Apple seriously considering iPhone rebate, subsidy - report

[AppleInsider]

Several recent developments on Apple's iPhone strategy have compelled one analyst to raise his estimates and price target on shares of the company, such as word that the iPod maker is seriously considering a move to subsidize the cost of the handset through rebates or other means.

Rebates or subsidies

In an in-depth research note released to clients on Tuesday, American Technology analyst Shaw Wu cited sources who indicate that a mail-in rebate or carrier subsidy for iPhone of $50-150 is under serious consideration by the Cupertino-based electronics firm.

"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," the analyst 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."

Revenue share and bounties

Wu also told clients that he believes Apple will be paid a "bounty" for each AT&T customer it signs up through its retail and online stores. "In addition, Apple will likely participate in a revenue sharing agreement where part of the monthly fee charged to customers will go to Apple ," he explained. "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."

Recurring revenue streams from carriers

In addition, the AmTech analyst estimates Apple to garner "mid to high single digit incremental high margin revenue per user" from its carrier partner, which could potentially surge as high as "low double digits" depending on future iPhone features.

"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," he wrote. "We believe this recurring revenue stream is high quality and adds an additional degree of stability and predictability to Apple 's financial results."

Adding Apple to AmTech's Focus List

As a result of his findings, Wu has placed Apple on AmTech's "Focus List" while also raising his estimates and price target on consumer electronics firm.

For fiscal 2008, the analyst now estimates Apple to generate sales of $31.1 billion and per-share earnings of $4.15, up from $28.8 billion and $3.75. His model assumes sales of 3.45 million iPhone units during the fiscal year, up from a previously conservative view of 790,000 units. Still, he said, estimates could turn out conservative depending on Apple 's ability to introduce lower cost cell phones which he believes could significantly raise unit assumptions.

"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," the analyst reiterated in his note to clients.

Wu also raised his price target on shares of Apple to $145 from $118.

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[Clive At Five]

Wu is a douche-bag. He is fabricating "insider info" to affect stock prices and/or getting investors behind him to bully Apple into doing what he wants it to.

And anyone who knows Apple knows that they would NEVER support "mail-in" rebates. They'd sooner cut their own prices before stooping to that level.

-Clive

[bdj21ya]

Wow! Up to 145 from 118. On a 1 year target? That is amazing. I've never really gotten a straight answer though. Is this a 12 month target, renewed every time the new target is announced, or is it a target for some specific date?

[HiddenWolf]

Originally Posted by AppleInsider

Wu also raised his price target on shares of Apple to $145 from $118.

This guy seems to be glowing with positive thoughts about Apple lately, doesn't he?

[Ireland]

Originally Posted by HiddenWolf

This guy seems to be glowing with positive thoughts about Apple lately, doesn't he?

You're new eh?

[Ireland]

Originally Posted by AppleInsider

"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," the analyst reiterated in his note to clients.

I hope Apple has that iPhone Nano's design process done already. A shuffle in a sleek phone from Apple with a great UI would be my phone of choice. I've that €300 ready and waiting.

[128pluspb100siduo230]

12 months out from now, is what is usally implied. But this excerted bit is refering to AAPL '08 revenue so it would be fair of Wu to claim a win at any point from when Apple projects '08 rev all the way up till how the market prices AAPL after the 4th qtr of Apple's fiscal '08 is reported.

Just an individual investor not an expert but this how I make my living so I have a fair handle on how to interpret these things. Average better than 20% returns from a diversified portfolio of over 80 companies. I'm usally analizing another 40 or so companies to have options of where I can realocate capital as long holdings become sells in part or full.

Wu and Munster take a lot of heat here, some of it fair but mostly I think most of us are just wishing we could be so fortunate. Paid to follow the forums, paid to attend every event that has any releavance and paid to wine and dine anyone that could provide the slightest of hints as to what really goes on behind closed doors, and last but not least to have a name that just might get your phone call responded to at an executive level from within Apple even if they won't take your call.

[EruIthildur]

Hmm... Apple announces that it's new OS is late and the analysts predict higher stock prices... Seems to go with how the price drops after new announcements!

[mark2005]

Originally Posted by Clive At Five

Wu is a douche-bag. He is fabricating "insider info" to affect stock prices and/or getting investors behind him to bully Apple into doing what he wants it to.

And anyone who knows Apple knows that they would NEVER support "mail-in" rebates. They'd sooner cut their own prices before stooping to that level.

-Clive

Apple does do mail-in rebates. The back-to-school Mac+iPod promotion was one.

[mark2005]

At first glance, the $145 target is quite a leap. I don't think there are any other analysts that are beyond $130, and most are still between $100 and $110.

If Wu's not pushing this simply to drive up the price (so he can sell), then he must be pretty confident in his sources. And if Apple and AT&T make this speculated "revenue-sharing" plan happen where the handset maker gets a portion of the recurring monthly revenue, that's a pretty big change in how the cellular market works, and the $145 moves into the realm of the possible.

Go Apple!

[willrob]

Originally Posted by bdj21ya

Wow! Up to 145 from 118. On a 1 year target? That is amazing. I've never really gotten a straight answer though. Is this a 12 month target, renewed every time the new target is announced, or is it a target for some specific date?

Apple's fiscal year ends in September. Wu's target is for September 2008. His previous $118 target was for this September, and was based on iPhone sales. I'm not sure how much the delay of Leopard would influence this years's target, but he is obviously skipping the issue by predicting September 2008 by which time Leopard will be hunting in the tall grass..

[quinney]

Originally Posted by mark2005

At first glance, the $145 target is quite a leap. I don't think there are any other analysts that are beyond $130, and most are still between $100 and $110.

If Wu's not pushing this simply to drive up the price (so he can sell), then he must be pretty confident in his sources. And if Apple and AT&T make this speculated "revenue-sharing" plan happen where the handset maker gets a portion of the recurring monthly revenue, that's a pretty big change in how the cellular market works, and the $145 moves into the realm of the possible.

Go Apple!

If this call is intended to drive up the price it is not working, at least today.
Maybe "Wall Street" disrespects Wu as much as AI members.

[ChevalierMalFet]

Rebates on a cell phone?

Shocker.

[ak1808]

A target price is based on what the analyst thinks the company is really worth.

The idea behind it: As the market comes to realize how right the analyst was in his predictions of future revenue and profit of the company, the stock price will move towards the target price.

It also gives an indication on whether the analyst thinks the stock is currently undervalued or overvalued. Similarily, it also gives you an indication as to when you should consider selling the stock - given that you believe the analyst got it right on all points.

Does that help you?

[palex9]

does jobs really believe that everybody is going to dish out 75-100 a month for a voice and data plan? plus hundreds (rebate or not) for the phone itself? on which planet does this guy live? i make six figures but am not willing to pay more than 15 a month or so for unlimited data (thats with sprint by the way). and i wont switch to att just because of a fancy shmancy phone! so if i happen to be his target group, he is in for a surprise.

[SpamSandwich]

Originally Posted by palex9

does jobs really believe that everybody is going to dish out 75-100 a month for a voice and data plan? plus hundreds (rebate or not) for the phone itself? on which planet does this guy live? i make six figures but am not willing to pay more than 15 a month or so for unlimited data (thats with sprint by the way). and i wont switch to att just because of a fancy shmancy phone! so if i happen to be his target group, he is in for a surprise.

This article is just Wu talking out of his bum. Don't believe it until you see it in writing from at&t or Apple.

[mugwump]

Totally agree, palex9. They are in for a surprise if they think that very many people will shell out for an overpriced data and voice plan. The slow EDGE data plan for a two year contract better be reasonable and/or subsidized.

[ChevalierMalFet]

...does jobs really believe that everybody is going to dish out 75-100 a month for a voice and data plan?

No doubt. I've known folks that pay close to $150 a month on cell.

[Superbass]

Originally Posted by ChevalierMalFet

No doubt. I've known folks that pay close to $150 a month on cell.

Yeah, this is definitely a phone for the rich. With a 2 year plan for 75-100 plan plus phone you're looking at a starting price of 2300-3000 plus whatever extra talk time and data isn't covered by the plan. Then, at the end of the 2 years, the battery is down to max 30-45 min. of talk time per charge, and you can choose to pay a hundred bucks to send the phone to apple and get a replacement, or buy the "much better" new model, and then the whole process starts again...

I find it interesting that people are expecting a "cheaper" version to come out. What features will they remove to make it cheap enough for the average user? I can't think of anything you could do to tone this one down without making it just another phone....

[ai51240]

Originally Posted by palex9

does jobs really believe that everybody is going to dish out 75-100 a month for a voice and data plan? plus hundreds (rebate or not) for the phone itself? on which planet does this guy live? i make six figures but am not willing to pay more than 15 a month or so for unlimited data (thats with sprint by the way). and i wont switch to att just because of a fancy shmancy phone! so if i happen to be his target group, he is in for a surprise.

Cingular charges $19.99/month for an uniimited EDGE data plan, with voice plans that start about $30. There's no reason to believe that the iPhone would mandate a more expensive plan, although they may tack on charges for the extra network features, i.e. visual voicemail.

[McHuman]

Originally Posted by Superbass

I find it interesting that people are expecting a "cheaper" version to come out. What features will they remove to make it cheap enough for the average user? I can't think of anything you could do to tone this one down without making it just another phone....

Uh..do you know how the tech economy works? When the first iPod came out, it was more expensive than most iPods today, had almost no storage, no clickwheel, no color screen, no video, and was big and clunky. Today the average nano is 10x better and cheaper, too. The iPhone will follow the same path.

[ChevalierMalFet]

Superbass, the price will come down in the same way it did for the iPod. CPUs, storage media, the LCD, other components will drop in price, manufacturing will shore up a bit, and the line will diversify. It may take a year or two rather than the month or so the immediate gratification brigade is targeting, but it'll happen. Personally, I'll probably buy one when the unlocked model hits $400-$500. By then it'll be about time to replace my unlocked RAZR anyway.

[McHuman]

Originally Posted by Superbass

Yeah, this is definitely a phone for the rich.

If you put about $2500 into apple stock today, by fall it will pretty much pay for the iPhone.

[Apparatus]

If they offered a $150 mail-in rebate on the 8GB iPhone I might just be tempted to switch carriers and acquire one!

[damiansipko]

Originally Posted by Clive At Five

And anyone who knows Apple knows that they would NEVER support "mail-in" rebates. They'd sooner cut their own prices before stooping to that level.

Umm, Apple offers mail-in rebates every back to school season on their iPods.

[EagerDragon]

$30 for voice + $20 for data and I am in, but not for 70 to 100.
I am not afraid of the handset cost that is a one time cost, I am afraid of the recurring monthly charges.

Come to think of it, the wife wants one and my kid also, thats 3 phones plus whatever the cost for a family plan for 2 years, ouch!!!!!!!!!!

[wilco]

How long until Apple announces a delay with the iPhone?

[ashraman]

Originally Posted by EagerDragon

$30 for voice + $20 for data and I am in, but not for 70 to 100.
I am not afraid of the handset cost that is a one time cost, I am afraid of the recurring monthly charges.

Come to think of it, the wife wants one and my kid also, thats 3 phones plus whatever the cost for a family plan for 2 years, ouch!!!!!!!!!!

I too have no problem for the handset cost for me and my daughter. However, I hope they will offer a family plan for data/email surfing/web surfing. Then I would be fine with me. My problem is also the same as yours, multiple recurring cost streams for the service beyond the voice plan.

FYI, I've had a BB before and my wife has one now ----BUT I am yet to find a single phone that can get me to websites and look up info. NYTimes, or Yahoo Finance or Google News or Google search.

This is what I hope the Iphone will change--but given AT&T wirlesss tech I am not so sure. IT may be still be PRETTY slow!

[EagerDragon]

Assuming this is correct, sounds like they anounced the price before sufficient research.

Many of us said that it was overpriced by 100 dollars. While it is two devices in one, a lot of the components are shared such as casing, cpu, software, battery, charging hardware, etc. It is not fair pricing to just add the total MSRP of two products just because the one device does the work of both.

You probably disagree, but 100 down to me is the sweet and fair spot for the iPhone.

[JeffDM]

Originally Posted by EagerDragon

Assuming this is correct, sounds like they anounced the price before sufficient research.

Many of us said that it was overpriced by 100 dollars. While it is two devices in one, a lot of the components are shared such as casing, cpu, software, battery, charging hardware, etc. It is not fair pricing to just add the total MSRP of two products just because the one device does the work of both.

That part of what they said was nonsense. The "iPod" part is just an app, while that development has to be paid for, it almost totally cuts out the incremental cost of hardware, with the exception of a fancy-pants DAC to get one like the main iPod has.

But the original presentation also factored in some intangibles, such as ease of use.

[melgross]

Originally Posted by bdj21ya

Wow! Up to 145 from 118. On a 1 year target? That is amazing. I've never really gotten a straight answer though. Is this a 12 month target, renewed every time the new target is announced, or is it a target for some specific date?

End of 2008 fiscal year, apparently.

[wnurse]

Originally Posted by ChevalierMalFet

No doubt. I've known folks that pay close to $150 a month on cell.

Yes, they are idiots.

[JeffDM]

Originally Posted by wnurse

Yes, they are idiots.

The few people that I knew that had plans near that price range actually do use the services enough to justify the costs. But I don't know many like that, I think they use cheaper plans that aren't so expensive.

[melgross]

Originally Posted by wnurse

Yes, they are idiots.

We have a plan with Sprint for three phones that comes to over $150 (without all the junk my daughter downloads each month). It's 2,000 minutes a month, and includes unlimited data.

[wnurse]

Originally Posted by melgross

We have a plan with Sprint for three phones that comes to over $150 (without all the junk my daughter downloads each month). It's 2,000 minutes a month, and includes unlimited data.

Yes but three phones is more than one isn't it?. Would you get three iphones if each phone resulted in a plan cost of $150?. I presume the conversation was about the bill for one phone or else the comparison is meaningless.. there are companies that pay thousands for phone bills (some cab companies for instance), there are some small businesses that also pay hundreds and possibly thousands.. just cause the phone bill for ONE iphone is less than their aggregate bill does not mean they run out and get an iphone.

So yes, anyone who pays 150 for a single phone bill has too much money and i can direct them where to donate it to a worthy cause (me). The only reason i would ever pay $150 for a phone plan is if somehow it is responsible for revenue that far exceeds it's cost (ie, a business tool)... i remember saying in another post that unless apple opens this iphone to outside development, it will be limited as a business tool. Businesses don't care if they can play itunes on their phones. I am finding it hard to fanthom exactly what customer demographic (except for the apple diehards who would buy shit if it came out of jobs ass) apple is aiming for. It's a weak business tool so the people who would most likely pay the exorbitant fee is disinterested, it's way more expensive than a consumer device.. who exactly are they aiming for?.. Richie rich kids?.

[JCG]

Originally Posted by EagerDragon

Assuming this is correct, sounds like they anounced the price before sufficient research.

Many of us said that it was overpriced by 100 dollars. While it is two devices in one, a lot of the components are shared such as casing, cpu, software, battery, charging hardware, etc. It is not fair pricing to just add the total MSRP of two products just because the one device does the work of both.

You probably disagree, but 100 down to me is the sweet and fair spot for the iPhone.

The iPhone is not two devices in one it is one device and with the new technology, software development, and component cost they have come up with a price for the product. I'm sure they took other things into consideration as well such as fair market price and gross as well as net profit margins. You statement about cost savings on the case, CPU, etc. is off base, especially since we dont know what components that the iPone will be using in the final version that is released to consumers. It also does not take into account the extra cost of the components that the iPone has that the other available products do not such as the larger (multi) touch screen which alone could add quite a bit of expense in R&D, software development, and component cost.

[Superbass]

Originally Posted by McHuman

Uh..do you know how the tech economy works? When the first iPod came out, it was more expensive than most iPods today, had almost no storage, no clickwheel, no color screen, no video, and was big and clunky. Today the average nano is 10x better and cheaper, too. The iPhone will follow the same path.

Yes, but with the iPod, the low cost options are shuffle, with no screen, tiny memory, no features other than playing music, or nano, which is also a tiny fraction of the memory of large ipod...

Using a model like this, the low budget iphone would just be another phone, if they released a model with no touchscreen , or only 512kb memory, or a more limited user interface... Even if it was half the price of the existing iPhone, that's still a high price for an average phone when you'll still be locked into a 2 year plan...

Apple has never adopted a policy of selling year-old tech as a "discount line", so we can't expect the current iPhone to become the discount line next year when the iPhone gets smaller, more memory, wifi, etc...

[Superbass]

Originally Posted by McHuman

If you put about $2500 into apple stock today, by fall it will pretty much pay for the iPhone.

Let me guess, you're 16 years old?

[wnurse]

Originally Posted by JCG

The iPhone is not two devices in one it is one device and with the new technology, software development, and component cost they have come up with a price for the product. I'm sure they took other things into consideration as well such as fair market price and gross as well as net profit margins. You statement about cost savings on the case, CPU, etc. is off base, especially since we dont know what components that the iPone will be using in the final version that is released to consumers. It also does not take into account the extra cost of the components that the iPone has that the other available products do not such as the larger (multi) touch screen which alone could add quite a bit of expense in R&D, software development, and component cost.

Dude, apple never have ever charged prices for their devices based on their cost. Which planet are you from?. Apple is gonna charge 500 or 600 until customers tells jobs to shove it up his ass then they will price the device according to cost. Without even knowing what the component cost is, i can say it is way less than what apple is charging.. wanna know how i know this?.. cause apple always charge way more than is justified by their cost. Also, the cost of the device was broken down. While this is an estimate, it's not an estimate based on a blind man picking a number. Here is the link

http://articles.techrepublic.com.com...1-6151185.html

Notice the component price of the 499 iphone is estimated at $245.83. So 499 represents a 50% profit. Even apple research and development cannot justify a 50% markup.. motorola have research and development cost too, so do nokia, etc.. and apple already knew how to make an ipod so this research was basically apple figuring out how to make an ipod make phone calls and before you scream touch screen.. my treo has a touch screen. Apple has not reinvented the wheel.. there is no leap in technology. Apple can claim leap in UI (that is still to be determined by consumers) but the tech was already there, apple putting it together does not justify 50% margin.

[EagerDragon]

Originally Posted by JCG

The iPhone is not two devices in one it is one device and with the new technology, software development, and component cost they have come up with a price for the product. I'm sure they took other things into consideration as well such as fair market price and gross as well as net profit margins. You statement about cost savings on the case, CPU, etc. is off base, especially since we dont know what components that the iPone will be using in the final version that is released to consumers. It also does not take into account the extra cost of the components that the iPone has that the other available products do not such as the larger (multi) touch screen which alone could add quite a bit of expense in R&D, software development, and component cost.

I chose my words based on how Steve presented the iPhone, he said it was 3 devices in one, and did the price comparison himself by adding the price of the iPod to the price of a phone to come up with the price he wanted us to pay. Check the presentation.

I do not think it is fair to consider the R&D on it, you always have R&D for new models of anything including a paperclip.

I did not assign a price based on the two major "devices", Steve did. I simply took what Steve did and took it to the next level, they are saving on a case, a battery, the construction of one device, etc, therefore the customers should get a piece of that and not just add the MSRP of two devices in the market for one device that does the functionality of two.

I can buy a stove with the oven built-in, or i can buy the two of them separetly. The separate solution is a hell of a lot more expensive check Sears and others. There are savings in one device with multiple functionalities. Those savings should go to the customer, it is called value for your money.

Take the video iPod, it used to be a music player, now it displays photos and also plays movies. There was some R&D on that. But Apple does not ask us to pay the MSRP of a small TV plus the MSRP of an iPod. That is value.