The iPhone's still got it! As Apple and Verizon brace for lines of customers at their retail locations when the iPhones go on sale, substantial pent-up demand for the iPhone on Verizon is being seen. And with the wind behind Verizon, there's a handsome upside for Apple: solid gains to its 16 percent share of worldwide smartphone sales.
Apple and Verizon Wireless have been taking online pre-orders for the iPhone 4 off and on since Thursday amid heated demand. The crush of interest sold more phones for Verizon in the first two hours of sales last week than any other phone on the first day of launch.
And it all started again at 3 a.m. ET [Wednesday] as tens of thousands of callers were expected to jam Web sites in hopes of getting their hands on one of the smartphones.
Still, the two companies are bracing for lines of customers at their retail locations when the phones go on sale in their stores Thursday. No matter that Apple's iPhone 5 is rumored just around the corner, roughly in June, and 4G phones sporting zippier data delivery are trickling into the market on popular Android-based smartphones.
This latest surge of interest is further testament to the runaway popularity of Apple's iconic iPhone. It's also a reflection of the enthusiasm for what's perceived as a better phone carrier in Verizon. Dissatisfaction has simmered since Apple's exclusive launch on AT&T's network in 2007.
"There is substantial pent-up demand for the iPhone on Verizon," says Richard Doherty, an analyst at The Envisioneering Group. "It's the biggest tech hit of the decade, and people have to have it. It will probably set off some new kind of record for Verizon."
Likely so, as reason doesn't always come into play where Apple products are concerned. Interest alone, even obsession, in the hot-selling device may well tell the story of why consumers stuck with it for so long on AT&T despite widespread bandwidth bog. Apple fans need just one more reason to be first on the block with the next device. This time, that's Verizon.
Sandy Rumsey of Hendersonville, N.C., waited years to get a Verizon iPhone. "It's the greatest gadget in the history of gadgets." She could have had an iPhone on the AT&T network at any time since June 2007, but she says AT&T service is bad in the mountainous area where she lives. Calls from her son in California are always cut short because of dropped calls, she says. Verizon "works everywhere for us," she says.
So, like many eager iPhone customers, she set her alarm and got through when the iPhone went on sale for Verizon customers in the wee hours of last Thursday. Verizon and Apple sold out the initial allotment by the next morning. Rumsey, whose phone arrived in the mail Monday, says, "I absolutely love it. It felt like being a child at Christmas and getting that Red Ryder BB gun."
Waiting for Years
Customer mania for the iPhone on the Verizon network began shortly after the iPhone was introduced in 2007 exclusively on AT&T.
Verizon's 94.1 million customers wanted in on the action, too. Even some of those initial AT&T iPhone buyers joined the clamor, upset about dropped calls and poor reception in some areas.
Now, Piper Jaffray analyst Gene Munster predicts that Apple and Verizon will sell 1 million phones by Sunday -- 200,000 more than were sold in the U.S. for last June's launch of the iPhone 4, the most recent iteration of the device. "People have been waiting," he says. "This has been the biggest request for a tech product."
He expects less frenzy at stores than there was last June, when lines extended for blocks and wait times went on for hours. Because of the two online sales, some 35% to 40% of the shipments have already gone out, which should make the lines shorter, he says. Still, as with past Apple product launches, he expects supply to be sold out by Sunday, with limited supply coming back in a few weeks.
For the past few years, Verizon -- which was first offered the iPhone but passed on the terms -- has tried to beat down iPhone fever by teaming with Google to push hard on Android phones, selling them as iPhone-like devices to its customers. Its line of Droids lets customers make calls, go online, check their e-mail and use the many apps that are also popular on Apple's device.
But while the Android operating system has flourished and spawned dozens of capable and stylish phones, none has captured the cultural imagination like the iPhone. "I love my Android, but I've got my heart set on an iPhone," says Aaron Drake, a medical supervisor from Scottsdale, Ariz.
Sheila Virgin, a retired association director from Manhattan Beach, Calif., bought an Android Galaxy last year from Verizon but returned it within a month. "It was too complicated," she says. "The iPhone is easier. My son has one, my girlfriends have it. I decided I should just wait and get one, too."
At her home, she's tried AT&T and Sprint but had reception issues. Not so with Verizon, which is why she's stayed with the company. And Cindy Collins, a Cody, Wyo., special education teacher, says with limited AT&T service in Wyoming, she never had the option of getting the iPhone. She ordered as soon as it became available for Verizon customers. "Verizon is our big carrier, with excellent coverage and service."
Verizon's ad campaign for the iPhone is focused solely on what's always been its biggest selling point -- its network.
In its Super Bowl ad on Sunday, the camera zoomed in on the iPhone, with moody lighting and dramatic music, as the announcer called the device, "beautiful, intelligent, even genius," then asked, "But does your network work?" The phone rang, and Verizon's pitchman answered, saying, "Yes, I can hear you now."
AT&T, which in late 2010 was called the "worst" of the four major carriers by Consumer Reports, has been running ads saying that data on its network are faster than Verizon's -- which was confirmed as superior in many of the early reviews for the Verizon network. Consumers aren't likely buying into AT&T's marketing campaign.
With the wind behind Verizon, there's a handsome upside for Apple: solid gains to its 16% share of worldwide smartphone sales.
"That number could pop over 5 percentage points once the iPhone 4 launches on the Verizon network," Needham & Co. analyst Charles Wolf wrote Monday in a research note to clients.
Such estimates aren't stopping AT&T from pushing for what it considers the better underlying technology of its network.
"A customer who gets an iPhone from another carrier is at a disadvantage," says AT&T spokesman Mark Siegel. With Verizon, you can't talk and surf the Web at the same time, AT&T's international coverage is wider, and "They don't have the data speed. Those are three critical, powerful advantages."
While AT&T gets lots of knocks in online forums, Siegel believes the truth is with the numbers. In the third quarter, shortly after the introduction of the iPhone 4, some 5.2 million iPhones were activated. In the fourth quarter, it logged 4.1 million.
"If people were dissatisfied, you wouldn't see those kinds of activation numbers," he says.
Indeed, Bill Hoemer of Dana Point, Calif., switched from Verizon to AT&T because he says its network served him better. "I've had zero regrets since," he says. "I've had no dropped calls whatsoever."
One reason AT&T has had issues is that the iPhone was so popular, its network got swamped with more usage than it ever expected.
"AT&T may not be at fault," says iPhone user Jim Silberman of New York City. "The iPhone will present a challenge for Verizon, and they will find that we iPhone users tend to be a very demanding bunch."
Pricing wise, AT&T and Verizon are almost identical. Both have voice plans that start at $39.99 for 450 minutes, but customers also need a data plan. And there the companies differ.
Verizon is offering unlimited data for $29.99, while AT&T offers a tiered service, starting at $15 monthly for 200 megabytes of data.
The iPhone reshaped Apple, a company that was once best known for its computers. While the iPod and iTunes were huge hits for the company, iPhone sales now represent 45% of total Apple sales, Munster says. Some 80 million iPhones have been sold.
Yet the iPhone 4 that Verizon is selling is a model that was created some time ago.
What About iPhone 5?
Since the iPhone 4 arrived, Verizon has introduced so-called 4G technology, offering faster network speeds that are available on a limited basis for Verizon, T-Mobile, Sprint and AT&T.
T-Mobile Senior Vice President Andrew Sherrard says buying the Verizon iPhone is to use a phone "with an outdated, slower 3G technology. The experience on T-Mobile is much faster."
However, that's with an Android phone, not an iPhone.
Little is known about what Apple will do for an encore with the phone it is expected to introduce in June. Will it offer a 4G version for Verizon and AT&T customers? "From a technology standpoint, it probably won't be much different, beyond a faster processor," says Munster.
Some iPhone fans say they just can't wait to find out.
"I thought about it, but I couldn't," says Quigg Lawrence, a Roanoke, Va., pastor. "I want the iPhone now."