Posted by Greg Mills
The Apple rumor mill, which we at MacTech contribute to, tends to build expectations for Apple product launches that sometimes go over the top. Had Apple called the iPhone 4S the iPhone 5, there would have been a very bad buzz in the press that the update was insufficient to get the name iPhone 5. The rumors that seek to fill the information void that Apple intentionally creates, generate expectations that each product launch is the end all, do all electronic bunker-buster of all time.
Sometimes, technology in chip development, for example, holds up an Apple product. Some analysts are speculating that the LTE G4 chips available today are just too big to fit the iPhone's slender form factor. Cost is also a consideration when you are planning on building 75 million of anything. Apple has gross margins to kill for, just ask any competitor forced to sell things at a loss to be competitive with them.
The roll out of the G4 network is going forward world wide, but is not universal enough that Apple was forced to bulk up the iPhone to include current oversized chips. Chips tend to be cheaper and smaller each generation as experience from prior chipset are passed down to the more modern silicon. Samsung had to use two chipsets in its 4G smartphone at a significant cost in both size and part prices. Apple choses to wait until the 4G chips are developed that will meet all their expectations. You can be sure they are working with the chip vendors to remedy the situation.
At the end of all the disappointment in the press, the improvements of the iPhone 4S over iPhone 4 are pretty impressive. Double the upgraded processing chip to a dual A5 and the power is incredible and able to do things it took a laptop to do previously. The cameras and lens assembly are much improved and will tend to replace more and more digital cameras. You always have your iPhone with you and the picutre quality is as good as most point and shoot digital cameras anyway.
If I wasn't ready to switch cellular networks when my contract gives up, I would likely buy an iPhone 4S. Timing is such that spring will likely be the period where the iPhone 5 hits the market. You can be sure, Apple isn't sleeping at the switch and just as fast as they can launch the perfect iPhone 5, they will do so.
Yesterday's sprint story seemed to be right except the part about them getting an exclusive on iPhone 5. The stock for sprint is down almost 20% since the US20 Billion dollar iPhone deal was reported by the WallStreet Journal. Investors in sprint fear the combination of consistent red ink for the last few years, a declining customer base, a giant investment in the ClearWire 4G network and now a contract with Apple worth twice sprint's market cap may tip the boat a little too much and take sprint down.
Frankly, if cash rich Apple wanted to buy sprint, fire the personnel down to the janitorial staff and build a world class cellular network, they could do it. The sprint market cap was about US9 Billion before the iPhone contract announcement, so a 20% drop in stock valuation would make sprint cheap enough to tempt a takeover. Retire the yellow swirl into the toilet logo and replace it with an Apple logo and the street would snatch up Apple Cellular stock like candy.
It is indeed ironic that the number one reason customers are leaving sprint is the lack of an iPhone in their inventory. Then they make a deal for 30.5 Million iPhones and their stock falls through the floor. If half the current sprint customers replace their existing phones with iPhones when their contract gives up, sprint will come out of the situation in 2014 or 2015. Right now, it will cost sprint $500 out of pocket, to supply iPhones to customers whos contract with them for at least 2 years of service.
The only other things sprint has going for it is that they are the only US carrier offering an unlimited data plan. Their network is under utilized due to bleeding customers to the other networks, so there is sufficient capacity to offer all the data you want for a flat rate. This will change if they ever begin to reach any where near capacity.
The other thing they have going for them is that while the ClearWire 4G network is still in development, they do have some 4G service in larger cities to sell. I tested a Clear 4G router a year ago and found that there was insufficent service area to justify the cost and if the mobile server reverted to 3G you had to also have a 3G sprint account. Not going to happen. Clear is losing money hand over fist and contributing to the the sinking valuation at sprint.
I hate to say it but, if you believe in the power of iPhone or figure Apple might buy or take over sprint, a long position on sprint stock might be a very good investment. The stock for sprint has been downgraded already to take the risk into account compared to hard valueation. That is Greg's Bite for today