“If Apple didn’t sell another iPhone or an Apple TV for the next two years, it would still recognize well over $292.5 million in revenue each quarter for the next year (Q3, Q4, Q1 & Q2), and roughly $763 million in revenue throughout the second half of fiscal 2009. That’s just from the 5.4 million iPhones Apple has already sold as of the end its fiscal second quarter,” Andy M. Zaky reports for AppleInsider.
“The reason? Apple’s war-chest holds nearly $1.170 billion in currently deferred revenue and $763 million in non-currently deferred revenue from sales of the iPhone and Apple TV as of the close of its fiscal second quarter,” Zaky reports.
“To fully grasp the potential impact of the iPhone on Apple’s future financial results, one must be aware of how Apple recognizes its revenue from iPhone and Apple TV sales. For some reason, analysts seem to overlook explaining this important detail to their readers. Under GAAP accounting, a company normally fully recognizes the revenue associated with the sale of a product, such as an iPod, once the device has reached the end user; or less commonly, when the device has shipped. Yet, due to certain idiosyncrasies with Sarbanes-Oxley (SarbOx), Apple is forced to use what is called the subscription method of accounting for recognizing iPhone revenue. Under this accounting method, Apple literally divides each iPhone sale by 730, and recognizes the portions from that particular iPhone each day for exactly two years or 730 days,” Zaky reports.
“I am absolutely confounded that Apple is not trading at well over $200 share right now—especially with 22 forward P/E according to my 2009 estimates. But then again: I was shocked to see Apple trade at $50 in July of 2006 and I’ve been long ever since,” Zaky writes.
Much more in the full article here.
[Thanks to MacDailyNews Reader “me” for the heads up.]