This article discusses the heavy discounting Motorola and Verizon have been obligated to on the T720. Tribune on T720
Sure. I'd forgetten this was in a "registered users" area of the site. Fancy phone proves a hard sell Motorola/Verizon slashes price By Barbara Rose Tribune staff reporter December 14, 2002 Talk about holiday bargains. Three months after Verizon Wireless introduced a new Motorola phone with a big color screen, the handset is selling at $49 including rebates-- one-fourth of its original $199 rebated introductory offer price. The steep discounting so soon after Motorola Inc.'s launch of the T720 phone confirms what many wireless industry analysts had predicted. Most U.S. customers simply aren't willing to pay more than $100 for a phone, even a new model loaded with such fancy features as games, Internet surfing and voice-activated dialing. Motorola's clamshell-shaped T720 phone was introduced in late September with Verizon's "Get It Now" service to help Verizon lure customers onto its new high-speed network. The launch was about two months later than planned due to delays in Motorola's shipments. Fierce holiday competition pushed the new phone's price down quickly. "Americans are notoriously cheap when it comes to handsets," said Roger Entner, wireless services program manager at Yankee Group. "They think handsets are made by little elves and come for free." Far from it. Industry analysts estimate that Motorola and Verizon are spending more than $100 per phone to subsidize their latest deal on the T720. Neither Motorola nor Verizon would disclose what Motorola charges Verizon for the phone or how they divvy up the discount, but analysts say the T720 subsidy likely exceeds the industry's average, which is $100 per phone. The discounting reflects the importance of this holiday's selling season. December's sales are important because carriers such as Verizon are counting on the allure of new color-screen phones to add customers to their high-speed networks. They're looking to hook customers on an array of services and features that will prompt them to stay on their phones longer, which boosts the carriers' average revenue per customer. As phone subsidies increase--an important component of the average $350 per customer the Yankee Group says carriers spend to sign up a new subscriber--the stakes for keeping customers increase. A disappointed subscriber who bolts is an expensive gaffe. Early reports indicate fourth-quarter cell phone sales will be up compared with the third quarter, but weak compared with last year's fourth quarter. The heavily discounted new Internet phones are selling well, industry analysts report. "There's cautious optimism about consumer pick-up, but it's still a very shaky time," said Jane Zweig, CEO of wireless consultancy Shosteck Group. "Even if you persuade people to upgrade their phones, if the network has problems or the total experience is not positive, you've lost your customer and it will be very hard to convince people to come back." For now, carriers continue cutting prices. Lindsay Notwell, Verizon's director of product marketing, confirmed that subsidies on Motorola's T720 offering are bigger than anticipated. "We hadn't planned for it to be promoted as aggressively as it has been," he said. "The market environment is extremely competitive. We're No. 1 (in subscribers) and we intend to remain No. 1." Michael Tatelman, Motorola's general manager for the Verizon account, said the T720 is selling "very well" across the country. But investors are worried about what discounts mean for profit margins. In a recent call with financial analysts, Motorola's general manager for cell phones, Tim Cawley, said the price cutting was anticipated in Motorola's budget planning. Cawley indicated the cell phone division's operating margins will be between 7.5 percent and 8 percent for the year, which implies that fourth-quarter margins will be between 9.5 percent and 9.8 percent, according to a recent report by Goldman Sachs analyst Brantley Thompson. "This is a positive as investors have been concerned about Motorola's ability to produce another strong handset margin given the heavy price discounts on leading products at Verizon," Thompson's report said. "From a consumer's point of view," said Zweig, "it's a buyer's market. You can get cheap phones and, in some cases, cheap (wireless fees)." Copyright © 2002, Chicago Tribune
Very interesting article, though I still think that the heavy discounts were cause the phone was/is a piece of crap. And yah..19D..blahh..blah..blahh...
"Most U.S. customers simply aren't willing to pay more than $100 for a phone, even a new model loaded with such fancy features as games" What games??? 'New verizon high speed network..." What high speed????!?
