Apple Boosts Profits with Another Big Move!

By Dan Gallagher, MarketWatch


SAN FRANCISCO (MarketWatch) -- Apple Inc. saw its shares rise Tuesday on a report that it may begin making its popular iPhone available for use on the Verizon Wireless network, breaking free from its exclusive relationship with AT&T in the U.S.

Hot Stocks: Verizon and the iPhoneSpeculation about a new version of the iPhone for Verizon drives action in the wireless provider, as well as in rival AT&T. Even BlackBerry maker Research In Motion and Palm are reeling.

The same news also put pressure on Apple's /quotes/comstock/15*!aapl/quotes/nls/aapl (AAPL 236.15, +3.76, +1.62%) rivals in the mobile device business. Research In Motion /quotes/comstock/15*!rimm/quotes/nls/rimm (RIMM 74.80, -0.90, -1.19%) and Palm /quotes/comstock/15*!palm/quotes/nls/palm (PALM 3.77, -0.13, -3.33%) both saw their shares take a hit on worries that the iPhone would eat into sales at their largest customer.
Palm shares were down more than 3% at $3.78 by midday Tuesday. RIM shares were off 1.3% to $74.73.
Shares of Apple were last up 1.5% at $235.90. The stock has been on a run for the last few weeks leading up to this weekend's planned launch of the iPad. See full story on iPad frenzy.



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• See all the latest markets video /conga/story/misc/markets.html 55637 In a story late Monday, the Wall Street Journal cited unnamed sources in reporting that Apple was developing an iPhone that would work on the CDMA networks of the type operated by Verizon. The company's manufacturing partners were planning to begin mass production on such a device by September, the article reported. See full story.



Verizon would represent a significant new customer base for the iPhone. Standard & Poors analyst Clyde Montevirgen said the move "could more than double Apple's addressable market" for the device.



Analysts had widely expected the iPhone to go to Verizon /quotes/comstock/13*!vz/quotes/nls/vz (VZ 31.34, +0.89, +2.92%) by next year, though some believe AT&T /quotes/comstock/13*!t/quotes/nls/t (T 25.96, -0.55, -2.06%) may press hard to keep its exclusivity deal.



"While a new iPhone (update to the 3GS) in June is in line with our expectations, we believe a launch of a CDMA-based phone with Verizon this year is unlikely but believe a CDMA phone could be launched with other operators later in the year (China Telecom and KDDI are possibilities)," wrote Maynard Um of UBS in a note to clients.



CDMA is a wireless technology used in the United States by Verizon and Sprint Nextel Corp. /quotes/comstock/13*!s/quotes/nls/s (S 3.81, +0.02, +0.40%) , as well as by other carriers globally.



The news also seemed to benefit Qualcomm /quotes/comstock/15*!qcom/quotes/nls/qcom (QCOM 42.16, +0.40, +0.96%) , which holds many key patents on CDMA and produces chipsets used by wireless device makers. Qualccomm shares were up 1% to $42.16 in early trades.



Trouble for RIM, Palm?

Verizon is one of the largest carrier partners for both Research In Motion and Palm.



RIM, which makes the popular BlackBerry family of smartphones, also sells to AT&T, Sprint and many other carriers. The company also has a large base of international customers and remains popular in the corporate market.



Palm, on the other hand, is struggling to revive its smartphone business. The company developed a new mobile operating system called webOS, which it launched last year with two new phones called the Pre and the Pixi.



Those two devices were launched on Verizon earlier this year. But strong competition from products such as the Motorola /quotes/comstock/13*!mot/quotes/nls/mot (MOT 7.25, +0.02, +0.28%) Droid and others have hampered sales of the devices. Palm reported disappointing results for its most recent quarter and slashed its forecast, citing high levels of inventory that have built up in the sales channel. See full story on Palm's results.



"Of the smartphone suppliers to Verizon, Palm appears to be the most vulnerable," wrote Lawrence Harris of CL King & Associates in a report.



Harris noted that the Journal's report of a new iPhone for AT&T this year could also hurt Palm, as the company plans to launch its Pre and Pixi devices at that carrier later this year.

Dan Gallagher is MarketWatch's technology editor, based in San Francisco.