Verizon could owe Apple $14 billion off iPhone sales shortfall
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.
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.
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.
Comments
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.
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?
Does that sound realistic?
How does this guy know what the verizon apple contract is?
I'm still sticking with AT&T though cus I apparently hate myself lol.
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.
Quote:
Originally Posted by blackbook
That's what they get for telling their retail employees to push Androids and turn people away from iPhones.
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.
They're probably committed to sell more next year.
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.
I doubt the figures. He takes Verizons known purchasing commitments and assumes the bulk are iPhones. No real proof.
Quote:
Originally Posted by blackbook
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/
Quote:
Originally Posted by blackbook
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).