Don’t be fooled by lackluster Verizon iPhone lines
By Joel Mathis
An iPhone launch typically means one thing—crowds queued up outside Apple Stores, waiting to get their hands on the latest smartphone out of Cupertino. But that didn’t happen with this week’s launch of the Verizon iPhone. When the CDMA-based version of the iPhone 4 arrived in stores, the usual crowd of covetous consumers didn’t arrive with it.
“The people I spoke with said traffic was much lower than they expected,” said Brian White, an analyst with Ticonderoga Securities.
“I’ve said for a long time this wouldn’t be a seismic event in the wireless industry,” said James Ratcliffe of Barclays Capital, “primarily because it’s not a new device.”
Analysts say Verizon still stands to sell a lot of iPhones—and could help Apple double its previous annual U.S. sales of the device—and any hints of a strikeout are offset by other factors: stratospheric preorder sales, bad weather in major markets on launch day, and the fact that the iPhone 4 isn’t exactly a new product. And despite years of complaints, it’s also possible that AT&T hasn’t generated as much consumer dissatisfaction as was previously believed.
Even with those last two factors in play, White said he continues to forecast that Verizon will sell more than 11 million iPhones before the end of 2011.
“I think that’s conservative,” he said on Friday.
Other analysts were similarly optimistic about Verizon sales, and about the value of the new market to Apple. Tim Bajarin, president of tech industry analysis firm Creative Strategies, suggested Verizon may have sacrificed some buzz when it made the phone available through online preorders.
“Verizon allowed current customers to buy them online days before they would be available in the stores,” Bajarin said. “Apple would not have had long lines either if people could have bought in advance of its broad availability.”
Ratcliffe agreed. “I think you saw a lot of those customers go the preorder route,” he said. “The true iPhone fans—the people who had to have the newest device, would stand in lines—already had their iPhones.”
AT&T has long been saddled with a reputation for providing substandard phone service on the iPhone. Even with great initial preorder sales for Verizon—and despite the cost of switching providers—analysts suggested the lack of lines might suggest greater contentment with AT&T than observers might’ve expected.
“For a lot of customers, particularly outside New York and SF, they’ve been content with AT&T service and haven’t seen the need to switch,” Ratcliffe said.
“There might not be the migration from AT&T to Verizon that people anticipated,” White added.
The result might be a robust iPhone market for both phone companies—much to Apple’s benefit. White’s forecast of 11.7 million iPhone activations for Verizon is joined by Ratcliffe, who expects the company to sell 10-12 million units.
That will be good news for Apple, Bajarin said, and may help the company compete better against the growing challenge from the Android line of phones.
“We believe that Apple could double their US sales in iPhones with this new partnership and we expect Verizon to always make it a marquee product in their line,” he said in an e-mail. “The Verizon iPhone will perhaps slow down Android growth for a very short time, but there is a lot of room for both phones/OS’s to survive and thrive side-by-side.”
In other words, don’t believe the lack of hype. Verizon should be in good shape going forward.
“I don’t think people should think Verizon won’t ramp big,” White said. “I think it will.”