Verizon iPhone Will Power Apple Momentum: Analyst

Verizon's iPhone will boost overall iPhone sales and help Apple maintain its momentum in the mobility space, according to new analyst reports.

Apple and Verizon Wireless executives took to a stage in New York City Jan. 11 to unveil the technology world's worst-kept secret: the iPhone running on the latter's CDMA-based network. That breaks AT&T's long-held exclusivity for the smartphone in the United States, and raises a host of questions over how the mobile landscape will change in months to come.

At first blush, analysts seem to think the Verizon deal will be nothing but a boon to Apple, which faces rising competition from a host of Google Android devices. The research firm IHS iSuppli "forecasts Apple will ship 12.1 million CDMA iPhones through Verizon and other global CDMA wireless carriers in 2011," according to a research note circulated to media minutes after the unveiling. "This will increase global iPhone shipments to 61.2 million units for the year, up 24.5 percent."

In addition, the firm feels the new CDMA model "will play a critical role in sustaining the growth of iPhone shipments this year, with total iPhone shipments expected to rise by 33.3 percent for 2011. Excluding CDMA, shipments would climb by only 7 percent."

The Verizon iPhone 4 will sell for either $199 for the 16GB model or $299 for the 32GB model with a two-year contract. However, the smartphone will not utilize the carrier's faster LTE network, currently ramping to life, because of what Apple COO Tim Cook referred to as his company's unwillingness to make "compromises" in hardware design. Indeed, the Verizon iPhone 4 closely resembles the AT&T version in both hardware and software, with the addition of a Verizon-specific "Personal Hotspot" that lets the smartphone connect with up to five WiFi devices.

Cook also suggested that the Verizon iPhone 4's exterior antenna rim had been optimized for the CDMA network. Following the Jan. 11 press conference, media were ushered into a separate area of the Time Warner Center to play around with the Verizon iPhone 4; that model's exterior antenna indeed looks different than on the AT&T version, particularly in the shifted placement of the notches around the rim. 

Unfortunately, a few minutes with the Verizon version wasn't sufficient to determine whether the revised antenna configuration, as well as any unseen hardware adjustments, had fixed the infamous "death grip" issues that plagued AT&T's iPhone 4 this past summer. Soon after that device's release, users began complaining that their bare skin on the lower-left portion of the antenna rim dampened its signal. Apple eventually offered free bumpers, which cover the iPhone 4's antenna rim, to early purchasers of the device.

While Apple has a history of updating the iPhone every summer, Cook declined to offer any schedule for future releases, including whether AT&T and Verizon iPhones would be refreshed at the same time.

According to Jefferies & Company analysts Peter Misek and Jason North, in a co-authored Jan. 11 research note, the "iPhone 5" will release on "GSM networks" in June. "We expect the main change will be a dual-core processor that improves performance speeds and multitasking," they wrote. "Also, we expect the antenna issues to be fixed." That will be followed in the October-November timeframe by an "LTE iPhone," as well as an LTE iPad sometime in the fourth quarter.

Demand for the iPhone and iPad, the analysts added, will continue to be strong: "We believe Apple's product leadership, vertical integration and vast scale means that it will receive the lion's share of the economic benefit from the two biggest multiyear trends in technology: 4G and tablets."

The question now is whether the iPhone on Verizon will impact AT&T's subscriber network. Various analysts have different theories, but the common conclusion seems to be that AT&T will suffer some subscriber drain. Over the summer, Barclays Capital analyst James Ratcliffe suggested that AT&T would lose between 500,000 and 1 million customers to a Verizon iPhone, although "pent-up demand" by existing Verizon subscribers would be the "primary source" of initial Verizon iPhone users.