Verizon may owe Apple $14 billion for not meeting iPhone sales goal

By on July 12, 2013, 11:15 AM
apple, iphone, verizon, smartphone, wireless provider, sales

An oversaturated market could spell big trouble for the nation’s largest wireless provider this year. While looking through an obscure securities filing, two analysts have come to the conclusion that Verizon will fall well short of estimated sales they promised to fulfill as part of a multiyear deal they signed with Apple in 2010.

According to analyst Craig Moffett of Moffett Research LLC, Verizon is obligated to sell $23.5 billion worth of iPhones this year. That’s more than twice the number of iPhones that Verizon sold in 2012 which means the company could come up short by $12 to $14 billion.

Nomura analyst Stuart Jeffrey essentially echoes those same sentiments. Jeffrey estimates that Verizon sold just 7.2 million iPhones during the first quarter of 2013 and will sell another 10.8 million units during the second half of this year. Based on his calculations, that leaves some 19 million unsold units at a value of around $12 billion.

All of this, of course, is assuming that Verizon agreed to receive and pay for that many phones in their agreement – something we are unsure of at this hour.

Either way, that’s a lot of unsold iPhones but the real question is, what is causing so many handsets to go unsold. As it turns out, there could be a number of factors leading to a slowdown of sales including the aforementioned saturated market, stiff competition from the likes of Samsung and the fact that several carriers now offer the iPhone (that wasn’t the case back in 2010).




User Comments: 6

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2 people like this | amstech amstech, TechSpot Enthusiast, said:

Betting on expansion/hints of success is the destroyer of so many companies and long term business transactions. How many companies need to get slapped across the face before they realize there is only so much profit to be had?

Cycloid Torus Cycloid Torus said:

Good catch by the analysts. Nice to know there are folks who can still read the small print.

Skidmarksdeluxe Skidmarksdeluxe said:

It's not Verizon's fault nobody wants an Apple phone but they should've been careful when dealing with Apple especially before signing their contract which invariably requires the use of a scanning electron microscope for reading the fine print.

RzmmDX said:

So, is this like buying options and betting that the stock price would be dropping?

That is a sound business strategy alright...

1 person liked this | MilwaukeeMike said:

Betting on expansion/hints of success is the destroyer of so many companies and long term business transactions. How many companies need to get slapped across the face before they realize there is only so much profit to be had?

True, and why does it seem so hard for companies to understand that there are only a finite number of people who are going to buy new iPhones... or PCs.. or whatever. Yeah PC sales are down because there are fewer people who need to upgrade or buy new. Iphone sales are down because there are fewer new customers and fewer need to upgrade. Even the Galaxy S4 didn't sell as well as they'd thought.

It's almost like they think of tech like movie sequels.... 'Hey the last one was great, let's make another' Except all those millions who bought a Galaxy S3 aren't going to buy an S4, like they're going to rush out to see Despicable Me 2 or Monsters U. Same thing with the 4S and iphone 5. This should be doubly obvious in the smartphone market where people sign 2 year contracts.

On a different note... I like the iPhone evolution photo. Shows how much they've changed, and how much they haven't changed.

drjekel_mrhyde drjekel_mrhyde said:

Is that picture true to scale?

/Non iPhone user

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