Good News! No More 720's for VZW

Exactly. That's a great explanation of how the process works.

But the bottom line is that we still don't know how much Verizon pays Motorola for these phones.

And, so it's not possible to know when (or if) they are selling them "at a loss" with the intention of making up the profit on service contracts, accessories and "pay as you go" services such as Get It Now.

That's where the differences of opinion of this thread came about.

 

That's was an excellent explanation Aregata4x4

 

Verizon is probably paying very little per phone (by cell phone standards) for the current batch of T720 - here is why:

1) Verizon is one of the few large customers who are going to buy this phone in the quantities that Motorola wants to sell them in. Verizon has proabably commited to purchasing over 1 million T720s in a six month time frame - this gives them incrediable leverage over Motorola. Joe's Cell Phone Store, without the backing of (Motorola/Verizon) is not going to get much of a discount off of the suggested retail price.

2) Further since the first batch of CDMA T720 had so many problems - Motorola is probably rebating Verizon big time ( per phone) to make-up for the fiasco and hold on to the Verizon T720 contact.

3) While Verizon is in the business of subsidizing cell phone to get customers to sign service contracts - they normally only underwrite $50 - $150 of the cost of the phone even on a two year contract.

4) While I am not familar with the backoffice mechanics of the $100 rebate, I believe Motorola and Verizon are sharing this, but are also getting a signifcant tax write off too.

My educated guess is that Verizon is paying Motorola around $175-$245 per phone - but what do I know...

 

The idea of a rebate plays into it as well. There was an article a while ago about how companies are, more and more, using rebates on their products because it allows them to advertise lower prices that don't necessarily work out. Not in an Enron way, but because it usually takes 6-8 weeks for the rebate to process and because people often forget to send in rebates. The number of people forgetting obviously decreases with the significance of the rebate, but I guarantee you a number of people will plain forget to send it in. Furthermore, Verizon has that extra hundred dollars for at least 6-8 weeks, and in two months it can earn some interest, go toward more research or other costs, etc. That is in addition to the fact that they are paying significantly less than most people think for the phone, because as jstone mentioned they have immense power with Motorola as the biggest company in the US. I don't think they'd be doing this if it wasn't profitable.

 

These are excellent points!! I think the best one made however is the fact that the places care less about the phones, its all about the service. If they lose 100-200 bucks on the phone, they dont care because their getting all their money back and more in the service. Thats where their money is made, in the service and accesories. Its like most electronic places make a large sum of money not from the appliance, but by selling you the extended warranty.

ONE!!

 

Well secret agent man, I think you need to get your information straight. You said the WHOLESALE price of the T720 is $399, well you see that makes a lot of since since the RETAIL listed price is $370. But I mean, why wouldn't they want to lose money? Doesn't everyone?

 

bump

 

bump?

 

The term retail price could be used in two different ways when a contract is an option. Some may say the retail cost is the price without a contract, others may say that it is the advertised price which is typically the price with contract. When a contract is signed the carrier usually takes a $50-150 loss on the phone to be made up in service. So yes we are in the business to lose money at the front end. So I'll just leave it at that because apparently you don't work in the Product Research & Development Department of one largest Cellular companies in the United States.