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Deferred Revenue for Apple TV and iPhone Climbs Dramatically

Deferred Revenue for Apple TV and iPhone Climbs Dramatically

by , 4:50 PM EDT, April 23rd, 2008

Apple's FY08 Q2 earnings report on Wednesday showed that deferred revenue, the so-called subscription accounting, for Apple TV and iPhone is rising dramatically.

In September, 2007 Apple reported US$1.391B in deferred revenue, current, for the Apple TV and iPhone. For the current Q2, that has risen to US$2.416B, a 74 percent increase.

In September, 2007 Apple reported US$849M in deferred revenue, non-current, for the Apple TV and iPhone. For the current Q2, that has risen to US$1.409B, a 66 percent increase.

Some analysts, like Carl Howe, have previously predicted that this money making engine would start to produce dramatic gains for Apple, and was likely to be overlooked in the near term. That's not likely to happen anymore now that the data is starting to accumulate.

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Subject: But it has...

But it has been overlooked, as analysts compare Apple's sales to last year's sales, and make no compensation for the deferred revenue. They just pretend it doesn't exist. For example, they state revenues are $7.5B vs $5.3B last year. Well, since last year, they've changed the way they account for items like the iPhone and ATV. I figure they had an additional $500M in iPhone sales that they have deferred. In other words, ACTUAL sales last quarter were roughly $8B, but Apple reports $7.5B, because they deferred an additional $500M. And, yet, no one mentions $8B in sales, and if they do mention $7.5B in sales, they don't mention the deferred sales of $500M. It's one or the other, but they don't do either.

If you look at January, when Apple announced $9.6B in sales, they actually had something like $10.5B, if you add in the iPhone deferred revs. Do you think the stockprice would have plunged as much if they had announced $10.5B in sales? If Apple hadn't changed their accounting treatment of the iPhone, but had just charged people $5 for updates, like the wifi-N update, then reporting $10.5B in sales would have been just fine and dandy. Like Carl noted, this deferred revenue is NOT being reported, because it should be, when comparing this year's sales to last year's, for a valid apples-to-apples comparison.

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