You can lose money selling iPhone, just ask Sprint
Be careful what you wish for, because you might get it -- as the old adage goes. Sprint wanted iPhone and got it, and paid dearly during the first quarter of sales.
This morning, before the opening bell, the nation's third-largest carrier announced holiday quarter results and another big operating loss. There, iPhone heavily contributed. The carrier reported a $1.3 billion loss, or 43 cents per diluted share, on revenue of $8.7 billion. Profit margins plummeted to 9.5 percent from 16 percent a year earlier, and iPhone largely accounted for the decline. Sprint loses would actually have been more, but the carrier gained fewer new subscribers than Wall Street expected.
Sprint's cost of wireless equipment rose to $1.7 billion from $1.2 billion in fourth quarter 2010. The carrier paid out $2.6 billion, offset by $910 million in revenue from equipment sales.
"The quarterly year-over-year and sequential increase in net subsidy is primarily due to the launch of the iPhone 4 and iPhone 4S, which on average carry a higher subsidy rate per handset as compared to other handsets", according to the company. In other words, Sprint finally got iPhone and paid more to get it.
That $199 you pay for 16GB iPhone 4S, for example, isn't what carriers do. To get a sense of how much, either calculate the tax on your new mobile or look to Apple Store's unlocked price -- $649.
Sprint sold 1.8 million iPhones during Q4 -- 40 percent of them to new customers. That pull can largely be attributed to what Sprint offers that AT&T and Verizon don't: unlimited data.
"Our strong fourth quarter performance illustrates the power of matching iconic devices like the iPhone with our simple, unlimited plans and industry-leading customer experience", says Sprint CEO Dan Hess.
Wall Street reacted poorly to the quarter's results, with shares down 6.5 percent in early trading to $2.29. Shares somewhat recovered by late morning -- down 2.86 percent around 11 am ET.