The Smartphone Wars: iPhone 4V Falls To Earth

So the Verizon iPhone arrives, iOS is finally multicarrier, and consumer first-day reaction is “meh…not interested”. Honestly, I wasn’t expecting this.

Yes, I predicted, based on looking at AT&T’s 4Q2010 numbers, that Verizon iPhone sales would be “anemic”. There are statistical clues that AT&T has already largely saturated the market of people who really want an iPhone. But the way I was expecting things to play out was for a strong initial burst of sales to true believers to be followed with an unusually rapid fall-off. This is not the result we got.

All day, reports were of short or no lines at Apple stores; several news stories reported that Apple employees, reporters, and cops laid on for crowd control consistently outnumbered the actual customers.

It is just as interesting that Apple and Verizon seem to have been caught completely flatfooted by the slackness of demand. They overstaffed, overprepared, and in all ways behaved as though they were braced for a buyer feeding frenzy. This, of course, had the effect of emphasizing that slackness.

I have no doubt that Apple and Verizon’s publicists will be engaging in some frenetic spin control over the next week. You’ll hear a lot of talk about record pre-order levels for the iPhone V, but watch for what you probably won’t hear – actual sales numbers, either for pre-orders or first-week in-store volume. What we’re likely to get is evasiveness on a par with Microsoft’s refusal to speak figures about WP7 sales. And what that will mean is that all three companies are running scared of what market analysts will say when they learn that a much-touted product has bombed.

I’m confident in these predictions because we know what success looks like; we’ve seen it often enough with the first-day frenzies surrounding previous iPhones. But that dog has failed to bark this time. Stage ignition not achieved, Houston we have a problem.

What happened here? How did a product that had been the focus of almost worshipful intensity fizzle like this? And what conspired to fool Apple and Verizon about the demand level?

Several hypotheses suggest themselves. One, which I’ve discussed here before, is simply that iPhone V is a weak product. It’s a serious problem for Apple that its phones only handle 3G when the transition to HSDPA and 4G/LTE is well underway; there were signs that this was impacting demand as early as the iPhone 4 launch last summer.

Ever since, it’s been clear that Apple must be bleeding potential customers to faster Android phones like the Sprint EVO and T-Mobile G-2. Nobody knew in what volume, but a craving for faster data rates was differentially more likely in the elite professionals, creatives, and youth market that Apple targets especially heavily. Now I think we’re getting a clue that this was not minor lossage – that, in fact, Android has siphoned off essentially all the growth there.

Another hypothesis is that the mass of iPhone customers were never as brand-loyal as the company believed. It may be they only looked that way because for the first couple of years after the 2007 launch there was nothing to match the product in features and perceived quality. Support for this one comes from the fact that iPhone market share has been much larger than Apple computer market share. The question we should perhaps thought to ask was this: if the iPhone was creating Apple loyalists in volume, why did their PC market share remain stable at a much lower level?

Now it’s 2011, the iPhone V is surrounded by cheap Android handsets with faster networking, and it begins to look as they have sucked away almost all the demand that we might otherwise have seen as block-long lines at Apple stores today.

As for how Apple and Verizon got fooled…well, one of the dangers of being really good at marketing is that you can start believing your own hype. Apple, if not Verizon, is a company composed almost entirely of people from the same demographic niches it has focused on in the past. I think they may be beginning to have trouble seeing outside that bubble.

The reality check is: how many of the phones did they actually sell, in preorders and today? How many will they sell over the next few weeks and the quarter? This is a question that we should not stop asking, and the importance of asking it rises directly with Apple’s reluctance to answer.

58 thoughts on “The Smartphone Wars: iPhone 4V Falls To Earth

  1. I can think of another explanation: Egypt.

    I’m making a mental note to never launch a product or website during a revolution or major civil unrest.

  2. You missed a group: some people are going to wait for their current contract with Verizon to run out before they get any new phone, particularly the remaining customers who are still in the discontinued “New Every Two” marketing program. In this model Verizon should have steady iPhone sales over the next year to a year and a half. Those who didn’t jump to AT&T already probably value Verizon service more than iPhone features, so I can’t see them rushing to get a new phone early.

  3. >how many of the phones did they actually sell, in preorders

    My admittedly unscientific experience seems to indicate that a lot of people went the pre-order route. It is worth noting, that among many things that might suppress opening demand for this phone (as noted, everyone is expecting the next model in less than 6 months), this is the first iPhone to have a pre-order launch. Obviously they expected bigger lines than they got, but the original iPhone, the 3G, and the 3Gs were all released on a friday in either june or july. The 4G was released on a thursday but again in june. Perhaps some of the lack of line is due to the fact that this is an early February launch. Yes plenty of people work in the summers, but more people have time off available in June and July and are also more likely to stand out in the elements when its warmer. I think a lot of things were working against a line this time, but this definitely caught some people off guard. Time will tell I guess.

    > This is a question that we should not stop asking, and the importance of asking it rises directly with Apple’s reluctance to answer.

    What reluctance? AFAIK, the only times Apple talks sales numbers are their events and quarterly earnings reports. Any silence on the issue at other times shouldn’t be taken as reluctance but as SOP for apple.

    >I can think of another explanation: Egypt.

    On the off chance that you’re serious, I don’t have enough faith in average american interest in world politics to think it has any impact on consumer electronic sales.

  4. @esr:

    Yeah, I already noticed the spin starting earlier today:


    Shorter-than-expected lines suggest that Apple and Verizon incorrectly estimated the mix of online orders and in-store purchases, said Gene Munster, an analyst at Piper Jaffray Cos. in Minneapolis. He kept his estimate of 1.5 million Verizon iPhones sold this quarter.

    @John Dougan:

    That will certainly provide them a steady stream of upgrades. OTOH, you would have thought people would have seen the iPhone coming, and the pent-up demand for would have resulted in a few more phones being sold right away. Even if all the customers upgrade as soon as they are eligible (doubtful), and none of the customers saw the iPhone coming (doubtful),
    then if just the customers who became eligible the last month (after the announcement, before the sale) jumped on the iPhone, that’s still probably around 3.5 million potential subscribers.

    If you take into account that some people procastinate, that others would have seen the iPhone coming and not upgraded in the last quarter of last year, etc., that raises the number of people who could have gotten the $50 off for new every two into the 5-10 million subscriber range. So it appears that a lot of them are taking a pass on it, for whatever reason.

  5. The lack of lines and crowds tells you nothing about the volume of vPhones shipped and delivered through the pre-order process.

  6. @tmoney:

    > this is the first iPhone to have a pre-order launch.

    Not sure what you mean. I thought it was SOP to allow pre-orders. At least, the AT&T iPhone 4 had a preorder period (and sold out, as well).

    > the only times Apple talks sales numbers are their events and quarterly earnings reports.

    “everybody” seemed to “know” there were 600K AT&T iPhone 4 preorders. Don’t know if that got validated later or not.

    @chris pugrud:

    > The lack of lines and crowds tells you nothing about the volume of vPhones shipped and delivered through the pre-order process.

    No, it’s up to Apple and/or Verizon to do that. See above. BTW, this isn’t a criminal trial and we’re not a jury. We are definitely allowed to infer whatever we want to from Apple and Verizon’s silence.

  7. >Gene Munster, an analyst at Piper Jaffray [...] kept his estimate of 1.5 million Verizon iPhones sold this quarter.

    Wait, what? That suggests he’s expecting Apple to do only 4.5M units by mid-year. That would barely be enough to overhaul Android even if Android’s share stays dead flat still and none of the iPhone V sales are poaching RIM, WP7 or dumb-phone customers; under more realistic assumptions, this performance would be a distant second.

  8. Apparently Gene’s historically been on the low-side with his iPhone estimates. Dunno if he’s trying to stay there, or trying to “fix” it.

  9. >“everybody” seemed to “know” there were 600K AT&T iPhone 4 preorders.

    Well, if that’s true and today’s sales velocity is predictive, it’s going to take them the rest of Q1 to match that. I’m going to guess maybe 1.8M units before iPhone 5 launch. That’d be a swing of about 3% of the current U.S. smartphone base.

  10. > Another hypothesis is that the mass of iPhone customers were never as brand-loyal as the company believed.

    Maybe it’s sorta the opposite. Maybe people think that if Jobs didn’t stand up and hold one and tell people how good it was, then it must not be Apple’s best products. I mean, sure Foxconn built it in China for Apple and everything, but it hasn’t been blessed.

  11. >> this is the first iPhone to have a pre-order launch.

    >Not sure what you mean. I thought it was SOP to allow pre-orders.

    What one could say about it is this was the first one where the pre-order process went off without a hitch. The AT&T iPhone 4 pre-order process was something of a fiasco – it repeatedly crashed. Quote: “Many customers were turned away or abandoned the process in frustration. We apologize to everyone who encountered difficulties, and hope that they will try again or visit an Apple or carrier store once the iPhone 4 is in stock..

    So one reason people lined up to buy at the stores last year was that they had no better option.

    Which might mean Apple finally got its act together on the production/distribution side of things, getting enough product and enough bandwidth in place to entirely handle a vast surge of orders, leaving only a tiny trickle of demand unmet.

    Or…it might just be another indication that the demand wasn’t all that large to begin with – the web sites handled the load better because the load wasn’t that great.

    Or both. We’ll know eventually; I can wait.

  12. > Maybe people think that if Jobs didn’t stand up and hold one and tell people how good it was, then it must not be Apple’s best products.

    I joked about that earlier, but it seems likely the causality runs mostly the other way on that one. My interpretation: Jobs correctly gauged that this wasn’t a truly exciting product, so he didn’t expend any of his own reputational capital on it. We like products that Jobs enthusiastically presents in large part because Jobs only presents with enthusiasm products that are inherently worthy of being liked.

  13. My guess is that anyone who can wait for the “iPhone 5″ launch (in 4 months or so) is doing so.

    It’s almost certain that the “5″ will have better performance, with a dual-core CPU likely. It’s fairly likely that it will be a dual GSM/CDMA unit; this is a decent guess because (a) the Qualcomm chipset in the iPhone 4V is already dual GSM/CDMA, they just don’t use the GSM bits, and (b) in general, Apple likes to have as few SKUs as possible. It’s also rumored that Apple will put NFC into it (to counter Android phones that already include it).

    Hell, under those circumstances, I’d wait, too.

    I sat out the iPhone 4 because, for some reason, my fiancee and I weren’t both eligible for the full-subsidy upgrade. We should be by the time the “5″ is out, but I’m wondering if a smarter course of action might not be: (a) spring for a high-end iPod Touch and migrate all my iOS apps and music onto it; (b) upgrade my phone, not to a “iPhone 5,” but to the latest in Android phones that AT&T has at that time; and (c) migrate critical functionality to the Android phone from the iPod Touch as I find Android apps to replace the ones I have.

    (I got the iPhone 3GS in the first place because, firstly, I was already an AT&T customer, and secondly, I was already an iPod user (3rd-gen Nano) and hence had iTunes set up and working, so going to iPhone was a no-brainer. And my fiancee both wanted a better phone and wanted an iPod, so we got his’n’her 3GSs.)

  14. I joked about that earlier, but it seems likely the causality runs mostly the other way on that one. My interpretation: Jobs correctly gauged that this wasn’t a truly exciting product, so he didn’t expend any of his own reputational capital on it. We like products that Jobs enthusiastically presents in large part because Jobs only presents with enthusiasm products that are inherently worthy of being liked.

    But isn’t the iPhone branding sacrosanct? My impression is that allowing a “eh… it’s ok, but it’s not a ….” phone penetrate the branding causes air raid sirens to go off all over Cupertino. If Jobs were specifically distancing himself from a lackluster product then i’d consider that an even more ominous sign.

  15. >It’s a serious problem for Apple that its phones only handle 3G

    Huh? The iPhone 4 does HSDPA. Do American carriers cripple it? Why?

    The iPhone has been multi-carrier in Europe for a few months now, and initial sales at the German second carrier [disclosure: my employer] were very good. Interesting that it’s different in the States.

  16. Maybe it was just too cold… it’s still winter in US?
    Don’t believe those global warming Bull Shitter!

    AnyWay January n early February is the best and the peakesttime to do business….
    Well if you r in greater china n Asia! Those Chinese Lunar New Year.

    But for the majority Christian nation it business peak before Christmas and those Solar New Year.

    Iphone 4 blow out the competition last year. Right now the iphone4 is 6 month old.
    Most probably Iphone 5 will blow out its competition but that’s another 6 month wait. April and may will be weak because everyone waiting for Iphone 5

    Maybe it’s time to pull out another secret weapon that Apple had reserve for. They been relatively conservative. Apple probably need to adjust their strategy 1 big yearly update to probably 1 big update plus another smaller won after 6-7 month later.

    While Google has already launch their Nuclear option in the name of Multitouch Android. Apple has suffer a bit but generally Iphone is doing well. Apple (and Microsoft) has their own Nucklear option that can wipe out Google completely and later go after the survivor of an even more fragmented Android.

    But as Jobs said in Boston 97….
    There is no need for Apple to have a mentality of
    Mac to Win… Windows needs to lose!

    But Jobs is not just a Strong strategist he is a wily Tactician.

  17. > Another hypothesis is that the mass of iPhone customers were never as brand-loyal as the company believed.

    I’m a case in point. I suffered with my dying RAZR until late 2009 waiting for the Pre. Saw it. Hated it. Couldn’t wait any longer. Caved and got an iPhone. Timing was everything. The iPhone is OK, but I’m looking forward to later this year when my AT&T contract is up, and I can get an Android phone. Three family members have the EVO, and I’m envious.

  18. I know the why there were so few lines for the iPhone.

    2011 is the year of Linux World Domination!

    < Hollow Evil Laughther, Tocata and Fuga in Dminor in the background > ;-)

    HP to Put Linux in Printers and PC’s: It’s the End of an Era for Windows
    http://www.linuxfoundation.org/news-media/blogs/browse/2011/02/hp-put-linux-printers-and-pc%E2%80%99s-it%E2%80%99s-end-era-windows

    By using Linux to capture what analysts predict will be a $30B market for tablets by 2012, HP is further validating Linux as the foundation from which next-generation mobile devices will run. Companies are choosing Linux because it supports more architectures and more devices than any other OS and is freely available and is able to be custom-branded. No other OS on the market can deliver on all of this.

  19. Curious plans.

    Nokia splits. The smartphone part will be “pwned” by MS. The cheap mobile part will be independent. They must deliver the “web for the next billion” phones. So I suppose they will build Android phones :-)

    Nokia outlines new strategy, introduces new leadership, operational structure
    http://www.nokia.com/press/press-releases/showpressrelease?newsid=1488004

    New company structure
    As of April 1, Nokia will have a new company structure, which features two distinct business units: Smart Devices and Mobile Phones. They will focus on Nokia’s key business areas: high-end smartphones and mass-market mobile phones. Each unit will have profit-and-loss responsibility and end-to-end accountability for the full consumer experience, including product development, product management and product marketing.

    Smart Devices will be responsible for building Nokia’s leadership in smartphones and will be led by Jo Harlow. The following sub-units now in Mobile Solutions will move under Smart Devices:
    - Symbian Smartphones
    - MeeGo Computers
    - Strategic Business Operations

    To support the planned new partnership with Microsoft, Smart Devices will be responsible for creating a winning Windows Phone portfolio.

    Mobile Phones will drive Nokia’s “web for the next billion” strategy. Mobile Phones will leverage its innovation and strength in growth markets to connect the next billion people and bring them affordable access to the Internet and applications. The Mobile Phones unit will be led by Mary McDowell.

  20. On a second look, Nokia’s strategy looks brilliant! Eric has been shouting from the roofs for years(?) that there is no economic sense in investing in your own mobile phone OS.

    So Nokia does the only sane thing. They take their Mobile OS section and “sell” it to MS (I suspect MS are going to sink billions in it). Then Nokia takes their hardware cheapo phone building and put someone else’s OS on it, Android.

    Note that the revenues and costs of both parts are independent.

  21. Nothing unexpected.

    RIM going the Android way, at least a small part of it:

    RIM PlayBook fondleslab to ‘run Google Android apps’ ‘Next generation’ Java VM
    http://www.theregister.co.uk/2011/02/11/rim_putting_android_apps_on_playbook_tablet/

    RIM intends to offer its own native SDK for the PlayBook operating system, but a Java VM would give users immediate access to tens of thousands of existing apps. The Android Market currently boasts around 230,000 apps, but sources speaking with Bloomberg said RM’s set up would provide access to around 130,000. RIM is already offering the WebWorks web-based application development kit, a means of building apps with HTML, CSS, and JavaScript

  22. > If Jobs were specifically distancing himself from a lackluster product then i’d consider that an even more ominous sign.

    JonB: Here’s the intro event for the Verizon iPhone. Apple sent Tim Cook, who made the bare minimum appearance one might expect – he blathered for a few minutes and then helped with a short Q&A. Quote:

    “Q: Can you address how many you’ll manufacture in the 1st year?

    Tim: I’m not going to get into our forecast. I think it’s fair to say that both of us think there’s tremendous opportunity.”

    In other words, they were vague well before the release date. They didn’t hold the announcement event anywhere near Cupertino, Jobs didn’t show up, and Jobs wasn’t involved in any way. As far as I know, Jobs hasn’t said anything at all about this product. Has he?

    Sure, you could blame it on his health or various strategic concerns – being too involved with the Verizon release might hurt Apple’s relationship with AT&T, for instance – but there’s no getting away from the fact that it’s fundamentally not a new product, so we don’t really need Apple to show us how it can make all our lives wonderful. I’m sure Apple is more excited about new stuff they’ve got in the chain than this. They didn’t waste much effort on it.

    kk man: I’m curious – what is your native language?

  23. @Patrick Maupin

    >> The lack of lines and crowds tells you nothing about the volume of vPhones shipped and delivered through the pre-order process.

    >No, it’s up to Apple and/or Verizon to do that. See above. BTW, this isn’t a criminal trial and we’re not a jury. We are definitely allowed to infer whatever we >want to from Apple and Verizon’s silence.

    Did not intend to suggest there was a trial. The few people I know that wanted vPhones pre-ordered them and they showed up last Saturday. Given the lack of social media “Got my vPhone” posts my completely unscientific and biased opinion is that vPhone sales fell far, far short of the hopes and dreams of Verizon and Apple.

    Now Nokia appears to have drank the Jonestown Koolaid.

    What a fantastic day to be a HTC, Motorola, or Samsung shareholder (of which I am not, for full disclosure).

  24. >Not sure what you mean. I thought it was SOP to allow pre-orders. At least, the AT&T iPhone 4 had a preorder period (and sold out, as well).

    I’d like to say that I meant first successful one, and that I wasn’t counting the the fiasco the 4 pre-order process was, but truth be told I simply forgot the 4 even had a pre-order. I got out before the iPhone 4, and AT&T botching the launch of an iPhone is nothing new, so it didn’t really stick out in my mind either.

    >“everybody” seemed to “know” there were 600K AT&T iPhone 4 preorders. Don’t know if that got validated later or not.

    “Everybody” seems to “know” lots of things about Apple, but they still don’t answer the questions until their designated times.

  25. Sure, you could blame it on his health or various strategic concerns – being too involved with the Verizon release might hurt Apple’s relationship with AT&T, for instance – but there’s no getting away from the fact that it’s fundamentally not a new product, so we don’t really need Apple to show us how it can make all our lives wonderful. I’m sure Apple is more excited about new stuff they’ve got in the chain than this. They didn’t waste much effort on it.

    Maybe I should unpack my original meaning.

    My understanding of the history of Apple has been that if a product would be “lackluster” (particularly in a brand that has a rep for being good) it would just get canned, specifically by Jobs(anecdotally he got given a “this is shit” red rubber stamp to save him from having to write it so much). I’m pretty sure i’ve seen much of the success of the i* brand attributed to this pre-selection.

    If Jobs was busy with being ill, that in and of itself should be worrying for Apply fans (particularly if no-one pulled the rubber stamp out in his stead). If Jobs has specifically not called shenanigans on a boring phone then there are many theories this could explain it but they all pretty much boil down to “hard times ahead” for the Apple branding.

    Of course this is entirely premature. Indications of first day crappy sales doesn’t necessarily mean the whole thing was a failure and there could be lots of reasons why it didn’t happen including Eric’s basic assumption which is that the rubber stamp got blind sided by it and your theory (as i read it) that this iPhone is an uninteresting sideshow until the next one comes out. But that explains my comment.

    We now return you to your regular programming. :)

  26. “They will focus on Nokia’s key business areas: high-end smartphones and mass-market mobile phones.”

    I really like this structure of separating smart phones and “dumb” phones. These two cater to two completely different class of customers. Nokia’s dumb phones are some of the best available in the market for their robustness and smart, intuitive UI.

    “- Symbian Smartphones
    - MeeGo Computers
    - Strategic Business Operations”

    Lol! Two things, the most obvious being that WP7 was not mentioned, which means they want to keep the option of other “Strategic Partners” if Microsoft blows. Secondly, they are definitely serious about developing their own platform, and will wait for the perfect opportunity to bring it out in mass production. I like it, this guy has a good long term vision, as well as an eye for short term profits. For his sake, I hope it’s not squinted.

  27. > My understanding of the history of Apple has been that if a product would be “lackluster” (particularly in a brand that has a rep for being good) it would just get canned

    I share that understanding when it comes to legitimately new products, but I think small upgrades to existing product lines are an exception. For instance, Apple gives predictable “speed bump” caliber changes to existing lines all the time. Hey, that iMac/iPod that came in five colors? For this season we’ve added “Paisley”! That macBook whose top option was an X gigabyte drive and Y gigahertz processor? We’ve bumped X and Y to slightly-larger values! Oh look, we’ve added a different screen option!

    Or: that phone you could use with AT&T? Now you can get it for Verizon!

    Stuff that’s deemed “insanely great” gets released as part of big Apple events. Stuff that’s important to stay competitive but not, on it’s own, surprising enough to make a splash…sometimes just shows up in the store without comment. Or maybe there’s a press release and a headline on the front page.

    If you forget for a minute the idea that this should be a move in an all-or-nothing war for smartphone supremacy and just think of it an ordinary product: suppose introducing now rather than rolling this change into the next Significant Event means they sell an extra, say, 500k phones. That’s still worth doing, right? Home runs are great but base hits are nice too.

  28. Last month’s predictions for posterity:

    http://www.eweek.com/c/a/Mobile-and-Wireless/Verizon-iPhone-Could-Sell-25-Million-Units-in-2011-Analyst-584340/

    BTW, AT&T is ramping down the price:

    $00.01 8GB iPhone 3GS refurb with cosmetic blemishes
    $19.00 8GB iPhone 3GS refurb
    $49.00 8GB iPhone 3GS new

    I wonder if they did a deal with ebay.

    Perhaps AT&T is only offering refurbished phones that its own customers traded in for iPhone — there should be a lot of those. OTOH, if ebay is offering $200 for any used 3GS, perhaps they have a deal with AT&T to efficiently recycle phones using a subsidy.

    I also see that Apple may be considering an iPhone nano for $200 with no contract (for when you only need 15 minutes of talk time, I guess). That would probably allow it to legitimately be in the $20-$50 range with a contract.

    This sort of price pressure is awesome. I’m sure Apple would love for a repeat of the iPod, where they own the category. It will be interesting to see how much profit they are willing to sacrifice from the customers who have to have iTunes and Apples app store, in order to drive prices down quickly and attempt to ramp market share.

    It will also be interesting to see who the glut of old iPhones affects more — Apple itself or Android sellers.

    And I’m sure a lot of iPhone users love iTunes and the app store. The question is, what percentage is that, and will Apple be able to drive the price down quickly enough to cause a huge enough bloodbath to kick everybody else out?

  29. I also see that Apple may be considering an iPhone nano for $200 with no contract (for when you only need 15 minutes of talk time, I guess). That would probably allow it to legitimately be in the $20-$50 range with a contract.

    That has got to be the one of the funniest damned things I’ve seen — ever.

    Let me know when the iPhone Shuffle comes out so I can grab one free at the next tradeshow. :)

  30. I was at the mall last night and spoke with the Verizon kiosk retailers there. According to them, they’ve seen a good bit of interest in the iPhone, but that they are limited by the supply available to them – they didn’t have one available to see me if I wanted one. They were still doing activations for people who bought them online, though.

    The lack of surge actually makes sense in this case. The main reasons I can think of that someone needs the new phone Right Now are: Gadget Freak, Status Symbol, and New Features. The gadget freak wants the new thing because it is new (and sometimes shiny). The iPhone V might be a new part number, but it really isn’t anything new (I’m piling the Apply FanBoys into this category). The Status Symbol people aren’t going to walk into a bar and impress people by saying “I just got an iPhone”. They’ve either already switched networks, or learned to live with the shame they experience. As a result, they aren’t going to be in a hurry.
    The New Features people realize that there is something which finally meets their needs on the market and are eager to buy it. I think the original iPhone did that (easy-to-use portable Internet device that worked everywhere). However, even for those people stuck on Verizon, there isn’t much of anything that the iPhone does that an Android phone can’t, even if you buy into the iFanboys – the Android phone may be ugly, slow, poor performing, etc., but it fundamentally has the same feature-set. As such, they aren’t going to go out, either.

    The result is that you will probably have a good number of upgraders over the next little bit converting, but no major surge. This is especially true when you consider that there’s a new model right around the corner. You’ve already had to wait this long – you might as well wait a few more month and leapfrog everybody else.

  31. >The result is that you will probably have a good number of upgraders over the next little bit converting, but no major surge.

    This seems plausible. The problem with your projection from Apple’s point of view, though, is that it implies iPhone V is largely mining their existing customer base, wiill neither significantly expand that base nor regain the market share lost to Android devices. That outcome is OK for looking good on the quarterlies but trouble in the longer term.

  32. You wrote ‘H*DS*PA’, when it is actually ‘H*SD*PA’ (High Speed Downlink Packet Access).

    ESR says: Thanks, typo corrected.

  33. In retrospect, I think this might have been a better move than I thought. There was never going to be a big group of people buying the iPhone V right off the bat. But I think that I missed something a little more subtle at first glance. The iPhone V was past the expiry date the moment it shipped (not new, existing accessories were slightly off due to button placement, no talk and data, etc). It had no wow factor, groupies or anything else. All it did for the customers is provide an outlet for some pent-up demand for a Verizon iPhone, but not much more. However, that’s only 1 of 3 of the important pieces involved.

    One of the hardest parts of the development lifecycle of any product is integration. For the iPhone 5, I’m going to assume that it’s going to support at least one variant of 4G service. However, anything that does so is also going to have to be backwards-compatible with the 3G (or 2G) service for areas where 4G service isn’t yet available. Plus, Apple needs to learn to deal with the internals of Verizon’s workflow, from order fulfillment, product support escalation, accounts receivable, etc.

    Verizon also has to worry about increased data loading, front-line customer support issues, order fulfillment, accounts receivable, etc.

    Developing the iPhone V right now probably took limited engineering effort – a new cell IC combined with a bit of layout rework and some basic extra drivers and status software. However, almost all of this was going to have to be done for a cross-carrier iPhone 5 anyways. By shipping this in the old form factor, they just managed to get a million beta testers for the core elements of the next generation of the phone. This cuts the number of new wireless protocols they need to deal with down from 3 to 1 (just 4G in the new version). It allows them to work the kinks out of all of the business side of things. This allows both Apple and Verizon to gear up and be ready to do a flawless (or is it gorgeous) job for the next major product cycle.

    From a market share perspective, Apple doesn’t get any immediate big sales out of this. However, it does mean that they can (perhaps) double the sales for the iPhone 5 when it comes out. Those people on Verizon who bought Android because of the features are more likely to wait a few extra months to get a new phone when eligible so they can get the new iPhone 5 instead of a new iPhone. Think of the iPhone V as one of the world’s largest beta test and marketing (not advertising) campaigns rolled into one that happens to make money. Suddenly it looks like a much better long-term strategy play.

  34. @Garrett:

    > Suddenly it looks like a much better long-term strategy play.

    I agree, for Apple. Verizon, maybe not so much. My thoughts on this a couple of weeks ago here:

    http://esr.ibiblio.org/?p=2864#comment-293782

    Of course, as soon as I posted that, several commenters criticized some relatively trivial aspects of the post while managing to completely miss the big picture…

  35. Mr. Maupin says:
    >Of course, as soon as I posted that, several commenters
    > criticized some relatively trivial aspects of the post while
    > managing to completely miss the big picture…

    So in other words a typical internet exchange.

  36. @PapayaSF:

    No, I hadn’t seen that. That’s very interesting. Apple, google, and all the carriers have learned well from Microsoft that the path to success is to commoditize the part of the system that’s not yours. Lets hope that they all succeed.

    Post-Bilski, one would hope that a commodities exchange was unpatentable, but what do I know?

  37. > So in other words a typical internet exchange.

    Heh. But one of the things that I like about hanging out here is that, while that’s not particularly atypical here, it’s not de rigueur.

  38. Maybe you should wait until Apple posts some sales numbers to call it a failure? You also have no indication that they won’t post sales numbers, other than your assumption it failed, and Apple will be too embarrassed to admit it.

    Verizon, on the other hand, has already bragged it did better than any other phone they’ve ever sold in the first two hours, so maybe it’s a 50/50 toss up if the sales are actually worth talking about. I certainly wouldn’t discount it.

    Of course none of this matters at the big-board-play level – the numbers, even if in the 2-5 million range (and that’s optimistic), wouldn’t convince you the phone would actually be a success.

    What would it actually mean to you for the Verizon iPhone not to have “bombed?”

  39. >What would it actually mean to you for the Verizon iPhone not to have “bombed?”

    Already said that. Sales of over 2.6M units, which would swing Apple’s U.S. smartphone market share just above statistical noise level. Less than that would be bombing, because Apple needs to move the share numbers to convince app developers that the platform isn’t stale and losing its appeal.

    Rumor has it Verizon sold 600K preorders. If that’s true (if!) then I’m projecting total volume of about 1.8M units before iPhone 5 comes out. If we get better numbers for preorders or first-day sales I’ll revise my estimate.

  40. Strictly speaking, you said “the way I was expecting things to play out was for a strong initial burst of sales to true believers to be followed with an unusually rapid fall-off…we know what success looks like; we’ve seen it often enough with the first-day frenzies surrounding previous iPhones.” Personally, that sounds like what you got.

    You say that what Apple needs to do, but failed to do — and hence they bombed — is to move share numbers to convince app developers that the platform isn’t stale. You’re saying a relaunch of a nearly identical previous device, just through a different distribution chain, was supposed to do this?

    As you take the time to specifically address this launch of a device that means nothing, I also feel strangely compelled to critique your post here. Did the event meet your expectations or not? You’ve said previously on Jan. 11 you expected this phone to change nothing. And now, you say, it changed nothing. So how did it disappoint your expectations?

    There is something about the flow of your argument that doesn’t make sense to me.

    I. “The Verizon iPhone is never going to sell well, and it ultimately won’t matter — iOS share will continue to drop.” [Jan. 11th]

    II. “But, it won’t matter much even if it sells well — even 2.6 million sales — as much as the new product launch last year!” It could be the same blockbuster success [my phrase, not yours] all over again, and it still won’t hold off Apple’s share losses. [Implicit from your previous post.]

    III. “The Verizon iPhone didn’t sell well at all. I can’t believe it sold so poorly! So you see, it definitely doesn’t matter. I can’t believe Apple and Verizon thought this thing could sell well — which they obviously did.” [Feb. 10th]

    My point is, if you’re arguing that the Verizon iPhone didn’t matter before and wasn’t going to sell well, then it seems logically inconsistent now for you to raise a big fuss about how the Verizon iPhone didn’t sell well…and therefore doesn’t matter. By your own definition of failure and success for Apple, the conclusion was decided long before any of this data was even gathered.

    The Verizon iPhone, by your argument, was irrelevant before it even hit the stores. You seem to be assigning a significance to it that you previously denied it — only to be overwhelmed by its banality. In counterpoint to the banality, you argue that Verizon and Apple must be fools to have assigned this significance to it.

    You also have your own definition of success and failure, and you are adamant that is the definition that matters. But that’s another argument that I’d rather not have.

  41. >You’re saying a relaunch of a nearly identical previous device, just through a different distribution chain, was supposed to do this?

    I listened to Apple fanboys yell at me for most of a year that none of Apple’s share losses to Android were because of Android’s quality. No, I’d hear, Android is a pile of camel vomit, and temporarily looking weak only because Apple isn’t multicarrier in the U.S., and when the V-phone comes out you’re going to get yours. It’s the Apple partisans who created this criterion of success, not me.

    >Did the event meet your expectations or not?

    No. As I’ve written, the product underperformed relative to what I expected.

    >You’ve said previously on Jan. 11 you expected this phone to change nothing.

    That’s right. Because I’m not an Apple fanboy, I think iOS has been getting the shit kicked out of it on the merits. I expected it to continue getting the shit kicked out of it during and after the iPhone V launch, and that’s what we’re seeing.

    >So how did it disappoint your expectations?

    I expected the initial launch to at least bring out enough of the Apple faithful to make a buzz. That didn’t happen. Instead, first day fell over thud.

    >My point is, if you’re arguing that the Verizon iPhone didn’t matter before and wasn’t going to sell well, then it seems logically inconsistent now for you to raise a big fuss about how the Verizon iPhone didn’t sell well…and therefore doesn’t matter. By your own definition of failure and success for Apple, the conclusion was decided long before any of this data was even gathered.

    You only see an inconsistency because, like the Apple fanboys, you’ve consigned all those glowing predictions about what would happen when Apple went multicarrier in the U.S. to the memory hole. It’s like an inverse of the AGW frauds last year confidently predicting that today’s children would grow up never seeing snow – well, we’ve got a deep winter outside and suddenly nobody remembers their own prognostications.

    What matters about the iPhone V having a limp first day is that it falsifies the Apple-fanboy fantasy they were so loud about. The fault that has allowed Android to go from 8% to 33% plurality share in a year lay not in AT&T’s inadequate backhaul but in the iPhone itself.

  42. I thank you for your reply.

    Being emotionally invested in a platform and being high profile enough to draw the ire of an entire community of raving idiots sounds like a really rough position to be in. Seriously.

    I still think your hypotheses are extremely nonsensical, yet I can’t even hold my own in this discussion due to the [justifiable] background of your personal bitterness against these attacks by “fanboy logic” and the [justifiable] assumption of my bias pre-empting my rationality. And in the end, I just want to pick at you because I think you’re incorrect. And who’s that going to help? I AM an idiot fanboy.

  43. >That seems far above “statistical noise level,” even before Verizon got the iPhone.

    You misunderstand. I’m saying sale of 2.6M units would swing the numbers, not that Apple’s present total market share is at or near noise level. 2.6M would be about 4% of a smartphone market of 65M users.

  44. >SeekingAlpha is estimating 2.4 million units so far, and 4 million units this quarter:

    Can’t read the WSJ aricle, no key to paywall.

    SeekingAlpha also speaks of a recent significant slowdown in sales. And there’s something odd about his figures – the table appears to claim 1M first-day sales, when other reports say it was around 160K. Nothing in the blog entry hint at where that round number and the subsequent Verizon sales numbers come from. So it seems pretty vaporous to me.

  45. It is being claimed that the preorder process went too smoothly for Verizon iPhone, as in not enough lines.

    They can’t impress us by telling us the actual numbers; the only way we are allowed to be wowed is by video of the humanity of it all.

    But don’t worry — Apple’s figured out a fix: no preorders for iPad 2.

    http://www.beatweek.com/news/8263-ipad-2-preorder-balk-is-revenge-for-verizon-iphone-4-coverage/

    http://www.gizmocrunch.com/apple/5717-ipad-2-preorder-verizon-iphone

    http://grayson.blogs.tuscaloosanews.com/13494/no-ipad-2-preorder-but-plenty-of-places-to-buy-it-come-launch-day/

    Of course, not everybody is automatically buying the company line:

    http://www.cultofmac.com/is-apple-facing-supply-serious-shortages-on-the-ipad-2-speculation/84849

  46. @esr:
    “Can’t read the WSJ aricle, no key to paywall.”

    copy and paste the title into google search, then clink on the link from google, and that will get you past the paywall.

  47. >It turns out that the actual number of CDMA iPhones sold to Verizon customers was around 3 million units in the quarter.

    Your cite does not support this inference, and in fact very carefully refrains from doing so. And there are other reasons to be skeptical; given the tital size of the U.A. userbase, 3 million Verizon iPhone sales would have noticeably moved the Kantar numbers.

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