According to P.T. Barnum, no one ever went broke overestimating the stupidity of the American public. Sprint CEO, Dan Hesse, however, is going to lose $3.5 million for underestimating the stupidity of his shareholders. This, after Sprint was rumored to have broken their piggy bank wide open by agreeing to buy 30.5 million iPhones from Apple for a whopping $15 billion over the next four years.
Shareholders are upset because the iPhone is expensive -- upwards of $200 more than competing smartphones from other vendors. The problem Sprint faced, however, is that not as many people wanted those cheaper competing phones. They wanted the iPhone. No other single phone in the industry sells as well or increases customer retention as much as the iPhone. Sprint waited as long as they could, almost a year longer than Verizon, and threw all sorts of webOS and Android devices at their customers, and they just couldn't fill the iPhone void. So they made the deal with Apple.
Since then, Sprint sold 1.8 million iPhones and added 5 million net new customers in Q4 2011, and sold 1.5 million iPhones, 44% of which went to new customers, in Q1 2012. Yes, the upfront cost of subsidizing the handsets have hurt short term profits, but it could be worse. They could be T-Mobile, who places the blame for their slump squarely on not having the iPhone.
Given how much of AT&T and Verizon's sales last quarter consisted of the iPhone, it be interesting to see what the brain trust behind Sprint's shareholder discontent thinks Dan Hesse should have done instead. Invested the money in a time machine so he could take them back to a pre-2007 smartphone world?
Still, executive compensation being tied to actual performance is never a bad thing and if Dan Hesse is reducing his incentives in the face of Sprint losses, that's a great gesture to the company in general, never mind the iPhone complainers.
"These voluntary actions regarding my personal compensation, which total $3,250,830, will eliminate any benefit for me to the discretionary adjustment the compensation committee made earlier this year," Hesse said in a letter to the company's human resources department.
So basically, Hesse's 2012 incentives are now back down to 2010 levels. He'll still be making more money than most of our towns, Apple will still be making more money than many of our nations, and Sprint's investors will still be making more complaints than a 3 year when the toy store closes.
No word on who's getting their pay docked or hand slapped for wasting years on WiMax before finally turning towards LTE a year late and billions short. Obviously that's no where near as bad as getting the best selling phone in the U.S. on your network...