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Business, Finance, Occupation & Industry

No, T-Mobile Has Not Killed iPhone Subsidies

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By Evan Niu, CFA, The Motley Fool

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T-Mobile’s been stirring the pot in recent months, launching an ambitious “Un-carrier” initiative and touting its new unsubsidized strategy. Contrary to popular belief, T-Mobile hasn’t been able to quit subsidies quite yet (they are rather addictive, after all).

I can’t quit you
The magenta carrier has axed service contracts, but is still offering to foot part of the device bill, even if it’s not being entirely forthright about it. I noted the discrepancy between Apple‘s retail pricing and T-Mobile’s installment plan totals when the device was announced last month, but now investors have more evidence regarding the arrangement.

For starters, Apple now sells T-Mobile iPhones through its own online store, and they’re unlocked and contract-free. These models are sold at full retail pricing of $649 to $849. Unlocked iPhone buyers can choose to have a T-Mobile SIM pre-installed or get one SIM-free. It makes no difference to Apple.

Source: Apple Online Store.

If you mosey on over to T-Mobile’s online storefront and compare full device cost, there’s exactly a $69 difference between its prices and Apple’s prices.

Buy From

16 GB Model

32 GB Model

64 GB Model

Unlocked?

T-Mobile

$580

$680

$780

No

Apple

$649

$749

$849

Yes

Difference

$69

$69

$69

—

Sources: Apple and T-Mobile. iPhone 5 pricing shown.

That missing money has to be coming from somewhere. There are exactly two candidates for who’s covering the difference. Hint: It’s not Apple.

Not something for nothing
It’s not as if T-Mobile is giving away the $69 for nothing. The vast majority of consumers will opt for the installment plan, and those devices will be locked to T-Mobile’s network while you’re still on the hook for 24 monthly payments. The carrier will unlock the device for you once it’s paid off and you can call it your own. For $69, T-Mobile still has a good shot of getting two years of loyalty, just not through a service contract.

In theory, a customer could go purchase an iPhone from T-Mobile at full price for $580 and have them unlock it immediately and then go use the savings to buy an Apple Wireless Keyboard, but T-Mobile is playing the odds and hoping very few people care enough to do this.

BTIG analyst Walter Piecyk also noticed this difference, and believes it’s a “promotional subsidy within T-Mobile’s new strategy.” Furthermore, Piecyk believes the promotion will expire eventually and T-Mobile iPhones will go back up to full retail pricing, even if they’re available on installment plans.

Been there, done that
T-Mobile actually isn’t the only carrier to offer these types of promotions. Other prepaid carriers do the same.

Leap Wireless‘ Cricket brand offers a $150 rebate, bringing the entry-level iPhone 5 down to $500. Cricket is also a prepaid carrier with no contracts, and Leap absolutely pays subsidies. On the most recent conference all, CFO

From: http://www.dailyfinance.com/2013/04/16/no-t-mobile-has-not-killed-iphone-subsidies/

Business, Finance, Occupation & Industry

More Evidence That Samsung Cares More About Marketing Than About Product Innovation

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By Evan Niu, CFA, The Motley Fool

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Much of Samsung’s rise to the top of the global smartphone market can be tied directly to the size of its marketing budget. The South Korean company has pulled out all the stops when it comes to building its Galaxy brand. Its U.S. marketing budget jumped more than five times last year, surpassing the ad spending of primary rival Apple .

Even as Samsung is now the No. 1 smartphone vendor, many onlookers wonder where its priorities lie. The company has seemed content to dramatically increase its advertising campaigns, while many question its interest in building higher-quality products. Even its high-end flagship devices remain encased in plastic; many rivals in the market segment have begun to place a higher emphasis on build quality.

Here’s more evidence that Samsung cares more about marketing than it does about product innovation.

Money is where the heart is
Resource allocation can tell investors a lot about what a company values. At the same time, that spending is expected to yield tangible results in the form of innovative features. Samsung unveiled a slew of new features in the Galaxy S4, such as Air Gesture and Smart Scroll, but early reviewers considered most of them novelties.

Looking at how much Apple and Samsung each spent on advertising and marketing compared with research and development paints a clear picture.

Sources: Apple 10-K and Samsung Investor Relations. Fiscal year ending September shown for Apple. Samsung figures translated from South Korean won at current exchange rates.

Samsung put more money into its global marketing and promotional campaigns than it did into R&D last year, while Apple spent more than three times as much on R&D as it did advertising. In absolute dollars, Samsung vastly outspent its rival from Cupertino in R&D, but Samsung also has countless other divisions that it needs to sustain.

Last week, a Samsung spokesman told Reuters, “We’ll keep boosting our R&D spending, while marketing will be executed flexibly according to market conditions.”

Apple is also generally known to spend rather efficiently when it comes to R&D, which comprised just 2.2% of fiscal 2012 revenue. Samsung’s R&D spending for 2012 amounted to 5.7% of sales.

Just because marketing works doesn’t mean it’s more important than innovation.

There is a debate raging as to whether Apple remains a buy. The Motley Fool’s senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

var FoolAnalyticsData = FoolAnalyticsData || []; …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Was This Steve Jobs' Biggest Mistake?

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By Evan Niu, CFA, CFA, The Motley Fool

Tablet PC Panel Shipment in Dec.’12 and Jan’13 (Million units). Source: NPD DisplaySearch.

Shipments of 9.7-inch panels fell dramatically from 7.4 million in December to 1.3 million January — an 82% drop off. Of course, that size panel is primarily the full-sized iPad. Within the larger segment, the 10.6-inch display is predominantly Microsoft Surface (both RT and Pro models). Those shipments went up slightly, which is expected since the software giant just recently launched the Pro model while yesterday announced it was

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Let’s face it: Steve Jobs was wrong. The Apple co-founder famously bashed smaller tablet form factors in 2010, saying that a 10-inch device was the perfect size. Then Apple launched the iPad Mini two and a half years later, and now the product family will never be the same.

Consumer demand has been quickly shifting toward smaller form factors, starting most notably with Amazon.com‘s Kindle Fire lineup. The e-tail giant was able to rank No. 3 in the tablet market in the fourth quarter with an estimated 6 million units shipped, and the company’s larger model doesn’t seem to have been selling particularly well.

Thanks to that transition, larger display panel shipments throughout the industry are getting eaten alive.

Paint me a picture
NPD DisplaySearch recently released some estimates on tablet panel shipments in January, and the data shows a precipitous drop in larger sizes (9 inches and above) accompanied by an increase in smaller sizes (7 to 8.9 inches). The total market decreased sequentially from December, which is expected because of seasonal patterns.

Tablet PC Panel Shipment in Dec.’12 and Jan’13 (Million units). Source: NPD DisplaySearch.

Shipments of 9.7-inch panels fell dramatically from 7.4 million in December to 1.3 million January — an 82% drop off. Of course, that size panel is primarily the full-sized iPad. Within the larger segment, the 10.6-inch display is predominantly Microsoft Surface (both RT and Pro models). Those shipments went up slightly, which is expected since the software giant just recently launched the Pro model while yesterday announced it was expanding international availability of the RT model.

Paint me some bigger pictures
It would seem that all the reports that Apple is cutting panel orders have some legs after all. The iPad maker reportedly reduced 9.7-inch panel orders from LG Display by 90% in January to just 600,000, while Sharp has nearly halted production of that size also.

Both Tim Cook and I have warned investors about reading too deeply into individual data points related to Apple’s supply chain, since they can’t accurately paint a bigger picture. That being said, DisplaySearch does detail its estimates on Apple’s production plans for the year, and the researcher believes that Apple has reduced its overall iPad build plans amid a shift toward the iPad Mini.

Source: NPD DisplaySearch.

In December, the researcher estimated that Apple was planning to ship 100 million total iPad units in 2013, a figure that’s now been reduced to 88 million units. Since DisplaySearch keeps its fingers on the broader display industry’s pulse, this estimate may be more meaningful than reported order activity at any single supplier.

Sources: Apple and NPD DisplaySearch.

Possible reduction notwithstanding, shipping 88 million tablets in 2013 would still be quite a respectable feat and would represent 34% unit growth from the 65.7 million iPads sold …read more
Source: FULL ARTICLE at DailyFinance