The timing of the upcoming Apple product event in China, a mere hours following the September 10 Apple event in California, has everyone talking about the possibility of an eagerly-anticipated possible partnership, writes MoneyShow's Jim Jubak, also of Jubak's Picks.
Now here's Apple (AAPL) speculation that's worth getting excited about: Apple has announced that it will hold a product event in China on September 11, just hours after the September 10 event in California that is almost certain to introduce the new iPhone. That timing and location has sent Apple watchers into a fury of speculation that has focused on the possibility that Apple will finally announce the long-awaited partnership with China Mobile (CHL).
That's a far bigger potential catalyst for the stock than introduction of multiple colors for a new iPhone.
Apple and China Mobile, the world's largest mobile phone operator, have been in discussion for months about the terms of any partnership. China Mobil, with 745 million subscribers, as of June, could use the iPhone to help it speed up its push into the 4G LTE network market. Less than one-third of China's mobile subscribers use 3G phones, and getting more of them to move up to that technology, and to 4G, is a key to selling more of lucrative services, such as video downloads and games.
But, as much as China Mobile might want a partnership with Apple to drive its penetration of that market, Apple needs China Mobile more. Apple's iPhone sales in China fell by 14% in the June quarter, thanks to relentless attacks from Chinese makers of lower priced smartphones. China isn't a market that Apple can afford to lose. Sales of smartphones doubled in China in the first half of 2013, according to Gartner. That's far ahead of the, itself impressive, 46.5% growth rate for global smartphone sales in the second quarter.
That dynamic has given China Mobile leverage in negotiations to push for a cheaper iPhone that's more competitive in the Chinese market—it looks like the company will get that with a low-cost model, with a plastic case, that is rumored to be part of the September 10 product introduction—and for as lower subsidy by the network operator than Apple has traditionally negotiated in deals with, say, AT&T (T) and Verizon (VZ).
Analysts at UBS forecast that Apple could sell 17 million iPhones through China Mobile in 2014. How profitable those sales might be will depend on the deal—if any—that Apple strikes with China Mobile.
Apple is a member of my Jubak's Picks portfolio.
Full disclosure: I don't own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund, I liquidated all my individual stock holdings and put the money into the fund. The fund may or may not now own positions in any stock mentioned in this post. The fund did own shares of Apple as of the end of June. For a full list of the stocks in the fund as of the end of June see the fund's portfolio here.