New Apple iPhone Apps and Apple TV Updates to Come

[dmlogs]

Plus EnGadget posted an "internal" AT&T Document that reads "... no subsidies are being offered on the phone at this time." HERE IS THE KEY!!! I don't know how it could be more clear, NO SUBSIDIES at this time, Steve Jobs said that this price point of $499 and $599 was with a 2 year contract thus subsidized. There is the conflict if AT&T now says the $499 and $599 price reflect NO SUBSIDIES.

IMO another hint at possible future subsidies is the fact that the phone is locked to cingular / at&t and you can't take it over as an unlocked phone and stick your tmobile sim card in it or anything. An AT&T / Cingular 2 yr contract subsidy would not lower Apples profits from the phone, only cingulars. Also you must take in to account $500-600 for a phone is a huge cost above other phones for the common consumer in a market where most phones are between Free to $100 with a 2 yr contract.

I would think Cingular is paying apple a ton of money to get exclusive rights for cell service on the iphone, which would mean they will probably have some way of making the iphone more appealing to the average consumer, especially teenagers who are constantly buying ipods and new cellphones. the iphone combines these

 

[Ars Diaboli]

Sharing Revenue

While I don't know the reason for doing Apple TV that way, I do remember that Cingular/ATT had to give up some monthly revenue on the 2-yr contracts to Apple. This is the most likely reason, accounting for the income as it accrues instead of on a cash basis.

This will lead to a modified statement, if I am hearing the report right. It appears that some of Apple's income is cash accounting (accounted when a sale is booked). This would create a hybrid statement if part were cash and part were on the accrual method.

And I do not for a minute think that the 'N' fiasco was due to accounting problems.

 

[roland.g]

Good to hear. As an Apple TV early adopter, many of us know that there are improvements that can be made within Apple TV software.

 

[Rocketman]

Steve Jobs said $499 and $599 with 2 year contract. he never said that it was with subsidies. people just assumed.

arn

During the conference call the only subsidy discussed was what AT&T will be paying TO APPLE to offer the service exclusively through them and let them exclusively sell such a popular and high priced piece of hardware in their stores.

There is no "subsidy" because there is a "reverse subsidy", even at the $599 price point and 50% gross margin

UPOD

Rocketman

 

[twoodcc]

Glad to hear they're planning on a lot of free updates to the iPhone service and the TV hardware.

me too. looking forward to getting an iPhone

 

[Ars Diaboli]

True Cingular plan costs

Now, It also stands to reason that Cingular will be able to offer cheaper plans for use of the iPhone. But somehow, I doubt that is going to happen.

Cingular has rollover minutes and a new text to everyone, ATT customers or not (but not incoming texts, these appear to still cost you (and I will stand corrected when someone can prove otherwise)). ATT has an all you can eat data plan, but it is expensive and not a quality communication venue, imho.

I believe that these will be required for optimization of the iPhone: a data plan, enrollment in the text service, and rollover (rollover comes standard). Now how much of that phone is really subsidized over the life of the contract.

My question is, is it reasonable to expect a monthly phone bill cut by 20% because I did not have to subsidize the cost of the new phone?

How much monthly revenue is Apple going to get from ATT? Is that 20% going to go to apple now? If so, I know of two companies that will have an increasing net revenue stream for 2007, Apple and ATT.

AAPL posted a $770MM net profit! And this is mainly because of new mac's. Wait till the iPhone hits!! Ye Gods! This stock will bump $150 and then split and possibly break $100 again by this time next year!!

 

[ShaneM]

3G support

Does anyone know if it will be possible for them to then add 3G support to the iPhone or is that a hardware thing? I know I'm gonna be locked in for 2 years so getting a non-3G phone when Jobs said he was going to release 3G devices in the future scares me.

 

[droz]

good, maybe they will actually push out some new firmware that will make the apple tv something more than a crappy paper weight.

 

[zwida]

Does anyone know if it will be possible for them to then add 3G support to the iPhone or is that a hardware thing? I know I'm gonna be locked in for 2 years so getting a non-3G phone when Jobs said he was going to release 3G devices in the future scares me.

It's a hardware thing. They could build the 3G chipset into the phone and activate it later (but they won't do that...).

 

[e28]

Deferring revenue for accounting I think has more to do with Apple hiding sales #'s for units of iPhones and AppleTV's and spreading the earnings increase over 2 years (less stock price volatility). They don't have to spread it out because they are offering free updates - that's just their excuse.

Nonetheless, it's certainly nice to hear that there will be functionality updates!

 

[Object-X]

24 months

So, this means the current AppleTV and the iPhone will be good for at least two years before Apple comes out with a next gen device.

I thought this had to be the case with the AppleTV. There is just too many possibilities this device has for it to remain static for any length of time. And I guess it makes sense for the iPhone since you have to sign up for a two year contract.

But will the next generation AppleTV support 1080p? I should be able to afford a nice Sony by then.

 

[SiliconAddict]

"We want to provide many of these new features and applications at no additional charge to users until the iPhone becomes insanely popular. At which point we'll just release updates for the latest and greatest iPhone."

Fixed that for you. Apple not trying to force people into upgrading their hardware through software updates is like Microsoft not pulling some underhanded slimeball business tactic. It just doesn't happen.

 

[shawnce]

So, this means the current AppleTV and the iPhone will be good for at least two years before Apple comes out with a next gen device.

Don't assume that. The 24 month spreading of revenue from the device doesn't really say anything about how often they are going to rev the hardware.

 

[shawnce]

Deferring revenue for accounting I think has more to do with Apple hiding sales #'s for units of iPhones and AppleTV's

They can hide those numbers by not stating them... spreading their revenue over 24 months isn't going to improve hiding of unit numbers. If they state any numbers then you can divide by 24 and make a guess at the unit volume, etc.

 

[syklee26]

The other really cool part about all of this has to do with my solid belief that Apple has decided to keep the iPhone extremely tight. If you buy an iPhone at launch that phone will continue to be updated and will last more than 2 years since they are accounting for it over a 24 month period. This means you will not be screwed by buying an iPhone in the begining. The iPhone hardware is advanced enough to handle the new software apple will want to ship, and when 3G and more memory is added in new models the form factor will remain the same, and as new features are added the entire line will see the benefits. Unlike the iPod where 3g iPods cannot play the games or some of the other new iPod OS features.

not quite. if there is hardware problem, you are out of luck. for example, first gen MBP, despite all the updates and stuff, is not as good as the recent ones because of hardware problems.

 

[dongmin]

It's a hardware thing. They could build the 3G chipset into the phone and activate it later (but they won't do that...).

Why not? I can see Apple producing one iPhone that works for both the 2.5G network in the US and the 3G network in Europe/Japan. Once 3G becomes wide-spread in the US, I can see a firmware update that upgrades your iPhone to utilize the 3G network.

Regarding the AppleTV, Apple will most likely activate the USB in a future firmware upgrade so that you can add peripherals to the AppleTV, as the recent patent application suggests.

 

[ShaneM]

So, this means the current AppleTV and the iPhone will be good for at least two years before Apple comes out with a next gen device.

I thought this had to be the case with the AppleTV. There is just too many possibilities this device has for it to remain static for any length of time. And I guess it makes sense for the iPhone since you have to sign up for a two year contract.

But will the next generation AppleTV support 1080p? I should be able to afford a nice Sony by then.

Not at all. 3G is not supported by iPhone and WILL be soon. 1080p is not supported on TV but WILL (i am speculating here) be soon. I may be mistaken but both of those are hardware updates. Just as computers and applications are updated constantly, hardware is too. This will also apply to iPhone. You will always have the latest version of the apps and firmware, but not the hardware.

I suppose if you meant will it still be usable in 2 years, yes. But it will by no means be the latest release (which is a big problem as this is the only apple product for which you must sign a contract ).

 

[toolhouse]

The Real Reason is Leopard!

Leopard is the reason for the accounting change. The "secret" features in Leopard interface and add amazing functionality to both the iPhone and TV. But Leopard doesn't release until October...and they don't want to get caught in another "N" mess. I keep looking at my TV and know that it does more. I was at the keynote and know the iPhone does more (Video iChat anyone?). Leopard is the key to unlocking the windoze world, you wait and see.

 

[rlreif]

Why not? I can see Apple producing one iPhone that works for both the 2.5G network in the US and the 3G network in Europe/Japan. Once 3G becomes wide-spread in the US, I can see a firmware update that upgrades your iPhone to utilize the 3G network.

Regarding the AppleTV, Apple will most likely activate the USB in a future firmware upgrade so that you can add peripherals to the AppleTV, as the recent patent application suggests.

why?
3g is widespread in the most populated parts of the country NOW
its not like you have anything to lose by having a 3g capable phone but no 3g service in your area, your device will use edge. why should apple decide that my capable device shouldnt get to use the 3g that already exists in my area, until they determine that it is widespread enough, thereby 'activating' it?

there is absolutely no reason for apple to sell a disabled device for future activation

 

[justflie]

Agreed. Even if the iPhone had 3G, it would be backward compatible, so why not? If they actually expect people to hang onto these/want to buy them, the specs can't (at release day nonetheless!) be worse than current offerings of other companies.

 

[quik]

The only reason why they want to spread the revenues through 24 months is simply because they don't want to get one or two great Q and get back to normal after. This is no good for the stock.

I got no idea how we call it in english, but in french we call it "amortissement & amortissement cumulé". They will probably also spread their developpement costs too

 

[Tadow]

Why not? I can see Apple producing one iPhone that works for both the 2.5G network in the US and the 3G network in Europe/Japan. Once 3G becomes wide-spread in the US, I can see a firmware update that upgrades your iPhone to utilize the 3G network.

Regarding the AppleTV, Apple will most likely activate the USB in a future firmware upgrade so that you can add peripherals to the AppleTV, as the recent patent application suggests.

3G in Europe is NOT the same as 3G in the US. One is at 1900 and the other at 2100. I found this out the hard way when I purchased the Nokia N80 and it would not work with Cingular's 3G.

 

[imacdaddy]

I'm not an Accountant

Going to take a stab at this

 

[imacdaddy]

I'm not an Accountant

Going to take a stab at this…please correct me if I’m wrong.

It all depends on how Apple is selling the iPhone to AT&T and other carriers going forward. I can think of 2 options mainly the 2nd relating to this news. (Option 1) Direct Sales to the Carriers. Payment received in full on receipt of goods by customer. In accounting, costs treated as COSP and booked as expense. Full revenue and cost of sales booked at the time of sale. (Option 2) Direct Sales to the Carriers with monthly installments from Carriers over an extended term (24 months). Cost treated as COSP and booked as expense. Revenue is accrued and spread over 24 months and cost can be amortised over the contract term. Option 2 will have a positive impact on their P&L at the Gross Margin level quarter on quarter. Perhaps in reverse, AT&T would prefer option 2, so in their accounting, they don’t have to be hit with huge OPEX for the iPhone even though they are receiving upfront payment from end customers. This way their revenues will be positive and the costs of the iPhone can be accrued over an extended period, ultimately improving their P&L on paper.

This accounting bit was just to give a heads up to investors that their P&L will look different from next quarter on without getting into too much detail on their relationship with the carriers, while hinting there will be a “subscription” base service coming. We shall be seeing something exciting for the iPhone and perhaps a monthly subscription for movie rentals or TV show packaging for AppleTV. Everything done up till this moment has been direct sales, one time revenue and cost booked up front (eg. Revenue from Apple Store/Vendors, songs from iTunes, software, hardware etc.)

As for free software/software update, Apple has been doing this all along with all their hardware and software so this is not unexpected. This is just reassurance that Apple is committed to these NEW products as much as the iPod, Macs and their apps.

 

[PubGuy]

I remember reading that the reason 3G was not going in iPhone in the first release was because of poor battery life. Seems the 3G saps more from the battery that the EDGE does and that Apple was still either seeking a more power efficient 3G hardware chip or needing to figure out a way to tweak more life via power management.