-OH): If we don't reform the tax code, we're competing with one hand tied behind our back. Almost all of our industrial competitors have shifted to a territorial system including the UK, France, Germany, Japan. I think that's the right way to go. They don't tax active business income earned beyond their borders and their businesses are more competitive as a result. $1.5-$2 trillion is locked up overseas. That money is being deployed to put factories and R&D overseas. We've got to move quickly. No other nation erects such a high barrier to bringing earnings back to the US. Every one of our global competitors have reformed their tax systems since we last reformed ours. Not just the rate, but the code. If we don't reform, we'll continue to lose opportunities. We need to create competitiveness so we can get new customers overseas. Tightening rules related to IP income is important too.

65% of your revenue is overseas. Is that accurate?

Cook: 2/3rds last quarter was overseas.

Portman: How many jobs in the US are because of overseas sales?

Cook: 600,000 jobs in the US total, it's difficult to allocate those to international. Our earnings overseas have powered our company.

Portman: We want you to sell stuff overseas because it causes jobs to come here. Is Samsung one of your major competitors? Is that an American company?

Cook: Yes, they are headquartered in South Korea.

Portman is comparing the Apple and Samsung's tax rates. Bullock says those rates are accurate, but Apple and Samsung pay similar global tax rates. However, Samsung can move their funds around the world as necessary and Apple cannot.

Portman: As a result, your investment rates are more limited than Samsung. How much do you spend on tax compliance efforts?

Bullock: I don't have that but it's a lot.

Portman: You should find out. I think the Americans want to know. I am a recovering lawyer, but I think you'd do better to spend money on engineers instead of lawyers. How big is your tax department?

Bullock: Several dozen around the world, plus several dozen more in support centers.

Portman: Plus a lot of law firms and outside help as well.

Bullock: If you can encourage Peter to hire me more people, that would be helpful as well.

Oppenheimer: The tax return that I sign each year is two feet tall or greater and we are under continuous examination and much of the effort particularly with our outside advisors is related to our US tax return.

Portman: So you have high tax compliance costs and you can't invest where you want to. What would happen if we just forced you to bring money back and take a chunk of that repatriated?

Cook: Very bad, sir. Not good.

Portman: I appreciate the hearing today, we don't want to design the tax code to require you to spend too much on tax compliance. We want a level playing field, it's a needlessly complex tax system, the solution isn't to tinker with the numbers or go backwards. We should take the President up on his offer to do comprehensive corporate tax reform. I hope this hearing helps us move towards that goal.

Levin: Of course you can bring the profits home. You bring them home from South America, right?

Cook: I don't understand the question. The economic transfer for Europe is in Ireland. For South America, I would guess there is some cash in South America.

Bullock: Profits from the rest of the Americas, including Mexico and Canada and Brazil is generated by Apple, Inc.

Chairman Levin is pushing back on Bullock and Oppenheimer over the Irish subsidiaries and the cost-sharing agreement they have. Cook and Oppenheimer both say they "disagree with the characterization" of the agreement.

Levin: Of course you can bring your profits home, $100 billion is stashed away in these three Irish companies that you control but its in their legal name. Will you bring those profits home? You can bring them home, you just have to pay the tax on it. You said you wouldn't bring that money home unless we reduce those tax rates.

Cook: There's a lot there. I'd appreciate the opportunity to answer that.

Levin: Is it true that you said you would not bring that money home at those tax rates?

Cook: I don't recall saying that. I have no plans to bring those funds back.

Levin: Isn't that you saying you would not bring the money back at the current tax rates?

Cook: I have no current plans to bring those funds back at the current rates.

Levin: You have an agreement that shifts the economic rights to the most valuable thing you have to three Irish companies. That's the shift. You're selling the golden goose. You have a right to do that, just like you have a right to not shift your intellectual property from Canada, Brazil and Mexico. OK, here's where we're at. You've got profits going, $100 billion, to Ireland. You say it's your current intent to not pay your taxes on it. You say you don't need to pay taxes on them. The economic value has been shifted.

Oppenheimer: We don't agree with your characterization.

Levin: What was shifted to them? In that agreement?

Oppenheimer: It began in 1980.

Levin: I'm talking about 2009.

Oppenheimer: We have not changed things since 1980. There is important context to the agreement that started 30 years ago.

Levin: There is an agreement in 2009. Apple employees signed that in 2008. It shifted economic rights to three Irish companies under your control that don't pay taxes in the United States.

Oppenheimer: I disagree with that.

Levin: It didn't shift the economic rights?

Oppenheimer: It started in 1980 --

Levin: You talked about that. I'm talking about the 2009 agreements. Did it give any rights to those Irish companies?

Oppenheimer: It's a continuation of an existing agreement.

Levin: It continued a transfer, under Apple's control, there is an agreement that is reached with a controlled corporation. You folks agreed you controlled it. Under that agreement, which continues an ongoing agreement -- you didn't have to shift your economic property, you're in control, it's your company. You made a decision. Don't kid ourselves as to the implications as to America's revenue. I'm not saying its illegal, I'm not saying its illegal. You made a decision to shift your crown jewels that creates the profits. You made that decision to continue that arrangement in 2008 and 2009.

Oppenheimer: We went to Ireland in 1980. We've continued to do that for the last 30 years. Our systems are set up for that way, our operations are. That's why we do that today.

Levin: The result of continuing that in 2008 is that most of your profits are stored in Ireland and are not taxed.

Oppenheimer: People love the iPhone and iPad around the world.

Levin: That's not the question, people love it everywhere. But the people who live it in Canada and Mexico and Brazil, their purchases are taxed here. Not in Europe. Most of your profits which come from your brilliant intellectual property, the continuation of that system, means that most of your profits are sitting in three Irish companies that you control that don't pay taxes. That's the result. You can defend it, but that's the result. Folks, there's a huge drain as a result. You point out, Mr. Cook, that 95% of the creativity that goes into those products is in California. Two-thirds of those profits are in Ireland. You've made a decision not to bring that money home.

Cook: We're proud that that R&D is in the US. All of the profits in the United States are taxed in the United States.

Levin: I know that. And all the profits from Mexico and Canada and Argentina are taxed in the United States. But you made a decision to shift economic value overseas and the result is that most of your profits are not taxed. You're an American company. You're proud of it, we're proud of it. The result of these arrangements is that most of your profit is now in Ireland in these companies that don't exist. Of course we have to change this system. But to change it, we have to understand what is going on. What is going on is a huge loss of revenue to the United States. We've got these corporations that are able to shift profits to places where you don't pay income tax on it. We better understand that if we're going to correct it. That's our purpose here today. To shed a light on that. I hope that purpose has been achieved. We cannot continue a system where the company, a multinational company, is phenomenally as successful as yours and can make a decision, sitting down in 2008 as to where the profits will flow.

Where the R&D is 95% in the United States. You got R&D tax credits, all the benefits of living in this country. You're sitting there, unilaterally deciding whether to continue a system where profits are shifted to a place where they are not available to the American taxman. Everyone agrees that we need to change this system. In order for us to change this system, we've got to understand what is going on. You make a unilateral decision, three Apple employees in 2008, essentially decided where these profits will be taxed or not taxed. It's not right. That is not right. To leave that decision, it seems to me, the way it is decided so unilaterally, that a company can shift its value to a tax haven -- that's what Ireland is -- I know its your intention and I applaud your view. I know its not even to come in front of the spotlight. It's important for us to write the laws. You agreed Mr. Cook that we need to rewrite these laws. Thank you for coming.

Messrs. Cook, Oppenheimer and Bullock have now been excused.

Note: Due to the political nature of the discussion regarding this topic, the comment thread is located in our Politics, Religion, Social Issues forum. All MacRumors forum members and site visitors are welcome to read and follow the thread, but posting is limited to forum members with at least 100 posts.

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Yahoo's Flickr Gets Major Design Overhaul, 1TB of Free Photo Storage Space

Juli Clover — Mon, 20 May 2013 22:22:02 GMT

Following this morning's acquisition of Tumblr, Yahoo today hosted an event in New York City to detail changes to its popular photo sharing site Flickr. Flickr on the web has been given a major design overhaul, with a focus on full resolution pictures.

In addition to eliminating much of the white space on the site, Flickr is now displaying in-line photo streams that encompass the majority of the screen and detailed photo-centric profile pages. Flickr has also implemented a slideshow mode to allow its users to flip through photos hands-free.

With the redesign, Flickr is encouraging its users to upload high resolution photos by giving every Flickr user 1TB of storage space for free. That is a marked increase from its former photo storage policy, which limited users' monthly upload bandwidth and allowed only 200 photos to be visible. Flickr will allow up to 3 minutes of 1080p video as well.

At Flickr, we believe you should share all your images in full resolution, so life's moments can be relived in their original quality. No limited pixels, no cramped formats, no memories that fall flat. We're giving your photos room to breathe, and you the space to upload a dizzying number of photos and videos, for free. Just how big is a terabyte? Well, you could take a photo every hour for forty years without filling one.

And yep, you heard us. It's free.

Flickr has upped the price of its ad-free accounts, charging $49.99 per year for an ad-free browsing experience, along with introducing a new "Doublr" account, which offers 2TB of storage space for $499 per year.

During the announcement, Flickr also revealed that its redesigned iOS app, which was released last December, grew total Flickr uploads by 25 percent. Flickr's iOS app can be downloaded from the App Store for free. [Direct Link]

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U.S. Senators Claim Apple Has Avoided Paying Billions in U.S. Income Taxes Ahead of Tim Cook Testimony

Jordan Golson — Mon, 20 May 2013 21:52:19 GMT

A Senate subcommittee has released a 40-page memo accusing Apple of not paying billions of dollars in federal taxes through "extensive tax-avoidance strategies".

Apple CEO Tim Cook, CFO Peter Oppenheimer, and Apple's head of tax operations Phillip A. Bullock will appear in front of the U.S. Senate Permanent Subcommittee on Investigation tomorrow. The company issued a statement earlier today in a preliminary defense against the Subcommittee's accusations.

The subcommittee, which previously explored tax avoidance by other multinational corporations using offshore subsidiaries, found similar practices at Apple. In addition, the subcommittee review discovered an unusual tax scheme: Apple’s claim that two key offshore companies are not tax residents of Ireland, where they are incorporated, or of the United States, where Apple executives manage and control the companies. One of those Irish subsidiaries has paid no income taxes to any national tax authority for the past five years.

"Apple wasn’t satisfied with shifting its profits to a low-tax offshore tax haven," said Sen. Levin. "Apple sought the Holy Grail of tax avoidance. It has created offshore entities holding tens of billions of dollars, while claiming to be tax resident nowhere. We intend to highlight that gimmick and other Apple offshore tax avoidance tactics so that American working families who pay their share of taxes understand how offshore tax loopholes raise their tax burden, add to the federal deficit and ought to be closed."

The full forty-page memorandum (PDF) goes into some detail on the company's tax strategies, and we will likely hear much more about this at tomorrow's hearing.

Note: Due to the political nature of the discussion regarding this topic, the comment thread is located in our Politics, Religion, Social Issues forum. All MacRumors forum members and site visitors are welcome to read and follow the thread, but posting is limited to forum members with at least 100 posts.

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Samsung and Sharp Introduce New Ultra-High-Resolution Notebook Displays

Jordan Golson — Mon, 20 May 2013 20:29:33 GMT

While Apple's 15" MacBook Pro was the first consumer notebook to gain a Retina-level display nearly a year ago, it is no longer the only such offering, as Google's Chromebook Pixel with its 12.85" 2560x1700 display and Toshiba's Kirabook with a 2560x1440 220 PPI display have joined the market in recent months.

Seeking to raise the ante on Retina displays, Samsung and Sharp have both introduced new high-resolution displays in the past week, targeting notebooks and ultrabooks with the latest technology. The new displays from both companies sport 16:9 ratios, making them unfit for Apple's line of notebooks, which all use 16:10 ratio displays, but they should make Retina displays a mainstream feature in the relatively near future.

Sharp last week announced new 11.6", 14", and 15.6" displays with pixel densities of 235-262 PPI, joining the company's existing 13.3" display at 221 PPI. Samsung's announcement today included a new 13.3" display with a 3200x1800 LCD panel at an even higher 276 PPI.

For comparison, Apple's 13" MacBook Pro with Retina Display has a 2560x1600 13.3" display at 227 PPI.

While high resolution is the most obvious benefit of these new displays for consumers, some of the screens bring other benefits as well. Samsung says its new 13.3" display offers 30% power savings over existing displays, something that would be important for a potential MacBook Air with Retina display. That machine is constrained by needs for a super-thin display and battery. And even for Apple's existing Retina MacBook Pro, advances being brought about by Samsung and Sharp are likely to make their way into Apple's notebook displays in the future.

Sharp advertises similar energy-saving benefits from its new IGZO displays:

IGZO technology enables smaller thin-film transistors and increased light transmittance. As a result, fine text can be rendered crisply and clearly, and images can be displayed with impressive realism. For example, the 14-inch panel boasts a pixel density of 262 ppi, which represents 1.67 times the number of pixels of full high definition. Increased light transmittance also means lower rates of energy consumption, with IGZO technology reducing the amount of power required to drive liquid crystals during the display of still images. These factors lead to greater energy efficiency and longer battery life on notebook PCs.

Apple has been rumored to be looking at Retina displays for desktop applications as well, but a future Retina iMac would face a different set of issues, including the cost of the panel itself at such large sizes, as well as the immense graphics and connectivity needs to drive such a display.

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AT&T to Expand FaceTime Over Cellular to All Customers by Year End

Juli Clover — Mon, 20 May 2013 19:08:48 GMT

In a statement to The Verge on the future of pre-loaded apps, AT&T today revealed that it is planning to offer FaceTime over cellular to all of its customers on any data plan by the end of 2013.

For video chat apps that come pre-loaded on devices, we currently give all OS and device makers the ability for those apps to work over cellular for our customers who are on Mobile Share or Tiered plans. Apple, Samsung and BlackBerry have chosen to enable this for their pre-loaded video chat apps. And by mid-June, we’ll have enabled those apps over cellular for our unlimited plan customers who have LTE devices from those three manufacturers.

Throughout the second half of this year, we plan to enable pre-loaded video chat apps over cellular for all our customers, regardless of data plan or device; that work is expected to be complete by year end.

When FaceTime over cellular was announced alongside iOS 6, AT&T initially restricted the service to its customers that subscribed to a Mobile Share data plan. AT&T soon expanded access, first to customers on a tiered data plan with an LTE device, and then to all customers with a tiered data plan regardless of device. Only customers with a grandfathered unlimited data plan were restricted from using the service.

AT&T plans to allow its unlimited customers with LTE devices access to FaceTime over cellular beginning in June, with full access to all customers becoming available by the end of the year.

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Apple Releases Statement Ahead of Tim Cook's Senate Appearance on Tax Policy

Jordan Golson — Mon, 20 May 2013 18:50:48 GMT

Apple today released a statement [PDF] ahead of Apple CEO Tim Cook, CFO Peter Oppenheimer, and head of tax operations Phillip A. Bullock's appearances in front of the U.S. Senate Permanent Subcommittee on Investigation tomorrow.

In the seventeen page statement, Apple notes that it has created hundreds of thousands of jobs in the United States -- both directly and through suppliers and contractors. It notes that the company paid nearly $6 billion in federal taxes in fiscal 2012 and the company expects to pay $7 billion in 2013.

The company also says Apple "does not use tax gimmicks", pushing back against reporting in The New York Times that examined Apple's international tax strategies.

Apple, a California company, employs tens of thousands of Americans, creates revolutionary products that improve the lives of tens of millions of Americans, and pays billions of dollars annually to the US Treasury in corporate income and payroll taxes. Apple’s shareholders – from individuals and institutions to pension funds and public employee retirement systems – have benefitted from the Company’s success through the appreciation of its stock price and generous dividends. Apple safeguards the capital entrusted to it by its shareholders with prudent management that reflects the Company’s extensive international operations. Apple complies fully with both the laws and spirit of the laws. And Apple pays all its required taxes, both in this country and abroad.

Apple reiterates repeatedly that all of its financial activities are fully legal and in the best interests of its shareholders. The company says it supports comprehensive reform of the U.S. corporate tax system, instead proposing a new system that is "revenue neutral, eliminates all tax expenditures, lowers tax rates and implements a reasonable tax on foreign earnings that allows free movement of capital back to the US." Apple notes that this would likely result in the company paying even more in corporate tax, but supports it nonetheless.

The document includes an extensive history of the company, as well as fairly extensive details about Apple's corporate structure and tax practices, including details about Apple's sales and use tax payments ($1.3 billion in FY2012), state income tax payments ($830 million), and Apple's contributions to employer payroll taxes ($327 million).

It lays out Apple's network of foreign subsidiaries, including several located in Ireland which distribute 'active foreign, post-tax income as dividend payments within Apple's foreign corporate structure'.

Apple wants to make clear to the Subcommittee that the Company does not use its Irish subsidiaries or any other entities to engage in the following tax practices that were the focus of the Subcommittee’s September 20, 2012 hearing, entitled Offshore Profit Shifting and the US Tax Code. Specifically, Apple does not move its intellectual property into offshore tax havens and use it to sell products back into the US to avoid US tax, nor does it use revolving loans from CFCs to fund its domestic operations. Apple does not hold money on a Caribbean island, does not have a bank account in the Cayman Islands, and does not move any taxable revenue from sales to US customers to other jurisdictions in order to avoid US taxation.

The statement continues in some detail, examining Apple's various international holdings and how the company uses them to fund international expansion of retail stores and other investments.

It also notes that analysis of its decision to issue $17 billion in debt to fund share repurchases and dividends, rather than repatriating foreign earnings, "was in its shareholders' best interests".

Apple CEO Tim Cook and CFO Peter Oppenheimer will appear at 9:30AM Eastern time in front of the U.S. Senate Permanent Subcommittee on Investigation. The hearing, titled "Offshore Profit Shifting and the U.S. Tax Code - Part 2" will be in the Dirksen Senate Office Building. The subcommittee is attached to the U.S. Senate Committee on Homeland Security and Government Affairs.

Other witnesses at the hearing include tax policy experts from the IRS and the Department of the Treasury, as well as professors from Harvard and Villanova.

Note: Due to the political nature of the discussion regarding this topic, the comment thread is located in our Politics, Religion, Social Issues forum. All MacRumors forum members and site visitors are welcome to read and follow the thread, but posting is limited to forum members with at least 100 posts.

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U.S. Mac Sales Flat in April as iPod Sales Continue to Slide

Eric Slivka — Mon, 20 May 2013 17:32:46 GMT

Piper Jaffray analyst Gene Munster today released a brief report highlighting April data from market research firm NPD looking at Apple's U.S. Mac and iPod sales. The data shows Apple's Mac sales coming in flat year-over-year, and while Munster acknowledges that it has become increasingly difficult to extrapolate NPD's numbers to Apple's global sales performance, he views the latest data as "neutral to slight positive" relative to expectations for the company.

Based on the differences between NPD data and Apple reported Mac sales over the past few quarters, we note it is becoming more difficult to draw conclusions from NPD data (see table below). We note that some of the more recent supply issues with the redesigned Macs have impacted the Apple reported numbers over the past two quarters. At the end of the day, we believe this April data point is likely a neutral to slight positive given our expectation that iPads will continue to cannibalize Macs over the next few years.

Munster stands by his predictions of 5% year-over-year decline in Mac sales for the second quarter as customers await updated models and the PC market remains weak.

On the iPod side, Munster only briefly cites NPD data showing sales sliding 36% year-over-year, compared to the Piper Jaffray estimate of a 23% decline for the entire quarter on a worldwide basis. But with iPod sales now representing only about 2% of Apple's revenue, the impact of the continued decline in iPod sales as customers shift increasingly to smartphones will be negligible.

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Apple's Revenue Per Store Visitor Hits Record High

Juli Clover — Mon, 20 May 2013 17:16:10 GMT

Apple's retail stores have been ranked as the U.S. retail chain with the highest sales per square foot for a number of years and according to a new report from Asymco’s Horace Dediu, the company also outranks competitors when it comes to revenue per visitor, hitting a record high of $57.60 per visitor in the first quarter of 2013.

Apple experienced a seven percent growth in visitors during the quarter, leading to an average of $13 million in revenue per Apple Store, which is the highest it has been during a non-holiday quarter.

During its Q2 financial results call, Apple reported a total of $43.6 billion in revenue with $5.2 billion in retail, up 19% from the previous quarter.

Apple gets an average of 250,000 visitors per store per quarter, up from approximately 170,000 visitors per quarter in 2010. In recent years, the company has been focusing on building new Apple Stores across the globe and expanding existing stores to increase available square footage. Apple plans to open 30 new retail stores in fiscal 2013 and remodel 20.

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Apple Raising Notebook Orders Ahead of Likely Launch at WWDC

Eric Slivka — Mon, 20 May 2013 15:01:23 GMT

Digitimes briefly reports that Apple will be releasing updated notebooks "in the near future", with supply chain sources indicating that Apple's orders will rise 20% in the second quarter compared to first-quarter production.

The new MacBooks are only expected to receive specification upgrades to Intel's latest Haswell platform and are estimated to be unveiled at the Apple Worldwide Developers Conference (WWDC) in June, the sources said.

Claims of a 20% increase in orders come less than a month after the site claimed that orders would see a 10% increase for the quarter, although overall notebook shipments for 2013 are expected to be flat or only slightly higher year over year due to a lack of major updates and a weak PC market.

Late last month, KGI Securities analyst Ming-Chi Kuo reported that an update to the MacBook Air and MacBook Pro lines would be a highlight for next month's Worldwide Developers Conference (WWDC), which kicks off on June 10. Kuo had previously believed that Apple would consolidate its MacBook Pro lines into an all-Retina lineup in mid-2013, but he now believes that continued popularity of the non-Retina models has led Apple to push back its consolidation plans for the time being.

Kuo indicated that updated models of the non-Retina MacBook Pro and MacBook Air should ship relatively soon after WWDC, with updated Retina MacBook Pro models shipping somewhat later due to constraints on display production.

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Apple to Begin Ramping Up Production of 25-33% Lighter iPad in July?

Eric Slivka — Mon, 20 May 2013 14:13:08 GMT

Digitimes reports that Apple will soon begin trial production on its fifth-generation iPad, with full production said to be planned to begin in July. Based on that schedule, Apple could hit monthly production of 2-3 million units by September as it prepares to launch the updated version of its full-size tablet.

Mockup of iPad 5 next to iPad mini and iPhone 5
As with a number of previous rumors, the report claims that the new iPad will be narrower, thinner, and lighter than the current design, taking a number of design cues from the iPad mini. As a result, Digitimes says that the new iPad will be 25-33% lighter than the current models, in line with previous claims from KGI Securities analyst Ming-Chi Kuo.

The display of the new iPad, which will hit market shelves as early as September, will still be a 2,048 x 1,536 Retina display, the same as the one used in the 4th-generation model, except that the new display is built on a glass substrate of 0.2mm, thinner than the 0.25mm one for the 4th-generation device, the sources said, adding the new table will has a narrow bezel.

The touch panel solution for 5th-generation iPad is GF2 (1 layer of glass and two layers of ITO film) instead of G/G bonding used in 4th-generation iPad, the sources added.

The new iPad will use one LED light bar for backlighting, compared to two LED light bars used in 4th-generation iPad, the sources noted.

Kuo had previously predicted that production on the new iPad would ramp up in August or September, with shipments following soon thereafter.

Rumors of an iPad mini-like design for the next-generation iPad have been supported by leaked photos showing what was claimed to be the front bezel and cover glass for the device, as well as photos of the device's rear shell and cases said to be based on the product's design.

Previous rumors have also suggested that Apple would be able to use more efficient backlighting in the fifth-generation iPad, reducing the device's size both directly through eliminating one of the two backlight units and indirectly through allowing for a smaller battery.

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Apple Reportedly Testing 1.5-Inch OLED Displays for Smart Watch

Eric Slivka — Mon, 20 May 2013 13:27:14 GMT

Japanese blog Macotakara points to a pair of reports in today's edition of Taiwanese newspaper Economic Times addressing rumors surrounding Apple's smart watch effort. According to the first report [Google translation], Apple has begun sampling 1.5-inch OLED displays from RITEK subsidiary RiTdisplay.

The report also claims that RITEK's joint venture RitFast will be supplying the touch sensor technology for the watch.

Today's report echoes a December claim about Apple's plans for RiTdisplay's 1.5-inch displays and word that Intel is involved in Apple's effort, but includes a detail indicating that Apple had originally hoped to use a 1.8-inch display in the smart watch. That display, however, proved to be too large and the company shifted to the smaller 1.5-inch display size.

The second report [Google translation] offers an overview of the smart watch industry, with "market rumors" indicating that Foxconn has already received orders for Apple's smart watch. But with order volumes said to be around 1,000 units, the production run would clearly be a small-scale trial.

Rumors of an Apple smart watch ramped up in the months following that December report about Apple and Intel working together, with The New York Times later reporting that Apple was "experimenting" with curved glass smart watch designs and Bloomberg following up to claim that Apple has 100 product designers working on the project.

"iWatch" rumors peaked in February and March of this year amid claims that the device could launch "as soon as this year", but things have been relatively quiet for the past several months.

(Photo: HEX Vision Metal Watchband for iPod nano (6th Gen.))

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Apple and Sony 'iRadio' Negotiations Stalling Over Skipped Songs

Juli Clover — Fri, 17 May 2013 20:58:17 GMT

Earlier today a report suggested that the launch of Apple's upcoming streaming music service deemed "iRadio" may be delayed due to difficult negotiations with Sony Music and Warner Music Group.

CNET is offering some additional information on Apple's trouble with Sony Music, explaining that the fees to be paid for skipped songs have become a point of contention between the companies.

Apple and Sony Music, the world's second largest music label, are still trying to hammer out details over how much Apple would pay for songs that people listen to a fraction of and then skip, according to people familiar with the negotiations.

While Apple's music service is said to be more similar to Pandora than Spotify, Apple does plan to deviate from Pandora's rigid station-based listening rules by giving users extended control, like the ability to rewind or skip a song after listening to a small portion of it. Pandora limits its users to 12 skips per day and pays the full royalty rate for each skipped track.

Apple has faced continual struggles over pricing during negotiations, originally offering to pay just half of Pandora's royalty rate while demanding more flexibility. The company later agreed to up its offered price, but it may not be willing to make further concessions as an Apple-branded music service offers additional perks that other music streaming sites can't compete with, such as an established market for purchasing streamed tracks.

The stalled negotiations between Apple and Sony Music are annoying other labels, who are eager to see iRadio launch. Apple finalized an agreement with Universal Music earlier this month and is close to signing a deal with Warner Music Group, according to CNET's sources.

That skipping has become an issue is frustrating executives at the other labels because they see Apple's free radio service as a potential boon for the music industry overall and are eager to help Apple get it launched.

Apple was pushing for a summer launch of iRadio, with possible plans to unveil the service at its annual Worldwide Developers Conference in June, but it is unclear if the company will be able to meet that deadline.

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Tightening MacBook Air Supplies at Resellers Hint at Upcoming Refresh

Juli Clover — Fri, 17 May 2013 17:31:22 GMT

As noted by AppleInsider, MacBook Air supplies are beginning to dry up as Apple's annual Worldwide Developers Conference approaches.

Currently, the 13.3-inch 256GB 1.8Ghz MacBook Air is out of stock at Amazon.com, with a listed one to two month waiting period. While the low end 13.3-inch MacBook Air is in stock, the 11.6-inch MacBook Air is in short supply. Amazon lists an inventory of just ten 1.7Ghz 128GB 11.6-inch MacBook Airs and just one lower end 64GB 11.6-inch MacBook Air available through a third party.

Several other authorized Apple resellers, such as MacConnection, MacMall, and B&H, are also seeing dwindling MacBook Air inventory, with the higher end versions of 13.3-inch MacBook Air being the hardest to find.

Low inventory supplies at third-party Apple retailers are often one of the initial signs of an upcoming product refresh. According to KGI Securities analyst Ming-Chi Kuo, Apple will be introducing new MacBook Pro and MacBook Air lines based on Intel's Haswell processors at WWDC, which takes place next month from June 10 to June 14.

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Difficult Negotiations May Prevent 'iRadio' Launch at WWDC

Eric Slivka — Fri, 17 May 2013 16:05:54 GMT

Last week, we noted that Apple was still struggling to convince the major music labels to sign on to its planned streaming service, informally dubbed "iRadio", with Sony and Warner reportedly holding out even after market leader Universal had agreed to Apple's revised terms.

In a new article highlighting how Google was able to announce its own music service ahead of Apple, The Verge notes that Apple's desire to provide a hybrid listener experience has meant more work at the negotiating table.

For starters, Google chose to offer a standard subscription music service very similar to those built by Spotify and Rdio, and that meant the terms had largely been established, according to multiple sources close to the talks. Apple, on the other hand, is pioneering a hybrid web and radio service — one that resembles Pandora but melds it with some on-demand features, the sources said. The licensing agreement had to be created from scratch.

According to the report's sources, number four music publisher BMG is also holding out against Apple's proposed terms, and while there still appears to be significant momentum behind iRadio and a desire by many parties to get a deal done as quickly as possible, it is now looking as though Apple may not be able to launch the service at next month's Worldwide Developers Conference (WWDC).

Word of Apple's plans for a Pandora-like service surfaced last September, with subsequent reports indicating that Apple was targeting the first quarter of this year for a launch. As negotiations continued to prove difficult, Apple shifted its focus to a summer launch, but it now appears unclear whether the company will be able to meet even that revised goal.

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U.S. Department of Defense Approves iOS 6 Devices for Military Networks

Eric Slivka — Fri, 17 May 2013 14:56:16 GMT

Following a report from earlier this month indicating that the U.S. Department of Defense was preparing to approve Apple devices running iOS 6 for use on military networks, Bloomberg now reports that the department has officially issued the authorization, opening the door for greater use of Apple's products.

The Defense Department said in a statement today that it has approved the use of Cupertino, California-based Apple’s products running a version of the iOS 6 mobile platform.

The decision eventually may spur a three-way fight for a market long dominated by Waterloo, Ontario-based BlackBerry. The Pentagon on May 2 approved Suwon, South Korea-based Samsung’s devices, as well as BlackBerry 10 smartphones and BlackBerry PlayBook tablets.

The report notes that out of more than 600,000 mobile devices used by the Defense Department, only about 41,000 of those are Apple products, with most of those not connected directly to the military's networks. With the new approvals, Apple and Samsung are expected to eat into BlackBerry's roughly 75% share of mobile devices within the agency.

As noted in the report earlier this month, the Department of Defense's approval of iOS 6 devices for sensitive applications is expected to have impact beyond the military, with other businesses requiring strict security standards becoming more likely to embrace Apple's products.

Pentagon approval for iOS 6 devices comes just as The Street reports that the U.S. Air Force is expecting to save more than $50 million over ten years following last year's decision to replace thousands of pages of flight manuals with iPads.

"By removing all that paper, [Air Mobility Command] will capture about $750,000 in fuel savings [annually] just based off the decreased weight," said [electronic flight bag program manager Major Brian] Moritz.

Removing the need to print and distribute thousands of flight manuals, however, equates to an even greater cost saving. "It comes out to just over $5 million a year," noted Moritz. "With fuel savings, it comes out to $5.7 million annually in pure cost. When you look at $5.7 million a year, over 10 years, that's well over $50 million."

The Air Force is not the only group switching to iPads to replace traditional flight bags used by pilots, as a number of commercial airlines have also begun transitioning to the technology in order to reduce weight and therefore fuel costs, as well as lighten loads for the pilots themselves.

Update: Apple has provided a comment on the Pentagon approval to AllThingsD:

“With iPhone and iPad being tested or deployed in almost every Fortune 500 company, Apple continues to scale across enterprise with nearly 30,000 companies globally developing and distributing iOS apps for corporate use by their employees,” Apple spokeswoman Trudy Muller told AllThingsD. “The FIPS 140-2 certification and STIG approval demonstrate our ongoing commitment to deliver a secure platform to our enterprise and government customers around the world who deploy iOS devices on their networks.”

(Photo: James Rogers/The Street)

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