

No Hope for the Verizon iPhone - woork
http://woorkup.com/2009/11/16/nope-hope-for-the-verizon-iphone/

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jsz0
My reading of the situation is Verizon is probably trying to talk Apple down
from their hefty iPhone hardware margins. Verizon doesn't want to subsidize a
$600+ device. They would much rather subsidize it at $400 and make more money
for themselves. Verizon's public support of Android is a way for them to test
the waters. If Android sales are good and begin to impact the iPhone's sales
in the next few months Verizon could very likely get a compromise from Apple
-- at least they'd have a shot at it. If Android fails to captivate and
doesn't stop customers jumping to AT&T they will have to accept Apple's terms.
Most likely the two parties compromise somewhere in the middle because both
parties will benefit greatly.

If Verizon & Apple can't work out a deal I do think Sprint is a very good
possibility. I don't think Apple has to sell all that many CDMA iPhones to
make it a profitable move. The other possibility is Apple will go the
vindictive route and simply sell an unlocked CDMA iPhone directly at the same
subsidized price Verizon wanted in the first place. This way Apple still makes
a good hardware profit, reaches customers outside of AT&T's 3G coverage, and
still sticks it to Verizon a little. Verizon would certainly benefit from this
also but not as much. The hardware subsidy is secondary to the lucrative 2
year up-sold contract requirement Verizon would be missing out on. How many
folks would jump ship from AT&T and get an iPhone as data-only on Verizon? or
voice only and use wifi? Lots I think. That hurts AT&T, it hurts Verizon, but
not Apple.

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smoody
The logic is flawed because the company behind the example he used -- ID --
doesn't make Apple hundreds of millions of dollars each year. Their software
doesn't sell Macs. In terms of bottom line, ID doesn't really matter all that
much to Apple.

But, Verizon would. They could easily double or triple Apple's iPhone revenue
next year -- perhaps to the point where they'd have a bigger market cap than
Microsoft -- imagine how that would make Steve Jobs feel. What the author is
claiming is that Apple would drop a Verizon deal just because they were
badmouthing them. That's bad business and Apple is not that stupid. For
example,Microsoft office is still for sale in the Apple Stores.

If you ask me (and you haven't), Verizon's ad campaign was an attempt to make
sure that when they finally go to the bargaining table with Apple, that
they'll have some ammunition -- if they have an android-based phone that has
considerable market share, then they're in a better place from a bargaining
perspective.

I'll even go out on a limb and make the claim that Verizon increasing their
early termination fees was, in part, a way to keep people from jumping over to
the iPhone to, once again, increase their bargaining power when sitting down
with Apple.

Verizon wants to increase profits. Apple wants to increase profits. Verizon +
Apple = increased profits for both.

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protomyth
Verizon insulted the iPhone. I would imagine this would make Jobs a little
madder then when ATI revealed information before a keynote. The dangerous
thing about Jobs is that he will do things that are not profit-based.

Profit wise, why would Apple give up margin for market share? The name of the
game is profit and increased market share brings its own problems (support,
regulators). There is a good % of market share and Apple can get there without
Verizon.

Verizon really doesn't have any bargaining power with Apple. It will cost
Apple money to make a phone to work with Verizon and Apple could instantly
boost one of the other carriers.

Most people don't really travel all that much. Really, most common people want
a phone that works in their area. AT&T works great in my area (no dropped
calls in MN), but crappy in other parts of the US. Adding T-Mobile or Sprint
will add a lot of service area.

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mattboehm
I kind of assumed this from Verizon's latest ads for the Droid, which focus
primarily on attacking the iPhone.

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nearestneighbor
How hard would it be for iPhone to switch to CDMA?

I wonder if Apple has some kind of exclusivity deal with AT&T that may prevent
it from working with other providers.

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stevejohnson
They had a 5-year (I think) agreement to be exclusive with AT&T.

