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iPhone unlocks could cost Apple $1.3B

updated 04:10 pm EST, Fri February 22, 2008

iPhone unlocks harm AAPL

Despite Apple's optimistic target of 10 million iPhones by the end of 2008, some analysts are skeptical, and others say the device may not be as profitable for the company as originally thought. According to MarketWatch, Apple faces an additional challenge in that as many as one million iPhones are unaccounted for on partner networks, and are assumed to be unlocked. These "missing" iPhones could ultimately contribute to almost $1.3 billion in lost subscription revenue over two years, should Apple meet the goal of 10 million sold.

"Apple's goal of selling 10 million iPhones this year is optimistic," said Toni Sacconaghi, analyst for Bernstein Research. "Particularly if Apple insists on carrier revenue sharing without significant price cuts or new model introductions." With this in mind, Sacconaghi predicts Apple should sell approximately 7.9 million iPhones by the end of the year, at an average rate of 180,000 units per week.

While Apple continually expands the iPhone's territory by creating new international partnerships, Sacconaghi says that " overall demand for the handset appears to be falling short of expectations." As demand slows, Apple's stock has slid over 40-percent on the Nasdaq exchange, well beyond the 14-percent average drop the exchange felt during the same period.

by MacNN Staff





  1. bobolicious

    Joined: Dec 1969


    I'd say additional sales!

    I for one would never buy an iPhone if I HAD to pay for a subscription I would never use - I use less than $10/mo mobile now - the whole point of this gadget for me is integration - so Apple can 'ransom' users to AT&T & get $0 from me, or $400 - which should they choose...?

    This is not revenue 'lost' IMHO...

  1. WiseWeasel

    Joined: Dec 1969


    sell them unlocked then

    Apple should suck it up and sell unlocked iPhones for a premium stateside as well, like they do in Europe, to help minimize that "loss". It's their own damn fault for agreeing to this exclusive deal with no possibility of unlocked phone sales.

  1. dagamer34

    Joined: Dec 1969


    MPAA argument

    If the iPhone could not have been unlocked, I would not have bought one. Similar argument to the MPAA calling piracy lost profits. Do you think most people would have bought the movie anyway?

  1. Eriamjh

    Joined: Dec 1969


    Unlocked phones...

    Mean extra revenue, not less!

    I would have never bought one if I couldn't unlock it.


  1. psdenno

    Joined: Dec 1969


    nothing lost...

    as long as the factories keep cranking them out, the boats don't sink on the way over here, and people keep buying.

  1. Salty

    Joined: Dec 1969


    I contributed to that?

    Well as a Canadian with an unlocked phone, yes you can look at it as costing Apple money, or you can say, hey they are still making one time amounts of money in markets they aren't even in yet. I imagine the percentage of phones being unlocked will drop as more carries in more countries come on board.

  1. Guest

    Joined: Dec 1969


    specious argument

    Since most agree that the vast majority of these unlocked iPhones are being used in markets where Apple has no carrier partner, Apple is not "losing" any potential revenue but only just collecting its very profitable margin on the hardware sale. Whether or not this has impact when Apple officially enters these markets, presumably with a carrier partner, remains to be seen.

    However, the fact that current sales figures do not support Apple hitting its 10M unit projection even with the high number of unlocked phones is troubling. This suggests that Apple is significantly behind in its unit sales relative to its sales projections in the official markets. The question is whether Apple can enter enough new markets (possibly with a revised phone) to drive additional sales and increase the attach rate to their carrier partners.

    It is interesting to note that one of the proposed solutions to drive sales - lowering the price - does nothing to increase the attach rate or compensate for the lower margin. If anything, it makes more sense for Apple to sell an unlocked phone at a premium to capture some of the lost carrier revenue rebate.

  1. heavyboots

    Joined: Dec 1969


    Carrier exclusivity

    ... was a bone-headed move. I hate/loathe/despise AT&T and Apple simply won't get my business until I can use the phone with the network of my choice. I'd love to buy an iPhone (well, if they add more storage space or drop the price a bit) but not if it means 2 years with a company I've had seriously bad experiences with in the past.

    One other thing too. As much as the iPhone is supposed to be an iPod replacement too, it is silly not to have a slightly thicker HD model that only runs 10 hrs (anything over about 8 is perfectly acceptable). I've got 50gb of legal CD rips. Yes, I could load up a "selection" of them, but the whole point of ripping all those CDs was to have a virtual jukebox that would surprise me with good stuff I haven't heard in a while on random album shuffle.

  1. rmanke

    Joined: Dec 1969


    Very Misleading Article

    I find it a bit irresponsible and misleading to have an article about how much revenue Apple has lost (or has the potential to lose) based on the number of inactivated phones.

    Here are a few reasons...

    1) For one thing, there is no proof that the people that purchased these phones would have purchased them in the first place had they not been able to be unlocked.

    2) It is possible that a large majority of these phones were sold to Canada and other places where there is no "approved" way to get an iPhone in their service area. For example, I saw a news story on one website/company in Canada who apparently sold over 17,000 iPhones to Canadians.

    These phones would not have been sold, had there not been a way to get unlocked and get service in Canada.

    3) Maybe the article should have been entitled "Apple Sells 1 Million more iPhones than Otherwise Possible, Due to Hackers".

    It is partly Apple's fault that people have to resort to things like this to get access to a technology that should have been available in countries like Canada. I would hope they aren't laying blame on hackers for "enabling their lost income" because there is no way to know if they would have lost income, or they are beneficiaries of additional income because of it.

    My personal opinion is that they have gained sales because of the unlockers, and the hackers that have enabled it to happen.

  1. rmanke

    Joined: Dec 1969


    One more thing...

    One more thing... how can something that is selling 180 thousand units a week be considered a failure?

    Someone is smoking something if they think Apple is losing revenue on the iPhone.

    How many first generation products have ever sold this many units???

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