Apple Inc. (AAPL) China Mobile Deal: Analysts Excited Yet Puzzled

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Apple Inc. (NASDAQ:AAPL)’s iPhone is just hours away from launching on the China Mobile Ltd. (NYSE:CHL) (HKG:0941) network, while analysts though excited are still puzzled over the terms of the deal that Apple agreed with the world’s largest carrier, says a report from AppleInsider.

Analysts speculating on terms

According to analyst Maynard Um of Wells Fargo, details like price, margins and so on are not disclosed yet, and that is the reason why experts are closely monitoring the gross margin. Apple and China Mobile have been in talks since 2008, and according to Um, Apple might have compromised on some financial clauses to finalize the partnership.

Apple Inc. (NASDAQ:AAPL) expects margins to be in the range of 36.5% and 37.5% for the current fiscal quarter, but if it declines then there might be more than one reason behind it.

It is possible that the iPhone maker would offer discounts on all or some handsets sold on the China Mobile network to bring down the high cost of subsidizing the device. Subsidizing the iPhones has been a constant issue between Apple Inc. (NASDAQ:AAPL) and other network carriers. Also, there might be a possibility that the iPhone maker agreed to share the revenue just like it made a deal with Chinese search engine Baidu in 2012.

Apple China Mobile deal to boost iPhone sales

Customers belonging to middle income group may also opt for mid price iPhone 5C over the profitable iPhone 5S. Cost of manufacturing an iPhone 5C is $25 less than that of iPhone 5S, but the former is sold for only $100 less than the latter. Um maintained that China Mobile would help Apple Inc. (NASDAQ:AAPL) penetrate deeper into the Chinese market and increase the unit sales, which could boost the iPhone sales decline after Christmas.

Piper Jaffray analyst Gene Munster is confident about the performance of Apple Inc. (NASDAQ:AAPL) iPhone in China after China Mobile chairman Xi Guohua stated that they have already received “several million” pre orders for Apple Inc. (NASDAQ:AAPL) handsets. The analyst predicted that around 3 million iPhone units would be sold through China Mobile for the second quarter of 2014, contributing an additional 5% to Apple’s revenue for the year.

Analyst Brian White of Cantor Fitzgerald said that the China Mobile deal was “worth the wait” for investors. The analyst expects sales to be somewhere between 20 million and 24 million additional units in fiscal 2014. J.P Morgan analyst Mark Moskowitz believes sales to be 2 million per quarter, whereas Cowen and the Company’s Timothy Acuri expect the sales between 20 million to 30 million.

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