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  1.    #1  
    Palm WebOS: Subscription Accounting | Palm WebOS

    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.

    Bottom line, Palm is amortizing because they intend on pumping out updates.
  2. #2  
    I just posted this in the thread about the iPhone 3.0 announcement, since we had a lengthy debate about whether Palm would follow suit, but I agree that this is worthy of its own thread. Not to nitpick, but we need to be careful about making future projections. While this is great news, it remains to be seen whether they'll be "pumping out updates."
    Now THIS is the future of smartphones.
  3. #3  
    Also, because they said that they will....
  4. #4  
    This is mostly about stricter accounting rules that say that you can't ring up a sale as completed in full if you are going to have to continue to spend money on development and support. Believe me, Palm really needs the money on their books up front not month to month. It means a much longer before they can break even.
  5. #5  
    It also could mean that they are receiving some percentage of the MRC from Sprint. Just like Apple with the original iPhone. Perhapse that is another reason Sprint seems to want to lock the Pre to 59.99+ plans.
  6.    #6  
    I don't think the Treo Pro is treated this way. The rule is really shaky but it implies that palm plans on giving webOS a healthy amount of updates. That webOS 2.0 will be available for the Pre later.

    For the Treo Pro, it implies that beyond any bug patches, forget any major updates. WM 7 aint coming to that device or would be a paid update. Palm has done all the significant work and can recognize the revenue immediately.
  7. #7  
    Carrying unearned revenue on the books as a liability helps at tax time too.
  8. #8  
    Quote Originally Posted by bryanharig View Post
    It also could mean that they are receiving some percentage of the MRC from Sprint. Just like Apple with the original iPhone. Perhapse that is another reason Sprint seems to want to lock the Pre to 59.99+ plans.
    Looks that way.
    Quote Originally Posted by cardfan View Post
    IThe rule is really shaky but it implies that palm plans on giving webOS a healthy amount of updates.
    Because it will need it. several of the features touted won't r may not be present at release.
    Quote Originally Posted by cardfan View Post
    For the Treo Pro, it implies that beyond any bug patches, forget any major updates. WM 7 aint coming to that device or would be a paid update.
    it doesn't need them, the pre will probably require them.
    Quote Originally Posted by Kupe View Post
    Carrying unearned revenue on the books as a liability helps at tax time too.
    exactly
  9.    #9  
    Me thinks palm has enough losses to carry over to help at tax time
  10. #10  
    Quote Originally Posted by cardfan View Post
    Me thinks palm has enough losses to carry over to help at tax time
    Ha ha! Ouch! I suppose that's true.
  11. #11  
    Quote Originally Posted by cardfan View Post
    I don't think the Treo Pro is treated this way. The rule is really shaky but it implies that palm plans on giving webOS a healthy amount of updates. That webOS 2.0 will be available for the Pre later.

    For the Treo Pro, it implies that beyond any bug patches, forget any major updates. WM 7 aint coming to that device or would be a paid update. Palm has done all the significant work and can recognize the revenue immediately.
    Very good point you make there. I'm still on my 3yr old Sprint 700wx which originally came with WM5, but thanks to folks like Ebag (*bows to Ebag*) and the folks at PPCGeeks and others, i've since *upgraded* to WM6 and now 6.1.

    No thanks to Palm there.
  12.    #12  
    I ran across a comment or two regarding palm's previous patches for Treos that probably are worth repeating.

    Just simply the fact, most people probably never downloaded them or even knew about them. And that's probably the one thing taken for granted now with the iphone's method doing updates..all done from the desktop app (itunes) upon letting you know an update is out.

    But we've seen how many MB's those iphone updates are and so i'm still curious just how this over the air updating will fly with Palm and how it could lead to screwups..

    One wonders if palm is biting off too much innovation at once here and that it doesn't lead to bricked phones or needing tons of support.
  13. EWT
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    #13  
    That's interesting that they're recognizing only 1/24th of the revenue in the month of sale. I'd argue that they're delivering a lot more than 1/24th of the entire package at the point of sale.

    In any case, analysts are smart enough to realize that the revenue is there even if most of it is deferred up front. Also, the thing that really matters for Palm's survival (receipt of cash) isn't going to be affected by when the revenue gets recognized.

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