Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold & the USDX: Correlations - 2nd Dec 20
How An Ancient Medicine Is Taking On The $16 Trillion Pharmaceutical Industry - 2nd Dec 20
Amazon Black Friday vs Prime Day vs Cyber Monday, Which are Real or Fake Sales - 1st Dec 20
The No.1 Biotech Stock for 2021 - 1st Dec 20
Stocks Bears Last Chance Before Market Rally To SPX 4200 In 2021 - 1st Dec 20
Globalists Poised for a “Great Reset” – Any Role for Gold? - 1st Dec 20
How to Get FREE REAL Christmas Tree 2020! Easy DIY Money Saving - 1st Dec 20
The Truth About “6G” - 30th Nov 20
Ancient Aztec Secret Could Lead To A $6.9 Billion Biotech Breakthrough - 30th Nov 20
AMD Ryzen Zen 3 NO UK MSRP Stock - 5600x, 5800x, 5900x 5950x Selling at DOUBLE FAKE MSRP Prices - 29th Nov 20
Stock Market Short-term Decision Time - 29th Nov 20
Look at These 2 Big Warning Signs for the U.S. Economy - 29th Nov 20
Dow Stock Market Short-term and Long-term Trend Analysis - 28th Nov 20
How To Spot The End Of An Excess Market Trend Phase – Part II - 28th Nov 20
The Gold Stocks Correction is Maturing - 28th Nov 20
Biden and Yellen Pushed Gold Price Down to $1,800 - 28th Nov 20
Sheffield Christmas Lights 2020 - Peace Gardens vs 2019 and 2018 - 28th Nov 20
MUST WATCH Before You Waste Money on Buying A New PC Computer System - 27th Nov 20
Gold: Insurance for Prudent Investors, Precious Metals Reduce Risk & Preserve Wealth - 27th Nov 20
How To Spot The End Of An Excess Market Trend Phase - 27th Nov 20
Snow Falling Effect Christmas Lights Outdoor Projector Amazon Review - 27th Nov 20
4 Reasons Why You Shouldn't Put off Your Roof Repairs - 27th Nov 20
Further Clues Reveal Gold’s Weakness - 26th Nov 20
Fun Things to Do this Christmas - 26th Nov 20
Industries that Require Secure Messaging Apps - 26th Nov 20
Dow Stock Market Trend Analysis - 25th Nov 20
Amazon Black Friday Dell 32 Inch S3220DGF VA Curved Screen Gaming Monitor Bargain Deal! - 25th Nov 20
Biden the Silver Bull - 25th Nov 20
Inflation Warning to the Fed: Be Careful What You Wish For - 25th Nov 20
Financial Stocks Sector ETF Shows Unique Island Setup – What Next? - 25th Nov 20
Herd Immunity or Herd Insolvency: Which Will Affect Gold More? - 25th Nov 20
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

How to Profit from the Verizon iPhone

Companies / Telecoms Feb 03, 2011 - 06:01 AM GMT

By: Money_Morning


Best Financial Markets Analysis ArticleDavid Zeiler writes: After three years of rumors, the Verizon iPhone has finally arrived.

Well, almost.

Existing Verizon Communications Inc. (NYSE: VZ) customers can pre-order the phone today (Thursday), with the long-awaited device going on sale to all on Feb. 10.

Of course, as soon as Verizon confirmed the existence of the iPhone Jan. 11 speculation turned from when the product would arrive to how many units would sell in the first year. Initial projections from analysts ranged from 9 million to 12 million handsets, although last week an analyst from R.W. Baird & Co. estimated the number of Verizon iPhones activated in the next three months alone could go as high as 25 million. Compare that to the 9 million iPhones AT&T Inc. (NYSE: T) sold in the second half of 2010.
Apple Inc.'s (Nasdaq: AAPL) own expectations for both the Verizon iPhone and the existing iPhone 4 remain ambitious. Apple in December upped its total 2011 shipment goal to 19-21 million units, according to DigiTimes.

While those numbers may sound large, there's still plenty of room for growth. In the U.S. market, the iPhone has snagged 25% of the 62 million-unit smartphone segment. Worldwide, Apple has about 4% of the total mobile phone market, and 17.25% of the smartphone segment.

Even for entities as large as Verizon and Apple, the almost unimaginable sales potential of the Verizon iPhone could provide a substantial boost to each company's bottom line.

Maximizing Market Share
With Apple expanding to two U.S. carriers, growth in the iPhone's market share is inevitable.

iPhones are Apple's most profitable segment and the main reason the company has grown as quickly as it has over the past three years. In fact, the product accounts for 53% of Apple's stock price, according to stock analysis site Trefis, which calculates the intrinsic value of the stock at $420 per share. (See accompanying chart)

Gross margins have fallen from more than 60% in 2007 to about 48% currently, but that still outdistances the gross margins of the Mac and the iPad, which Trefis estimates hover in the 30% range.

If you look at the trajectory of iPhone sales, even without the Verizon version, it's on a sharp upward curve. In the December quarter of 2008, for example, Apple sold 4.4 million iPhones. A year later it sold 8.7 million iPhones. In the most recent December quarter, Apple sold 16.2 million iPhones.

Indeed, Verizon stands to do very well with the iPhone. One of the biggest complaints from iPhone users over the past three years has been that AT&T's network is inadequate. That includes weak coverage, dropped calls, and difficulties downloading data.

Let's go back to that sales projection from R.W. Baird & Co. It was based on a survey of 1,000 mobile phone users in the United States. Of the existing Verizon customers, 37% said they definitely would purchase an iPhone in the next three months. Another 42% said they probably would.

Among AT&T customers, 6% said they'd get a Verizon iPhone, with 27% saying they probably would. About 5% of people using Sprint and T-Mobile said they definitely would buy a Verizon iPhone.

AT&T does have a few advantages over Verizon, however. For one thing, AT&T's network, while lacking Verizon's coverage, is faster. This Verizon iPhone isn't compatible with Verizon's next-generation LTE (Long Term Evolution) network, although the next model probably will be.

Another thing that could give mobile customers pause is that the Verizon iPhone won't be able to access the Internet while handling a phone call, as AT&T's network can. Nevertheless, Verizon's legendary network coverage is a big draw.

Baird based its projection only on the number of people who said they definitely would buy a Verizon iPhone, and then multiplied the percentages by each carrier's total number of customers. Verizon iPhone buyers do not include any of the respondents from the "probably" category.

Scouting Out Suppliers
Aside from Apple and Verizon, an assortment of smaller companies involved in supplying and assembling the parts for the iPhone should benefit from the product's phenomenal growth.
Although Apple does not make public its roster of suppliers and manufacturers, third parties have deduced many of them via product teardowns and periodic leaks.

And while the Verizon iPhone isn't yet available, analysts generally agree that it will contain almost all the same components as the previous iPhone 4 model, with the exception of the phone network circuitry.

That plum went to Qualcomm Inc. (Nasdaq: QCOM), with Apple snubbing Infineon Technologies AG (NYSE ADR: IFX), which makes the networking chips for the AT&T iPhone. That was the second recent victory for Qualcomm, which also will supply its Snapdragon chip to HTC for the Android-powered Nexus One phone.

According to iSuppli, which last year did a teardown analysis of the iPhone 4, the most expensive single component is the LCD display, which most likely comes from LG Display Co. Ltd. (NYSE ADR: LPL) or Toshiba Corp. (PINK: TOSYY). Both Toshiba and LG Display as well as Sharp Corp. (PINK: SHCAY) were mentioned this week in an iSuppli report that says Apple has invested $3.9 billion of its huge cash stockpile in long-term supply agreements with those three companies for LCD screens.

Also, the display is made of Corning Inc. (NYSE: GLW) Gorilla Glass - a thin, strong, scratch-resistant product that has proven popular among mobile device makers. Already it's used in 20% of the world's touch-screen handsets.

Perhaps the biggest beneficiary of the Verizon iPhone may be Samsung, which is manufacturing the Apple-designed A4 processing chip that powers the device in addition to supplying the phone's flash memory. Samsung is the global leader in memory chips.

The Korea Times last month reported that Samsung would quadruple the number of processors it ships to Apple. Amazingly, this means that half of Samsung's chip-making capacity will be devoted to Apple. In addition to the iPhone, Apple uses the A4 chip in the similar iPod Touch, the iPad, and Apple TV.

Broadcom Corp. (Nasdaq: BRCM) should be another winner. Broadcom makes the Wi-Fi and Bluetooth controllers, and is well-positioned to partake of Apple's successful family of mobile gadgets.

Finally, the two Taiwanese companies that will build the Verizon iPhone should reap rewards from the device's success. One is Foxconn Technology Co. Ltd., which builds many Apple products. The other is Pegatron Corp., a relatively new player that was spun off from ASUSTEK last year. Pegatron's version of the iPhone will go to Asian nations such as China, South Korea and Japan, all of which have significant CDMA networks, while Foxconn will build the Verizon iPhone for the United States.

Source :

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email:

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules