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ATPM 15.08
August 2009


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by Robert Paul Leitao,

Welcome to the August issue of About This Particular Macintosh! It’s been a hot summer, so the editors of ATPM have spent much time in the comfort of air conditioned environs slicing and dicing the state of all things Apple. Our collective analysis has come to one conclusion: there are two types of people in America—those that use an iPhone and those who choose Verizon for cell phone services. It’s a new digital divide.

We’re looking at the numbers in a uniquely ATPM kind of way, and our applied math techniques have earned their own issue. This August issue is now known as the ATPM New Math edition of your favorite monthly Internet magazine.

The Gap in GAAP

For the fiscal quarter ended June 27, 2009 Apple reported GAAP revenue of $8.34 billion and GAAP earnings of $1.23 billion or $1.35 per diluted share, surpassing Apple’s guidance (no surprise) but also besting Wall Street estimates by the ATPM New Math version of a country mile. But GAAP results leave a gap in the viewing the company’s performance in the quarter. Non-GAAP results show revenue from the sale of products and services of $9.74 billion and non-GAAP earnings of $1.94 billion.

Why the gap in GAAP? Because Apple recognizes the revenue and earnings on certain products and services (such as the iPhone and Apple TV) over the estimated economic life of the product (essentially two years from the time of purchase). The GAAP results record iPhone sales under the subscription accounting method. Non-GAAP results recognize iPhone revenue at time of sale. We’ve covered the subscription accounting method in ATPM before, but as iPhone sales rise the gap between GAAP performance and non-GAAP performance becomes more pronounced. During the quarter Apple sold 2.6 million Macs and 5.2 million iPhones.

The company’s June quarter non-GAAP performance caused Apple’s share price to “gap up” the day after the numbers were released, with some suggesting the gap between the stock’s current trading price and the stock’s all-time high may close within the next few to several months.

The iPhone’s Audacious Appetite

During the quarter ended June 27, 2009, iPod sales fell in both sequential comparisons (the previous quarter) and year-over-year comparisons as the popular iPhone cannibalized iPod sales. Not only is the popular iPhone winning customers for Apple and AT&T, but it’s also reducing demand for the iPod. But Apple knew this would happen, according to company executives. Looking at the matter in an ATPM New Math kind of way: iPhone = iPod2. In other words, each iPhone sold has a value far greater to Apple’s bottom line than a few iPods sold. Considering the retail value of each iPhone and the potential for App Store sales, an iPhone has much greater economic weight than an iPod. Better for Apple to cannibalize its own product sales than allow a competitor to do the same.

O Sole Mio

The term is from the Neopolitan language and is the name of a popular song recorded by many famous artists including rockers, crooners, and opera singers. Elvis Presley used the song’s melody but had the lyrics changed. His recording entitled “It’s Now or Never” became an international hit. It also has absolutely nothing to do with Apple except this writer saw a relationship between the title of Elvis Presley’s hit and the market’s view on AT&T’s wireless services success while the iPhone is under an exclusive deal. In other words, once the exclusive deal ends, AT&T may have trouble both keeping and acquiring new wireless customers.

The ATPM New Math equation is: iPhone = ATT2. Translation: the iPhone makes it easier for AT&T to acquire new customers and reduces customer acquisition and retention costs while the exclusive deal for the iPhone remains in force.


ATPM New Math creates a powerful statement:

If iPhone = iPod2, Then iPod2 = ATT2

In other words, the iPhone’s impact on both Apple’s iPod sales and AT&T’s cellular services sales is far greater than the handheld products and services offered previously by the respective companies. In the second calendar quarter, AT&T reported acquiring a net increase of 1.37 million wireless customers and activations of 2.4 million iPhones. One doesn’t need to have a scholarly ATPM New Math understanding to see that the iPhone is AT&T’s wireless customer acquisition driver while the company continues to lose residential phone line customers, an industry trend accelerated by the increasing use of cell phones at home and while on the go.

No Solo Mio

With 2.6 million Macs sold in the June quarter and estimates that Apple has secured 90% or more of domestic PC sales in the $1,000+ price category, as Mac users we are no longer alone. Each of us are members of a global group of users that is expanding by the day. As a universal group, our members speak many different languages but share a similar digital dream: using the best digital lifestyle products available to enhance our computing life and stay connected with friends and family. Each month ATPM chronicles what we call the “personal computing experience.” We thank you for joining us this month as we explore the world of Apple and share our work with our readers.

Our August issue includes:

Bloggable: A Bird in the Palm Is Worth…

Wes Meltzer mulls the topic of whether the Palm Pre represents a threat to the iPhone—or even the BlackBerry.

MacMuser: Blinking Cursors

“In my experience, if the monitor is alive so should be the computer.”

MacMuser: Faster, Cheaper, Better?

Mark Tennent has a three-sided look the shift from traditional analog technology to digital technology.

How To: Tethering a Mac to Your Cell Phone

Sylvester Roque shares detailed thoughts about whether to choose a wireless broadband modem or to use phone tethering.

Desktop Pictures: Travels

Reader Rob Colonna shares this month’s desktop photos featuring images from his travels around the world.

Out at Five

Matt Johnson’s new series, Out at Five looks at the workplace and its boundaries from all angles, revolving around many of the same characters from his former series, Cortland.

Qaptain Qwerty

Relax at home with a Mac, or not.

Review: Juice Pack Air

Great for hardcore iPhone users, less so for others, and noticeably bulky.

Review: LapDawg X4

A fantastic desk stand that can go from your bed to your desk to your couch and back without batting an eye.

Review: OWC USB 2.0 Display Adapter

The USB 2.0 Display Adapter can be a worthy means of adding additional monitors to your computer, provided you don’t require hardware acceleration.

Review: Typinator 3.5.1

Insert repetitive text, even pictures, into documents with Typinator. As long as you remember the keystrokes, that is.

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