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MacBytes
Jan 19, 2007, 08:47 PM
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Category: Apple Software
Link: Avoiding Apple's n-come tax (http://www.macbytes.com/link.php?sid=20070119214707)
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Posted on MacBytes.com (http://www.macbytes.com)
Approved by Mudbug

mkrishnan
Jan 19, 2007, 09:02 PM
Interesting analysis. Clearly the whole industry has to do something like this. SOX is just way too restrictive to the way the computer industry does things, otherwise. Not to mention that stopping things like this doesn't really protect the public in any way related to the Enron fiasco.

centauratlas
Jan 19, 2007, 09:32 PM
SOX is just way too restrictive to the way the computer industry

SOX is way to restrictive, but the thing to fear is the class action lawsuits later alleging that SOX was voilated. Until and unless it is clear, companies have to assume the worst from the trial lawyers.

scottlinux
Jan 19, 2007, 09:45 PM
It will be hacked, as soon as the updated driver is out. There are work arounds for everything.

Benjamindaines
Jan 19, 2007, 10:02 PM
It will be hacked, as soon as the updated driver is out. There are work arounds for everything.

That's not the point, I doubt Apple really cares that people are going to crack their Wireless N enabler that they don't even want to charge for in the first place. The point is that this is a stupid law that should be killed.

bhibbert
Jan 19, 2007, 10:16 PM
It basically boils down to this...

If Apple delivered iMacs and MacBooks with 802.11n hardware but not the software to drive them, then legally they would not be able to recognize the revenue from the sale until after the software was delivered. In other words the sale is not complete until the full features are delivered.

By charging additional fees they are selling the 802.11n as a new capability and therefore seperating it from the previously sold product.

If they gave it away then SOX would claim that Apple's accounts included revenue from products that had not been completely delivered and this would be in breach of the accounting rules.

If these were purely software features (like skins) it would be no big deal, because the original product delivered was complete. It's the fact that hardware was present without the driver that is the complication in this issue, and why, most likely, Apple are charging for the software drivers and therefore protecting themselves from any accounting claims.

bbarnhart
Jan 19, 2007, 10:17 PM
What would be funny is if Apple sold a total of 5 copies of the wireless N enabler. And, then when asked about it they would say "Oh, well... you know."

Blackheart
Jan 19, 2007, 11:01 PM
It basically boils down to this...

If Apple delivered iMacs and MacBooks with 802.11n hardware but not the software to drive them, then legally they would not be able to recognize the revenue from the sale until after the software was delivered. In other words the sale is not complete until the full features are delivered.

By charging additional fees they are selling the 802.11n as a new capability and therefore seperating it from the previously sold product.

If they gave it away then SOX would claim that Apple's accounts included revenue from products that had not been completely delivered and this would be in breach of the accounting rules.

Then why not charge $0.01?

shyataroo
Jan 20, 2007, 12:08 AM
Then why not charge $0.01?
distribution fees, profit margins.

DMann
Jan 20, 2007, 12:54 AM
Then why not charge $0.01?

let's be reasonable....... .50

Porco
Jan 20, 2007, 01:42 AM
I think they could have been much more imaginative (dare I say innovative?!) with this. Like $1 for the updater + 1 free iTunes track of your choice. They can charge 99 cents for an iTunes track, so it would effectively make it a 1 cent charge after the promotional cost of the track.

mkrishnan
Jan 20, 2007, 07:33 AM
What would be funny is if Apple sold a total of 5 copies of the wireless N enabler. And, then when asked about it they would say "Oh, well... you know."

:D

What? You don't believe us? Those damn Windows Mobile tools stole our iPhone interface in one day! Erm, what do you mean we stole the iPhone name? Erm... we are firmly committed to the war against terrorism, erm, piracy, erm, Windows. Yes. Gotta run. Fashion shoot, you know.

iW00t
Jan 20, 2007, 07:36 AM
I bought the router so I am not too pissed :)

123
Jan 20, 2007, 07:50 AM
If Apple delivered iMacs and MacBooks with 802.11n hardware but not the software to drive them, then legally they would not be able to recognize the revenue from the sale until after the software was delivered. In other words the sale is not complete until the full features are delivered.

Why? They never sold 802.11n, they sold a hardware and software bundle capable of 802.11g. And this is exactly what was advertised, what people paid for, and what was delivered. Sale completed.

By that reasoning, they wouldn't be allowed to distribute new versions of Quicktime either. They enable my hardware to display movies in new formats, something that has not been advertised when I bought the hardware.

Complete BS.

mkrishnan
Jan 20, 2007, 07:59 AM
By that reasoning, they wouldn't be allowed to distribute new versions of Quicktime either. They enable my hardware to display movies in new formats, something that has not been advertised when I bought the hardware.

It is BS, but it isn't Apple's fault. Every major company doing business in the US is adapting their practices as a result of the SOX.... And as another poster above said, they are doing it in a vacuum without knowing what future lawsuits might be raised for "non-compliance."

Apple released function enhancing updates to their products in the past. For instance, the previous AEBS got WPA2 after it initially shipped, as did, I think, Panther. So did Microsoft (e.g. XP/SP2). But the adaptations to this act are just now coming into place, and there is little trial law surrounding it. So accountants and legal counsel are playing it safe. It may be that for a while, Apple, MS, and everyone else will be very hesitant to do what they have done in the past.

It might all boil over. It might not. Hopefully, for the computer industry, where there is a long tradition of releasing free functionally enhancing upgrades to their products, the resolution will be one that favors customers. But we have to wait and see... SOX isn't just concerned about customers. Who had the major fallout from Enron? All those people who lost their jobs? All those people whose retirement accounts were affected by the stock market impact? This is a complicated problem. SOX is not necessarily the best solution. But it is the one that is in place, and we have to wait and see what happens.

In the meantime, so Apple is charging $2 to get 802.11n. Oh my god. I think I'm going to slit my wrists...vertically, naturally. ;)

MarcelV
Jan 20, 2007, 08:11 AM
Why? They never sold 802.11n, they sold a hardware and software bundle capable of 802.11g. And this is exactly what was advertised, what people paid for, and what was delivered. Sale completed.

Not completely true. The hardware was able to provide 802.11n. It was software that disabled this. Your QT analogy does not apply. The hardware is already capable of displaying the format and revenue was recognized at time of hardware sales.

Probably no one disagrees with your statement of BS, except that SOX is causing this, not Apple. And from the experience I have by daily having to deal with SOX, I understand Apple's interpretation. It's unfortunate, and I don't think SOX was meant this way, but as long as it is not clear, better to take the safe route as company.

matticus008
Jan 20, 2007, 08:22 AM
It was software that disabled this.
No. There was, at that time, no software in existence to enable it. There's a world of difference.

Belly-laughs
Jan 20, 2007, 08:46 AM
I just spent $5 worth of time reading the article and the posts. Doing the workaround will cost another $5-10 of my time. I rather pay Apple $1.99 and get it over with.

Oh, this post is $0.02.

MarcelV
Jan 20, 2007, 12:27 PM
No. There was, at that time, no software in existence to enable it. There's a world of difference.

You're correct. We can get very technical, but you're right. Hardware had the capabilities, software didn't exist to enable. But my point was to proof the QT codec example was not a similar scenario.
It would be the same, if a hardware accelerator was build in, not utilized, and the codec would enable the hardware part. But just upgrading software to provide new functionality on the same hardware as already was utilized would not fall in the same category.

Now, technically spoken, I don't think Apple's interpretation is what SOX tried to solve. This is corporate lawyers making sure no one can come back and get them in trouble. I think the lawyers stretched it a bit on this one, but I can see Apple's point that it's better to prevent than to cure at this time.

Jodeo
Jan 20, 2007, 01:17 PM
Hey,..

YOU KNOW WHAT? NUTHIN!!!

uNext
Jan 20, 2007, 04:55 PM
So whwy didtn apple just release it complete instead of waiting for this enabler?

Whos fault is it really? Not mine i went after what they where selling.
Is not my fault they did not want to enable it so why should i have to pay?

Yes its 1.99 but guess what if we dont stand up to this other companys will be like "HEY THEY WHERE FINE WITH SO LETS USE THAT EXCUSE TO GENERATE ANOTHER 6MILLION"

is not our fault is apples fault period.

Nermal
Jan 20, 2007, 05:28 PM
It'll be interesting to see whether the enabler becomes available as a free download from a country that doesn't have this law. Apple wouldn't tell their US users to go there, of course, but it might still be a possible workaround.

Edit: As a side note, I see that they're up to their usual tricks again: In one place they say that N offers 5x the performance, and in a different place they say it's 5x faster.

matticus008
Jan 20, 2007, 07:05 PM
So whwy didtn apple just release it complete instead of waiting for this enabler?
Those two options are mutually exclusive. If they had the software ready, it would have been released complete.

Whos fault is it really? Not mine i went after what they where selling.
Is not my fault they did not want to enable it so why should i have to pay?
You got exactly what they told you they were selling. They had no obligation whatsoever to enable it at all, for free or otherwise. Why is it okay that you have to pay? Because you were never entitled to it to begin with. It certainly would be nice if it was made available for free, but there's no reason customers deserve it for free.

SMM
Jan 20, 2007, 07:27 PM
Then why not charge $0.01?

They probably estimated the cost to process and report the payments. Administrative costs are not free. Look at bills you receive. Many will have a 'processing' fee. I am surprised they actually are charging so little. The fallout would have been the same for $5.

123
Jan 21, 2007, 09:25 AM
But my point was to proof the QT codec example was not a similar scenario. It would be the same, if a hardware accelerator was build in, not utilized, and the codec would enable the hardware part. But just upgrading software to provide new functionality on the same hardware as already was utilized would not fall in the same category.

This is exactly what they did. It is the same hardware component that was already being utilized (for 802.11g) that they are now using to do n too.

Mars
Jan 22, 2007, 11:58 AM
It's 2$ people! Get a life and buy a cheeseburger..no make that two...no three... :rolleyes:

rohitp
Jan 22, 2007, 01:56 PM
Just thank Apple for including the n capabilities with something you had already purchased as advertised, i.e., with g. I am thankful that Apple thought enough of it's customers and me to include the hardware with my MacBook anyway. You all would feel much worse if, a few weeks after you bought your Mac, they started shipping better hardware.

Give it a rest folks. Skip your cheeseburger and pay the $2.

shamino
Jan 22, 2007, 06:02 PM
Why? They never sold 802.11n, they sold a hardware and software bundle capable of 802.11g. And this is exactly what was advertised, what people paid for, and what was delivered. Sale completed.

By that reasoning, they wouldn't be allowed to distribute new versions of Quicktime either. They enable my hardware to display movies in new formats, something that has not been advertised when I bought the hardware.
New versions of QT are not an integral part of your hardware. They're all add-ons, and the original version is a free product to begin with. A free upgrade to something that's a free download isn't a problem.

I agree with you that shipping firmware with a new feature shouldn't invalidate the billing for systems already shipped, but what about those that have not shipped yet? Presumably, MacBooks shipping now (or in the near future) will come with the n-features enabled, but there are plenty of units in the retail channel that have the n-features disabled.

Now that Apple has admitted that there is n-hardware in there, if they give away the enabler, then any auditor can claim that those sales are incomplete until the customer downloads and installs that enabler. If the customer takes six months (or six years) to get around to it, the sale could be considered incomplete that entire time. This would create a terrible mess for the books.

By charging a token fee, now the original systems are sold complete, and you're paying for an upgrade.

Note that the updater is also being bundled with the new AirPort Extreme base station. It wouldn't surprise me if they bundle it with other paid products in the future (like Mac OS 10.5 and maybe other things.) The point isn't to make money, but to make sure they can tell auditors that the original MacBooks were shipped complete, and that this driver is an upgrade, not a completion to a prior sale.

I suppose Apple could've worked around this by shipping new MacBooks with the n-features enabled, and only announce the capability and enabler after they're reasonably certain that all of the n-disabled units have been sold. This way, nobody can say their hardware is less than what was advertised at the time of the sale. But this would mean delaying the release of the updater for a while, which would create flames over the AirPort Extreme (for shipping a pre-n router without any pre-n interfaces to connect to it.)
So whwy didtn apple just release it complete instead of waiting for this enabler?
My guess is that they hadn't developed the firmware at the time the Core2Duo systems were released, and they didn't want to delay the release of the computers.

Sure, the hardware manufacturer probably had firmware available, but it might've been designed around an earlier draft of 802.11n - one that Apple considered unacceptable for some reason.

So what do you do? Ship with sub-standard firmware, knowing that customers will have a lot of problems until it can be updated? Ship a b/g card instead and make people go through a hardware upgrade when the pre-n device is stable? Or ship it with the n-features disabled and release an updater later (realizing that accounting rules will make you play some stupid games and charge a token fee for the update.)?

The way I see it, they took the path that would generate the fewest problems in the long run.
Yes its 1.99 but guess what if we dont stand up to this other companys will be like "HEY THEY WHERE FINE WITH SO LETS USE THAT EXCUSE TO GENERATE ANOTHER 6MILLION"
Somehow, I think this update is going to cost them more (in terms of processing the payments) than the $2 you're being asked to pay.

If this is being used as a profit-center, then it's an awfully brain-dead one.

It may be worth noting that when Mac OS X 10.1 came out, it was a free upgrade to owners of 10.0, but you had to pay a $10 media charge, in order to cover the cost of the CD, packaging and distribution. I don't think they made any profit off of that either.

eenu
Jan 22, 2007, 06:25 PM
i wonder if 10.5 will automatically unlock it on a clean install......:rolleyes:

danny_w
Jan 22, 2007, 06:43 PM
These unclear parts of SOX and the costs associated with implementing it (and they are certainly not cheap - the end user ends up paying the bill) is why so many smaller companies like the one that I work for have gone to the pink sheets, where SOX is not a requirement. For smaller companies, the overhead involved in being a public company does not make any sense, esp. with the advent of SOX. Unfortunately, this is not an option for Apple.

Anonymous Freak
Jan 22, 2007, 07:41 PM
Somehow, I think this update is going to cost them more (in terms of processing the payments) than the $2 you're being asked to pay.

I run a small business. We accept credit card payments. A $1.99 charge would cost us $0.36, but for Apple, even that $1.53 is probably negated by the costs of downloading it, supporting it, etc. They might make a penny or two, but in all likelihood, their books will actually show them losing money on the $1.99 sale. (Although they probably also have a lower per-transaction rate than me.)

macfan881
Jan 22, 2007, 08:05 PM
Just thank Apple for including the n capabilities with something you had already purchased as advertised, i.e., with g. I am thankful that Apple thought enough of it's customers and me to include the hardware with my MacBook anyway. You all would feel much worse if, a few weeks after you bought your Mac, they started shipping better hardware.

Give it a rest folks. Skip your cheeseburger and pay the $2.
agreed or that tv show you download from itunes is it really that much

IJ Reilly
Jan 23, 2007, 12:37 AM
i wonder if 10.5 will automatically unlock it on a clean install......:rolleyes:

Why would it require a clean install? Leopard will be a paid upgrade. Presumably a paid upgrade can include new features.

123
Jan 30, 2007, 12:19 PM
I agree with you that shipping firmware with a new feature shouldn't invalidate the billing for systems already shipped, but what about those that have not shipped yet? Presumably, MacBooks shipping now (or in the near future) will come with the n-features enabled, but there are plenty of units in the retail channel that have the n-features disabled.

Now that Apple has admitted that there is n-hardware in there, if they give away the enabler, then any auditor can claim that those sales are incomplete until the customer downloads and installs that enabler. If the customer takes six months (or six years) to get around to it, the sale could be considered incomplete that entire time. This would create a terrible mess for the books.


You do of course realize that your post doesn't make any sense at all. So now "that Apple has admitted that there is n-hardware in there" and I buy one of those "plenty of units [still] in the retail channel that have the n-features disabled", I have to pay another $2 for an advertised feature? In that case Apple would really have a problem with accountants and customers alike.