Timeline Strategy Consulting

Mobile Phone Industry in Denial About Economy

Good article Mr. Bubley.

This would seem to favor a longer product cycle so that carriers can: (1) optimize the economics of existing mobile technology on their network; (2) avoid unanticipated launch costs; and (3) regain some power in the struggle that commits them to higher subsidy in order to get the latest new model.

For one example, and using your argument, the hype over the Palm Pre must be misdirected, given the necessity for high carrier subsidy to support the high build cost. Yet, without having ever sold a single unit, signed up a single subscriber, or sold a single app, the share price has tripled in anticipation.

I won't disguise my bias here. iPhone is the best positioned to thrive amidst this new environment that you describe for the following reasons for both users and carrier:

*It's the most differentiated
*It's constantly improving due to App Store
*It offers the best overall mobile browsing experience, justifying the data charge and perhaps for some users replacing a monthly internet access bill, especially if AT&T introduces tethering
*Even with a high cost to carrier, it's worth it for conversion and stickiness of users
*Number in the field will lower per unit carrier support costs while subsidizing the 3G buildout

It certainly doesn't hurt Apple that they have built a massive pile of $12 billion in deferred revenues in selling 20 million iPhones. This money will continue to be recognized for 2 years.

Feel free to correct me. I am by no means a mobile expert. I'm just an investor trying to learn more and creating theories to be tested all the time.