War of Words
Cingular ended up signing on to be the exclusive carrier for the iPhone when it debuts in June.
"We said no," said Verizon Wireless ' Gerace. "We have nothing bad to say about the Apple iPhone. We just couldn't reach a deal that was mutually beneficial."
Key to Verizon's decision to walk away was Steve Jobs' insistence on selling the sleek new phone only through Apple Inc. (Nasdaq: AAPL)-approved distribution channels, which don't include big retailers like Wal-Mart and Best Buy.
Gerace's comments have fueled speculation that Cingular Wireless essentially kissed Jobs' ring and agreed to whatever terms he dictated in order to ink an exclusive iPhone deal. Not so, says Glenn Lurie, who discussed the partnership at a press conference at the Consumer Electronics Show in Las Vegas earlier this month.
"I'm not sure we gave [away] anything," Lurie allowed, adding, "I think they bent a lot."
You can bet that most of this badinage is just spin, as the two carriers jostle over a highly visible phone that at best will take a few percentage points of the handset market in the next couple of years. Speaking yesterday on the conference call following Verizon's earnings report, COO Dennis F. Strigl was eager to point out that "we’re very confident with our strategic partners," who he expects will roll out models that will rival the iPhone, at much lower prices, in 2007.
"The iPhone market, the iPhone product is something where, quite frankly, we’re happy that we’re not first to market," added Strigl.
The war of words points up a potential basic flaw in Jobs' iPhone strategy: He's entering a mass market, hoping to bring Apple's cachet and marketing prowess to customers used to falling prices for phones with added features. Keeping the iPhone out of the hands of the hoi polloi who shop at Wal-Mart is directly in keeping with Apple's hipper-than-thou marketing campaign; but it's not clear that'll be a winner in the huge cellphone market.
Just ask Motorola Inc. (NYSE: MOT), which scored big with the RAZR when it first went on sale at $500 (about the same as the iPhone), but has seen the price drop to effectively zero with online rebate offers from carriers. (See The Perils of Being Slim.)
— Richard Martin, Senior Editor, Unstrung