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Apple's Second Quarter 2007 Financial Results: $770 Million Profit
- Thread starter Rocketman
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I have been trying to understand and integrate some of the "consequences" of the new accounting treatment for iPhone and AppleTV with the straight line 24 month revenue recognition (even though customers still pay cash on the barrelhead).
It seems to me one of the consequences is a very large portion of OSX development costs are going to be (or are already) ascribed to these new programs, thus, for accounting purposes, increasing the margins on traditional Macs.
With the componet gurus estimating iPhone has a 50% hardware gross profit margin as opposed to iPod around 30%, one wonders if instead of a portion being used to offset a data plan or increase retail margins, it is actually going into software development budgets (and corporate profits) during the 3-5 year ramp-up of the series of "iPhones" (ATN, ATNN, ATN2).
iPhone and AppleTV are, in fact, OSX Macs.
Rocketman
It seems to me one of the consequences is a very large portion of OSX development costs are going to be (or are already) ascribed to these new programs, thus, for accounting purposes, increasing the margins on traditional Macs.
With the componet gurus estimating iPhone has a 50% hardware gross profit margin as opposed to iPod around 30%, one wonders if instead of a portion being used to offset a data plan or increase retail margins, it is actually going into software development budgets (and corporate profits) during the 3-5 year ramp-up of the series of "iPhones" (ATN, ATNN, ATN2).
iPhone and AppleTV are, in fact, OSX Macs.
Rocketman
Last quarter's conference call stated-stay tuned for iLife/iWork updates. Apple's hasn't given any updates on that.
Will come out with Leopard and be Leopard only due to Core animation and Objective-C 2.0
The subscription accounting change for
tv looks like Sarbanes-Oxley ass-covering, i.e., an attempt to prevent another situation like "waking up" the n-card feature in the new MBPs without charging for it.tv is going to get some new goodies, but I don't really think that's news.
Apple shipped 1,517,000 Macs
Really? Wow!!! That is a lot of computers. Impressive!!!
And people are wondering why there are a lot of newbie questions around here
The subscription accounting change for
Yes, it does have to due with new accounting practices and SEC regulation, but notice how the iPod or Mac are not switching to the new accounting method. Just iPhone and AppleTV. This means the updates will make a material difference in the functioning of the device and as such the revenue of the device cannot be accounted for at sale because all of the features of the device have not yet been delivered. Therefore this is not about new content in the iTunes store. It is about new functionality, like iPhone as a remote for AppleTV, Browsing the Youtube clips on the Apple TV, buying content from Apple TV directly, allowing more formats to be played, and other features I cannot even think of.
Fantastic Growth Curve
Wow that's huge growth - especially in light of the fact that this is only the beginning of the transition to intel processors.
Wow that's huge growth - especially in light of the fact that this is only the beginning of the transition to intel processors.
Here's how they addressed that
"Apple assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates."
Chickens!
The long list of "risks" is fun to read and watch what new potential disasters they add each time (see post #1 near the end).
Rocketman
iPhone in LATE June
Notice that Stevo makes a point to say the iPhone is coming in LATE June.
So there goes any hope of seeing it released at WWDC...
Notice that Stevo makes a point to say the iPhone is coming in LATE June.
So there goes any hope of seeing it released at WWDC...
Well earnings came out at .87 a share. Wall Street anticipates some of that so the stock went up $2 in regular trading. In After Hours it is up $6.5 dollars breaking that 100 barrier. I see the stock trading between 100-110 for the next 3 months. The stock will really take off after 3rd quarter.
I'm going to disagree. What Apple uses its cash for is large prepayments to suppliers (flash, CPU, memory) to get favorable parts cost outcomes. Better than everyone else indeed. This has resulted in wildly increased profit margins, net profits and thus huge increases in share price. FAR more value than a dividend would deliver.
Growth is crack to the stock market (Cramer). Apple is focused on sales, profit and margin growth. As a stockholder, I'll take that over a dividend any day. The tax rate on long term capital gains is 15%.
Rocketman
That's cause wwdc is for COMPUTERS! but is it for osx developers that will also make iphone apps?
iphone is on hold cause wwdc he'll unveil a whole new imac/macbook/mbp lineup !!
They don't need a $12 billion cash mountain for that. Apple should invest that money in growth (capitalize it), or distribute at least some of it to the stockholders in the form of dividends (The tax rate on qualified dividends is as low as 5%). Dividends reward investor patience, decrease volatility and declaring one sends a positive message to the markets. Dividends are a good thing.
It also allows for more options in inventory management. For example, if a company must pay substantial debt service, they cannot afford to hold inventory. This places considerable pressure on supply chain management. You often must accept less than favorable suppliers, and terms. However, if you can capitalize your purchases, you can reverse both of these. You still must do good inventory management, but your options are much greater.
For example, take the case on the Mac Pro. If you were to take a caliper and micrometer and measure the tolerances, inside and out (I have), you will be impressed with how little tolerance build-up there is. These cases are built to aerospace specs - very impressive. Look at how well everything is radiused, the edges broken, etc. This is quality craftsmanship. Compare that to brand X. There is no comparison. The reason Apple can afford to offer such better quality is largely due to the fact they can order in large quantities to get the price down. That means they have to hold inventory, but if they do not have to pay debt service, it is largely mitigated.
Come now, that sounds like Apple propoganda.
Apple has something like 10 Billion in cash reserves. They do make use of a small fraction of that income to prepay suppliers but not close to the whole amount.
While stock price growth is excellent, I am not complaining about their performance, Apple could also commit to a quarterly dividend. Dividend payments would attract more investment from the sector of investors which invest for income generation and aren't as interested in long term growth. This demographic is getting very large now with the approaching of retirement age for many "baby-boomers".
High-growth stocks like Apple also tend to be higher-risk. In that, usually products are hit or miss and highly dependant on an economy populated by customers with a large disposable income. Don't forget that Apple had a pretty hard time in the mid-90's.
When profits are this strong and the market is growing this fast, I just think it is proper for Apple to consider yielding a dividend to the loyal stockholders that have stood with her through good and bad times.