updated 11:30 pm EST, Thu December 5, 2013
Agreement would increase iPad sales opportunities, lift Apple revenues
Assuming that the latest iPhones (and possibly iPads) debut in China and on China Mobile as expected on December 18, Apple will have just two weeks of sales there to record before the close of the company's fiscal Q1 for 2014. In a testament the sheer scale of both China's overall economy and China Mobile's subscriber base are, those few days might be enough to materially affect Apple's overall earnings for the period, says Piper Jaffray analyst Gene Munster.
Because Apple wouldn't have included the impact of a China Mobile deal on its guidance for this quarter or going forward -- as no deal existed at the time -- the pent-up demand for devices compatible with China's proprietary LTE phone networks may be high enough to materially impact revenue expectations. Apple is already expected to set records for its holiday-season earnings, but unanticipated additional sales over and above the company's already-growing presence in China could add as much as $10 billion in new revenue over the course of the year -- and that's just based on projected China Mobile iPhone sales of 17 million units, considered by some analysts to be a lowball estimate of Apple's potential success.
This also doesn't count the impact of the future introduction of iPads to the China Mobile deal. Presumably, TD-LTE compatible iPads would arrive sometime after or alongside the introduction of the iPhone 5s and 5c to China Mobile's 176 million 3G smartphone customers (out of a total subscriber base of 759 million users, many of whom will be able to upgrade to smartphones in the near future).
"In terms of the mechanics of the 17 million units, it is likely that there would be a proportionally larger chunk of devices sold in the first month or two of the device's availability," Munster told clients in an investor letter. Piper Jaffray reiterated its $640 price target for AAPL, as the stock has been steadily rising in recent weeks on a raft of recent product introductions, healthy sales and continuing high demand. An official announcement of a China Mobile agreement is likely to lift the stock further.