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Post by osx10 on Apr 22, 2014 14:44:22 GMT -8
Carl Icahn spoke with CNBC for a stream only broadcast tonite (6:30pm 4-22).
Money quote for AAPL was (icahn) "I have have not sold a single share"
Good to see he is still in - also said he thinks he won because Apple bought back more & is still very undervalued
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Mav
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Post by Mav on Apr 22, 2014 14:51:40 GMT -8
Since when does AT&T or any US carrier still give out iPhone activation #s?
Good luck to all tomorrow.
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Post by Deleted on Apr 22, 2014 17:02:37 GMT -8
I do have projections Mercel but I'm not 100% sure I got the "historical" deferrals generally right-ish yet. Safe bet that Q2/Q3 net deferrals are lower, not sure how much. Obviously depends on sell-in units. As for Q3 guidance, who knows. I think my dart throw had the top range at 36.5B. It is a simple (?) spreadsheet exercise to calculate the net increase/ decrease in deferred revenue. Apple supplies most of the information you need to do the calculations. To keep things simple, concentrate on the iphone, iPad and mac unit sales. Ignore iTunes and other sales. My conclusion is, and always been, that as long as unit sales increase deferred revenues will increase. It is when deferred revenues start decreasing that I get worried about future prospects. That's a gross oversimplification as it presumes that Apple's sales are not seasonal nor subject to product launch cycles. We know in fact that's not true. Further, the weight of 24 months deferred revenue at the higher deferral rates can produce net revenue to smooth the income, over and above the reduction from the current quarter's contribution to the deferral. I'm in favor of Apple's practice, giving it flexibility and time for it to transition with new product categories as the market for smartphones mature.
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Mav
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Post by Mav on Apr 22, 2014 17:25:42 GMT -8
No, macoz IS right that assuming same deferral rates and YOY unit growth, deferrals won't ever catch up overall.
Of course, who knows when Apple will change up deferral rates again, and net deferrals can vary by hundreds of millions over the course of a fiscal year.
At the moment, it would take pretty lousy unit sales from Apple in maybe two straight quarters for deferrals to have a chance of being outweighed by amortization. But you have a point about "smoothing". It's just that it's very, very difficult to quantify, except indirectly through net deferral analysis. Which would actually be reasonably accurate IF Apple gave all the numbers. It only gives a specific number for Mac, iPhone and iPad are "given" deferral ranges.
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Mav
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Post by Mav on Apr 22, 2014 17:29:28 GMT -8
Of course, this is only for iPhone, iPad and Mac "device" deferred revenue. And that unrecognized balance of ESP revenue, maybe $5B, is around half of Apple's total deferred revenue balance of $11B-ish, IIRC. But it provides some context for iPhone, iPad and Mac themselves.
That other $6B or so of deferred revenue is iTunes/Apple gift cards, AppleCare, incentive programs, rebates, provision for returns, in-transit online sales direct-shipped to consumers, etc. etc.
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Post by Deleted on Apr 22, 2014 17:42:05 GMT -8
No, macoz IS right that assuming same deferral rates and YOY unit growth, deferrals won't ever catch up overall. Of course, who knows when Apple will change up deferral rates again, and net deferrals can vary by hundreds of millions over the course of a fiscal year. At the moment, it would take pretty lousy unit sales from Apple in maybe two straight quarters for deferrals to have a chance of being outweighed by amortization. But you have a point about "smoothing". It's just that it's very, very difficult to quantify, except indirectly through net deferral analysis. Which would actually be reasonably accurate IF Apple gave all the numbers. It only gives a specific number for Mac, iPhone and iPad are "given" deferral ranges. Have you run the numbers on that? Too, you're making assumptions about YOY unit growth that not even Apple can anticipate, much less us. I think a soft quarter will benefit from the amortization that was built on bigger quarters (e.g. December quarter). And I already said we have to wait for 24 months at the higher deferral rates for that net pickup to occur.
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Mav
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Post by Mav on Apr 22, 2014 17:49:45 GMT -8
I _have_ been running numbers. Now, the biggest unknowns are whether iPhone and iPad per unit deferral is actually $20. We don't know for sure, but it should be around there. And it really is fundamentally simple math. If, in unit terms, iPhone and iPad and Mac grow YOY on a sell-in basis, and deferrals stay the same, YOY net deferral will always be negative. Which isn't to say it won't vary wildly, or that in the "right" conditions, certain product category net deferral actually _adds_ to revenue for a particular quarter. I assume iPhone, iPad and Mac will continue to grow YOY (overall) if Tim Cook and company have anything to say about it. If not, well, it's obviously a different story.
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Post by Deleted on Apr 22, 2014 18:00:39 GMT -8
Fast forward 24 months at the higher deferral rates with flat growth, combined with the fact the iPhone sales cycle is compressing, making the outcome of amortization exceeding new deferrals in a slow quarter more likely. That seems pretty straightforward without a spreadsheet. That Apple raised the rates of deferral may mean they see this coming after iPhone 6.
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Mav
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Post by Mav on Apr 22, 2014 18:30:51 GMT -8
Ahem..."which isn't to say it won't vary wildly". Look at fiscal Q3! Of course, that quarter still was "lousy". Call it, uh, a quarter with less deferral disadvantage than usual.
If fiscal Q3 2014 looks to have flat revenue growth as well, we'll see a similar situation.
Of course, if ever Apple _does_ "use" amortization to "cover" for a "bad" quarter, enter a whole bunch of people suddenly inspired to do the deferral math in order to decry or "demean" Apple's use of "tricks" to "prop up" said quarter.
Let's just see how the next two fiscal years go.
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Post by macoz on Apr 22, 2014 18:33:59 GMT -8
Don't over analyse the recognition of deferred revenue. Just assume that the amortisation is done on a monthly basis and not daily basis. For us amateur analysts we can assume the amortisation on a quarterly basis. With such large numbers (in the billions) the distortion is not material. Apple has told us how much is deferred for each product and for how long. They also provide quarterly unit sales numbers. Do we need more to have a reasonably accurate forecast. Just do some simple math and you will realise the bulk of deferred revenue comes from the sale of iphone, iPad and macs. I would have included iPods but the volume there is declining rapidly. Deferred revenue from other sources is not material in my opinion.
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Mav
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Post by Mav on Apr 22, 2014 19:13:21 GMT -8
Deferred revenue is over 11B.
iPhone/iPad/Mac deferred revenue yet to be recognized is probably about $5B.
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Post by Deleted on Apr 22, 2014 19:19:06 GMT -8
I've exhausted myself on Def. Rev. lol. Now it's time to watch Jobs, which is now playing on Netflix. The movie opens with the introduction of iPod to Apple staff. That seems like another lifetime ago. Then iPhone, then iPad. Next up, mobile payment processing, iTV or Apple TV Plus, iWatch -- all three of which were on the table when Steve was still alive. It's now just execution, which NO ONE claimed Steve was responsible for -- it was Tim Cook and many, many others. I just don't get the skepticism that WS has for this company.
It brings back great memories though. Steve Jobs embodied INTENSE like no one else. I have to believe it wasn't the healthiest mind/body state for him or anyone.
Incidentally, you can still dislike Ashton Kutcher and like "Jobs" to enjoy the movie.
Good luck to everyone tomorrow. I have no strong feeling about how it goes.
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Mav
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Post by Mav on Apr 22, 2014 19:33:43 GMT -8
Jobs was an OK movie.
Upbeat on Apple past WWDC, we'll see about results and guidance tomorrow.
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Post by Deleted on Apr 22, 2014 19:38:48 GMT -8
Jobs was an OK movie. Upbeat on Apple past WWDC, we'll see about results and guidance tomorrow. Agreed. Apple is a post WWDC story in 2014 -- the question is when do institutions buy in to it? I don't see any rush to buy ahead of WWDC, short of a bigger surprise than anyone is expecting tomorrow.
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