3 hurdles to Verizon iPhone success
On the eve of the Apple iPhone's much-anticipated debut on Verizon's wireless network, it may not matter that the phone is stale, a new one is coming and not everyone can afford it.
By Scott Moritz, TheStreet
But on the eve of this long-awaited arrival, naysayers might wonder if the presumed success of the Verizon iPhone may be just a little bit overblown.
The answer will come quickly.
Based on the first hours of order volume, Verizon and Apple will have a good idea of how demand stacks up to their internal projections and whether they are likely to hit the 11 million iPhone target that analysts forecast and Verizon has adopted.
So what could impede Apple on its latest road victory?
Here are three main concerns that loom ahead of the Verizon iPhone debut.
All theatrics aside, the big difference with the Verizon iPhone is that Apple has merely added a 3G CDMA wireless chip to the iPhone 4 that was launched with AT&T (T) last summer. As one observer noted at the Verizon Apple iPhone unveiling: "It's a middle-aged phone going to a new carrier."
The lack of newness with the Verizon iPhone becomes more obvious when you consider that there's a faster, better version looming just a few months ahead. For the past four summers, Apple has introduced a new, improved version of the iPhone. In keeping with that tradition, the next iPhone is widely expected to be an LTE-capable 4G model that promises lightning-fast Internet connections on a mobile device.
Finally, Verizon has had a successful Google (GOOG) Android campaign with phones from HTC, Motorola (MMI) and Samsung, not to mention the millions of Research In Motion (RIMM) BlackBerry customers. Verizon said last week that about 23 million of its subscribers now own smartphones. The question now is: How many more will be leaving their $50-a-month plan and jumping onto the $100-a-month smartphone bandwagon?
A lot of these concerns could quickly be trampled by the onrush of Verizon iPhone buyers who, for months, maybe years, have been gearing up for this day.
"It's going to be more supply-constrained than demand-constrained," said Recon Analytics' Roger Entner, a wireless industry strategist and close observer of the past four iPhone launches. "They will sell everything they have, however many units that is. The first announcement will be: 'We are sold out.'"
That would be little surprise to anyone who has paid attention to the drama leading up to this moment. On TheStreet's site alone, the phrase "Verizon iPhone" has appeared in 133 stories since we first broke the news of a CDMA iPhone a year ago.
Investors and consumers alike have been transfixed by the prospects of a big sales debut of the Verizon iPhone. And much of the excitement is fueled by years of pent-up demand.
So where are all these estimated millions of Verizon iPhone buyers going to come from?
Bank of America analyst David Barden asked as much during the Verizon earnings conference call last week. While it's easy to see where a quarter of Verizon's customers can afford the upwards of $100-a-month smartphone, getting larger percentages of customers to cough that up will be more difficult, Barden reasoned.
In reply, Verizon chief Ivan Seidenberg essentially said that smartphones change everything. "The revenue pie we're looking into is much bigger than the one that you think exists today," said Seidenberg. "So not only will those $40 customers become higher data users, but the $80 customers will go to $105 and $110."
What else would you expect a phone company chief to say?
Some analysts note that Verizon's Droid and BlackBerry fans have become quite loyal to their camps during the rise of the iPhone and many will opt to stay put.
"The real surprise may come from the feature phone owners and iPhone fans at the other carriers," said industry strategist Michael Cote of the Cote Collaborative, referring to the types of customers that will likely be a part of the Verizon iPhone sales rush. "I think we'll see a lot of Droid holdouts and a lot of iPhone hopefuls."
Copyright © 2014 Microsoft. All rights reserved.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.