Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

How to Profit from the Verizon iPhone

Companies / Telecoms Feb 03, 2011 - 06:01 AM GMT

By: Money_Morning

Companies

Best Financial Markets Analysis ArticleDavid Zeiler writes: After three years of rumors, the Verizon iPhone has finally arrived.

Well, almost.

Existing Verizon Communications Inc. (NYSE: VZ) customers can pre-order the phone today (Thursday), with the long-awaited device going on sale to all on Feb. 10.


Of course, as soon as Verizon confirmed the existence of the iPhone Jan. 11 speculation turned from when the product would arrive to how many units would sell in the first year. Initial projections from analysts ranged from 9 million to 12 million handsets, although last week an analyst from R.W. Baird & Co. estimated the number of Verizon iPhones activated in the next three months alone could go as high as 25 million. Compare that to the 9 million iPhones AT&T Inc. (NYSE: T) sold in the second half of 2010.
Apple Inc.'s (Nasdaq: AAPL) own expectations for both the Verizon iPhone and the existing iPhone 4 remain ambitious. Apple in December upped its total 2011 shipment goal to 19-21 million units, according to DigiTimes.

While those numbers may sound large, there's still plenty of room for growth. In the U.S. market, the iPhone has snagged 25% of the 62 million-unit smartphone segment. Worldwide, Apple has about 4% of the total mobile phone market, and 17.25% of the smartphone segment.

Even for entities as large as Verizon and Apple, the almost unimaginable sales potential of the Verizon iPhone could provide a substantial boost to each company's bottom line.

Maximizing Market Share
With Apple expanding to two U.S. carriers, growth in the iPhone's market share is inevitable.

iPhones are Apple's most profitable segment and the main reason the company has grown as quickly as it has over the past three years. In fact, the product accounts for 53% of Apple's stock price, according to stock analysis site Trefis, which calculates the intrinsic value of the stock at $420 per share. (See accompanying chart)

Gross margins have fallen from more than 60% in 2007 to about 48% currently, but that still outdistances the gross margins of the Mac and the iPad, which Trefis estimates hover in the 30% range.

If you look at the trajectory of iPhone sales, even without the Verizon version, it's on a sharp upward curve. In the December quarter of 2008, for example, Apple sold 4.4 million iPhones. A year later it sold 8.7 million iPhones. In the most recent December quarter, Apple sold 16.2 million iPhones.

Indeed, Verizon stands to do very well with the iPhone. One of the biggest complaints from iPhone users over the past three years has been that AT&T's network is inadequate. That includes weak coverage, dropped calls, and difficulties downloading data.

Let's go back to that sales projection from R.W. Baird & Co. It was based on a survey of 1,000 mobile phone users in the United States. Of the existing Verizon customers, 37% said they definitely would purchase an iPhone in the next three months. Another 42% said they probably would.

Among AT&T customers, 6% said they'd get a Verizon iPhone, with 27% saying they probably would. About 5% of people using Sprint and T-Mobile said they definitely would buy a Verizon iPhone.

AT&T does have a few advantages over Verizon, however. For one thing, AT&T's network, while lacking Verizon's coverage, is faster. This Verizon iPhone isn't compatible with Verizon's next-generation LTE (Long Term Evolution) network, although the next model probably will be.

Another thing that could give mobile customers pause is that the Verizon iPhone won't be able to access the Internet while handling a phone call, as AT&T's network can. Nevertheless, Verizon's legendary network coverage is a big draw.

Baird based its projection only on the number of people who said they definitely would buy a Verizon iPhone, and then multiplied the percentages by each carrier's total number of customers. Verizon iPhone buyers do not include any of the respondents from the "probably" category.

Scouting Out Suppliers
Aside from Apple and Verizon, an assortment of smaller companies involved in supplying and assembling the parts for the iPhone should benefit from the product's phenomenal growth.
Although Apple does not make public its roster of suppliers and manufacturers, third parties have deduced many of them via product teardowns and periodic leaks.

And while the Verizon iPhone isn't yet available, analysts generally agree that it will contain almost all the same components as the previous iPhone 4 model, with the exception of the phone network circuitry.

That plum went to Qualcomm Inc. (Nasdaq: QCOM), with Apple snubbing Infineon Technologies AG (NYSE ADR: IFX), which makes the networking chips for the AT&T iPhone. That was the second recent victory for Qualcomm, which also will supply its Snapdragon chip to HTC for the Android-powered Nexus One phone.

According to iSuppli, which last year did a teardown analysis of the iPhone 4, the most expensive single component is the LCD display, which most likely comes from LG Display Co. Ltd. (NYSE ADR: LPL) or Toshiba Corp. (PINK: TOSYY). Both Toshiba and LG Display as well as Sharp Corp. (PINK: SHCAY) were mentioned this week in an iSuppli report that says Apple has invested $3.9 billion of its huge cash stockpile in long-term supply agreements with those three companies for LCD screens.

Also, the display is made of Corning Inc. (NYSE: GLW) Gorilla Glass - a thin, strong, scratch-resistant product that has proven popular among mobile device makers. Already it's used in 20% of the world's touch-screen handsets.

Perhaps the biggest beneficiary of the Verizon iPhone may be Samsung, which is manufacturing the Apple-designed A4 processing chip that powers the device in addition to supplying the phone's flash memory. Samsung is the global leader in memory chips.

The Korea Times last month reported that Samsung would quadruple the number of processors it ships to Apple. Amazingly, this means that half of Samsung's chip-making capacity will be devoted to Apple. In addition to the iPhone, Apple uses the A4 chip in the similar iPod Touch, the iPad, and Apple TV.

Broadcom Corp. (Nasdaq: BRCM) should be another winner. Broadcom makes the Wi-Fi and Bluetooth controllers, and is well-positioned to partake of Apple's successful family of mobile gadgets.

Finally, the two Taiwanese companies that will build the Verizon iPhone should reap rewards from the device's success. One is Foxconn Technology Co. Ltd., which builds many Apple products. The other is Pegatron Corp., a relatively new player that was spun off from ASUSTEK last year. Pegatron's version of the iPhone will go to Asian nations such as China, South Korea and Japan, all of which have significant CDMA networks, while Foxconn will build the Verizon iPhone for the United States.

Source : http://moneymorning.com/2011/02/03/...

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in