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IPhone Purchase Commitments Will Bite Someone Hard! Maybe It Will Be Apple.

|Includes:Apple Inc. (AAPL)

Apple (NASDAQ:AAPL) extracted mega purchase commitments from U.S. carriers such as Verizon (as much as $45 billion over 3 years beginning 2010. AT&T and Sprint made outsized commitments as well. Now that the iPhone popularity is fading, the carriers may come to regret their commitments and find disfavor with Apple for compelling them to enter into such contracts just to be supplied with the iPhone.

What goes around comes around. This could play out a number of ways. First, for example, Verizon might just pay Apple the estimated $14 billion some reports suggest it is short on its commitment. Or, it might try to renegotiate the arrangement.

One thing is certain - the carriers once bitten will be twice shy about such agreements going forward, and their enormous support for Apple is likely to wane. Without such support, including massive subsidies for iPhones, Apple market share is going to come under pressure.

I have no current position in Apple, but expect to add a short position on any strength.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: I may write both puts and calls on Apple on the eve of its earnings call since I think the stock will simply drift sideways and both options will expire worthless

Stocks: AAPL