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.
ZT,
The reason Ron hasn’t started a blog is because he’s only allowed access to a computer when there’s a mental health professional who can supervise.
The idea that, after the “mainstream media” acted as a cheerleader for this administration’s illegal and unwarranted invasion of Iraq or the travesty that was ABC/Disney’s “The Road To 9/11” (or whatever it was called), that the MSM is dominated by liberals is, with the best will in the world, utter balderdash.
It took at least six years for this administration’s press corps to finally start asking some probing questions about the honesty and integrity of this administration (esp. Cheney and Rove), which coincided with the turning of public opinion in the run-up to the mid-terms.
No administration of whatever stripe should have a lick-spittle media that has less curiosity and intellect than a King Charles Cavalier Spaniel; in the absence of real checks and balances, the media – as was proven by Watergate and Murrow’s opposition to McCarthy – is the only safeguard when the Executive Branch tries to manipulate support by using fear and hysteria.
I’ve been pointing out Apple’s deferred revenues in a number of posts here, since earnings. They are NOT to cover red rings of death, like MS’s Xbox 360, they are to meet the new accounting standards. Revenues where services are provided over time, must have revenue recognized over time. So, an iPhone generally comes with a 2-yr contract. The revenue is then recognized over 2 years, etc. This is also why the iPod Touch requires $20 for the upgrade why the AppleTV and iPhone do not. The Touch’s revenue is not being recognized over time, while the others are. Accounting rules require that new services be paid for.
Now, look at the iPhone. If you sell 2.3M units this past quarter, that should add just over $1B in revenue, but it didn’t. It added only 1/8th of that amount. The other 7/8ths are recognized in the next seven quarters.
Can you imagine if Apple had reported $10.5B in revenues and not $9.6B? Because $10.5B is what they sold.
And, he’s right, Apple added $3B to its cash position, while only adding $1.6B in income. The $900M in deferred income is a large part of the gap. It’s only $900M, as that’s 7/8ths of the $1B. Apple recognizes 1/8th.
The other tidbit you can pick up from Apple’s conference call and financials is that based upon the deferred income number from this quarter and last, you can figure that Apple gets $450 for each iPhone, including fees from AT&T;, over the two years.
MDN, frequented and fermented by libs. Only a few here who are on the ‘Right’ track.
@ Wallace
No, GAAP (Generally Accepted Acct Principles) require that in tech, if you expect software upgrades, you must book aportion of the sales price to cover the value of the upgrade.
There was a stink about having hidden features, and sending an upgrade to unlock the features, without accounting for it.
Apple is trying to account for it.
Presumably, that’s the “Right” track that saw the the US public debt increase to $9 trillion from $5.6 trillion at the end of the Clinton administration.
Remind me, Ron. When Clinton left office, what was the public debt’s percentage of GDP? How come Truman through Carter (including Ford and Nixon) managed to wipe out the debt caused by WWII (despite fighting the Korean and Vietnam wars) and the administrations that followed – including Reagan and Bush Jr. – have wound it back up again to around two-thirds of GDP?
What was that about Republicans, conservatives and small government?
Maybe all of that doesn’t matter if someone else’s children are going to land up paying for it; over $28,000 for every man, woman and child in the US as it currently stands.
Is it the “Right” track that around 30% of general taxation goes on defence spending, and 19% goes on interest? Is it the “Right” track that the Federal government now routinely “steals” money from the Social Security trust fund (leaving IOUs that will never be paid back).
So that deals with the myth of Republican fiscal conservativism.
The truth is that the Republican “Right” is taking the US to fiscal bankruptcy, whilst being morally bankrupt itself: it has allowed the US to become associated with illegal wars, torture, environmental ignorance, contempt for science. In itself, it has used FUD to manipulate the population into accepting an erosion of personal liberties that would make the Founding Fathers spin in their graves.
MCCFR,
Well said. Thank you.
MCCFR,
Gloom and Doom, Gloom and Doom
I like pie
mw: college
apt, as usual
Go Romney!
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