Verizon Wireless unveils Motorola DROID Smartphone

| Oct 30, 2009 | Mobile Devices | Competitive Intelligence Report

| Analyst: Avi Greengart

Current Perspective: Very Positive
Vendor Importance: Very High
Market Impact: High

Event Summary

October 28, 2009 -- Verizon Wireless unveiled DROID by Motorola, the first smartphone powered by Android 2.0, which includes Microsoft Exchange support and turn-by-turn navigation. The DROID is a 13.7mm QWERTY slider with a 3.7”, 480x854 WVGA capacitive touchscreen, 3G, WiFi, 5MP camera, and a preloaded 16GB microSDHC card. The DROID will be available exclusively at Verizon Wireless in the U.S. on November 6 for $199.99 with a new two-year contract after a $100 mail-in rebate.

Analytical Summary

• Current Perspective: Very positive on the Motorola DROID launch at Verizon Wireless, because this phone is going to help everyone involved; Motorola badly needs to prove that its strategy of focusing on Android can produce results, Verizon Wireless needs something to stem the tide of iPhone defections, and Google needs better devices from more OEMs at more networks. The DROID is extremely impressive. It is easily the best hardware Android has seen, and it incorporates major improvements to the OS, including turn-by-turn navigation. There is pent-up demand for an exciting touchscreen smartphone among Verizon Wireless customers, it is priced right, and the carrier is giving the device an enormous marketing push. If the DROID launches bug-free – our unit has been rock solid so far, but we have had it for just over a day – it will be a surefire hit this season. However, that does not make the DROID an “iPhone killer;” these are very different products with different brands, feature emphasis, and user experiences.

• Vendor Importance: Very high to Motorola, as its Android phones are a giant reset button for the company, which continues to lose hundreds of millions of dollars per quarter as it transitions to the new product line. It is also a critical launch for Verizon Wireless, which has lacked differentiated smartphones, and Google, which needs to build an installed base for Android.

• Market Impact: High on the smartphone market, because Android has not been a significant factor in the U.S., and that is about to change in a fairly significant way. Verizon Wireless is the largest U.S. carrier with historically low churn, but its growth has been slowing in large part to iPhone defections. The carrier is putting a huge amount of money into the DROID launch, which we expect will break through the clutter this holiday season. The biggest impact may be to PND (personal navigation device) vendors such as Garmin and TomTom; navigation is rapidly becoming a “free” standard feature on smartphones. While Android 2.0 will not kill the market for standalone devices, it will exert extreme price pressure on them, crushing profit margins.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

| Client access - Full report in Wireless Services - U.S. | More information

Recommended Competitor Actions

• Sprint should be promoting the fact that all of its data plans include voice-guided navigation, not just a single device running Android 2.0. Sprint should also provide an immediate timeline for when Android 2.0 will be available for the HTC Hero and Samsung Moment. T-Mobile also needs to provide Android 2.0 upgrade information for the HTC G1, HTC myTouch 3G, Motorola CLIQ, and the upcoming Samsung Behold II.

• Apple does not need to respond to the “iDon’t” ads with ads of its own (a tactic it employs when fighting the much larger Microsoft). In this case, Apple needs to act like it is the category leader (though, technically, that would be RIM in North America and Nokia everywhere else) and ignore the challenger. Apple also needs to address areas where it is falling significantly behind rivals: third-party multi-tasking, social network integration, and plug-in capabilities.

• PND vendors will feel the biggest impact as Android 2.0 proliferates and competitors make navigation an included feature to match Google. The PND market will not go away – there are plenty of reasons for consumers to prefer a dedicated device over a smartphone implementation – but price points will need to drop further and profit margins will get crushed.

• The Tour, Bold 9700, and Curve should sell well this holiday season, but RIM cannot count on Verizon Wireless to push the Storm2 after November 6th, when it will be focused on the DROID. RIM had its chance at Verizon Wireless with the Storm last year and sold a million units even though that device was a buggy mess. The Storm2 fixes all the problems of the original but is otherwise unremarkable. By this time next year, RIM had better deliver something remarkable, or it will be in trouble.

• LG has been Verizon Wireless’ leading feature phone vendor, and the company has deftly shifted from clamshells to QWERTY messaging phones to touchscreens. However, we begged LG to start building smartphones a few years ago; as Verizon Wireless’ subscribers increasingly upgrade to BlackBerrys and DROIDs, LG is going to feel the brunt of the impact. At this point, LG not only needs to introduce its first smartphone at Verizon Wireless, it needs to leapfrog Motorola, RIM, and (soon) Palm.

• Palm needs to do whatever it takes to get apps into its App Catalog by the end of the year so that it can hit the ground running when its webOS phones arrive at Verizon Wireless and AT&T in early 2010. Palm also needs to introduce a webOS phone with a larger screen and larger keyboard; webOS would really shine with more space and a keyboard designed for people with people-sized fingers.

Recommended End User / Customer Actions

• Verizon Wireless customers looking for an exciting smartphone with great hardware and a modern touchscreen OS should look no further than the Motorola DROID. However, they should be aware that a less expensive Android handset is expected at the carrier shortly as well.

• Verizon Wireless customers who specifically want a phone with a fruit logo, iTunes integration, and Apple’s App Store have two choices: go to AT&T or wait several years.

• Sprint’s service plans can be less expensive than equivalent options at Verizon Wireless, but Sprint customers may still wonder whether Verizon Wireless’ Motorola DROID is better than Sprint’s Samsung’s Moment. It is. AMOLED screens are brighter and more colorful than TFT, but the DROID’s larger, sharper TFT display trumps the Moment’s beautiful AMOLED screen. A staggered key layout is better for typing, but the DROID’s thin profile and higher-quality materials are more important than the staggered button layout on the Moment’s QWERTY.

• A similar analysis finds Motorola’s DROID outclassing its sibling, the CLIQ at T-Mobile, even though the CLIQ has Motorola’s BLUR software.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

| Client access - Full report in Mobile Devices | More information

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