Corey Tamas, May 9, 2012
Apple’s stock has seen years of skyrocketing success, but (for the moment at least) Verizon and AT&T are giving the Cupertino giant a kicking. Since April 9, Verizon and AT&T (VZ and T) are the second and third-best performing stock on the Dow Jones (out of 30), both rising 8.2 percent and 7.8 percent respectively, and only Travelers (TRV) is doing better. Apple’s stock, which is not on the Dow, has dropped nearly 11 percent in the same time period. It’s mysterious to see, given Apple’s “holy cow” earnings report in which they declared profits to be even better than expected and lauded the arrival of the iPhone in China. It may well be a recent dip in iPhone sales that has given the telecom companies a bit of room to flex their muscles (as they both pay heavy subsidies on the iPhone). Apple did expect to sell fewer phones in this quarter than the previous one, but there’s still some disappointment.
CNN takes a look at the decline and has a few thoughts:
[quote]A trend is emerging: bad news for Apple’s iPhone sales is good news for carriers — in the short-term, anyway. That made investors think about giving the telecoms a second chance, after fleeing from the stocks earlier in the year. ”Improved margins from AT&T and Verizon, and more muted outlooks from tech and cable companies, has caused a substantial rotation into telecom,” said Kevin Smithen, analyst at Macquarie Research[/quote]
There are expectations of a new iPhone from Apple this summer, which will likely reverse the recent fortunes of the company and will likely take some spring back out of the carriers’ step.
[quote]“When you see AT&T doing well when they sell fewer iPhones, it raises questions about the subsidy issue,” said Colin Gillis, analyst at BGC Partners. “Competition is coming in hard and fast using the one lever they have: price. And though it’s a good deal to subsidize a smartphone for $400 and lock a customer in for two years, it’s an even better deal to do it for $200.”[/quote]
It’s true that carriers are feeling some pinch from Apple’s iPhone (or “iPain” as CNN adorably names it), but with the hidden charges, over-inflated service fees, and gross overpricing of features, it’s hard to drum up too much sympathy. The iPhone is a phone that is designed for the customer: If the customer likes the phone, Apple makes money… and if they don’t, Apple doesn’t. With other phones (specifically Android), customer satisfaction takes a backseat to Google’s business model, which involves getting as many eyes as possible on as many ads as possible. If the customer wants a certain kind of phone that doesn’t help carriers to make billions and billions of dollars (instead of just billions of dollars), I don’t think it’s something worth crying over.
Source: CNNFollow @macgasm