Leap (LEAP) May End Up with Glut of Unsold iPhones (AAPL)
It may be a company-specific problem, but Leap Wireless (Nasdaq: LEAP) is having an issue with Apple's (Nasdaq: AAPL) iPhone: it can't sell the device.
According to the WSJ, Leap, which runs prepaid carrier Cricket, said it was on pace to sell half as many iPhones as it committed to sell during its first year, which ends next June. That could leave Leap with about $100 million of unsold inventory on the books.
Unlike national post-paid carriers like AT&T (NYSE: T) and Verizon (NYSE: VZ), Leap also offers less of a subsidy for the iPhone. Customers are expected to shell out about $500 for the device, though savings are realized in a lower month-to-month bill. There is also no contract for Leap customers.
Another point made is Leap's lack of footprint. The company has a smaller network than the larger rivals and certain technology limitations means that the iPhone can't be sold in all of its markets.
Lower sales at leap might also be an indicator that the larger carriers won't be able to move away from generous subsidies quite as fast, with customers appearing to balk at the higher price.
Last week, Leap COO Jerry Elliott said the company was not concerned about meeting iPhone sales goals. One analyst from BTIG estimates that Leap will have sold about 160,000 of the device by June, leaving it on the hook for another 160,000 units.
Selling the devices won't get any easier either. Samsung will be debuting its next generation Galaxy smartphone in March, while BlackBerry (Nasdaq: BBRY) and Nokia (NYSE: NOK) will also be bringing new devices to market over the next few months.
Investors are exercising a little caution with Apple, shares indicated for a lower open early.
According to the WSJ, Leap, which runs prepaid carrier Cricket, said it was on pace to sell half as many iPhones as it committed to sell during its first year, which ends next June. That could leave Leap with about $100 million of unsold inventory on the books.
Unlike national post-paid carriers like AT&T (NYSE: T) and Verizon (NYSE: VZ), Leap also offers less of a subsidy for the iPhone. Customers are expected to shell out about $500 for the device, though savings are realized in a lower month-to-month bill. There is also no contract for Leap customers.
Another point made is Leap's lack of footprint. The company has a smaller network than the larger rivals and certain technology limitations means that the iPhone can't be sold in all of its markets.
Lower sales at leap might also be an indicator that the larger carriers won't be able to move away from generous subsidies quite as fast, with customers appearing to balk at the higher price.
Last week, Leap COO Jerry Elliott said the company was not concerned about meeting iPhone sales goals. One analyst from BTIG estimates that Leap will have sold about 160,000 of the device by June, leaving it on the hook for another 160,000 units.
Selling the devices won't get any easier either. Samsung will be debuting its next generation Galaxy smartphone in March, while BlackBerry (Nasdaq: BBRY) and Nokia (NYSE: NOK) will also be bringing new devices to market over the next few months.
Investors are exercising a little caution with Apple, shares indicated for a lower open early.