PMP Today

Is the iPhone in trouble? American Technology (AmTech) analyst Shaw Wu had it from reliable sources that Apple is considering selling a subsidized iPhone through its exclusive carrier AT&T. “We are hearing rebates of $50-150 that will be offered by AT&T to lower the price points for iPhone (currently $499 for 4 GB and $599 for 8 GB) and to entice customers to sign longer term voice and data contracts,” Wu wrote. “From AT&T’s perspective, a rebate is a great marketing tool and small sacrifice to make to entice a customer to sign up for 2-year voice and data cell phone plans that cost about $75-100 per month (before taxes and fees), meaning $1800-2400 in ‘guaranteed’ bi-annual revenue.”

AT&T is likely to pay Apple for every new client. “In addition,

“Wu continued, “Apple will likely participate in a revenue sharing agreement where part of the monthly fee charged to customers will go to Apple. Besides the hardware, Apple ’s value added for the iPhone to AT&T is its marketing, customer service, and unique software and features, including visual voicemail and the most complete PC experience on a cell phone.”

It appears, Apple does not need to sell the iPhone for the original $499 asking price for the 4GB version. Apple is expected to rake in a good amount of cash from incremental revenues. “We view this incremental revenue from the carriers for Apple ’s value-added as positive in that it will likely be very high margin, in the 80 percent range, similar to royalty and/or intellectual property (IP) revenue where there is little incremental cost,” Wu wrote. “We believe this recurring revenue stream is high quality and adds an additional degree of stability and predictability to Apple ’s financial results.”

Analysts are actually predicting a rise in Apple revenues to the tune of $31.1 billion and per-share earnings of $4.15, up from $28.8 billion and $3.75. Wu concludes: We continue to view Apple as among the strongest fundamental stories with its four-pronged vertically integrated end-to-end portfolio (Mac, iPod + iTunes, Apple TV, and iPhone) and see several catalysts in the quarters ahead, including Mac OS X Leopard, new Macs, new iPods, new movie and carrier partners, and lower cost cell phones.”

[via informationweek, source]