An analyst at Moffett Research is saying that Verizon may have to pay Apple $14 billion if iPhone sales continue at the current rate. In order to meet its commitment to Apple, Verizon would need to sell $23.5 billion worth of iPhones this year, and analysts believe actual sales are falling far short of that number.
The Wall Street Journal’s Ryan Knutson reported, “Verizon Wireless could be on the hook for a lot of unsold iPhones. An obscure securities filing revealed that the country’s largest wireless carrier had entered into roughly $45 billion worth of purchase commitments—the bulk of which likely involve Apple Inc.’s high-end smartphone, according to analyst Craig Moffett of Moffett Research LLC. In a research note, Mr. Moffett said Verizon’s sales haven’t kept up the pace.”
PCMag’s Stephanie Mlot explained, “[Basically], Verizon signed a three-year contract with Apple, agreeing to sell $40 to $45 billion worth of iDevices between 2011 and 2013. But, shortfalls in the first two years have left the carrier with $23.5 billion in aggregate ‘purchase commitments’ — more than two times their actual iPhone sales in 2012. By comparison, AT&T’s consolidated purchase commitments at the end of 2012 were just $3.8 billion.”
The Apple Insider quoted the research report, which said, “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. It is therefore unrealistic to think that Apple won’t extract some consideration for renegotiating these shortfalls.”
Paresh Dave with the Los Angeles Times noted, “The revelations about Verizon’s potentially staggering deal with Apple take up less than two pages of the 115-page report on the state of the telecommunications industry. Moffett warns that giants such as Verizon and AT&T are weak long-term investments because of slower smartphone sales growth and increasing competition.”