Dan, As I read the terms, you sign up for four years, not two. At the end of two years, you can trade it in for an upgrade, but you still owe the two remaining years. They sell it to you at retail, offer to buy it back at wholesale after two years and sell you another at retail.
Last time I checked the want ads, two year old PC's were going begging at $300. Assuming $15 per month of the payment is internet fee, one is paying $1680 plus financing for the computer. This will only attract the mathematically challenged and those who can't afford $1000 all at once. Perhaps they will have to add a new line on their balance sheet - Allowance for Bad Debts, instead of netting it into receivables.
You are right about their ASP going down. They had the highest growth in laptops, which are higher priced and the ASP still went down. With the growth rates shown, it is hard to justify a trailing PE of 82 (the world according to GAAP), or a forward PE of 30.
Good Luck! |
