The true age of the smartphone can now begin: Verizon (NYSE: VZ ) is carrying
Apples (NASDAQ: AAPL ) iPhone. Apple products have created hype in the past, but
the news that the companys smartphone would come to Verizons network in February
has inspired hyperbole thats practically messianic. The Daily Show s Jon Stewart
and correspondent John Oliver likened the announcement to V-E Day and, as far as
their audience was concerned, they were only half kidding. UBS analyst John
Hodulik expects Verizon to sell 13 million iPhones in 2011, Barclays Jame
Ratcliffe says 9 million, and every other Wall Street analyst has announced
expectations of sales between many and a whole lot. Between the deal with
Verizon and expectations surrounding record-breaking holiday sales, Apples share
price may finally hit that $400 target that has been predicted for nearly a
year. The truth is that this new deal may not be the beginning of the iPhones
glorious second phase but rather a last hurrah before the device begins to see
its market share worldwide plateau. Kaufman Bros. analyst Shaw Wu said in a
recent note to investors that Verizon had worked out a deal with Apple not
dissimilar to the one AT&T (NYSE: T ) has enjoyed since the original iPhone
released in 2007. The idea was that Verizon had convinced Apple to keep the
iPhone exclusive to both Verizon and AT&T in the U.S. On Tuesday, Apple Chief
Operating Officer Tim Cook said the deal with Verizon is non-exclusive, implying
that the CDMA iPhone could come to Sprint Nextels (NYSE: S ) 3G network soon. It
also could mean that a third model of iPhone, one using the GSM standard, could
come to T-Mobile USAs network. It appears that the CDMA iPhone is a necessary
product for Apple this year that the company has finally been forced to make
its smartphone line as widely distributed as possible. More than a need to find
new opportunities in the U.S. market, a Verizon CDMA iPhone is also a bid to
finally bring the international iPhone market in line with its U.S. counterpart.
New iPhone models have traditionally only been released in Asian and European
markets months after theyre already sold here, but Apple has been slowly
attempting to sync those releases. In 2010, the iPhone 4 made it to China just
four months after its release in the U.S., a record turnaround for the company.
The iPhone 4s Chinese sales, however, show that new product launches for Apple
dont translate to spectacular sales : The iPhone 4 sold out in China within 10
hours of release, but only 100,000 phones were available. Its the older models
that tend to sell abroad. the iPhone 3 and 3GS have helped Apple capture a 72%
share of the Japanese smartphone market and a 32% of the European smartphone
market traditionally controlled by Nokia (NYSE: NOK ) (These statistics are
based on 2010 reports by MM Research Institute Ltd. and InMobi, respectively.)
The announcement of a CDMA device for 3G networks at the beginning of 2011 when
most carriers are pushing newly opened 4G networks seems to not be the bold
populist move most folks are making it out to be. The Verizon iPhone is proof
that Apple isnt infallible in the smartphone market they need to evolve now or
face decline. Rather than evolve, theyve gone for a lowest common denominator a
new phone working on an older 3G standard to bring in a necessary flux of new
users in the U.S., as well as China and India via carriers China Telecom and
Reliance if Morgan Stanley analyst Katy Huberty is right before iPhone 4 sales
bottom out. Of course, the CDMA iPhone may be Apples Trojan horse. If the
company can lock millions of users into new multi-year contracts with carriers
around the world in anticipation of a simultaneous international launch of a 4G
iPhone 5 later this year, the company will have finally found a way to make
their device truly ubiquitous. As of this writing, Anthony John Agnello did not
own a position in any of the stocks named here.
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