Apple Drops as China Mobile CEO Says IPhone Faces Hurdles
Apple Inc. (AAPL) shares extended their decline after China Mobile Ltd. (941) Chief Executive Officer Li Yue said he wouldn’t add the iPhone to the world’s largest wireless network without a deal that's favorable for his company.
“The business model and benefit sharing still need further discussion,” Li said at a conference in Guangzhou yesterday. Technical issues related to the carrier’s homegrown third- generation network standard would also need to be resolved, Li said.
The iPhone isn’t available to most users in China as the Cupertino, California-based company has yet to reach an agreement with China Mobile, which had 703 million subscribers at the end of October, including 79.3 million users of high- speed, third-generation services that give smartphones faster Internet access. Apple’s iPhone is available with the nation’s two smaller carriers: China Unicom (Hong Kong) Ltd. and China Telecom Corp. (728), both of which sell it with a subsidy. The new iPhone 5 will begin sales with those carriers next week.
“Li’s comment suggests that China Mobile has no intention of simply gifting Apple access to its huge subscriber base without extracting a pound of flesh from Apple,” said Teck- Zhung Wong, a Singapore-based analyst with market researcher IDC.
Apple fell 2.1 percent to $527.33 at 9:41 a.m. in New York. Yesterday, the shares posted their biggest drop since Dec. 17, 2008, erasing $34.9 billion in market value.
“Nokia announced that they are launching one of their Lumia phones with China Mobile, and there was some hope that Apple would launch their iPhone on that network,” Gus Papageorgiou, an analyst with Scotia Capital Inc. in Toronto, said in an interview. “I think they still will, but they’ll probably launch closer to Chinese New Year.”
China’s next lunar year begins Feb. 10.
Apple’s slide also may be the result of traders predicting a drop after the stock failed to sustain a recent rally, a “classic technical breakdown,” according to Gene Munster, an analyst at Piper Jaffray Cos.
Munster said new so-called margin rules also may have been put in place by some investors that could limit how many Apple shares a firm can own. Investors may also be disappointed Apple isn’t issuing a special dividend like Oracle Corp. (ORCL), Wal-Mart Stores Inc. (WMT) and other U.S. companies, he said.
In another announcement that may be fueling Apple stock’s slide, research firm IDC said in a report yesterday that Apple’s share of the tablet market will slip to 53.8 percent this year from 56.3 percent in 2011, while Google’s portion will advance to 42.7 percent from 39.8 percent. Apple’s tablet share will slip to less than 50 percent by 2016, as total global tablet sales more than double to 282.7 million units in four years as consumers increasingly shun personal computers, according to IDC.
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