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Apple Could Make Changing Wireless Firms As Easy As Changing Socks

Apple ( AAPL ) makes things easy, a big reason the iPhone is so popular. Soon, things might get easier for iPhone users in one major respect: They might be able to switch wireless service providers as easily as they change socks.  Alphabet ’s ( GOOGL ) Google could do the same. It’s not a day that leading wireless-services providers AT&T ( T ) or Verizon Communications ( VZ ), which strive to retain their customers, are looking forward to. Some observers say this could lead to the next step, which is Apple and/or Google actually offering wireless services themselves by leasing a wireless network from a carrier, though there has been no indication that such a move is planned. The easy-switch technology probably will not be included in Apple’s next smartphone, the iPhone 7, due this fall. But it might happen with the following iPhone, and the wireless industry might never be the same. The basic idea is that consumers no longer will need to visit wireless firms’ retail stores, where they sign up for service, and where a salesperson then inserts a tiny “SIM” card into a phone. That tiny SIM (subscriber identity module) card, often found under the battery, provides access to a wireless network. Instead of this scenario, consumers would buy a smartphone directly from Apple or Google. Built into the phone would be reprogrammable software that provides network access. Analysts call it a smart SIM, an electronic SIM, a soft SIM or a virtual SIM. In any case, it does what the conventional SIM does, but it’s embedded in electronic wiring that doesn’t have to be swapped out. Soft-SIMs Are A Nightmare For Carriers Aside from Apple selling its own wireless service directly to consumers — a potential worry at some point — putting a smart SIM into iPhones is the most “destabilizing thing” that Apple could do to wireless firms, says Strategy Analytics. “We expect the first smartphones with embedded-SIM cards to emerge worldwide in 2017,” Neil Mawston, an analyst at Strategy Analytics, told IBD. “We expect the Apple iPhone to contain an embedded-SIM by 2018.” With a soft-SIM, consumers could shop for the best wireless data plan and switch service providers instantly. They would not need new phones or new SIM cards if they switched service providers. And Apple or Google would be there to help with any issues. “Soft SIMs have always been the nightmare scenario for wireless carriers,” Craig Moffett, an analyst at MoffettNathanson, told IBD. “Anything that lowers switching costs and reduces brand loyalty is bad, and soft SIMs would do both in spades.” Most consumers still buy iPhones and other devices from wireless firms, and nowadays they usually buy a phone in monthly installment payments. But Apple rolled out its own iPhone-upgrade financing plan last September. Samsung has also explored the model. In China, selling phones directly to consumers is how fast-growing Xiaomi does business. It probably would not make sense for wireless firms themselves to sell e-SIM-equipped smartphones that make it easy for consumers to switch service providers at the drop of a hat, analysts say. They don’t want their customers switching. On the other hand, offering an e-SIM could give consumers more reason to purchase an iPhone from Apple or an Android phone from Google or Samsung. AT&T declined to comment for this story, and Verizon didn’t respond to requests for comment. “Apple and Google might try to become more aggressive using smart SIMs that play each carrier off one another for the lowest priced service,” speculated Oppenheimer’s Tim Horan in a research report. He says it’s unclear, though, whether Apple or Google would then take the next step — morphing into an “MVNO,” a reseller of wireless services. The idea that Apple or Google might become a wireless-services provider isn’t new. In January, consulting firm McKinsey noted that “in 2011, Apple was granted a U.S. patent to create a MVNO platform that would allow wireless networks to place bids for the right to provide their network services to Apple, which would then pass those offers on to iPhone customers. ” McKinsey points out, however, that because wireless firms are still important distribution partners for Apple, the company has been careful about using smart SIMs. Apple Tests New SIMs In iPads But Apple has been innovating with SIMs in its iPad tablet-computer products. In 2014, Apple built the “Apple SIM” into iPad Air 2 and iPad Mini 3 tablets sold in the U.K. However, U.S. Strategy Analytics says those initial Apple SIMs were still physical SIM cards, installed at the factory. Apple last month launched its 9.7-inch iPad Pro, along with its iPhone SE. What’s different about the new iPad Pro is that SIM circuitry is embedded in the device and is no longer removable. The new iPAD’s e-SIM could be a precursor to a smart SIM in an upcoming iPhone, says Strategy Analytics. In 2015, both Apple and Samsung were reported to be in talks with an industry standards-setting group called GSMA. The industry group has been developing standards for e-SIMs embedded in consumer electronics such as phones, as well as for the “Internet of Things.” IoT refers to wireless technology that connects industrial, medical, automotive and consumer devices to the Web. Many wireless firms, including AT&T and Verizon, see IoT as a big growth opportunity, and e-SIMs would make sense in some applications. In March, U.K.-based Vodafone Group ( VOD ) said it’s working on e-SIMs with Germany’s Giesecke & Devrient for IoT markets. At the Mobile World Congress in February, Samsung rolled out a smartwatch, the Gear S2. The Gear S2 featured a built-in smart SIM. Apple’s smartwatches do not yet have their own cellular links to wireless networks and rely on nearby iPhones for Internet connectivity. The GSMA is still in talks with wireless phone companies and aims to release an e-SIM standard for smartphones this year, analysts say. “The Apple iPhone 7 will almost certainly not have an embedded-SIM,” said Mawston. “Operators are still resisting, while Apple remains publicly undecided on whether to continue supporting its own Apple SIM or the GSMA standard. We think the uncertainty surrounding embedded-SIMs in the short-term means Apple will hold off on the iPhone 7 for now.” Market research firm Ovum, in a February report, said that “given Apple’s support of the e-SIM specification, it is seems likely that Apple’s products will also feature embedded SIMs in the very near future.” Ovum, though, says wireless firms might not fare as badly as some pundits predict, depending on what the GSMA’s smart-SIM standards look like in the end. “An extremely polarized scenario could see OEMs (smartphone makers) selling connectivity via their application stores in the form of apps and charging end users either directly via carrier billing or via their accounts such as Google Play and App Store,” said Ovum. “This is a pretty scary scenario for mobile operators, and surely the GSMA’s standardization activities will try and avoid this from happening. “Commercial tweaking — and in some cases stiff negotiation — are sure to take place before the reprogrammable e-SIM will seriously disrupt existing players in the mobile industry, but it is useful to acknowledge that, from a technology point of view, the building blocks have been laid.”

Forget The Apple iPhone SE, The Samsung S7 Is A Big-Screen Hit

Samsung Electronics reported better-than-expected preliminary first-quarter earnings as its latest flagship smartphone proved much more successful than its predecessor, even as  Apple ( AAPL ) is expected to report its first iPhone sales decline ever. The South Korean electronics giant had operating income of 6.6 trillion won ($5.7 billion), far above analyst estimates for about 5.5 trillion won. Revenue was 49 trillion won, up 4% and slightly above estimates. Samsung released its S7 smartphones in March, a month earlier than its S6 line in 2015. Nine million S7 phones were sold in their first month, triple what the S6 did in its first month. The S7 has a better camera and microSD storage support. Samsung also didn’t run into supply shortages of curved-glass screens for the jumbo S7 Edge, unlike last year’s Edge. Due to the S7 and an improved, streamlined phone product lineup overall, the smartphone business was likely the company’s best division in several quarters. Meanwhile chip operating profit likely fell about 15%. A cheaper won vs. the dollar also bolstered results. Meanwhile, the Apple iPhone 6S has not been a blockbuster, despite technical improvements vs. the 6 line. Apple revenue and iPhone unit sales likely fell in the first three months of the year vs. early 2015. Late last month, Apple began selling the iPhone SE, a new 4-inch phone. It fills out Apple’s product line, especially in emerging markets, but it early sales don’t appear to be huge and its margins are likely smaller than the flagship smartphone. Apple rose 1.05% to 110.96 on the stock market today, just below its 200-day line. Apple hasn’t closed above that level since Nov. 4.

Amazon, Apple, Google Not Serious Threat To PayPal: Analyst

PayPal ( PYPL ), now untied from its prior owner eBay ( EBAY ), does not face a serious competitive threat in the near future, an analyst said Wednesday. At the Electronic Payments Summit in New York, panelists were “generally bullish” on the San Jose, Calif.-based company’s chances at holding on to its market share, according to a research note from Jefferies analyst Jason Kupferberg. The analyst cites the company’s installed base of 185 million consumers and 13 million merchants. “This represents a competitive advantage, which is reinforced by new products such as One Touch and Venmo,” Kupferberg wrote. “While some large merchants are still somewhat ambivalent about the benefits of PayPal, one panelist highlighted a 14% online sales increase for a big merchant once they implemented PayPal.” Kupferberg also wrote that large merchants are generally reluctant to have more than two checkout buttons or digital wallets available for shoppers because returns “diminish beyond that number.” Competitors in payments , such as e-commerce leader  Amazon.com ( AMZN ) and digital cash register and payments processor Square ( SQ ), have been aiming for a greater foothold in payments. Amazon has been at it for some time, but with little to show for it, according to Wedbush analyst Gil Luria. For its part, Square announced last week that it was adding Web checkout capabilities to its array of features, which is likely a direct challenge to PayPal’s payments platform. Also at the payments summit, Kupferberg wrote that 10% mobile wallet penetration of U.S. in-store payments could be five years away. Firms such as Apple ( AAPL ) and Alphabet ( GOOGL ) unit Google, among others, have developed such technology . PayPal stock was up more than 1%, near 39, in midday trading on the stock market today . PayPal is an IBD Leaderboard stock and has an IBD Composite Rating of 93, where 99 is the highest. Shares are below a 40.03 entry but just above an earlier entry at 38.62.