“The quick version: Apple blew past second quarter estimates, reporting earnings of $0.87 per diluted share, $0.89 per basic share. The official press release is here. But Peter Oppenheimer, CFO of Apple, provided some interesting details that aren’t in the release,” Carl Howe reports for Blackfriars’ Marketing.
“So here was the surprising news: Apple will continually develop new software features for the iPhone and Apple TV series, and Apple will upgrade the features free of charge. As a result, they’ll recognize deferred revenue for iPhone sales, accessories, and subscription revenue over 24 months. This accounting policy will have no impact on cash flow, but it will smooth out their lumpy results over two years,” Howe reports.
Howe reports, “Even more surprisingly, Apple TV features will also be updated over time free of charge, and therefore Apple will amortize that revenue over 24 months as well.”
Full article, with interesting tidbits about Apple Retails Store network and more, here.
[Thanks to MacDailyNews Reader “LinuxGuy and Mac Prodigal Son” for the heads up.]
This accounting problem is odd. Isn’t the expectation of every computer owner that there will be software enhancements that can take more advantage of relatively new hardware?
Hmmmm, if I read that right, Apple will defer some of the income from AppleTV and iPhone for a period of time.
That means that while they will be sucessful right away, they will also get credit for the success (money wise) again and again over the next two years. Smart move, me thinks.
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@Chris
Not really. I think that the trend has been that you get what you bought on purchase date, and anything that comes after that you have to pay for. This has been true with Apple, Microsoft, etc. The exception has been that if you bought a new machine and the new OS came out within 90 days then you usually got the new version for free. I think it’s nice that Apple has decided to update our machines as new features come out. Let’s hope that begins a new trend.
That’s “interesting”. Amortizing revenue over two years? If they’ve already started that, then they have hidden revenue they have yet to report! While the AppleTV is a low-profit item compared to Macs, reporting revenue for hundreds of thousands of them over the next seven quarters will camouflage their position – show it as weaker – while it grows stronger.
OTOH: this says quite clearly that neither product is actually ready for Prime Time. They may be ready for the market they face, but they need more time to ramp up for the market coming soon.
DLMeyer – the Voice of G.L.Horton’s Stage Page Pod-Cast
How does this jibe with the charge for 802.11n SW being charged for on certain Macs with n capable cards?
Hmmm. Follow up thought.
If Apple is announcing that it will update FOR FREE, this equipment, it means that if you were thinking of buying one and wanted to hold off for a better version 2 or 3 (Microsoft thinking 🙁 ) then you can now buy this right off the bat and know that you will have upgrades for free over and over again, No buying last years technology.
Neat idea. Savvy business move.
Not true – because theu have agreed to list sales and shipments for both iPhone and AppleTV. Just makes sense to smooth out profits especially as they are getting recurring subscription revenue.
show me the “money”
Not true – because theu have agreed to list sales and shipments for both iPhone and AppleTV. Just makes sense to smooth out profits especially as they are getting recurring subscription revenue.
show me the “money”
Not true – because theu have agreed to list sales and shipments for both iPhone and AppleTV. Just makes sense to smooth out profits especially as they are getting recurring subscription revenue.
show me the “money”
Not true – because theu have agreed to list sales and shipments for both iPhone and AppleTV. Just makes sense to smooth out profits especially as they are getting recurring subscription revenue.
show me the “money”
agree – alsop means apple can freely talk about upcoming AppleTV software updates (even if vaporware) and not worry about consumers holding off.
Free is good, but I don’t have a TV. If Apple will buy me a Panasonic TH-42PHD8UK, I’ll be glad to purchase Apple TV and associated software. Since I doubt that will happen, I’m thrilled for the rest of you.
OS X bitch!
in my opinion apple needs to make a macbook with de design of marc newson and jonathan ive,that will put apple even better in my opinion.
Jimbo has it right … mostly. You buy a Mac and you expect a limited number of free OS updates and patches to be free. Then you get to pay. You buy a PC and you can expect little to be free after that. Two years is about the longest you get free updates from Apple. But, here’s the kicker:“Apple will continually develop new software features”. Not mere “updates”, features!
Remember the accounting problems when Apple wanted to upgrade the iMacs with the new Airport-Extreme standard and they weren’t allowed to do it for free, so they had to charge some bucks?
Same reasoning seems to apply here: a massive enhancement of the gadget’s functionality through software update isn’t “allowed” by accounting standards unless you choose a somewhat strange method reported now.
What an original TIVO/cell phone industry idea…..
Just my $0.02
“G. L. Horton” said “OS X bitch!”.
Part of one reader’s continuing complaints about my use of a link in my .sig – and another reason we need log-ins and editing abilities here. BTW: your silliness drew a couple dozen new listeners to our pod-cast … thank you.
MW=FULL – as in “you are full of …
One side effect of this form of accounting is that customers can get free software upgrades for the iPhone and Apple TV without violating the evil Sarbanes Oxley law.
Apple TV is in dire need of a software update… i.e. music video playlists without stop, etc. Good news, but they better make the update free—apple tv is just a mac computer and they don’t charge for the mac software updates.
DL… don’t feed the troll bro.
LinuxGuy,
The Oxley-Sarbanes law is not “evil”.
It was the major reform law passed after the Enron, Worldcom, and Tyco scandals (you do remember these, don’t you?).
The law is not perfect, and it has driven up costs for public companies.
But it has put corporate executives on notice that if they behave like crooks, loot their companies, or defraud their shareholders, that their actions will come to light, and they will be held accountable.
So no, the law isn’t “evil”. That’s plainly ridiculous, whatever your disagreements with it may be.
Apple TV will be getting updates as iTunes receives them:
1. HD movie content
2. “Netflix-like” movie rental service
3. The biggest feature – iTunes rental or purchase ability directly in the living-room with Apple TV. This makes Apple TV more than just a one-way iPod like device. One can purchase or rent movies with Apple TV, and if purchasing the movies, Apple TV dumps them back to the Mac/PC iTunes Movie Library. A huge barrier in Apple TV acceptance. No need to involve the computer to get new video content, but just do that from the living-room. Nice.
Software upgrades, paid or not, are the usual expectation. What’s different here is the unspoken “You won’t be able to load them yourself anymore, we’ll take care of it for you.” “Oh, and you won’t have the option to skip an upgrade.” (maybe if it’s free, they won’t question our having complete control of a device they paid for)
What was the intro. to “The Outer Limits”?
MDN word “born” – like, were you born yesterday?
Software upgrades, paid or not, are the usual expectation. What’s different here is the unspoken “You won’t be able to load them yourself anymore, we’ll take care of it for you.” “Oh, and you won’t have the option to skip an upgrade.” (maybe if it’s free, they won’t question our having complete control of a device they paid for)
What was the intro. to “The Outer Limits”?
MDN word “born” – like, were you born yesterday?