I am hoping for that plummet.... can't wait to get my hands on some shares of apple. I wanted to buy some back in the day when I think they were around 10 bucks a share....still crying over that one years later....
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Apple Posts 4Q 2008 Earnings Results
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I am hoping for that plummet.... can't wait to get my hands on some shares of apple. I wanted to buy some back in the day when I think they were around 10 bucks a share....still crying over that one years later....
Hi, I used to be an auditor, so I know a little bit about this:
The reason GAAP exists is to protect investors from marketing mumbo jumbo such as this. Apple isn't allowed to account for these sales because they haven't earned them yet, and this money could potentially disappear with returns, or if people cancel their contracts. It's not unimaginable that an issue with the app store for example causes mass contract cancellations.
You were probably just referring to this for the sake of discussion. I just didn't want any readers to make decisions based on these numbers.
I don't claim to fully understand the accounting mumbo jumbo but they did say in the conference call that the non-GAAP numbers were estimates used for internal tracking purposes, and that they included projections for warranty return costs, etc. Also FWIW, contract cancellations come with penalties. So what I think Apple is trying to communicate here is that they'd still have a tremendous amount of revenue to book in future quarters even if they never sold another iPhone. That was news I could use.
I don't understand this mentality. Fact is that Apple has been a EXCELLENT investment for long-term investors. "give something back".... I would say that they should hang on to that money, keep on making great products that drive up the share-price.
And "giving something back" means that Apple has received something from the investors. Well, unless the investors you are talking about are part of the buyers of the original IPO, Apple has not received one dime from the current owners. When you buy shares in Apple, Apple does not get any of that money, the current owners of the shares do. So there's nothing to "give back" to the owners, since they have not taken anything from the owners.
This is a rather simplistic bit of reasoning. The equity markets don't exist without investors. Further, corporations like Apple often pay their employees with stock options, which would be bloody worthless without other people prepared to buy them.
The fastest way for Apple stabilize their share price would be to (1) buy back shares, or (2) declare a dividend.
IJ, I just want to thank you for your insight and comments, from what I follow, you are quite vested in Apple and have followed them quite exstensively. Would you care to remind us your position stake and/or your relationship? I recall you were a columnist for MacWorld in the early 90's? If you don't want to respond publicly, could you PM? I would love to chat...
Good news. The below-expectations Mac sales were probably due to people holding off for the new notebooks. Expect next quarter to be a blast.
I'm still interested in the cash reserves. $25Bn is too much for just R&D. I have a feeling Apple's going to use the current economic climate to acquire some companies with undervalued stock prices. Possibly software related.
There's been a feeling for a long time that tech stocks were going to plummet in a way similar to the .com bubble. If this does happen, with so much cash, Apple is in a really strong position for acquisitions.
I could see Apple making an acquisition in the fabrication area. Apple's a company that doesn't like to share - custom operating system, custom chips from PA Semi, unique aluminium enclosure...etc.
That's just my opinion.
I'm still interested in the cash reserves. $25Bn is too much for just R&D. I have a feeling Apple's going to use the current economic climate to acquire some companies with undervalued stock prices. Possibly software related.
There's been a feeling for a long time that tech stocks were going to plummet in a way similar to the .com bubble. If this does happen, with so much cash, Apple is in a really strong position for acquisitions.
I could see Apple making an acquisition in the fabrication area. Apple's a company that doesn't like to share - custom operating system, custom chips from PA Semi, unique aluminium enclosure...etc.
That's just my opinion.
Apple is in a very unique situation right now, they could consume some very interesting fish in the coming months...
Forgot about PA Semi... How much has Apple forked out to acquire them or has the sum not been disclosed?
Because it's from Apple, the same company that has also proclaimed the handle on the iBook to be an "unbelievably incredible feature."
Not really.
Sure. But that still doesn't mean that Apple "owes" the investors anything. They invested voluntarily on Apple's shares and they have got plenty of return for their investment.
Apple might owe the investors who invested in them during their initial IPO, since they gave their money to Apple, instead of other investors. But those are few and far between.
Yes, I know that my reasoning goes against the currently popular thinking of "I am the stock-owner, everyone bow down before me!". So be it.
Besides, company does not have to be publicly traded in order to be successful.
They could instead pay them with cash.
When Microsoft issued a dividend, their stock-price went down, because investors perceived that as a sign of the fact that Microsoft has moved from being a growth-company in to a stable blue-chip company. And after MS spent their cash on dividends, they found themselves to be short on cash, which meant that they had to borrow money.
how about Adobe? current cap: 13.8 billion.
or maybe a content play? a bid for one of the movie+music studios perhaps.
When any company issues a dividend, the stock price _must_ go down. Apple has enough money to give $10 to shareholders for each share held. When the shareholders have the money in their pocket, and Apple has less money in the bank accordingly, Apple shares are worth $10 less. Of course if Apple gave a ten cent dividend, you wouldn't notice it in the noise.
That is actually not why revenues and cost are recorded over 24 months. The reason is that if revenues are recorded immediately, Apple would be going against SEC rules if they released any free updates for the iPhone and for the Apple TV. Remember when Apple charged customers the enormous sum of $2 to upgrade the wireless network on some MacBooks? They were forced to do this because doing it for free would have meant Apple broke the SEC rules.
Apple could very easily and completely legally record all the iPhone revenues at the time of sale. GAP rules mean Apple has to be reasonably sure to get their money. So if you could cancel a contract without penalty, money from that contract wouldn't be counted. If you could stop paying for a contract because you are bankrupt, Apple would have to make allowances for that and record only say 90% of the revenues. Customers cannot just "mass cancel" their contracts; they are binding contracts and they have to pay.
But doing this and recording revenues immediately would mean Apple cannot give free upgrades to iPhone customers. And it is a marketing decision that for the price of an iPhone, you get the phone with today's software and a reasonable expectation of free improvements over the phone's lifetime. You don't get these upgrades for free for the iPod Touch.
I am not Accountant not Auditor either but...
what we, the public, have been told, is that Apple chose to account this way, not that have to do it, to be able to still deliver product enhancements after the initial sale. This applies to the AppleTV even if there is no contract with it. The first gen iPhone was getting extra revenue on a monthly basis from AT&T so that revenue was at risk if the contract was cancelled by the user. The new iPhone 3G is subsidized by the Telcos and they pay full price (whatever that is) to Apple for the phones, but Apple still accounts for them in a 2 year period, even if they receive all the cash well before those 2 years. So, is this not true?
what we, the public, have been told, is that Apple chose to account this way, not that have to do it, to be able to still deliver product enhancements after the initial sale. This applies to the AppleTV even if there is no contract with it. The first gen iPhone was getting extra revenue on a monthly basis from AT&T so that revenue was at risk if the contract was cancelled by the user. The new iPhone 3G is subsidized by the Telcos and they pay full price (whatever that is) to Apple for the phones, but Apple still accounts for them in a 2 year period, even if they receive all the cash well before those 2 years. So, is this not true?
Completely wrong. Not even close. Aapl has earned them. They are not contract based. The iPhone sales (and appleTV sales) are completed sales, not dependent on future contracts. It's cash in the bank. Aapl claimed with Gen1 that it decided to use subscription accounting since it would be upgrading iPhone during 2 year period of AT&T contract, and didn't want to get into having to charge for those upgrades like it does with the Touch. I have my suspicions that that was not the main reason, but that's beside the point. And all contract based income (such as monthly subsidies from Gen1 iPhone) is accounted for as received.
And $25 billion of cash safely in the bank with zero debt.
"Safely in the bank". I hope it is. Would they have it all with one bank? I certainly wouldn't have that kind of money placed with one organization. Is it all cash? Would not some of it be invested in areas that have recently been drastically revalued?
I got a bounced cheque the other day stamped with "insufficient funds" and was left wondering whether it was my funds or theirs.
"Safely in the bank". I hope it is. Would they have it all with one bank? I certainly wouldn't have that kind of money placed with one organization. Is it all cash? Would not some of it be invested in areas that have recently been drastically revalued?
I got a bounced cheque the other day stamped with "insufficient funds" and was left wondering whether it was my funds or theirs.
Why a divident
The owners are the owners, so they're entitled to all of Apple's cash and other assets. Now let me explain the "mentality" in economic terms.
The value of any asset, be it a stock, a bond of a factory, is the present value of all future income from that asset. Asset prices fluctuate based on the shifts in the expected future income streams and changes in discount rates.
Individual investors may plan to sell the asset (in this case, a stock) at a certain point in the future, in which case the present value of the resale price is a part of the revenue stream they expect from that asset. In a perfect market (such as we usually assume in economics) that does not change the value of the asset, because we expect it to be priced in the future according to the discounted rate of future income at that point in time.
If a company never ever pays out a dividend, then the future resale price is going to be the only part of the discounted revenue stream.
Put all this together, and the stock is worthless. Why? Because if someone buys an Apple stock and holds it forever, it should provide the same utility as buying now and selling in one year's time (that's the perfect market assumption). But since there's going to be no dividends ever, buying and holding forever is throwing away your money - you won't see a dime. This means that the stock's value is zero.
So why is the stock valued at above-zero prices? Well, people expect the price to go up so that they make a healthy profit on the stock, but that can't account for everything, because this doesn't give the stock any value. The only thing that can give the stock value is if people expect the stock to gain some real value (rather than market fluctuations) by either of several things happening:
One way or another, every investor is counting on one of the above events happening. Without them, Apple's stock is worthless.
The owners are the owners, so they're entitled to all of Apple's cash and other assets. Now let me explain the "mentality" in economic terms.
The value of any asset, be it a stock, a bond of a factory, is the present value of all future income from that asset. Asset prices fluctuate based on the shifts in the expected future income streams and changes in discount rates.
Individual investors may plan to sell the asset (in this case, a stock) at a certain point in the future, in which case the present value of the resale price is a part of the revenue stream they expect from that asset. In a perfect market (such as we usually assume in economics) that does not change the value of the asset, because we expect it to be priced in the future according to the discounted rate of future income at that point in time.
If a company never ever pays out a dividend, then the future resale price is going to be the only part of the discounted revenue stream.
Put all this together, and the stock is worthless. Why? Because if someone buys an Apple stock and holds it forever, it should provide the same utility as buying now and selling in one year's time (that's the perfect market assumption). But since there's going to be no dividends ever, buying and holding forever is throwing away your money - you won't see a dime. This means that the stock's value is zero.
So why is the stock valued at above-zero prices? Well, people expect the price to go up so that they make a healthy profit on the stock, but that can't account for everything, because this doesn't give the stock any value. The only thing that can give the stock value is if people expect the stock to gain some real value (rather than market fluctuations) by either of several things happening:
- Apple might pay a dividend
- Apple may buy back stock, effectively giving money to some stockholders
- Apple may disband and distribute the remains to investors (never happens)
- Apple may sell out to another company that will buy everybody's stock
- Apple may sell out to another company that will replace everybody's stock with its own
One way or another, every investor is counting on one of the above events happening. Without them, Apple's stock is worthless.
