AT&T Feeling the iPhone Squeeze From Verizon

AT&T delivered a respectable set of numbers in its quarterly earnings report on Tuesday. At the same time, its report on Q2 activity revealed how much it still depends on Apple and its devices for its revenues.

First, the numbers: For the quarter ended June 30, 2012, AT&T’s consolidated revenues totaled US$31.6 billion, up 0.3 percent versus the year-earlier quarter. Second-quarter 2012 net income totaled $3.9 billion, or $0.66 per diluted share, up from $3.6 billion, or $0.60 per diluted share, in the year-earlier quarter.

Not Too Shabby

Total wireless revenues, which include equipment sales, were up 4.8 percent year over year to $16.4 billion. Wireless service revenues increased 4.3 percent, to $14.8 billion.

AT&T reported its best-ever wireless service margins of 30.3 percent versus 26.9 percent in the year-earlier quarter. It attributed the growth to improved operating efficiencies, fewer handset upgrades, and further revenue gains from its 43 million smartphone subscribers.

The company proudly pointed to other metrics as well: It posted a net increase in total wireless subscribers of 1.3 million in Q2 to reach 105.2 million in service. Its postpaid, prepaid and total churn reached their lowest levels ever — postpaid churn in Q2, for example, was 0.97 percent, compared to 1.15 percent in the same quarter last year and 1.10 percent in the first quarter of 2012. Total churn was 1.18 percent versus 1.43 percent in the second quarter of 2011 and 1.47 percent in the first quarter of 2012.

“These are very respectable results,” John Jackson, vice president of research at CCS Insight, told the E-Commerce Times.

In fact, AT&T’s performance was especially good considering the macroeconomic and global events that occurred during the quarter, he added, including the troubles in Greece, and growing worries domestically about the so-called fiscal cliff.

Focus on the iPhone

All that said, the quarterly earnings report underscores — yet again — AT&T’s reliance on the iPhone. Furthermore, the earnings highlighted a sobering trend: The iPhone as a percentage of AT&T’s smartphones sold to contract subscribers is dropping, noted Jackson. Two quarters ago, the iPhone accounted for of 81 percent of such sales. It was 78 percent last quarter, and 72.5 percent for Q2.

“The iPhone is still the dominant device for AT&T, but it is taking a relatively smaller and smaller share,” Jackson said.

This is largely attributable to people waiting for the iPhone 5, he added, and indeed AT&T has indicated — in a roundabout way — that it expects to sell far more phones in the second half of the year. It projects 25 million in unit sales for the year, Jackson said. “So far, they have done just over 10 million.”

For the most part, there is nothing alarming about the drop, Azita Arvani of the Arvani Group told the E-Commerce Times.

“This is just part of the normal product upgrade cycle, which should be incorporated in future projections,” she said.

In fact, a similar drop can be seen with Verizon Wireless, she added, with Verizon declining from 3.2 million units in Q1 to 2.7 million in Q2.

“Sprint will probably show a similar decline when it reports on July 26th,” Arvani said.

Reports of lagging iPhone sales are ubiquitous throughout the supply chain channel, Jackson pointed out. At the same time, suppliers are stock,piling relevant components in preparation for the iPhone 5 “for which everyone expects sales to be very robust.”

The real story is not the declining number of iPhone sales for AT&T or Verizon or Sprint for that matter, Arvani said. Rather, it is the fact that while AT&T is still the top U.S. iPhone seller, the gap between Verizon and AT&T iPhone sales has been shrinking over the last three quarters.

“We’ll wait and see how this plays out,” she said, “[how] the iPhone 5 — which is expected to run on LTE networks — will affect the sales across these two operators.”

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OPINION

How Not To Do CX, Lenovo Style

Sometimes the world of smart technology innovations collides with the planet of dumb customer service provisions. That collision usually does not bode well for the customer.

In my case, that scenario is particularly true. I bought Lenovo’s Chromebook Duet 5 for an attractive price from a major national electronics store. In hindsight, that was a purchase I wish I could undo.

The Duet 5 is regarded in numerous reliable reviews as the best overall ChromeOS tablet/detachable computer available this year. Its larger screen and detachable full-size keyboard make a usable and fun tablet experience not available with pure Android devices.

For me, that accolade falls far short of reaching that mark. In fact, if your primary need for a Chromebook is to run Linux apps, think again about not buying Lenovo’s Duet 5. You might get a unit like mine that does not do Linux even though it is supposed to work. That failure is not considered a valid claim under Lenovo’s warranty.

I have become quite fond of Chromebooks. ChromeOS devices supplement my home office cadre of Linux computers. They link to my Android phone and its apps. I can run the same productivity apps and access their data directly on the Chromebook.

What fed my attraction to the Duet 5 is its logical follow-up to the very popular 10.1″ original Duet I bought a few years ago. The Duet line has a detachable keyboard and is a stand-alone ChromeOS tablet.

Putting want versus need aside, I debated the prospect of more productivity and convenience with a bigger screen at 400 nits, larger keyboard, and 8GB of RAM. I knew the manufacturer and the retail store as well as the product line. Or so I thought.

What could go wrong? Three things: a failed product, no support, and a warranty that also did not work!

Maybe One Too Many

The last thing I needed to buy was yet another Chromebook. Over the last few years, I have used four or five models from HP, Lenovo, and Asus.

The Duet 5 seemed to check all the boxes. As it turned out, the check mark fell out of the box for reliable tech support and customer service.

Nope, I could not return the computer. By the time I discovered its defective nature the undo window had closed.

I suppose this incident will nudge me to buy expensive add-on store warranties for less expensive electronic devices. Adding insult to injury, Lenovo tech support said the malfunction was “beyond the scope of the manufacturer’s one-year warranty.”

A final correspondence from Lenovo’s tech support told me that if I shipped the device to its repair facility, all the technicians would do is reset the unit to its original OS status and remove Linux.

Heck, I had already done the same thing twice.

Lenovo Buyers Beware

This account is not intended to be a product review. Rather, it tells what happens when corporate arrogance destroys the customer experience.

I usually write about business technology issues and open-source developments impacting the Linux OS. My reporting beat overlaps with e-commerce and customer relationship management (CRM) issues.

As a tech writer and product reviewer, I am used to manufacturers sending me top-of-their-line products in hopes of showing off their best wares. Marketing marvels often offer high-end configurations to curry consumers’ attention. They go out of their way to make sure the reviewer is fully satisfied.

Too bad that mentality does not always exist when lowly consumers are on the receiving end. But I was not using a loaner unit I would send back anyway, satisfied or not. I bought this model with no plans to review it. I just wanted to use it.

My personal experience hardened my resolve to not buy a Lenovo product going forward. Not because of a bad product encounter. Lenovo lost my customer loyalty because of shoddy customer service and no dedication to resolving my issue with a malfunctioning computer that they built.

The Gory Details

According to Lenovo’s ill-conceived logic, the warranty on Chromebooks does not cover user modifications. Since I activated the Linux partition, ran into a problem, removed the partition, and reinstalled Linux apps not there when I bought it, I was guilty of modifying the device.

To clarify, all Chromebooks require the user to turn on the Linux partition and install Linux apps. That is the same process for using Android apps on Chromebooks.

Chromebooks are built to run the ChromeOS and optionally to run in separate built-in containers Android and Linux software. Google certifies the hardware to ensure the software works.

The ChromeOS similarly enables users to access websites in a browser environment. An added option lets users access those web destinations to run application services within tabbed browser windows or as progressive web apps (PWAs) in their own isolated windows.

That is what Chromebooks are designed to do on any manufacturer’s hardware. Turning these built-in features on/off should not be construed as “modifying” the device.

Tech Support Hell

A few weeks after receiving the Duet 5, I experienced only an intermittent screen flickering issue. That cleared up after a system update. No worries. No concerns.

At that point I turned on the Linux partition and installed the same Linux apps that I use on my other lesser-endowed Chromebooks. Those devices worked fine with the same apps installed.

But the Lenovo Duet 5 froze after loading the Linux apps and running for a few minutes. Glitchy installations happen. So I did what is standard troubleshooting. I reset the ChromeOS to its original status. I then set up the Linux partition and sized it well beyond the Google-recommended minimum size.

Problem NOT solved. So I wiped the Linux partition again. This time, I installed a single Linux app one at a time looking for the culprit throwing the others out of whack. Every Linux app in isolation froze.

Lenovo tech support declined to investigate or test the hardware. The agents suggested finding an affiliated tech center to pursue a solution.

Stuck With No Options

I gladly would have done that. But the nearest such Lenovo repair center was across state lines some 150 miles away.

I reached out to the Google Chromebook support community for an alternative solution. A support person there had me run the “df command” in a Linux terminal to determine the physical health of the partition.

The readout from that diagnostic confirmed the device has a valid and working Linux container. That partially settled the question about the hardware. It did not, however, identify what other hardware issues might be involved.

The Google support forum tech then suggested I look for one or more dud packages by following the procedure outlined above. But, of course, I already did that several times.

Lousy Lessons Learned

If you plan to buy a Chromebook just to have easy access to selected Linux apps, seriously consider my experience. Maybe look elsewhere instead of the Duet 5. Numerous Chromebook alternatives exist.

Who knows? Maybe the Linux apps will work fine for you on your Duet 5. As I said, I have not had this situation on any other Chromebook product I use.

No doubt my experience was a gross anomaly. The aggravating part in all of this is that I will never know the cause.

But if you buy a Duet 5 from a retail outlet instead of directly from the manufacturer, be sure to confirm how that store honors the warranty. You now know how Lenovo honors its warranty.

The opinions expressed in this article are those of the author and do not necessarily reflect the views of ECT News Network.
Jack M. Germain

Jack M. Germain has been an ECT News Network reporter since 2003. His main areas of focus are enterprise IT, Linux and open-source technologies. He is an esteemed reviewer of Linux distros and other open-source software. In addition, Jack extensively covers business technology and privacy issues, as well as developments in e-commerce and consumer electronics. Email Jack.

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