Apple Hardware Rentals

What happens if Apple no longer sells cell phones and rents them instead?  Not much.  For years the cell carriers rented hardware by the month on a multi-year contract, and consumers weren’t horribly upset.   So long as Apple continues to force customers into regular replacements – the rental concept is more honest than the pretense of a sale without having the advantages of ownership. 

We’ve argued for years that a company that demands total control over their assets should not sell those assets in the first place.  Retaining ownership is essential to having full control.  But retaining ownership has accounting implications for Apple, that might not be so advantageous. 

Apple sells equipment and then reports their revenue based on the full sales value minus an accrual for their anticipated costs of fulfilling their warranty obligations.   Wall Street is devoted to seeing top-line revenue growth, and a rental or lease plan different from an account perspective.  This might not be helpful to stock pricing even if it is preferable over the long term. (“Long-term” meaning more than one quarter of a year. :) 

Rentals and not sales also keep Apple on the hook for more than revenue recognition.  Apple as the equipment owner retains responsibility for how equipment is used, or abused, or neglected or even used in crimes.  These are the dark side of ownership.  Apple has avoided the unhappy side of being the owner while commanding ownership control through unfair and deceptive contracts -  which is clearly a topic of discussion among lawmakers.  Apple has been having their cake and eating it too – which appears to be coming to an end through Right to Repair legislation. 

Personally, I think Apple will do very well to rent and not sell their phones.  Consumers may feel differently – but they should have the option to either own and control their purchases, or to rent them and not control them.