Feeds

Apple on the lookout for one million unlocked iPhones

Steve Jobs' strategic headache

Designing a Defense for Mobile Applications

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. ®

HP ProLiant Gen8: Integrated lifecycle automation

More from The Register

next story
Auntie remains MYSTIFIED by that weekend BBC iPlayer and website outage
Still doing 'forensics' on the caching layer – Beeb digi wonk
Apple orders huge MOUNTAIN of 80 MILLION 'Air' iPhone 6s
Bigger, harder trouser bulges foretold for fanbois
Bring back error correction, say Danish 'net boffins
We don't need no steenkin' TCP/IP retransmission and the congestion it causes
GoTenna: How does this 'magic' work?
An ideal product if you believe the Earth is flat
Samsung Z Tizen OS mobe is post-phoned – this time for good?
Russian launch for Sammy's non-droid knocked back
Telstra to KILL 2G network by end of 2016
GSM now stands for Grave-Seeking-Mobile network
Seeking LTE expert to insert small cells into BT customers' places
Is this the first step to a FON-a-like 4G network?
Yorkshire cops fail to grasp principle behind BT Fon Wi-Fi network
'Prevent people that are passing by to hook up to your network', pleads plod
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Application security programs and practises
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Securing Web Applications Made Simple and Scalable
Learn how automated security testing can provide a simple and scalable way to protect your web applications.