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Thread: Apple Gets Unexpected Downgrade on Wall Street Today

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    MMi Staff Writer Michael Essany's Avatar
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    Default 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.

    Source: CNBC

  2. #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.

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    Livin the iPhone Life bigboyz's Avatar
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    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!!!

  4. #4
    Quote Originally Posted by cmwade77 View Post
    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.
    I completely agree here. I for one would not sign a 2 year contract, and I would expect MUCH lower payments. I'm not going to pay $100+ a month for a phone that I paid $600+ for. F that. I'll go to some crappy local carrier to save the extra bucks if I have too.
    iEat. iSleep. iPhone.

  5. #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.

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    iPhone? More like MyPhone fbiryujin's Avatar
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    Quote Originally Posted by bigboyz View Post
    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!!!
    The problem is very few people are willing to spend $600 up front for a cell phone. Even those with the understanding that a contract costs them a LOT more in the long run than a non-subsidized phone, some people just can't/won't afford a $600 phone up front. I do it, but that's because I absolutely refuse to sign any contract I can't negotiate. Most people aren't like me though. They don't even read what they sign. They just want to see the low numbers on their credit card statements.
    -FBIRyuJin

  7. #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

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    My iPhone is a Part of Me iLoveWindows&iPhone's Avatar
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    Quote Originally Posted by redstar299 View Post
    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
    I don't think he means only the iPhone. I believe he is referring to wireless providers in general, regardless if it's a iPhone or a Droid.
    El Zurdo

  9. #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.

  10. #10
    iPhone? More like MyPhone RoloDiva13's Avatar
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    Quote Originally Posted by andypropaganda View Post
    I completely agree here. I for one would not sign a 2 year contract, and I would expect MUCH lower payments. I'm not going to pay $100+ a month for a phone that I paid $600+ for. F that. I'll go to some crappy local carrier to save the extra bucks if I have too.
    Really? So you would put a LTE iPhone (when it arrives) on a small, regional carrier that has 3 cities covered with that technology just to "save the extra bucks"..?

    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.

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