Carriers Can’t Afford Not to Carry iPhone, Analyst

| Apple Stock Watch

AppleSterne Agee analyst Shaw Wu told clients on Thursday that carriers can’t afford not to carry the iPhone, and that concerns on Wall Street about lower iPhone subsidies are “overblown.” The comments came after a meeting with Apple’s management.

On April 9th, Walter Piecyk downgraded AAPL based on his concern that changes to aggressive carrier subsidy policies will result in fewer smartphone upgrades. He also expressed doubt about Apple’s ability to wrangle US$600 per iPhone in emerging markets where carrier subsidies are few and far between.

Mr. Piecyk lowered his rating on the company’s stock from a “Buy” to “Neutral,” and that began a multi-week sell off that was exacerbated by a broader market retreat.

In a research note obtained by The Mac Observer, Shaw Wu said, “We believe concerns over lower carrier subsidies is overblown and in addition believe a carrier cannot afford to not carry iPhone as it risks losing market share to a carrier who does.”

He also said that a US$400 subsidy isn’t that high when considered within the context of the $1920 that carriers can earn with a two-year iPhone $80 per month contract, especially when that’s a subscriber, “it otherwise may not acquire.”

iCloud

Apple executives also told the analyst that they believe that many customers use iCloud without knowing it because no training is required to use many aspects of the service, it’s seamlessly integrated with iOS and OS X, and because it just works.

IT

The other portion of his research note that we found interesting is that management told him that it will not be providing custom models of its devices for the enterprise market like other companies do. While Apple had been adding to its enterprise sales team, building up its Value Added Reseller (VAR) network, and adding briefing rooms to some of its retail stores, the company will continue to offer up the same models to both consumers and companies.

This doesn’t represent a change of any sort, and long-time Apple observers have long understood this about the company. What’s interesting to us is that Apple hasn’t often expressed this so directly.

Whatever the case, however, the information was aimed at investors who might not have as good a grasp on Apple and its business model as regular readers of TMO.

Shares of AAPL edged higher on Thursday, ending the day at $571.72, up $0.260 (+0.05 percent), on light volume of 13.6 million shares trading hands.

*In the interest of full disclosure, the author holds a tiny, almost insignificant share in AAPL stock that was not an influence in the creation of this article.

Sign Up for the Newsletter

Join the TMO Express Daily Newsletter to get the latest Mac headlines in your e-mail every weekday.

3 Comments

Winski

AND, this it only part of the story why T-Mumble keeps falling further and further and further behind and soon will lay in a pile of dust at our feet.

Constable Odo

No point in Apple providing custom models of the iPhone.  It’s going to be a BYOD world from now on.  The consumer is going to bring his personal mobile device to work.  It should save companies a lot of money in the end.

Brewer

Munster is completely correct here.  The misinformed WS analysts always treat Apple like it’s a commodity, and treat the real commodity stuff (windows, Android) like it could never fail. 

No carrier in their right mind would drop iPhone.  Look, ATT was NOT apple’s first choice.  They were really ‘Singular’.  ATT HAD no mobile network prior to that purchase.  They were TINY compared with Verizon.  But not anymore.  The reason:  iPhone.  Anyone who thinks differently on this one is either delusional or misinformed.  Even the executives have said as much, right though their normal corporate maneuvering.

In fact, ATT was killing VZ until VZ finally wised up and got the iPhone.

Just open your eyes, and look around, iPhones are everywhere, and they are not much more expensive than the copy-cats.  Yes, that is due to the carrier support.  Will this change?  Not on your life, until at least, subscribers in the US start to move to a pay as you go model.  That would take several years at the very least.  Apple has had these kind of breakthroughs before (Mac at the least) but they have never had this kind of acceptance before.  This sort of popularity is all that DOS/Windows ever had to move it to it’s (more or less) monopoly status.  All DOS (and M$ parlayed that nicely into WinDOS, clearly) ever had going for it was software availability.  The software wasn’t even that good, there was just a whole lot of it.  We see this with iPhone, and yet it also has a quality advantage.  iOS has all the advantages of Mac, DOS, and Windows—a plethora of really good quality software. 

The Mac itself is way beyond a niche status at this point.  It’s populariy will continue to grow with further inroads from iOS until it rivals Windows in sales.  Apple may even get into licensing again, the way this is going.    How could any of the other vendors compete in any case, with Apple’s hardware design?  That is not as easy as it was in the ‘power computing’ days (late 90’s).

Log-in to comment