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Tuesday, January 26, 2010, 12:55 pm PT (03:55 pm ET)

App Store wildly successful, but not hugely profitable for Apple

Despite a record quarter for the largest mobile application store on the market and Apple taking a 30 percent cut of all sales, the App Store for the iPhone and iPod touch is still not a big revenue generator for the handset maker.

Apple Chief Financial Officer Peter Oppenheimer revealed Monday that neither the App Store or iTunes create much revenue for Apple. He said the focus is on adding to the user experience by providing easy access to new content.

"Regarding the App Store and iTunes stores, we are running those a bit over break even, and that hasn't changed," Oppenheimer said during a conference call following Monday's quarterly earnings report. "We are very excited to be providing our developers with a fabulous opportunity and we think that is helping us a lot with the iPhone and iPod touch platform."

Apple has long maintained that the App Store isn't meant to be a profit generator, as much as a means of attracting customers to the iPhone and iPod touch. But with more than 3 billion downloads from the App Store, Apple's near-break-even might come as a surprise to some.

Apple executives were also quizzed about the App Store approval process, which has come under fire for not being responsive enough to the needs of developers. Chief Operating Officer Tim Cook said over 90 percent of applications submitted are approved within 14 days.

Some of the rejections, he said, are applications that "degrade the core experience of the phone." Apple said last year that it did not accept the Google Voice application because it too closely mimicked the core functionality of the iPhone. Other rejections are due to objectionable content, such as pornography, but Cook said that doesn't apply to the bulk of software not seen fit for the App Store.

"Most of the rejections, however, are actually bugs in the code itself," Cook said. "This is protecting the customer and the devleoper to a great extent, because they don't want customers who are unhappy with the app."

Cook also revealed that Apple has not conducted any research on the App Store regarding customer satisfaction. The revelation came after analyst Charles Wolf with Needham & Co. asked him if iPhone owners are "comfortable and happy" with the App Store.

No new statistics on the App Store were revealed Monday, with Oppenheimer merely repeating the 3 billion download figure first revealed earlier this month. The App Store is available to iPhone and iPod touch users in 77 countries.

Oppenheimer said Apple is reluctant to provide any additional information for competitive reasons. The company noted that it was a "record" quarter for iTunes, but did not give specifics.

Apple's next-closest competitor in the mobile application space is Google's Android Market, which, in December, was said to have passed the 20,000 threshold. That total lags well behind the 100,000 apps announced by Apple in November.

"We are way ahead of our competitors with over 100,000 apps on our store," he said. "That dwarfs anybody we are competing with. We provided many, many great applications with our developers to customers. That is helping us with both iPhone and iPod touch. It was one of a few reasons why iTunes set a record in the quarter."