Palm fans hoping webOS gets the same kind of upgrade attention Apple's been
lavishing on the iPhone take note: a deck of presentation slides has revealed plans to recognize revenue from webOS products over two years using subscription accounting, so Palm can "periodically provide new software features free or charge" to customers of its "
webOS products, including the recently announced Pre." If that didn't make any sense to the non-suits out there, just remember this bit of number magic is why Apple treats iPhone and iPod touch users differently when it comes to updates -- the iPod doesn't get 3.0 for free because Apple doesn't handle the math this way. At any rate, number crunchers and MAC students can head on down to the read link for lots more invigorating stuff.
posted Mar 19th 2009 9:31AM
That's fantastic. [/sarcasm]
Release date?
Actually, it is fantastic. Apple do this with the iPhone, which is how they're able to account for free updates like the 3.0 update, which not only fix bugs, but add buckets of new features.
Now Palm's doing it too. That is good news.
That is good, so this means no 9.95 updates for addtional functions.....some other company out there listing?
@Kiwi616
Yeah, the "other" company is not charging their PHONE users any fees for updates either. Or did you miss that part? Only their iPod users are being charge. Hmm - I wonder why. Let me think on that and get back to you! :P
Enough already. Jeesh.
@absolutc
Already knew that, but since I own an iPod Touch I would like for them to spread the policy. Maybe I should be more direct in my commenting next time for special people like you (not everyone wants an iPhone and therefore has a Touch).
Better???
Absolutc is right. This post is about accounting practices. The iPod touch is not accounted for using this subscription method, only the iPhone is. Hence the free upgrades.
It's going to be interesting to see what happens after the two year contract period of EDGE iPhones. They shouldn't be eligible for free upgrades (strictly speaking).
@Kiwi616
So instead of paying an optional $9.95 once a year you'd rather pay $60 a month for your iPod Touch? Because you do know what the subscription part of Subscription Accounting means, right?
Palm will get back part of whatever fees the carrier charges just like Apple does form ATT, that's what allows them to use the subscription model.
You see, subscription means paying a regular fee for an on going service, sorry if that's pedantic, but I wanted it to be clear for people like you.
@bugster.
Sorry, I don[t think you have it right
a subscription, like a subscription to an online service is not the same as subscription accounting. This has nothing to do with getting any fees from AT&T. This is an accounting method.
for a "normal", non-subscription sale like an iPod, Apple recognizes the Revenue and Expenses at the time of sale.
for a subscription sale, Apple recognizes the revenue and expense over a period of time, in this case 24 months. This includes the at&t subsidy (revenue)
The reason this exists is that due to tightening of accounting practices (thanks, Enron). If Apple sells the Touch for $200, recognizes that revenue at the time of sale (which they do) then provide a material update like OS 2.0 or 3.0 at a later date, it can be argued that they recognized revenue ahead of the actual delivery of goods, which is an accounting no-no. according to GAAP you cannot recognize the revenue until you deliver (ship) the goods. If you do, and you are a publicly traded company, the SEC can fine you and make you restate your financials, which is a very bad thing It's that simple.
@ Bugster : You obviously did not read the article and you for sure did not understand it. I Dont really want to give you an accounting 101 primer but I would surely want you to STFU about stuff you dont know!
@ bugster
As the others already stated....go take an accounting course, you obviously don't know what you are talking about. Damn finance majors trying to be accountants. :P
@ pradster
Oh yes please why don't you school me in accounting 101, I'm sure you're overflowing with knowledge.
Why don't you start with subscription accounting, under which Apple defers some of the income from sold iPhones over the course the next 3 years. This allows them to continue providing free upgrades to the software without violating the sarbanes-oxley act. After the 3 years the Apple realizes the full income and the transaction is considered fulfilled. But wait, doesn't that mean that Apple has to keep track of when every single iPhone is sold so they can stop supplying free upgrades to each user when the time comes?
Remember how Apple went to great lengths to lock the iPhone to individual carriers? That means that Apple can claim with good faith that any iPhone still in use is still accruing income for Apple from the subscription fees and therefore Messrs Sarbanes and Oxley are kept happy.
If they used Subscription accounting for the iPod Touch they would have to cut off free upgrades after the 3 years had passed for each sale.
But doesn't this also imply that, once the device (iPhone, Pre, etc) are outside of the period over which revenue is recognized, that you'll have to pay for updates?
Or does the accounting somehow figure that the device is "worthless" and hence adding new features doesn't add value?
... clearly not an accountant.
The key part of Palm's SEC filings, IMHO, is that they are coming out with "WebOS services" as products (not new phones as some have incorrectly extrapolated their vague words). That suggests the "online" cost of the Pre is going to be more than mere run-of-the-mill carrier fees.
Owning a Palm like owning a Nokia: Customers can rely on the phone's hardware and software build quality, and know they're in good hands.
Other companies (read: HTC) should learn from that.
Got free software updates?
Don't THINK so, KNOW so.
Palm.
You're in good hands.
You're in good palms.
you are kidding right? look at Palms BBB rating. It is an F for a reason. Their latest all Palm product, 800w, is listed by users as one of the worst smartphones ever and there are problems they never fixed (like advertised standalone GPS). They replaced that model with the HTC made Palm Treo Pro, which fixes all the problems in their own Palm desinged model!
I am happy and optimistic about the Pre and WebOS, the chance for Palm survival, the moving forward off innovation and competition -- but you are way off base with the HTC comment relative to Palm, which near killed itself with poor product reliability, endless delays, poor customer service and failure to back its own products.
@Dutch
A BBB rating is as good as a census count, anyone can complain about company "A". BBB makes several calls to company "A", if no official/supervisor is available, a message is left. If the BBB does not receive a call back within a "reasonable" amount of time, the BBB may downgrade the company. FYI, many Fortune 500 companies do not correspond with the BBB. Unfortunately there are people who complain about the dumbest things.
As to the article. I think this is great news, Why the negative comments and sarcasm?... That's in general not directed at you Dutch!
...periodically provide new software features free of charge.*
*Except for Pre touch owners, who will pay $9.95 per download.
Okay that was bad, but couldn't help it.
Reading between the lines (the only way we CAN read Palm's lack-of-clarity words, huh?), Palm is expecting to release incomplete/buggy software on their WebOS servers so have decided to amortize the up-front charges across the time it takes to get it right?
This is like deja vu, seems some other company has pretty much done EVERYTHING Palm is doing with this Pre, those of you who cant see this have giant fanboy/Apple hater glasses on.
Because of the accounting method they use to realize income they're coping apple?
Seriously I hope that was a joke because that would be a whole new level of apple love. Apple didn't invent GAAP
No I'm not suggesting they invented GAAP I am however suggesting that this device screams APPLE all the way through it and I think we all know this. I will say however I do like their notification system, this is one area that they took to the next level, I also like the unified messaging. SO I will say that there is a TON of Apple influence here there are some compelling features of the OS that they seem to have done well with.
Anyone who remembers the late 90s can see a lot of palm not only in the iPhone, but in every smart phone where you poke at the screen to make shit happen, have contacts->phone integration, display texts like a chat session, etc, etc, etc. Apple likes to pretend they invented all this stuff, and given their marketing machine, people who have never owned a smartphone before tend to eat it up. My apologies if you're in high school and it was all before your time - go read a history book, wikipedia, or even this fine site's rundown of the various IP claims palm and apple likely have against each other.
What I *can* see is a lot of pressure from the impending pre release forcing apple to finally enable features their devices should have launched with (real bluetooth support, tethering, copy/paste et al.)
of course they invented iGAAP
generally accepted apple principles
corny? profoundly, but it makes me happy :D
"webOS products, including the recently announced Pre."
...
I'm really happy, that the free features are also available for the Pre. Imagine if they only were free for the other webOS based products which are on the market right now...
The "No copy paste" retort is valid until iPhone OS 3.0 is released to the public.
So, LOL.
It took Apple HOW LONG to add Copy & Paste?
Copy & Paste is in v3.0 thanks to the Pre! The Pre will come out of the box with Copy & Paste. Apple is trying to spiff up their products before the Pre comes out so that people will be less likely to drop the iPhone for the Pre.
So thank Palm for putting pressure on Apple to add new features, such as:
Copy & Paste
A2DP Bluetooth
It only took Apple 3 full versions of their OS to get these seldom used features, whats all the hubbub about?
[/sarcasm]
"...we are told that the company aims to "periodically provide new software features free or charge" "
That would be "...free OF charge." I was all confused until I reread the slide. (admittedly I confuse easily)
Yes, Kiwi. . .the other company is out there "listing."
You should've stayed in school.
Palm - Confidential-
Someone is going to get fired.
PALM needs to do something to grease the wheels of its hype machine. We're all patiently waiting for this thing to come out, but just give us a darn release date to keep that hype going!
I bet this thing slips into Q3...
It's according to GAAP. Because when buyers of the Pre (or the iphone) make a purchase, it's not just the phone they're buying. They're buying software updates for the next two years. This is work the company hasn't done yet and must recognize this as Unearned Revenue which is what this spreading over 24 months thing is all about.
The ipod (along with Centro, Treos, etc) are recognized immediately as income. While any bug patches are usually included in the price, real updates would have to be purchased later if even offered.
The trick is trying to determine which products should or should not be amortized in this manner. It's usually not preferred to do this no matter what you hear from people saying this will help level revenue. Generally you want to be able to recognize revenue asap so its not like these companies are doing this because its to their advantage. It doesn't affect cash flows but does affect the balance sheet and income stmt.
I guess you got the wrong perspective....
Spread the policy to the iPod Touch.
Raise your hand if all you really want to know is when you can buy a Palm Pre!
Aye!
What I also want to know is why Apple are unable to charge a token amount like 1 cent for iPod Touch updates if they are genuinely being constricted by accounting law. Unless ofc it's shameless profiteering, but surely that can't be the case? :)
Like the CPAs have said before, its based on GAAP Accounting and matching up revenues and expenses, they could very easily charge 1 cent for said upgrade, but software revenue gets very very hairy when it comes to items like this. Auditors could easily say that some of the original purchase price revenue should be pushed to the software updates as the software updates are worth more than 1 cent (or some other arbitrary number). I am under the assumption that the 10$ figure they arrived upon for updates was instituted in order to move away from any confusion around this principle. I do not know software revenue very well and I think all this is covered in an SOP maybe SOP 97-2 or something. I just know that software revenue is a quagmire.
The only thing I care is Flash update for Pre will be free update at the end of year :)
Whew... I thought when I read that title that they would be charging a subscription for using the online features... THAT would have killed the Pre dead.
I'm so happy Palm is looking into a platform of multiple devices and doesn't treat its prospect user base as cult zombies.
The reason why apple does not give you free updates is coz it can continue to milk you by using an accounting system that suits its own pocket!
if they really have to charge something to show in their books why not charge 5 cents per update instead of the $5, 10, 20 it usually charges?
Typo in your quote, free OR charge is a little less cool.
So, how does Microsoft give away updates? The Zune has had feature updates, from what I hear, none of the owners had to pay for it.