This fall release date would seem to support speculation by various media outlets that the latest iPhone model may be introduced in September or October. The iPhone 4S was released on October, 14, 2011, making it the first new generation iPhone not released in June or July since the inception of the device.
Apple has historically released quarterly earnings in July and October. Last year, some analysts were concerned that consumers who wanted the iPhone delayed purchases until October, affecting earnings for the prior quarters.
Analysts have recently been warning of a possible similar effect this year. To add to potential recent worries about Apple, at least one analyst has expressed concerns that changes to carrier upgrade policies at U.S. carriers Verizon (VZ) and Sprint (S), and at foreign carriers may be detrimental to iPhone sales. Foreign carriers that were cited included: Vodafone (VOD), Deutsche Telekom (DTEGF.PK), and Telefonica (TEF). These worries have been fueled by the fact that typical subsidies for phones using Google's (GOOG) Android operating system are reportedly $60 to $200 less than those subsidies for iPhones at Verizon. That said, Sprint stated in March that iPhone users are more profitable than Android users, according to Ars Technica.
A waiting period of several months may not be a bad thing for U.S. carriers, including the first carrier of the iPhone, AT&T (T). This, in turn, may not be such a bad thing for Apple's future prospects of getting further carrier subsidies.
In February, CNN Money reported that the subsidy for an iPhone user is about $450. CNN specifically reported that:
Verizon had just one "good" stretch this year: The third quarter, when its margin bounced back up to a record 47.8%. That's the same quarter in which iPhone sales stalled, as customers waited for Apple to unveil its heavily anticipated new model.
Let's assume, for hypothetical purposes, that the next iPhone is released in October. If iPhone owners whose contracts expire this month elect to wait for release of a new iPhone prior to renewing their contracts, their carriers will not have to subsidize new devices for those customers for about four months. Obviously, that period of time would be less for consumers with contracts that will expire closer to October.
Apple indicated at the keynote that 75% of owners of iOS devices are "very satisfied" with their devices, compared to less than 50% of owners of competing devices. These statistics correspond to a Change Wave Research survey conducted in December 2011. In that survey, Android received "very satisfied" ratings from 47% of respondents. In comparison, 32% of Microsoft's (MSFT) Windows mobile operating system owners were "very satisfied"; and 22% of owners were "very satisfied" with Research In Motion's (RIMM) operating system at the time of that survey.
Given customer satisfaction with the iOS system, and less satisfaction with other operating systems, among consumers looking to upgrade, iPhone may have an advantage in attracting consumers wanting to switch to a different operating system.
Although iPhone subsidies may be higher, if it weren't for the excitement of the next expected iPhone, some consumers may elect to upgrade to current iPhones or competing devices immediately upon expiration of their contracts. Immediate upgrades result in immediate carrier subsidies for those upgraded devices. In future years, regardless of when Apple is rumored to announce new phones, some consumers will wait several months prior to the expected announcement of new phones to upgrade. That may be beneficial to carriers by potentially reducing any impact of subsidies, especially if considered along with the fact carriers may earn more per iPhone user than per user of competing devices.
What does this mean for Apple?
Many analysts or reporters may initially declare "disappointment" if Apple's iPhone unit sales miss expectations as consumers wait for a new model. From Apple's point of view, sales revenue would be delayed from those consumers who wait. As we don't know the price points or estimated costs of producing any upcoming phones, one can only speculate about the impact on margins of customers waiting to upgrade. Obviously, Apple will be more successful if it can manage its phone inventories by accurately estimating the number of consumers who will wait to purchase newer models.
For current iOS users who plan to wait to upgrade, Apple will still derive other revenue from application and other purchases made from the current devices while they wait. Some current iOS users who begin to run out of storage space as they wait for a new iPhone may have an incentive to buy a higher-priced model that can store more data when the new devices become available.
Further, last October, Apple reported results for the quarter ending September 24, 2011, a time period before the iPhone 4S was released. Despite the later release than prior years, the company reported record revenue and earnings for the September quarter, along with record quarterly Mac and iPad sales.
You may be wondering about consumers who hoped for a June 2011 iPhone release and whether those consumers impacted Apple's third quarter that year. On July 19, 2011, Apple reported that for the third quarter ended June 25, 2011, the company had all-time record revenue and earnings for a quarter. They also reported 142% year-over-year iPhone unit growth for the quarter and 148% iPad year-over-year unit growth for the quarter. While media attention may have been paid to some consumers waiting for new models within the U.S., consumers were buying iPhones in 105 countries around the world during that quarter. During the conference call for that quarter, Apple CFO, Peter Oppenheimer stated:
iPhone sales momentum in the Asia-Pacific region was particularly robust with sales almost quadrupling year-over-year.
As mentioned earlier in this article, concerns of subsidies have not been limited to America. That said, earlier this year, the iPhone 4S was made available on China's second and third largest carriers, China Unicom (CHU), and China Telecom (CHA). These carriers announced that they were fully subsidizing the phone with a 3 year contract.
Current iPhones are not available at the world's largest carrier, China Mobile (CHL), due to compatibility issues. According to Forbes, China Mobile indicated at a shareholder meeting that it was in talks with Apple to offer an iPhone. Apple's decision to highlight improvements helpful to iOS users in China at its keynote may provide a hint of prospects of a future phone on China's largest network.
As investors read warnings that Apple may be hurt if carriers discontinue subsidies, they may want to consider the potential benefits Apple creates for carriers. This includes potentially encouraging consumers to wait to upgrade phones, resulting in carriers being able to provide services to some customers for months without subsidizing new devices. This needs to be weighed against Apple's ability to manage their inventories in anticipation of consumers waiting to upgrade, and also the prospect that some consumers may choose a competitor's device rather than wait for the next iPhone. Further, investors may want to keep an eye on how subsidies fare in the world's second largest economy.
In addition, investors in carriers should consider the impact a later iPhone release may have on their own investments, including the potential impact on margins prior to release of a new phone.
Disclosure: I am long AAPL.