NY Times: The 1 Million Missing iPhones

[kili-kili power]

laugh trip lang... kakatawa how naive they are at first...

http://bits.blogs.nytimes.com/2008/0...ref=technology

January 28, 2008, 5:13 pm Good News in the 1 Million Missing iPhones

By Saul Hansell
Tags: Apple, iphone

Wall Street analysts have begun to search the globe for 1.7 million lost iPhones.
Apple said that it has sold 3.75 million iPhones through the end of last year, but AT&T has activated a bit less than 2 million phones. There was a moment of panic as investors imagined more than a million unsold iPhones piled up in the stock rooms of AT&T stores.
Upon reflection, several analysts have come to the conclusion that the vast bulk of these have been bought and unlocked to use on carriers other than AT&T in the United States and on European carriers who are Apple’s partners.


I was skeptical of this, as unlocking an iPhone is rather complex and risky proposition. But as I talked to Gene Munster, of Piper Jaffray, and A.M. Sacconaghi, Jr. of Sanford C. Bernstein, who were both convinced that there is widespread buying of unlocked phones, my skepticism abated a bit.



What about people who got the phones as Christmas presents and did not get around to activating them before the end of the year, I asked.



Mr. Sacconaghi said he believes that most people who got phones as gifts activated them right away.



“Typically people activate a phone within three days, and the holiday season is when you have the most time and if you are excited about a gift,” he said.


There are not, however, 1 million people who are going to steep themselves in the art of iPhone hacking. Rather, both analysts suggested that there are organized groups of gray market dealers who are buying up iPhones, unlocking them, and reselling them, largely overseas.



Mr. Munster, in fact, dispatched spies to monitor Apple stores in New York, San Francisco, and Minneapolis, who found that some 40 percent of the phones were sold to people who purchased more than one phone at a time.



“The majority of the people who were buying more than one phone were Asian, and they were bringing small buses of people who all buy more than one phone,” he said. Mr. Munster conjectured that many of the phones are being resold into Asia. It is hard to get an iPhone there and, he said, “With the value of the dollar, the cost of the phone is much less here.”



Mr. Munster estimates that of the 1.7 million phones not activated by AT&T 350,000 were sold through Apple’s partners in Europe, 512,000 were in inventory at AT&T and the European carriers, and 838,000 were sold and unlocked. Mr. Sacconaghi figures slightly fewer phones were sold in Europe and are in inventory, leaving 1 million unlocked phones.
I called Apple’s public relations department, which, as usual, declined to comment. On its conference call with analysts earlier this month, Apple said that a significant number of phones were sold and unlocked.



On the face of it, this isn’t good news for Apple. The company receives a payment estimated to be about $15 a month, from AT&T and other carriers, for iPhone accounts that are activated. So every unlocked phone is $360 of revenue forgone over the two year life of a contract.
But there are a few reasons why we shouldn’t shed a tear for Apple on this one.


For one, it shows great demand for the iPhone, especially because Apple has not made it easy for people deal in unlocked phones. With each software update it tries to close the software loopholes that allowed previous versions to be connected to unauthorized carriers (although hackers seem to always find new unlocking methods within weeks). And it restricts the number of iPhones people can buy at any one time.



Mr. Sacconaghi said it is possible that the gray market dealers, however, have overestimated demand and have a big inventory backlog themselves.



What is more, both Mr. Munster and Mr. Sacconaghi are convinced that Apple actually makes money on the iPhone without taking into account the payments from the carriers. Mr. Munster estimates that gross profit on each iPhone is about $50. That doesn’t take into account costs like development and marketing, but it’s still amazing given the product is so new in its life cycle. (The cost of making a product tends to go down faster than its selling price.) If true, Apple’s effective profits from the iPhone, taking into account the payments from carriers, are huge even if diluted because a quarter of the phones are being unlocked.


Moreover, Apple has several ways to reduce the percentage of phones that are being unlocked. The most significant plan is simply to expand the number of countries in which it sells the phones, giving buyers in Asia and Latin America a legitimate alternative to gray market dealers. If Apple still found all this to be a significant problem, it could certainly require customers to sign up for a service plan before they left the store. And it wouldn’t be a surprise if the next generation of iPhone, which Mr. Munster expects over the summer, has even tougher ways of keeping the phones locked.

[aragorn_109]

Hehe... How naive...

If they just point their browsers to the PhilMUG iPhone roll call thread, that already accounts for almost 300 iPhones. Considering those who are not muggers and those who didn't sign up in the roll call, we are probably looking at over a thousand iPhone users in Metro Manila alone.

[Aws3ya]

maybe i should remove my name from the list, in case they do check it out...LOL

[thelostsheep]

would this mean that if you happen to visit the US then you're from a country where iPhones have yet to be released, your iPhone will be confiscated/seized? You know how the US looks down on piracy! Haha

I better bring a spare phone all the time!

[aragorn_109]

The article never said it was illegal to unlock the iPhones, it just said that they were "unaccounted" for.

Ironically, once you enter the U.S., you are protected by a certain law which says all phones can be unlocked by the owner for personal use. It is probably outside the U.S. where owning an unlocked iPhone can have legal problems.

[alvinrayyu]

http://www.ilounge.com/index.php/new...-of-2007/13368

According to China Mobile, the largest wireless carrier in China, roughly 400,000 unlocked iPhones were operating on its cellular network by the end of 2007. Previously, it had been rumored that China Mobile would be the iPhone’s carrier in the country, but a January report suggested that Apple and the carrier had broken off negotiations; Apple dismissed the “negotiations” as a single, limited meeting. Compared against Apple’s sales figures, In-Stat reports, the 400,000 iPhones represent one out of every 10 iPhones shipped globally by the company. The report goes on to state that an estimated 20% of handsets sold in China during 2007 cost more than 4,000 RMB (around $533), indicating that there are as many as 28 million potential iPhone customers in the country.

[manolop10]

I knew sooner or later they would have to say something about this, with numbers too! Haha! Good job AT&T and Apple.

[noeltan]

i wonder how many of the 1.7m iphones are here in the philippines? hehe

[McGrill]

Well, Apple could have sold more than triple if they sell unlocked phones and could overtake the sales of other cellphone brands.