Market Playground

By Brian “Newman” Rayl

Rumors of Verizon (NASDAQ: VZ) getting access to sell the Apple (NASDAQ: AAPL) iPhone have been circulating almost as long as the iPhone itself. Every year the drums get pounded and people start talking about the mythical Verizon iPhone. This year, however, those drums are becoming too loud to ignore, and it is quite possible that the Verizon iPhone will be launched as early as January of next year according to an article in Bloomberg. While this article was released at the end of June, a number of key details have emerged since then which only adds fuel to the fire.

The latest and perhaps most credible of the reports now comes from an October 7th article from the Wall Street Journal citing sources familiar with the matter. The article states that the new iPhone would start being mass produced by the end of the year, and it would be released in the first quarter of 2011. It also states that Verizon Wireless has been meeting with Apple, adding capacity, and testing its networks to prepare for the heavy data load by iPhone users.

According to TechCrunch, “sources with knowledge of this entire situation” have advised that Apple has submitted orders for millions of units of Qualcomm (NASDAQ: QCOM) CDMA chip sets. Well, it turns out that an overseas company has confirmed that Apple has officially picked Qualcomm now for both the iPhone and iPad chips. For those unfamiliar with cell phone networks, CDMA is the network in which Verizon (and rival Sprint (NYSE: S)) work off of, where as AT&T (NASDAQ: T) runs on a GSM network. Apple has never ordered chipsets from Qualcomm before, instead dealing with Infineon. The chip sets were ordered for delivery in December, indicating a January release is possible and CDMA iPads may follow shortly.

The rumor mill roared even louder when it was announced that Verizon CEO Ivan Seidenberg would be the keynote speaker at the 2011 Consumer Electronics Show (CES) on Thursday, January 6th. Historically, big announcements are made at these keynote addresses. In 2010, Microsoft’s (NYSE: MSFT) Steve Ballmer was the keynote speaker and released the details of Project Natal for the XBox 360, one of the most intuitive and simple natural user interfaces yet to be announced. In 2009, it was the resurgence of the now Hewlett-Packard (NYSE: HP) Palm platform with the release of the Palm Pre and the new WebOS operating system, which at that time was coined the “iPhone killer”.

Coincidentally (or not), Macworld 2011 will be held in San Francisco a few weeks later on January 27th, 2011. A list of speakers has not been released yet. Apple did not present at Macworld 2010, so their inclusion in the 2011 meeting would seem unlikely, but certainly not out of the question.

While they won’t loose access to selling the iPhone, the effects of AT&T loosing their exclusive agreement to the device could be devastating. According to a report released by Credit Suise, they surmise that if the Verizon iPhone were to be released by mid-February, an estimated 1.4 million subscribers, or 23% of current iPhone users, would drop AT&T and switch to the new Verizon iPhone by the end of 2011. Verizon, on the other hand, would double from their current 2 million subscribers to over 4 million by the end of 2011 according to the report. The iPhone has accounted for approximately 30% of all new AT&T subscriptions in 2009 and 2010.

While iPhone sales have been strong, this exclusive agreement with AT&T has limited Apple’s ability to compete on a wider scale with some of the other phone manufacturers. Google’s (NASDAQ: GOOG) Android platform has soared in popularity in the recent year.

What does this all mean? It means that in less than 6 months, there should be a lot of VERY happy Verizon customers.

Disclosure: Long AAPL, GOOG, and I will be the first in line for a Verizon iPhone.
Contact the author at Newman@MarketPlayground.com