The Worst $15.5B Ever Spent? (S)
Down)
...or maybe the best?
Yesterday, Goldman Sachs commented that Verizon (NYSE: VZ) should ditch Apple's (Nasdaq: AAPL) iPhone...and soon.
In October, it was rumored that Sprint (NYSE: S) would commit about $20 billion to secure its place amongst its brethren in providing the iPhone for its customers. The deal ended up costing Sprint about $15.5 billion and covers the promised sale of 30.5 million iPhones. Even then Sprint said it will lose money through at least 2014.
Now, even for larger carriers like Verizon and AT&T (NYSE: T), which have roughly twice as many wireless subs as Sprint each, the impact from iPhone subsidies is telling. Last quarter alone Verizon was hit on its operating margins from subsidizing the iPhone, leading to mixed results for the company and some sell-off from investors.
Likewise, sales of smartphones at Sprint led to a wider loss for the company: from 31 cents per share last year to 43 cents in 2011s fourth-quarter, wider than the 37 cent loss forecast by the Street. Adjusted OIBDA margin moved from 17.6 percent during 2010's fourth quarter to 10.8 percent.
For Sprint and the iPhone, things might be different. It almost needs the iPhone to continue to thrive and remain relevant. Last quarter, Sprint slung 1.8 million iPhones, leading to a net gain of 161,000 contract customers, and an overall wireless base of 55 million customers.
Sure, it's losing money on every iPhone sold and will continue to do so for some time, but with shares down 45 percent over the last year, Sprint's bet on the iPhone is the same as a bet on its future...for better or worse. After all, stock prices don't just reflect pure numbers; they're also a show of investor confidence in the company at its direction.
Then again, Sprint did just come off one of its best quarters, adding subs and increasing ARPU left-and-right. Churn was even lower. Bleeding is bleeding and maybe Sprint should mimic Nokia and start carrying more Microsoft (Nasdaq: MSFT) Windows Phones.
Because being third to a product out of three doesn't make you a leader...it makes you an also-ran.
Shares are down 3.7 percent Wednesday.
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Yesterday, Goldman Sachs commented that Verizon (NYSE: VZ) should ditch Apple's (Nasdaq: AAPL) iPhone...and soon.
In October, it was rumored that Sprint (NYSE: S) would commit about $20 billion to secure its place amongst its brethren in providing the iPhone for its customers. The deal ended up costing Sprint about $15.5 billion and covers the promised sale of 30.5 million iPhones. Even then Sprint said it will lose money through at least 2014.
Now, even for larger carriers like Verizon and AT&T (NYSE: T), which have roughly twice as many wireless subs as Sprint each, the impact from iPhone subsidies is telling. Last quarter alone Verizon was hit on its operating margins from subsidizing the iPhone, leading to mixed results for the company and some sell-off from investors.
Likewise, sales of smartphones at Sprint led to a wider loss for the company: from 31 cents per share last year to 43 cents in 2011s fourth-quarter, wider than the 37 cent loss forecast by the Street. Adjusted OIBDA margin moved from 17.6 percent during 2010's fourth quarter to 10.8 percent.
For Sprint and the iPhone, things might be different. It almost needs the iPhone to continue to thrive and remain relevant. Last quarter, Sprint slung 1.8 million iPhones, leading to a net gain of 161,000 contract customers, and an overall wireless base of 55 million customers.
Sure, it's losing money on every iPhone sold and will continue to do so for some time, but with shares down 45 percent over the last year, Sprint's bet on the iPhone is the same as a bet on its future...for better or worse. After all, stock prices don't just reflect pure numbers; they're also a show of investor confidence in the company at its direction.
Then again, Sprint did just come off one of its best quarters, adding subs and increasing ARPU left-and-right. Churn was even lower. Bleeding is bleeding and maybe Sprint should mimic Nokia and start carrying more Microsoft (Nasdaq: MSFT) Windows Phones.
Because being third to a product out of three doesn't make you a leader...it makes you an also-ran.
Shares are down 3.7 percent Wednesday.
Get immediate access to market moving news and alerts with StreetInsider.com Premium - FREE TRIAL!
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