Verizon Could Face Up to $14 Billion in Unsold iPhone Purchase Commitments for 2013

[FrozenDarkness]

That is the problem, Apple is inflating it's numbers by demanding carriers buy back all unsold stock.

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Is there any NDA involved?

Apple isn't inflating numbers. The article seems to say that they would be paying a fine instead of just buying massive quantities of iphones and letting it sit there. Apple, being master of control of their own supply chain, probably won't allow that much warehousing of their own products.


NDA could protect any complaining, but verizon has an obligation to its shareholders to talk about risks like this.


don't they also sell ipad at verizon?

 

[StyxMaker]

I blame Apple and it's monopolistic ways!

It's obvious you don't understand what the word monopoly means.

 

[Maschil]

You sort of missed the whole point. The phone doesn't matter. The commission is the focus. Substitute any phone you'd like for the HTC One.

lol i understand... but still got to be somewhat accurate

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Where did you even get that definition from? Karma is for after you die...

"(in Hinduism and Buddhism) the sum of a person's actions in this and previous states of existence, viewed as deciding their fate in future existences."

lol

 

[SusanK]

That has nothing to do with this. Particularly since it means they would be going to the carrier and buying from them, thus reducing this unsold count.

Thanks for bringing this to my attention. I did not make my point.

If the consumer is so naive not to understand they can buy iPhone from Apple and walk out activated on carrier of their choice it is not difficult for the carrier's sales rep to send them out the door with a phone they did not originally intend to buy.

 

[3282868]

I'm sure it has been mentioned (don't have time to weed through 200+ comments), I swear I read articles on former VZW employees that claimed VZW "pushed" sales of non-iPhone devices with incentives and/or quota's. The reasoning is beyond me, perhaps VZW felt the iPhone would sell itself. I remember considering switching to VZW when AT&T began throttling my 5 year old grandfathered data plan (which never went over ~3GB/mo for 5 months), the sales rep kept pushing everything but the iPhone. Thought it was off.

 

[Dontazemebro]

I love arguments like this on the internet. Both sides seem very compelling. One side (you) seems to have the straight scoop straight from the horse's mouth. The other side seems to confirm the various anecdotal stories about sales folks pushing non-iPhones.

By the way, I'm sure your friend isn't lying to you. But perhaps stores in other locations or which are owned in different manners have different incentives.

But it is equally unlikely that Verizon would commit to huge iPhone sales and set up reverse incentives for its sales agents. Maybe the sales agents just really don't like iPhones. Lots of techy guys are board with iOS. So they may be just doing what they think is best for the customer and giving their honest opinion.

I tend to agree with this train of thought. Well said

 

[senseless]

Who exactly is providing these spiffs? If salesperson bonuses are coming directly from the manufacturers and Apple refuses to play, is Verizon to blame?

Maybe not me, but alot of people seemed to swayed by sales people.

Most people that walk into a verizon store to get an iPhone just know that want an iPhone so they can text, take pic, surf internet...standard stuff.

Once the sales persons (who they assume are just being honest and not working on commission) start pushing them to another phone that can do that also, I can see new/average smartphone users being swayed.

 

[n4uaj]

I'm gonna have to say every time I've walked into my VZ store to buy an iPhone the only thing they ask is what capacity and do u want black or white. I have never had a problem with customer service. Last month I got the notice that we were about to go over on data. I gave em a call and after a conversation about why we went over she said no sense in paying the $15 per gb overage just move up to the next level for 10 and she set it to drop back to the lower one on the correct date. All went as she said. I personally don't need to access the web while I'm talking to someone so that ain't a biggie.

 

[JimBo2613]

Poor Verizon!

Apple doesn't need a cheap iPhone.....it's the Service Provider that people can't afford, Stupid!!

 

[macs4nw]

There's lots of anecdotal evidence out there that Verizon had employees push consumers to other phones. I've read several stories where someone came in to Verizon specifically for the iPhone and the sales rep tried to steer them to another phone. I'm sure the carriers hate Apple because they have very little control. Can't put their stupid logo on the hardware or install bloatware on the device. And they have no control over software updates.

This surely is a love-hate relationship, if ever there was one.

hahaha! I know several people that went to Verizon to buy an iPhone and came out with a Galaxy because the salesperson told them it was a far superior phone and these people didn't know any better. Maybe Verizon should tell their employees to let people who want to buy an iPhone do just that with no questions asked.

Sales people are expected to be brand-neutral and objective with their sales advice. But we all know, in the real world, this isn't true. They are going to steer you towards the product, where they make the most $$ on. I can only speculate here, but maybe they make more money on non-APPLE phones, at lower initial outlay for the consumer, which is an easier 'sell', plus more frequent repeat sales? Or perhaps, they are staying deliberately below the target, to 'convince' APPLE, those targets are unrealistic?

This is something APPLE must loathe, but really can do very little about. $23.5 Billion at the average quoted price of 613/unit translates to over 38 million new iPhones a year, or an average of 9.5 million per quarter. Even for VERIZON, the largest US carrier, that is an aggressive target. Of course, VERIZON knew this when they entered into that contract. With this forecasted shortfall, there are no winners here. If APPLE insists on holding VER to that contract, VER might balk at, and refuse subsequent agreements like these. If, on the other hand APPLE let's VER off the hook, they are opening a can of worms, as far as dealing with the other carriers is concerned.

 

[FrozenDarkness]

This surely is a love-hate relationship, if ever there was one.



Sales people are expected to be brand-neutral and objective with their sales advice. But we all know, in the real world, this isn't true. They are going to steer you towards the product, where they make the most $$ on. I can only speculate here, but maybe they make more money on non-APPLE phones, at lower initial outlay for the consumer, which is an easier 'sell', plus more frequent repeat sales? Or perhaps, they are staying deliberately below the target, to 'convince' APPLE, those targets are unrealistic?

This is something APPLE must loathe, but really can do very little about. $23.5 Billion at the average quoted price of 613/unit translates to over 38 million new iPhones a year, or an average of 9.5 million per quarter. Even for VERIZON, the largest US carrier, that is an aggressive target. Of course, VERIZON knew this when they entered into that contract. With this forecasted shortfall, there are no winners here. If APPLE insists on holding VER to that contract, VER might balk at, and refuse subsequent agreements like these. If, on the other hand APPLE let's VER off the hook, they are opening a can of worms, as far as dealing with the other carriers is concerned.

unless apple falls off the wayside, there's no way verizon won't sign another contract.

 

[NOS2U]

Will it meet the commitment after the 5s comes out?

That's what Verizon gets for trying to push products with better profit margins onto customers. Main reason I left Verizon. When trying to buy our first iPhones, the 4s, I felt the Verizon sales rep was pushing me onto other phones. We left Verizon after being with them for 10 years and switched to AT&T and the only difference I've noticed is the savings. AT&T is $20/month cheaper than what Verizon was offering.

 

[johnny5k]

So this is Apple's argument of sales vs sold.

I guess it's not all the Android phones sitting in the back shelves. Seems like an awful lot of iphones are sitting in stock rooms gathering dust.

Sales vs Sold my ass!

Not so fast. Verizon *committed* to buying a certain number of iPhones. That doesn't mean Apple included those in their sales reporting, or there would have been a HUGE surge in iPhone "sales" whenever that transaction went through. Apple is still (more than likely) reporting actual units sold to consumers, vs. those sold to retailers & possibly sitting on shelves.

 

[captain kaos]

So for a company to sell the iphone they are forced to buy twice what they purchased last year, plus we all know that every year iphone X comes along, so a company probably is going to have a store room full of last years tech! Strong arm tactics anyone??!

 

[AppleScruff1]

I recently got a text from Verizon offering the iPhone 5 for 99.99 plus a $35 upgrade fee along with unlimited talk, text and 2 GB of data for $60 per month. Evidently they are trying to push the iPhone now.

 

[kdarling]

Who exactly is providing these spiffs? If salesperson bonuses are coming directly from the manufacturers and Apple refuses to play, is Verizon to blame?

It's not spiffs, but apparently just regular commissions. Something like $5-10 for iPhones, and $30-50 for other smartphones.

(The commissions are higher for other phones because the store makes more money on the other phones. OTOH, Apple keeps much more for themselves, thus high profit margins for them and low profit margins for the store.)

Not so fast. Verizon *committed* to buying a certain number of iPhones. That doesn't mean Apple included those in their sales reporting, or there would have been a HUGE surge in iPhone "sales" whenever that transaction went through. Apple is still (more than likely) reporting actual units sold to consumers, vs. those sold to retailers & possibly sitting on shelves.

Right, the entire commitment number would not be reported at once. It would take place over several years.

However, Apple does report sales to retailers (as well as direct consumer sales from their own stores).

 

[thekev]

I'm sure it has been mentioned (don't have time to weed through 200+ comments), I swear I read articles on former VZW employees that claimed VZW "pushed" sales of non-iPhone devices with incentives and/or quota's. The reasoning is beyond me, perhaps VZW felt the iPhone would sell itself. I remember considering switching to VZW when AT&T began throttling my 5 year old grandfathered data plan (which never went over ~3GB/mo for 5 months), the sales rep kept pushing everything but the iPhone. Thought it was off.

I've read the same articles, and yeah they probably figured the iphone would sell itself, so they would push whatever was cheapest to subsidize per unit.

 

[sigamy]

Is there proof that these purchases have to be iPhones? Could there be 4G enabled MacBook Air's coming? But even if so, I wonder if Apple would trust Verizon to sell Mac's in Verizon stores...

 

[xdxdaustin]

There's lots of anecdotal evidence out there that Verizon had employees push consumers to other phones. I've read several stories where someone came in to Verizon specifically for the iPhone and the sales rep tried to steer them to another phone.

I'm sure the carriers hate Apple because they have very little control. Can't put their stupid logo on the hardware or install bloatware on the device. And they have no control over software updates.

I hear all the time of people going into the Verizon store wanting an iPhone and walking out with an Android phone because the Verizon reps pushed them into it. Hmm...it appears someone made their bed. Time for them to lay in it.

 

[rpaloalto]

Thats what they get for sleeping with the NSA

 

[Fishticks]

Preventing Verizon from selling iPhones by selling their own devices ?!
Samsung really are such blood-suckers !

 

[SoAnyway]

Take that Verizon!

Perhaps the big telecoms need to rethink their business model?

 

[jimbo1mcm]

Now I know why Apple has been so slow to develop new phones. What is the incentive when they have future sales in their back pocket? Verizon made a bad deal, so did Sprint. Verizon should just refuse to pay, sue Apple for not keeping up with technology and let the courts decide. Meanwhile, I sold my Ip5 for a Galaxy S4 and love it. If Apple had kept up, I would be using a 4.7 inch Iphone 6.

 

[Shasterball]

But this 22% decline is basically a rumor, no? Also, AAPL is up 7% for the month of July so this report at least doesn't seem to be negatively impacting the stock.

If you think Apple stock is in good shape as of late, I have a bridge to sell you in Arizona. If you're interested...

 

[Fairthrope]

Was the 4s really that much better than its competition?

The initial push for 4S was the Church of Apple bought them to commemorate the passing of Saint Jobs. Sales tapered off afterward when he didn't make Time magazine cover and The Holy See refused to canonized him.

S is not for Siri, but for Steve.

It wouldn't sell this much if Jobs was still alive when it was launched. It would be just a new iPhone.

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unless apple falls off the wayside, there's no way verizon won't sign another contract.

5S with the same old shell and not enough bells & whistles might just be enough to convince Verizon that. You and I know better, but I'm sure Verizon teams will use this to argue when both side come back to talk terms.

AND, China Telecom could use this story to press Apple even harder for even juicer terms for them to carry iPhone. They know APPLE WILL BLINK.

This could not have come at the worse time.