When investors are paying $600 billion for a consumer electronics company, they are forecasting ample growth prospects and stable margins. Apple (AAPL) has played by its own rules which has worked out wonderfully for the company. But by making the carriers subsidize the company’s gross margins through reducing the phone costs to consumers, the carriers are experiencing margin contraction. It makes sense for the carriers to want to promote other phones and operating systems because that would pressure AAPL to reduce prices to the carriers, thereby reducing the subsidy and helping margins. The worst case scenario would be if AAPL phones were the only game in town, because they have shown that they are looking out for their own interests far more than their business partners. To me this looks like a long-term margin contraction story, and is a primary reason why I’m not comfortable investing in the company at the current price.
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