Verizon Could Owe Apple Up To $14 Billion In Unsold iPhones

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Posted July 11, 2013 at 3:55pm by iClarified

Verizon Wireless could end up owing Apple as much as $14 billion in purchase commitments if the carrier fails to sell a certain number of iPhones. This figure is estimated based on the current iPhone sales and the amount Verizon committed to sell in 2013.

Under a multiyear deal signed with Apple in 2010, Verizon Wireless is obligated to buy $23.5 billion worth of iPhones in 2013 alone, according to Craig Moffett, a telecommunications analyst who left Sanford C. Bernstein & Co. earlier this year to start his own research firm. Since the purchase commitment is more than twice what Verizon Wireless sold in 2012, the company may have a shortfall of $12 billion to $14 billion, worth $4 to $5 per share, Moffett said in the report.

The report suggests sluggish demand for the iPhone that could bring up this hefty bill for Verizon and even other carriers. Apple often makes wireless providers commit to a certain amount of units over the years which has aggravated some carriers. Estimates peg Apple at a 22 percent decline in net income in the third quarter.

However, Moffett believes Apple may simply ignore these commitments since other carriers around the world are in similar situations.

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,” Moffett wrote. “It is therefore unrealistic to think that Apple won’t extract some consideration for renegotiating these shortfalls.”

Both Apple and Verizon declined to comment.

Read More via MacRumors

Verizon Could Owe Apple Up To $14 Billion In Unsold iPhones

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vzrep - July 24, 2013 at 4:45am

i work for an apple retailer. do you know why verizon sells less apple than samsung? because of the payout. Apple is holding verizon hostage with the cost of the phones. as a sales rep, i can make $50 off an iphone, or i can make $120 off the samsung phone. I already believe the samsung is a better product, and the fact that i am making more? sweetens the pot. if apple wants to have verizon move more, just increase it by $25 and i will sell nothing but iphones.

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gamerscul9870 - July 24, 2013 at 6:03am

Samsuck is better? Please, they have been using the same material for ages and haven't change, even with craplets. Would you choose a phablet with 4.7" thin screen? You'd pay more for repair since it is too big than iphone.

High Technology - July 12, 2013 at 7:10pm

I don't see how Verizon could have agreed to buy $23.5B worth of iPhones in 2013 alone -- that's between 30 and 40 million handsets (assuming they cost around $600 each). Considering the US population is around 310 million, that means that Verizon agreed to sell an iPhone to one out of 10 people in the US during 2013 alone. It's a staggering promise, even more so when you consider the population includes young children and the elderly, who are less likely buy an iPhone. Verizon has about 100M subscriber lines, including prepaid lines which aren't iPhone eligible/likely. Verizon activated 7.2 million phones in the first quarter. So even if they sold no other phone, they could barely hit this target of 30+million iPhones. The math here just doesn't work...

gamerscul9870 - July 12, 2013 at 12:28pm

No, just wait until I cqn afford one, then I'll buy.

Silvertongue - July 12, 2013 at 6:03am

Serves to demonstrate that the grasping, greedy marketing approach used by Apple is sure to take them down, along with their refusal to include innovative advancements in their handheld devices. Lovely combination of arrogance and ignorance--reminds one of the corporate attitude of RIM who blew themselves out of serious competition with similar heavy-handed business dealings.

DabluegmcNyC - July 12, 2013 at 4:12am

If verizon would lower their prices on their plans then maybe they would able to pick up in some sales. Also talk while you surf verizon doesn't offer it on the iPhone5.. Step it up Verizon or pay back!

Me - July 11, 2013 at 5:14pm

Because Verizon hires untrained employees. They knew nothing about the iPhone.I know more about the device better than Apple store employees .Verizon has been pushing Galaxys3-S4!! Thy need to have some a promotion to motivate their employees.you sell 6 iPhones a week you get $50 bonus that $200 a month additional to you pay check.. That's only 1 iPhone a day . I bet every employee will force the consumers to do it , and its called salesman!they are all order takers..they don't sale value .let me train them ..lol!

NoGoodNick - July 11, 2013 at 8:15pm

That's why I NEVER visit wireless carriers to purchase a smartphone. I'd rather buy from Apple directly, because the Apple Store 'geniuses' at least know what they're talking about and won't try to talk you out of what you want to purchase!

mxgarcia31 - July 11, 2013 at 4:23pm

OWE!!!! They mean OWE!!!

iOS - July 11, 2013 at 4:03pm

Own or OWE?!