Apple could be turning carrier strategy into a liability

“News that Verizon might have to pay Apple as much as $14 billion for unsold iPhones lifts the lid on Apple’s carrier strategy and explains why so many carriers still do not yet carry the iPhone – notably China Mobile,” Haydn Shaughnessy writes for Forbes.

“To secure rights to the iPhone Verizon appears to have made a purchase commitment from Apple for 2013 that is twice its 2012 sales,” Shaughnessy writes. “Two issues arise from Verizon’s plight, both of which give us an insight into the smartphone business and Apple’s near term future.”

Shaughnessy writes, “The first is, can Apple afford to continue this type of pressure? The second is that the Verizon problem is being interpreted as a result of falling iPhone sales. That could be an error.”

Read more in the full article here.

MacDailyNews Take: Anything that legally creates an impetus for carriers to provide their customers with the world’s best mobile devices is good news for Apple and bad news for peddlers of fake iPhones.

Related article:
iPhone sales shortfall could leave Verizon owing Apple $14 billion – July 11, 2013

28 Comments

  1. yeah, but iphone is already 50% of sales at VZ. no way they sell enough this year unless they discount it somehow. either early upgrades or some special to steal customers from other carriers

    1. Verizon is the number one reason that Android sales took off in the US. I will never be able to she’d any tears for their misfortune and I will never be a customer of theirs again. Ever.

      That said assuming this article is based on any facts, then this might be a bad idea for Apple to do this. But that’s a big assumption. We have zero proof this is true.

    2. I’m pretty sure Verizon will hit their iPhone mark easily when the iPhone 6 is released.

      Glad no reporters have figured out that insight based on a early fall release of new Apple products…

          1. you must have missed the last few sales quarters and the general numbers of smartphone penetration being above 50% in the USA

            the only non-smartphone people left are like my mom who wants a $140 no contract smartphone to get better MMS capability

            i’m at the point where i’m considering keeping my iphone 5 for 3-4 years and going prepaid or tmobile and away from AT&T. and going forward pay full price for a new iphone every 3-4 years. no point in doing it every year anymore

            1. Your idea has some merit. I definitely think there has been a leveling off in the rate of new feature growth in all smart phones. I actually like my iPhone 4 almost enough to go prepaid with it. But, no Siri and no voice guidance in Maps. If I had a 32GB iPhone 4S it would be a no brainer. As it is I’ll probably get the iPhone 5S, run out that contract and then go prepaid.

              Or, if the rumored low cost iPhone turns out to be a real goodie, I’m might do something completely different.

            2. just use waze or google maps for voice turn by turn directions
              waze is better than apple and google maps
              siri is as useless as google now

    1. Interesting point. Of course, any minimum sales agreement may just be Apples way of being sure that Verizon does not push the Android phone with spiffs to spite Apple.

    2. The reason why China Mobile hasn’t had the iPhone isn’t due to carrier negotiations but because it uses an incompatible cellular radio type to the rest of the world. Qualcomm has only just released a compatible chipset this year. Would have meant another separate iPhone just for China. With the new chipset apple can make the iPhone 5S China Mobile compatible

  2. Clearly what worked for Apple pushing the iPhone five years ago is different than the situation today. Apple had no real competitor in the beginning. So Apple could pretty much write it’s own ticket. The Verizon situation could be very uncomfortable for Apple. Thus the reason Tim Cook wants more iPhones sold through the Apple store.

    1. So Verizon makes boneheaded decisions to hike its prices and lower data caps, but its apple’s fault they aren’t gaining more customers???

      The iPhone is already half their cell business. Against the 20 other models, in fact. So the real problem is Verizon isn’t gaining iPhone customers now that tmobile and others are in the iPhone game. That’s not apple’s problem. That’s Verizon’s for pushing a ton of shitty android devices. The sell through is prevent retailers coasting. If Verizon doesn’t want those 50% iPhone customers, AT&T sprint or tmobile will scoop them up and apple will be absolutely fine.

    2. That, and the fact that TC would probably prefer the iPhones be promoted and sold by in-store personnel who actually LIKE the product and want to sell it. Not begrudging kickback trollers and sleazy spiff artists who despise the iPhone and aggressively steer people towards interchangeable POS droids instead.

      Payback’s a bitch, huh Verizon? You made all these noises about how happy you’d be to sell iPhones, IF ONLY that SJ would open distribution up (conveniently ignoring the fact that you had first crack at the product, but wouldn’t accept Steve’s terms). So you jumped on the bandwagon selling cheap knockoffs instead, giving Apple no choice but to insure you’d walk the walk when it came time to making a financial commitment to the product. Now boo-fscking-hoo, you’re on the hook for the $$.

      iPhones make up over half your sales, DESPITE your best efforts! Gee, how much of that purchase commitment would you be stuck with if you actually lifted a finger to sell them??

      (To answer this self-evident question, head over to verizonwireless.com from a non-Apple source and try to find mention of an iPhone. Good luck with that.)

  3. I just posted this on the Forbes site in reply:
    The distributor has no right to complain when the staff repeatedly works hard to discourage the sales of the iPhone in it’s own stores.

    Verison could have easily sold more iPhones if their sales representatives were not aggressively trying to talk customers out of buying an iPhone when they walk in the store specifically asking for an iPhone. I can tell you of 7 instances (different cities different states in some of the cases) I know of 3x it happened to people in my family including myself. I know of 2 older people (one in NY one in WV) who were successfully convinced by the store’s Verison rep to buy an Android phone—even though their first request was to be given an iPhone. My own son was talked out of it. And now he can’t wait for his contract to be up on the Droid so he can get an iPhone.

    I got fed up after the 2nd question probing why I thought I had to have an iPhone and not a competitor’s which was just as good for the price, and told the rep in my town “Don’t try to sell me that garbage, just give me the iPhone.” I actually got into an argument with a Verison rep in a State Fair Booth because he was advising someone incorrectly of disadvantages to having an iPhone vs. Droid or whatever else he was pushing. Total lies were told. I have no sympathy for Verison’s unsold inventory. Look in the mirror Verison.

  4. I am a fan of Apple products. They are usually the best of breed. It would make sense to have an incentive program to induce carriers to maximize sales. However, this sounds like damn foolishness. It is never a good idea to cut off the hand that feeds you.

      1. $14 Billion is more than the total Verizon Wireless profit for the last two years. Apple may be able to punish their carriers like this if they have binding contracts but this is no way to build long term relationships in a competitive market. Verizon doesn’t toss that kind of money in the dumper because salesmen are unilaterally recommending other phones to maximize commissions. That explanation does not pass the sniff test. The company would convene a firing squad. If that sales behavior is happening systematically it is because salesmen are directed to do so. No company would do this voluntarily in the face of penalties that wipe out all profit. I don’t know the real story but that isn’t it.

        1. So every customer that walks into a Verizon store wanting an iPhone gets pressured to buy something else, and now Verizon has the balls to complain that they can’t sell all the iPhones they contracted for? I don’t care whether it was Verizon corporate policy to switch customers away from iPhones or not. Verizon management is responsible for what goes on in their stores, not Apple. Sound slike piss poor management on Verizon’s part, fueled by greed and short-sightedness.

  5. Things are always changing. The iPhone 4 is a robust model that will last for at least 4 years in most people hands.
    The 4S and 5 probably the same or better.
    This will impact sales eventually.
    It might mean that Samsung et al will suffer because iPhone owners who want a new model will sell or give a working older model to someone who cant afford the expensive stuff.

  6. Who cares what Verizon says. These companies area making hand over fist. They signed the deal, so just shut up and pay it. You can’t back down b/c your sh**y sales reps sell your plastic phones for higher commission and talk down the iPhone.

  7. This is Verizon’s own fault. If they have made such a heavy commitment, they apparently haven’t communicated this to their sales people, or their incentive policies haven’t really caught up with this commitment.

    When you walk into a Verizon mobile store to buy an iPhone, salespeople will do anything in their power to make sure you walk out with a Droid. Their bull$h!t is legendary, and this seems to be very much the same across the Verizon land. If Verizon isn’t selling as many phones as it had promised to Apple, it is because their salespeople are trying to make more money (buy selling Android for which they get a commission, and not iPhone, for which they apparently don’t).

    Verizon Corporate, you may want to talk to your sales guys in the trenches.

  8. I feel no pity towards Verizon.

    They want their sales rep to push Samsung phones? Fine.

    They want to bury iPhones deep down on their website? Fine.

    Then they should be fine with paying the $14 billion for not selling enough iPhones.

  9. Verizon’s reputation falls in 2013. About time. Darn, they’re stuck with iPhones as a result of their own incompetence. Not Apple’s problem

    China Mobile: Not willing to offer their customers the best smart phone. BFD. Apple: Let China Mobile enjoy their cheap crap products for their cheap crap customers. Yawn. Maybe toss them a bone in the form of a cheap crap rendition of an iPhone? I don’t advise it, but I don’t run Apple. China demands crap? China gets crap, as the dead bloated pigs full of cadmium and melamine go floating on by down the river. What a hell hole.

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