The Land Of A Billion iPhones?

It's no secret that Apple Inc. AAPL is trying to expand into China, and according to the Wall Street Journal, the Cupertino, Calif.-based company is getting closer to achieving this goal. This comes just one month after acting CEO Tim Cook was spotted in China at China Mobile Ltd., CHL headquarters. If Apple does indeed give the iPhone to state-owned China Mobile, Apple then has access to the largest cell-phone market in the world, and potentially hundreds of millions new iPhone customers. China is a huge market for Apple, and key towards continuing to grow at seemingly incredulous rates for a company the size of Apple. Apple recently opened its first Apple stores in the country, selling its Mac computers, iPads and of course the iPhone. With China Mobile having over 600 million subscribers, Apple has the ability to transform itself into perhaps the largest company in the world by market cap, as the revenue possibilities are endless in China. Competitor China Unicom CHU only has 200 million subscribers. The Apple fanboys and money mangers are salivating over the endless opportunities, yet China is not the easiest market to navigate, given harsh scrutiny from the Chinese government, and the huge black market for electronics. Competitors like Nokia NOK, Research in Motion RIMM and Dell DELL already have made huge strides towards developing brand loyalty in the world's largest populated country, and all of these companies offer lower priced products than Apple. The iPad tablet starts at 3,688 yuan ($570) in China, compared with $499 in the U.S. Despite the potential worries, revenues from the 4 Apple stores in China, and the surrounding areas, including Hong Kong and Taiwan, revenue quadrupled to around $5 billion for the six months ended March 26. The Greater China region still only accounts for less than 10% of the company's revenues, indicating there are significant opportunities in this region. Apple's retail stores in China have more than 40,000 visitors per day, four times what these stores see in the U.S. It looks as if the iPhone will come to China Mobile in the next year or so, according to Wall Street analysts, which could be just the catalyst that Apple needs to get its share price into rarefied air. Many on Wall Street have $400+ price targets on Apple, but if even 10% of China Mobile's subscribers were to get an iPhone, that's an additional 60 million iPhones sold. It may not be the land of a billion iPhones, but it is certainly enough to make Steve Jobs and the rest of the Apple team seeing green on the screen. ACTION ITEMS:

Bullish:
Traders who believe that Apple will move into China in a meaningful way might want to consider the following trades:

• Go long Apple. The stock has been breaking out to new 52 week highs, and the company reports earnings tonight after the bell, which are likely to be incredibly strong.

• Investors may also want to consider buying China Mobile. When AT&T T and Verizon VZ got the iPhone, their stock prices rose considerably.

Bearish:
Traders who believe that Apple will kill the competition in China may consider alternate positions:

• Short the other smartphone makers, like Nokia NOK, Hewlett-Packard HPQ with its Palm offerings, and Research in Motion RIMM on a Apple deal with China Mobile.

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