VZ Cuts BlackBerry Storm Price

Verizon (VZ - Analyst Report) has reportedly slashed the price of BlackBerry Storm touchscreen smartphone, which is marketed by the company under an exclusive distribution agreement with Research In Motion (RIMM - Analyst Report).

The largest wireless carrier by subscriber has announced that the popular handset is now available for just $99.99 under a two-year service contract, making it more attractive to customers. The new price reflects a 50% discount on the original launch price of $200 for a new contract. 
 
BlackBerry Storm represents one of the 36 new devices Verizon offered during 2008. The handset was launched in November 2008 as the first all-touchscreen phone in the BlackBerry series.
 
Although the BlackBerry Storm was originally positioned as an alternative to Apple's (AAPL - Analyst Report) iPhone, it failed to generate strong market appeal due to certain drawbacks. The most important of them is the lack of Wi-Fi (wireless broadband) support, which has so far prevented Verizon from effectively competing with iPhone 3G, marketed by its archrival AT&T (T - Analyst Report) in the US.

Verizon sold 500,000 units of BlackBerry Storm in the first month after launch compared to 3 million units sold for iPhone 3G in the same time frame.
 
Verizon’s decision to offer hefty price discount comes as a response to AT&T’s recent aggressive move to reduce the price of the entry-level iPhone 3G to $99 from $199 for new two-year contracts. Additionally, AT&T commenced the nationwide roll-out of the new iPhone 3GS (an upgraded version of iPhone 3G) in June 2009, which offers superior features and functionality compared to iPhone 3G including faster processor speed, improved battery life and a better camera. 
 
Following the price cut on BlackBerry Storm, Verizon is on a level playing field, enabling it to compete more effectively with AT&T’s iPhone 3G. Moreover, this attractive deal also paves the way for the upcoming launch (expected in September 2009) of the more advanced BlackBerry Storm 2, which has been designed to address the shortcomings of its predecessor and will be positioned as a head-to-head competitor to iPhone 3GS.

However, it remains to be seen whether Verizon’s new approach effectively succeeds in driving sales in the highly competitive US smartphone market. That said, we maintain our Hold rating for Verizon.

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