Droid Smart Phone Attracts Early Buyers

U.S. Verizon stores opened their doors at 7 a.m. Friday for the launch of Motorola's Droid handset, which many observers see as a credible threat to the Apple iPhone.

Geoffrey Fuller showed up 15 minutes before the opening of his local Verizon store, in the Westwood area of Los Angeles.

"It's a minicomputer that can also make phone calls," said Fuller, who's replacing his BlackBerry with a Droid. "I think it will be a strong competitor to the iPhone."

He considered an iPhone but didn't want AT&T (NYSE:T - News)as his service provider, fearing dropped calls. AT&T is the exclusive provider of iPhone service in the U.S., as is Verizon Wireless for Droid.

Boo Fisher also bought a Droid at the Westwood store, one of just three people in line for the launch. But at another Verizon store 10 miles away, in Culver City, Calif., about 40 people lined up before doors opened, a store manager said.

Verizon saw "a steady, consistent flow of customers" all day, said spokesman Ken Muche.

Fisher is replacing his LG Voyager with a Droid. "I'm averse to Apple (NasdaqGS:AAPL - News)," he said. "They charge too much for the sake of simplicity."

Droid is the first handset to sport the latest version of the Google (NasdaqGS:GOOG - News)-backed Android operating system, version 2.0. It costs $200 after a $100 rebate, with a two-year Verizon Wireless service contract. Besides Verizon stores, the phone will be sold at Best Buy (NYSE:BBY - News), Wal-Mart (NYSE:WMT - News) and Costco (NasdaqGS:COST - News).

Avian Securities analyst Matthew Thornton estimates 800,000 Droid phones will be sold through Dec. 31. Sprint Nextel (NYSE:S - News)sold about 700,000 Palm (NasdaqGS:PALM - News) Pre handsets in the first three months of that smart phone's release this summer, while Apple sold 1.1 million iPhones in its first three months, in 2007.

"The Droid reviews have been overwhelmingly favorable," Thornton said.

Motorola (NYSE:MOT - News) needs a hit. Market tracker iSuppli says Motorola had a 5.4% share of the global market as of June 30, down from 22.5% three years ago.

"Droid is potentially a game changer for Motorola," iSuppli analyst Tina Teng said in a statement.

Seven handset makers have licensed Android, including Samsung, LG Electronics, Sony Ericsson (NYSE:SNE - News) (NasdaqGS:ERIC - News) and HTC. Carriers providing service also include Sprint and T-Mobile.

Android's share of the market for handset operating systems will rise to 9% in 2013 from 2.4% in the second quarter, forecasts iSuppli. Research firm Gartner, however, projects Android's share will hit 14.5% by 2012, moving into second place behind only Nokia (NYSE:NOK - News)-led Symbian, surpassing Apple and Research In Motion's (NasdaqGS:RIMM - News) BlackBerry. Android is open and free to all handset makers, while Apple and RIM keep a close hold on their operating systems.

Tim McLaughlin, president and founder of Siteworx, a Web site and application developer for computer and mobile platforms, has yet a different outlook. He says the smart-phone market will become a two-horse race between the iPhone and Android phones, with Android winning. "In the long run, Android will prevail," he said. "Droid represents the first real competitor to iPhone."

There's a comparison with the PC and Mac battle, he says. The Microsoft Windows/Intel platform was essentially open and accumulated 90% of the market. Apple kept a close hold on its Macintosh platform, which gave it a much smaller -- albeit loyal -- following.

"Unless Apple changes its business model, the Android will prevail," McLaughlin said.

Albert Pena, who bought a Droid at the Culver City, Calif., Verizon store, would agree. "I think the Droid will offer all the iPhone will offer," he said.

"Droid will do extremely well," said Avi Greengart, analyst at research firm Current Analysis. "It's backed by the full force of Verizon's marketing budget, so it will break through the clutter."