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

[Tiger8]

Just shows that there are many more options for consumers and they are taking advantage of some of the other devices. Apple needs to refresh the iPhone more often IMO.

No, what killed verizon is the fact that cusotmers have other options now; Sprint, T-Mobile, Straighttalk, Virgin, C-Spire.

They might as well offer deep discounts on the iPhones if they are going to loose that much money. I'm sure Verizon would prefer to give the money to their customers rather than to Apple.

And Apple may not like the deep discounts on their flagship product so Verizon may be able to extract some concessions from Apple

Hillarious, Verizon love their customers! It's evident with the fact that they are taking away more features and increasing prices and overage charges.

 

[Konrad9]

And the geniuses keep training to push their employees to sell non iPhones....

How dare they sell anything other than Apple products. Heathens.

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Wow, maybe it is time to make your phones capable of talk and data. (Granted, heard it will be available with next phone)

This is comical hearing that they were trying to push people to other phones.

My android VZW phones could do that, my VZW iPhone 5, however, cannot.

 

[lilo777]

And now we know

why our wireless plans cost so much. We thought the carriers were to blame but it turns out it's all because of Apple's greed.

 

[Rogifan]

Just shows that there are many more options for consumers and they are taking advantage of some of the other devices. Apple needs to refresh the iPhone more often IMO.

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.

 

[ArtOfWarfare]

It seems to me that Apple has screwed Verizon (and themselves) over in 2013 by failing to launch a compelling iPhone early enough in the year.

 

[Dyspareunia]

And the geniuses keep training to push their employees to sell non iPhones....

Exactly this. Have friends that work for VZW, even one as a branch manager and they are trained try to steer most of their prospective handset purchasers towards non-iOS units, like Android or Window, because of higher commissions/payouts.

They take the short-term commissions gains, but end up with burden of a higher profit loss to Apple, for their short-sightedness.

Personally, I wish VZW (which I have as my provider) employees would actually listen to what the customer's needs are, not whatever the shareholder's whims are.

 

[darster]

Exactly what happened tp Sprint. This just gives ammo to Verizon to eliminate subsidies, and get out of selling phones period. Lets hope they switch to BYOD.

 

[Aidyn's X]

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.

 

[Macist]

Apple has nothing to gain by seeing a carrier 'punished'.

 

[roadbloc]

Too bad Verizon. I guess somebody over-predicted and cost you dear.

 

[TallManNY]

As a company, if your product can't sell in my store, I shouldn't be held liable. Now if I'm purposely not selling or prohibiting sales of it, then I have no case.

It seems what Verizon is doing is preventing sales of the iPhone, so Apple should push to get the money.

However, I feel Verizon may just drop the iPhone completely. Heck, I'd even disable any off-contract iPhones on the network too. Yeah it may piss off customers, but it'll make Apple give in too.

Dropping iPhone in the US is basically tantamount to going out of business. Apple knows this, Verizon knows this, and hence Apple was able to wring an obscene commitment out of Verizon. Think about it, a guaranteed 100% increase in purchases year over year. All negotiated last year when Samsung was clearly making a very nice Android Phone in the GS3 and Jelly Bean was a fine OS. Verizon is probably not surprised at all that it can't keep up with these sales commitments.

 

[ArtOfWarfare]

Apple has nothing to gain by seeing a carrier 'punished'.

Except $14B. Which, despite how large Apple is, $14B is still pretty considerable. I'm not able to find exact numbers but I think their annual revenue is a few hundred billion, so $14B is somewhere between 1 and 10% of all their revenue for a year.

 

[lunaoso]

Verizon: Here's your iPhone! By the way, there will be a $14 billion fee added on to the cost of the phone.
Customer: For what?
Verizon: Aaaaahhhh... A..... Handling fee. Yes it had to travel from Apple Headquarters, located in the outer reaches of space, and was delivered by the Pope right to this store, just for you.
Customer: Sounds reasonable enough. Deal.

 

[jfx94]

I think we might see Verizon retailers suggesting iPhones more frequently now.

 

[MrNomNoms]

Le Sigh:

Apple routinely requires new iPhone carriers to commit to purchasing a certain number of iPhones over a period of years

It is clear that the Apple bashers have never worked in business; such contracts are the norm - if I were to become a reseller for a distributor I am obligated to purchase minimum $x of goods per month or else I lose the ability to resell their products. I remember a few years ago in NZ where VST (a distributor for a number of companies) had a minimum of $10,000 worth of sales per month as the minimum level with a sliding increase per month based on the discount per unit they could give - again, what Apple has it the contracts they write up is hardly new or onerous.

 

[Newton70]

This is absolutely not good for Apple. Such a significant shortfall only gives the carriers more leverage to push back Apple and its minimum purchase commitments. Frankly, Apple only has itself to blame since they've allowed the competition to catch up (if not surpass in certain areas).

 

[tekno]

How is that?

Read the thing through, not just the headline, and you'll begin to realize why analysts have a worse reputation that lawyers or politicians!

Uhhhh did you read the article?

I did read the article.

Those figures would be come to using data on past sales, potential sales etc. etc. If there's going the be a $14 BILLION shortfall, can you imagine Verizon doing a deal like that again?

This sends a strong signal - Apple doesn't have the draw it used to. This could cause Apple's brand to devalue somewhat amongst the carriers.

"Apple to report a 22 percent decline in net income" is the particularly concerning bit.

 

[GoldenJoe]

This is simply a matter of Verizon's point-of-sale tactics catching up to them. They pay their salesmen low wages, and hinge their real, commision-based income (and continued employment) on selling devices with high profit margins. Whether it's some junk feature phone, or the Android du jour, they run a vicious, no-holds-barred sales environment that is aimed at maximizing margins, rather than selling the customer the device that best suits their needs. As it turns out, the iPhone is one of their least profitable devices, and employees get in trouble or are outright terminated if they sell too many of them. That's the real reason Android has a greater market share in the US, and it's the reason Verizon finds themselves in the position that they are currently in. Apple was smart to put that term in place - it is the only thing that protects them from backwards point of sale systems like the one Verizon employs.

 

[HenryDJP]

They might as well offer deep discounts on the iPhones if they are going to loose that much money. I'm sure Verizon would prefer to give the money to their customers rather than to Apple.

And Apple may not like the deep discounts on their flagship product so Verizon may be able to extract some concessions from Apple

It doesn't work that way. When companies sell select products to retailers there's usually a clause in the contract that prevents them from "dropping their drawers" on the pricing of the company's products. $5 drop here and there is usually acceptable but deep discounts have to be allowable in the contract. I've never seen a 3rd party Apple retailer offering deep discounts. Most likely Apple restricts this in the contract.

 

[tekno]

This is simply a matter of Verizon's point-of-sale tactics catching up to them.

And this alone could cause a 22% decline in Apple's income? I doubt it. I think it's more to do with the iPhone's faultering attractiveness.

 

[calpolygraduate]

I blame Apple and it's monopolistic ways!

 

[pure3d2]

Verizon is making money hand over fist by fleecing its customers. They can afford to lose a few billion.

 

[pacalis]

How is that?

Read the thing through, not just the headline, and you'll begin to realize why analysts have a worse reputation that lawyers or politicians!

Fire sale.

And if they can't fire sale because of contract clauses, it raises the spectre of anti-competitive practices and price fixing (hmmm, that hasn't come up before this week has it).

In short, it's bad because Verizon's not going to eat $14 billion to keep Apple happy.

 

[HenryDJP]

If this is true, Verizon should be to blame. Every time you go to a Verizon store the sales people are never pushing the iPhone. If you ask about the iPhone, they immediately try to get you to buy a different phone. Their sales reps are obviously incentivized to sale other phones, not iPhones.

Ah that's interesting. When I worked at Sprint we never got paid based on phone sales revenue, we were paid based on the rate plan chosen and the amount of phones sold for that month.
There's another caveat and probability to Verizon's declining iPhone sales, their rate plans just aren't for everyone. The pricing is too high for what they are offering. Their services aren't much different from AT&T or Sprint where they can justify being more expensive.
Yes, Verizons coverage is wider but for most people all 3 carriers are roughly the same. I have friends with Verizon and their phones drop calls as much as Sprint and AT&T.

 

[4TheLoveOfTech]

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.

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!