AT&T paying $325 subsidy for new iPhone

[Paddy]

http://www.macsimumnews.com/index.php/arch..._for_iphone_3g/

All told, Apple is getting the same amount for the new 3G phones as it did for the old ones - only now it's all upfront. Guess that news helped the stock price jump today! Oh, Chicken Little, the sky is NOT falling!

In other iPhone news, PriceGrabber did a survey of over 3000 cellphone users and found that 42% of them are considering getting an iPhone 3G:

http://www.macsimumnews.com/index.php/arch...g_an_iphone_3g/

Only 4% of those surveyed currently own an iPhone.

[sandbox]

QUOTE(Paddy @ Jun 19 2008, 11:06 PM) <{POST_SNAPBACK}>

http://www.macsimumnews.com/index.php/arch..._for_iphone_3g/

All told, Apple is getting the same amount for the new 3G phones as it did for the old ones - only now it's all upfront. Guess that news helped the stock price jump today! Oh, Chicken Little, the sky is NOT falling!

In other iPhone news, PriceGrabber did a survey of over 3000 cellphone users and found that 42% of them are considering getting an iPhone 3G:

http://www.macsimumnews.com/index.php/arch...g_an_iphone_3g/

Only 4% of those surveyed currently own an iPhone.

Chicken Little, the sky is NOT falling! rolleyes.gif

No but the dollar has, so if you compare new Apple to old Apple you will see that $186.00 or whatever isn't what it used to be. In december the stock peaked at close to $200, 6 months later is down by 7-8% so in six months an investor has managed to make 0 and loose 7% if they were to get out now. The value of the dollar has also decreased 10% +-so add that loss as well. Now were talking about a loss of 17% +- in 6 months.

also the increase in apple's value last year was in part due to the 11% loss in the US currency and the false correction that the Street was making bringing more and more people to invest in Apple and then take a heavy loss in January.

On the contrary, Apple has not been a good investment and if they are forced to subsidize their products today they probably are not estimating a good forcast in the near future.

[Paddy]

I think you misunderstood, SB - Apple is not subsidizing the iPhone - AT&T is. Apple is making as much money off the new 3G phones as they did on the old ones - with the benefit of the money being upfront AND mandatory; you cannot buy one without an AT&T contract.

As for Apple being a good investment or not, not if you bought when the stock was at its peak on Dec. 28, 2007, but if you bought any time prior to 2007 or even in February's trough, you're doing rather well. The relative worth of the US dollar in foreign currency makes little difference to the average individual investor - he/she is dealing in USD period. The foreign investor might indeed have lost more. If you start claiming that the drop in the US dollar makes Apple a bad investment, then the same goes for ANY US company - and that's true only for foreign investors who bought when the dollar was high relative to their own currency AND the stock price was high.

On Dec. 31, 2004, AAPL was at 32.20 - it went on to split two for one a few weeks later and continued to climb. The Euro was at $1.35. Today it's $1.56. Methinks those who invested in Apple have done rather well - no matter where they live.

[krissel]

Another poll:

QUOTE

We love our gadgets.

That's the conclusion of a new poll commissioned by Forbes.com and conducted by social network LinkedIn among its members.

Nearly half of those polled this week about their favorite electronics said they would like an iPhone as a gift, while 26% selected Apple's (nasdaq: AAPL - news - people ) lightweight MacBook Air. A GPS navigation system and Amazon.com's (nasdaq: AMZN - news - people ) Kindle e-book garnered fewer votes, 11% and 3%, respectively.

All told, LinkedIn launched four polls Tuesday on its site that attracted between 600 and 1,100 responses from members.

http://www.forbes.com/2008/06/20/linkedin-...artner=yahootix


People shouldn't focus on the iPhone as Apple's main product. There is a very large potential in the Mac sales of the future, beyond the present weakness in the economy.

[sandbox]

Paddy,
Apple gets a healthy portion of revenue from the at&t service. If at&t is subsidizing the iPhone, Apple is paying a portion from that revenue stream, not to mention any deal that they may have made for the promotional campaign. There is no incentive for at&t to subsidize an iPhone over another full service unit, say a Blackberry or a Nokia if the margins are the same. At&t didn't offer this in a vacuum, they don't need to sell iPhones… Apple does, at&t has options and can profit just as much from any other smartphone and probably more, given the gouge Apple takes from their plan stream.

If you got out of retail in December, as I did, and put your money in anything that didn't loose since then, you would be ahead of the game. The small oil wells in N. Dakota are doing fine, plutonium and solar energy hardware. Steal was solid for 6 months, anything to do with moving liquids, like pipes, copper, pumps, faucets.
Have a look at the performance of this little domestic number  http://caps.fool.com/Ticker/ENER.aspx I luv alt. energy stocks!

here's a good window into alt. energy and tweaking stuff http://www.motherearthnews.com/Renewable-Energy.aspx

[krissel]

If anyone can manage to slog through the long dissertation, this is a very detailed evaluation of what the subscription method of acknowledging income means to the bottom line for Apple in the years to come. Read the comments after for more insight.

http://seekingalpha.com/article/82183-the-...ne?source=yahoo

[Gregg]

QUOTE(Paddy @ Jun 19 2008, 11:06 PM) <{POST_SNAPBACK}>

All told, Apple is getting the same amount for the new 3G phones as it did for the old ones - only now it's all upfront.

And besides that, the consumer is actually paying more! The monthly charge is higher, and you can add more bells and whistles for even more money. This is according to a newspaper story I read yesterday.

[Paddy]

SB, AT&T are paying Apple a subsidy. Apple doesn't pay a portion of this - it doesn't come out of their revenue stream. Cell phone carriers pay all sorts of cell phone companies subsidies. I'd imagine the subsidy they're paying Apple is not out of line with what they pay RIM or indeed paid Motorola in the early days of the RAZR (remember - it cost $600 initially and then the carriers started subsidizing it and Mote no doubt dropped their prices somewhat as well - but it sure as heck ain't "free"). As for incentive - there's plenty of incentive to sell the cell phone that everybody wants!! I'm pretty sure that neither Apple nor AT&T are losing anything on this deal.

Interesting article, Kris. I would wonder if the same Sarbonne-Oxley rule will apply to the 3G phones since Apple is no longer receiving a piece of the subscription pie? My understanding was that the only reason they had to apply the subscription method of accounting in the first place was because they were getting a piece of the AT&T subscription - which is not a "normal" model for cell phone manufacturers from my understanding.

[Gregg]

Go to Japan for this deal

[Xairbusdriver]

I have to assume that AT&T sees an incentive to selling iPhones. And not a small one either. Ironically, the mention of RAZR(sp?) brings the incentive into sharper focus. AT&T doesn't expect much or any profit in selling the hardware. After all, that's not their business. The profit will come with increased sales of various monthly services that they will be more than happy to charge you. It has already been widely reported that iPhone users spend more money on services than the average 'smart phone' user and certainly much more than the average generic cell phone user. AT&T (and most other providers) are pushing their expensive 'smart phones' quite aggressively right now, so why wouldn't they want to get in on the action of one of the most recognized smart phones ever created? But what do I know?!

[sandbox]

QUOTE(Paddy @ Jun 23 2008, 09:14 AM) <{POST_SNAPBACK}>

SB,... As for incentive - there's plenty of incentive to sell the cell phone that everybody wants!!

If they want it so bad why does at&t need to pay them to purchase it? They should, once again, be standing inline around the corner paying scalpers 100-200 $ over retail to get one, just as they did when they were introduced.

If you have a captive audience, as at&t does, where the iPhone can't be used legally on any-other network, so the option of going to a competitor is not a concern, why give customer 300 + dollars when they have no choice?

There is an agreement or quota that is built-in the contract that has inspired this activity, this sort of a cost shift doesn't happen in a vacuum. I can't remember what apple gets from at&t ... plan...10-20%, so if their  % of the revenue is subtracted from the gross then apple wouldn't pay their share but one would hardly expected that such an agreement would ever be struck. Apple's kick back is most likely received after the costs are accounted for, which means that they would share in the subsidy. You give apple the full retail amount, (unlikely) then you short them on the revenue plan side, at&t writes off the subsidy and apple writes off the lost revenue stream later. In the mean time, Apple sales look like they're increasing now, drawing people in, then at the end of the year the projections aren't met and the investors take a hit. Sounds like another Christmas Present to me.

[Xairbusdriver]

QUOTE

You give apple the full retail amount, (unlikely) then you short them on the revenue plan side, at&t writes off the subsidy and apple writes off the lost revenue stream later.

I believe that's exactly what the article states. Actually, AT&T is supposedly paying more than retail and Apple will not be losing much from any loss of 'kickbacks.' AT&T Investors, on the other hand, don't seem to be impressed with AT&Ts logic, countering that the extra immediate expense will not be returned in future service fees. Thus AT&T stock went down after the announcement. I tend not to put too much credibility in 'buyers/sellers' since they are mostly 'speculators' not businessmen ( except, of course, you, Paddy and other TS investors! ). And, IMHO, they are usually only interested in short term profits. But I'm probably just too conservative!

I don't think you'll see any lines 'around the block' until it actually becomes physically available. At least I don't see any point in sitting on a sidewalk for days/weeks. YMMV.

[Xairbusdriver]

I saw an article early this AM that I thought I might post at TS. Then I read the whole thing and the comments made about it and decided it was not real news but the assumptions of a third party company that 'guesstimates' production costs based on "insights from its staff!" Further more its guesstimate did not include "software development, shipping and distribution, and packaging." Certainly many of those will be a small percentage of the total costs but the software efforts are ongoing and could be quite significant. Seems the real story is this company needs/wants some free publicity before they actually know anything. And now, the 'news' has spread to multiple news sites that seem to need 'filler' rather than facts! "Send me your press release and we'll doctor it up enough to look like it's reporting!"