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Piper: AT&T iPhone costs suggest greater profit

updated 03:20 pm EDT, Tue July 1, 2008

Piper on AT&T iPhone costs

Earlier estimates for the ASP (average selling price) of the iPhone 3G were too low, write analysts with Piper Jaffray. Following the announcement of AT&T's new iPhone plans, under which people can buy unsubsidized iPhones for $599 and $699, Piper admits that its earlier prediction of a $425 ASP was likely wrong. This is despite the fact that AT&T is believed to be drastically marking up the iPhone, in theory exaggerating Apple's revenue potential.

Using the older ASP, AT&T would have been charging a 50 percent markup on the contract-free device. Piper now believes that the markup is substantially lower, and Apple may be taking home an ASP of as much as $500. If this is true, it could add 8 percent to predicted CY09 revenue, working on an assumption of 45 million in unit shipments.

Piper further notes that if AT&T's markup is approximately 30 percent, it would still be higher than that Apple's typical number, which hovers around 10 percent for Macs and iPods.




by MacNN Staff

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  1. testudo

    Joined: Dec 1969

    -1

    What????

    You can buy the iPhone unlocked and untied to a plan??? Then what the h*** is everyone complaining about how AT&T is s******* them?

    And not that I follow what any of these numbers are supposed to mean (so is the average selling price the amount Apple is supposed to get, or the amount that it will sell for on average at stores?), but can you really trust analysts who use the words "believe", "may be" and "if"?

  1. vasic

    Joined: Dec 1969

    +2

    NOt much choice there

    It is up to you to decide whether to trust analysts. Gene Munster happens to be on the money when it comes to Apple, for the most part (can't remember when he overshot or was flat-out wrong).

    The complainers were talking about the original iPhone. For the 3G, looks like things are a bit different, although the full, unsubsidised price of the device is quite high ($600 - $700).

    Munster's point was that his original estimates about how much Apple will be getting from AT&T in addition to the full retail price were wrong and on the low side. He is revising them higher. The final point is, this should lift profits even further (and with them, hopefully, AAPL stock).

  1. vasic

    Joined: Dec 1969

    +1

    30% markup?

    I don't see why would Apple allow AT&T to mark up the phone by 30% if they don't let resellers go beyond 10% on Macs and other hardware. Resellers don't have much else to bundle together with those Macs and other hardware. AT&T could easily use the iPhone as a loss-leader to sell service, even if it is just month-to-month, no-commitment. There is little doubt that majority of those who bought the iPhone at unsubsidised full price of $600 would continue to use it on AT&T for months, if not years. The revenue might be smaller than from monthly subscribers with 2-year contract, but it would still be solid profits.

    I doubt that an unsubsidised iPhone is marked up any more than 10%, if even that. In other words, Apple is getting $550 for each unlocked iPhone sold.

  1. lkrupp

    Joined: Dec 1969

    +2

    Unlocked?????

    "Contract free" does NOT translate to "unlocked". The iPhone you buy from at&t for $600 will still be locked to at&t's network since they are the exclusive carrier. As with the first generation iPhones the purchaser will have to choose to violate the terms of sale, unlock the device using hacked software, void the warranty, and then live with the consequences of future updates. Stupid is as stupid does momma always said. Oh, and the United Nations charter says nothing about unlocked iPhones being a basic human right nor at&t exclusivity as violating the Geneva Convention.

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