Buy On (Or From) the Dips

Apple shares have been trading sharply lower in the last two weeks, ahead of their Q1 earnings report. First, there’s the short-term problem, reported by CNBC:

In its quarterly earnings report Tuesday, AT&T (T – News), the largest seller of Apple’s (AAPL – News) coveted handset, announced it activated 4.3 million iPhones in the first quarter, a sharp decline from 7.6 million in the fourth quarter. While fewer iPhone sales translate to weaker subscriber growth for AT&T, it did help the company’s profit margin.

AT&T’s announcement comes a few days after rival Verizon (VZ – News) posted its quarterly earnings. Like AT&T, Verizon also reported a drop in iPhone activation to 3.2 million iPhones from 4.2 million in the prior quarter.

This could be a non-issue. Calendar Q4 wasn’t just when the iPhone 4S launched, it was also the holiday quarter. Previous iPhone releases had all been in Q3. Add launch to holiday sales, and you’d expect the numbers to be goosed up — way up. It should come as no surprise that sales would be apparently lower in Q1 — when all retail sales shrink.

But analysts see a longer-term problem for Apple. From the same story:

Adding to a string of bad news for Apple, Microsoft (MSFT – News) and Nokia (NOK – News) recently announced a new joint venture called AppCampus, devoting $12 million each to help fund developers at a university in Finland to build apps for the Windows Phone and other Nokia platforms.

“Longer term for Apple, you have to be aware of the fact that the carriers are really backing this Microsoft/Nokia platform because they want to get phones at a lower average price,” explained Gillis.

Let’s stipulate that Windows Phone is going to go somewhere other than down. While I like the Metro UI, it hasn’t been enough to help put phones into buyers’ hands. But let’s just say that WP8 takes off when it’s released later this year — right up against the release of this year’s new iPhone. Is WP8 going to steal sales from iPhone, which enjoys record customer satisfaction? Or is it going to steal sales from Android, which is already showing platform weakness and not-as-good customer satisfaction?

iPhone buyers have already proven themselves immune to “lower average prices.” Android thrives in that market segment. If that’s where Microsoft and Nokia have set their sights, it’s Samsung that ought to be worried.

Anyway, the numbers will be out shortly, and I expect them to be solid. Maybe not (yet another) doubling of previous sales records — but solid.

UPDATE: “Apple Delivers Another Monster Quarter.”

•Revenue: $39.2 versus $36.81 billion expected by analysts

•EPS: $12.30 versus $10.06 expected by analysts

•iPhone sales: 35.1 million versus 30.5 million expected by analysts, 32 million units is the whisper number

•iPad sales: 11.8 million versus 13 million units expected by analysts, whisper number is also 13 million

Beating expert EPS estimates by 20% — again? I think the Street needs better “experts.”

ANOTHER UPDATE: More numbers from SAI: