This is nuts.

Oh, about that 802.11n card in your C2D Mac

From an Apple representative on the show floor: so if you have a Core 2 Duo Macintosh, you have a card capable of 802.11b, g, and – surprise, surprise – n. (Well, apparently n draft 2, which may or may not be like the final ratified standard come 2008, but will be supported in multiple Apple products.) And Apple’s going to distribute software to let you unlock the n standard in that card, which offers superior bandwidth for all sorts of data, especially and including high-bitrate video. Great news, right?

I’m not going to claim to understand this next part, which really just makes no sense to me at all, but the claim Apple’s making is that it _can’t_ give you the 802.11n-unlocking software for free. The reason: the Core 2 Duo Macs weren’t advertised as 802.11n-ready, and a little law called the Sarbanes-Oxley Act supposedly prohibits Apple from giving away an unadvertised new feature for one of its products. Hence, said the Apple rep, the company’s not distributing new _features_ in Software Update any more, just _bug fixes._ Because of Sarbanes-Oxley.

Another Apple representative has added details on the Sarbanes situation: 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. Ridiculous.



  1. V says:

    This kind of logic would allow Microsoft to charge for “upgrades” like IE7, Genuine Advantage, etc. Apple is smarter then this. It makes you wonder, maybe they’re just not the “non-evil empire nice guys” that MacFans make them out to be…

  2. BHK says:

    Can’t really blame them for wanting to avoid huge fines and possible felony charges. Consumers wanted Congress to “fix” corporate corruption quickly and without much thought to consequences, and now we reap what we sow.

  3. GregA says:

    Bwhahahahaha,

    Apples accounting practices (sarbanes-oxley) are under review, and they need to raise some cash fast! Given the way apple has been acting since this investigation started, with the sloppy iPhone release, weird lawyering, etc… Certainly looks to me like Apple is about to do an Enron.

  4. I wonder when the government will realize that making more laws just creates a new set of problems, and really doesn’t fix the issue. Both parties are very guilty of this (and frankly, anymore, there is almost no difference between the two).

  5. Bill says:

    Actually, as weird and stupid as this sounds the part about recognizing revenue for incomplete products is true. But it’s my understanding that (I work in engineering and I am not a Lawyer or a Finance guy)
    – it is a new GAAP and not a Sarb-ox rule
    – If you deliver an incomplete product, for example, you advertize an N compliant adapter but it takes a SW upgrade sometime after you buy the product, you can’t recognize revenue from the sale of the HW until the SW upgrade is delivered. This is different from what the post said, but this is my understanding.

    As a result the company where I work has added fuses to our Si product to allow us to disable features to prohibit upgrades (I’m not saying we’re going to ‘use’ that feature, but we put it in just in case).

    I don’t know the intent of the rule but it is loaded with consequences.

  6. Bill says:

    Actually, is this something our fearless leader of “Dvorak.org/blog” can check into? I’d love to read his blast on crap like this.

  7. Carlos says:

    Is there anything that prohibits them from charging a very small fee? Say a dollar?

  8. Most people (like me) will probably just not buy the software… unless you have another 802.11n device, it is useless. The two Apple 802.11n devices out there (Airport Extreme and iTV) come with the enabler software already, so if you get those you don’t need to buy it.

  9. Whaapp! says:

    Been doing SOX testing for about 3 years now and this does not ring true. I think the Apple rep may just be full of it . . .

    However my experience is with SOX compliance for IT rather than finance.

  10. tallwookie says:

    hACK tHe pLiZAne+

  11. #5 count on it…

  12. Mac Guy says:

    So considering Apple came out with Airport, THEN established 802.11b , would that have been a violation?

    Jesus, what’s the big deal about a damn firmware upgrade?

  13. JT says:

    This is just another backhanded corporate attack against Sarbanes-Oxley. They despise it and are working tirelessly to get it rolled back or rescinded. What better way than to start turning the general public against it.

  14. Mike says:

    Yep, I don’t see the logic in the statement either. If they advertise and sell an 802.11g computer, they earn and recognize that revenue when they deliver an 802.11g capable computer to the customer. Even if the hardware may have been more capable than advertised and an update is later provided, the accounting for the revenue of the sale should not be affected.

    Hell, that argument would mean that nobody could issue a firmware update that provided additional functionality.

  15. Angel H. Wong says:

    Finally something that proves my theory that Apple is sleazier than M$.

  16. smarty pants says:

    um, im glad you guys believe things from “un-named” apple “reps.” havent you people learned to wait until something factual comes out? remember the cisco iphone story? how many people were POSITIVE that the announcement was going to be from apple.

  17. andrewj says:

    What law made them charge $300 for a $100 stick of RAM?

  18. PJI says:

    Ummm… so an unnamed source at Apple, a company currently under investigation for accounting issues, claims that accounting regulations are forcing them into the ludicrous situation of charging their customers to activate hardware their customers already own. So, does anybody else sense a connection there, or am I deep into tinfoil hat territory?

  19. Aric says:

    #22

    No, put your tinfoil down. You’re dead on. This is probably some lame attempt to get people to turn on the Sarbanes-Oxley Act (see #10).

    While I agree with the notion that you can’t legislate companies into not being douche bags, the fact that a ton of companies (many under investigation or pending) are bitching about this act tells me it should stay put.

    But honestly, trade show floor reps know jack shit about anything thats going on. This moron read some email vomit being passed around the mac offices, and this doofus came up with this. It’s horseshit and I hope they do it. What better to screw their business and chase people away.

  20. Mike Novick says:

    Maybe this’ll be enough to get Sarbanes-Oxley rolled back. Already comapnies are fleeing to London for IPOs and stock market listing. Somehow I doubt that they are less corrupt over there.

  21. Drew Nichols says:

    This is yet another example of the “status quo” in technology being ahead of GAAP. It is also the result of over-bearing legislation trying to keep the honest people honest.

  22. John says:

    As a finance guy I’ve just got to say that this is ridiculous. And that Bill (#5) and Joey (#10) have got it right.

    Firstly as has already been said the potential to upgrade to 802.11n was never advertised and thus when customers acquired the product there was no expectation that it would have this feature. What GAAP is trying to prevent is companies from recognizing revenue on products that haven’t shipped or that have extended service features. If I preorder Halo 3 from Microsoft, they can’t recognize the revenue until they ship me the product or if I pay for a one year service contract on my computer that revenue can only be recognized over time or at the end of the one year, once the company has earned the money by delivering the service.

    Secondly, even if the argument existed that consumers had an expectation for the potential of upgrades and that because of that expectation were willing to pay a premium to have that potential upgrades. GAAP requires that you determine a value for that premium and if the costs of determining the actual number out way the benefits obtained from that number it, can generally be disregarded as a factor in the revenue recognition calculation.

    And finally, I suspect that even if a value was determined that it would not be a material amount. Given Apple’s current Net Income, materiality for the company is somewhere in the range of $100 million, which would mean that there auditors likely wouldn’t make an issue of this problem unless they suspected that the difference was more than $5 million.

    All and all, this is more the case of someone not fully understanding the accounting rules and trying to force them to be arbitrarily rigid. If Apple is seriously concerned about this problem then they need only point to the note in their financial statements which says that in some cases Apple uses estimates because the real data is not available, and because of this the actual results might vary.

  23. Podesta says:

    Actually, the reason why there might be SOX liability is pretty clear. In essence a ‘g’ card came with the computer. The firmware change that will make it ‘n’ will actually be a sell of software.

    I think the expectation interest will actually apply to Leopard. With ‘n’ support included in the OS, the user of the card will then have paid for it. Since there was no expectation interest of ‘n’ when purchasing computers with the card, there’s no legitimate gripe.

  24. Mucous says:

    As long as Apple gets bad rep and Steve Jobs is inconvenienced, it’s all good.

  25. moss says:

    The charge has been confirmed by Apple as $1.99…

  26. Marcus says:

    So will Microsoft have to charge for every “Ultimate Extra” for Vista? I doubt it. Apple’s just trying to make a little cash on the side.


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