The iPhone's Influence Is Alive and Well

Try as it might, AT&T (NYSE: T  ) is finding it hard to resist the long-term allure of the iPhone.

Glenn Lurie, head of Ma Bell's emerging-devices group, told investors at a conference in Barcelona that the company is negotiating to carry Windows smartphones built by Nokia (NYSE: NOK  ) sometime next year. He also said that Microsoft (Nasdaq: MSFT  ) will face "a lot of challenges" in trying to win market share from Apple (Nasdaq: AAPL  ) and Android rivals HTC and Samsung, Bloomberg reported.

Translation: We like Windows, but we know where our bread gets buttered.

Mmmmmm, iPhone
No device has added more flavor to AT&T's recent results than the iPhone. Ma Bell has activated more than 6 million Apple handsets over the past two quarters alone.

Android has also had an impact. Google's (Nasdaq: GOOG  ) mobile OS accounted for about 40% of AT&T's smartphone sales in the second quarter. In Q3, Android handset sales doubled, while close to 50% of all smartphone sales were for something other than an iPhone. All of which, interestingly, speaks to just how alluring the iPhone remains.

Say what you will about Android or new handsets from Research In Motion (Nasdaq: RIMM  ) , but more than half of AT&T subscribers still prefer iCandy -- and that's despite the hoo-ha over Apple's not-quite iPhone 5. (Otherwise known as the iPhone 4S.)

What a Windows Phone means
Lurie wasn't and isn't knocking Windows. He's just admitting what we already know. As good as the new Mango OS looks -- and as good as Windows 8 might be -- developers have already committed huge resources to Android and iOS.

Hewlett-Packard (NYSE: HPQ  ) faced the same issue when it couldn't find a buyer for Palm. WebOS isn't bad; it just isn't so awesome that it deserves attention when compared with the money to be made writing for other operating systems.

AT&T knows this, and like any other carrier, it's going to put the most resources behind handsets built to sell. Will Nokia's Windows handsets fit the profile? Lurie, like the rest of us, is admitting that he doesn't know. Whatever deal Nokia and AT&T come to will reflect this variability, and as a result the terms will come well short of what Ma Bell pays for distributing the iPhone. So while there's going to be plenty of money to be made on the smartphone revolution, betting on Microsoft and Nokia probably isn't the way forward. Both stocks have proved to be market laggards year to date.

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Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He owned shares of Apple and Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

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  • Report this Comment On November 19, 2011, at 2:52 PM, etgh wrote:

    "Mmmmmm, iPhone"

    I guess the check from Apple arrived and so here we see the result, more "unbiased" journalism.

    I just wish we could get a balanced realistic view of this hot market

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