Woe be Verizon. After chasing AT&T for a share of the iPhone piggy bank, a report recently emerged claiming the carrier could sell a CDMA version this summer. That word was quickly pounced upon by doubting analysts. Now another expert suggests even if Verizon could sell iPhones, the handset would be a drain on revenue. The iPhone would be a “mixed blessing” Bank of America analyst David Lynch told investors Monday.
“While clearly accretive to market share in our view, it is not accretive to earnings, even assuming steady pricing, until 2013,” Barden writes. In other words, although the iPhone would boost Verizon’s market share, it wouldn’t see any money from the deal until another three years.
The iPhone would cost Verizon $3.3 billion in 2011, $4.4 billion in 2012, and $5.2 billion in 2013, according to the analyst. Additionally, the iPhone would drag down earnings $0.24 in 2011, $0.02 in 2012, before boosting Verizon’s earnings per share by $0.17 in 2013.
For AT&T, loss of exclusivity would have the opposite effect. The carrier would see the biggest benefit the first year – a $0.13 earnings-per-share jump -, then $0.11 in the second, and $0.08 the third year.
Last week, Verizon Wireless CEO Ivan Seidenberg told a Council on Foreign Relations audience he had told Apple his company was interested in selling the iPhone. Although he provided little details about that conversation, he used a recent Wall Street Journal report to peg his latest hopes. That report suggested the Cupertino, Calif. company may develop a CDMA version of its iconic handset for Verizon, releasing it this summer.
Although intriguing, the report was quickly refuted by several analysts who said it was more likely China or Japan would receive the new iPhone before Verizon. Another analyst, Richard Gardner of Citigroup, increased the skepticism when he announced delay of a “key component”, believed to be a Qualcomm chipset, would push any Verizon iPhone deal into 2011 or 2012.
[via Barron’s]
