As Apple will receive $500 to $600 from T on each iPhone sold beginning 7/11, and on DAY ONE, the full amount of each sale will have to be recorded as of that accounting period. There is no way around that!
Um yeah. Exclamation points aside, I wonder how they got around that immutable law of nature for the Apple TV.
I guess I'll give you the answer....
Apple uses that method of accounting because they plan to provide those feature updates, and that's why Apple will continue using that method for the iPhone 3G.
The biggest thing, which everyone here seems to be missing, is that IT DOESNT MATTER.
My point is that 5% of people don't care about the cost of what they buy. But 95% of people and 100% of companies do.
Business care more about Total Cost of Ownership than just the purchase price of a product. They take into consideration support costs and the cost of lost productivity due to system downtime.
With the additional cost of Virus protection software and subscriptions, downtime caused by virus/trojan/worm infections Mac suddenly becomes a lot more competitive even if the initial retail price is higher (compared to entry level mini-tower desktops).
SME business around the world that are unable to negotiate massive discounts from Dell and HP like multi-national corps are buying and moving to the mac platform in increasing numbers.
I have not had a single days downtime on my work computer since I moved away from Windows 98. (never used xp as a regular desktop). With my consulting charge out rate over $200 per hour a single days downtime a year cause by virus screwing up my machine would cost over $1600. I explain this to other self-employed consultants and small business owners and the next time they need a new laptop or desktop computer its a Mac.
The point of this post is it's really only the retail customer who cares about the retail cost. Most business purchases (well smart companies) look at the TCO.
Um yeah. Exclamation points aside, I wonder how they got around that immutable law of nature for the Apple TV.
I guess I'll give you the answer....
Apple uses that method of accounting because they plan to provide those feature updates, and that's why Apple will continue using that method for the iPhone 3G.
The biggest thing, which everyone here seems to be missing, is that IT DOESNT MATTER.
It is amazing that after all these months and the repeated explanation of how this works that some people refuse to accept the subscription accounting for what it is: an easy means for Apple to offer future upgrades for free which also happens to potentially stabilize the top line. It is not as if Apple is the first company to employ this accounting method and it certainly does not increase Apple's revenue for the products receiving this revenue treatment.
In an ideal situation, the best Apple could hope for is that expanding sales of iPhones and AppleTVs (and perhaps future products) might reduce some volatility in its share price as Apple's revenues become less driven by product release cycles.
Apple will CHANGE its accounting treatment of the iPhone revenues, and discontinue to use subscription accounting for the NEW 3G iPhones.
It has been said before and I'll say it again. Subscription accouting has NOTHING to do with the AT&T revenue share arrangement.
AppleTV uses subscription accounting and does not have income from AT&T.
Subscription revenue is used because of Sarbanes-Oxley.
Apple will stop using subscription accounting when they have a mature software platform for the AppleTV and iPhone which they no longer wish to provide "Free" feature upgrades to customers.
iPhone 3G is not a mature software platform ergo subscription accounting will continue.
I would also love the boost the share price would receive if they dropped the subscription accounting and booked all revenue at time of sale. But you have to look at the reason WHY subscription accounting is used and apply reasonable logic to determine if the introduction of the 3G iPhone will have changed the original reason. The answer to that is clearly no.
There are many fallacies with your assumptions, but I'm going to hold off on making a long post until you can show me that an HP, Lenovo or any other major brand is $300?$500 more than a Mac with essentially the same guts, because in the US that is not the case. Sure, the lowest priced Mac notebook is $700 more than the lowest priced Dell or HP notebook, but the guts are not even close to being the same.
Save yourself the long post - you already know that no amount of reasoning will convince him that he is wrong. He sees only price as the means to compete in the long term and fails to recognize that Apple's recent growth demonstrates that the market is not fully commoditized. He cannot understand that Apple is peeling off the 5% most profitable part of the market and has no clue about contribution margins (Apple's products are higher than the competition) and so he rants.
In the end, his posts always seem to suggest two things:
1) He cannot afford to purchase a new Mac at a price that he is willing to pay (or that he can afford);
2) Based on his many prior posts - he resents that someone with only a high school education (Steve Jobs) is paid better and has a higher net worth than someone with a university degree (which I guess he might have). Never mind what Jobs has accomplished at Apple, NeXT and Pixar, the lack of a university degree makes Jobs somehow less capable than himself.
This is my first post, but I am a long time reader. I am studying for a master's in accounting currently and thus, feel the need to provide a minor correction to this story. I agree with one of the above replies that states that companies feel the need to be much more conservative with accounting for revenues after SOX, but the real reason Apple accounts for the iPhone and AppleTV with subscription based revenue is Statement of Position 97-2. For a quick explanation of this, please read the following:
I will post a a short newsletter article I wrote for my school's chapter of Beta Alpha Psi, the national accounting honor society, in its entirety now:
Recently, Apple offered major software updates for two products in their wildly successful stable of consumer electronics devices. The updates provide a bevy of new features for the iPod Touch and Apple TV. The iPod Touch?s update serves up applications for e-mail, Google Maps, stock listings, weather reports, note taking, and watching rented movies via the iTunes store while the Apple TV update includes the ability to directly rent movies and purchase music from the iTunes store as well as new features for viewing photos from the popular image sharing website, Flickr. With the frequency of software updates for most applications and devices approaching weekly, most consumers expect these updates for free. However, Apple drew the ire of consumers by charging $20 for the iPod Touch update while leaving the Apple TV update free of charge. Apple publicly blames the situation on Sarbanes-Oxley, but perhaps some other accounting issue helped to force their hand.
Apple?s decision to charge $20 for the iPod Touch update may indicate that they view it as a separate unit of accounting from the original product. Why would Apple account for the update separately? According to the New York State Society of Certified Public Accountants? summary of ?SOP 97-2: Revenue Recognition for Software Products with Multiple Deliverables?, a vendor must defer the recognition of revenue for a software product (or combination software and hardware product) ?if undelivered elements are essential to the functionality of any delivered elements.? In this case, the update constitutes an ?undelivered element? that is ?essential to the functionality? of the iPod Touch or Apple TV. SOP 97-2, which is a clarification of issues explored in EITF 00-21, further requires that the vendor establish stand-alone fair value for any undelivered elements with ?vendor specific objective evidence?. Since most companies shun restating revenues, Apple must charge for the update to establish stand-alone fair value for the update.
So, that still leaves the question: how did Apple escape charging for the Apple TV update? Prior to releasing the Apple TV, they announced they would recognize revenue for Apple TV sales over a period of 24 months. Essentially, they recognize revenue as an ongoing transaction; this enables Apple to release multiple updates that include YouTube viewing support, iTunes movie rentals, and photo album viewing free of charge. Apple also chose the same revenue recognition method for the iPhone, however they did not for the iPod Touch. Time may tell whether that was an intentional decision or a major goof on Apple?s part. Still, the AppleTV updates provide an excellent example of a major company using accounting methods to provide better value to the consumer.
If you have any questions, please feel free to ask.
I disagree that they will discontinue use of subscription based accounting since I assume Apple will continue to release major software updates for the iPhone. See my above post for more details.
Q: Then how can Apple release a point updates for OS X for free if it is not under any similar accounting model?
They do not provide an ?undelivered element? that is ?essential to the functionality? of OS X. The updates simply provide bug fixes and minor feature improvements, but as quoted, nothing that is "essential to the functionality" of OS X.
As another example, does anyone remember when Apple charged $1.99 or some such ridiculous amount for an update to 802.11n; the reason Apple felt the need to do that is SOP 97-2.
As another example, does anyone remember when Apple charged $1.99 or some such ridiculous amount for an update to 802.11n; the reason Apple had to do that is SOP 97-2.
If Apple is required to charge, what determines the price-point? WHy can't they charge $1 or $.01? The first iPod Touch update was $20, yet the next one will only be $10 and is considerably more feature filled than the first one.
If Apple is required to charge, what determines the price-point? WHy can't they charge $1 or $.01? The first iPod Touch update was $20, yet the next one will only be $10 and is considerably more feature filled than the first one.
No particular reason, they probably just pulled a number out of their ass, but as for the $20 iPod Touch update, to actually recoup some cost of providing the rather extensive update. They probably realized the $20 update was too much and reduced it.
again edited for clarity, sorry just got home from the bar after an exam
No particular reason, they probably just pulled a number out of their ass, but as for the $20 iPod Touch update, to actually recoup some cost of providing the rather extensive update.
If there is no guideline to establishing a fee thereby allowing you to make the fee as low as you wish, then I don't see how the fees imposed by Apple on its customers are nothing more than a way to get more money while pointing the finger at SOx.
Windows XP has included many new features since its 2001 debut and no service packs were ever a paid update. The features included over the last 7 years go well beyond bug fixes and security updates. Of course, using Windows always comes with a severe cost to your time and sanity, but I have a feeling that SOx doesn't account for that.
If there is no guideline to establishing a fee thereby allowing you can making the fee as low as you wish then I don't see how the fees imposed by Apple on it's customers are nothing more than a way to get more money while pointing the finger at SOx.
Windows XP has included many new features since it's 2001 debut and no service packs were ever paid for these updates well beyond bug fixes and security updates. Of course, using Windows always comes with a severe cost to your time and sanity, but I have a feeling that SOx doesn't account for that.
You make a good point, but I and most at this site would argue that most of the updates to XP actually do represent bug and security fixes . They did present new features, but I expect that Microsoft's developers and accountants cooperated to provide a detailed analysis that presented the updates as a percentage of the total features/functionality provided by XP to justify their case to their auditor, Deloitte and Touche, to not account for the updates as a separate unit of accounting. Good question.
Edit, I forgot to respond to the first paragraph:
Apple probably felt that explaining SOP 97-2 was too complicated, so they just blamed it on SOX which is no crime. Of course, they tried to extract as much money as possible for their updates; they are a publicly traded company.
Windows XP has included many new features since its 2001 debut and no service packs were ever a paid update. The features included over the last 7 years go well beyond bug fixes and security updates. Of course, using Windows always comes with a severe cost to your time and sanity, but I have a feeling that SOx doesn't account for that.
I doubt any of us know whether MS accounts of OS sales on a cash basis or over time....
I doubt any of us know whether MS accounts of OS sales on a cash basis or over time....
Microsoft must explicitly mention any major changes in GAAP (generally accepted accounting principles) in the notes for their 10-K/Q (annual/quarterly reports filed with the Securities and Exchange Commission). I find no such reference regarding their treatment of Windows XP as a separate unit of accounting.
You can build a speculative bubble only ...But they don't build anything that lasts. And that is the tragedy of the Mac and, now, the iPhone platforms. They won't last at CURRENT PRICES.
-Yup. Just the way Porsche, the most profitable automaker in the world should pack up the tent. -And Lambo, Maser, Ferrari, etc.
Quote:
Originally Posted by nvidia2008
I tell you, now that...
Is this why accountants get so much money for doing all this seemingly purposeless hax?
Finance and accounting. Most of it is seems like just legalised hacking. This is why it frustrates me so much when I go to a place like H&R Block, when, sometimes the service is good, but other times, it is like, why the F can't I expense this and this, when big corporations (not necessarily Apple) are getting away with, well, whatever they get away with???
-I could not agree MORE. Divide x by 1, multiply by 2/2, subtract zero. -oof!
Andy Zaky did a just AMAZING article here, the likes of which I don't think I've seen more than 1-2x on any blog or site like AI. So, Big Ups to you! -Excellent job, Andy!
-That being said, I am now reminded of why I Hate accountants and am so very glad that I am a Warrior Poet instead of an Accountant.
Quote:
Originally Posted by Constable Odo
Would one of you brilliant number crunchers tell me... on this point.
A few things I can think of are:
The PEG is the real number to look at for a stock's priciness.
It's the P/E divided by the Average EPS Growth Rate (I think over the last year from the most recent quarter reported backward, ex: Q1,2007-Q1,2008). That is the measure of what you're paying for what Growth you're getting. 1 is considered ~fairly valued. < 1 is underpriced. >1 is overpriced.
There's such a thing as a Good Stock In a Bad Market.
ie: Apple.
Minimum ~70% of all stocks will follow the major averages. Ie: Nasdaq up, apple up. Dow down, IBM down.
There's also the "Dell Computer Effect" (probs. a better name for it somewhere, but this is mine).
Back 10,000 years ago when Dell didn't suck so bad and was actually growing, there was an Inflection point where the price stopped going up a lot ****Because the company only did -a little- better than the numbers, instead of totally knocking them 4 Time Zones Out of The Park.
Any time a recently really hot stock does that, I feel Speculators will punish it and the froth will come down short-term.
-It doesn't necessarily mean anything bad otherwise, depending on what the story behind the current #s is. Remember, most trader/speculators have the Evolutionary Fear Reactions of a Female Zebra on the African Savannah, Ngorongoro crater -even.
Apple's current PEG is about ~1.3. For it to be in such a crappy general market and still be that high can be viewed as a sign of strength. If you have money on the sidelines, the price getting its ass kicked one way or another can be a good thing for you, especially if you're an expert on the company; it's like "Sale on Ferraris 50% off, get 'em while they're hot!!!"
Warren Buffett's favorite measure of a success is ROI.
Jimmy Buffett's favorite measure of success is the severity of a post-bender hangover.
Comments
As Apple will receive $500 to $600 from T on each iPhone sold beginning 7/11, and on DAY ONE, the full amount of each sale will have to be recorded as of that accounting period. There is no way around that!
Um yeah. Exclamation points aside, I wonder how they got around that immutable law of nature for the Apple TV.
I guess I'll give you the answer....
Apple uses that method of accounting because they plan to provide those feature updates, and that's why Apple will continue using that method for the iPhone 3G.
The biggest thing, which everyone here seems to be missing, is that IT DOESNT MATTER.
My point is that 5% of people don't care about the cost of what they buy. But 95% of people and 100% of companies do.
Business care more about Total Cost of Ownership than just the purchase price of a product. They take into consideration support costs and the cost of lost productivity due to system downtime.
With the additional cost of Virus protection software and subscriptions, downtime caused by virus/trojan/worm infections Mac suddenly becomes a lot more competitive even if the initial retail price is higher (compared to entry level mini-tower desktops).
SME business around the world that are unable to negotiate massive discounts from Dell and HP like multi-national corps are buying and moving to the mac platform in increasing numbers.
I have not had a single days downtime on my work computer since I moved away from Windows 98. (never used xp as a regular desktop). With my consulting charge out rate over $200 per hour a single days downtime a year cause by virus screwing up my machine would cost over $1600. I explain this to other self-employed consultants and small business owners and the next time they need a new laptop or desktop computer its a Mac.
The point of this post is it's really only the retail customer who cares about the retail cost. Most business purchases (well smart companies) look at the TCO.
Um yeah. Exclamation points aside, I wonder how they got around that immutable law of nature for the Apple TV.
I guess I'll give you the answer....
Apple uses that method of accounting because they plan to provide those feature updates, and that's why Apple will continue using that method for the iPhone 3G.
The biggest thing, which everyone here seems to be missing, is that IT DOESNT MATTER.
It is amazing that after all these months and the repeated explanation of how this works that some people refuse to accept the subscription accounting for what it is: an easy means for Apple to offer future upgrades for free which also happens to potentially stabilize the top line. It is not as if Apple is the first company to employ this accounting method and it certainly does not increase Apple's revenue for the products receiving this revenue treatment.
In an ideal situation, the best Apple could hope for is that expanding sales of iPhones and AppleTVs (and perhaps future products) might reduce some volatility in its share price as Apple's revenues become less driven by product release cycles.
Apple will CHANGE its accounting treatment of the iPhone revenues, and discontinue to use subscription accounting for the NEW 3G iPhones.
It has been said before and I'll say it again. Subscription accouting has NOTHING to do with the AT&T revenue share arrangement.
AppleTV uses subscription accounting and does not have income from AT&T.
Subscription revenue is used because of Sarbanes-Oxley.
Apple will stop using subscription accounting when they have a mature software platform for the AppleTV and iPhone which they no longer wish to provide "Free" feature upgrades to customers.
iPhone 3G is not a mature software platform ergo subscription accounting will continue.
I would also love the boost the share price would receive if they dropped the subscription accounting and booked all revenue at time of sale. But you have to look at the reason WHY subscription accounting is used and apply reasonable logic to determine if the introduction of the 3G iPhone will have changed the original reason. The answer to that is clearly no.
There are many fallacies with your assumptions, but I'm going to hold off on making a long post until you can show me that an HP, Lenovo or any other major brand is $300?$500 more than a Mac with essentially the same guts, because in the US that is not the case. Sure, the lowest priced Mac notebook is $700 more than the lowest priced Dell or HP notebook, but the guts are not even close to being the same.
Save yourself the long post - you already know that no amount of reasoning will convince him that he is wrong. He sees only price as the means to compete in the long term and fails to recognize that Apple's recent growth demonstrates that the market is not fully commoditized. He cannot understand that Apple is peeling off the 5% most profitable part of the market and has no clue about contribution margins (Apple's products are higher than the competition) and so he rants.
In the end, his posts always seem to suggest two things:
1) He cannot afford to purchase a new Mac at a price that he is willing to pay (or that he can afford);
2) Based on his many prior posts - he resents that someone with only a high school education (Steve Jobs) is paid better and has a higher net worth than someone with a university degree (which I guess he might have). Never mind what Jobs has accomplished at Apple, NeXT and Pixar, the lack of a university degree makes Jobs somehow less capable than himself.
http://www.nysscpa.org/cpajournal/20...ntials/p38.htm
I will post a a short newsletter article I wrote for my school's chapter of Beta Alpha Psi, the national accounting honor society, in its entirety now:
Recently, Apple offered major software updates for two products in their wildly successful stable of consumer electronics devices. The updates provide a bevy of new features for the iPod Touch and Apple TV. The iPod Touch?s update serves up applications for e-mail, Google Maps, stock listings, weather reports, note taking, and watching rented movies via the iTunes store while the Apple TV update includes the ability to directly rent movies and purchase music from the iTunes store as well as new features for viewing photos from the popular image sharing website, Flickr. With the frequency of software updates for most applications and devices approaching weekly, most consumers expect these updates for free. However, Apple drew the ire of consumers by charging $20 for the iPod Touch update while leaving the Apple TV update free of charge. Apple publicly blames the situation on Sarbanes-Oxley, but perhaps some other accounting issue helped to force their hand.
Apple?s decision to charge $20 for the iPod Touch update may indicate that they view it as a separate unit of accounting from the original product. Why would Apple account for the update separately? According to the New York State Society of Certified Public Accountants? summary of ?SOP 97-2: Revenue Recognition for Software Products with Multiple Deliverables?, a vendor must defer the recognition of revenue for a software product (or combination software and hardware product) ?if undelivered elements are essential to the functionality of any delivered elements.? In this case, the update constitutes an ?undelivered element? that is ?essential to the functionality? of the iPod Touch or Apple TV. SOP 97-2, which is a clarification of issues explored in EITF 00-21, further requires that the vendor establish stand-alone fair value for any undelivered elements with ?vendor specific objective evidence?. Since most companies shun restating revenues, Apple must charge for the update to establish stand-alone fair value for the update.
So, that still leaves the question: how did Apple escape charging for the Apple TV update? Prior to releasing the Apple TV, they announced they would recognize revenue for Apple TV sales over a period of 24 months. Essentially, they recognize revenue as an ongoing transaction; this enables Apple to release multiple updates that include YouTube viewing support, iTunes movie rentals, and photo album viewing free of charge. Apple also chose the same revenue recognition method for the iPhone, however they did not for the iPod Touch. Time may tell whether that was an intentional decision or a major goof on Apple?s part. Still, the AppleTV updates provide an excellent example of a major company using accounting methods to provide better value to the consumer.
If you have any questions, please feel free to ask.
If you have any questions, please feel free to ask.
Nice post, welcome to AI as a poster.
Q: Then how can Apple release a point updates for OS X for free if it is not under any similar accounting model?
I disagree that they will discontinue use of subscription based accounting since I assume Apple will continue to release major software updates for the iPhone. See my above post for more details.
Nice post, welcome to AI as a poster.
Q: Then how can Apple release a point updates for OS X for free if it is not under any similar accounting model?
They do not provide an ?undelivered element? that is ?essential to the functionality? of OS X. The updates simply provide bug fixes and minor feature improvements, but as quoted, nothing that is "essential to the functionality" of OS X.
edited for clarity
As another example, does anyone remember when Apple charged $1.99 or some such ridiculous amount for an update to 802.11n; the reason Apple had to do that is SOP 97-2.
If Apple is required to charge, what determines the price-point? WHy can't they charge $1 or $.01? The first iPod Touch update was $20, yet the next one will only be $10 and is considerably more feature filled than the first one.
They do not provide an ?undelivered element? that is ?essential to the functionality? of OS X.
You apparently didn't use 10.5.0, because the 10.5.1 update was most certainly ?essential to the functionality?.
If Apple is required to charge, what determines the price-point? WHy can't they charge $1 or $.01? The first iPod Touch update was $20, yet the next one will only be $10 and is considerably more feature filled than the first one.
No particular reason, they probably just pulled a number out of their ass, but as for the $20 iPod Touch update, to actually recoup some cost of providing the rather extensive update. They probably realized the $20 update was too much and reduced it.
again edited for clarity, sorry just got home from the bar after an exam
You apparently didn't use 10.5.0, because the 10.5.1 update was most certainly ?essential to the functionality?.
My dad and uncle f**king hated 10.5.0, I occasionally rejoice that I waited.
No particular reason, they probably just pulled a number out of their ass, but as for the $20 iPod Touch update, to actually recoup some cost of providing the rather extensive update.
If there is no guideline to establishing a fee thereby allowing you to make the fee as low as you wish, then I don't see how the fees imposed by Apple on its customers are nothing more than a way to get more money while pointing the finger at SOx.
Windows XP has included many new features since its 2001 debut and no service packs were ever a paid update. The features included over the last 7 years go well beyond bug fixes and security updates. Of course, using Windows always comes with a severe cost to your time and sanity, but I have a feeling that SOx doesn't account for that.
My dad and uncle f**king hated 10.5.0, I occasionally rejoice that I waited.
Ironically, The 6 months of developer builds before Leopard's Gold Master was considerably more stable for me.
If there is no guideline to establishing a fee thereby allowing you can making the fee as low as you wish then I don't see how the fees imposed by Apple on it's customers are nothing more than a way to get more money while pointing the finger at SOx.
Windows XP has included many new features since it's 2001 debut and no service packs were ever paid for these updates well beyond bug fixes and security updates. Of course, using Windows always comes with a severe cost to your time and sanity, but I have a feeling that SOx doesn't account for that.
You make a good point, but I and most at this site would argue that most of the updates to XP actually do represent bug and security fixes
Edit, I forgot to respond to the first paragraph:
Apple probably felt that explaining SOP 97-2 was too complicated, so they just blamed it on SOX which is no crime. Of course, they tried to extract as much money as possible for their updates; they are a publicly traded company.
Windows XP has included many new features since its 2001 debut and no service packs were ever a paid update. The features included over the last 7 years go well beyond bug fixes and security updates. Of course, using Windows always comes with a severe cost to your time and sanity, but I have a feeling that SOx doesn't account for that.
I doubt any of us know whether MS accounts of OS sales on a cash basis or over time....
I doubt any of us know whether MS accounts of OS sales on a cash basis or over time....
Microsoft must explicitly mention any major changes in GAAP (generally accepted accounting principles) in the notes for their 10-K/Q (annual/quarterly reports filed with the Securities and Exchange Commission). I find no such reference regarding their treatment of Windows XP as a separate unit of accounting.
You can build a speculative bubble only ...But they don't build anything that lasts. And that is the tragedy of the Mac and, now, the iPhone platforms. They won't last at CURRENT PRICES.
-Yup. Just the way Porsche, the most profitable automaker in the world should pack up the tent. -And Lambo, Maser, Ferrari, etc.
I tell you, now that...
Is this why accountants get so much money for doing all this seemingly purposeless hax?
Finance and accounting. Most of it is seems like just legalised hacking. This is why it frustrates me so much when I go to a place like H&R Block, when, sometimes the service is good, but other times, it is like, why the F can't I expense this and this, when big corporations (not necessarily Apple) are getting away with, well, whatever they get away with???
-I could not agree MORE. Divide x by 1, multiply by 2/2, subtract zero. -oof!
Andy Zaky did a just AMAZING article here, the likes of which I don't think I've seen more than 1-2x on any blog or site like AI. So, Big Ups to you! -Excellent job, Andy!
-That being said, I am now reminded of why I Hate accountants and am so very glad that I am a Warrior Poet instead of an Accountant.
Would one of you brilliant number crunchers tell me... on this point.
A few things I can think of are:
The PEG is the real number to look at for a stock's priciness.
It's the P/E divided by the Average EPS Growth Rate (I think over the last year from the most recent quarter reported backward, ex: Q1,2007-Q1,2008). That is the measure of what you're paying for what Growth you're getting. 1 is considered ~fairly valued. < 1 is underpriced. >1 is overpriced.
There's such a thing as a Good Stock In a Bad Market.
ie: Apple.
Minimum ~70% of all stocks will follow the major averages. Ie: Nasdaq up, apple up. Dow down, IBM down.
There's also the "Dell Computer Effect" (probs. a better name for it somewhere, but this is mine).
Back 10,000 years ago when Dell didn't suck so bad and was actually growing, there was an Inflection point where the price stopped going up a lot ****Because the company only did -a little- better than the numbers, instead of totally knocking them 4 Time Zones Out of The Park.
Any time a recently really hot stock does that, I feel Speculators will punish it and the froth will come down short-term.
-It doesn't necessarily mean anything bad otherwise, depending on what the story behind the current #s is. Remember, most trader/speculators have the Evolutionary Fear Reactions of a Female Zebra on the African Savannah, Ngorongoro crater -even.
Apple's current PEG is about ~1.3. For it to be in such a crappy general market and still be that high can be viewed as a sign of strength. If you have money on the sidelines, the price getting its ass kicked one way or another can be a good thing for you, especially if you're an expert on the company; it's like "Sale on Ferraris 50% off, get 'em while they're hot!!!"
Warren Buffett's favorite measure of a success is ROI.
Jimmy Buffett's favorite measure of success is the severity of a post-bender hangover.
I like "One Up On Wall Street", by Peter Lynch.