Verizon iPhone Demand Could Hit Nearly 25 Million, Theoretically

It’s indisputable that Verizon is going to sell a lot of iPhones when the device finally arrives on its network. The question is how many? And the answer is as varied as the research houses trying to pinpoint the number. On the low end, analysts have been calling for nine million, and at the highest end, 12 million.

Until today, when R.W. Baird & Co. analyst William Power reset those parameters with a bullish new potentiality: 23.8 million iPhones sold to Verizon subscribers in the first year.

That’s about double the top end of the range I mentioned (it’s also more than a quarter of Verizon’s current subscriber base). But according to Power–who cautions that this is a “directional number” and not a forecast (there are constraints around how many devices Apple can actually ship)–a recent Baird survey of 1,000 smartphone users supports it. From the survey:

29 percent of current Verizon feature phone owners said they will “probably” or “definitely” upgrade to the Verizon iPhone in the next three months. The carrier has roughly 64 million postpaid feature phone users, so that’s 19 million potential iPhone upgrades, assuming eligibility.
25 percent of Verizon’s current smartphone users said they will “probably” or “definitely” switch to the iPhone. That’s 4.8 million additional potential iPhone sales, again assuming eligibility.

Grand total: 23.8 million potential Verizon iPhone sales–from the carrier’s installed base alone. Add to that the 5.6 percent of current AT&T iPhone users who told Baird they planned to switch to Verizon and that number rises to nearly 25 million.

Which sounds fantastical, seemingly even to Power, who is standing by his current forecast of 10 million iPhone activations at Verizon. But it does suggest, strongly, that demand could be far greater than anyone has anticipated.

That’s great for Verizon (though perhaps less so for its network) and even better for Apple. Not too bad for AT&T, either. Doesn’t bode well for Android handset makers like Motorola Mobility, though. As CEO Sanjay Jha said during an earnings call yesterday, the company has already seen a slowing of device shipments around news of the Verizon iPhone. “Since the announcement of the iPhone, we have seen some slowdown in our sell through of devices at Verizon,” Jha said. “There was anticipation of devices coming to Verizon even prior the announcement of the iPhone.”

Below, a carrier-by-carrier breakdown of interest in the Verizon iPhone. Each pie chart represents the base of subscribers at each carrier who plan to purchase a smartphone in the next three months. Note: the 25 percent / 29percent numbers above refer to the percentage of the total base of Verizon respondents (i.e. Verizon respondents who plan to purchase a smartphone in the next three months plus those who don’t).

demodave

Let’s say Apple does not manage to sell 25 million iPhones to Verizon. Let’s say they “disappoint” on that possibility and sell only 15 million iPhones to Verizon. That’s still a 20% beat over the most bullish forecasts. That also roughly $10 billion in revenue ($600 per phone including subsidy to Apple – I like round numbers) or $10 per share. That seems encouraging to me, but I don’t think that goes directly to eps, which would presumably at $150 to share value at a P/E ratio of 15:1. Eep. :)
Anonymous

Enough with the Verizon/iPhone hype already. As it turns out, the VZ version is stuck with the same limitation as other smartphones: you can’t use telephony and internet (e.g., web browsing) at the same time. (Perhaps they’ll arrange it so that data will go over WiFi, if available.) On a head-to-head basis, the AT&T version will be the superior product. Yes, AT&T has congestion problems in certain markets, such as NYC. However, in most markets their network is just fine. People should recognize the iPhone on VZ for what it is: a loss leader to pave the way for a future LTE (4G) version of the iPhone at a later date.
http://twitter.com/OwnedbyGod Brian Daniel

Does that mean Sprint and T-mo are the places non-apple-fanboys go now?
Anonymous

The Verizon iPhone will not be a loss leader. Verizon will make more from it than any phone they have ever sold. In this survey, more of their feature phone users express a desire to become iPhone users than have become smartphone users in all of Verizon’s history.

All 3G phones lead to 4G phones, and all 4G to 5G. Means nothing. Getting an HD video editor and hundreds of thousands of other powerful desktop class native C apps in your phone is meaningful. Being online all the time, not just on the phone network, but on the Internet with a PC class device is meaningful.
Anonymous

There a couple of other giant CDMA carriers worldwide, too. And a new iPhone and iOS in 5-6 months. It is the iPod all over again.
Anonymous

Motorola death watch. 75% of their business to Apple, 10% to Samsung, 15% to Other, just like the music player market.
Anonymous

Yes, if they survive.
Anonymous

Yup. Agreed.

Apple demonstrates that a marriage of hardware and software does equal a hot selling product.
Anonymous

I have no doubt that Apple will turn a profit on the VZ iPhone, but VZ itself? Doubtful. First, there’s the handset subsidy that goes to Apple. Up until now, developmental costs were amortized over a 1-year product life cycle. This handset, I expect, has a 6-month life expectancy, with a commensurately higher subsidy required. Second, VZ will have capital costs to increase the capacity of their legacy 3G network — both diverting investment from the new 4G network and similarly, with a relatively short amortization period. Third, VZ loses the revenue streams from V Cast and their other pay-for-download services. Fourth, it’s not as if people who really wanted an iPhone, and who had freedom to pick their wireless provider, have been twiddling their thumbs for the past 3 1/2 years. VZ will be taking business primarily from people who were wedded to VZ in the past, and it’s not clear that the margins will be that much better than with their previous handsets.
Anonymous

Does it really?, Verizon iPhone 4G is NOT selling in the thousands, this is not speculation, its a fact!

Verizon iPhone Demand Could Hit Nearly 25 Million, Theoretically

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