Wow. I hate to be the skunk here, but this is a lot of 'ink' for very little insight.
(i) As has been pointed about above, people can say what they want about SOX and such, but that's a red herring; it was Apple's decision, and one that was bending over backwards to please some obscure accounting Gods on a 'just-in-case-it-ever-becomes-an-issue' basis. Apple got totally shaken by its options backdating scandal, and wanted no more whiffs of anything similar. (Although their handing of SJ's illness landed them in another pickle, but that is a different story).
(ii) While short-hand metrics such as EPS and P/E ratio are used as rules of thumb, any part-way decent valuation would necessarily look at the company for its free cash flow, and not accrual-accounting based metrics. Free cash flow is simply the actual cash that comes into your business from operations, net of cash that is used for investing needs (i.e., capex and operating working capital).
(iii) Given Apple's financials, it takes a couple of minutes to calculate that number, and a semi-literate analyst can and should (and, in all likelihood, did) do that. Free cash flow did not change one iota because of this revenue recognition principle being adopted, and will not change an iota if/when it is discarded. It is a 'neutral mutation.'
(iv) If anyone believes this stuff matters for Apple's valuation, I'd like to do business with them...... there's some beachfront property in AZ that I have in mind....
You make a lot of assumptions that are not compatible with reality.
Apple is not the only company using subscription accounting. Palm did the same thing with the Pre for quite obviously the same reasons. To suggest that Apple did this purely to piss off a bunch of Mac users or because the company went stupidly overboard in conservative accounting is so simplistic that it strains credulity.
Quite obviously, while "any part-way decent valuation would necessarily look at the company for its free cash flow," that DIDN'T HAPPEN, as Apple's roller coaster stock price makes blatantly evident.
"If anyone believes this stuff matters for Apple's valuation?" right, so ignore all the evidence that Apple's stock price was manipulated by false information and continue talking about the price of tea in china and other meaningless cliches.
I'm sure the douchebag AI trolls will congratulate your prescience. Where's techstuck when you need him?
I don't believe that accounting issues were the only ones in Apple's decision. Apple didn't know how successful the iPhone might be, nor what its margins would be. I think that they wanted to be as secretive as possible with their revenue reports. Subscription accounting facilitates this, especially when the numbers are mixed with non-subscription earnings and reported in aggregate.
The figure on p. 2 illustrates the point. The reason that unit sales are used instead of revenues is that Apple never reported revenues for the iPhone. The numbers that they report to this day are insufficient to determine iPhone revenue per quarter. To say that Apple wants the rules changed so that they be more open is wrong. Nothing prevents Apple from reporting iPhone revenues, MacBooks sold, margins on MacPros, costs of components for iPods. Apple chooses not to report any of these.
You make a lot of assumptions that are not compatible with reality.
Apple is not the only company using subscription accounting. Palm did the same thing with the Pre for quite obviously the same reasons. To suggest that Apple did this purely to piss off a bunch of Mac users or because the company went stupidly overboard in conservative accounting is so simplistic that it strains credulity.
Quite obviously, while "any part-way decent valuation would necessarily look at the company for its free cash flow," that DIDN'T HAPPEN, as Apple's roller coaster stock price makes blatantly evident.
"If anyone believes this stuff matters for Apple's valuation?" right, so ignore all the evidence that Apple's stock price was manipulated by false information and continue talking about the price of tea in china and other meaningless cliches.
I'm sure the douchebag AI trolls will congratulate your prescience. Where's techstuck when you need him?
I know someone who once said: "You make a lot of assumptions that are not compatible with reality" (see bolded portions).
Comments
Wow. I hate to be the skunk here, but this is a lot of 'ink' for very little insight.
(i) As has been pointed about above, people can say what they want about SOX and such, but that's a red herring; it was Apple's decision, and one that was bending over backwards to please some obscure accounting Gods on a 'just-in-case-it-ever-becomes-an-issue' basis. Apple got totally shaken by its options backdating scandal, and wanted no more whiffs of anything similar. (Although their handing of SJ's illness landed them in another pickle, but that is a different story).
(ii) While short-hand metrics such as EPS and P/E ratio are used as rules of thumb, any part-way decent valuation would necessarily look at the company for its free cash flow, and not accrual-accounting based metrics. Free cash flow is simply the actual cash that comes into your business from operations, net of cash that is used for investing needs (i.e., capex and operating working capital).
(iii) Given Apple's financials, it takes a couple of minutes to calculate that number, and a semi-literate analyst can and should (and, in all likelihood, did) do that. Free cash flow did not change one iota because of this revenue recognition principle being adopted, and will not change an iota if/when it is discarded. It is a 'neutral mutation.'
(iv) If anyone believes this stuff matters for Apple's valuation, I'd like to do business with them...... there's some beachfront property in AZ that I have in mind....
You make a lot of assumptions that are not compatible with reality.
Apple is not the only company using subscription accounting. Palm did the same thing with the Pre for quite obviously the same reasons. To suggest that Apple did this purely to piss off a bunch of Mac users or because the company went stupidly overboard in conservative accounting is so simplistic that it strains credulity.
Quite obviously, while "any part-way decent valuation would necessarily look at the company for its free cash flow," that DIDN'T HAPPEN, as Apple's roller coaster stock price makes blatantly evident.
"If anyone believes this stuff matters for Apple's valuation?" right, so ignore all the evidence that Apple's stock price was manipulated by false information and continue talking about the price of tea in china and other meaningless cliches.
I'm sure the douchebag AI trolls will congratulate your prescience. Where's techstuck when you need him?
The figure on p. 2 illustrates the point. The reason that unit sales are used instead of revenues is that Apple never reported revenues for the iPhone. The numbers that they report to this day are insufficient to determine iPhone revenue per quarter. To say that Apple wants the rules changed so that they be more open is wrong. Nothing prevents Apple from reporting iPhone revenues, MacBooks sold, margins on MacPros, costs of components for iPods. Apple chooses not to report any of these.
You make a lot of assumptions that are not compatible with reality.
Apple is not the only company using subscription accounting. Palm did the same thing with the Pre for quite obviously the same reasons. To suggest that Apple did this purely to piss off a bunch of Mac users or because the company went stupidly overboard in conservative accounting is so simplistic that it strains credulity.
Quite obviously, while "any part-way decent valuation would necessarily look at the company for its free cash flow," that DIDN'T HAPPEN, as Apple's roller coaster stock price makes blatantly evident.
"If anyone believes this stuff matters for Apple's valuation?" right, so ignore all the evidence that Apple's stock price was manipulated by false information and continue talking about the price of tea in china and other meaningless cliches.
I'm sure the douchebag AI trolls will congratulate your prescience. Where's techstuck when you need him?
I know someone who once said: "You make a lot of assumptions that are not compatible with reality" (see bolded portions).
This decision invoked the wrath of shareholders, ... delaying their ability to make short term profits.
My heart bleeds.