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Analysts describe the number of unlocked iPhones as "astounding"

Apple’s iPhone was arguably the hottest piece of consumer electronic for 2007. Those who purchased iPhones were expected to activate new contracts on exclusive wireless networks in the U.S. and parts of Europe. This proved difficult for those who desperately wanted iPhones, but were either unwilling or unable to commit with AT&T – such as those who live outside of the officially supported territories.

Such restrictions have led savvy cell phone enthusiasts to acquire iPhone hardware, but evade the attached contract. Those who wish to run iPhone have to unlock the mobile before it may run on any outside GSM network.

According to analysts cited by Bloomberg, around 1 million of 3.75 million iPhones sold last year were unlocked to run on outside networks. Since Apple receives an estimated several hundred dollars in royalties for every iPhone contract, Toni Sacconaghi of Institutional Investor magazine believes that Apple is losing $300 to $400 million in future revenue due to the abundance of unlocked phones.

"The prevalence of unlocked iPhones presents a significant strategic dilemma to Apple," said Sacconaghi, adding that unlocked iPhones generate 50 percent less revenue and as much as 75 percent less profit than those under contract. Furthermore, new carriers may be reluctant to sign with Apple due to the unlocking market.

The prevalence of unlocked iPhones is something Apple is fully aware of, but doesn’t appear to be addressing. "The number of iPhones bought with the intention of unlocking was significant in the quarter, but we are unsure how to reliably estimate the number," Chief Operating Officer Timothy Cook told analysts during Apple’s first-quarter results reveal. "We are unsure when all the recipients will activate."

Unlocked iPhones aren’t ideal for Apple’s business model, but aren’t completely bad either. Mike Abramsky of RBC Capital Markets wrote in a report that unlocked phones, "though a headache for carriers, are financially positive for Apple, and in our view bode well for global iPhone demand, and for Apple exceeding its 10 million, 18-month target."

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By eye smite on 1/29/2008 9:33:09 AM , Rating: 5
Well there's another million sheep going over the cliff.

RE: Hmmm
By AlphaVirus on 1/29/2008 12:08:25 PM , Rating: 3
Lol I was thinking the same thing.

I always wonder, the claims made on how well this iphone sold seem to amaze me, they say its sooo many millions but I rarely see anyone in person with one.

When I am at the mall, driving around, at a corner store, at the park, even starbucks, I rarely see anyone with it.

Are all the sheep at the ifarm or something, getting their expensive wool taken from em? =( poor sheep

Maybe its overhyped market appeal really did pay off, get people to spend $500-600 on a cell phone and $60+ on a plan and nobody is even pulling it out of their pocket to use it.

RE: Hmmm
By kinnoch on 1/29/2008 12:18:10 PM , Rating: 2
I'm actually surprised by how many iphones I see at my company (In Silicon Valley). Of the 40 people I deal with on a regular basis, around 5 have an iphone.

RE: Hmmm
By JonnyBlaze on 1/29/2008 12:20:39 PM , Rating: 2
I know at least 6 people with one. 2 of which I unlocked to be used on t-mobile.

RE: Hmmm
By Samus on 1/31/08, Rating: 0
RE: Hmmm
By jtemplin on 1/29/2008 2:43:44 PM , Rating: 5
Did you forget? This is America land of the free and home of the disposable income. Failing that, we have irresponsible spending.

RE: Hmmm
By Omega215D on 1/29/2008 3:30:48 PM , Rating: 2
Disposable income is money left over after bills and other necessary expenses. Why is people using that money for stuff they want irresponsible? If they can afford it good for them.

RE: Hmmm
By jtemplin on 1/31/2008 9:34:19 AM , Rating: 2
I was putting them into two seperate categories. One being disposable, and if its disposable then you obviously don't needs the $ to subsist, so thats ok in my book.

I am also sure there are people who want the iPhone for its "bling" status even though they should be saving their money for next month's bills etc.

So in conclusion I think you don't seem to disagree with me. If they can afford it, good for them!

RE: Hmmm
By Grast on 1/29/2008 3:45:42 PM , Rating: 2

If you dislike the spending habits of the average American, please blame the American Government during the 20's through 40's. It was during the time of the depression and after WWII in which the American government actively encouraged Americans to spend rather than save their money in order to keep the economy going. If you add in the main stream of credit cards in the 80's, you will see that American culture has been moving away from saving and into spending for the last 80 years.

One of the major indicator for the American economy is the consumer buying index. This index is a represenation of how many Americans are spending their money on excess non essestial goods and thus stimulating the economy. When this index is down, this main means that excess money is not avaiable or people are unsure of the economy and thus not spending. This has historically mean a recession is coming.

The bright side to this issues is the inclusion of 401K saving plans. Since companies are moving away from pension programs, it is very easy for the average American to set aside a large amount of money in their 401K's. It not really a savings plan but anything is better than nothing.

Now for everyone that is going to say that not everyone works for a company which offers such programs. I would say STOP thinking of working at a burger join for 20 years as a wise decision and get some education. If education is not your cup of tea, Think up a business idea and become a small business owner. Then you will either work for a company which offers 401k type programs or start you own program in your own business.

I digress. The point of my rant is simple. American culture has been steadyly since the 20's moving away from saving and increasing to spending. They did not call the 80's the ME generation for nothing.


RE: Hmmm
By Adonlude on 1/29/2008 4:04:27 PM , Rating: 2
Hey, don't listen to this guy about an education, someone needs to make my burgers! Preferably an American citizen (spawn of illegals don't count in my book).

RE: Hmmm
By jtemplin on 1/31/2008 9:31:08 AM , Rating: 2
Very interesting Grast. I wouldn't say I necessarily dislike American's spending habits. I was trying to provide an "off the cuff" explanation for the people who were saying "Omg iphone=expensive, if you buy that thing your stupid". Now I do know some people who are irresponsible spenders, but I certainly don't know enough people here (or in the rest of the world) to make a claim about the spending habits of all Americans.
Thanks for sharing, I am always interested in hearing about the historical roots of the modern condition!

RE: Hmmm
By KeypoX on 1/29/2008 10:11:36 PM , Rating: 3
apple the company that is generally a year behind in technology, yet sells it like its the new hot thing.

Check out some of the nokias that have been out since 2006 they kill the iphone. Like the nokia n95 that is a killer phone.

RE: Hmmm
By robinthakur on 1/30/2008 6:12:52 AM , Rating: 3
The N95 on paper seems to wipe the floor with the iPhone. Having owned both, I can tell you that I would much rather have the iPhone ANY DAY! The snazzy touch interface alone is worth the price. Struggling with the N95's archaic interface, appalling battery life and inferior screen is something best reserved for those who prefer their benefits on paper rather than in practice.

Having said that, I sold my (unlocked) iPhone in preperation for the next revision which comes out in May (apparently) and am currently (and unfortuantely) using a HTC TYTN2 phone, which plainly sucks.

By ForumMaster on 1/29/2008 9:47:52 AM , Rating: 2
this is definitely the case. i have several friends (I'm from Israel) that have an iphone. all obviously hacked.

also, a there was a big article in the newspapers yesterday about how several CEO's here have iphones, all unlocked. they also explained how to unlock the iphone.

if apple would offer it in other countries, people would buy it. it's an awesome device, just bound to a crappy cellular provider.

RE: indeed
By retrospooty on 1/29/2008 9:59:43 AM , Rating: 2
Yup. its scary to think how well it might do when better features and carriers are available on a future model.

Picture an iPhone with 3G, removable battery, GPS on almost any carrier worldwide.

RE: indeed
By Griswold on 1/29/2008 10:56:53 AM , Rating: 2
Apples greed will come back and bite them in the ass.

Though, Other "analysts" see over 600k iphones that are unaccounted for (if you add the numbers up that apple and the telcos provide minus the unlocked estimates). The bottom line of some reports is: the number of iphones sitting on the shelves / stuck in the channel could be increasing, same with the unlocked ones while the number of them sold and activated the way apple would want it to, is decreasing (I believe AT&T reported only 900k for Q4 - this includes the holiday season sales though!).

The iphone bubble might burst if apple keeps this bogus way of selling the iphone up.

Especially in europe, the sales figures are less than stellar - a meager 70k (activated ones) in germany since they started selling it last november... if you're generous, add a couple ten thousand unlocked ones, but thats still a joke for such a large market.

They day they get rid of this gag&bag tactics, I'll be buying one - just have to have patience, I guess.

RE: indeed
By CubicleDilbert on 1/29/2008 4:50:06 PM , Rating: 2
Yeah, some 70.000 people in Germany got ripped off or were just stupid. That iphone with T-mobile contract costs around $3000-5000 (!!) for the 2-year contract. The monthly charges are astronomical.
No wonder, many immediately unlocked their phone and use Wifi instead of expensive T-Mobile ripp-off rates.

By WayneG on 1/29/2008 10:16:58 AM , Rating: 2
Apple, and indeed the networks, cannot realistically expect iPhone users to be soo dumb as to sign a contract that leaves them spending £1000 over the period of the contract for a phone! It's an alright phone tied to a terrible contract. Soo much cheaper to buy the handset and get your own sim card contract on better terms... No brainer IMO..

RE: Price???
By masher2 on 1/29/2008 10:56:18 AM , Rating: 1
Considering you get unlimited data transfers, the deal is far better than most contracts-- if you use the data portion.

RE: Price???
By InternetGeek on 1/29/2008 5:06:54 PM , Rating: 2
It's still not worth it. You can just access a hotspot and use that internet which would be a lot cheaper anyways. Either at work or at home or if you're travelling you just use the hotel's internet.

By Flunk on 1/29/2008 12:42:12 PM , Rating: 3
So, when is locking cell phones going to be made illegal?

Seems like a clear case of violated rights to me. Oh wait, big business (who controls everything) doesn't want that.

$400 vs. $0?
By enlil242 on 1/29/2008 2:39:34 PM , Rating: 2
Well, I bought an iPhone when the price was down to $399. It was a bit more than the average smartphone, but the features I find great outweight the featrues that are missing. (e.g. activesync)

Here's the rub I found. I cannot get AT&T service in my home. I literally get "0" bars. I worked with AT&T for several hours over 4 days trying to find out why. (I live in Chicago). Their recommendation was to return the phone and they cancelled my contract without any fees.

Now, I could have taken the phone back but I instead unlocked it for use with my work t-mobile SIM. To me, this scenario doesn't hurt apple at all. They made a sale on the hardware and also have me as a spokesman for the product. (For better or for worse)

As far as the caveats to unlocking... To not be able to upgrade right away when new features are introduced is a bit of a pain, but I'll take what I can get for now. Also, I find the 3rd party apps I have access to offsets alot of the features Apple introduces in their firmware updates... We'll see how the SDK is managed.

Also, AT&T's plans are very competitive. I would be paying at least the same or more with TMobile (If I was paying for it, that is).

Says Analysts?
By Yawgm0th on 1/29/2008 3:00:57 PM , Rating: 2
Does they really?

By Bigjee on 1/29/2008 5:18:46 PM , Rating: 2
At $95 a month on the cheapest AT&T plan (after taxes) who in there right mind would want to keep one? There's a difference in tech savvy and out right dumb ass and its good to see that at least 25% of the people who have iphones have some intelligence to unlock it. I mean you'd be buying another iphone every 3-4 months on the bloody contract. What'll be interesting is the number of iphones that will be unlocked in the 10million-18months target that Apple has set.

Service Requistion Form:
By JonnyDough on 1/30/2008 10:28:54 AM , Rating: 1
I for one would never buy a car that I had to get serviced at one specific dealership. What does that do to consumerism and competition? The same goes with any phone that I have to use with only one telco or cable company. If I only had one choice of cable company or landline telephone company, I'd go without tv and talking to my folks (not necessarily a loss).

Wait, no I wouldn't - because I don't really seem to have a choice on my cable or telephone company. Oh well, at least I can take my car to any mechanic I darn well please. =\

As long as there is a choice, I'll choose the company that doesn't make me sign a 2 year contract so they can rob me if I decide it isn't in my budget to keep the service, and (to Apple:) I'll buy a cell phone from the company that allows me to switch my service anywhere I darn well please.

And all the consumers said "Amen"

Communist Corporate America
By ZeroKool2k5 on 1/29/08, Rating: -1
RE: Communist Corporate America
By MrPickins on 1/29/2008 11:13:10 AM , Rating: 5
You might want to bone up on communism. You don't seem to have a very good grasp of what it means.

RE: Communist Corporate America
By eye smite on 1/29/2008 11:48:16 AM , Rating: 3
I would say this is more a case of capitolism winning over democracy consistently. This is a country for the elitists now matter how you label it. As bas as the problems are today, fixing them won't work, it would take our lifetimes and more, so the logical conclusion is another civil war. I'm pretty sure that's what everything is leading to, however it won't be north against south this time. It will be the people against the federal gov't. I speculate though, lets all hope I'm very wrong.

RE: Communist Corporate America
By Wightout on 1/29/2008 3:22:00 PM , Rating: 2
o0o0o the plot thickens...

What a twist!

I think too many people forget that apple doesn't care about the common consumer same as the high end car companies and designer clothing lines... They are there to be elite for the sole purpose of being elite.

Kinda snooty, but a money maker none the less. Cant say I don't like some of their products, though most are out of my price range.

RE: Communist Corporate America
By Etsp on 1/29/08, Rating: 0
RE: Communist Corporate America
By dflynchimp on 1/29/2008 12:51:33 PM , Rating: 2
lol, I pissed myself laughing at your post.

We're we a communistic society Apple wouldn't even exist, let alone being allowed to practice its monopolistic business dealings. The words Communist and Corporate just don't go together in the same sentence.

RE: Communist Corporate America
By enlil242 on 1/29/08, Rating: 0
RE: Communist Corporate America
By Bigjee on 1/29/2008 5:11:52 PM , Rating: 1
I think what you're defining is capitalism at its worst rather than communism.

"Intel is investing heavily (think gazillions of dollars and bazillions of engineering man hours) in resources to create an Intel host controllers spec in order to speed time to market of the USB 3.0 technology." -- Intel blogger Nick Knupffer
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