AppleInsider has run many stories that suggest that some of the "big guy" analysts regularly miss this fact about the GAAP revenue. Apple's approach to revenue in that regard is a rare enough situation for many to miss.
So AppleInsider has published factual articles that support their contention.
What do you have besides "I doubt it" ?
Deferred Revenue is not a new concept by any means. It may be unusual for Apple, but analysts are well aware of it. You cannot be a CFA / CPA / registered licensed analyst without being fully aware of the concept of deferred revenue, let alone be the analyst assigned to follow Apple and not be aware of it. It's simply not that big of a deal. Apple's cash flows are enormous since they get the cash upfront, but have to recognize the revenue over time. Analysts see this as well, and it likely mitigates any issues around the deferred revenue. It's all about cash, and Apple's got plenty of it. This revenue rule is actually a good thing, since it smooths out the income over each quarter, instead of huge bursts of revenue, such as from iPod sales in November and December.
I'm a long-time AAPL investor, and would consider myself worried not about a 6% drop in sales, but further P/E erosion and a lack of overall confidence. Fortunately, every time I pass by an Apple store most of that concern ebbs away, seeing how they are firing on all cylinders. I just wish I was better diversified, I guess...
The GAAP accounting will help make the next four quarters look better than they really are, but I think they need to re-think how they realize profits on the iPhone.
You and me are in the same boat, my eggs are pretty heavily in one AAPL basket ...
A lot of mine were bought at sub $50 how about you?
The GAAP accounting will help make the next four quarters look better than they really are, but I think they need to re-think how they realize profits on the iPhone.
This assumes that you keep the same phone over 2 years. What if someone breaks the contract or changes their phone either by updgrade or actual change before 2 years? I wonder if they pick up all the remaining revenue then at that point? I pity the poor accountants trying to reconcile that mess.
I wonder how soon we will se the re-introduction of the word 'beleaguered' in the context of Apple (or should I say the Cupertino based Electronics Maker?).
It's time the SEC investigated the biassed reporting that goes on in the tech media with regards to Apple - at best it's inaccurate and misleading, at worst it's deliberately manipulative.
There are too many people who would feel very happy if Apple were to have a bad time, and they are massaging facts in order to fit with their opinion. In these jittery market conditions that's having a serious destabilising effect on APPL and I think it's easily open to abuse.
It's time the SEC investigated the biassed reporting that goes on in the tech media with regards to Apple - at best it's inaccurate and misleading, at worst it's deliberately manipulative.
There are too many people who would feel very happy if Apple were to have a bad time, and they are massaging facts in order to fit with their opinion. In these jittery market conditions that's having a serious destabilising effect on APPL and I think it's easily open to abuse.
Me thinks the SEC is way too busy investigating who Madoff with the money then adressing your whine.
Because Apple's guidance accounted for a 12% decline in earnings apart from the subscription accounting revenues already in the bank, the 6% drop in Mac sales is "at worst a non-event" Needham stated in the brief.
The market is reacting to Apple's sales figures and bleak prospects in a continuing recession, Apple being the only "high price" company that prides itself for not giving its customers what they want, i.e. decent prices for the latest technology.
Apple's senior management decided long ago that they would demand higher prices for Macs and iPhones so that they could line their pockets with billion dollar bonuses. They never really cared about what customers wanted, just what senior management could take from the company.
On a different note, the current slide in stock price will go on for the foreseeable future. It's a reflection of what happens when a stock is "priced for perfection" and takes into account unrealistic growth projections.
The growth projections were unrealistic given Apple's high prices and reluctance to use the latest technology or high quality, more expensive, components.
The cautious individual investor has long left the Apple stock. Hedge funds were more suitable investors for a secretive company running on rumors, hopes and whims (as opposed to facts and published hardware roadmaps).
Hopefully, Apple will use the current circumstances to refocus itself on its customers and offer competitive products at a competitive price.
It's time the SEC investigated the biassed reporting that goes on in the tech media with regards to Apple - at best it's inaccurate and misleading, at worst it's deliberately manipulative. ...
It's the biased SEC itself that is investigating Apple though, on the advice of it's former head who was an extremely biased Bush political appointee.
As long as the SEC itself is rife with such political bias it's not worth talking about the reporting. Although at this point it does seem that right-wing financial reporters "run" the SEC in a similar manner to how Rush Limbaugh "runs" the Republican party. Saner less-biased points of view can't prevail because they are afraid of being pilloried by the right-dominated media reporting on these issues.
Deferred Revenue is not a new concept by any means. It may be unusual for Apple, but analysts are well aware of it. You cannot be a CFA / CPA / registered licensed analyst without being fully aware of the concept of deferred revenue, let alone be the analyst assigned to follow Apple and not be aware of it. It's simply not that big of a deal. Apple's cash flows are enormous since they get the cash upfront, but have to recognize the revenue over time. Analysts see this as well, and it likely mitigates any issues around the deferred revenue. It's all about cash, and Apple's got plenty of it. This revenue rule is actually a good thing, since it smooths out the income over each quarter, instead of huge bursts of revenue, such as from iPod sales in November and December.
I would agree, and also agree that any "analyst" worth their paycheck should be well aware of these sorts of things.
My point was that some of the supposedly "big name" analysts have in recent memory published articles about Apple in major financial rags that indicate they didn't take GAAP into account. so I would argue that the correlation between being a "big name analyst" at a big financial concern or newspaper, and knowing about GAAP, is not 100% by any means. Some of these guys are just giant dumbasses masquerading as "analysts."
It's the biased SEC itself that is investigating Apple though, on the advice of it's former head who was an extremely biased Bush political appointee.
As long as the SEC itself is rife with such political bias it's not worth talking about the reporting. Although at this point it does seem that right-wing financial reporters "run" the SEC in a similar manner to how Rush Limbaugh "runs" the Republican party. Saner less-biased points of view can't prevail because they are afraid of being pilloried by the right-dominated media reporting on these issues.
Why are you bringing politics into this discussion? Didn't you listen to the President? This is a bi-partisan USA now.
The Problem is the components are not as cheep now as they were.. Due to all the $ vs Yen vs £ and other major problems the cost price of many of these products has gone up...
Pioneer have stopped making TVs and are putting prices up
Sony are putting prices up
Denon are putting prices up
MSI are putting prices up
Acer are putting prices up
what makes you think that Apple will be able to soak up this raw price increase....
If they cant make between 30 and 50% markup on a system by the time it gets to the dealer on the street its not worth doing..
and before you all jump up and down about margins on there kit.. any sensible business man will tell you that paying the wages and costs of running a company the size of apple requires a decent margin....
I dont belive that any of theses companies have the ability to pass on to the consumer any of the price increaes your talking about. Further more raw materials prices are sinking.
Apple has to dig in and let this recession pass, and yes they will sell less and the share price will decline a bit.
The recession has barely started and this generation does not know what a full blown recession is like. There is no quick cure and when your out of a job the last thing you will think about is buying a new computer or Ipod.
GAAP accounting is NOT related to the AT&T contacts in anyway. It is NOT cash being given to Apple by AT&T for phone subscriptions.
GAAP accounting simply means that Apple are only recognising the sale of the actual iPhone itself over a 24 month period. Every month they take 1/24 of the sale value of the iPhone as revenue in to thier accounts. This accounting method lets Apple update the iPhone on a regular basis for free without falling foul of the Sabaine Oxley rules. Apple also apply the same GAAP accounting to the AppleTV, hence it gets free updates. They do not apply GAAP accounting to the iPod Touch, all revenue for those is taken a tiem of sale, hence you have to pay for updates.
Basically it works like this. If Apple have taken the revenue for a device then the device has not been fully paid for in accounting terms. Therefore they can offer additional features as upgrades without being sued by share holders who could insist the updates are paid for. The reason being the delayed revenue means the updates are paid for over the first 24 months of the device being owned.
Actually, I think it does relate to the AT&T contracts, in a roundabout sort of a way...
Essentially, Apple are paid a %age of the revenue AT&T receive. Although this is (probably) over the lifetime of the phone usage (rather than the lifetime of the contract), you obviously have to choose a time period over which to report the revenue. Clearly Apple's auditers feel that 2 years is sufficient.
I used to work for a mobile operator, and worked on the Apple contract. I know the contents of the KTA Apple had with the operator, so know that these monthly payments are made to Apple.
Now, without delving into Apple's figures further, I don't know if Apple only defer the revenue from AT&T (and T-Mobile, Orange, O2, et al); or if they defer this revenue plus 1/24th of the device sale cost. If I recall correctly, the sort of numbers Apple were talking about receiving from (my) operator was ~13% of billed revenue for existing customers, and 16% for new. Based on an average monthly bill of $80, that's nearly $300 in additional revenue over the 2 year period. Obviously Apple are only being paid it on a monthly basis, and can't be guaranteed it for the full 2 years. Hence they can only book it when they get it.
The 'free' updates I think is a side issue, and simply an added bonus of the subscription accounting model.
No matter what happens, they always advise the same thing: Buy!
WHAT A FARCE!
The Stock Market is a ponzi scheme. Nobody can give you back more money than you gave them, without taking it from somebody else. Stock brokers are just trying to get people to play, so they take the first percentage of all profits; everybody else gets paid last, if they get paid at all.
And, when you do get paid, it comes back to you as inflation anyway. There is no way to win inside of a ponzi scheme, except by not playing. Look at how much money and goods big corporations move, but they fall into debt anyway. One person's profit is always somebody else's expense.
Get out of the market and stay out. The best thing Apple can do is go private, and exit the ponzi scheme. The ponzi scheme brings down everybody eventually. (When will Obama tell the people the truth?)
If you love Apple, then give them your stocks. Don't suck the life-blood out of them like a leech.
The market is reacting to Apple's sales figures and bleak prospects in a continuing recession, Apple being the only "high price" company that prides itself for not giving its customers what they want, i.e. decent prices for the latest technology.
What a nutty statement. It must be hard to have an outlook on life like you do.
Comments
Actually ....
AppleInsider has run many stories that suggest that some of the "big guy" analysts regularly miss this fact about the GAAP revenue. Apple's approach to revenue in that regard is a rare enough situation for many to miss.
So AppleInsider has published factual articles that support their contention.
What do you have besides "I doubt it" ?
Deferred Revenue is not a new concept by any means. It may be unusual for Apple, but analysts are well aware of it. You cannot be a CFA / CPA / registered licensed analyst without being fully aware of the concept of deferred revenue, let alone be the analyst assigned to follow Apple and not be aware of it. It's simply not that big of a deal. Apple's cash flows are enormous since they get the cash upfront, but have to recognize the revenue over time. Analysts see this as well, and it likely mitigates any issues around the deferred revenue. It's all about cash, and Apple's got plenty of it. This revenue rule is actually a good thing, since it smooths out the income over each quarter, instead of huge bursts of revenue, such as from iPod sales in November and December.
I'm a long-time AAPL investor, and would consider myself worried not about a 6% drop in sales, but further P/E erosion and a lack of overall confidence. Fortunately, every time I pass by an Apple store most of that concern ebbs away, seeing how they are firing on all cylinders. I just wish I was better diversified, I guess...
The GAAP accounting will help make the next four quarters look better than they really are, but I think they need to re-think how they realize profits on the iPhone.
You and me are in the same boat, my eggs are pretty heavily in one AAPL basket ...
A lot of mine were bought at sub $50 how about you?
The GAAP accounting will help make the next four quarters look better than they really are, but I think they need to re-think how they realize profits on the iPhone.
This assumes that you keep the same phone over 2 years. What if someone breaks the contract or changes their phone either by updgrade or actual change before 2 years? I wonder if they pick up all the remaining revenue then at that point? I pity the poor accountants trying to reconcile that mess.
I wonder how soon we will se the re-introduction of the word 'beleaguered' in the context of Apple (or should I say the Cupertino based Electronics Maker?).
Not a chance.
There are too many people who would feel very happy if Apple were to have a bad time, and they are massaging facts in order to fit with their opinion. In these jittery market conditions that's having a serious destabilising effect on APPL and I think it's easily open to abuse.
My wish is your complaint?
Actually it's more like a fine whine.
Ha ha ha...I like that...a fine whine.
It's time the SEC investigated the biassed reporting that goes on in the tech media with regards to Apple - at best it's inaccurate and misleading, at worst it's deliberately manipulative.
There are too many people who would feel very happy if Apple were to have a bad time, and they are massaging facts in order to fit with their opinion. In these jittery market conditions that's having a serious destabilising effect on APPL and I think it's easily open to abuse.
Me thinks the SEC is way too busy investigating who Madoff with the money then adressing your whine.
After Apple shares plunged by nearly 4% on Thursday
Plunged?
4% is a "plunge"?
So the opposite would be "Apple shares skyrocketed with 4% gain"?
Because Apple's guidance accounted for a 12% decline in earnings apart from the subscription accounting revenues already in the bank, the 6% drop in Mac sales is "at worst a non-event" Needham stated in the brief.
The market is reacting to Apple's sales figures and bleak prospects in a continuing recession, Apple being the only "high price" company that prides itself for not giving its customers what they want, i.e. decent prices for the latest technology.
Apple's senior management decided long ago that they would demand higher prices for Macs and iPhones so that they could line their pockets with billion dollar bonuses. They never really cared about what customers wanted, just what senior management could take from the company.
On a different note, the current slide in stock price will go on for the foreseeable future. It's a reflection of what happens when a stock is "priced for perfection" and takes into account unrealistic growth projections.
The growth projections were unrealistic given Apple's high prices and reluctance to use the latest technology or high quality, more expensive, components.
The cautious individual investor has long left the Apple stock. Hedge funds were more suitable investors for a secretive company running on rumors, hopes and whims (as opposed to facts and published hardware roadmaps).
Hopefully, Apple will use the current circumstances to refocus itself on its customers and offer competitive products at a competitive price.
It's time the SEC investigated the biassed reporting that goes on in the tech media with regards to Apple - at best it's inaccurate and misleading, at worst it's deliberately manipulative. ...
It's the biased SEC itself that is investigating Apple though, on the advice of it's former head who was an extremely biased Bush political appointee.
As long as the SEC itself is rife with such political bias it's not worth talking about the reporting. Although at this point it does seem that right-wing financial reporters "run" the SEC in a similar manner to how Rush Limbaugh "runs" the Republican party. Saner less-biased points of view can't prevail because they are afraid of being pilloried by the right-dominated media reporting on these issues.
Deferred Revenue is not a new concept by any means. It may be unusual for Apple, but analysts are well aware of it. You cannot be a CFA / CPA / registered licensed analyst without being fully aware of the concept of deferred revenue, let alone be the analyst assigned to follow Apple and not be aware of it. It's simply not that big of a deal. Apple's cash flows are enormous since they get the cash upfront, but have to recognize the revenue over time. Analysts see this as well, and it likely mitigates any issues around the deferred revenue. It's all about cash, and Apple's got plenty of it. This revenue rule is actually a good thing, since it smooths out the income over each quarter, instead of huge bursts of revenue, such as from iPod sales in November and December.
I would agree, and also agree that any "analyst" worth their paycheck should be well aware of these sorts of things.
My point was that some of the supposedly "big name" analysts have in recent memory published articles about Apple in major financial rags that indicate they didn't take GAAP into account. so I would argue that the correlation between being a "big name analyst" at a big financial concern or newspaper, and knowing about GAAP, is not 100% by any means. Some of these guys are just giant dumbasses masquerading as "analysts."
Everybody's stock is tanking. How could anybody seriously think Apple would remain impervious to the current economic worldwide collapse?
Agree. It's plain common sense.
...my eggs are pretty heavily in one AAPL basket ...
A lot of mine were bought at sub $50...
And if you sell now you double your investment (before any capital gains taxes).
It's the biased SEC itself that is investigating Apple though, on the advice of it's former head who was an extremely biased Bush political appointee.
As long as the SEC itself is rife with such political bias it's not worth talking about the reporting. Although at this point it does seem that right-wing financial reporters "run" the SEC in a similar manner to how Rush Limbaugh "runs" the Republican party. Saner less-biased points of view can't prevail because they are afraid of being pilloried by the right-dominated media reporting on these issues.
Why are you bringing politics into this discussion? Didn't you listen to the President? This is a bi-partisan USA now.
The Problem is the components are not as cheep now as they were.. Due to all the $ vs Yen vs £ and other major problems the cost price of many of these products has gone up...
Pioneer have stopped making TVs and are putting prices up
Sony are putting prices up
Denon are putting prices up
MSI are putting prices up
Acer are putting prices up
what makes you think that Apple will be able to soak up this raw price increase....
If they cant make between 30 and 50% markup on a system by the time it gets to the dealer on the street its not worth doing..
and before you all jump up and down about margins on there kit.. any sensible business man will tell you that paying the wages and costs of running a company the size of apple requires a decent margin....
I dont belive that any of theses companies have the ability to pass on to the consumer any of the price increaes your talking about. Further more raw materials prices are sinking.
Apple has to dig in and let this recession pass, and yes they will sell less and the share price will decline a bit.
The recession has barely started and this generation does not know what a full blown recession is like. There is no quick cure and when your out of a job the last thing you will think about is buying a new computer or Ipod.
GAAP accounting is NOT related to the AT&T contacts in anyway. It is NOT cash being given to Apple by AT&T for phone subscriptions.
GAAP accounting simply means that Apple are only recognising the sale of the actual iPhone itself over a 24 month period. Every month they take 1/24 of the sale value of the iPhone as revenue in to thier accounts. This accounting method lets Apple update the iPhone on a regular basis for free without falling foul of the Sabaine Oxley rules. Apple also apply the same GAAP accounting to the AppleTV, hence it gets free updates. They do not apply GAAP accounting to the iPod Touch, all revenue for those is taken a tiem of sale, hence you have to pay for updates.
Basically it works like this. If Apple have taken the revenue for a device then the device has not been fully paid for in accounting terms. Therefore they can offer additional features as upgrades without being sued by share holders who could insist the updates are paid for. The reason being the delayed revenue means the updates are paid for over the first 24 months of the device being owned.
Actually, I think it does relate to the AT&T contracts, in a roundabout sort of a way...
Essentially, Apple are paid a %age of the revenue AT&T receive. Although this is (probably) over the lifetime of the phone usage (rather than the lifetime of the contract), you obviously have to choose a time period over which to report the revenue. Clearly Apple's auditers feel that 2 years is sufficient.
I used to work for a mobile operator, and worked on the Apple contract. I know the contents of the KTA Apple had with the operator, so know that these monthly payments are made to Apple.
Now, without delving into Apple's figures further, I don't know if Apple only defer the revenue from AT&T (and T-Mobile, Orange, O2, et al); or if they defer this revenue plus 1/24th of the device sale cost. If I recall correctly, the sort of numbers Apple were talking about receiving from (my) operator was ~13% of billed revenue for existing customers, and 16% for new. Based on an average monthly bill of $80, that's nearly $300 in additional revenue over the 2 year period. Obviously Apple are only being paid it on a monthly basis, and can't be guaranteed it for the full 2 years. Hence they can only book it when they get it.
The 'free' updates I think is a side issue, and simply an added bonus of the subscription accounting model.
WHAT A FARCE!
The Stock Market is a ponzi scheme. Nobody can give you back more money than you gave them, without taking it from somebody else. Stock brokers are just trying to get people to play, so they take the first percentage of all profits; everybody else gets paid last, if they get paid at all.
And, when you do get paid, it comes back to you as inflation anyway. There is no way to win inside of a ponzi scheme, except by not playing. Look at how much money and goods big corporations move, but they fall into debt anyway. One person's profit is always somebody else's expense.
Get out of the market and stay out. The best thing Apple can do is go private, and exit the ponzi scheme. The ponzi scheme brings down everybody eventually. (When will Obama tell the people the truth?)
If you love Apple, then give them your stocks. Don't suck the life-blood out of them like a leech.
Think Different, or don't think at all.
The market is reacting to Apple's sales figures and bleak prospects in a continuing recession, Apple being the only "high price" company that prides itself for not giving its customers what they want, i.e. decent prices for the latest technology.
What a nutty statement. It must be hard to have an outlook on life like you do.
There are two very simple ways for Apple to help it's bottom line.
I know it's a Quixotic battle, but I owe it to my mother, the English teacher: The possessive is "its", not it's".