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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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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
"Google fired a shot heard 'round the world, and now a second American company has answered the call to defend the rights of the Chinese people." -- Rep. Christopher H. Smith (R-N.J.)

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