Apple Charges For 802.11n, Blames Accounting Law 471
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."
Don't tell Microsoft! (Score:4, Interesting)
Re:Don't tell Microsoft! (Score:5, Informative)
Re:Don't tell Microsoft! (Score:5, Informative)
Re:Don't tell Microsoft! (Score:5, Funny)
Wait! You forgot the most important new feature of all: Windows Genuine Advantage®
Hard to picture how we could get along without it, these days.
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The update in question enables dormant hardware that isn't being charged for in the purchase of the product.
It's the same as if Apple sells 2 types of iSight cameras. One that is the normal web camera that uses the visible spectrum and another that enables x-ray vision.
The cameras are the the same but the software package that accompanies the camera is different.
They could sell an update to those who purchased the visible camera to enable the x-ray vision at an additional cost
Re:Don't tell Microsoft! (Score:5, Informative)
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.
Re:Don't tell Microsoft! (Score:5, Informative)
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.
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Re:Don't tell Microsoft! (Score:5, Insightful)
Stop apologising for Apple.
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If EAP-FAST wireless authentication added FM tuning, then that is an additional feature.
Re:Don't tell Microsoft! (Score:4, Informative)
It's profiteering at the expense of users.
Re:Don't tell Microsoft! (Score:5, Insightful)
Another example. I want to buy an Audi. I was reading a brochure on it. It tells me that the car is capable of 151mph. It has an asterisk saying "* electronically limited to 130mph in US and Canada". Now, I'm not sure on the inherent legality thereof, but you can bet if I wanted to remove that limiter and took it to my Audi dealer to do so, and they wanted to charge me anything /beyond/ the labor for removing said limiter, I'd be mad as hell.
Now, you might point to that 'labor' word and say "well, there /is/ labor, and that's what you're being charged for"... I don't buy that. You'd better believe that that wireless card was supplied with a skeletal driver for (a?)/b/g/n, not (a?)/b/g only.
Apple just found a way to double charge you for the same thing, and apologists like you are defending them.
Say ATI sells you a new PCIe card. You know through various channels that this card is PCIe. But guess what, it only runs at PCI speeds, and guess what, "$5 gets you the 'upgrade' to use PCIe" - people, here on Slashdot and elsewhere would be screaming bloody murder, diseminating this patch left right and center, and wailing the house down, and you know they would (and rightly so) - but here's yet another free pass for Apple from the "loyal following".
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I'm a geek. I know what cards do what. I know that an Intel EtherExpress Pro card ran at 10 and 100mbps. That a seller might say "Intel EtherExpress Pro network card, 10mbps networking" is up to them. I am not required to subsidize the fact that they /understated/ the abilities of the hardware. I know the card does this, I made my value judgment on the cost of the computer based on that, and then ran into, through false limitation alone, this u
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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 key
What about Xbox? (Score:4, Insightful)
Re:What about Xbox? (Score:4, Insightful)
NVIDIA has done this (Score:4, Informative)
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If only Apple were so savvy!
*ducks*
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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 f
bs (Score:5, Insightful)
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Because software features aren't accounted for. (Score:5, Informative)
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.
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Your argument concerning material misstatements is self-contradictory. The original statement that it has a b/g wireless chi
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That makes no sense at all.
Deferring the income would be selling it as a 802.11n device that will be turned on later.
Magically converting a device that no one knew was 802.11n to 802.11n is not 'deferring' anyway, anymore than cars have 'deferred' upgrades when the car dealership randomly gives them a free cup holder at their 30,000 mile oil change.
The law is designed to stop companies from selling things that don't exist yet, and accounting for them now, before they've actually made them. I.e, selling a
Re:Because software features aren't accounted for. (Score:5, Informative)
Exactly as you specified, the law prohibited Apple from marketing the devices as n-compliant, and it also prohibits them from retroactively restating its hardware. They can't go back and say, "oh by the way, the last 800,000 computers we shipped had different hardware than reported in our disclosures." They HAVE to treat material changes as product upgrades, and in order to include it in accounting filings, there has to be money involved. Yes, it is a very strict interpretation of the PCAOB rules, but keep in mind they're being investigated at this very moment for their accounting practices. Now's not the time to play fast and loose with the regulators.
The law requires ACCURATE reporting of products and services, and expenditures therein. In order to revise an existing product, you must handle each as a new upgrade according to a strict interpretation; anything else represents a material misstatement, something which can come with heavy fines in the post-Enron age. If Intel shipped an update uncrippling its old Celerons to full-blown Pentiums, they'd be in the same boat--those products were sold as Celerons, not as Pentiums.
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IMHO, they screwed up and are now using a technical loop-hole to avoid being fined for a material misstatement. Worse, they found a way to turn the loop-hole into profit. Even worse, the
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The law says 802.11g and 802.11n are different products. Moving from one to the other is a material change in your computer, and the law doesn't care whether you have to swap out hardware or just patch the firmware.
When Apple sold the computer, it said the computer had 802.11g functionality. The fact that the chipset was capable of something else is irrelevant. Apple only had to be able to prove that the chips it used did in fact deliver
Re:bs (Score:5, Funny)
I seriously doubt you ever used a Mac or quit using it because of that.
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Finally! (Score:5, Funny)
mmm.. boooze.... (Score:2, Interesting)
Either that or someone high up in apple is really jumpy right now and it playing it safe to insane degrees.
Re:mmm.. boooze.... (Score:4, Insightful)
After the stock options issue, you bet that they are being over cautious. Now whether they are interpreting the law correctly, is another matter.
Wow (Score:2, Insightful)
I know which one I believe.
Re:Wow (Score:5, Insightful)
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http://www.microsoft.com/windowsxp/downloads/powe
I think that apple is just trying to eek out a profit
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PowerToys is considered a beta offering. Microsoft will not support it and thus is not a product. From the page:
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Re:Wow (Score:5, Insightful)
Apple doesn't need a few hundred people spending $4.95 to be profitable. I think they're on to something here in their interpretation of the law, unfortunately. I'm not a lawyer, but you can bet Apple had their lawyers look at it.
Re:Wow (Score:5, Funny)
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You probably meant this to be a humorous comment. On the off chance you were serious it should be pointed out that Apple is a large multinational company and as such they have an entire legal department. They are paid a salary, not consulting fees. Ocassionally they may be given a biscuit for a particularly nice trick.
Re:Wow (Score:5, Insightful)
It's not about free patches being illegal, it's about Apple not reporting its hardware properly. You can't make a substantive, material change. From the perspective of government oversight, the products Apple has been shipping did NOT have n-capable hardware. Now they do, but you can't go back and re-file the paperwork. You have to report the upgrade in accounting filings, and you can't report something in your accounting files that doesn't cost anything. With the company being under investigation for its accounting practices, it's best not to take any risks at all while under the probe.
If federal regulators respond to the story and say "Apple can ship this update for free without worrying about legal implications" you can bet your ass that the $4.99 fee will be dropped. Like they want to deal with handling a bunch of $5 transactions and shipping out physical CDs instead of pushing a software update.
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Windows 98 was a $100.00 patch to windows 95. Windows 98SE was a patch to windows 98 that ALSO cost money.
I dont consider Windows ME to be an upgrade to anything.
Origin of this whole problem (Score:3, Insightful)
I understand why we need laws about when you are supposed to book revenue because I've seen it abused. The whole house of cards collapses hard when growth slows. My job was lost when the dotcom bubble burst and they couldn't hi
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Oh yeah baby! In the wild days of telecom in the late 80's, a company called Datapoint had a bonus structure based on revenue billed in the quarter. One group of sales managers booked millions of dollars of orders to "Joe Custome
Option (c) (Score:5, Insightful)
This is actually a real problem. If you sell a product that has upgradable firmware then you need to only recognise revenue as you provide the service. For example let's say you sell a device for $1000 and provide free firmware upgrades for 1 year. You might structure this that the base product is worth $900 and the 12 months tech support is worth $100. You then recognise the revenue as $900 at time of sale and $100/12 per month.
For a product that has free firmware upgrades "forever", you might introduce some reasonable lifetime (like 3 years), perhaps the typical depreciation period for the product.
Now Apple beancounters fucked up. They recognised all revenue immediately. They should have really defered some of the revenue recognition but they wanted to look all shiny for Wall Street (Enron, on a smaller scale). By chraging for this upgrade they're probably hoping to create a loop hole.
Needless to say, MS most likely just moons the act and does not care any more than they care about the DOJ nailing them with anti-trust.
Re:Option (c) (Score:4, Interesting)
Similarly, what if: with the products there's a disclaimer that Apple makes no guarantees that there will be future product enhancements, only bug fixes for the declared product lifespan (like MS does with Windows support lifetime declarations), and that any future product enhancement that MAY exist MAY OR MAY NOT be offered for free to existing users of this product.
This is where we get asinine workarounds just to comply with poorly drafted and overly expansive laws that are crafted too quickly and reach too far. This is why accounting, and law in general, is so byzantine needed the existence of entire cadres of lawyerbots just to navigate the waters...
Its about shareholders, not customers (Score:3, Insightful)
Apple are trying to cover their tracks. If some shareholders want to hound Apple at some point for some less-than-stellar performance on Wall St, they could easily bring up the fact that Apple recognised this revenue too early and thus brough the profits forward a few quarters (meaning that profit that should have ha
Doesn't Make Sense to Me (Score:3, Insightful)
OK, so it's fair that they're charging for it - if you believe their excuse, but why not $0.99 or $1?
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Re:Doesn't Make Sense to Me (Score:5, Funny)
-Ac
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I guess the whole thing sound ridiculous to you, as it does to me, and probably to Apple's accountants as we
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So why does it cost $4.99 for a feature which tas taken very little work to implement? OK, so it's fair that they're charging for it - if you believe their excuse, but why not $0.99 or $1?
I think most people are missing the point. I suspect it's not the software feature so much that users are paying for. Apple told users they were getting 802.11G cards and sold them as such. In reality, some were also capable of 802.11N. Since that feature was disabled, that was just fine, but if they're going to send ou
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It might have to do with spirit of the act. By charging anything Apple covers themselves with the letter of law but they have to charge something nominal in order to comply the spirit of the law. After all, what is the wholesale cost difference between a 802.11g card and a 802.11n card? Probably around $5.
Re:Doesn't Make Sense to Me (Score:5, Insightful)
I think I'll wait until Apple actually announces this before I even think about reacting to it one way or the other.
Credit card processing minimum charges? (Score:3, Interesting)
Well understood (Score:5, Insightful)
I thought this was common knowledge - I've been arguing that the effects of Sarbanes-Oxley are detrimental for some time now.
The major problem is that it invites software companies (I'm not making any accusations here) to put out shoddy software, full of bugs and not-ready-for-primetime features, giving themselves the option to *not* charge for upgrades later, perhaps for business-reasons. Bugfixes, you see, are not subject to the S-O ruling. This is not the way I'd like to see the s/w industry go...
Simon.
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mandelbr0t
Re:Well understood-Give Me A Break (Score:3, Funny)
Give me a break. Who among the Slashdot readers besides the .01% group you obviously belong to finds anything common knowledge about Sarbanes-Oxley?
the obvious fix (Score:3, Insightful)
Oh, wait.... [theregister.co.uk]
And who's going to believe that? (Score:2, Insightful)
And even if they believe their own propaganda, why don't charge one dollar, or even one cent? The accounting principle wouldn't be broken.
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Sorry I torrented it, Blame copyright law! (Score:2)
It's not an incomplete product (Score:2)
Hardware vs. software? (Score:2)
I have doubts... (Score:2)
Further, I would think that Sarbanes-Oxley would include a provision for things like hardware that could be updated through software. Other people have pointed out that software is updated all the time with added features for free. This does seem different to me though; Apple is adding a hardware feat
Hiding behind legislation (Score:2)
Upselling features (scum marketing) (Score:2, Interesting)
"upgrade" to "Premium" or "Ultimate" versions with your credit card,
how long before Apple turns around and says
"I see you are trying to use your bluetooth adapter. For a one-time use
feature please authorize a $2.99 charge to your credit card. If you want to
use this feature for longer periods of time the following plans are
available: 2 weeks of operation $8.99, 4 weeks of operation $14.99.
Time limited options extend automatically with recurrin
It's a software update, pay if you want (Score:2)
The place where this might get more aggravating is when it is applied to the minor system software updates, e.g. 10.4.7 -> 10.4.8. In the past such updates could include changes that go beyond just bug fixes.
Link Please... (Score:5, Insightful)
Sure it could have been a penny, but that may have been construed as trying to sell the feature for less than market value. I'm not an accountant, but I know that you can get in trouble for stock options granted at less than estimated market value for a private (unlisted) company, therefore you have the pick the lowest number that can be seen as a reasonable value. I was lucky to get my shares at $0.02 a piece since when I was granted the options the startup company I started working at had yet to make their first sale. A year later they had to grant options at $0.50 and up.
In all honesty $5 is cheap for a draft-N card. Consider the alternative of buying a PCMCIA Wireless N card and tell me its not a deal?
Re:Link Please... (Score:5, Insightful)
Also, even if you believe the "article", you could get the software patch for free by buying the new 802.11n Airport Extreme base station from Apple which in theory you would need anyway in order to use this.
If you think about it for a second, this idea doesn't even make sense. How is it not just free software that they give in order for the router to work? Apple gives out lots of free software.
This thing sounds like someone talking out of their ass. Possibly it is a fake rumor that someone at Apple planted to track down a leaker.
Do you detect a note of skepticism in my post? It is because I don't believe a word of this.
That's the SEC (Score:5, Informative)
Oh, poo on that... (Score:4, Interesting)
It's funny how BIOS updates and other drivers aren't seemingly worried about SOX...or how Microsoft Update isn't either...
Re:Oh, poo on that... (Score:5, Insightful)
I could imagine that Sarbanes-Oxley is very sensitive about any attempts to get around it.
Has Apple already claimed the revenue? (Score:2)
To be fair... (Score:5, Insightful)
For that matter, the same can be said of many different types of software. If you get a digital converter box from your cable company, by virtue of having the box you aren't granted access to every channel the box can theoretically decode.
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Corporate Debian users (Score:2)
Back in the days (Score:2)
Apple Isn't Charging, Blaming Anything (Score:5, Insightful)
IAACPA - I Am A CPA (Score:5, Informative)
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 [slashdot.org] 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. [nysscpa.org]
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.
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Would there be any problem with Apple offering the upgrade for $5 and offering a $5 instant rebate?
Weak Excuse (Score:3, Interesting)
Re:So does the law require them to charge $4.99? (Score:5, Insightful)
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Re:So are they not going to patch software anymore (Score:2)
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Said feature was never announced or advertised, so nobody would expect anything of the kind.
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802.11n was still in draft. The standard still has not been fully approved although a number of companies have created products based on it. From what I understand the version in the Macs were draft2. So if you're Apple do you advertise that your hardware uses it and take a gamble that it won't be revised later creating incompatibility? Or do you go with the safe route by implementing but only releasing it to be used for 802.11g?
Why is it being update
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100% true - But they should have the balls to come out and say so, not hide behind a totally unrelated law that even the experts disagree on its exactly implications.
Perhaps they want to win some sympathy points from the customers?
<cough>Market share<cough>
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The story is not accurate, at least in the sense that Apple's excuse is a valid one. The only way this could be considered "a feature of the product that was not delivered until a later time" would be if the laptops were advertised as having this feature to begin with, which they weren't. Nobody was sold these by Apple with the idea that 802.11n support would be forthcoming. Apple is just trying to deflect complainers.
Given t