Analyst: If iPhone subsidies end, Microsoft could gain

by Cromwell Schubarth?- Silicon Valley/San Jose Business Journal on Monday, April 9, 2012, 1:16pm PDT

Microsoft might be in a position to make a dent in the smartphone war through an unbelievable concept ? competitive pricing.

This thought comes to mind as analyst Walter Piecyk of BTIG expresses concerns about how long wireless carriers will continue to keep Apple's iPhone price point at $199.

Piecyk cut Apple's stock rating to "hold" from "buy" Monday even though he expects the company to beat analyst expectations when it reports earnings later this month.

The problem, he believes, is that wireless carriers such at AT&T Inc., Verizon and Sprint are unlikely to support frequent iPhone upgrades on $600 iPhones that consumers are paying just $199 for when they sign up for a service plan.

Carriers will be working hard to promote smartphones that use the Android operating system from Google, he writes, and there's also hope for devices from Microsoft and Nokia: "As Android's initial popularity continues to fade because of its uneven and fragmented performance and BlackBerry falls further into oblivion, there is renewed hope that Microsoft and Nokia will be able to produce a viable alternative to Apple."

Earlier this year, TechFlash reported that Microsoft is paying Nokia $230 for each Windows phone in an effort to catch up with Apple and Google in the cell phone market.

For Apple, Piecyk predicts a decline of 4 million units between the first and second quarters, to just 9 million units, with the biggest drop from Apple's biggest customer, AT&T.

"We expect post-paid wireless operators to remain firm in their plan to stunt the pace of phone upgrades in 2012 and we expect to see some initial evidence of their success in the current quarter," he wrote.

That will put pressure on Apple to lower its price on its popular iPhone, he believes, cutting its profit margin on the device.

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