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War of Words

The blogosphere has been humming the last 24 hours with talk of the big carriers and the iPhone, since USA Today on Monday came out with a story quoting Verizon Wireless vice president Jim Gerace to the effect that the No. 2 U.S. wireless operator walked away from a deal to be the exclusive provider for the hot new Apple device.

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

AllKindsOfThings 12/5/2012 | 3:15:39 PM
re: War of Words Indeed - to take "a few" percentage points of the handset market will be no piece of cake - even for Apple.

Reaching a single percent - already IS the 10 Million devices Mr. Jobs has given out as a global target. Not really all that hard to do? Well this is a market where Nokia alone shipsmore than 750 thousand devices EVERY single DAY, counting 24/7

And Apple is new to this. iPod don't requires any contracts, no maintenance, no configuration issues, no software compatibility, no installation - handset have all that plus security and privacy issus.

Even as the iPhone once again shows off several great ideas and underlines Apples user interface expertise: Apple does not enter this battle as a category leader, as with the iPod, nor is much of the iPhone technically really new.

Hence a functional gap between iPod and other options is rather small compared to quality offerings of Nokia, Motorola, Samsung or SonyEricsson.

The rather disappointing wireless properties will also take their toll: Acceptance of the device outside the US will be dramatically bad, as in many places no upper end device will sell if it has no 3G.

The announced channel limits will do its own to keep the device from becoming Mass market.

And that assumes that the already established device vendors will fall totally asleep and not promote anything new of their own - quite unrealistic!
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