iPhone Could be Hurt by AT&T Strike

By Richard Menta 4/19/09

The possibility that we may soon see the largest strike in the US since the UPS strike in 1997 may cause pain to Apple and sales of its very popular iPhone.

On April 5th the contract between AT&T and the Communications Workers of America (CWA) expired. Talks between the two sides turned for the worse as the telecom giant, which earned $12.8 billion in profits last year, threatened major cuts to employee health care. The union balked at the new contract proposal and is now mobilizing its 90,000+ strong workforce for a strike. If a workers strike hampers or shuts down service it will effect all iPhone users.

Apple has an exclusive arrangement with AT&T who serves as the only service provider for the iPhone. If a strike comes to fruition iPhone service could be severely degraded. If the strike lasts for an extended period it could steer many customers to other telecoms. Trapped by their exclusive contract Apple could watch the strike derail iPhone sales as customers coming off contract turn to other services and, by default, other mobile phones.

In an economy that is floundering, Apple's stock price has made significant gains, thanks in part to strong iPhone sales. But the strike highlights the risks that come with exclusive contracts. AT&T is pushing to renew their iPhone agreement with Apple, but if the strike happens and if it gets bad, Apple will probably rethink that move.

The good news is that there is no guarantee there will be a strike at all and even if there is a strike there is a lot of pressure to keep it short. But as we saw with the lengthy writers strike in Hollywood last year stubborn negotiations can leave a lot of collateral damage in it's wake. For example, pundits expect Apple to release two new iPhones by June. A strike in May could easily postpone such an unveiling. Changing the release date of a new product can play havoc on the company's manufacturing and shipping schedules, especially since there are so many unknowns.

Hopefully, if there is a strike it will be brief and the fallout will be minimal if not inconsequential.

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