Feeds

back to article Poor iPhone sales mean Verizon could owe Apple $14bn

Verizon is facing a massive financial shortfall because it isn't selling enough iPhones, according to analysis from Moffett Research. Apple demands that network partners commit in advance to buy a certain number of handsets before it agrees to do business with them. Sprint, for example, agreed in 2011 to spend $15.5bn on iPhones …

COMMENTS

This topic is closed for new posts.
Bronze badge

Interesting. So not only is there a reduction in iPhone sales, but it's happening at the great and powerful Verizon Wireless? Hmmm... Maybe they'll get lucky and that low cost iPhone gets sold in the USA. They can sell a ton of the candy plastic iPhones and make up that shortfall. Or only the emerging markets get the plastic iPhone (assuming China mobile and India isn't yawning at the device), and the iPhone 5S is little more than the usual incrementally upgraded yawn-fest...

2
0
Anonymous Coward

There is a reduction all right

There is a reduction all right. However, in this particular case, it is probably more of Verizon marketing setting wildly overoptimistic targets and Apple happily allowing them to commit to them.

1
0
Silver badge
Pint

Incremental Upgrades

Don't always apply only to Apple. Some of the phones that Samsung keep pumping out are hardly ground breakers in functionality when compared to their predecessors.

This is a sure sign that the overall market is maturing.

After that measured comment and the expected plethora of downvotes because I dare criticise Samsung, I'm going to need a few of these tonight.

6
0
Anonymous Coward

They will offer all their phones with a free upgrade to iOS 7, that will shift the old stock....

0
0
Anonymous Coward

"iPhone 5S is little more than the usual incrementally upgraded yawn-fest..."

Lets hope so, we need to rescue or freidns and colleagues from the disease that iFolly is.

I pray for them that they also realise just how "BAD" Faercebook is and how "council" it makes them look!

0
2
Anonymous Coward

Re: Incremental Upgrades

"After that measured comment and the expected plethora of downvotes because I dare criticise Samsung, I'm going to need a few of these tonight."

So that is just the rantings of an old drunk then?

0
0
Bronze badge
Thumb Up

Re: Incremental Upgrades

I doubt you'll get down votes for making a fair comment. Samsung fans aren't blinded by shiney.

2
0
Silver badge
Big Brother

Ahh the quaint old iPhone - that takes me back a few years

There was a time all phones had tiny screens, could only do one thing at once,were totally locked down by the nanny that made them and cost a fortune. You say they're still for sale? That's amazing, but then again I guess there's always some level of demand for a nostalgic trip down memory lane.

9
6
Silver badge
Happy

Re: Ahh the quaint old iPhone - that takes me back a few years

If you want nostalga in a phone try going back to something like a Nokia 6310i.

I use one every day. I really don't NEED a smartphone. I had one once but it was more trouble that it was worth.

1
1
Silver badge
Coffee/keyboard

Re: Ahh the quaint old iPhone - that takes me back a few years

@Bob Vistakin - >"You say they're still for sale? That's amazing, but then again I guess there's always some level of demand for a nostalgic trip down memory lane."

Probably some of the same millions of people who are still using dial-up AOL.

0
0
Anonymous Coward

Re: Ahh the quaint old iPhone - that takes me back a few years

Well you know what they say about little men with big screen phones?

The same as what they say about little men with big cars.

It's a way to compensate.

3
3
Anonymous Coward

Re: Ahh the quaint old iPhone - that takes me back a few years

I have just bought a Nokia 301 Dual SIM: Old Skool!

0
0
g e
Silver badge
Holmes

Re: Ahh the quaint old iPhone - that takes me back a few years

@Apple Cultist 7:10

Which is what people always say when they can't get/afford the best and/or latest or just realise they made a poor purchasing decision in the firs tplace

4
3
Anonymous Coward

Re: Ahh the quaint old iPhone - that takes me back a few years

"Well you know what they say about little men with big screen phones?

The same as what they say about little men with big cars.

It's a way to compensate."

EH? WTF? Buying an iFolly for status! Hows is that any different?

3
2
Bronze badge
Gimp

Re: Ahh the quaint old iPhone - that takes me back a few years

When are you going to twig that nobody buys an iPhone "for status" any more because they are WAY too common. This is because they are WAY too popular.

This in turn is because they are WAY better than any other phone IF - and I admit this is a big enough IF to separate the population down the middle - what you want from a phone is a rock-solid warranty (yes yes you have to pay for it), freedom from virus/malware paranoia, access to the largest app store in the world, guaranteed updates to the latest and most secure OS, 100% compatibility with all your other stuff (so long as it's Apple), hassle-free backup and restore.... Yes, you pay for all this. But if you can't afford it go get one of those freetard android monsters.

I could go on but my lunchtime is over and I have to go back to writing software for a load of buggy, fragmented, laggy, slow droid phones. We just got a galaxy 4 - boy, was *that ever a let-down.

3
5

What people need to realise is that under this "commitment to buy" agreement, Verizon have effectively pre-ordered $14billion worth of iPhones, and while Apple are able to sell some elsewhere, they won't be able to sell all of them... As with any B2B relationship they will come to an arrangement that isn't as much mutually agreeable as will be made out in the press releases...

0
0
g e
Silver badge
Holmes

Also...

Verizon won't do it a second time. Nor will anyone else.

Footbullet for Apple sales.

9
0

Apple Values

So they are not selling enough phones yet Apple charge a fortune for them. Its proof you cannot buck peoples expectations that electronics fall in price and rise in features. For the last 10 years Apple have refused this and ended up with billions in the bank. Unfortunately this means you are vulnerable to catchup from competitors. Samsung now make far more profits on their phone sales as they don't have to undercut Apple by much. Apple could drop prices, raise sales and drop Samsung profits too but that bursts the bubble of the goose that lays golden eggs.

So unless they come up with something groundbreaking soon, the stock price has to fall much further. So much for the guys pushing it to $1000 a share

2
1

Its kind of dumb for companies to look so closely at annual sales of new handsets when theyre usually attached to a TWO year contract meaning that whenever a major new and exclusive handset comes out there will be a large bump in sales the contracts to which wont run out for 24 months meaning the following year will slump for people that favour that make/model

The concept of prior agreement to sales though is one the industry itself should extinguish by collectively telling companies like apple to shove it. After all the BUYER should be the one directing the market not the manufacturer and its time the retailers remembered that it doesn't matter how good your product is if nobody is selling it or letting it use their networks

2
0
Silver badge

"Apple demands that network partners commit in advance to buy a certain number of handsets before it agrees to do business with them"

Hasn't a judge just found Apple guilty of unfair competitive practices?

4
1

Standard business practice

Most manufacturers of anything will have a minimum order value. There are plenty of warehouses the world over that have a part pallet of old stock that some buyer optimistically ordered and they've never managed to shift.

It's just that the order value here is just rather more than Verizon have managed to sell.

0
0
Gold badge

Velv,

It's not anti-competitive. It's all about the discount. Ask anyone in sales. If you pre-commit to buy 1,000 of our gubbins, I'll give you a bigger discount than if you only order 1.

If on the other hand you order 1, and promise to order 1,000 later, honest - then I may trust you, but you still won't get the juiciest discount that they guy who signs a commitment to order the whole lot will get.

For a contract of that size, I'd image there are build in penalty clauses. It would be silly to force Verizon to buy the lot, unless Apple have changed their manufacturing amounts based on pre-orders. Although if they have, then Verizon may have to eat a lot of the difference. However, it's equally likely that Apple will just claw back a few percentage points of discount on previously made sales. Or even reduce their agreed marketing assistance payments, which are often based on those negotiated discounts.

1
0

Business as usual (for Apple)

Like them or not, you have to admit that Apple has a pretty slick deal for their phone order contracts (assuming they follow through in some way):

The phone is successful, Apple gets paid

The phone is unsuccessful, Apple gets paid

0
0
Gold badge

Surprising...

I find this rather surprising. AT&T got the IPhone exclusive in the US because Apple offered it to VZW (Verizon Wireless) first, VZW saw the terms Apple wanted and told Apple to go f**k themselves. I really had assumed that once Apple (Steve Jobs) got so worked up over AT&T's poor network performance that they broke AT&T's exclusivity agreement early, that Verizon would have gotten more favorable terms than they apparently have gotten. This suggests to me that AT&T may end up owing even more to Apple (assuming similar sales).

Why the sales figures? I think it's easy -- Sprint has unlimited data for about $30, T-Mobile has an unlimited data option as well (and if you buy the 2GB, 1GB, 500MB, 250MB option, you are just throttled when you hit the limit, not a giant cash overage.) You could get unlimited everything from either one of them for way under $100 for unlimited everything, and closer to $50 if you just wanted 2GB or so.

AT&T and VZW? Well, VZW now charges *$60* for a plan with 2GB data, unlimited text, and unlimited talk (with NO OPTION to get less talk and text if you want data!) THEN charge *$40* a line to add to it! $100 for *1* line, and no option to get anything cheaper!!! AT&T? 300MB for $20, 3GB for $30, 5GB for $50, but you can't just get data -- add $40 for 450 minutes and no texts. For the unlimited, you end up with $40 a month for 1GB plus $45 a device, straight to $70 a month for 4GB + $40 a line. OUCH!

2
0
This topic is closed for new posts.