Verizon overestimated iphone sales? How could that be? hope iphone 5s can make it up in time.
We don't know the specifics of Verizon's commitment to Apple, so this whole story could just be headline grab-ass tactics.
However, when Verizon signed on with Apple back in 2011, Apple had no real smartphone competition, and the smartphone market had less overall saturation.
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).
The analysis also doesn't seem to take into account that the 2010 agreement might have been updated/ameneded, possibily several times, since it was first entred into. It's not like Verizon would let something like that sneak up on them without acting (ie, pushing more iPhones, discount pricing, renegotiate the contract, etc) and it's in the interest of both companies to maintain a good working relationship.
I agree with others I doubt that Verizon signed on to sell the stated number of iPhones. I do however think that these telcos who have deals with Apple that state they must sell X number of iPhones in a given time frame should re-examine allowing sales people to receive spiffs (incentives) to sell Android phones. This seems to be in direct opposition to what is the best for the health of the overall company as well as distorting the market.
I doubt anything comes of this but ultimately, Apple may demand the end of these incentives paid to sales staff that give Android and advantage while creating a disincentive to selling iPhones.
Apple doesn't need to get involved.
It is really a problem of Verizon's own making.
If they want their employees to sell more iPhones, they can eliminate the spiffs or they can pay Apple a few Billion.
If they want their employees to sell more iPhones, they can eliminate the spiffs or they can pay Apple a few Billion.
Their choice.
I am sure the Verizon employees would be thrilled at making thousands less in salary a year. Verizon would never do that. Samsung and others are essentially subsidizing the salary of Verizon employees so why would Verizon stop that free cash flow to their employees they don't have to pay?
If Apple wants these sales reps to push the iPhone as hard as Android phones then they need to match or at least increase their spiff. All sales reps will always try and make the most money possible and who can blame them.
It serves Verizon right by pushing all those "Android iPhones". My neighbor has one. I too am angry at Verizon for doing so because I am a stockholder in both companies and what they are doing is not serving their relationship with Apple at all. That is why Apple this fall is going to make it more likely that people will buy their iPhones at the Apple store.
I am sure the Verizon employees would be thrilled at making thousands less in salary a year. Verizon would never do that. Samsung and others are essentially subsidizing the salary of Verizon employees so why would Verizon stop that free cash flow to their employees they don't have to pay?
If Apple wants these sales reps to push the iPhone as hard as Android phones then they need to match or at least increase their spiff. All sales reps will always try and make the most money possible and who can blame them.
I'm sure Apple doesn't care what Verizon reps do. As long as management pays what the contract with Apple says. Let Verizon handle employee compensation for their own company. Maybe they could use a tip jar like all the coffe shops.
I'm sure Apple doesn't care what Verizon reps do. As long as management pays what the contract with Apple says. Let Verizon handle employee compensation for their own company. Maybe they could use a tip jar like all the coffe shops.
Apple hasn't cared and that is true which is why Verizon reps are pushing Android and doing their absolute best to convince customers not to get an iPhone. I am not saying that is right it is simply a matter of money and common sense. No rep in their right mind would not try and sell a phone where they will make possibly $40 more off of that sale. You would be crazy not to push Android if it means $40 extra dollars then multiply that by a few dozen customers and you are talking big money. Perhaps Apple should care and consider increasing their spiff to match or at least come closer to what others are paying. Salespeople that derive a large part of their income off of commission can't be expected to push a product with no commission.
This is all speculation on my part since they seem to keep spiffs a secret and I can't find any actual link. But from what I understand a galaxy phone can be worth an extra $50 and an iPhone can be from zero to $10. In that case which would you try and sell if you were a sales rep?
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).
I did not check, but if VZ in fact signed a purchase agreement like this (which are actually common place) they would have been required to disclose that fact in their 10K filing with the SEC. So if you really want to know if VZ and Apple has an iron clad deal with purchase liabilities as pointed out, go read the 10K from that time period.
Yes there is a scenario where they could pay out a check. The contract probably had a take or pay prevision in it. Now the reality of the situation would most likely have Apple and VZ renegotiating that prevision, but I double Apple would just let VZ with some future commitment for business of a payout now to remove any future liability.
Quote:
Originally Posted by blackbook
That's what they get for telling their retail employees to push Androids and turn people away from iPhones.
I have to agree and this is exactly what I thought when I read this, why sign a deal like this with Apple when they were also inking similar deals with Motorola and Samsung. You would think their management would be telling employee to push as many Iphones as possible. But it could have been a calculated risk too.
This is/has become a silly discussion, who cares what Verizon does and doesn't push. The customer should always do their research before buying, if you walk into a store to buy an iPhone and leave with a SG4, well you deserve what you got. I have bought all of my phones online for the last 5 years, I might stop and check out the new phones and maybe ask a question or two but that's it.
Apple hasn't cared and that is true which is why Verizon reps are pushing Android and doing their absolute best to convince customers not to get an iPhone. I am not saying that is right it is simply a matter of money and common sense. No rep in their right mind would not try and sell a phone where they will make possibly $40 more off of that sale. You would be crazy not to push Android if it means $40 extra dollars then multiply that by a few dozen customers and you are talking big money. Perhaps Apple should care and consider increasing their spiff to match or at least come closer to what others are paying. Salespeople that derive a large part of their income off of commission can't be expected to push a product with no commission.
This is all speculation on my part since they seem to keep spiffs a secret and I can't find any actual link. But from what I understand a galaxy phone can be worth an extra $50 and an iPhone can be from zero to $10. In that case which would you try and sell if you were a sales rep?
Apple shouldn't care. If Verizon wants to squeeze its employees with a commission sales policy then they can deal with it. Which I'd guess is considered by apple when they wrote the contract. Just pay the agreed amount and you figure out your own screwy employee policies. I for one am very glad Apple doesn't play the commission game, it feels like a used car lot.
Apple shouldn't care. If Verizon wants to squeeze its employees with a commission sales policy then they can deal with it. Which I'd guess is considered by apple when they wrote the contract. Just pay the agreed amount and you figure out your own screwy employee policies. I for one am very glad Apple doesn't play the commission game, it feels like a used car lot.
I agree that customers should do their homework before they ever walk into a store. I also think you can often get far better deals at places like Amazon, Best Buy, Radio Shack and others on a new iPhone over a carrier. But the reality is they don't and most are easily swayed by a good sales pitch. I only think Apple should care if this is costing them big money and a substantial loss of revenue. This article and other recent ones seems to suggests iPhone sales could be a lot better so something is wrong or could be improved. I have no idea how many lost sales they have due to spliffs. I know that this is not limited to Verizon, the same thing applies to AT&T, Sprint, and overseas carriers as well.
I know that this is not limited to Verizon, the same thing applies to AT&T, Sprint, and overseas carriers as well.
Swisscom does things a little different, when you first walk into the store and need help, there is a bright red metal ticket machine in the middle of the store. You pull the ticket and then wait till your number is called. The employees will then answer any questions you might have or ring the product up. They are all payed on salary, no commission, so there is no incentive for them to push any product over another, to them you are just a ticket number.
I agree that customers should do their homework before they ever walk into a store. I also think you can often get far better deals at places like Amazon, Best Buy, Radio Shack and others on a new iPhone over a carrier. But the reality is they don't and most are easily swayed by a good sales pitch. I only think Apple should care if this is costing them big money and a substantial loss of revenue. This article and other recent ones seems to suggests iPhone sales could be a lot better so something is wrong or could be improved. I have no idea how many lost sales they have due to spliffs. I know that this is not limited to Verizon, the same thing applies to AT&T, Sprint, and overseas carriers as well.
Maybe the solution is for one or more of the mobile companies to offer to be the place where customers can come and get their hands on different phones and get knowledgeable information without the bias of a commission sale. Apple is smart not to fall for for the "bribe our sales staff" trick. It's a useless distraction.
I'm sure "something is wrong or could be improved" at Apple as you said. There always seems to be. And it's usually headline news.
I doubt that Apple would insist on any substantial penalty payments from Verizon or any of the major carriers. Just imagine that this really happens. It would probably cost the President/CEO his job. It would have the almost inevitable effect that Verizon would (a) never enter into such a contract again (b) probably kill any subsidies, which are a loss-maker for the carriers and (c) it would set off a chain of reactions from all of the other carriers. They hate the Apple terms and conditions anyway, they see that there are increasingly reasonable alternatives for a large sector of the customer base and the "premium" value of the iPhone is much less than it was a couple of years ago. In the end that could devastate Apple and I am pretty sure that Apple is smart enough to see that possibility.
I suspect that this all has more to do with smartphone sales growth in general starting to level off. Verizon might have negotiated the carriage deal with Apple on the assumption that smartphone sales growth would continue its exponential trajectory at least through next year. They simply overprojected how the segment as a whole would perform. Everyone knows that smartphone sales growth was going to slow down at some point, it was always a matter of when. That's why the analysts are all in a panic state about Apple and now Samsung -- they would rather cry wolf when the fundamentals are still healthy, than keep recommending stock buys after the market expansion actually stops.
With the sales staff, I know that most of the CE giants are very active with incentive programs for their retail partners, especially Samsung. Everything from spiffs (cash and/or products) for sales reps, to "rent" payments for end cap placement or other favorable display space, co-advertising support (often in return for "minimum advertised price" guarantees), and in-store promotions with company reps. This stuff is all behind-the-scenes and has no material impact on the customer, except in how it influences the sales process and product placement.
Apple has has generally avoided (at least since Jobs' return) these long-standing practices, and that has the effect of pushing them down the totem pole with retail employees and store managers. That was the primary reasoning for Apple opening their own retail stores -- they gain full control over the messaging and product placement, as well as the retail profit margin.
Even if retail store staffers aren't officially told to favor other brands over Apple, they know that competing companies can often offer more incentives and favorable returns. Apple is going to generate floor traffic, because they produce high demand, high quality products. Sales reps won't say no to a customer that comes into the store looking to buy an Apple product -- that's an easy sale, and with phones, the sales reps also receive commissions on the two-year contracts. But, if a customer is more undecided, or needs to take more of a sales rep's time, the employee in that situation would have more incentive to favor a competing product. From what I've heard, retail employees tend to like Apple products more than they like Apple the company.
Comments
We don't know the specifics of Verizon's commitment to Apple, so this whole story could just be headline grab-ass tactics.
However, when Verizon signed on with Apple back in 2011, Apple had no real smartphone competition, and the smartphone market had less overall saturation.
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).
The analysis also doesn't seem to take into account that the 2010 agreement might have been updated/ameneded, possibily several times, since it was first entred into. It's not like Verizon would let something like that sneak up on them without acting (ie, pushing more iPhones, discount pricing, renegotiate the contract, etc) and it's in the interest of both companies to maintain a good working relationship.Quote:
Originally Posted by AppleTechSpot
I agree with others I doubt that Verizon signed on to sell the stated number of iPhones. I do however think that these telcos who have deals with Apple that state they must sell X number of iPhones in a given time frame should re-examine allowing sales people to receive spiffs (incentives) to sell Android phones. This seems to be in direct opposition to what is the best for the health of the overall company as well as distorting the market.
I doubt anything comes of this but ultimately, Apple may demand the end of these incentives paid to sales staff that give Android and advantage while creating a disincentive to selling iPhones.
Apple doesn't need to get involved.
It is really a problem of Verizon's own making.
If they want their employees to sell more iPhones, they can eliminate the spiffs or they can pay Apple a few Billion.
Their choice.
Quote:
Originally Posted by Johnny Mozzarella
Apple doesn't need to get involved.
It is really a problem of Verizon's own making.
If they want their employees to sell more iPhones, they can eliminate the spiffs or they can pay Apple a few Billion.
Their choice.
I am sure the Verizon employees would be thrilled at making thousands less in salary a year. Verizon would never do that. Samsung and others are essentially subsidizing the salary of Verizon employees so why would Verizon stop that free cash flow to their employees they don't have to pay?
If Apple wants these sales reps to push the iPhone as hard as Android phones then they need to match or at least increase their spiff. All sales reps will always try and make the most money possible and who can blame them.
Sure, that'll be $1,300, cash or charge?
If Apple will release these this year, it's a different story. Can they?
I'm sure Apple doesn't care what Verizon reps do. As long as management pays what the contract with Apple says. Let Verizon handle employee compensation for their own company. Maybe they could use a tip jar like all the coffe shops.
Quote:
Originally Posted by geekdad
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?
Maybe they could just...you know, stop trying to shove Android phones down people's throat when they come in for iPhones.
Quote:
Originally Posted by Doctor David
I'm sure Apple doesn't care what Verizon reps do. As long as management pays what the contract with Apple says. Let Verizon handle employee compensation for their own company. Maybe they could use a tip jar like all the coffe shops.
Apple hasn't cared and that is true which is why Verizon reps are pushing Android and doing their absolute best to convince customers not to get an iPhone. I am not saying that is right it is simply a matter of money and common sense. No rep in their right mind would not try and sell a phone where they will make possibly $40 more off of that sale. You would be crazy not to push Android if it means $40 extra dollars then multiply that by a few dozen customers and you are talking big money. Perhaps Apple should care and consider increasing their spiff to match or at least come closer to what others are paying. Salespeople that derive a large part of their income off of commission can't be expected to push a product with no commission.
This is all speculation on my part since they seem to keep spiffs a secret and I can't find any actual link. But from what I understand a galaxy phone can be worth an extra $50 and an iPhone can be from zero to $10. In that case which would you try and sell if you were a sales rep?
Quote:
Originally Posted by malax
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).
I did not check, but if VZ in fact signed a purchase agreement like this (which are actually common place) they would have been required to disclose that fact in their 10K filing with the SEC. So if you really want to know if VZ and Apple has an iron clad deal with purchase liabilities as pointed out, go read the 10K from that time period.
Yes there is a scenario where they could pay out a check. The contract probably had a take or pay prevision in it. Now the reality of the situation would most likely have Apple and VZ renegotiating that prevision, but I double Apple would just let VZ with some future commitment for business of a payout now to remove any future liability.
Quote:
Originally Posted by blackbook
That's what they get for telling their retail employees to push Androids and turn people away from iPhones.
I have to agree and this is exactly what I thought when I read this, why sign a deal like this with Apple when they were also inking similar deals with Motorola and Samsung. You would think their management would be telling employee to push as many Iphones as possible. But it could have been a calculated risk too.
This is/has become a silly discussion, who cares what Verizon does and doesn't push. The customer should always do their research before buying, if you walk into a store to buy an iPhone and leave with a SG4, well you deserve what you got. I have bought all of my phones online for the last 5 years, I might stop and check out the new phones and maybe ask a question or two but that's it.
Apple shouldn't care. If Verizon wants to squeeze its employees with a commission sales policy then they can deal with it. Which I'd guess is considered by apple when they wrote the contract. Just pay the agreed amount and you figure out your own screwy employee policies. I for one am very glad Apple doesn't play the commission game, it feels like a used car lot.
Quote:
Originally Posted by Doctor David
Apple shouldn't care. If Verizon wants to squeeze its employees with a commission sales policy then they can deal with it. Which I'd guess is considered by apple when they wrote the contract. Just pay the agreed amount and you figure out your own screwy employee policies. I for one am very glad Apple doesn't play the commission game, it feels like a used car lot.
I agree that customers should do their homework before they ever walk into a store. I also think you can often get far better deals at places like Amazon, Best Buy, Radio Shack and others on a new iPhone over a carrier. But the reality is they don't and most are easily swayed by a good sales pitch. I only think Apple should care if this is costing them big money and a substantial loss of revenue. This article and other recent ones seems to suggests iPhone sales could be a lot better so something is wrong or could be improved. I have no idea how many lost sales they have due to spliffs. I know that this is not limited to Verizon, the same thing applies to AT&T, Sprint, and overseas carriers as well.
Quote:
Originally Posted by gwmac
I know that this is not limited to Verizon, the same thing applies to AT&T, Sprint, and overseas carriers as well.
Swisscom does things a little different, when you first walk into the store and need help, there is a bright red metal ticket machine in the middle of the store. You pull the ticket and then wait till your number is called. The employees will then answer any questions you might have or ring the product up. They are all payed on salary, no commission, so there is no incentive for them to push any product over another, to them you are just a ticket number.
I ended up with Virgin Mobile.
Maybe the solution is for one or more of the mobile companies to offer to be the place where customers can come and get their hands on different phones and get knowledgeable information without the bias of a commission sale. Apple is smart not to fall for for the "bribe our sales staff" trick. It's a useless distraction.
I'm sure "something is wrong or could be improved" at Apple as you said. There always seems to be. And it's usually headline news.
I doubt that Apple would insist on any substantial penalty payments from Verizon or any of the major carriers. Just imagine that this really happens. It would probably cost the President/CEO his job. It would have the almost inevitable effect that Verizon would (a) never enter into such a contract again (b) probably kill any subsidies, which are a loss-maker for the carriers and (c) it would set off a chain of reactions from all of the other carriers. They hate the Apple terms and conditions anyway, they see that there are increasingly reasonable alternatives for a large sector of the customer base and the "premium" value of the iPhone is much less than it was a couple of years ago. In the end that could devastate Apple and I am pretty sure that Apple is smart enough to see that possibility.
I suspect that this all has more to do with smartphone sales growth in general starting to level off. Verizon might have negotiated the carriage deal with Apple on the assumption that smartphone sales growth would continue its exponential trajectory at least through next year. They simply overprojected how the segment as a whole would perform. Everyone knows that smartphone sales growth was going to slow down at some point, it was always a matter of when. That's why the analysts are all in a panic state about Apple and now Samsung -- they would rather cry wolf when the fundamentals are still healthy, than keep recommending stock buys after the market expansion actually stops.
With the sales staff, I know that most of the CE giants are very active with incentive programs for their retail partners, especially Samsung. Everything from spiffs (cash and/or products) for sales reps, to "rent" payments for end cap placement or other favorable display space, co-advertising support (often in return for "minimum advertised price" guarantees), and in-store promotions with company reps. This stuff is all behind-the-scenes and has no material impact on the customer, except in how it influences the sales process and product placement.
Apple has has generally avoided (at least since Jobs' return) these long-standing practices, and that has the effect of pushing them down the totem pole with retail employees and store managers. That was the primary reasoning for Apple opening their own retail stores -- they gain full control over the messaging and product placement, as well as the retail profit margin.
Even if retail store staffers aren't officially told to favor other brands over Apple, they know that competing companies can often offer more incentives and favorable returns. Apple is going to generate floor traffic, because they produce high demand, high quality products. Sales reps won't say no to a customer that comes into the store looking to buy an Apple product -- that's an easy sale, and with phones, the sales reps also receive commissions on the two-year contracts. But, if a customer is more undecided, or needs to take more of a sales rep's time, the employee in that situation would have more incentive to favor a competing product. From what I've heard, retail employees tend to like Apple products more than they like Apple the company.