The Mac and iPod slices shrank between '08 and '09. iTunes grew a bit. iPhone grew a lot.

Source: Company reports

Steve Jobs likes to describe Apple's (AAPL) business model as a stool built on three-legs: the Mac, the iPod and the iPhone.

But a quick glance at the 2009 Form 10-K, which Apple filed on Tuesday, shows that it is now more like a four-leg chair, with a couple of wedge-shaped pillows on the side.

The Mac and iPod still bring in the biggest part of Apple's total sales revenue — 37.7% and 22.1%, respectively — but their shares of the pie are shrinking.

The iPhone, meanwhile, is rapidly catching up, thanks to unit sales that grew 78% and GAAP revenue (swelled by deferred revenue dating back to 2007) that grew 266%. The iPhone now accounts for 18.5% of Apple's sales, just behind the iPod.

The fourth leg of the chair is the line item Apple calls "other music related products and services" but which is mostly iTunes Store sales — music, video and apps. It continues to grow at a steady pace and now represents about 11% of Apple's net sales.

Spreadsheets summarizing Apple's revenue streams are pasted below the fold. Apple's 2009 Form 10-K is available as a pdf file here.

[Follow Philip Elmer-DeWitt on Twitter @philiped]

Net sales by product in millions.

Source: Apple 10-K report

Share of total revenue by product.

Source: Apple 10-K report

Legal departments turn to technology to handle an onslaught of regulatory requests

By Aaref Hilaly , president and CEO, Clearwell Systems

Hilaly: Lawyers need tech to meet fresh regulatory demands Photo: Clearwell Systems

Have some sympathy for your corporate legal department – it’s facing the perfect storm.

Like everyone else this year, the legal department is required to cut its budget, in some cases by 20% or more. But unlike other departments, legal faces a greatly increased workload. It’s not so much because of litigation, although there continues to be no shortage of that. Rather, it’s because of a regulatory crackdown that goes far beyond the financial services industry.

The increase in regulatory activity has come in three broad areas. First, many of our public company clients are seeing far more regulatory inquiries than in prior years. These cause havoc for legal departments because the information requests are often broad and with very tight deadlines. For example, one of our technology clients recently received a request from the Security and Exchange Commission for “all information pertaining to executive compensation since 1992” – and was given five days to provide it.

The second area of increased regulatory activity is around the Foreign Corrupt Practices Act. This has been on the books for a long time, but enforcement has stepped considerably under Mark Mendolsohn, deputy chief of the fraud division at the Department of Justice. This year alone there have been more than 100 enforcement actions, compared to only 38 two years ago, including cases against Sun Microsystems, Shell Oil and one that may result in jail time for the founder of accessories firm, Dooney & Bourke.

For those found guilty, the sanctions have been unforgiving: in the first few months of this year, ABB took an $800 million accounting reserve for issues related to the Foreign Corrupt Practices Act; Halliburton got fined $177 million, KBR $502 million, and the KBR CEO, Albert Stanley, was sentenced to seven years in jail to go along with his $11 million personal fine.

Your most demanding customer: the federal government?

Finally, the federal government has become a more demanding customer, with the Office of Inspector General at each government agency investigating more and more transactions in search of wrongdoing. That impacts every company that does business with the federal government, which has been the one big spender during the economic downturn. We have seen every agency — from Health and Human Services to the General Services Administration to the Veterans Administration — step up its scrutiny of government contracts.

To cope with this increasing workload at a time of shrinking budgets, legal departments are doing what other areas like sales, finance and human resources did long ago: namely, leveraging technology. Previously they may have relied on service providers offering expensive white-glove service, now they are buying software to automate the electronic discovery process so that they can respond to government inquiries quickly and efficiently.

There are two main areas where technology can help.

One is with the collection and preservation of email, attachments and files, so that companies can be sure that nothing gets deleted inadvertently.

The other is with the analysis and review process whereby companies sift through all that information to figure out what they need to provide to regulators.

The savings can be substantial. For example, in a recent exchange on Twitter, an executive at Delta Airlines bragged that his investment in e-discovery software had “paid for itself in the first 45 days.”  (Full disclosure, he was talking about Clearwell – but other products have their fans, too.)

Legal departments are not typically known as hotbeds of innovation within most companies. But that’s changing, as the best ones embrace technology. It’s the only way to weather the perfect storm of shrinking budgets and increased regulatory activity.

Hilaly is president and CEO of Clearwell Systems, a provider of software that helps companies perform electronic discovery in response to litigation, regulatory inquiries, and corporate investigations.

It's been nearly six months since Bloomberg News, which had been leading the pack investigating the vagaries of Steve Jobs' health problems, reported that Apple (AAPL) was facing a "review" by Securities and Exchange Commission.

On Wednesday, team Bloomberg revisited the story and reported that Apple's disclosures about Jobs' health "remain under scrutiny" by the SEC.

But the 1,039 word piece, reported by Connie Guglielmo, David Scheer and Karen Gullo, offers no new information about the government probe, what it's after or what progress it has made.

The story quotes a former SEC lawyer, a former SEC enforcement attorney, a securities law professor, and the author of a paper on advocating CEO health disclosures.

The pivotal question, as the experts point out, is what happened in the nine days between Steve Jobs' Jan. 5 announcement that he had a "hormone imbalance" and his Jan. 14 statement that he was taking a five and a half month medical leave.

Connie Guglielmo led the Bloomberg team that reported in January that Jobs was considering a liver transplant. The fact that Jobs had the surgery — and had been sick enough to go to the head of the transplant waiting list — was not revealed until June 20, a few days before he returned from his medical leave.

Given that her sources had nothing new to say about the SEC review, it's not clear why Guglielmo chose to revisit the story today, less than two weeks before Apple is scheduled to release earnings for what analysts think will be a strong quarter.

There was one nugget of news in the piece, however. It had been widely reported that members of Apple's board were being briefed by Jobs' doctors on his condition. The Bloomberg story names them: Art Levinson, former CEO of Genentech, and Bill Campbell, the former CEO of Intuit.

See also:

• Apple: 'Steve Jobs is back to work'
• Inside Steve Jobs' liver transplant
• Steve Jobs takes a medical leave
• Steve Jobs, chained to a rock

The report Wednesday that the Securities and Exchange Commission is looking closely at Apple's disclosures about the state of Steve Jobs' health (link) follows speculation last week that stockholders are also likely to file lawsuits against the company.

The issue, of course, is whether Apple (AAPL) and Jobs misled investors by issuing first good news ("hormone imbalance") that drove the stock up, followed by bad news ("medical leave") that drove it down.

But even if Jobs has been less than forthcoming about his health problems — as many doctors suspect — legal experts say that neither the SEC probe nor any investor lawsuit is likely to get very far.

Even the sources quoted by Bloomberg News, which reported the SEC rumor, say that the commission would have a tough time bringing a case against Apple. According to Peter Henning, a former SEC prosecuter, it would have to prove that the company tried to benefit by withholding information about an unambiguous diagnosis.

Former SEC commisioner Joseph Grundfest takes an even dimmer view of suits filed on behalf of investors or speculators who lost money in the see-sawing stock price.

"I never underestimate the cleverness of plaintiffs attorneys," he told Reuters. "But I personally am aware of no theory that would support a filing of a case."

Although Jobs is not expected to participate in Apple's Q1 earnings call with reporters and analysts this afternoon at 5 p.m. EST (2 p.m. PST), questions about the state of his health are sure to come up. Tune in here for our live blog.

See also:

• Steve Jobs, chained to a rock

Of all the reporters who have tried to slog their way through Apple's 100-page Form 10-K for fiscal year 2008, nobody has done a better job digging out nuggets of news than AppleInsider's Prince McLean. (We got bogged down in the page-turning boilerplate of the Risk Factors section.)

What did Mr. McLean discover? Here are his highlights:

• A shift in business strategy. From "digital lifestyle" products to "high-end hardware solutions" for "enterprise, government and creative" markets.
• A big push in retail. Apple now has 247 retail stores, up from 197 in 2007, aimed at reaching people who "do not already own the Company's products."
• A huge investment in R&D. Spending for research and development has nearly doubled in three years, from $535 million in fiscal 2005 to $1.1 billion in 2008.
• A lot more air miles for Steve Jobs. Jobs was reimbursed $202,000 for company use of his private jet in 2006, $776,000 in 2007 and $871,000 in 2008. As a rule of thumb, the more time Jobs spends in the air, the more deals with overseas vendors Apple cuts.
• An increasingly global outlook. The share of Apple sales made in the United States fell from 60% in 2007 to 57% in 2008, reflecting the company's accelerating expansion beyond our borders.
• A lot of new hires. The headcount of full-time equivalent employees jumped nearly 50%, from 21,600 in 2007 to 32,000 in 2008. Temps grew nearly as fast, from 2,100 to 3,100.
• A pair of golden handcuffs for Tony Fadell. As he leaves Apple, the man who made the iPod will receive an annual salary of $300,000 to act as a Special Advisor to Steve Jobs, as well as 77,500 shares of restricted Apple (AAPL) stock that vest on March 24, 2010 — provided Fadell doesn't jump ship before then.

You can download Apple's Form 10-K here. You can read McLean's full summary here.

Apple on Wednesday filed its Form 10-K for fiscal year 2008, as required by the SEC.

And as is customary, the report includes a long section on "Risk Factors," in which it rattles off everything that could possibly go wrong with the company.

These things always make for unsettling reading, but this year's list of risks is longer than last years's and, given the economic climate, seems even scarier. Among the topics:

• The effects of a global financial meltdown
• New lawsuits stemming from the Apple stock option investigation
• Price cutting, piracy and Mac OS clones
• Badly managed product transitions in a particularly volatile environment
• Rapid product obsolescence and unexpected inventory write-downs
• Shortages of NAND flash memory, DRAM and LCDs, and associated price increases
• Disruptions in foreign contracts for manufacturing and logistics
• Deal-breaking demands by digital film and music suppliers
• Getting caught infringing on other people's patents
• Third-party software developers deciding to abandon ship
• The discovery of serious bugs and manufacturing defects in Apple products
• Late-in-the-quarter events that disrupt the usual seasonal fluctuations in sales and revenue
• Failure of overseas mobile phone carriers to properly support the iPhone
• Changing laws and regulations in overseas mobile phone markets
• System failures, network disruptions, breaches in data security
• Extreme fluctuations in the company's stock price
• Political events, war, terrorism, natural disasters and public health emergencies
• Difficulty attracting and retaining key personnel given the new option regulations
• Ongoing lawsuits decided against Apple
• Fluctuating foreign currency rates and changes in international tax laws, labor conditions etc.
• Declining sales in stores that have long leases and are particularly expensive to maintain
• Acquisitions and business strategies that go sour
• Distributors, resellers, wholesalers and catalog companies getting squeezed or going bankrupt
• Material losses in the company's $24.5 billion investment portfolio
• The effect of worsening economic conditions on unsecured non-trade receivables
• New laws and regulations related to health, safety and environmental protection
• Changes in the company's tax rates
• Insurance problems. "For certain risks, the Company does not maintain insurance coverage because of cost and/or availability"

Not listed: The risks associated with the company's dependence on the health and well being of Steve Jobs.

You can read the full text of Apple's (AAPL) 2008 10-K here.

Should investors take comfort in the news that the Securities and Exchange Commission is investigating "Johntw," the as-yet unidentified rumor mongerer who briefly drove Apple (AAPL) down nearly 10% Friday before Apple PR finally broke its silence and let it be known that Steve Jobs had not, in fact, suffered a heart attack? (link)

Not necessarily.

As anybody who follows the company knows, rumors about Apple — negative and positive — are as common as crabgrass. This one, posted on CNN's iReport site, was particularly egregious, as it hit Apple where it is most vulnerable. CNN and Fortune are both owned by Time Warner (TWX).

CNN says it is cooperating with the investigation, giving the SEC what information it has about Johntw (most likely limited to an IP number and an e-mail address), and it is possible that the Feds will get their man. Or woman.

But then what? Although SEC Chairman Christopher Cox supposedly declared war against false rumors in July when Fannie Mae and Fannie Mac were getting clobbered by short-sellers, he admitted to the Senate Banking Committee at the time that before he stepped up the plate, the SEC had never before in its 75-year history brought market manipulation charges against a trader who was knowingly spreading lies.

It's true that in April Cox's SEC made an example of a trader named Paul Berliner, charging him with securities fraud for spreading a made-up story (via instant messages to traders in brockerage firms and hedge funds) that the Blackstone Group was renegotiating the price it had agreed to pay to acquire Alliance Data Systems — all while Berliner was selling ADS short, according to the SEC. (See here.)

"The message of this case is simple and direct" Cox thundered in the accompanying press release. "The Commission will vigorously investigate and prosecute those who manipulate markets with this witch's brew of damaging rumors and short sales."

But what did Berliner pay for his alleged crimes? He agreed to settle the charges by "disgorging" $26,129 in profits and interest, paying a penalty of $130,000 (the maximum), and consenting an order barring him from futher association with any broker or dealer. (link)

Will $130,000 dissuade anyone who is making millions at this game?

In his famous video interview with TheStreet.com — since removed from YouTube — CNBC personality and former hedge fund manager Jim Cramer told viewers how simple and profitable the game can be — especially with stocks like RIM (RIMM) and Apple.

Take Apple before iPhone came out, he says on tape, "it’s very important to spread the rumor that both Verizon and AT&T decided they didn’t like the phone… and this is very easy because the people who write about Apple want that story and you can claim that it’s credible because you spoke to someone at Apple because Apple doesn’t issue any statements."

It may be illegal, he adds, but it's easy to do "because the SEC doesn't understand it." (link)

The SEC now says it understands what's going on — although if they catch Johntw they still have to prove he (or she) was trying to profit from the false post. But it's not at all clear — especially with everything else that's going on in the market — that Cox has the resources to catch the thousands of Internet day traders who try to work this con every day of the week.

Or the teeth to make any punishments stick.

JPMorgan Chase (JPM) CEO Chase Jamie Dimon, for one, wants the SEC to toughen its sanctions.

"I think if someone knowingly starts a rumor or passes on a rumor, they should go to jail," he recently told Charlie Rose. "This is even worse than insider trading. This is deliberate and malicious destruction of value and people's lives." (link)