Terminally Incoherent

Utterly random, incoherent and disjointed rants and ramblings...

Tuesday, August 16, 2005

iStampede!

School officials in Henrico County, VA have decided to sell used iBooks for $50 a pop creating a riot that slashdot described as iStampede (boingboing also covered this story). Why was there a riot? Because the laptops were sold at a fraction of their price. Dumping a truckload of cash into the street would probably have the same effect.

I find it very interesting that public schools have decided to basically give these computers away for free. Charging $50 for a $1000+ computer is a joke. Tgibbs - one of the slashdot readers made a very good comment:

My theory is the following: To get the money to purchase new laptops from Dell and Microsoft, somebody had to represent that the existing, perfectly-good iBooks were obsolete and near-worthless. If they had been offered at auction, they would have sold at a much higher price, exposing the fraud. So instead, they were offered to the public at fire-sale prices. The riot was the predictable outcome.

In fact, it is hard to imagine what student use would have required anything more powerful than a 500 MHz iBook. The only one that leaps to mind is video editing, and somehow I doubt that a large number of students needed to do that on their laptops.

That sounds very plausible considering how MS sales reps work. I wouldn't necessarily call this a fraud - I would call it but a very good PR effort from Dell/MS team. To get a good deal with Dell, old computers had to be disposed off quickly - best if sold very cheap to underline the desperate need for new systems and make the school administration more willing to invest. Hence someone slapped $5o tag on them, and figureheads said "wow - these laptops must be really crappy if they are only worth $50 a piece - we better sign that deal with Dell".

Now I know that Henrico citizens demanded that the laptops were sold cheap, but still - they could have charged much more and it would still be cheap for an apple.

Another slashdot reader, alexhmit01 offers a theory with a little less conspiracy involved:


Generally, assets are depreciated over a set schedule. UNLIKE Tax accounting, where the IRS sets the depreciation schedule, for financial reporting and to some extent governments, can set the rules.

For example, they may have decided that we buy these machines for $1250, will get four years out of them, then have a salvage value of $50. Therefore, we take $300/year in machine costs (the depreciation) and sell them at the end.

Now, if a corp. sold them at the end for $200, then they would book $150/each. as a profit on disposed asset. But the school system has no concept, so likely sold them for the salvage value from 4 years ago... and that salvage value was probably based on previous laptop salvage pricing, ignoring that the Mac market tends to have higher salvage values.

So it likely wasn't fraud, but rather a government official confusing accounting with reality.


So it is likely that this might have been simply bad accounting, and not fraud. But then again, why just dump all the perfectly working iBooks? They could use both Dells and Apples in tandem, right? Jc42 from slashdot suggests that there might be another explanation here:

The special-price deal they got with Dell probably included the condition that they get rid of all their non-Dell computers.

Salesmen routinely make deals like this. Usually they're "privately-arranged" deals that are not explicit in the written contract. But the contract is carefully phrased so that they can legally demand more money if they discover any of the old computers on the premises. Some admins resist this sort of deal; many don't.

I would not be surprised if this was true. We all know how these companies work. As much as I like Dell, they are still a big evil corporation.

Btw, some idiot decided to turn his near-death experience at Hernico stampede into profit selling his $50 iBook for #250 on ebay. Sigh...




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