The ongoing saga of the Verizon iPhone entered a new chapter yesterday when the Wall Street Journal published a report claiming the oft-rumored, always-denied smartphone would be coming in early 2011. Reports claiming that a new version of the iPhone separate from than the current model line, now in its fourth-generation with the iPhone 4, that has been exclusively carried by AT&T (NYSE: T) since 2007 in the United States have been swirling about the mainstream and industry press since the beginning of 2010. A week hasn’t gone by without a new rumor confirming the late-2010, early-2011, or even mid-2012 release of an Apple Inc. (NASDAQ: APPL) iPhone built specifically for service on the country’s most successful mobile phone carrier, Verizon (NYSE: VZ).
Yesterday’s Wall Street Journal article, citing multiple sources close to the matter, added little to the evolving narrative of Apple’s unconfirmed relationship with Verizon. The report claims that during the first quarter of calendar 2011, Apple will unveil a brand new line of iPhones. These iPhones will not be branded in the numerical progression of previous iPhone releases like the iPhone 3GS or iPhone 4, but a wholly new line built specifically for Verizon’s network. While it’s possible that one of these Verizon iPhones will be built with a CDMA chipset for support on the telecom’s existing 3G network, it is more likely that it will be built using LTE (long term evolution) technology built specifically for Verizon’s LTE 4G network which is set to be rolled out throughout the first half of 2011.
The WSJ‘s sources also echoed Kaufman Bros.’ analyst Shaw Wu’s report from earlier this week that Apple will be releasing phones in early 2011 that have significantly different form factors than current iPhones. Wu’s report, based on contacts with Apple’s component suppliers abroad, describes a slimmer iPhone Nano or iPhone Mini with a candy bar shape as well as a larger iPhone with a form factor not unlike Dell‘s (NASDAQ: DELL) Streak tablet computer. The WSJ did claim a CDMA iPhone will be manufactured by Pegatron Technology, subsidiary of Asustek (TPE: 2357), but this has been contradicted by other reports from sources like Piper Jaffray analyst Christopher Lawson. Pegatron declined to comment.
Following the report’s publication, Verizon president and COO Lowell McAdam was asked to confirm the WSJ story while speaking at a press conference during the CTIA Conference in San Francisco. McAdam told the assembled press that the story was untrue and that if anyone will be announcing a Verizon iPhone, it’ll be Apple. “I can’t give you any insights, but I think Apple is the one that has to make that announcement.” Investors wouldn’t be wrong in interpreting McAdam’s remarks as standoffish. The WSJ report was expanded later in the day to describe the thorny negotiations between Apple and Verizon over retail options and sales of digital content like apps. Reports that the two companies have had contentious meetings about a smartphone partnership are as common as those about the device itself, but the updated WSJ report did provide new details. Things broke down between the companies when Apple demanded that Verizon not allow its retail partners to sell the new iPhone. Things became worse when Verizon refused to give up their own digital retail space for content like downloadable music and apps in order to make space for Apple’s famous iTunes and App Store retail options.
While Apple still has a commanding presence in the smartphone market with 13.5 million iPhones sold in the United States alone, they will need to settle their issues with Verizon and other carriers like Sprint (NYSE: S) and T-Mobile USA (ETR: DTE) soon. If they don’t, they run the risk of being completely overtaken by smartphone manufactures like Motorola (NYSE: MOT) whose products run Google Inc.‘s (NASDAQ: GOOG) Android operating system. comScore Inc. found that there are 10.9 million subscribers using Android phones in the United States as of August 2010. There were a mere 866,000 the year before.
Investors should pay close attention to the situation as it develops over the next three months. While Apple’s steady growth may not be profoundly affected by the announcement of a Verizon iPhone, Verizon’s stock just might. Verizon is trading at just above $33 today, close to is 52-week high of $34.13. Shares haven’t traded above $40 since 2008 but a partnership with the world’s most valuable technology company could make Verizon a very good portfolio addition indeed.
As of this writing, Anthony Agnello did not own a position in any of the stocks named here.
Daily Trader’s Alert — Yours FREE! In each issue, InvestorPlace’s Chief Technical Analyst Sam Collins gives you his take on what’s slated to impact your portfolio during the trading day. It also includes Sam’s Trade of the Day — his daily stock or ETF pick complete with chart and trading target. Daily Trader’s Alert is yours free, sent right to your e-mail inbox each trading day before the market open. Click here to get started now.