This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Apple: Higher Margins Mean Reduced Exposure in Emerging Markets

Stocks in this article: APPL CHL

NEW YORK ( TheStreet) -- While most of Apple's (APPL) reputation is centered on the fact that the company holds a strong position as one of the greatest innovators in recent memory, a good deal of attention has also been paid to the high margin levels associated with its products.

The results of this strategy are clear: Higher margins (and prices) mean that fewer items are sold, and critical demographics in emerging markets are forced to find cheaper alternatives (or even outright copies) made by other companies.

But the key question for Apple is whether or not these scenarios have prevented the company from achieving stronger profits, and sacrificed important markets to its competitors. At this stage, there appears to be a growing sense that Apple's reluctance to alter its strategies has limited profit growth and put the company in a vulnerable position when compared to companies with a more flexible approach.

Missed Opportunities

Thus far, many wireless carriers in Asia have been unwilling to accept Apple's stringent partnership conditions. This essentially means that since the end of 2011, Apple has had only 11 wireless-service providers sign on to sell the iPhone. This also means that there could be as many as 2.8 million potential smart phone customers that are unable to buy the iPhone as part of a service plan.

Currently, Apple has about 240 wireless carriers that sell its mobile devices, with key holdouts seen in countries like China, India, Russia, and Japan. As a comparative example, Samsung (Apple's biggest competitor) is able to sell its products to nearly all of the 800 wireless-service providers around the world. At China Mobile (CHL) alone, Apple is losing out on roughly 700 million potential customers because its devices are not compatible with the China Mobile networks. Clearly, this is something Apple wants (and needs) to change. But will they be able to bend on the time-tested market approach that has brought so much success to the company in the last decade?


Possible Changes in Strategy

Recent stories hinting that Apple has considered producing a cheaper version of the iPhone would suggest that the answer to this question is "yes." But changing the company's flagship product to structure an agreement with companies like China Mobile would likely not be enough to complete a partnership. Reported points of contention from China Mobile have mostly centered on the subsidy Apple will require China Mobile to dish out before handsets can be distributed to customers.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,164.95 -251.90 -1.45%
S&P 500 1,994.99 -26.26 -1.30%
NASDAQ 4,635.24 -48.1670 -1.03%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs