AT&T’s Q1 Record Results Show That There Is More Money In Android Than There Ever Was In Apple: How Do You Compete With Less Than Free?

In support of my post, “Google’s Q1 2011 Review: Part 2 Of My Comments On The Gross Misvaluation of Google“, as well as “My Thoughts on Roger McNamee’s View of Google and Mobile Computing”, I bring you news that “AT&T Earnings Solid Despite Loss of iPhone Rights”.  From CNBC:

AT&T posted record first-quarter subscriber growth, despite giving up exclusive US rights to sell the iPhone.

This statement is quite, quite telling. With all of the brouhaha over the iPhone, the quarter that AT&T loses exclusivity was also (coincidentally of course, for since Apple is the best thing in the whole wide world AT&T’s record performance was due to the surge in superior iPhone screen protectors for the legacy customers). Realistically, AT&T’s results illustrate the power of Google’s “significantly cheaper than free” business model as well as demonstrates how accurate I was in challenging Roger McNamee’s View of Google and Mobile Computing. Mr. McNamee said that no one is making money with Android. Samsung, LG, HTC, Motorola, Sprint, T-Mobile, Verizon and AT&T beg to differ. Witness HTC’s “no money” on Android:

You see, Android is a money printing machine, and those who don’t jump on the Android bandwagon will get steamrolled by those who do. For those who do not recognize the “significantly less than free” pricing scheme, not only does Google offer what is arguably the best mobile OS available for free, complete with updates and potential for customization, Google also shares ad revenue and app revenue. Thus, you not only get one of the, if not the, best mobile OS for free, you get paid for getting it for free. A rather hard proposal to bypass. Even harder if all of your competitors are doing it, for they now have a significantly higher margin cushion than you would have if you didn’t get assimilated by the Android/Borg.

The company posted earnings of 57 cents a share, narrowly topping Wall Street expectations, on net income of $3.4 billion. That compares to 41 cents a share and $2.5 billion from the same quarter in 2010. Revenue rose 2.3 percent to $31.2 billion. … “We delivered another robust mobile broadband growth quarter for a very solid start to the year,” Randall Stephenson, AT&T chairman and chief executive officer, said in a statement.

Though AT&T now must share rights to the Apple iPhone with Verizon, it saw a 10.2 percent growth in revenues, including an 8.6 percent increase in wireless service revenues. It marked the company’s best-ever first quarter increase in total subscribers, which rose 2 million to 97.5 million total.

The company also saw its best first-quarter smartphone sales, with more than 5.5 million units sold, and an increase of one million annualized in iPhone activations.

What does this do to Apple’s negotiating leverage when companies make more money by losing Apple exclusivity? Most people do not realize that Google’s coup is not creating a slick OS, it is creating a virtually unassailable business model. A business model that was literally cherry-picked to take on the Apple closed-OS business model.

As you can see, AT&T has sold a LOT of high end Android phones last quarter, as well as mid-level and low and phones – and their customers LOVE them. Just note the ratings for each one:

Subscribers, see the Google forensic report (63 pg Google Forensic Valuation, to plug in your own assumptions see Google Valuation Model (pro and institutional)).

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