I’m not entirely sure why, but Apple seems to have transcended the stock market
to become some kind of pop-cultural phenomenon – not as a technology company,
but as a stock. I’m no stock-picker, but not everybody knows that, and often
when people find out I write about finance, they ask me for stock-market advice.
And as often as not, the advice they want concerns the question of whether they
should buy Apple stock.
The reason, of course, is that these people feel as though their love for Apple
products is finally being reflected in a soaring share price. But that’s not
the case: if Apple could really monetize its fan base, it would have been much
more successful many years ago – and its stock wouldn’t have been able
to rise so much of late. The big run-up in the Apple stock price is primarily
attributable to iPod and iTunes sales. Apple has managed to maneuver itself
into a position where it is dominating the main retail channel for online music
sales, and it’s Apple’s monopoly there which accounts for most of the frothiness
in its share price.
The rest of the frothiness is down to the iPhone, which is on track to sell
more than 10 million units by the end of next year. That’s a lot of revenue
for Apple – more than you might think if you simply multiplied those 10
million units by the price of the phone.Thestreet.com’s Scott Moritz
AT&T is paying Apple a bounty of between $150 and $200 per phone — plus
$9 a month per phone over the life of the typical two-year customer contract.
That’s another $400 or so on top of the sale price of as much as $600. And
it doesn’t even include any revenue that AT&T may or may not pay to Apple
in years 3-5, when iPhone owners will still be locked in to AT&T.
It’s not clear whether Apple will be able to get the same kind of deal from
carriers in Europe, but my guess is that given the strength of the iPhone’s
reception in the US, European carriers will be desperate – and willing
to pay a lot of money – to have iPhone exclusivity. (Even though that
will violate the European norm, where most phones are unlocked.)
What fascinates me is that Moritz also reports, at the end of his column, that
Apple first approached Verizon before finally going with AT&T. I’m surprised
at that, because Verizon’s US network doesn’t use the GSM technology which is
needed to be able to use
the iPhone worldwide. If Apple had gone with Verizon, it would have had
to fit both CDMA and GSM hardware into its device. Which would
have been ambitious indeed for a first-generation product.