There are a number of reasons for Apple's (Nasdaq:
) precipitous decline on Wednesday. Benzinga discussed the rumor
that a securities clearinghouse was going to raise its margin
requirements for Apple shares
Other analysts cited Wednesday's news that Apple rival Nokia
) had signed a deal with China Mobile (NYSE:
), the world's largest mobile telecommunications carrier with
more than 700 million subscribers, to sell its flagship Windows 8
smartphone, the Lumia 920T, to China Mobile's 79.3 million
smartphone users by year-end.
Apple does sell its iPhones in China but only to two smaller
carriers, China Unicom (NYSE:
) and China Telecom (NYSE:
). Even so,
noted, "China contributed revenue of $23.8 billion in Apple's
fiscal year ended in September, accounting for 15 percent of the
total and up 78 percent from the previous year, Chief Executive
Officer Tim Cook said last month on a conference call."
But the big prize, China Mobile, still eludes Apple. "Besides
the technical issues, the business model and benefit sharing
still need further discussion," China Mobile Chief Executive
Officer Li Yue told a developer conference in Guangzhou
"'Li's comment suggests that China Mobile has no intention of
simply gifting Apple access to its huge subscriber base without
extracting a pound of flesh from Apple,' said Teck- Zhung Wong, a
Singapore-based analyst with market researcher IDC," cited by
"China Mobile is state-owned, and recent reports have suggests
that bureaucrats involved with the company do not want to pay the
subsidies Apple demands of all of its other partners,"
the Mac Observer
However, Piper Jaffrey analyst Gene Munster, who has a Buy
rating on Apple and a price target of $900, thinks that China
Mobile will eventually open up to Apple's iPhones.
cited Munster's note, "We believe some investors have speculated
that China Mobile will carry the Lumia instead of the iPhone,"
Munster wrote. "We do not believe this is true and note that
China Mobile already carries multiple smartphones from multiple
vendors. We continue to expect China Mobile to add the iPhone in
the back half of 2013."
Jefferies analyst Peter Misek, who also has a "BUY" rating on
Apple with a price target of $900, disagrees on the timing of any
iPhone sales to China Mobile. As
noted, Qualcomm (Nasdaq:
) said at its analyst day event on Tuesday that China Mobile is
not likely to be running any iPhones in 2013.
"The roadmap suggests no iPhone 5 at China Mobile in H1:13,"
Misek wrote. "QCOM noted that they are unlikely to gain much
TD-SCDMA (China Mobile's 3G technology) penetration until the
ramp of TD-LTE, which is not expected to start wider trials until
H2:13 with a full ramp later). We do not believe the lack of the
iPhone 5 in China is due to any business or technical issue but
rather is a political decision. We had hoped China Mobile would
represent potential upside in 2013, but due to the uncertain
timing, we did not include any units in our iPhone estimates and
leave our model unchanged."
Apple management will have to think very carefully about what
thy would be willing to give up in order to gain access to China
Mobile's customer base.
"Apple has been very open about how much profit it is taking
from China, and that was bound to get somebody here thinking
'Hey, we want some of that: after all, without us, they're
dead,'" David Wolf, CEO of Wolf Group Asia, a Beijing-based
marketing consulting firm told Bloomberg. "The company could find
itself forced to choose between its margins and its access to the
Chinese market. Apple now needs to play a deft game."
(c) 2012 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.