Breaking Finance News

Verizon may Owe Apple $14 Billion

According to a New York Post article late Wednesday night, Verizon (NYSE: VZ) may owe Apple (NASDAQ: AAPL) up to $14 billion.

According to the post, Verizon signed a multi-year agreement with Apple in 2010 that obligates the company to purchase $23.5 billion worth of iPhones in 2013. This, according to telecom analyst, Craig Moffett.

That equates to double the amount of phones Verizon sold in its stores in 2012. Assuming iPhone demand continues to be soft, that would equate to $12 to $14 billion worth of product that Verizon would be obligated to purchase–or $4 to $5 per share, according to Moffett.

Assuming Apple has similar arrangements with companies around the world, the same problem may exist for other companies too.

While this may seem like a bullish agreement for Apple, the fact that iPhone sales continue to soften doesn’t bode well for the company. Once these agreements run out, the company is unlikely to be on the receiving end of such favorable terms.

[stock-tools exchange="NASDAQ" symbol="AAPL" image_height="230" image_width="350"]

Disclosure: At the time of this writing, the author had no position in the companies mentioned.

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