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Verizon’s Earnings Confirm The Economic Impact of Android vs iPhone In Regards To Carrier Profitability
Verizon inched past estimates, but actually turned lower subscriber
growth than AT&T, despite getting the iPhone and AT&T losing the
exclusive. Verizon’s net gain of post paid subscribers was much larger
than that of AT&T’s (who aggressively pushed high end Android phones
for the first time last quarter) – largely due to the introduction of
the iPhone, but the economic advantage of the iPhone in regards to
Verizon’s business appears to have be significantly overestimated. As a
result, AT&T is trading up on the news and Verizon is trading down.
This goes to vindicate my thesis that Google’s killer “Less than
free” business model is extremely difficult to compete with and is very,
very profitable to those who have embraced it – which is now almost
everyone. Remember, there is most likely more profit in an Android phone
sold (due to Google’s revenue sharing model) than there is an iPhone
sold, and the iPhone probably engenders more expense to the carrier in
terms of data network usage. It doesn’t take a genius to determine where
the focus of carrier marketing dollars will be focused in the upcoming
quarters, not that this real time experiment has produced results.
As reported on CNBC.com
Verizon reported a profit Thursday that topped analyst estimates.
The telecommunications company said
it earned 51 cents a share in the first quarter, compared with 16 cents
a share in the same period last year.
Revenue edged up slightly to $26.99 billion, from $26.91 billion a year ago.
Equity analysts who follow Verizon had expected earnings of 50 cents on sales of $26.9 billion.
In the company’s wireless business,
the company added a net 1.8 million subscribers, including 906,000
retail post-paid customers. Earlier this week, rival wireless provider AT&T reported a 2.0 million net gain in wireless subscribers, including 62,000 retail post-paid subscribers.
Shares of the company, which closed regular Wednesday trade at $37.79 were last lower in pre-market trade.
It is very important to note that until reliance on carriers is
broken, carriers pretty much make or break handsets due to their
connection to the consumer through subsidization. Apple (and I’m sure
Google as well) are working on breaking that reliance (as Google tried
with the initial Nexus business model, and as Apple is allegedly
developing a software SIM), but until then, carriers rule. It should be
quite obvious to most that carriers and vendors alike consider Android
to be a goldmine.
See also:
Google’s Q1 2011 Review: Part 2 Of My Comments On The Gross Misvaluation of Googl
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So RM is right as is the Apple loving community...But who will win the margin game overall between Android autoroute users and Apple still has to be seen as both advance : Apple broad band or Android's straight and narrow mobile autoroute?
As the arabs say : Inchallah! Let the All-mighty decide!
I hear Google is trying some new concepts:
http://www.geekculture.com/joyoftech/joyarchives/1527.html
Hang in there, Reggie!
Apple is a religion - a company blessed with godlike creative potential and deserving of an infinite PE ratio.
It is the latest recipient of what I labeled back in 1973 as the "Prince Racquet" effect. Yuppies will hop on the stock of the latest item that fills their hand at the time.
In our world of extreme stratification by IQ and profession, the yuppie, isolated from all but his or her fellow professionals, is incapable of grasping the idea that the rest of the World might not worship the latest gadget that fills his or her hand. Thus are fad stocks driven to the moon and purchased at prices which guarantee abysmal long term future returns.
Thanks, but there is no need to hang in there. Apple's results are exactly as I said they would be, as is their warnings and the results of their carriers... Exactly! You are absolutly correct in that Apple's followers have a religious, near cult-like devotion that absolutely clouds them to basic fundamentals of economics and business.
+1
I've been saying this for days, Reggie (& other analyists) only looks at phone sales & margins and they are missing a large part of Apple's profitability. Apple is a software company first, and as sexy as the industrial design of thier products is, it's the software which drives revenue. HALO effect, Corporate penetration, App sales, iTunes sales, Apple's first party software... these are all revenue streams that Google doesn't have. Sure, Google has search ad revenues.
I still believe Google makes more money off search advertising on the iOS platform then Android platform.
iPhone uses more data then because it's a superior product, and users actually use the features (like the App Store, downloading applications, etc.)
yes and nobody compares Apple to crap-bag Microsoft anymore... a global software monopoly that has delivered total garbage for decades... such unreliable dross anyone who uses it is still on near 20 year old XP because their latest products are such bug ridden virus attracting rubbish
don't we have consumer legislation against companies selling 'lemons' ? ....so how does jerk-offs Gates & Bulmer get away with selling absolute lemon-coded junk year after year?????
Hey Reggie, better check on your buddy KD. He soiled himself so badly after yesterday's AAPL earnings call, his site is off line.
Thanks Reggie- I was wondering how this would affect the iphone versus android battle.
I know for a fact that ATT complains about the iPhone contract- they lost money on iPhones for years. i think with the new pricing schema its doing better.
ATT's woes are no fault but their own. They let Apple out negotiate them. As a matter of fact, they forced Apple to renogotiate the contract a few years ago. The interesting thing is that many European carriers have lost money selling iPhones as well. What many on this site seem to be missing is that now that carriers have a viable, and apparently more profitable alternative, pressure will be put on iPhone deals.
Each of AAPL and GOOG have issues, both security related. Steve Jobs control issues appear to have manifested themselves in the growing iOS "tracking" issue. If true, AAPL has a problem, and will need to backtrack meaningfully on the marketing side.
GOOG's problems are more fundamental. Android and the Android App store are the wild west compared to AAPL, and unless GOOG begins to exert more control (but not as much as Jobs!) of what is permitted to run on the device, serious data corruption and/or loss issues will cripple the growth of the OS. I run a rooted version of Android on a NOOKColor and will refuse to purchase any more apps on the Android Market until they get their issues fixed. Amazon now has a perfetly good App store up and running on Android, and they get it when it comes to security of credit card info, etc.
Bizarre analysis. This seems to take every random, unrelated fact out there to come to house-of-cards conclusion. And you wonder why people in the industry like to make fun of Wall Street analysts. Guys have no clue.
It dawned on me this week just how efficacious Apple's model is. It is simplistic to focus only on Apples phone segment.
Putting aside their knock down results, I heard for the first time that iPhone4 will soon be the most popular camera on Flickr. I have used Flickr for over 5 years. If this is true, and I don't doubt it, it is a very impressive statistic. I also learned in the Samsung litigation, that there is a huge ecosystem of iPod touches, which are essentially iPhones with no phone guts and more memory.
This coupled with the iPad (1&2) which has a towering lead in the tablet market, means that Apple has a an overpowering engine for creating demand in it's App segment, which is another market Apple created out of thin air. This is the icing on the cake, the 99 cent game and software model has clearly shot through the roof.
I can only speak for myself. I hated buying software before. It was overpriced and the support was miserable. Now I buy new Apps constantly for a fraction of the cost. And the stuff is very good. A good portion of what I do on Adobe Photoshop (which is over 1000 dollars if you buy the suite) I can now do using various Apps. Same with test editing and document creation.
Good luck to all replicating this.
Bottom line, Apple does not have to be undisputed king of the hill in POTs, because people are buying the hardware for other reasons.
Good points Banzai, while Reggie focuses on iPhone, AAPL executes on a much broader business model. GOOG is a one-trick pony by comparison. Add up the revenue streams from all of those synergistic business units and there is the "secret" of Jobs' magic (ha ha) cash machine. When Apple introduces cloud services married (and monetized) with the tech they bought in Siri, $1K is just the first stop.
why not focus on iPhone, sales up over 100% ....iPad sales up 30% ...these are colossal figures in a recession
Reggie
Apple Up +2.50%
Google Down -0.15%
whatever your logial fundamental arguments they ain't showing yet ...and judging by Googles loss of cost control while Apple profits surge 95% (even with a bottleneck in iPad production) it looks like sentiment (emotions) is still winning the day, at least for now
...having said that Google lost a whopping 9% last Friday which would have been a lovely immediate pay-off if you'd shorted the right stock
You can't be serious. Your judging short term results in a long term game, and the Apple short made money just as the Google long did. You obviously aren't reading my blog. Goggle's loss of cost control is an uneducated statement (I'm not going to say ignorant because that would be offensive). Read a more accurate analysis of last quarter's results then come back and let's have a discussion: http://boombustblog.com/reggie-middleton/2011/04/19/googles-q1-2011-review-part-2-of-my-comments-on-the-gross-misvaluation-of-google/
Apple is certainly minting money, but things are falling in place just as I said they have. Google is up to 350,000 phone activations per DAY, up from 300,000 last quarter and 200k+ the quarter before. The tablet OS is launching in June and Apple is warnging of margin pressures going forward. This is exactly as I predicted and is something anyone could have seen if they were objective and didn't see the world through an Apple core.
Harping on what happened last Friday, yesterday or the week before is indicative of one who cannot see the longer term horizon. Longer term, at least thus far, there is no reason reason to believe that Google is still not in the pole position to win the mobile computing wars. Of course, this is a very volatile spot so its not as if they can't be knocked off of their perch.
Reggie, you're being brutal with me Boo Hoo ;''(
as a general rule of thumb every innovator or market pathfinding company is a 'One-Hit Wonder'. Googles one hit is search. Every other escapade they have made and will make, which you've not mentioned in your 'Google notes' to date, is going to be a mess and unprofitable
Have you seen scumbags Microsofts record outside of their sack of shit software Windows? An absolute MS joke in every sector they've tried to muscle/buy into.
Google are going to fail outside of search, i 100% guarantee it (see their investment in green cars, how pathetic, Tesler).
The lines in the sand between us on this one are crystal clear. And you are going to eat your very sound logical fundamental analysis in a few years and throw in the towel ...animal instinct rules markets, not logic ...a lesson for you to learn Reggie
Apple Up +2.50%
Google Down -0.15%
That is a little better than par for Reggie. Usually his book locks in losses in and around the abysmal -200% range.
Apple is up +35% in the past 52 weeks while Goggle is down -5% over the same period so Reggies short isn't looking too good. But if Reggie is wanting to short the highest riser he's picked well for the one furthest to fall ...but i think when the market drops they'll both get hit equally as hard though i still much prefer Apples lush rich seem of a business model to Googles low margin high volume flog Ads' and Android warehousing!
Plus Apple is a fricking ATM machine with almost 66B in cash and marketable securities.
They've been adding 6 Billion a quarter for the last few anyway. The only thing I can figure, given the high risk /high reward mentality there is they are planning on paying cash for their own carrier built with the latest and greatest with world wide coverage. SJ is a control freak, no doubt about it. What would be the ultimate form of control? Carry the data your products produce and get paid for it. No legacy issues. No debt. A brand name recognized for quality and innovation. One more year and I'd say they'll commit half or more of their 100B in cash or more to a whole new build out.
Look at the debt loads Verizon and AT&T have. Look at what the debt is for? Infrastructure build outs that cost way more than they do now. What type of tech would Apple be working on right now to control the delivery of all things technical at speed that are unheard of in any developed country?. Apple's Internet 2.
Holding on to 66B in cash along with their hatred of all things debt? I can't think of anything that would add more to the now famous "One more thing"...
I am curious about your take on apple shares climbing, and google declining. Exactly the reverse of your projections!! Are you becoming like Goldman Sachs. :-)
I like your work. It is very helpful. I'll sell the verizon and buy more silver. woohoo
but can android do this:
So apparently iOS doesn’t respect users privacy, as it should, as the word is the iPhone has secret tracking software that records the users whereabouts, which then gets synced to your computer as part of iTunes sync.
According to an article over on 9to5 Mac by way of The Guardian, iOS 4 covertly tracks a user’s location and apparently for some users this means there could well be “almost a year’s worth of data stored.”
According to The Guardian, security researchers discovered the file that contains the longitude and latitude coordinates along with a timestamp, which means anyone that happened to steal your iPhone could with the help of a simple app discover the users movements.
One of the researchers, Pete Warden says…“Apple has made it possible for almost anybody – a jealous spouse, a private detective – with access to your phone or computer to get detailed information about where you’ve been.”
The director of pressure group Privacy International, Simon Davies had this to say…“This is a worrying discovery. Location is one of the most sensitive elements in anyone’s life – just think where people go in the evening. The existence of that data creates a real threat to privacy. The absence of notice to users or any control option can only stem from an ignorance about privacy at the design stage.”
An Apple keeps cranking with touches and iPads untethered to carriers.
Android losing momentum. Honeycomb is late and no longer open.
HP soon to enter along with MS
There goes your google mobile ad revenue percentage
Apple iAd sales were up relative to the Googs.
My bet with you is still a winner.
;-)