Verizon iPhone On the Way - But Not Before Christmas

Apple Inc. (Nasdaq: AAPL) will escalate the war for smartphone dominance in early 2011 by releasing a new version of its iPhone to run on the popular Verizon Wireless (NYSE: VZ) network, the biggest U.S. carrier by subscribers.

However, the phone won't make it out in time for the Christmas season, as many had hoped.

Apple will be ramping up to mass produce the new touchscreen handset by the end of 2010 and release it in the first quarter of 2011, people familiar with the matter told The Wall Street Journal. While the phone would be similar to the iPhone 4 sold by its current carrier, AT&T (NYSE: T), it would be based on an alternative wireless technology used by Verizon, the people said.

The Verizon iPhone will mark the end of AT&T's agreement with Apple that gave the telecommunications giant exclusive rights to market and sell the handset since 2007, when Apple Chief Executive Steve Jobs introduced the original iPhone.

Verizon has been testing its networks and capacity to handle the heavy data load by iPhone users, seeking to avoid the kind of bad publicity that plagued AT&T after booming sales of data-hungry iPhones crippled its network.

AT&T's iPhone customers have complained endlessly about dropped calls and poor service, especially in the user-heavy cities of New York and San Francisco.

Verizon's network is untested in terms of whether it can withstand millions of iPhone users, but studies by Consumer Reports and others have concluded Verizon has a better network than AT&T, The Journal reported.

By making the iPhone available to Verizon customers Apple is striving to fend off an assault on its business from several fronts. The move is expected to help the iPhone compete in its battle with Google Inc.'s (Nasdaq: GOOG) Android software, which has made significant inroads on Apple's market share.

The innovative iPhone and its operating system software package, known as iOS, was knocked from its lofty perch among U.S. technophobes by Google's Android handset software in the second quarter of this year.

While Apple is on track to sell 40 million iPhones across the globe this year, it is under pressure in the United States from Android. Android handsets, which have been heavily promoted by Verizon, had 27% of the U.S. market in the second quarter among new U.S. smartphone users, compared with 23% for iOS, market research firm Nielsen Co. said on its website.

Android's startling success may mean Google will overtake Apple's iOS globally earlier than previously expected, Will Stofega, program director at research firm International Data Corp. (NYSE: IDC) in Framingham, Massachusetts told Bloomberg. Earlier this year, IDC said it expected Android to overtake iOS globally in 2011.

And in its boldest move yet to return to prominence in the mobile business, Microsoft Corp. (Nasdaq: MSFT), recently unveiled a lineup of smartphones that use its revamped Windows Phone 7 mobile-operating system.

The software giant spent two years developing the new operating system as the centerpiece of its assault on the crowded smartphone market, where it has struggled to gain a foothold.

Still, the iPhone may get a significant boost from Verizon's customers, according to analysts and polls.

Many Verizon customers have been clamoring for the iPhone for years, and iPhone lovers in New York - a Verizon stronghold - were thrilled by the news.

"I love the iPhone, but AT&T's coverage is terrible compared to Verizon," Victoria Tlot, a St. John's University student told The New York Daily News. "If Verizon comes out with the iPhone, I'm going to switch."

Verizon could add more than 10 million U.S. iPhone customers, Toni Sacconaghi, a Sanford Bernstein analyst, told The Journal. And a poll by ChangeWave, which surveyed 1,212 new smartphone owners, showed that 34% of consumers would have opted for an iPhone instead of a different smartphone had it been available through their carrier.

"The results show the continuing threat the iPhone poses to the rest of the industry," said ChangeWave Vice President of Research Paul Carton.

Separately, Apple is developing a new, fifth-generation iPhone model, anonymous sources told The Journal. It was unclear how soon that version would be available to Verizon or other carriers.

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