There’s a little joke at the end of Charlie Sorrell’s nicely illustrated 8 Things to Expect in the Next iPhone Update on Wired.com.

The last item in Sorrell’s list of known fixes (cobbled together from leaks from iPhone Firmware 2.2 Beta 2) is improvement No. 8:

Copy and Paste

Kidding! You didn’t fall for that one, did you?

The irony of Sorrell’s joke is not just that the one fix users have been asking Apple (AAPL) to make since Day 1 hasn’t been addressed. It’s that none of these improvements top anyone’s wish list.

Here’s an eye-opening exercise: Compare Sorrell’s iPhone 2.2 feature list to the first eight items (of hundreds) in the user-generated wish list being assembled at Please Fix the iPhone, which began soliciting suggestions 12 days ago and has already generated more than 270,000 responses:

Note that not one of the iPhone’s new features appears on the user-generated list. In fact, you have scroll down to No. 18 — “Walking directions,” a new Google Maps feature — to find anything that matches.

A publicist for FullSix, the “relationship marketing” agency that created Please Fix the iPhone, talks about a growing trend in which companies use customer feedback to drive product development — citing as examples My Starbucks (SBUX) Idea and Dell’s (DELL) Idea Storm.

Steve Jobs prides himself in taking the opposite approach. He believes customers don’t really know what they want until they see it. “I skate to where the puck is going to be,” he says, quoting Wayne Gretzky. “Not to where it’s been.”

But you can wear Steve Jobs down. “We heard you,” he’ll say at a keynote, when he introduces a fix that users have been clamoring for.

If you have improvements you’d like to see in future iPhone firmware updates, it’s not too late to add your vote — or your ideas — to Please Fix the iPhone here.

Here’s a headache most companies would love to have.

Apple is sitting on a huge cash reserve — $24.5 billion as of September and growing at the rate of $8 to $10 billion a year –  that’s doing almost nothing for it.

The money is earning about $1.55% interest after taxes, according to a report issued Wednesday by Bernstein Research’s Toni Sacconaghi, at a time when the company’s stock is trading at a unusually low (for Apple) multiple of 15 times earnings.

That makes conditions ideal for a massive buyback of Apple (AAPL) shares, says Sacconaghi.

“Mathematically,” he wrote “share buybacks boost EPS only if a stock’s P/E multiple is lower than the reciprocal of the after-tax interest rate earned on cash.”

Apple has been trading at 30 to 40 times earnings in recent years, which Sacconaghi believes is one reason Apple has not initiated a stock repurchase program in the past 5 years.

But today, according to Sacconaghi’s model, Apple is trading at about 18 times his fiscal year 2009 earnings estimate (and about 13 times earnings using non-GAAP numbers). By his formula

18 < 1/.0155 < 64.5

Sacconaghi goes on to calculate what a buyback would do to Apple’s share price. Ten billion dollars spent purchasing Apple share, he estimates, would boost the company’s (GAAP) EPS about 4%. A $20 billion buyback program would boost it about 9%. And if the $20 billion program were front-loaded — completed in the first fiscal quarter of 2009 — the company’s EPS could jump as much as 15% (or $0.75 a share).

Heady stuff for shareholders. And, according to Sacconaghi, better than the alternatives: making a major acquisition, paying a substantial dividend or continuing to let its cash hoard grow — which might make it a tempting target for corporate raiders who see the cash as a way to pay for a hostile takeover.

A big dividend — say, 5% — would consume only about half Apple’s cash flow, and a special dividend would dilute Apple’s earnings growth too much to please shareholders.

A major acquisition is another possibility, but it would be out of character for Apple. The company usually buys small shops that it can bend to its will, and there aren’t many big ones out there that can keep up with Apple’s blistering pace of innovation.

Of course, Steve Jobs may have better ideas than Toni Sacconaghi about what $25 billion can do. The last time Apple’s stock fell this sharply — plunging from nearly $40 a share in March 2000 to $7.44 in December 2000 –  Jobs used the cash he had on hand to start a chain of Apple Stores.

[Chart courtesy of Bernstein Research.]

Bullish Cross‘ Andy Zaky has been on a tear lately.

The blogger-analyst, whose predictions of Apple’s (AAPL) quarterly earnings bested the pros for the second time this year (see here and here), is using the new adjusted revenue numbers Steve Jobs released last week to take a fresh look at every aspect of company’s business.

Today he’s looking at the iPod — the MP3 player that was once the main driver of Apple’s growth, and which contributed more than 55% to its total sales revenue as recently as the first quarter of fiscal 2006.

But the days that Apple was driven by the iPod are over, he concludes in an article posted Sunday evening. When viewed using so-called non-GAAP* revenue numbers (i.e., including the revenue from iPhone sales that Apple has been hiding in subscription-based accounting), the iPod’s contribution to Apple’s quarterly sales has shrunk from 55.6% in 2006 to 14.2% last quarter, as shown in Zaky’s chart below:

One consequence of the iPod’s diminishing role in Apple’s business model is a lessening of the company’s dependence on its first fiscal quarter — the one that includes revenue from the millions of iPods purchased as Christmas gifts. Notice in the following Zaky chart how the spike represented by Q1 sales in each of the last three years has been replaced by a spike in Q4 — the September quarter in which Apple released its iPhone revenue bomb.

*GAAP = Generally accepted accounting principles, by which Apple spread the revenue from iPhone and Apple TV sales over the life of the product rather than reporting it in the month the device was sold.

Here’s a chart that should keep Steve Ballmer up at night.

It compares Microsoft’s (MSFT) market share, revenue, net profit and growth rate to Apple’s (AAPL), using the numbers from each company’s most recent quarterly report.

Although Apple has a bit more cash on hand ($24.5 billion v. $20.7 billion), Microsoft’s operating system still dominates. And if you use generally accepted accounting principles (GAAP), Redmond’s revenue and net income still dwarf Cupertino’s.

But it turns out that Apple has been hiding most of its iPhone revenue behind subscription-based accounting (see here). As Apple Insider’s Prince McLean points out, if you use the non-GAAP deferred revenue numbers that Apple released last week (and are shown in this chart), the company now earns more than half of Microsoft’s profits on more than three fourths of its revenue (see Apple earnings, profits, and cash embarrass Microsoft).

Steve Jobs’ company is also growing much more quickly than Ballmer’s. Microsoft’s revenue grew 9% year over year last quarter. Apple’s grew 75%.

Some Apple watchers have complained almost since the launch of the iPhone that Wall Street doesn’t understand the device’s value to the company. Analysts consistently underestimate Apple’s revenue, these investors insist, because they fail to fully account for iPhone sales.

The problem has been festering for so long — and the gap has grown so large between Apple’s actual earnings and the Street’s grasp of those earnings — that Apple finally let the cat out of the bag Tuesday during its quarterly earnings call.

Measured by so-called generally accepted accounting principles (GAAP), the company earned $1.26 a share in 2008 Q4 on revenue of $7.9 billion. This is the form in which Apple (AAPL) has always reported its income.

But on Tuesday, for the first time, the company went one step further. CFO Peter Oppenheimer told analysts that when measured by actual revenue — counting the full value of every iPhone and Apple TV sold in the quarter — the company earned a good deal more: $2.69 per share on sales of $11.68 billion (see transcript here).

The consensus among analysts before the earnings call was that Apple’s revenue for the quarter would be about $8.05 billion. Some traders looked at $7.9 billion and thought Apple had fallen short of the Street’s target by $150 million. The smart ones looked at $11.682 billion and realized they’d underestimated Apple’s earnings by nearly $3.8 billion. They’re probably the reason Apple’s share price jumped 12% in after hours trading.

How could the analysts have been so wrong?

In the analysts’ defense, the accounting methods Apple uses aren’t easy to follow — even though Oppenheimer has spelled them out at almost every earnings call.

For reasons that have to do with being able to provide free upgrades over the life of the phone, Apple doesn’t book the full value of, say, a $199 iPhone the day it’s sold. Rather, its accountants spread that income out over 24 months, booking $8.29 in the first month, $8.29 the second month, and so on until the revenue from that iPhone has been fully accounted for. (Actually, the value of that iPhone is probably closer to $500, once AT&T has paid its share, but you get the idea.)

Given that Apple’s iPhone sales have been growing exponentially over the past 15 months and that each month’s iPhone revenue includes not just a share of the sales from that month, but a share of iPhone sales from each of the months that preceded it, you begin to see the dimensions of what one might call Apple’s iPhone revenue bomb.

“This is a pretty big deal,” Steve Jobs told analysts and journalists on Tuesday, as he made his first appearance at an Apple earnings call in 8 years to try to explain the iPhone’s so-called subscription accounting system.

“As long as our iPhone business was small relative to our Mac and music businesses, this didn’t really matter much. But this past quarter, as you heard, our iPhone business has grown to about $4.6 billion, or 39% of Apple’s total business, clearly too big for Apple management or investors to ignore.”

Oppenheimer and Jobs promised to provide adjusted revenue numbers — so-called non-GAAP revenue — every quarter going forward. But they didn’t provide any non-GAAP numbers from quarters past, making it difficult to gauge how fast Apple is actually growing.

That’s where Andy Zaky comes in. An amateur Apple watcher — and one of the blogger-analysts who humiliated the professionals in a Q4 earnings estimate smackdown earlier this week (see here) — Zaky stayed up all night Wednesday trying to reconstruct Apple’s actual earnings in quarters for which it didn’t provide non-GAAP data.

His results, published early Thursday on his blog Bullish Cross, and republished by AppleInsider and Seeking Alpha, show that Apple’s revenue actually grew 75% year-to-year last quarter, not the 27% that the company reported, while its real net income grew nearly 125%. The pros could learn a lot by studying his findings.

Zaky’s results are summarized in the chart below. To see how he arrived at his numbers, click here.

Here’s an interesting corporate milestone: When the markets closed on Wednesday, Dell (DELL) was trading at $11.98 share, with 1.96 billion shares outstanding. That puts Dell’s market capitalization at $23.5 billion.

Meanwhile on Tuesday, Steve Jobs reported that Apple (AAPL) ended fiscal year 2008 with $24.5 billion in the bank.

In other words, Apple could buy Dell with the cash it has on hand and still have more than $1 billion left over. (Or rather $10 billion, if you count, as reader Joe Goodart does, the $9 billion Dell has in the bank.)

Hard to believe that it’s been only 11 years since Michael Dell, asked what he would do if he were Apple’s CEO, answered:

“What would I do? I’d shut it down and give the money back to the shareholders.” (link)

For the record, Apple’s market cap today stands at $85.8 billion.

Don’t cry for Michael Dell, however. According to a list of the 400 wealthiest Americans published last month, his net worth is still more than three times Steve Jobs’.

• Michael Dell: $17.3 billion
• Steve Jobs: $5.7 billion

For a timeline of other Apple v. Dell milestones, see MacDailyNews here.

Now that Apple (AAPL) has shipped its 10 millionth iPhone this year — outselling Research in Motion’s (RIMM) BlackBerry for the quarter, according to Steve Jobs, and climbing to the No. 3 spot in cell phone revenues worldwide, after Nokia (NOK) and Samsung — this might be a good time to revisit MacDailyNews‘ collection the dumbest things people have said about the device over the past two years.

A sampling:

“Apple is slated to come out with a new phone… And it will largely fail.”
Michael Kanellos, CNET, December 07, 2006

“[Apple's iPhone] is the most expensive phone in the world and it doesn’t appeal to business customers because it doesn’t have a keyboard which makes it not a very good email machine… So, I, I kinda look at that and I say, well, I like our strategy. I like it a lot.”
Steve Ballmer, Microsoft CEO, January 17, 2007

“Apple should pull the plug on the iPhone… What Apple risks here is its reputation as a hot company that can do no wrong. If it’s smart it will call the iPhone a ‘reference design’ and pass it to some suckers to build with someone else’s marketing budget. Then it can wash its hands of any marketplace failures… Otherwise I’d advise people to cover their eyes. You are not going to like what you’ll see.”
John C. Dvorak, Bloated Gas Bag, March 28, 2007

“The iPhone is going to be nothing more than a temporary novelty that will eventually wear off.”
Gundeep Hora, CoolTechZone Editor-in-Chief, April 02, 2007

“I’m more convinced than ever that, after an initial frenzy of publicity and sales to early adopters, iPhone sales will be unspectacular… iPhone may well become Apple’s next Newton.”
David Haskin, Computerworld, February 26, 2007

“There’s no chance that the iPhone is going to get any significant market share. No chance. It’s a $500 subsidized item. They may make a lot of money. But if you actually take a look at the 1.3 billion phones that get sold, I’d prefer to have our software in 60% or 70% or 80% of them, than I would to have 2% or 3%, which is what Apple might get.”
Steve Ballmer, Microsoft CEO, 30 April 2007

“How do you deal with that? How do they deal with us?”
Ed Zander, Motorola CEO/Chairman May 10, 2007

“It just doesn’t matter anymore. There are now alternatives to the iPhone, which has been introduced everywhere else in the world. It’s no longer a novelty.”
Eamon Hoey, Hoey and Associates, April 30, 2008

To see MacDailyNews’ full list, click here.

Last week, Andy Zaky of Bullish Cross, representing a group of unpaid analysts who follow Apple (AAPL) in blogs, challenged the professionals who do it for banks and brokerage houses — and whom the bloggers claim are clueless (see Apple Q4 earnings smackdown).

So now that Apple has reported its 2008 Q4 earnings, how did the two teams do?

The results are summarized in the chart below, with estimates closest to the mark highlighted in green and the worst highlighted in orange:

What jumps out of the chart for me is how badly the pros blew the iPhone numbers: the Street consensus was off by a shocking 72%. It was here that the bloggers shone. All three came within 8% of the actual number and Turley Muller of Financial Alchemist hit it on the head with an estimate of 6.8 million.

“I was just lucky the data was good,” says Muller. “All the data — my checks with Best Buy managers, counts at Apple stores, IMEI numbers, assumed production rates — pointed to the same general number.”

Muller, it must be said, had the worst estimates for total revenue and Mac sales — overshooting actual sales of 2.611 million by 350,000 Macs. But everybody overshot Mac sales, which were hurt by weak school purchasing and customers holding out for the new notebooks Apple introduced last week. For some reason, the major sales tracking firms missed those trends.  “I can no longer rely on Gartner and IDC data,” says Zaky. “They really got it wrong — or if they didn’t get a wrong, then sales overseas are collapsing.”

Because everybody over-estimated Mac sales, they also over-estimated revenue — Muller and Piper Jaffray’s Gene Munster worst of all. But in Munster’s defense, he has mastered the art of predicting iPod sales based on NPD data, and everybody who followed his lead got that number right.

Munster is also the only analyst I know who dared publish an estimate of deferred revenue, which Apple reported for the first time on Tuesday. When deferred revenue from iPhone and Apple TV sales is factored in, Apple earned a stunning $2.69 a share on sales of $11.7 billion last quarter. Munster’s estimates were $1.60 and $10.1 billion, respectively.

Two bloggers — Zaky and Deagol — ended up with with the most greens in a row, with three best-in-category squares out of six and no oranges.

The prize for the most embarrassing call goes to Barklay’s Ben Reitzes for missing the iPhone number by more than 3 million units, followed closely by Merrill Lynch’s Jeff Fidacaro and Bernstein’s Tony Sacconaghi.

Bottom line: Nobody got everything right, but considering how badly the pros misjudged iPhone sales and how close the unpaid analysts were on the other numbers, I have to give this round to the bloggers.

The best thing about the blogger-analysts is that you don’t have to pay to read their estimates — at least for now. The best places to find them on the Web are The Mac Observer’s Apple Finance Board and Investor Village’s private AAPL Sanity (registration required).

You can read our live-blog of Apple’s Q4 earnings call here or read the transcript here. If you have an hour to spare, you can hear the Web cast — which includes a rare guest appearance by Steve Jobs — at Apple’s Web site here, where it will be available for two weeks.

This is a live blog of Apple’s (AAPL) Q4 earnings call, which began at 5 p.m. ET (2 p.m. PT) and lasted about an hour.

3:38 p.m. With the markets minutes away from the closing bell, Apple’s shares were getting clobbered: down more than 7 points (7.14%) on a day in which the Dow fell 2.5%. Conventional wisdom has it that Yahoo (YHOO) and Apple got caught in the slipstream of Texas Instrument’s (TXN) bearish news, but why Apple would fall harder than TI or Yahoo is beyond me.

4:20 Apple closed at 91.49, down 6.95 (7.06%) for the day. It’s up about half a point in after hours trading.

4:22: No sign yet of Apple’s press release, which usually comes out about half an hour after the closing bell. The conference call isn’t letting anyone in for another 10 minutes.

4:34 We’re in. Classical music. Flute and violins. Conference starts in 26 minutes.

4:43 Apple’s press release with its Q4 earnings results has hit the wires. The headlines:

• Revenue: $7.9 billion, up from $6.22 billion in Q4 2007
• Profit: $ 1.14 billion, up more than 26% from $904 million in 2007
• EPS: $1.26  per diluted share, up from $1.01 in 2007
• Gross margin: 34.7%, up (!) from 33.6%
• International sales: 41% of revenue, up from 40% in 2007, down from 42% in Q3
• Adjusted sales (including deferred rev. from iPhone and Apple TV): an astonishing $11.68 billion
• Adjusted net income: $2.44 billion, more than double its net without the deferred revenue
• Macs shipped: 2.611  million (21% unit growth, 17% rev. growth from same quarter 2007)
• iPods sold:  11.052 million
• iPhones sold in quarter: 6.892 million, up from 1.119 in Q4 2007

Sound bite from Steve Jobs: “We sold more phones than RIM” (RIMM)

Guidance for 2009 Q1: A “wide range,” says CFO Peter Oppenheimer. Targeting revenue between $9.0 and $10.0 billion and EPS between $1.06 and $1.35.

That revenue number is below the Street’s consensus — and way below the whisper numbers — but the gross margin is better than anyone thought it would be. Given Oppenheimer’s warning that it would take a big cut this quarter, he’s got some explaining to do.

4:59 Please stand by. Below the fold: The earnings call begins, right on time.

Apple guides conservatively — which is to say it low-balls its earnings and revenue numbers for the coming quarter so that it can blow them out of the water three months later. It’s a game the company plays every quarter, but the market never seems to learn; Apple’s shares invariably take a hit in after-hours trading.

To help his clients get a handle on this phenomenon in advance of Apple’s fourth-quarter earnings report — scheduled for release Tuesday afternoon — Piper Jaffray’s Gene Munster has issued a handy guide to Apple’s guidance, complete with charts going back eight quarters.

Bottom line: on average over the past two years, Apple (AAPL) has guided earnings per share 9% below Street expectations and revenue 4% below. Then when it reports its actual earnings, it beats the Street’s consensus 27% on EPS and 4% on revenue.

There’s some variation, as you can see from the charts below. Apple actually guided higher than the Street’s expectations for the December quarter last year, triggering a run on the stock that took it to over $200 a share. Munster doesn’t expect a repeat of that this year. In fact, given the dismal economic climate, he warns that Apple’s guidance could be even more conservative than usual. Specifically, he expects the company to guide EPS 5% below consensus to about $1.41 and revenues 15% below consensus to about $10.1 billion.

Piper Jaffray’s (PJC) estimates for Q4 remain unchanged and are summarized in the chart below. Meanwhile, Munster is sticking stubbornly to his target of $250 a share, resisting the recent downgrade trend (see here). For a table comparing Munster’s Q4 estimates with those of other leading Wall Street analysts — and a few unpaid analysts who claim to have a better track record than the professionals — see Apple Q4 earnings smackdown.

Apple has scheduled an earnings conference call for Tuesday at 5 p.m. ET. We’ll be listening in and live blogging here.