Is Apple Using Sarbox as a Scapegoat?

Lora Bentley



That's what it will cost Apple's U.S. customers to enable the 802.11n functionality in the iMac with Intel Core 2 Duo (except 17-inch, 1.83GHz iMac), the MacBook with Intel Core 2 Duo, the MacBook Pro with Intel Core 2 Duo, and the Mac Pro with AirPort Extreme card option.


The fact that the functionality is being added isn't a problem for users. What's perplexing them is why they have to pay for it.


The company is blaming Sarbanes-Oxley for the decision to charge for the enablers, and at least iLounge's Jeremy Horwitz is wondering how legitimate the excuse is. We're betting he's not alone. Here at IT Business Edge, of course, we have documented the tendency of public companies to immediately blame Sarbox for their problems.


We're not experts on Sarbanes-Oxley (feel free to enlighten us if you are), but according to what we've read today, Apple's claim that offering the enablers for free would violate Sarbanes-Oxley looks legitimate. It's all about precise accounting. The clearest explanation we've seen so far appears in Reg Hardware, where Tony Smith puts it this way:

If Apple begins selling a product at the start of, say, Q1 and then adds a previously unadvertised feature to it at the beginning of Q2, under Sarbanes-Oxley, it has to recognise revenues from the product from Q2 onwards. Revenues recognised in Q1 run contrary to the rules enshrined in the Act. Unless, of course, the extra feature is a 'new' product, attracting its own revenue stream.

Presumably, then, the $4.99 fee accompanying the "previously unadvertised" or "new" 802.11n functionality gives it its own revenue stream; thus, Apple is complying with Sarbanes-Oxley. When the 802.11n enablers are bundled with the yet-to-be-released AirPort Extreme Base Station, the fee will not apply because the base stations are already being advertised as 802.11n-capable.


If allowing users to add unadvertised functionality at no cost does violate Sarbox, how many other software companies are guilty of the same thing?


UPDATE: On January 18, Ars Technica reported that Apple will indeed charge a fee for the functionality, but according to company statements, it will charge only $1.99 rather than $4.99.

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Add Comment      Leave a comment on this blog post
Jan 18, 2007 7:39 PM Milo Panni Milo Panni  says:
I've been working with Sarbanes Oxley since it was first enacted and have seen its impact at a number of different companies and industries.I think apple's explaination is baloney.  SOX requires companies to have sufficient and effective means to prevent errors in their financial statements.In this case they sell computers and recognize full revenue when they ship a computer to a customer or retailer. There are alot of things those computers can do that is unadvertized but that has no bearing on revenue after its shipped. If this were truely driven by SOX or by generally accepted accounting principles Apple would be able to explain it rather than just saying SOX made us do it. Reply

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