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The GAAP Between Apple and Investors

The GAAP Between Apple and Investors

by , 4:10 PM EDT, October 24th, 2008

Apple's subscription accounting method for iPhone and Apple TV, GAAP and non-GAAP revenue, forced by the Sarbanes-Oxley law is making increasingly difficult for some analysts and investors to sort out Apple's real value, according to Jim Goldman at CNBC. Even so, there is plenty of good market research that gives valuable insight into Apple's potential in all its markets, and it's up to everyone to find it and pay attention.

For the first time in Apple's last earnings report, it reported the traditional revenue and EPS numbers, but then tried to give a clealer picture of its financial success by providing the non-GAAP numbers -- which were astounding.

"Never mind nuances: If analysts offer the GAAP number for comparison, its the GAAP number we use. Lost, however, might be the real value of Apple itself, and the extraordinary growth this company is enjoying," Mr. Goldman wrote.

Despite that, some analysts are fretting about how to get a good mathematical handle on Apple's finances, given the two methods of accounting Apple invoked. However, Mr. Goldman suggested that that's just part of the analyst's job. What's really important, anyway, is the unit sales. The fact that Apple sold almost 7 million iPhones in the last quarter [more than RIM BlackBerries] shouldn't be lost on anyone.

Accounting illusion remain, however. "But these accounting illusions are creating tough times of their own for Apple because the company itself seems to be selling itself short, reporting GAAP numbers, but trying to emphasize non-GAAP after the fact. And investors are caught in the middle. Wall Street won't focus on these numbers until Apple does. And it should. Wall Street's a big boy. It can handle it," Mr. Goldman concluded.

Observer Comments

Show: Subjects Only | Full Comments
Close Name:Guest
Subject: Why is the article title say GAPP when the acronym is GAAP?

Why is the article title say GAPP when the acronym is GAAP?

Close Name:Guest
Subject: Please proofread

The title of your article is spelled wrong. It should be GAAP, not GAPP. You might want to try proofreading your articles in the future.

Close Name:Guest
Subject: GAAP

Generally Accepted Accounting Principles.

Close Name:Guest
Subject: Article Headline

Don't blame the authors, journalists never choose their headlines, Editors do. Blame the editor.

Close Name:Guest
Subject:

Learn to spell you idiots

Quote
Guest wrote:
Don't blame the authors, journalists never choose their headlines, Editors do. Blame the editor.

Close Name:Guest
Subject: play on words?

Looks like a pun to me.

Close Name:Guest
Subject: apple investors

If you are a apple i nvestor please watch your money because the market is droping fast. watch funny videos [link removed]

Close Name:j.martellaro -   TMO Staff Posts: 97 Joined: 07 Dec 2006
Subject: GAAP

I blame it on my AAPL keyboard. (And that *was* intentional for the record.)


J.M.

Close Name:Guest
Subject:

Quote
Guest wrote:
Looks like a pun to me.


Duh. Everyone else needs to think a little before making a post.

Close Name:Guest
Subject: bonuses

One value the GAAP to non-GAAP numbers provide is a sense of company skimming of profits as bonuses, share awards, options etc. Remember, Steve Jobs did sign off on options back-dating but was deemed too valuable to prosecute.
This is a feel-good article to promote Apple.

Close Name:Guest
Subject:

"One value the GAAP to non-GAAP numbers provide is a sense of company skimming of profits as bonuses, share awards, options etc. Remember, Steve Jobs did sign off on options back-dating but was deemed too valuable to prosecute."

Jobs was not "deemed too valuable to prosecute"; the investigations could not demonstrate criminal culpability on his part.

Nice try with the skimming remark. I guess you missed the part in their earnings report where they announced how much their cash horde has grown. Oh, that right, you were interested only in trolling, not the truth.

Close Name:Guest
Subject: Dividend

If Apple cared about its shareholders, it would set a dividend, and people would invest to realize real returns rather than gamble on the ups and downs of the share price.

Close Name:Chaz Posts: 2 Joined: 16 Oct 2008
Subject: "Too valuable to prosecute"???????

Guess you missed the Spitzer debacle on TV, or how about Ken Lay and Skiling even their pac monies didn't save them. Give me a break. There a lots of people who would love to make a career move and take a guy like Steve Jobs down.

As guest above noted, look past all of the accounting numbers and the question is simply is cash / cash returned to shareholders going up or down? When cash / cash returned to shareholders is going up that means the earnings are for real.

Close Name:Guest
Subject: Jim, Apples real value is $200 a share!

Jim, Apples real value is $200 a share! These idiots that call themselves ANAL-ISTS don't have a clue, sarbanes or not! They've been hitting Apples stock for a long time, devaluing it at every chance with some pitiful excuses.
It doesn't take a brilliant mind to calculate Apple's value. 124% rise in sales would give you some cause to think the stock should go higher. Sales 3x any other PC maker in the business is doing, should make you think that the stock should be higher. NO DEBT and 25 BILLION DOLLARS IN THE BANK, should make you think that the stock should be higher. DUH!!!!!!!

Close Name:Guest
Subject: Value of AAPL

Guest, AAPL's real value is not $200/share. It has nothing to do with their earnings. Perhaps at the most basic level, it has to do with cash and disposable assets on hand. No dividend, no way to figure out what it's value is. It's value on a day to day basis is simply what a small fraction of shareholders can sell their positions for that day multiplied by the number of outstanding shares. I'd rather sit at the roulette table.

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