Sterne 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.”
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.
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.