Over the past several years, Apple has arguably gotten the
better end of its iPhone partnership with the carriers -- but right now, it's
the telecoms that have investors more excited. Since April 9, Verizon (VZ, Fortune 500) and AT&T (T,
Fortune 500) are the second- and third-best performers among the 30 Dow Jones
industrial average stocks, rising 8.2% and 7.8% respectively. In a tumultuous
month for the stock market, the only Dow company to outpace the two telecom
giants is Travelers. During that same
one-month period, Apple's (AAPL, Fortune 500) stock, which is not in the Dow,
has tumbled by nearly 11%.
That drop is particularly head-scratching given the strength
of Apple's recent earnings report. The tech behemoth reported much
better-than-expected sales and profits, particularly from the iPhone, which
made its debut in China.
The telecoms had some surprises of their own last quarter. A
sharp sequential decline in iPhone sales in the United States provided Verizon
and AT&T's wireless service profit margins with a much-needed shot in the
arm. Both companies pay heavy up-front subsidies to bring the cost of iPhones
down to $200 for their customers. Verizon's margin rose to 46%, rebounding from
42% in the previous quarter, and AT&T's wireless margin rose to 42%, up
from 38% in the fourth quarter.
Apple's iPhone outlook for the current quarter was slightly
disappointing, as the company said it would likely sell fewer smartphones
between April and June than it did in the first quarter.
A trend is emerging: bad news for Apple's iPhone sales is
good news for carriers. Well, in the short-term, anyway. But stay tuned readers. Don't touch that dial.....
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