Apple CEO Steve Jobs, who normally doesn’t attend quarterly conference calls, did just that today. Here are Jobs’ comments, verbatim:

“I couldn’t help dropping by for our first $20 billion quarter.”

“First, let me discuss iPhone. We sold 14.1 million iPhones in the quarter which represents a 91% unit growth over the year ago quarter and was well ahead of IDC’s latest published estimate of 64% growth for the global smartphone market in the September quarter. And it handily beat RIM’s 12.1 million BlackBerries sold in their most recent quarter ending in August. We’ve now passed RIM. And I don’t see them catching up with us for the foreseeable future. They must move beyond their area of strength and comfort into the unfamiliar territory of trying to become a software platform company. I think it’s going to be a challenge for them to create a competitive platform and to convince developers to create apps for yet a third software platform after iOS and Android. With 300,000 apps on Apple’s App Store, RIM has a high mountain ahead of them to climb.”

“What about Google? Last week, Eric Schmidt reiterated that they are activating 200,000 Android devices per day and have around 90,000 apps in their app store. For comparison, Apple has activated around 275,000 iOS devices per day, on average, for the past 30 days, with a peak of almost 300,000 iOS devices per day on a few of those days. And Apple has 300,000 apps on its App Store. Unfortunately, there is no solid data on how many Android phones are shipped each quarter. We hope that manufacturers will soon start reporting the number of Android handsets that they ship each quarter, but today that just isn’t the case. Gartner reported that about 10 million Android phones were shipped in the June quarter and we await to see if iPhone or Android was the winner in this most recent quarter.”

“Google loves to characterize Android as ‘open’ and iOS and iPhone as ‘closed.’ We find this a bit disingenuous and clouding the real difference between our two approaches. The first thing most of us think about when we heard the word ‘open’ is Windows, which is available on a variety of devices. Unlike Windows, however, where most PCs have the same user interface and run the same apps, Android is very fragmented. Many Android OEMs including the two largest, HTC and Motorola, install proprietary user interfaces to differentiate themselves from the commodity Android experience. The user is left to figure it all out.”

“Compare this with iPhone, where every handset works the same. Twitter client, TwitterDeck, recently launched their app for Android. They reported that they had to contend with more than a hundred different versions of Android software on 244 different handsets. The multiple hardware and software iterations presents developers with a daunting challenge. Many Android apps work only on selected Android handsets running selected Android versions. And this is for handsets that have been shipped less than 12 months ago. Compare this with iPhone, where there are two versions of the software, the current and the most recent predecessor to test against.”

“In addition to Google’s own app marketplace, Amazon, Verizon, and Vodafone have all announced that they are creating their own app stores for Android. So, there will be at least four app stores on Android, which customers must search among to find the app they want and developers will need to work with to distribute their apps and get paid.”

“This is going to be a mess for both users and developers.”

“Contrast this with Apple’s integrated App Store which offers users the easiest to use, largest App Store in the world, preloaded on every iPhone. Apple’s App Store has over three times as many apps as Google’s marketplace and offers developers one-stop shopping to get their apps to market easily and to get paid swiftly.”

“You know, even if Google were right and the real issue is ‘closed’ versus ‘open,’ it is worthwhile to remember that ‘open’ systems don’t always win. Take Microsoft’s ‘PlaysForSure’ music strategy which used the PC model, which Android uses as well, of separating the software components from the hardware components. Even Microsoft finally abandoned this ‘open’ strategy in favor of copying Apple’s integrated approach with their Zune player; unfortunately leaving with OEMs empty-handed in the process. Goolge flirted with this integrated approach with their Nexus One phone.”

“In reality, we think the ‘open’ vs. ‘closed’ argument is just a smokescreen to try and hide the real issue which is: What’s best for the customer? Fragmented versus integrated. We think Android is very, very fragmented and becoming more fragmented by the day. And, as you know, Apple strives for the integrated model so the user isn’t forced to be the systems integrator. We see tremendous value in having Apple, rather than our users, be the systems integrator.”

“We think this is a huge strength of our approach compared to Google’s. When selling to users who want their devices to just work, we believe integrated will trump fragmented every time. And we also think our developers can be more innovative if they can target a singular platform, rather than a hundred variants. They can put their time into innovative new features, rather than testing on hundreds of different handsets. So we are very committed to the integrated approach, no matter how many times Google tries to characterize it as ‘closed,’ and we are confident that it’ll triumph over Google’s fragmented approach, no matter how many times Google tries to characterize it as ‘open.’”

“Second: I’d like to comment on the avalanche of tablets poised to enter the market in the coming months. First, it appears to be just a handful of credible entrants, not exactly an avalanche. Second, almost all of them use 7-inch screens as compared to iPad’s nearly 10-inch screen. Let’s start there.”

“One naturally thinks that a 7-inch screen would offer 70% of the benefits of a 10-inch screen. Unfortunately, this is far from the truth. The screen measurements are diagonal, so that a 7-inch screen is only 45% as large as iPad’s 10-inch screen. You heard me right: Just 45% as large.”

“If you take an iPad an hold it upright in portrait view and draw an imaginary horizontal line halfway down the screen, the screens on these 7-inch tablets are a bit smaller than the bottom half of the ipad’s display. This size isn’t sufficient to create great tablet apps in our opinion. While one could increase the resolution of the display to make up for some of the difference, it is meaningless unless your tablet also includes sandpaper, so that the user can sand down their fingers to around one quarter of their present size.”

“Apple has done extensive user testing on touch interfaces over many years and we really understand this stuff. There are clear limits of how close you can physically place elements on a touchscreen before users cannot reliably tap, flick, or pinch them. This is one of the key reasons we think the 10-inch screen size is the minimum size required to create great tablet apps.”

“Third: Every tablet user is also a smartphone user. No tablet can compete with the mobility of a smartphone; its ease of fitting into your pocket or purse, its unobtrusiveness when used in a crowd. Given that all tablet users will already have a smartphone in their pocket, giving up precious display area to fit a tablet in their pockets is clearly the wrong tradeoff”

“The 7-inch tablets are tweeners. Too big to compete with a smartphone and too small to compete with an iPad.”

“Fourth: Almost all of these new tablets use Android software, but even Google is telling the tablet manufacturers no tot use their current release, Froyo, for tablets and to wait for a special tablet release next year. What does it mean when your software supplier says not to use their software and what does it mean when you ignore them and use it anyway?”

“Fifth: iPad now has over 35,000 apps on the App Store. This new crop of tablets will have near zero.”

“And, sixth and last: Our potential competitors are having a tough time coming close to iPad’s pricing, even with their far smaller, far less expensive screens. The iPad incorporates everything we’ve learned about building high value products from iPhone, iPods, and Macs. We create our own A4 chip, our own software, our own battery chemistry, our own enclosure, our own everything. And this results in an incredible product at a great price. The proof of this will be in the pricing of our competitors’ products which will likely offer less for more.”

“These are among the reasons we think the current crop of 7-inch tablets are going to be DOA. Dead On Arrival. Their manufacturers will learn the painful lesson that their tablets are too small and increase the size next year, thereby abandoning both customers and developers who jumped on the 7-inch bandwagon with an orphaned product.”

“Sounds like lots of fun ahead.”

Listen to the replay of the entire conference call here.

MacDailyNews Take: Tour de force.