Sprint CEO cuts his bonus by $3.5 million after shareholders complain about iPhone costs

Sprint CEO cuts his bonus by $3.5 million after shareholders complain about iPhone costs

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...

Source: Reuters

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Rene Ritchie

EiC of iMore, EP of Mobile Nations, Apple analyst, co-host of Debug, Iterate, Vector, Review, and MacBreak Weekly podcasts. Cook, grappler, photon wrangler. Follow him on Twitter and Google+.

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Reader comments

Sprint CEO cuts his bonus by $3.5 million after shareholders complain about iPhone costs


At the very least he is much better than the idiot at AT&T. Keeping true to his word of unlimited data and keeping his customers happy. And for the stupid investors..... Investment in a long term goal takes time for a profitable return!

I don't leave a response, but I broewsd some of the comments here Apple's Japanese Site Let's the Cat out of the bag. iPhone 4S launching Oct 14th. | GeekAhead.Com. I do have 2 questions for you if it's okay. Is it only me or does it look like like some of the comments appear as if they are coming from brain dead visitors? And, if you are writing on additional online social sites, I would like to follow you. Could you list of the complete urls of your public pages like your Facebook page, twitter feed, or linkedin profile?

I totally agree with you. Investment takes time. Hell they just got the dang iPhone. Which I am a customer of Sprint and I love my iPhone 4S and the fact that I have unlimited data unlike Verizon and AT&T. Sure the 3G may not be as fast as the Big Red and AT&T, but neither is my monthly bill. Besides, I'm usually on Wi-Fi anyway. So Mr. Hesse I salute you in keeping your customers happy.

With you on that.
3G is slower than LTE, but my battery likely lasts longer than any of those LTE phones. Unlimited works for me. I didn't get my iPhone directly from Sprint. I got it from the Apple store, thanks to 'Winning an Awesome Contest" from an AWESOME APPLE TECH WEBSITE, AHEM!! >:-)

Comparing my current ATT service plan with iPhone and a comparable Sprint 'unlimited' service plan, the Sprint monthly fee is $79.99, and ATT is $89.99. $10/month more for a much more usable data experience is more than worth it to me.
To top it off, I get a 22% service discount on ATT service through my employer, so the real monthly fee is $81. Why deal with Sprint's poor data service to have unlimited data which is almost unusable at times?
Plus, here in TX, ATT has the best coverage for service. My personal phone is ATT, and my work phone is Sprint (employer provided). I've been to many places where the Sprint phone is notifying me of 'No Service' while my ATT phone still has 3-4 bars of signal!

Well they did sell their soul to the devil( apple) and selling that many iphones in 4 years is going to be hard for sprint to do.

I think Sprint will be fine as long as they stay true to unlimited data in combination with the iPhone.

Glad he acquiesced to returning it b/c the last thing customers need is an issue between shareholders and the officers running the company. He still makes a lot of money, I am sure. Plus, I think sprint will be fine if they keep unlimited data and increase their speeds b/c they never followed through with a lot of their plans. I have been a customer for over 10 years, and speeds have been horrendous for the last couple of years on 3g. I want sprint to do well, but if they continue on their downward spiral, I do not know if I will stay because I hate how prices keep going up, but service keeps getting worse. Oh well... I guess that's business.

I wish sprint was available in Canada unlike Rogers. They use to be here a longtime ago but I guess Rogers and bell wiggled them out of here. Having an unlimited data plan would appeal to millions of Canadians here on smart phones. Blackberries have unlimited social networking and that had to be the best thing about it when I had my blackberry plan. I didn't have to worry about going over my data and with UMA I didn't have to worry about going over my minutes either. Apple needs to introduce these things. apps and fancy games can't fill that void.

I have been with Sprint for years, until about 15 months ago when I switched to Verizon JUST to get the iPhone. I'll be going back to Sprint when my Verizon contract expires....

At least he realizes the cut in his pay will benefit the company later and keep the shareholders happy now. He's not being greedy but he realizes that the iPhone is a must for Sprint to stay alive. People want the iPhone, thats the only reason there a true "App driven" smartphone market. Look what happened with Nokia, 4 years ago they were making 80% of the smartphone's profits, now they're barely 1% simply cause they didn't change with the times. Samsung is now starting to do the smart thing, create a good phone and let every single carrier in the world have it (In one version or another). Sprint didn't want to be left behind, they were losing customers and Android can't do it alone. WebOS had a footprint for a year until the Evo 4G came out and they did nothing. You have to change with the times and listen to what customers want or they're gonna stop buying your products/services. Dan took a hit so his company can grow. He's not going bankrupt and will be just fine. I applaud him for making the selfless choice.

Thats great action on his part but i fear this will continue to slow down the progress of LTE which ive seen on verizon phones to be damn near amazing.

they made a deal with the devil. Although the iphone is great not everybody is on board palm had great ideas and so does windows. I own the lumia 900 and I left sprint to get it. Sometimes the carriers hurt themselves by not pushing for other platform they practically gave apple the leverage! If sprint does more with windows I'll come back because I would love to have an unlimited wp7.. Not bashing apple at all its smart business on there part!

This is why I love Sprint. Unfortunately, the only thing stopping me from switching to them is their horribly slow data speeds in Southern California.

I think Dan knows he's not going to sell 30 million iPhones in 4 years because it's impossible.
So far Sprint sold 3.2 million in two quarters, if they keep this trend they'll sell 6.4 in one year, and 25.6 in 4 years. That would be almost ok if that trend would continue but I don't think it will.
Sprint will make some record braking sales with the next iPhone but that's about it. The reason for this is that the iPhone is simply too good. See, if you have an Android device today, you'll want the latest and greatest when it comes out, because Android devices still have a few quirks that they need to have worked out. You love a model and then you get fed up with it's problems, you see the next one and you want it, hoping you'll get everything you love about Android, minus the issues you're having.
Ain't so with the iPhone, people want the latest iPhone just because it's the latest iPhone, the iPhone 4 today is a phone you can keep for many years, it works grate and gives you no reason to upgrade. The iPhone 4s is even better, and the iPhone 5 will probably have a larger display and god knows what else and it will give people almost no reason to ever change it.
That's ho iPhone sales will go down, not just for Sprint. The 4s record sales were owed to the fact that many people didn't have an iPhone or had an old one. Now many people already have a 4 or 4s, some will upgrade to 5 when it comes out but after that who will buy a new iPhone? And why if the current models perform so good.

You make good points here. I won't be getting an iPhone 5 this year because my contract ends next year, and unless my iPhon 4S is malfunctioning by then, I'm not likely to upgrade then either. My iPhone 4S has never slowed down, locked up, or needed to be rebooted. Absolutely ZERO PROBLEMS WITH IT since day one. Couldn't say that for my HTC EVO 4G.

Post is written as if we all don't know that the iPhone has and always has its own set of issues. The phone was damn near synonymous with dropped calls. Has that proximity bug ever been fixed? Cracked phones galore due to the stupid decision to go almost all glass. Android users are under the same contracts as iPhone and upgrade at the same frequency. Can offer proof to back up your statement?

I am regular visitor to all mobile nation sites. Though every site has their own fanboys this site is the most ridiculous. Most fans including editors here see the world through Apple glass. For them it's like following religion. Tmobile/Sprint lost customers. It's because they don't have Iphone. Wonder why Verizon was doing fine without Iphone? I understand this site is about apple products but at least don't make it look so bad by following it like religion.

Sprint and Tmobile may get some extra customers because of iphone but biggest reason they loose customer is their network. Their network is simply not as good as Verizon. What is the use of unlimited data if it's not that good. Verizon was doing just fine without iphone when only AT&T had iphone. Only one entity benefits from Sprint Iphone contract and that is Apple. Sprint will keep bleeding money. And that's what Sprint shareholder has realized. Sprint might have been in better in spending $15B in upgrading their network. BTW, iphone is great device and it did revolution in smartphone industry but Stop acting like dog walking below the bullock cart and thinking he is carrying whole weight of cart. Apple is not savior of mobile industry.

When AT&T was exclusive network for iph, nobody else quite suffered because the vast majority of the market had no idea how great the iph is; it's quite a different world now, in which a carrier gas to have the iph or be prepared to bleed customers for not doing so. Once you lose those customers, a fixed pct of them ain't coming back.

Seriously... Verizon got Iphone around Feb 2011. Do you seriously believe no one new about Iphone until then. On the contrary, there was hardly any competition for Iphone around that period. Android was still catching up. Even At& T and Verizon has realized that Iphone may get them some customers but each customer cost them extra $200. That's why Apple Stock was dropping recently. See how massively At&T is promoting Nokia Lumia. And that's why Iphone is much more popular in US because provider pays $200 extra and not the end customer. Also now on competition will only increase. Android has become dominant. Windows 8 will is coming and blackberry 10 is also coming. Sprint entered into this at wrong time.

Uh, excuse me, but Sprint customers roam for free on Verizon's network. Since we have the benefit of both Sprint and Verizon coverage, do you think you could explain how Verizon supposedly has "better coverage"?

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