How Will Apple Handle Verizon’s iPhone Shortfall?
Verizon has an iPhone problem and it’s not going away.
Verizon said that more than half of the 7.5 million smartphones it activated during the period were iPhones. That’s a big number and good news for the carrier. But sadly it’s not nearly good enough to significantly pare down its ballooning iPhone purchase commitment to Apple. Verizon must sell $23.5 billion worth of iPhones this year to satisfy the agreement it made with Apple in 2010, according to an analysis of SEC filings by former Sanford C. Bernstein & Co. analyst Craig Moffett. And at the rate it’s currently going, it has very little chance of doing that. To date, Verizon’s reported iPhone sales have lagged so far behind its commitments that Moffett figures the company is likely headed toward a shortfall of more than $12 billion. And that’s a problem not just for Verizon, but for Apple as well. Obviously, the company would rather not advertise that a high-profile carrier like Verizon has fallen so far short of its purchase obligations for one of its flagship products. But there’s far too much money at stake here for it to simply grant Verizon amnesty. It’s quite the conundrum for Apple — more so now that its shareholders and other carrier partners are aware of it. Apple’s negotiations with Verizon will likely be materially different simply because Verizon’s iPhone shortfall is no longer a secret.