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Morgan Stanley (MS), China Mobile Ltd. (ADR) (CHL): Here’s How Apple Inc. (AAPL) Wins in China

One of the negative aspects of Apple Inc. (NASDAQ:AAPL)‘s most recent quarterly results was an unexpectedly large slowdown in China. This was particularly concerning because at $4.9 billion in revenue during the third quarter, Apple’s Greater China business accounts for about 14% of its total sales — and Apple needs this number to grow substantially in the years ahead if it’s to muster any type of significant revenue growth from this point forward. Instead, Apple Inc. (NASDAQ:AAPL)’s Greater China operating segment revenue declined by 14% in the third quarter on a year-over-year basis and 43% when compared to the second quarter of 2013.

Apple Inc. (AAPL)

Also of concern to Apple Inc. (NASDAQ:AAPL) investors is the rapid rise in market share for Google‘s Android operating system, which has taken a commanding lead in China and other global markets. In fact, some estimates peg Google’s share of the Chinese smartphone market at more than 70%.

However, recently published research from Morgan Stanley (NYSE:MS) suggests that Apple Inc. (NASDAQ:AAPL)’s prospects in China are about to receive a substantial boost from the rumored launch of a lower-priced iPhone “5C” on September 10.

Morgan Stanley (NYSE:MS) surveyed 2,000 Chinese mobile phone users and found that 23% of potential smartphone buyers intended to purchase the iPhone 5S, which was slightly above the 19% of phone owners that chose the iPhone in Morgan Stanley’s previous survey in January 2013. However, that number jumped to 36% if Apple Inc. (NASDAQ:AAPL) were to launch a lower-priced iPhone.

As for how low the iPhone 5C would have to be priced, the survey found that Chinese consumers consider US$486 (or RMB 4,000) to be an acceptable price range. That’s a very positive sign for Apple, because it’s widely expected to price the iPhone 5C at $399 or less.

Also interesting to note is that Morgan Stanley (NYSE:MS)’s survey found that Apple could receive an additional 6% boost in market share if it were to reach a deal with China Mobile Ltd. (ADR) (NYSE:CHL) to bring the iPhone to its massive network of subscribers. With recent reports of talks between Apple CEO Tim Cook and China Mobile Ltd. (ADR) (NYSE:CHL)’s management, the two companies may be making progress on this front.

The article Here’s How Apple Wins in China originally appeared on and is written by Joe Tenebruso.

Joe Tenebruso manages a Real-Money Portfolio for The Motley Fool and is an analyst on the Motley Fool Stock Advisor and Supernova premium service teams. You can connect with him on Twitter @Tier1Investor. Joe has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple and Google. It also owns shares of China Mobile.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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