updated 01:50 pm EDT, Thu October 23, 2008
'True' Apple growth missed
Looking past GAAP accounting measures, Apple's adjusted net income grew 124.6 percent in the past quarter, says Seeking Alpha. The publication has analyzed numbers from Apple's Q4 fiscal report this week, and comments that Wall Street analysts failed to highlight the strong growth numbers produced when adjusting for GAAP (Generally Accepted Accounting Principles) subscription method procedures that are delaying much iPhone revenue by amortizing the full value of the phone over a two-year period. Apple is reporting 43 percent of its revenue and is earning 63 percent of its net income from the iPhone.
GAAP accounting procedures have forced Apple to spread the net income from the iPhone over eight quarters, reflecting a two-year subscription model, effectively hiding nearly 90 percent of the iPhone's net income. The accounting standard leaves Apple trading on a P/E ratio (price-to-earnings ratio) that fails to reflect huge earnings numbers that could make Apple's stock a much more attractive buy for investors.
The difference in real versus GAAP rates is said to have limited visible growth for Apple to 23 percent, and produced smaller profit numbers contributing to numerous bearish ratings from analysts, which in turn have depressed Apple's stock price.