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04-09-2012, 10:10 AM #1
Apple Gets Unexpected Downgrade on Wall Street Today
Here's a headline you don't see every day. In fact, here's a headline you haven't seen this year.
For the first time in close to six months, Apple today received an unexpected downgrade from Wall Street as a new breed of analyst is emerging: one who doubts that wireless carriers will keep offering giant iPhone subsidies. If the subsidies don't hold, neither will Apple's huge profit margins for the popular touchscreen smartphone.
“We expect post-paid wireless operators to remain firm in their plan to stunt the pace of phone upgrades in 2012 and we expect to see some initial evidence of their success in the current quarter,” BTIG’s Walter Piecyk, a veteran technology analyst, told clients Monday. “This will increase the need for Apple to grow its business in the pre-paid dominated emerging market space, in which handset subsidies are a rarity and the $600 ASP (average selling price) of the iPhone represents a big chunk of a household’s monthly income.”
As we all know, wireless operators like AT&T were more than happy to shell out big bucks for the iPhone when it first launched, both in light of domestic market exclusivity and the prospect of higher monthly wireless bills from iPhone users. But there remains a gap between this "nice thought" and the reality that ultimately manifested.
With carrier exclusively gone and features like iMessage drastically cutting into wireless plan profits, the iPhone is no longer the cash cow for carriers that it had been, given the enormous subsidies still in place. For that reason, analysts like Piecyk think the subsidies won't stay. And Apple's profits will take a hit as a result.
So how have investors and traders reacted to the downgrade? AAPL hit another new all-time high today north of $635 a share.
04-09-2012, 10:15 AM #2
I think the Subsidies may go, but if they do, then the idea of locked phones need to go as well.
Also, carriers will find that if there are no subsidies, no one will sign a two year contract.
04-09-2012, 10:23 AM #3
It's an inevitability that they do go. You guys just wrote an article the other day stating AT&T will "Unlock" your iPhone after your 2 year agreement with them is up. Hidden cost "subsidies" will probably dwindle considering the direction things are going. No exclusive agreements means any carrier can have the coveted iPhone. Maybe its time to go back to 1 year contracts? They worked in the past. Either that or the pre paid market is about to go BOOM!!!
04-09-2012, 11:02 AM #4
iEat. iSleep. iPhone.
04-09-2012, 12:28 PM #5
if they go then i expect at the most 1 year contract if that. Otherwise i will stick with a cheap flip phone and use my current iphone as an ipod and such.
04-09-2012, 12:59 PM #6
04-09-2012, 01:40 PM #7
This guy is an idiot. Not a chance Apple is gonna be the only smartphone out there with no subsidy. These carriers can ***** and moan all they want they aren't dropping the iPhone
04-09-2012, 02:43 PM #8
04-09-2012, 04:44 PM #9
I disagree, as long as the iPhone remains popular the prices will remain the same. iMessage isn't hurting anything, it cost a carrier nothing, & it only works on idevices.
The biggest money for carriers is the data plans. I know a lot of people that pay 15 a month & use maybe 20-30mb. That's pennies when you consider that higher plans overage is 10.00 for 1gb. So those low data usage users are paying 360 for the contract terms, then upgrading for another 2 years.
Now they raised it to 20.00 a month for 300mb so newer customers are going to be paying even more. AT&T did stop what was hurting them, yearly upgrades.
As long as the popularity stays, the subsidies will stay. I'm actually surprised they haven't given the ipad subsidies.
04-10-2012, 04:36 PM #10
If you are looking for lower payments get rid of useless features like text messaging (btwn iMessage and other apps most folks don't need it) and don't blow up your data with a $30/mo plan. There are ways to be frugal with the big boys but let's be honest, they aren't really looking for el cheapo customers anyway. They want the big spenders (hence the smartphone boom). If you want a phone that does more (i.e. faster downloads over a larger network) you're going to be paying more.