Verizon Communications Inc. (VZ) and Samsung Electronics Co. have partnered to make a 5G smartphone they plan to roll out in the first half of 2019.
Apple Inc. (AAPL) , which saw its stock rise 3.49% to $184.82 on Monday after getting a boost from the positive meeting over the weekend between Donald Trump and Chinese President Xi Jinping, won't roll out its 5G phone until 2020. Any concerns that may arise from a 5G delay from Apple were clearly offset by word that tariff duties on Apple devices coming into the U.S. from China won't get worse in the near future.
On the 5G issue, Apple is likely making a "calculated" bet, D.A. Davidson & Co. analyst Tom Forte told TheStreet.
"If Apple is delaying the rollout of 5G iPhones, it's because it doesn't believe that the technology is there, meaning that the coverage won't be adequate," Forte added. Apple is betting that it won't lose a significant enough number of sales to Samsung in 2019 to justify making a 5G phone that won't have premium technology to the other devices in the market.
Apple's brand relies heavily on the ability to give consumers "a high-quality essence, consistently," Forte said, adding that "Apple takes into consideration the quality of the user experience." Simply put, Apple wants to build a premium product and it's willing to wait until 2020 to do so.
Service revenue is, of course, the perceived driver of the next phase of growth for Apple. Unit sales, in fact, won't even be reported in the tech behemoth's earnings releases from here on out because services revenue is so important.
Greg Portell, lead partner of global consumer industries and retail at A.T. Kearney Consulting, is "not really concerned about unit sales," he told TheStreet back in early Novemeber, after Apple's earnings disappointed investors. While Forte thinks it's valid to ponder whether slowing device sales could hurt services revenue, he maintained that the IOS ecosystem is so strong that the value of each device will help Apple continue to deliver strong services revenue. "The value of the IOS ecosystem is greater because purchase activity is higher," he noted.
As for Verizon, the stock fell 3.55% to $58.16 a share Monday, after JPMorgan analysts downgraded it, citing reasons unrelated to the 5G news. Samsung shares rallied 3.35%.