Following the announcement of the iPhone 5 it seems that Apple have another huge hit under their belt. Though, some have been saying that there is nothing innovative about the handset. Apple on the other hand is very pleased with how pre-orders have gone, but with AT&T and Verizon news of the iPhone 5 is not so good.
AT&T & Verizon stock take a beating from iPhone 5 sales
It seems that the demand for the iPhone 5 has suffered the same fate as when the Samsung Galaxy S3 was launched. The iPhone 5 was sold out in within the first hour online for pre-orders. Thanks to margin pressure due to the iPhone 5s launch next week both carriers have seen their shares fall by 2% following an hold on stocks. This is due to the subsidies that the carriers have to pay Apple so that they can keep prices low for their customers.
A carrier for instance could pay Apple $400 for an iPhone while the cost to the consumer would be $199 if they took out the phone over two years on contract. This means that profit margins for carrier are weighed down by subsidies, especially when the device is as expensive as the iPhone 5.
An analyst for Stifel Nicolaus has taken away his buy rating from AT&T along with Verizon, and made note that the estimates should be revised due to the fact that the iPhone 5 was expected to launch in Q4. As it is now launching in Q3 it affects figures from this period. It is thought that this will mean potential downsides to the estimates of earnings going into the last half of the year. This will be down to the fact that only 11 days of sales will remain when the iPhone 5 goes on sale before the end of Q3. King also said that Verizon and AT&T will also be faced with more pressure in the last quarter of 2012.
It is thought that margins at AT&T may drop by as much as 12% before the year is out and the figure at Verizon may be around 5.3%. if the device suffers from shortages as predicted this could mean that the numbers relating to EPS could rise due to lower subsidies paid. This seems strange that the iPhone 5 would generate so much money but would be detrimental for the profits of carriers upon its initial release.