Feeds

Apple on the lookout for one million unlocked iPhones

Steve Jobs' strategic headache

Website security in corporate America

About 27 per cent of the iPhones sold in 2007 are being operated on unauthorized wireless networks, according to research released today. That works out at about one million handsets.

The unlocked phones are used largely in regions where the must-have device isn't officially sold, according to a report issued by Bernstein Research analyst Toni Sacconaghi. He says the appetite for the modified phones has given way to a cottage industry that sells hacks or phones that come out of the box unlocked. Most phones originated in the US where, thanks to current currency exchange rates, prices are comparatively low.

AT&T reported having about two million iPhones on its network as of the end of the year. Over the same period, Apple said it sold 3.75m units. These figures caught the eye of Sacconaghi last week, prompting him to write an initial research note. "Significant interest" in that note led the analyst to dig deeper into the matter. As a result, he pumped out fresh figures today that include information gained from talking to channel partners and other sources.

"We now believe that 315,000 iPhones were sold in Europe (down modestly from our previous estimate), leaving 1.45m iPhone units missing in action – either sitting in channel inventory or being used 'unlocked,'" Sacconaghi wrote this week.

Subtracting 480,000 units of channel inventory, Sacconaghi reckons about one million phones had been unlocked, up from a previous estimate of 750,000.

The figure represents quite the predicament for Apple.

Unlocked phones represent a significant drag on the profitability of the device. With Apple receiving $300 to $400 in carrier payments for each iPhone sold, they generate 50 per cent less revenue and up to 75 per cent less profit than normal. The 1m phones translates into as much as $400m in lost revenue.

If 30 per cent of the 10m devices Apple expects to sell in 2008 are never activated, sales are lowered by $500 million for each of the two years the carrier contract would have been in place and earnings per share declines by 37 cents.

Unlocked phones also weaken Apple's hand when negotiating terms with prospective new carriers. That's because the promise of being the exclusive network carries less weight.

At the same time, a sale is a sale. If Apple clamps down too much on unlocked phones it forgoes all the revenue it would have made selling them. And equally unappealing, it risks missing its lofty goal of selling 10m devices by the end of this year.

Apple has gone to great lengths to make it hard to unlock iPhones. Updates to patch security bugs typically re-lock the handsets. So far, hackers have managed to defeat the restrictions. Less than a week after the most recent version of the firmware was released, so-called jailbreaks that unlock the phone were circulating online. ®

Internet Security Threat Report 2014

More from The Register

next story
Brit telcos warn Scots that voting Yes could lead to HEFTY bills
BT and Co: Independence vote likely to mean 'increased costs'
Phones 4u slips into administration after EE cuts ties with Brit mobe retailer
More than 5,500 jobs could be axed if rescue mission fails
ISPs' post-net-neutrality world is built on 'bribes' says Tim Berners-Lee
Father of the worldwide web is extremely peeved over pay-per-packet-type plans
New 'Cosmos' browser surfs the net by TXT alone
No data plan? No WiFi? No worries ... except sluggish download speed
Radio hams can encrypt, in emergencies, says Ofcom
Consultation promises new spectrum and hints at relaxed licence conditions
Turnbull: NBN won't turn your town into Silicon Valley
'People have been brainwashed to believe that their world will be changed forever if they get FTTP'
Google+ GOING, GOING ... ? Newbie Gmailers no longer forced into mandatory ID slurp
Mountain View distances itself from lame 'network thingy'
Blockbuster book lays out the first 20 years of the Smartphone Wars
Symbian's David Wood bares all. Not for the faint hearted
prev story

Whitepapers

Secure remote control for conventional and virtual desktops
Balancing user privacy and privileged access, in accordance with compliance frameworks and legislation. Evaluating any potential remote control choice.
WIN a very cool portable ZX Spectrum
Win a one-off portable Spectrum built by legendary hardware hacker Ben Heck
Storage capacity and performance optimization at Mizuno USA
Mizuno USA turn to Tegile storage technology to solve both their SAN and backup issues.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
The next step in data security
With recent increased privacy concerns and computers becoming more powerful, the chance of hackers being able to crack smaller-sized RSA keys increases.