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Apple Charges For 802.11n, Blames Accounting Law
If you have a Core 2 Duo Macintosh, the built-in WLAN card is capable of networking using (draft 2) 802.11n. This capability can be unlocked via an update Apple distributes with the new AirPort Extreme Base Station. Or, they will sell it to you for $4.99. Why don't they give it away for free, say with Software Update? Because of the Sarbanes-Oxley Act (which was passed in the wake of the Enron scandal). iLounge quotes an Apple representative: "It's about accounting. Because of the Act, the company believes that if it sells a product, then later adds a feature to that product, it can be held liable for improper accounting if it recognizes revenue from the product at the time of sale, given that it hasn't finished delivering the product at that point."
The issue here is that Apple's patch can be construed as "new functionality" as there is significantly increased network performance in products that have been shipping for months, whereas most of the patches from MS are attempting to fix existing, yet broken functionality.
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Microsoft add new features too. The security centre & windows firewall for one example.
If you have a GeForce/Quadro, it is called 'NVIDIA PureVideo Decoder'.
PowerToys is considered a beta offering. Microsoft will not support it and thus is not a product. From the page:
Well, there's spam egg sausage and spam, that's not got much spam in it.
I suspect Apple is just spreading the pain resulting from Sarbanes-Oxley and as time passes others, probably including Microsoft, will be forced to a similar position. At this point the idea that Apple has to "eek out a profit" is comical. Take a look at the financial numbers for Apple to see how silly that comment is. There are reasons why their stock price is at its highest level ever.
Even before Sarbanes-Oxley (e.g. in the mid-1990's) ethical, conservative CFO's [admitted a rare breed] were very careful about "recognizing revenue" for a product when a newer or better version was in the works. Our "head up the ass" Congress passed Sarbanes-Oxley and now companies have hire many more lawyers to cover their asses. Lots of companies in Apple's situation would simply do NOTHING - no charge, no upgrade: WYSIWYG hardware. Is that in the consumer's best interest? I think not!
Except software has never really been considered a 'feature'. Free updates that include new functionality in software are not considered a problem.
.11n. Apple never guaranteed .11n functionality at time of purchase, so .11n functionality wasn't something they 'sold'. Any computers sold SINCE the announcement I would say fall under this provision, since Apple has explicitly said that such computers include .11n hardware. Although I would hope that new computers include the enabler by default. (Although neither the Tech Specs pages nor the Store pages on any of the hardware say .11n yet.)
It's HARDWARE that has the problem. For example, if Ford sold a car, then six months later said "bring your car in, and we'll turn on Anti-Lock Brakes for free!" that there's a problem. The car really had to include it all along, so it could be considered that this feature wasn't delivered until six months later, so they shouldn't be able to count the income from that feature until it is delivered.
Although I would think that common sense would say that this would only apply when the feature *WAS* advertised at time of sale, with the caveat that wouldn't be available for some time. "Anti-Lock Brakes included, to be unlocked via a software update in six months!" is selling the ABS, even though you don't get it. The 'free update' six months later means that the customer wasn't sold ABS at time of purchase, so the income to Ford at time of purchase is based on *NOT* including ABS. So they COULD claim ABS as a 'free update'.
Back to Apple, because they never advertised it as 802.11n, customers couldn't in good conscience be considered to have bought it expecting
Another non-functioning site was "uncertainty.microsoft.com."
The purpose of that site was not known.
It's amazing what gets 'blamed' on Sarbanes-Oxley. And most of the time, completely off base. While there is surely some money-grubbing from Apple, this is probably nothing more than Apple making a conservative decision to apply existing accounting policy more stringently. The previous poster here gets it right.
I am a forensic accountant - I do large corporate financial investigations, which involve accounting analysis and numerous interviews of management.
And I can't tell you how many times I've heard people in companies, when asked about $FOO, say "we had to do this because of SOX". Most of the time, they couldn't tell you what SOX is, or why that is the cause of $FOO.
SOX has turned into the Boogeyman, the shadow lurking in the background of any financial discussion. Unknown reason? SOX made us!
At its simplest, SOX requires that companies document what they do and how they do it. "404" is just a requirement that companies have a complete set of working documents describing accounting processes and the controls around those processes, and that they have actually tested to see that the processes and controls work properly.
Along with 404, SOX also heightened the burden on the financial accounting groups. Now CEOs and CFOs sign statements in quaterly and annual SEC filings, under penalties of civil and criminal law, that certify that they are "responsible for establishing and maintaining internal controls", including upward reporting from subordinates and subsidiaries, and that the controls have been tested and reported on in the filing.
As a result, corporate accounting departments have tightened up, More documentation of different types of accounting processes mean that existing, latent accounting issues are being surfaced and addressed. More conservative usually, in the sense that one does not 'push the envelope' of GAAP.
This is not really 'SOX made us do it', but rather as result of the analysis that SOX calls for. Sematics, but an important difference, I think.
Accounting Background - What is at work here?
SOP 97-2 "Revenue Recognition for Software Products with Multiple Deliverables".
SEC and AICPA: Revenue generally is realized or realizable and earned when all of the following criteria are met:
- Persuasive evidence of an arrangement exists
- Delivery has occured or services have been rendered
- The seller's price to the buyer is fixed or determinable, and
- Collectibility is reasonably assured
So, Apple decided that at the time of the sale of the computer with 802.11n (but not yet functional), with no additional amounts due from the customer, that since Apple had not perfected delivery of the complete laptop with 802.11n, they had not finalized all terms of the delivery, and thus had not "earned" all of the revenue from that sale. This would cause them to 'defer' some portion of the revenue (a liability on the balance sheet) until the final piece of the sale (802.11n) was delivered to the customer.
Under Apple's current policy, the computer is sold without 802.11n, delivery of this total package is complete when the customer receives the laptop, and Apple recognizes that entire sale as current revenue. Then a new $4.99 sales happens when the customer purchases the upgrade.
See: NY Society of CPA's discussion of SOP 97-2.
Now, there are certainly valid objections to the scope and scale of 404, but those are fairly focused on the size of companies that SOX should apply to, and how much testing the auditor should demand that they and the company do around 404.
Software products are advertised for their core functionality. They're intended to be fluid products, and accounting doesn't care what features are added or removed in software, as long as Photoshop stays an image editor and Dreamweaver stays a web content editor, the rules are met.
Not the same with hardware. Any material change in the product has to be accounted for. If Apple already filed its disclosure statements indicating that its products had b/g wireless chipsets in it (which it would have), it can't go back and change that later and say "oops actually it's 802.11n." Doing so would be a "material misstatement" punishable by the PCAOB under Sarbanes-Oxley. By charging for the 'upgrade' they can file current accounting documents saying that the products were upgraded with new functionality.
... enables dormant hardware that isn't being charged for in the purchase of the product.
Yes it is. If you bought the hardware you paid for everything. There are no 'free parts' - all the components are part of a whole. The fact that something isn't enabled is completely irrelevant - you were charged for it and paid for it.
What happens if we apply this thinking to patches? Oh I'm sorry - we fixed that last exploit with a new version of Safari that adds xxxxx feature, but because it wasn't there when we sold you the computer, we are going to have to charge you.
This is nothing more than fleecing users for cash.
Forget whether $4.99 is a fair price. The important issue is whether Apple's explanation is really true, i.e. that they have to charge for it.
Their spin almost fits -- if you sell a product and then later materially change the product you sold such that the first release would be considered not a product, then you have revenue recognition issues. You might have to re-book the deal because you sold something that did not yet exist.
In this case, I see this as a new feature to an existing product. New features that don't re-define the product aren't going to cause a Sarbox issue.
From the sales perspective, if someone says "Sarbox issue", you should be skeptical. Usually "Sarbox issue" means "I'm too lazy to figure out how to get this to market without causing any revenue recognition issues. And I might see some money in it too."
10.1 hasn't been updated since 2002-06-21. 10.2 hasn't been updated since 2004-12-04. With the release of 10.5, 10.3 will cease being updated. Now, it's not like your Mac is likely to get pwned without being patched every month or two, as is the case with 4-year-old copies of Windows, so updates aren't as critical to simply keep your system going. But the fact is if they find a new hole in 10.1 or 10.2 tomorrow, they aren't going to fix it. It remains to be seen if this policy will continue if security holes in Macs actually start getting exploited in the wild, but for the time being Apple really do have extremely short product lifecycles. The lack of product activation (there isn't even a license key, let alone all the bullshit you get with XP) mitigates this a bit if you don't mind a bit of piracy, and family pack licenses mitiagate it if you have multiple Macs, but it still sucks. Me? I take "family pack" literally, so I updated my iBook from my brother's purchased Tiger family pack disks. If they wanted to make it clear it was for a single households, they should have called it a "household pack" :)
Chernobyl 'not a wildlife haven' - BBC News
Upgrade through extortion is not uncommon at all in the high powered computer [graphics] world.
First, buy a $600,000 Quantel compositing workstation. You want glints, glows and shadows with that? $15,000 later, they send the 60 digit unlock code. No hardware change required. First time I saw that, I said *WTF* so loud they heard it back in England. If it's in there, why can't I use it NOW?
Same with some of the old 3D modeling software on SGIs etc. Not even an updated piece of software, just a bunch of keys to turn on the features - and expire them.
Should I remind everyone about QuickTime Pro?
Most of the stuff on
If there was a chip license fee, you already paid it when you paid for the computer. 802.11n requires no payment of license to use as the frequency is public band.
It's profiteering at the expense of users.
I'm trying to not be an apple apologist as the $4.99 price is ridiculous
Oh, come on, that's nothing! Your average stereotypical Mac owner probably spends twice that in a single sitting in Starbucks. For those of us outside the US, it gets even better - that relates to about £2.60 at the current exchange rate. An upgrade to 802.11n for less than the price of 50 blank CDs? Oh, I think so...
That sounds exactly like what has happened to apple, except in reverse. Apple advertised a product with some set of features x. But now it turns out they really shipped x+1 and just turned it off in software. I'm not sure of any way to squint at Apple's promotional materials from when these products were sold and somehow think people got less than what they were promised, which is where you would have a problem with Sarbanes/Oxley. It's much closer to say, a baker being in violation of S/O because you ordered a dozen donuts and he gave you thirteen (the proverbial baker's dozen). And what about other hardware companies? If turning things on after selling a product is illegal, HP in the story above this (about having VT turned off and now they're releasing a new bios to enable it) would be violating S/O and I can't imagine their lawyers haven't given this just as much thought as Apple's. This charging five bucks so as not to be in violation of S/O seems to be pretty far fetched to me.
Now, landing thrusters.. landing thrusters, hmm. Now if I were a landing thruster, which one of these would I be?
When I was in high school, we had an IBM 1130 system. We had a slow line printer. IBM sold two different versions of that printer - a slow one, and a fast one. The fast one cost several thousand dollars more. The difference? one jumper (which, if you switched manually, you voided the warranty).
Often, manufacturers will sell a range of products, and it's cheaper for them to sell artificially castrated versions of the expensive versions as cheap ones, rather than manufacturing a cheaper product separately.
If you pay for a cheap unit and they give you an expensive one with the additional features disabled instead, you have no cause to whine about it being disabled, since you didn't pay for it - you got it for free.