Verizon Got the iPhone -- What Happens to Android?

So Verizon (NYSE: VZ  ) finally got its hands on the Apple (Nasdaq: AAPL  ) iPhone. The biggest champion of Android phones now has much less incentive to sell Androids and a whole lot of motivation to put marketing muscle behind the iPhone instead.

Game over, Google (Nasdaq: GOOG  ) ?

That would be the obvious snap judgment of the situation as disgruntled AT&T (NYSE: T  ) customers make the pilgrimage over to Verizon only to pick up a more reliable version of the phone they already know and love. Apple's share of the smartphone market should increase dramatically, even if you count on millions of customers simply buying one iPhone to replace another. After all, many a potential user must have stayed on the sidelines with a temporary Droid or something, just counting the days until Big Red could deliver on their dreams.

But then you're overlooking another moving part in the share puzzle: What will AT&T do?

You can't expect AT&T to sit idly by. The company has put the vast majority of its smartphone efforts into the iPhone so far, but now suddenly has reason to sell Androids, Microsoft Windows Phone 7, and Research In Motion (Nasdaq: RIMM  ) BlackBerry phones. Verizon famously poured about $100 million into promoting the original Droid in 2009, and the Droid line has performed admirably ever since. Would you really expect AT&T to do anything less for a rivaling platform now that the iPhone is a polygamist?

Recent news says it won't be. The company threw its support behind Android at the industry's CES event last week, highlighting more than a dozen new Android phones. Among these was the powerful Motorola (NYSE: MMI  ) Atrix smartphone powered by NVIDIA's (Nasdaq: NVDA  ) Tegra processor. Expect the Atrix and its Android brethren to get a promotional bump in the coming weeks, especially since AT&T will be promoting these new phones along with a faux-4G network upgrade.

The pull of Verizon's network is very real, but it will be counteracted by AT&T's counterstrike. The net effect is a multi-horse race, depending on exactly where AT&T places its bets. Apple will grow, Android will grow, and maybe even Microsoft gets a toehold in the market at long last. The only question is which platform grows faster than the others in an expanding total market.

The Verizon iPhone won't kill anybody or anything else. This is just another shot of intravenous caffeine for smartphones in general.

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Fool contributor Anders Bylund owns shares of Google but holds no other position in any of the companies discussed here. Google and Microsoft are Motley Fool Inside Value picks. Google is a Motley Fool Rule Breakers recommendation. Apple is a Motley Fool Stock Advisor selection. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Apple, Google, and Microsoft. NVIDIA is a Motley Fool Stock Advisor choice. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


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  • Report this Comment On January 13, 2011, at 8:15 PM, xmmj wrote:

    "AT&T ... has put the vast majority of its smartphone efforts into the iPhone so far, but now suddenly has reason to sell Androids."

    Very false reasoning here.

    That is not the question. What does ATT gain by pushing alternatives to iPhone? Not much they are not in competition with the iPhone. They still sell them. It is not like V now has the exclusive. ATT is in competition with their own image. Sure, they need to let on that they have all these alternatives to iPhone, but pushing heavy on them will not gain them a lot of new customers.

    You seem to be thinking that the only people guying V iPhones will be people leaving ATT. That is ridiculous! Lots of people who have no smartphone will be buying their first one, and lots of people who bought Android or BBs because they were on V or T or S will be buy new, first time iPs.

    ---

    "The biggest champion of Android phones now has much less incentive to sell Androids"

    Darn straight mister! Here is the crux. Especially when you realize that we are not talking just about tv ads -- we are talking about the really big promo - the BOGO program. (buy one get one free)

    Now I do not know if this is true or not, but I have seen it written that V was paying for that. Is ATT really going to pick this up in order to get customers? If they were to do so, why not do it with the iPhone as well?

    The real thing is that Android will no longer have a BOGO program that doubles the number of units sold. Put THAT into your pipe and smoke it papa.

    Let me spell it out for you in simple arithmetic:

    NOGO BOGO = ANDRO SLOWGO

    You wanna put some money on that? I am ready to.

  • Report this Comment On January 14, 2011, at 1:15 AM, BR14 wrote:

    I think you'll find carriers invest time and energy in marketing something they think will make them money. If the markup is good they'll sell it. If it attracts high spending users on long term contracts, they'll sell it.

    As for iPhone market share, why would you pay good money for an iPhone when you can get an equivalent Android for less.

    If you wanted an iPhone, the only reason not to switch to AT&T was because you were tied to a contract with another carrier. iPhone has been available for several years, so its unlikely too many people who really wanted iPhones haven't already switched.

    Verizons rationale for the change is direction is clear enough. The number of subscribers switching to AT&T has hit Verizon and so they adopt the iPhone to try and stem the flow.

    But the real question this change presents concerns Apple. Why is Apple now moving away from its single carrier model? Why are they producing a phone that has only CDMA? Why not multiple radios or a world phone?

    Time for innovation or Apple will become just another has been in the constantly changing cell phone market.

  • Report this Comment On January 19, 2011, at 9:43 PM, Xennex1170 wrote:

    Making a GSM capable Verizon iPhone makes as much sense as putting legs on a space shuttle."

    True.. Since Verizon does not have GSM. Useless.

    "iPhone is the most advanced smartphone best engineered for real world user experience."

    False with the most advanced.. True (for most) for the real world user experience. Call quality is part of User experience for a phone after all.

    "The iPad has no competition."

    No real contest there, call us back around mid-2012 when more tablets will have been released.

    "There are many flashy oil paintings but none like the masterpieces by Leonardo da Vinci. Ditto for the iPad. It is becoming rather monotonous and silly trying to compare potentially hundreds of iPad wannabes to the one and only iPad. Why bother?"

    Quite right, and look at the number of Da Vinci pieces owned by less affluent people. Comparison seems disconnected with reality.. Makes Apple look small but elite, VERY niche.. Probably not what you were going for. A better comparison would probably be the Ford-T, very popular for the time with its singular experience but got pushed aside after a few years for other cars that offered different experiences.

  • Report this Comment On January 19, 2011, at 10:25 PM, Xennex1170 wrote:

    ["AT&T ... has put the vast majority of its smartphone efforts into the iPhone so far, but now suddenly has reason to sell Androids."

    Very false reasoning here.

    That is not the question. What does ATT gain by pushing alternatives to iPhone? Not much they are not in competition with the iPhone. They still sell them. It is not like V now has the exclusive. ATT is in competition with their own image. Sure, they need to let on that they have all these alternatives to iPhone, but pushing heavy on them will not gain them a lot of new customers.]

    Actually it is very good reasoning.. If Verizon will be 'pushing' iPhone to gain subscribers, it is to AT&T's benefit to 'push' Android phones now especially since it is no longer the exclusive iPhone carrier. It is reasonable to assume AT&T didn't push Android phones in the past so not to lose concentration on the iPhone.. It may also have been part of their contract with Apple. Pushing heavy now on Android with 2 4G Android phones to arrive 1Q this year is extremely prudent for them considering also that Verizon's 4G Android phones are not expected to arrive till Summer.

    [You seem to be thinking that the only people guying V iPhones will be people leaving ATT. That is ridiculous! Lots of people who have no smartphone will be buying their first one, and lots of people who bought Android or BBs because they were on V or T or S will be buy new, first time iPs.]

    Or not.. New Android phones are being released all the time.. More and more choices arrive and from 2.2 Froyo the majority of the Android kernel can be upgraded independently of the UI suggesting less time between new OS release and Upgrade.

    ---

    ["The biggest champion of Android phones now has much less incentive to sell Androids"

    Darn straight mister! Here is the crux. Especially when you realize that we are not talking just about tv ads -- we are talking about the really big promo - the BOGO program. (buy one get one free)]

    Yes, less incentive but if they want to keep/increase their overall subscriber share they cannot just give up on marketing Android. That would be VERY shortsighted on their part. And just because Verizon may stop with the BOGO doesn't mean all other carriers worldwide will stop. As has been pointed out by lots of people, the true profit from cellphones are not from the devices but from the plans that are bought for those devices. One of the reasons Apple did so well financially, btw. Apple is the ONLY cellphone handset provider that has contracted to receive a share of monthly subscriber fees. (which btw may not be true anymore since there is no longer any exclusivity contract involved.)

    [Now I do not know if this is true or not, but I have seen it written that V was paying for that. Is ATT really going to pick this up in order to get customers? If they were to do so, why not do it with the iPhone as well?]

    Maybe, maybe not.. On the other hand the majority of Android phones DO cost less per unit for the carrier to purchase from the hardware vendor, thus a smaller 'loss' when offering it for free or reduced cost. They would take a larger loss if they sold iPhones that cost them more per unit in comparison. They would just have to weigh their expected profit from the plan that will be purchased with the phone.

    [The real thing is that Android will no longer have a BOGO program that doubles the number of units sold. Put THAT into your pipe and smoke it papa.

    Let me spell it out for you in simple arithmetic:

    NOGO BOGO = ANDRO SLOWGO

    You wanna put some money on that? I am ready to.]

    There is nothing real about that.. I haven't heard anything about Verizon stopping BOGO plans. If you have please drop a link to let us know. As far as I can see Verizon still has BOGO plans for Android devices in place. If you understand that carriers are not so much interested in market share of cellphone devices, as they are in subscriber share you may see that it is not necessarily in Verizon's interest to stop BOGO deals.

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