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Ron Galloway

Ron Galloway

Posted: July 10, 2007 04:42 PM

iDenial: How Verizon Made The Biggest Corporate Mistake In 25 Years


On June 20th Verizon's CEO Ivan Seidenberg remarked "but we don't believe it (the iPhone) changes the game plan that we put in place for how we segment the market and what we think will attract the wireless user."

"[Apple CEO] Steve Jobs is a brilliant guy and AT&T is obviously a very formidable company," Seidenberg said. But, he said, "the burden is on them to prove that the market will change."

Earth to Ivan, the market has changed.

When I dropped my daughter off for violin lessons today, her teacher, who is in her 60's, could not wait to show off her new iPhone. She was near a Apple Store in Atlanta, and said she could not help herself. She bought two. This is no Gen-x, yuppie, postmodern consumer. This is an elderly violin teacher, who bought $1,200 worth of phones and will spend another $1,500 per year with AT&T for service.

Apple has sold one million iPhones in its first week. Half of those iPhones were sold to customers from a carrier other than AT&T. Reports are that 25% of all new iPhones sold are to Verizon customers, who then switch to AT&T. Verizon loses $1,000 per year for every customer who leaves.

Analyst Gene Munster pegs iPhone sales for 2008 at 12 million units, meaning, if the current trend holds, Verizon will lose 3 million customers, or $3 billion in revenue to AT&T. In 2008 alone. Not to mention the halo effect of being the iPhone's carrier.

Reports are Verizon was offered the iPhone first, but refused to implement features Apple wanted, such as Visual Voicemail, and balked at giving up part of their revenue stream to Apple.

I believe Verizon's shortsighted decision to spurn the iPhone will be remembered as the biggest corporate mistake since IBM decided they didn't want to be in the operating system business, thereby begetting Microsoft.

"Hey Ivan, this is Steve. Can you hear me now?"

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