Tim Beyers and I don't see eye to eye on Apple (Nasdaq: AAPL) as an investment at today's prices. He is bullish. I am bearish. It's the very nature of Dueling Fools. Now I get my shot to counter my worthy opponent's latest bullish claims.
Look away, Steve Jobs worshipers. I come with more mock than turtleneck.
Tim's bullish thesis consists of a few meaty morsels:
AT&T (NYSE: T) runs out next year.With $28 billion in cash and marketable securities sitting on its balance sheet, it "allows Apple to focus on long-term innovation."I've lined 'em up. Let's shoot 'em down.
App to succeed
The App Store is a hit, but just as Apple borrowed liberally from social networking outlets and Microsoft 's (Nasdaq: MSFT) Xbox Live Marketplace in dreaming up the mobile concept, all of the other smartphone makers have caught on quickly.
Research In Motion (Nasdaq: RIMM) continues to widen its BlackBerry lead over Apple every passing quarter. It now has an applications platform. Google (Nasdaq: GOOG) has thrown out a wider net with Android, and it too will benefit from its app store.
Apple has served up a billion App Store downloads to iPhone users -- and iPod touch owners with Wi-Fi -- but what do you think that means financially to Apple? This isn't like Apple's iTunes Music Store, where most folks are paying for their digital downloads. The App Store's most popular programs are often the free ones, which users quickly discard. Still, even with iTunes, Apple has historically considered selling digital music to be a low-margin endeavor designed primarily to move iPods.
Apple's App Store may be a moneymaker as well as a promotional tool, but it will never rival the money Apple makes from AT&T subsidizing most of the iPhone purchase price.
Reach out and gouge someone
Tim believes that Apple will be able to command a king's ransom when it comes time to renew its deal with AT&T. Really? Isn't this the same AT&T that posted a dip in revenue, and an even larger decline in profitability, this past quarter?
More importantly, how big do you think the iPhone market actually is? Tim has an iPhone. I have an iPhone. However, it's not as if everyone can afford the $30-a-month unlimited 3G data plan that AT&T slaps on top of its regular wireless contracts. AT&T subsidizes roughly $375 for every activated iPhone, so it has to make that back somehow.
Tim sees AT&T paying more if it wants to retain its exclusivity, but the elasticity isn't there. If AT&T pays more, it will have to charge its subscribers even more, limiting the size of the iPhone market. Continued... |