Verizon could owe Apple $14 billion off iPhone sales shortfall

Posted:
in iPhone edited January 2014
Verizon has sold more than 10 million iPhones over the last several months, but a new report finds that the nation's largest carrier could still wind up owing Apple billions of dollars for failing to meet expectations.

verizon


Apple's iPhone has been selling more slowly than expected, thanks to the high-end smartphone market becoming somewhat saturated. A report from Moffett Research looked at the numbers and estimated that Verizon might wind up owing Apple up to $14 billion if it doesn't effectively double its iPhone sales from last year, according to the LA Times.

In 2010, Verizon reportedly agreed to $45 billion in purchase agreements through the end of this year. By Moffett's estimate, most of that money is due to Apple since Apple is one of the only manufacturers with the sway to require a purchase commitment of this fashion.

?It is likely that Apple would be reluctant to simply ignore these commitments, since many other carriers around the world are probably in a similar situation, and a simple amnesty would set an unwanted precedent,? the report reads. ?It is therefore unrealistic to think that Apple won?t extract some consideration for renegotiating these shortfalls.?

In the fourth quarter of 2012 and the first quarter of 2013, Verizon shifted more than 10 million iPhone units, with many of those being the more expensive iPhone 5. In order to meet its estimated sales commitment to Apple, Verizon would have to sell $23.5 billion worth of iPhones in 2013, or twice its 2012 iPhone sales.

Representatives from both Verizon and Apple have declined to comment on the Moffett report's contentions.
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Comments

  • Reply 1 of 93
    mhiklmhikl Posts: 471member
    Oh, I hope not. The fair thing to do would be to allow an extension. It certainly would not be publicly nor commercially in Apple's favour to be persistent in its demands.
  • Reply 2 of 93
    malaxmalax Posts: 1,598member
    I suspect Moffett's analysis is simply faulty. We don't know what the Apple-Verizon agreement actually says, but I seriously doubt there's a scenario where VZ is writing a multi-billion dollar check to Apple for iPhones not ordered. There agreement almost certainly specifies what the effect of not meeting sales goals are that are less draconian (or Verizon would have been insane to agree to the deal).
  • Reply 3 of 93


    Easy solution. The new iPhone comes out this fall so Verizon could order more of those devices to make up any shortfall this year and sell them into next year.


     


    Unless Verizon has also committed to selling the same amount next year.

  • Reply 4 of 93
    geekdadgeekdad Posts: 1,131member


    So that adds up to about what 20 million iPhones? Does that come off of the shipped or sold numbers then?


    So now is Verizon going to have a BOG4 sale?

  • Reply 5 of 93
    jungmarkjungmark Posts: 6,658member
    What's moffett's methodology?
  • Reply 6 of 93
    blackbookblackbook Posts: 1,361member
    That's what they get for telling their retail employees to push Androids and turn people away from iPhones.
  • Reply 7 of 93
    So verizon agreed to sell 70 million iphones in two years... (45billion/630)

    Does that sound realistic?

    How does this guy know what the verizon apple contract is?
  • Reply 8 of 93
    ajbdtc826ajbdtc826 Posts: 190member
    BOGOF iPhone 5S sale coming soon?

    I'm still sticking with AT&T though cus I apparently hate myself lol.
  • Reply 9 of 93
    What a dumb move on Verizon's part to order so many more iPhones for the second year. Why did they expect to double their sales from 2012 in the first place, especially since more carriers than ever now carry the iPhone?
  • Reply 10 of 93
    rnb2rnb2 Posts: 47member
    I'd be interested to know what impact Verizon's new "Share Everything" plans (and their elimination of individual plans) has had on sales. When Best Buy had their trade-in deal recently (which amounted to getting a free 16GB iPhone 5), I finally convinced my wife to upgrade from her ordered-on-the-first-day Verizon iPhone 4. Only problem: "Share Everything" would have dramatically increased her monthly bill, and there were no other options.

    So, after talking it over, she moved to AT&T, and we're now on a Family Plan that saves us quite a bit over what we used to pay individually. "Share Everything" plans are a terrible deal for 1-2 phone households, and Verizon's insistence that everybody move to these plans definitely cost them a happy customer in our case.
  • Reply 11 of 93
    relicrelic Posts: 4,735member

    Quote:

    Originally Posted by blackbook View Post



    That's what they get for telling their retail employees to push Androids and turn people away from iPhones.


     


    Where did you hear that?

  • Reply 12 of 93
    blackbookblackbook Posts: 1,361member
    relic wrote: »
    Where did you hear that?

    I've heard many first hand stories of people going to Verizon to buy an iPhone but being convinced to buy an Android phone instead.

    Tim Cook seems to agree this is a legitimate problem because he commented on their anti-iPhone practices at Apples latest retail meeting.
  • Reply 13 of 93
    solomansoloman Posts: 228member
    Easy solution. The new iPhone comes out this fall so Verizon could order more of those devices to make up any shortfall this year and sell them into next year.

    Unless Verizon has also committed to selling the same amount next year.

    They're probably committed to sell more next year.
  • Reply 14 of 93
    solomansoloman Posts: 228member
    blackbook wrote: »
    I've heard many first hand stories of people going to Verizon to buy an iPhone but being convinced to buy an Android phone instead.

    Tim Cook seems to agree this is a legitimate problem because he commented on their anti-iPhone practices at Apples latest retail meeting.

    Funny because my experience has been the opposite. I frequently visit the VZW store by me because it close and the salesperson is quite lovely, and I almost always see someone buying a iPhone that's coming off a Android device.
  • Reply 15 of 93
    gwmacgwmac Posts: 1,796member
    I have never even been inside a Verizon store but listening to friends and also on forums it seems that new or upgrade customers are steered away from the iPhone by the sales reps. They do their best to push you towards an Android device I suppose because of a higher commission. Who can blame them though, they have bills to pay and why wouldn't you do your best to bring home more money for your family. Apple probably needs to do a better job to match the commission or at least increase it to offer an incentive for store sales reps not to trash the iPhone and push Android. These employees aren't making big salaries and of course they are going to try and make the most money they can. If you get an extra $50 from signing up a customer with an S4 vs. $0 for signing them up with an iPhone 5 what would you do? I have no idea if this is true or not or how much the spiffs are so please correct me if I am mistaken. Does anyone know if these spiffs exist and if so how much?
  • Reply 16 of 93
    tzterritzterri Posts: 97member
    I often talk and use data at the same time so that is a deal killer for me with Verizon.
  • Reply 17 of 93
    asdasdasdasd Posts: 5,265member


    I doubt the figures. He takes Verizons known purchasing commitments and assumes the bulk are iPhones. No real proof. 

  • Reply 18 of 93
    mdriftmeyermdriftmeyer Posts: 7,229member
    Apple does 5 year contracts. If they don't meet that contract, Verizon will most certainly have to pay the difference. It's incumbent upon the CEO to do his job or get canned at Verizon.
  • Reply 19 of 93
    geekdadgeekdad Posts: 1,131member

    Quote:

    Originally Posted by blackbook View Post





    I've heard many first hand stories of people going to Verizon to buy an iPhone but being convinced to buy an Android phone instead.



    Tim Cook seems to agree this is a legitimate problem because he commented on their anti-iPhone practices at Apples latest retail meeting.


    Actually, Verizon has said that they don't condone such behavior. 


     


    The reason for people pushing other phones is quite simple.  There's a lower commission on iPhones because of what Apple keeps for themselves.


     


    Verizon salespeople say they make about $5-10 from an iPhone, versus $30-50 for others.  Best Buy salespeople say they get nothing for an iPhone;  instead they must make money from accessories.


     


    http://jeffstern.co/2012/08/11/verizon-android-over-iphone/


     

  • Reply 20 of 93

    Quote:

    Originally Posted by blackbook View Post



    That's what they get for telling their retail employees to push Androids and turn people away from iPhones.




    That's what I was thinking too. This rumor seems unlikely, but if it is, maybe Verizon will have to start pushing iPhones the way they have traditionally pushed Android phones, which would be great for Apple. It shouldn't be that hard.


     


    Maybe you can't blame people for pushing Android phones if they are getting better commissions, but if they pretend that they think Android phones are better when they actually don't, they're just being dishonest to make a quick buck, which in my eyes is tantamount to fraud unless you can safely assume that the customers know that the seller has ulterior motives (as is the case when a vendor claims that their own product is better when it actually isn't).

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