The Apple (NASDAQ: AAPL) iPhone was supposed to help AT&T (NYSE: T) get wireless market share from its competition. That may be working, but AT&T is paying a price. As other carriers introduce new handsets of their own, AT&T has to keep significant subsidies for the Steve Jobs product.
According to Reuters, "The derivative effect is lower profitability in wireless for all the carriers," said UBS analyst John Hodulik, adding that the iPhone is selling faster than he expected, which is actually bad for AT&T's profitability in the short term.
Counter-intuitive but true. The iPhone was supposed to be a big financial help to AT&T but no one seemed to think about margins. The question is whether the financial strain of marketing the handset will hurt is sales longer term. If it becomes too much of a burden on AT&T and overseas carriers who market the new 3G version, some might make the decision to go to competing products which are more profitable.
Apple's business philosophy, which has worked until now, is it introduce extraordinarily good products and charge a significant premium for them. Let the customer demand Apple's products and let the middle man whether that is the retailer or cell carrier bear the burden. Jobs ends up keeping what may be more than his fair share.
Pushing for most of the profit may work in an expanding economy, but if Apple wants to push that model in tough times, the company may find it has fewer friends.
Source: bloggingstocks.com
No comments:
Post a Comment