Tech Check

Apple Earnings: Predicting the China Factor

Here we are still in February, and there's already a healthy amount of speculation about Apple's earnings. And when they are released in April, they could hold some surprising news.

Apple's numbers have been tick-tocking their way through the quarter. One day, worries that the company won't make its numbers; another day, they'll soar past expectations. One day, they'll only meet Apple's own guidance; another day they'll miss Street forecasts.

One week, we hear rumors or "market research" suggesting iPhone sales have slowed; or that no one is buying the new MacBook Air; or that manufacturing is being curtailed because of slackening demand; or that iPods are cannabalizing themselves. Or that MacBook Air is actually selling better than expected, and that MacBooks are in short supply.

The latest data points, such that they are, come from market research that purports to show astounding iPhone adoption by China Mobile, which doesn't have a relationship with Apple. Yet. The analysis suggests that a whopping 400,000 iPhones are currently active on China Mobile, which would show enormous unlocking there.

Is it any wonder why China Mobile isn't interested in signing a deal with Apple, signing over a hefty chunk of those monthly service fees to Steve Jobs, if it doesn't have to? Sure makes sense to me: China Mobile gets all those data charges and usage fees that iPhone spawns without having to share. Pretty sweet.

A couple of thoughts here: Steve Jobs told me that there have been no negotiations between Apple and China, as of early January. He said that a single individual from China Mobile made a single visit to Cupertino.

There's a thought that unlocked iPhones could be Apple's undoing because Apple won't receive the ongoing revenue stream its unique relationship with AT&T affords. But China's market is so huge: China inStat suggests the potential for 28 million iPhone buyers, the potential so dramatic, that the missed monthly fees would be a loss, but not cataclysmic. So far, 400,000 iPhones -- if you believe the research -- are in use in China.

A deal with China Mobile could mean even more widespread adoption, but Apple seems to be doing well there even without it.

I'm not saying the arrangement is ideal, but it's not as bad as you might think. And with Apple scheduled to open its first China store in Beijing around the time the Olympics kick off, Apple's foothold in the China market will only strengthen. Research in Motion proved that a deal could get done. Apple may have to change its model to get one done itself.

There's also the possibility that the numbers are skewed -- that China Mobile is making them up to wield leverage over Apple. That wouldn't be such a surprise. Apple needs China. China wants the iPhone. A deal will get done. If anything, iPhone activity in China today shows just how robust this market could become.

In the meantime, it's another data point to keep in mind as we try to calculate Apple's earnings: China may be happening for iPhone sooner than we thought.

Questions?  Comments?