During U.S. Cellular’s (NYSE:USM) Q3 earnings conference call, the company CEO Mary Dillon mentioned that it turned down the Apple (NASDAQ:AAPL) iPhone because it did not make economic sense. [1] Dillon said that the carrier had the opportunity to sell the iPhone but that Apple’s “terms were unacceptable from a risk and profitability standpoint.” This decision of company’s looked surprising at the first place considering C Spire will begin offering iPhone 4S in a few days from now, with AT&T (NYSE:T), Verizon (NYSE:VZ) and Sprint (NYSE:S) already having started selling iPhones.
See our complete analysis for Apple stock here
According to an in-depth report by Bloomberg BusinessWeek, Apple will continue to enjoy operational efficiency through upfront cash payments offered to its suppliers as “strategic weapons” to secure a significant advantage over its rivals. [2] In the past, Apple has overcome its supply related issues, which includes shortages of both labor and materials at its plants in China and the Japanese earthquake leading to a squeeze in raw material supply (see Apple Eyes $430 as Component Prices Improve). By managing the supply chain efficiently, the company is in a better position to negotiate its terms with suppliers. This helps the company cut down on its raw material costs and hence improve gross margins.
Our $500 price estimate for Apple stock is about 25% above market price.
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Notes:- U.S. Cellular Q3 2011 earnings conference call transcript, SeekingAlpha, November 4th, 2011 [↩]
- Apple’s Supply-Chain Secret? Hoard Lasers, Bloomberg BusinessWeek, November 3rd, 2011 [↩]
