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

[Rohiggidy]

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

Bloomberg yesterday reported on a research note from analyst Craig Moffett pointing out that Verizon could potentially face a massive bill from Apple of up to $14 billion this year based on current iPhone sales rates and the carrier's commitment to purchase a minimum number of iPhones from Apple.

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.

Apple routinely requires new iPhone carriers to commit to purchasing a certain number of iPhones over a period of years, a requirement that has led some carriers to balk at offering the device.

As Moffett points out, Apple's contract with Verizon requires the carrier to purchase more than twice as many iPhone this year as it did last year. During the first quarter of 2013, Verizon activated four million iPhones on its network, a figure representing roughly $2.5 billion in hardware value at Apple's average selling price of about $613 per unit.

Update: Nomura analyst Stuart Jeffrey has released his own note examining the situation and concurs with Moffett that Apple and Verizon are in a difficult spot. Verizon disclosed at the end of its 2012 financial statements that it holds $23.5 billion in purchase commitments for 2013, with Moffett and Jeffrey both believing that the iPhone accounts for the vast majority of that amount.

Jeffrey notes that Verizon could still satisfy its obligation by making a massive advance purchase of iPhones for 2014 at the end of 2013, although such a purchase would obviously have an effect on any purchase requirements to be built into a renewal contract with Apple. Alternatively, Apple could simply allow Verizon to roll over its commitment into 2014 in order to prevent Verizon having to make a massive expenditure at the of the 2013, although such an allowance would undermine Apple's minimum purchase agreements with other carriers.

 

[Ed MOTHEREFFING G]

You've become a google / anti apple spammer and its not cool. We have enough undercover employees and spammers here. Its dissapointing rbk.

 

[chemicalsword]

apple pimpin these nikkas.....

 

[Mr. Somebody]

Very unethical on iphones part. Just pushing the industry away from them.

 

[Rohiggidy]

You've become a google / anti apple spammer and its not cool. We have enough undercover employees and spammers here. Its dissapointing rbk.

do yopu work for APPLE. Verizon is the Loser here

 

[Slystallion]

I'm sure apple will adjust something or break it up into future years, it doesn't do apple any good to cause a company that sells your product to go into massive debt, but if course the other companies will ask the same type of adjustment to their commitments and apple may have no choice but to comply

 

[Rohiggidy]

I'm sure apple will adjust something or break it up into future years, it doesn't do apple any good to cause a company that sells your product to go into massive debt, but if course the other companies will ask the same type of adjustment to their commitments and apple may have no choice but to comply

which means there sales numbers will be much lower = lower stock price. Tim cook bout to be fired