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BTIG's Walter Piecyk, who downgraded Apple (AAPL -0.6%) to Neutral 2 weeks ago on subsidy cut...

BTIG's Walter Piecyk, who downgraded Apple (AAPL -0.6%) to Neutral 2 weeks ago on subsidy cut fears, argues today that cuts are already quietly occurring. As evidence, he points out AT&T (T), whose iPhone sales are heavily skewed towards upgrades, has stopped allowing iPhone users to obtain subsidized upgrades after just a year. In addition, Piecyk estimates Sprint sold just 1.4M iPhones in Q1, down from 1.8M in Q4. Apple reports after the close tomorrow. (also)
Comments (13)
  • gensearch2
    , contributor
    Comments (1504) | Send Message
     
    That doesn't seem logical. A decrease in subsidies would be consistent with an increase in sales. Not a decrease. In the case of AT&T, in particular, that suggests that the subsidies haven't decreased, it suggests that AT&T is balking at paying them.

     

    Will that lead Apple to cut subsidies? Possibly. But if Apple does, you would expect that AT&T would be re-instating their upgrade at one year policy and Verizon will be pushing iPhones rather than trying to direct customer to Android products.

     

    I personally think that it's in Apple's best interest to cut back on their margins and pass that on to the carriers to increase sales. I know all the shareholders love the 40%+ margins, I love them, but accelerating market shares isn't a bad think and it puts the competition under even more pressure. .
    23 Apr 2012, 12:30 PM Reply Like
  • what do I know
    , contributor
    Comments (1049) | Send Message
     
    gensearch2: could it be that your understanding of subsidy is not what is happening here? The subsidy makes the iphone cheaper to the buyers and if the carriers decrease that subsidy then the buyer has to pay more, this is assuming the price remains constant. The picture you have is that the price of iphone comes down and in that case the P-Q relationship takes over- price down quantity up. To fiddle with price is a big thing and Apple has to seriously think about it.
    24 Apr 2012, 08:42 AM Reply Like
  • doc47
    , contributor
    Comments (1200) | Send Message
     
    I agree with G2, volume, via "economies of scale" and the like, can make up for reduced margins almost every time. In the end, China and other growth economies will want more iphones.
    23 Apr 2012, 12:55 PM Reply Like
  • alkramer
    , contributor
    Comments (8) | Send Message
     
    Sprint sold less phones because people are waiting for the iPhone5 - 2 people in my immediate family who would have gotten the 4s are.
    23 Apr 2012, 01:17 PM Reply Like
  • GoingLong1
    , contributor
    Comments (37) | Send Message
     
    And I am waiting for the iphone 5 before switching from my DroidX...it will get me 4gG network plus all the other wonderful iphone features
    23 Apr 2012, 03:10 PM Reply Like
  • mnicoletti
    , contributor
    Comments (57) | Send Message
     
    I remember the same story about AT&T when the iPhone 3Gs came out, but when the rubber hit the road, AT&T was more than happy to let people upgrade rather than risk the loss of monthly revenue. As for me, my AT&T bill (just for my iPhone) is close to a $160 a month and I can promise you that in October, if AT&T doesn't want to subsidize my iPhone 5 (or whatever it's called), I am sure I will be able to find a carrier that will - and will happily send AT&T a $150 check to cancel my account (and will also be sure to switch my two iPads to Verizon as well). But that is just me and pretty much everyone I know (but I can't speak for everyone).
    23 Apr 2012, 02:22 PM Reply Like
  • ArcherBullseye
    , contributor
    Comments (84) | Send Message
     
    It takes months for a mobile service provider to earn back the cost of the subsidized equipment. Why wouldn't they make it easier to make a buck? Also VZW stopped their Annual Upgrade policy when they first started carrying the iPhone..... So im not sure why he thinks that's a 'telling sign'.

     

    Long AAPL and VZ
    23 Apr 2012, 02:23 PM Reply Like
  • John1138
    , contributor
    Comments (161) | Send Message
     
    "Q1" versus "Q4"?
    When did people stop comparing quarters year to year and start using a record Holiday blowout as the benchmark for a NON-holiday quarter?

     

    Yeah, I thought so.
    23 Apr 2012, 03:27 PM Reply Like
  • Worldwalker
    , contributor
    Comments (5) | Send Message
     
    I was going to point this out as well. There is little if any chance the unit sales #s from the quarter being reported tomorrow will exceed the unit sales #s reported in January. And just to clarify, Apple is reporting Q2 numbers tomorrow, not Q1.
    23 Apr 2012, 03:46 PM Reply Like
  • what do I know
    , contributor
    Comments (1049) | Send Message
     
    So, Sprint sold ( estimate ) less than some number and I don't see how does it contribute to the thesis of Apple getting hit on less subsidy or a mutiny from the carriers for a less subsidy.
    23 Apr 2012, 03:30 PM Reply Like
  • Worldwalker
    , contributor
    Comments (5) | Send Message
     
    I dumped my 1,100 shares of Apple back at 610. I couldn't understand Apple going down in 3 consecutive days where the broader market was up (substantially one day). I would like to get back in but plan to wait until after earnings. Yes I might miss AAPL grappling higher tomorrow after the bell but there will still be time to get into the residual run (which could prove substantial if a product release is announced) and my downside is non-existent. I did sell some naked out of the money puts at the 50 and 100 day moving avg prices.
    23 Apr 2012, 03:51 PM Reply Like
  • muoio
    , contributor
    Comments (2957) | Send Message
     
    Short AAPL Long T,S,VZ.

     

    Then buckle up and hope.

     

    LOL
    23 Apr 2012, 05:51 PM Reply Like
  • dividend_growth
    , contributor
    Comments (2896) | Send Message
     
    A year ago, iPhones made up 65% of AT&T's smartphone sales.

     

    This year, iPhones made up 78% of AT&T's smartphone sales.

     

    Contrary to what this 'analyst' implies, Apple's grip of AT&T has only tightened. But it was AT&T's overall weakness that caused iPhone sales to drop.
    24 Apr 2012, 08:17 AM Reply Like
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