July 11, 2013
Slowing iPhone sales may mean very little to Apple, at least in the short term. Verizon Wireless, like other carriers, agreed to sell a certain number of handsets as part of their agreement with Apple. That contact may cost Verizon up to $14 billion this year alone, according to Bloomberg. Under a multiyear deal signed in 2010, the largest carrier in the U.S. is obligated to buy $23.5 billion worth of iPhones in 2013. That obligation is more than twice what Verizon sold last year. According to Craig Moffett, a telecommunications analyst, this may mean that Verizon will have to pay Apple between $12 billion and $14 billion to cover declining sales. As Moffett notes:
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.Analysts expect Apple to report a 22 percent decline in net income when it announces third quarter results on July 23. Verizon isn’t the only carrier facing contractual obligations with Apple. Sprint agreed in 2011 to buy $15.5 billion worth of iPhones over the next four years. So far, the third-largest carrier in the U.S. looks likely to meet that obligation through sales alone. With Apple’s share price down nearly 40 percent since its September high, investors are hoping that a refreshed lineup of iPhones will turn things around. The so-called “iPhone 5S,” along with a less expensive “iPhone mini” model are expected to debut in September. See also: The Next iPhone Could Be Super Fast, Support LTE-A, Foxconn Said To Begin Shipping The First Budget iPhone Units To Apple, and Android's Lead Over iOS In The US Narrows.