Paul Zimbardo

Rumor or Hubris? Apple Tablet Connects to Internet via iPhone

If the rumored $900+ price target set on this thing are remotely accurate, I cannot see Mr. Jobs forcing users to tether to access the Internet.

Perhaps iPhone AT&T customers will be able to purchase an add-on for ~$10 to $15 a month that grants web access on the Tablet as well?

Will a Black Eye from Consumer Reports Hurt AT&T, iPhone?

Consumer Reports lost its relevance when the Internet exploded.

In other words, this will have no impact on AAPL. It may persuade people from getting a lower-tier phone on AT&T. I use AT&T everyday and I have no problems with it. I guess the cool think to do now is beat-up on AT&T.

The iPhone's Next Carrier Is Likely T-Mobile, Not Verizon

The same analyst (Doug Reid of Thomas Weisel Partners) who broke this rumor in an analyst report also set a $245 price target for AAPL. I guess that was overlooked...

www.appleinsider.com/a...

Google Responds to AT&T's Claims of Call Blocking

@Weez

I guess the other carriers don't have the type of data splicing and dicing capabilities that GOOG has. Or perhaps AT&T has no real incentive to cutout these expenses?


On Oct 29 05:39 PM Weez wrote:

> And why didn't the other carriers point this out before?

AT&T: Playing the Options

I have to problems with this strategy:

First of all, your return is rather low. For each contract you tie up $1,750 in cash to seek a return of $90 (before commissions and fees). This is a return of just over five percent for ~18 months. Not too great given the risks I will mention below.

Secondly, anytime that you lockup a position for such a tremendous amount of time, you face great risks. Just look at what happened in the last year. A fall of 30% is not that unrealistic. If T fell so dramatically, it is likely that the dividend would be cut as well. While you may be happy to own AT&T today at $17.50 (who wouldn't?), you could find yourself waking up in January 2011 owning an AT&T without the exclusive rights to the iPhone, facing Verizon with the iPhone, increased regulatory pressures, a stronger Google model pushing wifi phones, and who knows what else.

When factoring in these risks, I would demand a much greater premium than below five percent annualized.

Time to Get Conservative? 50 Ideas for a Summer Sell-Off

@Dr. O - In regards to commissions, that is a very good question. My broker charges the same fee for buy-write trades as it does for option commissions so I effectively get a 50% discount on commissions. A very important note - if your position is called away (as it often will be in this type of trade), you often have to pay a commission that is twice as high as a normal commission. As a result, you may consider buying back the option and writing out a covered call for the following month, especially if you are bullish on the underlying security.

@User 274233 - I am very interested in ETFs that employ this strategy so I will look into BEO; however, I usually stay away from actively managed ETFs due to the fees.


On Aug 04 06:52 AM Dr. O wrote:

> Nice article on hedging/collecting premium with selling calls. As
> you mentioned, this seems to work best in a sideways or declining
> market. A declining market serves up increased call premiums, hence
> the enhanced return relative to the index/stock. A sideways market
> allows you to collect premium and make money even while the underlying
> index/stock does nothing.
>
> As a frequent trader, the first thing I wondered about were costs
> of commissions and how selling calls with each stock purchase might
> affect returns.

Time to Get Conservative? 50 Ideas for a Summer Sell-Off

Another excellent article from Mr. Hickey.

I narrowed in on AMGN as the best trade out of your list based on its risk/return profile and solid fundamentals even if I am forced to buy keep the stock short-term. Another plus for Amgen is its low beta of ~.5.

In future articles of this type, I would complement the listing by including the equity betas.

Palm Pre: Are Returns Slowing Growth?

It is also important to mention that some of these returns could be due to Apple's move to lock-out the Pre from synching with iTunes. This was another strong selling point for the Pre that could be a catalyst for returns when removed.

3 Must-Know Options Strategies for Dividend Investors

I use both covered calls and cash secured puts to generate income and this is a well written article that is a great introduction for others.

Good job.

Why AT&T Is a Strong Growth Story

@Brad Castro & Stephen Rosenman

You both raised excellent points regarding AT&T’s debt level. As you noted, telecom is an extremely capital intensive industry so the risks related to high levels of debt are always present; however, the commitments are manageable. Specifically, the weighted-average interest rates for the next five years are as follows:

2009: 4.3%
2010: 5.2%
2011: 7.1%
2012: 6.6%
2013: 5.6%

I did not conduct an in-depth constructive capitalization analysis of T’s obligations as I did not see any red-flags but it is always important to investigate companies with high levels of debt outstanding.

The intangible asset item is another pertinent observation but your assertion that “ATT is in great danger” is quite the exaggeration. Over thirty years ago, the telecom industry revolved around tangible assets but as of 2006, 79% of telecom assets were intangible. To quote ‘Power of Intangible Assets’ (cited below), “With the introduction of wireless and cellular service, and the widespread use of computers and the internet in the 1990s, knowledgeable investors no longer assessed the value of the sector solely on its tangible assets. The assessment of a company’s capacity for innovation and proprietary technology, its intangible assets, are the most meaningful, relevant, and valuable criteria to assess a telecommunication company’s value.”

Diving into the footnotes once again (my accounting background is coming in handy!) reveals valuable insight into T’s intangibles. AT&T has had no impairment of its intangible assets recently. Unlike traditional goodwill/intangibles that arise from overpaying for acquisitions, much of AT&T’s intangibles are FCC licenses related to radio frequency spectrum: despite being intangible, these are most definitely real assets with value.

Sources:

www.att.com/Common/abo...
adiat.ciateq.mx/wp-fil...

@Anthony B

If we ever reach the point in which the majority of cell phone users are subscribing to data plans, AT&T will be absolutely swimming in cash. Check out the following article from this week’s BusinessWeek which explores even more possible avenues for AT&T’s growth.

www.businessweek.com/m...

@JamesApple

You again make convincing points. The iPhone and Apple’s OS are certainly better than any offering from RIMM but the hardware QWERTY keyboard is going to continue to keep Blackberries relevant in the corporate setting for the foreseeable future. As far as AT&T is concerned, they have great offerings from both Apple and RIMM so the company can offer the best of both worlds.

Thanks all for the comments. I hope that I have been successful in shedding some additional light on AT&T and the industry thus far.

Why AT&T Is a Strong Growth Story

Thanks for all of the comments. Please bear with me while I get the hang of replying en mass.

@buoy

Alas, life without a smartphone is even harder.

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On Jul 09 09:11 AM buoy wrote:

> Life without a telephone is difficult.


@ john12345

I am a big fan of Peter Lynch and his investment strategy but I believe that it is only one aspect of the investment decision. In fact, I have done the following in the last month: (1) called AT&T customer service, (2) visited AT&T’s website, (3) visited an AT&T outlet, and (4) purchased a new cell phone from AT&T. Was the experience great? No. Did I have to call multiple times and deal with unknowledgeable sales people? Yes. Was the experience much worse than what I have heard from my associates with Verizon or T-Mobile? No. Currently none of the big telecoms are trying to compete with their customer service so I did not view this as having a material impact on my financial analysis. This is not the case in other industries as customer service and an operational experience is a tremendous factor, such as in the retail industry.

It is worth noting that AT&T does have a leg-up with the service provided by Apple and its Genius Bar. I have an iPod Touch and I personally had no problem setting up my email service. Check out this account from the most recent eWeek regarding Mr. Sturdevant’s experience with the Genius Bar.

www.eweek.com/c/a/Ente.../

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On Jul 09 10:15 AM john12345 wrote:

> Peter Lynch recommended visiting the company's operations and becoming
> familiar with it's operations. He was very successful with Dunkin
> Donuts etc for a long period. I suggest you visit an ATT outlet and
> try to get service of any kind. For more fun, go to their website
> or call them. Then call a psychiatrist. This is one of the problems
> when stock analysis looks at financial info and data and avoids the
> reality of where the rubber meets the road. ATT will drive me to
> Pre, Rim or other in spite of the iPhone's great features. By the
> way, can you help me get the email to work on my iPhone?


@JamesApple

I have not personally used the Genius Bar but I have heard good things about their service (although I have also heard it is overpriced). I suspect that you are not surprised by Mr. Sturdevant’s experience with the Genius Bar that I posted above in response to john12345.

I own both a Blackberry and an iPod Touch and it is hard to say flat-out that all Blackeberries are inferior. Both have their uses but I will agree that Apple clearly has the upper hand and momentum right now. I would be foolish to stand in front of the freight train that is Apple.

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On Jul 09 10:44 AM JamesApple wrote:

> For all intensive purposes, the best iPhone support in the world
> are the iPhone geniuses at the Apple Stores, far superior to anything
> I can imagine on this planet. I applaud these Apple Geniuses for
> their superlative contributions to mankind in the area of knowledge
> sharing and tutoring in making what is already super easy iPhone
> even painlessly smoother experience.
>
> I also abhor the complacencies of the phone carriers of the world,
> either ATT, Verizon, or Sprint. The runaway successes of the iPhone
> has produced a generation of arrogance tucking along Apple's coattail
> for a ride, and this doesn't stop with the carriers only, even incompetent
> companies like Research in Motion tags on Apple's coattail for the
> remnants of the smartphone waves Apple has generated benefitting
> from people who would not subscribe to ATT but chose Verizon's instead.
>
>
> Rim blackberries are inferior.

Why AT&T Is a Strong Growth Story

Thanks for the comment.

I acknowledge that subscriber growth is important and that US wireless penetration has passed ninety percent; however, I see AT&T pursuing less traditional avenues for growth. Specifically, AT&T has been able to take customers away from Verizon and its peers rather than relying on overall subscriber growth. According to a study by ChangeWave in May, “Thirty-three percent of subscribers looking to churn say they'll jump to AT&T--the highest percentage since ChangeWave started tracking these results”. Is this a more costly strategy? Yes, but this is where the industry is heading as it matures. Also, with the rise of smartphones and data plans, AT&T can focus on up-selling expensive data plans to customers which are highly profitable (for proof, take a look at how much it is rumored that AT&T would like to charge for tethering on the iPhone). Another avenue for growth which I did not touch upon in this article is the expansion of the traditional cell phone business model to the rapidly expanding netbook product.

In regards to the economic/unemployment comment, cell phones and internet access have become such a necessity that I am not worried about this. According to a survey by BIGresearch in February, “81 percent of those surveyed were most unwilling to part with their Internet service; 64 percent said they couldn’t do without their cell phones”. It is true that people may delay purchasing the next new gadget but they will not cancel their cell phone service outright (landlines are another issue altogether and look to be going the way of the dinosaurs).

Sources:
www.fiercemobileconten...

blogs.consumerreports....

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On Jul 09 08:58 AM skwestorange wrote:

> Have you given thought to subscriber growth (better, lack thereof)
> in their wireless since that is the largest contributor to their
> cash flow ans profits. Specifically, think about the fact that US
> wireless penetration is around 90plus %. Finally with the unemployment
> situation not likely to get better in the next couple of years according
> to many leading economists, think about the charge offs and loss
> of subs.