Motorola Mobility's shares dropped by around 8% today after CEO Sanjay Jha issued guidance that competitive actions in the first quarter of this year by customer Verizon Wireless (VzW) could have "an impact" on Motorola's financial results during the forthcoming period. VzW has announced that it will begin selling the Apple iPhone next month.
In an effort to understand the potential impact of the VzW iPhone launch on consumer purchasing intentions, Strategy Analytics undertook a small scale qualitative survey of 72 smartphone owners and intenders in San Diego, CA. The research was conducted in the week ending 21st January 2011 with consumers in the following categories:
- 26 iPhone Owners
- 22 VzW Droid Owners
- 24 VzW Feature Phone Owners (all of whom intend to purchase a smartphone within the next sixty days)
Note: Due to the small sample size and the narrow geographic market, we caution that these results should be considered as purely indicative.
Respondents were asked how likely they were to purchase a Verizon Wireless iPhone in each of three time frames:
- As soon as the Verizon Wireless iPhone is launched
- When their next upgrade is due, and
- As soon as a 4G LTE version of the iPhone is launched by Verizon Wireless
Respondents were also asked to write down the reasons for their answers.
Our results would appear to support the view that the launch of the iPhone will have a greater negative impact on Motorola than AT&T.
Of our 26 current iPhone owners, only 3 are keen to switch to Verizon Wireless as soon as the iPhone is launched. The same number said that they would consider switching when they are out of contract with AT&T. Only 7 out of the 26 iPhone owners said they would consider switching even if VzW were to launch a 4G LTE version of the iPhone.
Analysis of respondent comments suggests that while they are tied into a fixed term contract (5 of the 26 mentioned this) these individuals are also generally happy with AT&T service. Exactly half - 13 respondents - said they were happy with AT&T and had no reason to switch provider.
By contrast, our 24 VzW customers who are actively investigating the purchase of a smartphone are much more interested in the iPhone. Fully half of these individuals said they were either Somewhat Likely or Very Likely to buy the VzW iPhone as soon as it is launched. 19 out of the 24 said they would consider buying one when they next come to upgrade their phone.
This segment is where the iPhone represents a major competitive threat for Motorola. However, the fact that these individuals are not certain that they will buy an iPhone (11 of them said they were just 'Somewhat Likely') as well as many of the participant comments, would suggest a potential reactive strategy for Motorola should be one based on price. 6 of these 24 individuals explicitly raised concerns about the price of the iPhone, and told us that their decision would depend on the purchase cost.
Lastly, feedback from our 22 current Motorola Droid owners suggests that while they are likely to consider getting a VzW iPhone, they will not be rushing to return recently purchased Droid devices to VzW and exchange them for the iPhone.
Only 2 of our 22 Droid owners said they were 'Very Likely' to purchase the VzW iPhone at launch. Both of these mentioned that they had been waiting for VzW to launch an iPhone because they do not live in areas with strong AT&T coverage. A further 8 Droid owners said that they are very likely to purchase a VzW iPhone when they are due to upgrade their device. However, 6 of the 22 Droid owners had no intention of purchasing the iPhone whatsoever. These individuals all said that they preferred Android, many adding that they consider Android devices to have better features or capabilities.
For a full discussion of consumer preference for Smartphone Operating Systems, Wireless Device Lab clients should refer to this report.