Wireless

(Credit: Marguerite Reardon/CNET)

Early indications suggest that the Motorola Droid could be the breakout hit phone of the holiday season.

You might not have guessed it from the lack of long lines this past weekend, but analysts believe that Verizon is seeing strong sales of the Motorola Droid. The device went on sale on Friday across the country. And unlike other big launches for phones such as Apple's iPhone or even the Palm Pre, retailers had plenty of devices in stock, and customers didn't have to stand in long lines to get their phones.

Neither Verizon nor Motorola is providing exact sales figures, but David Samberg, a spokesman for Verizon, said sales were very strong over the weekend, with a steady stream of customers Friday, Saturday, and Sunday. Store representatives in Manhattan confirmed this, with one sales associate telling me on Monday afternoon that there had been a steady stream of customers in the store all weekend and even through Monday.

Analysts also believe that the phone is selling well. Mark McKechnie, an analyst at Broadpoint AmTech, who covers Motorola, checked with a small sample of Verizon retailers around the country and said in a research note on Monday that he is encouraged by the anecdotal reports.

"While it is early, and the sample size is small, we are encouraged by our findings," he said.

McKechnie estimates that Verizon had about 200,000 phones in retail channels for the launch, with many stores in larger metropolitan markets, such as New York and Los Angeles, getting about 300 devices. Stores in cities such as San Francisco got more than a 100 devices, and retailers in smaller cities got between 25 and 40 devices each.

Locations were stocked well enough that there were no reports of any stores that were completely sold out. An employee at the Verizon Wireless store on West 34th Street in New York said his store had gotten about 500 Motorola Droids and HTC Android Eris phones for Friday. The store didn't sell out of either phone, but much of its stock is now gone.

That said, the store employee, who didn't want his name used, said his store did sell out of the $29.99 Droid docking station, which charges the device. As of Monday, the company still hadn't restocked its supply of that accessory.

McKechnie reported in his research note that the Droid outsold the HTC Eris, which also went on sale Friday. And checks with Verizon stores in Manhattan back up this claim. While there were plenty of customers looking at the HTC Android Eris in the Verizon stores I visited Monday afternoon, most people said they planned to buy the Droid. The main reasons were the device's higher-resolution screen, better camera, faster processor, and latest Android software.

Still, plenty of customers noted that they preferred the look of the HTC Eris over that of the Droid.

Verizon's marketing may also be paying off. Verizon is spending more money on the Droid advertising campaign than it has on any other device launch. At least one customer at the West 34th Street said Verizon's advertisements had convinced him to get the Droid instead of Apple's iPhone, which runs on AT&T's network.

"I was considering the iPhone," said Henry Goodison of the Bronx borough. "But I saw a commercial about AT&T's 3G coverage. It said, 'Here is AT&T's 3G coverage, and here is ours.' And I thought it would be better to have Verizon, if I travel to another state, where AT&T doesn't have 3G coverage."

AT&T is actually suing Verizon Wireless over this commercial, asserting that Verizon's advertisement is misleading consumers. Verizon dismisses this claim as untrue.

Big lines didn't form outside most Verizon Wireless stores the day the new Droid hit the market.

(Credit: Marguerite Reardon/CNET)

NEW YORK--The new Motorola Droid got a sleepy reception on Friday morning when it officially went on sale across the country in Verizon Wireless stores starting at 7 a.m. in some places.

From New York to San Francisco, most stores around the country had few if any lines when doors opened Friday morning. There was a handful of people waiting outside at the Verizon Wireless store on West 34th Street here in Manhattan. And about 20 people waited in line outside a store here on Sixth Avenue, as well as at one in Clifton, N.J., Verizon officials said.

CNET reporters in San Francisco reported they saw only about 15 customers lined up for the device before a Verizon Wireless store opened there Friday.

The scene was somewhat more lively last night, when Verizon Wireless opened its West 34th Street in New York City from midnight to 2 a.m. About 100 eager Droid customers were in line when the store opened last night. Verizon spokesman David Samberg said the company sold 85 Droids in the first 45 minutes the store was open on Thursday night.

But even though the Droid didn't stir enough enthusiasm to get people to stand outside on a cold November morning, there appeared to be a steady stream of customers in several Verizon Wireless stores. Many customers were interested in the Droid, while some were checking out the new HTC Android Eris, which also went on sale Friday.

Lines are overrated
Samberg said that a lack of a long line or shortage of devices is actually a good thing. And he urged people to not prejudge the phone's success on that alone.

NEW YORK--More than a hundred people were lined up at midnight outside a Verizon Wireless store in midtown Manhattan to be among the first people to buy the new Motorola Droid.

More than a hundred people showed up at a Verizon Wireless store in New York City at midnight to buy the new Motorola Droid Thursday night.

(Credit: Marguerite Reardon/CNET)

About 65 eager shoppers lined the south side of West 34th Street across from Macy's in Manhattan at 11:30 p.m. Thursday waiting for the store to open. Verizon opened the store from midnight to 2 a.m. to give people in the Big Apple a head start on the morning cell phone rush. By midnight, when the doors officially opened, about 100 people stood in line as Verizon officials ushered in customers 25 at a time.

Once inside the store, about 13 sales representatives and another four or five device specialists milled around, helping customers and demonstrating the phone's features. Representative were also helping customers transfer contacts to their new phone.

Verizon Wireless spokesman David Samberg said he felt confident that Verizon would be able to meet customer demand for the new Droid in New York City. The 34th Street store alone had at least 500 Droids as well as some HTC Android Eris phones, and Samberg said he expects anyone wanting to buy a Droid on Friday in New York City will be able to get one.

"Five hundred phones is a lot of phones to sell in one day," he said.

Most people standing in line for the new Motorola Droid are long time, loyal Verizon Wireless customers.

(Credit: Marguerite Reardon/CNET)

Most of the people standing in line at midnight for a Droid were loyal Verizon Wireless customers. Geoffrey Aravallis, who stopped to pick up his Droid on his way home from a dance club in the city, said he has been a Verizon Wireless customer for nine years.

He said he had been tempted to switch to AT&T for the iPhone but didn't because he felt Verizon has a better network than AT&T. Now that the Droid is out, he is glad he waited.

"I use Gmail and all kinds of Google services, so it's nice to be able to have all that on my phone," he said. "And the Droid is much more open than the iPhone."

Gabrielle Dahms admitted she had also been tempted to get the iPhone. But she had heard terrible things about AT&T's network and was leery about making the switch. Instead, she decided to wait for the Droid.

"It has all the features I like on the iPhone," she said. "Plus it has a real keyboard, which sold me."

Many people have been comparing the new Droid to the iPhone, and some have even called the new device the true iPhone killer. But judging from the people I talked with who were buying the Droid, it looks like it might be more of a BlackBerry killer.

Dahms and her boyfriend, Will Welch, had been BlackBerry Curve users. Welch said he had tried the BlackBerry Storm last year when it first came out, but he didn't like it. He also thought the iPhone was cool, but was unwilling to switch carriers for it. And he said he would have probably upgraded to the BlackBerry Tour if the Droid hadn't come along.

The Droid will hit store shelves nationally starting at 7 a.m. Friday in many stores around the country. CNET News will be covering the launch, so stay tuned for updates.

It was bound to happen. AT&T is suing Verizon Wireless over its "There's a Map for That" advertising campaign.

When I first saw the advertisements on TV, I thought for sure that AT&T or Apple would file a lawsuit claiming the advertisement was too similar to the iPhone's "There's an App for That" slogan.

I was right about one thing. AT&T is suing Verizon. But I was wrong about the reason behind the suit.

AT&T's beef isn't over the wording of the "There's a Map for That" slogan. Instead the company claims that Verizon is misleading customers into thinking that AT&T subscribers are not able to use their phones in areas where the carrier does not offer 3G wireless coverage.

In the suit that AT&T filed Tuesday in Atlanta federal court, AT&T describes how Verizon's ad campaign shows maps with white spaces, which it claims misleads consumers into thinking that AT&T has no wireless coverage in particular areas of the country.

But that is not the case. The white spaces actually indicate where AT&T does not have 3G wireless access. It doesn't indicate that AT&T has no wireless coverage. In fact, in most parts of the country, AT&T has a 2.5G Edge network.

AT&T doesn't dispute the fact that its 3G wireless service is not in every region of the country indicated on the map. But the company says that the advertisement makes consumers believe that AT&T has no service in those areas, which implies that subscribers can't use their phones at all in those regions.

"Contrary to the misleading message conveyed by Verizon's advertisements, AT&T customers can fully use their wireless devices outside of a '3G' coverage area and undisputedly have coverage in areas depicted by the white or blank spaces on the maps used in Verizon's advertisements," AT&T said in its complaint.

AT&T also asserts in its complaint that it is "losing incalculable market share, invaluable goodwill that it has spent billions of dollars to develop among consumers, and the significant investment it has made in its wireless network."

AT&T is not asking Verizon to stop its ad campaign entirely. And it's not asking its rival to change the wording of its advertising. What AT&T wants is for Verizon to stop showing maps of AT&T's 3G coverage areas that it claims mislead customers into thinking they can't use their phones in non-3G areas.

AT&T has asked for a temporary restraining order against Verizon so that it cannot benefit from the ads while the companies await a permanent injunction.

Verizon Wireless, which is owned jointly by Verizon Communications and Vodafone Group, said AT&T's suit is without merit. The company has said that the ads clearly state that voice and data services are available outside 3G areas.

"The ads are serving to inform customers where the coverage critical to operating a smartphone is available," said Brenda Raney, a Verizon Wireless spokeswoman. "Considering their limited 3G coverage, our competitor should examine whether they are misleading customers with their fastest 3G network claim."

Motorola Droid

(Credit: Motorola)

The hard-hitting advertising campaign and AT&T's lawsuit are just the latest signs that competition in the U.S. wireless market is reaching a fever pitch. More than 89 percent of Americans already subscribe to a cell phone service, according to the CTIA. This means that for wireless operators to grow, they must lure new subscribers from competitors.

Verizon Wireless and AT&T control the lion's share of the wireless market as the No.1 and No. 2 operators in the country, respectively. Sprint Nextel and T-Mobile USA are the other two main national carriers. Sprint has steadily been losing customers for several quarters. And T-Mobile has been unsuccessful in becoming a major threat to the big two operators.

As a result, the rivalry between the two largest wireless companies, Verizon and AT&T, is heating up. Verizon has historically had a very good reputation for having a reliable network with broad network coverage. But even with a strong network, the company has lacked cool phones, which consumers have complained about.

Meanwhile, AT&T's network has had a mediocre reputation at best, but the carrier is the exclusive wireless operator in the U.S. for Apple's iPhone. And despite the fact that subscribers have been complaining about poor service and spotty coverage on AT&T's network, new subscribers are still flocking to the carrier to buy the popular iPhone. In the third quarter, AT&T reported it had signed up a net of 2 million subscribers. Verizon signed up 1.2 million new subscribers for the same period.

But now Verizon is about to launch a phone that many analysts believe could give the iPhone a run for its money. The Motorola Droid, which uses Google's Android operating system, goes on sale Friday. And since the phone was revealed to analysts and product reviewers last week, it's been getting high marks.

Verizon's top marketing executive John Stratton said the ad campaign for the new Droid will be the biggest Verizon has ever launched. But he said that the company will focus more on what the Droid can do and less on what other devices or competitors cannot do. One thing is clear, the battle for wireless subscribers is likely to get nastier.

As a consumer, I hope this intense competition eventually leads to better services, cooler devices, and lower prices. But we'll just have to wait and see. Right now, it just looks like a war of words.

Could Motorola's new smartphone, the Droid, be the company's next Razr a la 2010?

Judging from the hype surrounding the new smartphone, which is the first device to use the Google Android 2.0 operating system, there is a good chance the Droid could be the breakthrough device that helps Motorola rise from the ashes. But it will likely take more than a single phone to get Motorola back in the game after losing market share for nearly three years, especially as competition in the handset market intensifies.

Gadget bloggers and device reviewers, such as our own Bonnie Cha, have been impressed with the new Droid, which was announced on Wednesday. But Motorola's mobile devices CEO Sanjay Jha said that the Droid is just the beginning. The company plans to introduce no fewer than 20 devices using the Google Android operating system in 2010, he said during the Droid launch event in New York on Wednesday.

The Droid and the Cliq, which is being sold on T-Mobile USA's network, are the first two Motorola Android phones to hit the market. But Jha said that the Google Android operating system will not only be used in high-end devices like the Droid, but it will also be used to power less expensive phones, creating a new tier of smartphone that will eventually replace the basic feature phone category.

"With these products we've taken the first step in positioning ourselves for the mobile Internet and smartphone market," Jha said during the company's third-quarter earnings conference call Thursday. "And in 2010, there will be a variety of new devices as we expand the portfolio across various tiers. We will continue to shift the mix of products to respond to the growing smartphone opportunity."

Motorola, the iconic American company that had practically invented the cell phone market, has struggled for several years now. After the runaway success of the ultra-thin Motorola Razr in 2004, the company has been unable to come up with a hit phone.

As the company's market share slipped lower and financial losses mounted, shareholders ousted then CEO Ed Zander. And Jha, an engineer who had worked his way up the ranks at mobile chipmaker Qualcomm, was brought on board to turn the business around. In addition to cutting costs, he quickly worked to get Motorola's product development teams back on track. He recently told The New York Times that the situation at Motorola was much worse than he had expected when he took the job.

He said when he arrived at Motorola he found a company with "a dysfunctional management culture" that simply didn't understand that consumer preferences had shifted. Customers no longer wanted just a phone for making phone calls. Instead, they wanted a device that could also access the Internet, give them directions, and provide text-based communications.

The Motorola Droid

(Credit: Kent German/CNET )

Early on Jha scrapped the company's lineup of unprofitable phones that were using dead-end technology. In an attempt to streamline development and refocus the company's attention on creating new, cool devices, he concentrated the company's efforts almost exclusively on building phones using the Google Android operating system.

About a year after announcing this new strategy, the company introduced the Cliq and the Droid. In general, the Cliq has gotten a good reception from reviewers, but there seems to be much more enthusiasm around the Droid, a touch-screen device that some say rivals Apple's iPhone.

Some of the impressive features include Google-powered voice-activated search, a 550MHz processor, and a 3.7-inch with 480x854-pixel resolution. But what is likely to make the device a true competitor to the iPhone is the fact that it is exclusively available on the Verizon Wireless network. Verizon is the largest wireless operator in the U.S. and it has the largest coverage footprint. The company has also gotten high marks for its reliable network. And its customers are among the most loyal in the industry.

Verizon has been looking for an iPhone-killer since AT&T started its exclusive partnership with Apple. But devices, such as Research In Motion's first touch-screen phone, the BlackBerry Storm, have not met the challenge.

Verizon is expected to launch its most aggressive marketing campaign ever to promote the new device, John Stratton, executive vice president and chief marketing officer at Verizon Wireless, said at the Droid launch event in New York this week. The company has already launched a pre-advertising campaign that spoofs the iPhone. Analysts expect the device to sell well out of the gate.

"Verizon sold a million of the original BlackBerry Storms in the first nine weeks it was available," Avi Greengart, an analyst with Current Analysis, said. "And that was a buggy mess. So I expect this device will at least meet that, if not exceed it."

Motorola's Jha said during the company's earnings conference call Thursday that the company is ready for a flood of orders.

"We feel very good about our ability to meet demand for the Droid," he said. "We've spent a lot of time studying what has happened in market when successful new products have been introduced. And we've been working closely with Verizon, and we've got good access to components suppliers that we feel good about things."

Motorola's management team has successfully cut costs, which included eliminating 8,000 jobs. And on Thursday it announced its second consecutive quarter of profits after experiencing heavy losses and shrinking market share in the cell phone business for several quarters.

Success not guaranteed, analyst cautions
Wall Street analysts are encouraged by the good news.

"Directionally, things are moving the right way in terms of new devices, carrier partnerships, and narrowing losses for Motorola's Mobile Devices segment," Mark Sue, an equities analyst with RBC Capital, said in a research note.

But Sue also cautioned that Motorola's success is not guaranteed.

"It won't be a smooth ride however, with timely delivery of new smartphones, high quality, and carrier endorsements key elements of Motorola's future success," he said.

What's more, Motorola also faces tough competition in the smartphone market. This holiday season consumers will be inundated with iPhone alternatives. Research In Motion has two new BlackBerry devices on the market. And there are a slew of other Android phones that have recently been introduced.

In addition to the Motorola Cliq and Motorola Droid, there is also the Samsung Moment and the HTC Hero, both on Sprint's network. T-Mobile also has other Android devices, including the G1 and the myTouch. The Palm Pre, which went on sale in June, is yet another smartphone on the market with similar functionality.

Again, one of the good things the Droid has going for it is its affiliation with Verizon, whose executives seem pleased to reconnect with the handset maker.

"We've had a long history with Motorola," Verizon's top marketing executive, John Stratton, said at the Droid event. "And we've lived through the company's ups and downs. This is a new Motorola. We took a chance, maybe even a risk, at the early stage in the rebirth of the company, and we're delighted in what we've seen in last 12 months."