01/29/2008, 11:30am, EST
Tuesday, January 29th
Analysis: Over 25% of iPhones unlocked
Over 25 percent of those who have bought US iPhones to date are using them on networks other than the intended one, says Toni Sacconaghi of Bernstein Research. Reuters quotes the analyst as basing numbers on discrepancies between Apple and AT&T, the latter of which is the only authorized iPhone carrier in the States. By the end of 2007, some 1.45 million iPhones were "missing in action," built but not subscribed to AT&T. The carrier is believed to have held 480,000 of these back as inventory, but that leaves nearly 1 million -- 27 percent -- unaccounted for.
Because people must officially activate iPhones via iTunes before use, and this directs people into an AT&T contract, any other use must involve some form of unlocking, whether through hardware or software. Apple itself has admitted that many iPhones may be unlocked, yet following last week's quarterly earnings report, it has still declined to give precise estimates.
iPhone owners can technically unlock their devices under a provision of the Digital Millennium Copyright Act, but Sacconaghi notes that this may cause problems for Apple as well as AT&T. Under the terms of a five-year exclusivity contract, Apple earns a portion of the revenue for each iPhone on AT&T's network; if the former reaches its target of 10 million iPhones by the end of 2008, and 30 percent do not attach to AT&T, revenue could fall $500 million below expectations, with a corresponding earnings-per-share drop of 37 cents.
Apple cannot, however, afford to crack down too hard on unlockers, says Sacconaghi. Eliminating hacks would maintain profit margins, but could alienate the public, shrinking sales and deterring future carriers from signing on in the US or abroad.
Filed under: iPhone, Investor, hacks, Apple
Other story tags: unlock, DMCA, ATT
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I personally know at least a dozen people with iPhones, and not a single one is unlocked. Since the phone was released I have on seen only one unlocked phone.
And Apple has no stock in the pipeline? what percentage just never were activated? Lost after purchase? Effectively destroyed accidentally? Still in a truck hijacked in the midwest?
I don't think there is enough actual data to base this statement on, but even so, the result might come close to the projection... Just seems sloppy to me.
The choice was 7 million on the AT&T network and no additional phones sold. Or 7 million on the AT&T network and an additional 3 million phones sold. (to use numbers from the authors example).
It's nappy time, dreamland 'lost revenue' the author is trying to calculate...but it has no basis in fact, science, or economics.
The fact is, someone who bought the iPhone and unlocked it...was never going on the at&t network. They would have just bought a different phone, had unlocking not been an option.
And for millions more...Apple gets zero revenue. I won't go on the at&t network, and I also won't buy a phone I have to unlock by some silly method.
So, take another 10 million of customers and call them 'non apple customers' and calculate how much revenue was left on the table there....I would have loved an iPhone, but I won't take either of the current options.
These are all "estimates" based on very little hard data.
The problem with the lost revenue is Apple reports 4 million phones sold and the stock goes up. When AT&T reports 2.5 million iPhone users stock goes down because investors expected Apple income from 4 mill.
Lose the AT&T contract, Apple, and you will sell more phones.
People who, are on long term contracts with another provider, pick up an iPhone, and then when their old contract expires, they go to at&t.
Typically, when a contract expires, a cell company is very good about extending the contract with some bs promotion.
The fact is, this is why checking facts and actually doing studies is important, even if modern day journalists prefer just to pull stories out of their hind end.
Those people would have never gone to the at&t network, and just chosen a different phone...surveys have proven this. By getting an iPhone, they end up bridging to at&t at a much higher rate of adoption than the general public.
Not only does apple make money on every iPhone sold, but the unlocked iPhone 'bridge platform' actually increases the migration to at&t than otherwise.
Now....I could be pulling this out of my hind end too. But I'm not a journalist, and my point stands....until you know, you don't know.
You cannot make supercilious projections about 'lost revenue'.
The choice was 7 million on the AT&T network and no additional phones sold. Or 7 million on the AT&T network and an additional 3 million phones sold. (to use numbers from the authors example).
This may be "flawed" thinking, but it's how the suits who run companies, and the suits that work as analysts think. (The ol' "2000 people use our software illegally, so that's $200,000 in losses!" argument).
Apple and the investors are expecting that revenue from their iPhone sales (which is why they want that subsidy from AT&T or whoever). Apple doesn't want to sell iPhones by themselves, because they make little money on the iPhone. At a 30% margin, that's $120. Taken over 24 months (because they're 'subscribing' the revenue over 2 years), its $5 a month on the books. Wow, the excitement.
But that's not the money they want. They want that $10/month from AT&T and whomever, not to mention possible income from marketing and placement deals (like to put YouTube or Google Maps on the device). That's where the money is, and that's the money the investors are expecting.