Raymond James analysts Frank G. Louthan IV and Tavis C. McCourt take a close look at the smartphone market and current trends therein, and what it all means for companies like Apple, BlackBerry, AT&T, and Verizon.
AT&T, Verizon: Pricing Changes Underscore our Thesis
More pricing adjustments over the weekend out of wireless with AT&T Inc. (NYSE:T) helping to attract lower end customers to Next plans and T-Mobile US Inc (NYSE:TMUS) raising unlimited pricing. Both underscore that thesis that data addiction is the key theme and that the lower end of the market is where competitive issues are arising. Additionally there were WSJ articles implying AT&T was less interested in investing in Europe. This last commentary is in contrast to investor opinions we have heard recently and we would not be so quick to write off the possibility of a major investment outside the U.S. by AT&T. All of this underscores our view that investors should be more overweight Verizon, which appears to be faring better in the pricing scheme and lacks a potential deal overhang. We expect the sale of shares from Vodafone holders to subside over the next few weeks and at similar valuations, we prefer Verizon Communications Inc. (NYSE:VZ).
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ComScore Data Indicates Apple iPhone Still Gaining Share in U.S. y/y
ComScore announced on Friday its smartphone OEM and OS market share results for the three months ending in January (note this is a survey of subscribers, not representative of recent phone sales.) Notably, market share for Apple Inc. (NASDAQ:AAPL)’s iPhone share declined slightly to 41.6% from 41.8% in December, the first sequential monthly decline since September, though up from 37.8% a year ago. This decline compares to a 150 bp jump from December 2012 to January 2013 last year. This also compares to 51.7% for Android, which increased month-over-month for the first time since October, but was down from 52.3% in January 2013. In general, Apple iPhone is still gaining share y/y, but its share gains are slowing, while Android’s share loss in the U.S. appears to be stabilizing.
BlackBerry sales slide to new lows
Microsoft Corporation (NASDAQ:MSFT)’s Windows Phone remained mired at 3.2% while BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) slid again to another new low of 3.1%. On the OEM side, Samsung climbed to 26.7% while competing Android vendors HTC, LG, and Motorola all remained below 7% each, with HTC seeing the biggest slide to 5.4%. Given tepid media reaction to the recently unveiled Galaxy 5 which goes on sale April 11th and the likelihood of Apple’s iPhone 6 will finally include a larger screen model, we believe Apple Inc. (NASDAQ:AAPL) likely has at least one more year of share gains in the U.S., but in general, the smartphone market is seeing limited share shifts as both iOS and Android have witnessed reasonably low rates of churn/switching.