Tech's 3 Biggest Partnerships: Watch These Businesses Grow

This past week, the stock market benefited from a tech stock rally. In specific, cell phone makers and service providers saw a surge in their stock prices. Several companies came out with new products, while others signed up new customers.

Several analysts believe that tech stocks have enjoyed their run and will quietly let other stocks enjoy the center stage. But if we look at the long term, say the next couple of months, these stocks could potentially reward their investors with surprising profits.

Let’s look at three partnerships that hold the limelight when talking about cell phones and service providers.

First, we have Palm Inc (PALM) and Sprint Nextel Corp (S). Palm Inc recently came out with its long-awaited Palm Pre. Within hours of its release, the company reportedly sold out in stores around the country and began a waiting list. The company was later estimated to have sold 100,000 handsets over its first week. If at least half of those customers were new to Sprint, then that means Sprint gained 50,000 new customers. This is because the Pre is being exclusively sold through Sprint over a 6 month period. Consumer interest hasn’t waned and the Pre has gained rave reviews from analysts who were essentially skeptical of Palm’s new smart phone. If Palm proves to have a relatively superb product on the market, then this could indicate more handsets being sold by Palm and more customers being signed up by Sprint. This could boost both companies’ bottom lines.

The second partnership we will look at is the famous Apple Inc.(AAPL) and AT&T Inc. (T) partnership. A few days after the Palm Pre was officially launched, Apple announced its latest version of the iPhone called the iPhone 3GS. It will be available for sale on June 19^th and AT&T recently stated that it has sold out all its available stock due to pre-order demands. Apple also cut prices on the currently available iPhone 3G to $99. Such demand for iPhone 3GSs and an affordable model now available, investors can expect Apple to sell an unprecedented number of smart phones and can also expect AT&T to sign on many new customers or have their old ones sign on for an additional two years.

The iPhone is exclusive to AT&T until next year, at the earliest. AT&T has been trying to extend its contract with Apple for an additional year, but rumors have been circulating that Apple may partner with Verizon (VZ) after their contract is over. Nevertheless, both companies can easily expect their profits to increase, as consumers will have no other choice but to come to them in order to have access to such a widely popular product.

Finally, we get to our last partnership. Although this partnership is not truly mutually exclusive, they can be considered two companies that widely prefer working with one another. The partnership in mind consists of Research in Motion Limited (RIMM) and Verizon Communications Inc (VZ). The first two partnerships discussed have already enjoyed a surge in stock prices due to their own recent activities, however, these two companies are just gearing up for their own surges.

RIMM is the maker of the popular Blackberry line and in response to Apple’s iPhone; the company created its first touch screen Blackberry called the Blackberry Storm. Verizon locked onto the Storm and established an exclusive contract with RIMM. Verizon recently announced that during the upcoming 6 months, it will be providing service to several new phones. Amongst them are two new Blackberries, the Blackberry Tour and the Blackberry Storm 2. Yes, you read correctly. RIMM will launch its latest version of the Storm on Verizon over the next 6 months. Verizon will also release phones that will run on Google’s (GOOG) Android and has said that it will offer the Palm Pre once its exclusive contract with Sprint is over. Both these companies have exciting releases in the next 6 months, and as such, their stocks may soon reflect the markets excitement as the release dates approach.

The stock market might feel that the tech stocks have had their run for now, but in the long term these companies will see their numbers increase as cell phone makers and service providers gain new customers and keep their old ones.

Original Post

Disclosure: No positions

Comments

[Aryamehr:]

VZ will only get the Palm Pre in 2010 if Sprint chooses not to extend their contract, which I highly doubt. However VZ will be getting a WebOS phone from Palm in the early part of 2010. The Blackberry Tour will not be a VZ exclusive phone, it is also being released to Sprint. It is my understanding that Sprint will be getting an Android based phone this summer from its Asian suppliers.

VZ will be getting an upgrade to its Storm, the Storm 2 and a slew of new devices this summer. The rumour is out that Apple will not extend its iPhone exclusivity after ATT's contract is over in 2010. It is the only way Apple can maintain its growth. Apple's iPhone growth will be seriously stunted if they continue their ATT exclusivity, hence don't expect them to continue being tethered to ATT.

The cell phone battles will be waged on a more level playing field by the end of this year, were most carriers will have a decent gamut of Smart phones on their menus, putting more emphassis on the quality of service and monthly costs. This will surely benefit the consumer.

Jun 16 10:51 AM

[JamesApple:]

Storm and Tour are Rim's latest attempt to convert QWERTY users to touch screens while the stauchest blackberry users are criticising the demerits of touch screens. Seems Rim is going against the grain of its own existing customers.

Pre and iPhone 3G are superior to Storm and Tour in engineering, packaging, usabilty and iPhone has thousands of fantastic apps. Storm and Tour have no significant impact.

Verizon pays less subsidy for blackberry as Verizon carry other phones which are superior and cheaper than blackberry. In time blackberry will be phased out all together.

Jun 16 12:00 PM

[Aryana:]

Once you use a Pre it will be very difficult to convert back to an iPhone. Palm truly has a winner on its hands. Ever since I acquired my Pre I have just been in heaven. I never thought anyone could come up with a phone that could sway me away from my iPhone. I love the Mulit-Tasking, Qwerty keyboard, Synergy and its elegant UI.

Jun 16 05:31 PM