Which Company Has the iPhone Affected the Most?
Tyler is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
There has been a lot of media covering the iPhone 5. First there were enormous expectations about how many devices would be sold, and then there was media discussing the disappointing sales. Does the media have any effect on product sold by a mobile telephone company? How has the iPhone affected Apple's (NASDAQ: AAPL) growth, how have mobile telephone companies been affected by adding this device to their inventory, and how will it affect them in the future?
Let's start with AT&T (NYSE: T), simply because it was the first company to have contracts with Apple. I remember hearing about this news and how great the iPhone was supposed to be. In June of 2007, AT&T became the first company to sell iPhones. Looking at AT&T's stock price during the first six months of sales, there is an immediate jump at the time of the initial release of the iPhone for about a week (it hit the shelves in late June of 2007). In fact, in that initial week of sales, AT&T's stock price rose almost 8%. However, the following months varied, falling and rising with the market.
Verizon (NYSE: VZ) was the next major company that signed contracts with Apple, although it took almost four years to do so. In February of 2011 Verizon was marketing and selling the iPhone 4. By now, people knew what the iPhone was, how it worked, and most people had even used one. Interestingly, as shown below, it took about a month for Verizon to show any serious results. However, in late March there was a pretty significant jump. From March 15 through April 5, the stock rose over 12%, showing strong sales with the iPhone 4.
Seeing the results that Verizon had received from the iPhone 4, Sprint (NYSE: S) wanted its piece of the pie. In October of 2011 they became the next company began selling the device. October didn't start well, but it did rebound nicely after the iPhone 4S was available to sell. Sprint and Nextel had joined forces prior to this event, and it hadn't gone as smoothly as planned. From Oct. 8 through Oct. 18, Sprint experienced an astonishing 30% increase, which did nothing but bring them back to previous levels.
So, we have looked at how Apple has effected other companies, but what effect did the iPhone have on Apple itself? The chart below confirms that Apple has done better than all the mobile telephone companies combined. Apple has other products, but currently 52% of its revenue is derived from the iPhone. From the time the iPhone was released until now, Apple has had the best results.
If someone is looking for very short term results (a week or two), investing with a company like Sprint, Verizon, or AT&T might not be a bad move. Notice how as time goes on, however, new devices are making less of an impact, even in the short term. However, if someone is looking for more long term success, Apple would probably be a better option. After all, Apple and Verizon are the only companies showing any profit over the last five years.
The mobile telephone business is a very competitive business. Unless one company comes out with a product, or the rights to a product that is "game-changing," I wouldn't expect any one company to thrive more than any of the others.
Yes, Apple has fallen recently, but that means it is just selling at a cheaper price. The iPhone 5 has sold more units than the iPhone 4S did this soon after its release. I wouldn't expect the stock to decline a whole lot more than it has before continuing its upward trend. Apple is a company that knows how to market its products, and this will play a role in the future.
The Bottom Line...
From the time the iPhone came out, it has been all over the media, in millions of people's pockets, and made several companies a lot of money. It has become obvious that though mobile telephone companies can profit pretty substantially from the iPhone in the short term, the greatest beneficiary of all is Apple. Apple consistently out-performs the mobile telephone companies that sell its product, and this trend doesn't appear to be stopping. Apple shows why it is sometimes better to own the patents and products, rather than distribute them. Past history doesn't dictate future results, but it appears that Apple is the only company that is greatly effected by the iPhone.
tlwofford has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple. Motley Fool newsletter services recommend Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!