Optical/IP Networks

Is the iPhone Becoming AT&T's RAZR?

3:25 PM -- The iPhone is still riding high. AT&T Inc. (NYSE: T) says it sold more than 1.6 million units to new and existing customers in the first quarter of 2009. Apple Inc. (Nasdaq: AAPL), meanwhile, shifted 3.79 million units in the same period, representing a 123 percent unit growth over the year-ago quarter. (See Apple Reports Q2 and AT&T: Another Bumper iPhone Quarter.)

Pretty impressive, huh?

I have to wonder if the Apple iPhone is becoming for AT&T something like the RAZR was for Motorola Inc. (NYSE: MOT) a couple of years ago: a star performer that isn't easily replaced when it becomes obsolete.

Consider the numbers: AT&T said that more than 40 percent of the 1.6 million iPhones added in the quarter were bought by new subscribers. That means that around 640,000 new users bought into a monthly contract with AT&T to get an iPhone. In all, AT&T added 875,000 higher-value monthly subscribers during the quarter, so almost three-quarters of its new customers on contract bought an iPhone.

AT&T says that in the first quarter, "integrated devices" (3G smartphones and other devices) accounted for more than 100 percent of its postpaid net adds. But it is obvious that the majority of these sales were of the iPhone. (See AT&T Reports Q1.)

No wonder the operator is said to be keen on extending its contract with Apple past 2010!

All the same, does this remind anyone of the Motorola RAZR? Motorola launched the RAZR -- the hip, must-have handset of its day -- in 2004 and shifted 50 million units in less than two years.

As the RAZR cult grew, however, Motorola tended to neglect developing other models. When Moto's then-CEO Ed Zander was asked how he would follow-up on the RAZR craze, Zander replied, "More RAZRs."

Clearly, AT&T is beholden to cellphone vendors for new models, but that doesn't mean the carrier couldn't do more to look beyond its current cash-cow. The operator didn't even mention the BlackBerry Bold or Nokia Corp. (NYSE: NOK) 5800 XpressMusic phone on its latest call.

There may be new models coming from Apple, and the iPhone cult could continue for a couple of years to come. If we know anything about the cellphone business, however, it's that the market is fickle and driven by a desire for the new thing.

There are signs that even AT&T recognizes that today with the leak of an internal document instructing salespeople on comparisons between the iPhone and the Palm Inc. Pre.

— Dan Jones, Site Editor, Unstrung

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