Apple’s extra 1 billion dollars of deferred revenue

Apple’s (AAPL) deferred revenues are “a huge stream of revenues that it doesn’t add into the quarter’s numbers,” Stephen Rosenman explains for Seeking Alpha.

“Deferred revenues represent money actually received but not officially booked, because more services may be required by the company to the customer. APPL has recently decided to make a large amount of its sales–iPhones, Apple TV, AppleCare– go to deferred revenues. So when AAPL sells its iPhones, Apple TVs and AppleCare, it only books a small portion of the revenues in the quarter sold. The company reasons that customers may require other services on these products such as free software upgrades. AAPL sets a two year period over which these products are incrementally added to its balance sheet. Remember the costs of iPhones and Apple TVs have already been largely incurred,” Rosenman writes.

“This quarter, AAPL did 1 billion dollars of deferred revenue, money that will be gradually added in quarter after quarter over a 2 year period… That’s why its operating cash flow is so high at 2.787 billion, almost twice the net income. This hidden revenue stream has largely been paid,” Rosenman writes. “And, as long as iPhones and Apple TVs are being sold, deferred revenue will be a huge factor, one that must not go unnoticed.”

Full article here.

MacDailyNews Note: We have corrected certain Apple product name errors in Rosenman’s original article in order to keep the focus on the salient point: Apple’s deferred revenue stream.

37 Comments

  1. I have stated this very fact to many-a-friend. It is very, very important to consider it.

    If Apple were like other companies and recognized it all in the same quarter, Apple would have blow away both earnings and forecasts considerably more.

    When the market wakes up to this, it will matter.

  2. Stephen Rosenman refers to TV as iTV several times in the original article. Has he been in a coma? Similarly, Jennifer Westhoven on CNN kept referring to “Apple Computer” several days ago. There is a lot of sloppy reporting in mainstream media and even more sloppiness on blogs which keep getting more attention.

  3. …AAPL did 1 billion dollars of deferred revenue, money that will be gradually added in quarter after quarter over a 2 year period…

    2 years is also the AppleCare extended warranty coverage.

    Beleive me, Apple shells out a lot of money in repairs and Apple Care workers salaries.

    This is mainly the reason why Apple sticks to all in one devices, has been closing off sections of the Mac Pro to reduce customer tampering.

    You see with PC’s there is a whole industry of third party support buisnesses. With Mac’s there isn’t, although it is growing somewhat.

    So Apple does everything it can to eliminate/reduce repairs and support costs. It is in it’s best interests to make a safe and secure OS, reliable hardware etc. Unlike Windows PC’s.

    Now only if OS X could run Windows in a “shell”, safe from the internet and the results of malware attacks.

  4. NBC reported that Apple had a bad holiday quarter with slow sales. I sent them a copy of Apples record breaking sales numbers and recommend they fire their financial reporter for getting the facts all wrong.
    But, Apple breaking sales records and having the best holiday quarter didn’t play into there doom and gloom recession story so, they had to skew it so, it did.

  5. “Now you know how those serving in Iraq feel.”

    I really don’t but I get your point. Ratings over accuracy is shameful. I have no doubt that some misreporting (on both sides of the fence) is deliberate especially with regards to politics.

  6. So NBC has an agenda to make things look a lot worse than they really are. Gee, imagine that. You’d think we were on the verge of the Great Depression by listening to what these biased morons in the media are spouting off these days.

  7. Isn´t deferred revenue such as this a negative?
    Apple is acknowledging problems with its product and keeping money (lots of it) in reserve to handle returns and other repairs and defects.
    On the flip side if Apple knew it was going to have no major problems with its products why not claim it all on the current balance sheet?
    Not good.

  8. And I could have done without seeing Heath Ledger or Anna Nicole Smith in a body bag. Was that really necessary in reporting the story? The networks would probably broadcast autopsies if they thought they could get away with it.

  9. “You’d think we were on the verge of the Great Depression by listening to what these biased morons in the media are spouting off these days.”

    It’s funny how people consistently call the media ‘liberal’ or biased when ALL media is owned by huge multinational corporations, that have a lot to lose if the economy sinks.

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