Archive for the 'Telecom' Category
SAN ANTONIO–(BUSINESS WIRE)–AT&T Inc. (NYSE:T) today announced that its board of directors has approved a 12.7 percent increase in the company’s quarterly dividend, the largest annual increase in the company’s history, and a new 400 million share repurchase authorization.
AT&T directors increased the quarterly dividend rate from $0.355 to $0.40 a share on a quarterly basis and from $1.42 to $1.60 a share on an annual basis.
At the same time, AT&T announced a new share repurchase authorization for 400 million shares, which replaces the authorization announced in 2006 under which AT&T repurchased more than $13 billion of its shares through Dec. 7, 2007. Based on current market conditions and the company’s outlook, AT&T expects to complete the repurchases available in the new authorization by the end of 2009.
“This latest dividend increase, combined with the new share repurchase authorization, reflects the strength of AT&T’s operations, and our board’s confidence in the future of our business and our ability to continue to deliver strong results,” said Randall Stephenson, AT&T chairman and CEO. “AT&T has great assets in a growth industry, and we’re excited about the opportunities we have to continue to grow our business while also delivering value to shareowners.”
The dividend will be payable on Feb. 1, 2008, to common shareowners of record on Jan. 10, 2008. The timing and nature of repurchases are subject to market conditions and applicable securities laws.
On Wednesday September 5, 2007 Steve Jobs announced a $200 price drop on the iPhone. This is unheard of in the tech industry!
With no new version on the horizon why would Apple drop the price of its “hot” new piece of technology only two months after it was released? Why did Steve Jobs release a press release after the fact offering a $100 store credit to customers who purchased the device at full price? I have a few ideas of mine own on this but first let me show you the stock chart for the last 5 days.
Apple 5 day chart from Yahoo Finance
Investors were very happy leading up to the Apple announcements last week. News of the “fat” Nano had leaked and there were rumours about a “touch” iPod on the horizon. Everything was looking great until the price cut was announced. Once that news hit the stock began to take a serious nose dive. Trading was way up and the stock ended the day almost ten points lower than the daily high. (Daily High: 145.84, Closing Price: 136.76)
Over the course of the next few days The market reacted somewhat positively towards the rebate offer and the new products being released. Friday was the worst day so far with the stock ending the day at $131.77 per share, $14 off the high from Wednesday.
Why Steve, why?
According to a news release posted on gizmodo Apple just reached the million iPhones sold mark. Sadly, this news was released after the price drop. So, if the iPhone is selling so well (it took almost two years to sell 2 million iPods) why are they dropping the price?
It could be because of the problems:
- Buying an iPhone requires changing carriers to at&t if you are not already with them.
- For $600 you can buy a much bigger iPod (capacity) and a damn fine cell phone.
- Changing cell carriers involves an early termination fee.
- Did I mention at&t already?
You might have also seen the recent news about the iPod “Touch” that was just announced. It is an iPhone without the phone but it has wi-fi. It will only be a matter of time before someone figures out how to hack that device to use it with a bluetooth headset. You know what that means? It means you will have an “iPhone” that works with Skype! Now that will sell some hardware!
Gizmodo also touches on Apple possibly entering the wireless market in the upcoming spectrum auction. Is Apple thinking of going it alone or just using this to help push iTunes and iPod sales?
So, knowing all of this why has Apple cut the price on the iPhone when there is no second generation iPhone replacing it? How will a price drop affect future Apple products?
First off most people believe that the spike in Apple sales upon release of a new product is due to the Apple “fanboys” who buy everything the company makes. These people would pay double for “iToilet Paper” if it had an Apple logo on it. It is quite possible that all of the fanboys have purchased their iPhones and Apple saw sales declining. Knocking the price down to $400 does make sense in that now the rest of the market may give the iPhone a second look. After all it is no big secret how much the iPhone costs to produce.
What about the secondary effect of a price drop? If Apple is willing to knock a third of the price off of their device after the fanboys buy it what is to stop the fanboys from taking a “wait and see” approach to the next Apple device? If a two-month wait gets you a 33% price drop why buy anything when it comes out?
I still think the iPhone was over-hyped and that Steve Jobs is right in saying that the device was priced to high. I just think they should have came out with the lower price from the start. Dropping the price this soon after release can only be bad news for Apple. No one ever drops the price on a device because it is selling “too well”.
That must be what the executives over at at&t are saying. I mean, they had a deal with Apple to make the iPhone exclusive to the at&t cell phone network and now hackers all over the world are unlocking the iPhone!
The law is not exactly on at&t’s side either. Some exceptions were made to the DMCA last year specifically to allow owners of cell phones to unlock the device. Hacking a phone to illegally use a carrier’s network is still illegal but that was never the goal of iPhone hackers. iPhone hackers have only one goal in mind, to free the iPhone from the lock that at&t and Apple added to the device to secure an exclusive two year contract between the two parties.
Already we have news of a kid, who unlocked an iPhone, trading the iPhone (and his skills) for a new car and a job.
Right now the focus is on getting the iPhone to work with T-Mobile, who uses the same network system as at&t. Several groups have already done this and provided photographical evidence to many in the media.
So, how have the stocks of at&t and Apple fared with this recent news?
at&t 5 day
Apple 5 day
Looking at these two charts we can see that when the big news hit on Friday about the unlocked iPhones both stocks began to slide. Do you know why that is? It is because not only did Apple get a big chunk of change up front from at&t but they also stand to gain via a revenue share agreement! If the iPhone gets unlocked how can they collect? Even worse is the thought that foreign cell phone companies may bail on signing such agreements once they see how easy it is to hack the iPhone and put any old SIM card in that the consumer wants!
Some legal experts think that Apple and at&t will use the DMCA to put these hackers in their place but, like I said earlier, a change was made last year to allow consumers the right to unlock their phones as long as they are not doing so to get free service.
At this stage of the game Apple stands to lose a lot more stock value than at&t does. If this happened after all of the foreign markets were tied down via contracts it would not be as bad for Apple. Coming now it is real bad. I expect Apple stock to continue to decline. If they call out the lawyers rather than figure out a software fix it will get even worse for them.
Why is that? Because a software fix says Apple is in charge while a court battle says that they have already lost. Apple hit $148 back in July 2007 and they have been falling ever since. I had planned to get out at $140 but I rode it up to $145 and started kicking myself. Now that I’m out I can honestly say that I made my money and I’m happy.
Why am I suddenly reminded of the old Jerry Reed song She Got The Goldmine (I Got The Shaft) when looking at the recent stock prices for at&t and Apple Inc?
At close of business Monday July 2, 2007 (the first full trading day after the iPhone release) Apple stock closed at $121.26 and at&t stock closed at $41.49. That was as low as Apple was going to go and as high as at&t has made it.
Disclaimer: at&t did declare a dividend of $0.355 per share on July 6, 2007 and stocks are known to drop after a dividend is declared.
Stock Prices at Close post-iPhone
| Date |
Apple stock |
at&t stock |
| 29-Jun-07 |
$122.04 |
$41.14 |
| 2-Jul-07 |
$121.26 |
$41.49 |
| 3-Jul-07 |
$127.17 |
$41.14 |
| 4-Jul-07 |
no data |
$40.60 |
| 5-Jul-07 |
$132.75 |
$40.66 |
| 6-Jul-07 |
$132.30 |
$40.66 |
| 9-Jul-07 |
$130.33 |
$40.49 |
| 10-Jul-07 |
$132.35 |
$39.50 |
* prices are for adjusted close at end of day. The price may have been higher or lower during daily trading.
As we learned in the past when Engadget posted (false) negative news about Apple and the iPhone a news story can have a short term impact on the stock price. We saw this play out again on Tuesday July 10, 2007 when rumors of an iPhone Nano surfaced. Apple stock flew up to a high of $134.50 on that news and did not fall back for about two hours!
Stock Tip
With at&t gaining no real market benefit from the iPhone I’m going to go out on a limb and suggest that the stock may have hit its year end target early. I sold a good amount of at&t stock when it hit $36 because I thought it would not hit $40 until the end of the year and I wanted to move my money into a stock with better bang for my buck. When I sold those stocks Apple was just shy of $90 per share. Every two and one-half shares of at&t stock I sold I converted into one share of Apple stock. With Apple gaining about $45 per share since then I have made out like a bandit!
It’s not too late for you. There is still some money to be made from Apple stock but you will likely not see the record gains of the past six months repeated in the near future. It might get as high as $150 per share by year end but I’ll probably sell it if it hits $140 and begins to flatline there.
As for at&t stock? I’m setting a year end target of $44 for that one. Yes, I’m sticking with the Apple stock.
With recent reports of hackers crawling through the innards of the iPhone markets are aghast at the prospect of what this means. So, what does it mean?
It means that Apple wins and at&t loses.
at&t missed out on one very important thing when they plunked those millions of dollars down to gain exclusivity on the iPhone. They missed out on the hacker aspect.
Hackers
The hacker aspect is very simple. In this new world of technology that we live in consumers do not like it when they buy a device and find it locked. It does not matter if it is a DVD player with its region encoding or a cell phone with a carrier lock. Consumers feel, and rightly so, that if they pay the money they own the product.
If a device uses mp3 files for ringtones why must the consumer pay $0.99 to put that sound on their phone? If the phone is just a small computer why can they not record their own ringtone and add it to their phone for free?
Think of your computer. Say you purchase a PC from Dell and it comes with Windows Vista pre-installed. You have paid for the computer and the software, if you now choose to remove Windows Vista and put Linux on there neither Dell nor Microsoft can stop you.
When you buy that PC Dell can not force you into only using at&t as your broadband provider so why can Apple force you into using at&t as your wireless carrier? You already paid full price for the iPhone (and then some) so why the lockdown?
There is no technological reason for the lockdown so it must just be a software “feature” that you are paying for. In this day and age the consumer who wants an iPhone may not want to switch carriers. Not all consumers are tech savvy enough to hack their iPhone but those who are (or know someone who is) will likely go this route.
Understand this; the hackers who are hacking the iPhone are not doing this to steal service, no, that is not their goal. Their goal is to unlock the device so that it works the way they want it to and so that they can take a SIM card from their phone and put it in the iPhone.
Apple can put out patches and the like but even those things can be worked around. Besides, every Apple iPhone sold is money in Apples stock price; do they really care if you use the iPhone with at&t? I don’t think they care privately though they may care publicly (at least until the European release contracts are signed).
Conclusion
In the end the iPhone is going to be a big boon for Apple and only for Apple. Apple stores have been selling far more iPhones than at&t stores. That alone tells me that Apple has been making far more money than at&t right off the bat. As someone who knows a thing or two about how the wholesale system works an iPhone sold at the Apple store means Apple gets all the money while an iPhone purchased at an at&t store means Apple only gets the wholesale price, which may be in the 50% of retail range. (iPhone parts are near 50% of the cost of the unit.)
Stock Tip
If you are watching the two stocks involved here I suggest you go for the Apple stock. Even though it costs over three times what at&t stock costs at&t stands to gain nothing when the European contracts are signed later this year. Apple stands to gain a bundle!
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