Where have all the iPhones gone?

Called the “Mystery of the Missing iPhones," the disparity between Apple’s reported sales of 3.7 million units and AT&T’s reports of 2 million activations last year leave industry analysts doing the math. Where are the other 1.7 million iPhones?

Called the "Mystery of the Missing iPhones," the disparity between Apple's reported sales of 3.7 million units and AT&T's reports of 2 million activations last year leave industry analysts doing the math. Where are the other 1.7 million iPhones?

The uncertainty has contributed to Apple's stock price sinking to $130 a share, down 34% since the beginning of the year. This is worse than the 13% drop for the tech-heavy NASDAQ index.

From Business Week:

So where are the missing phones? Two industry insiders confirm what is only now becoming apparent to analysts: that Apple is selling far more "unlocked" iPhones than previously expected. Those phones are adapted by the user with unauthorized software and phone cards so they run on nonapproved wireless networks.

Financially, unlocked iPhones are bad news for Apple. While its revenue-sharing agreement with AT&T is kept under wraps, Charles Wolf, an analyst wiatth Needham & Co., believes the carrier pays Apple $10 per iPhone-brandishing subscriber per month of the two-year contract. While Apple still earns admirable margins on each iPhone it sells, missing out on this cut of monthly phone bills would cost Apple $300 million to $400 million in revenue and profits for every million unlocked phones sold. Although Apple posted sales of $24 billion in 2007, such lost revenues could become more significant as the iPhone becomes a bigger part of Apple's overall business. This year consultant Technology Business Research expects Apple to sell 7 million units, booking $1.7 billion in revenues and $340 million in operating income.

Are unlocked iPhones really so bad for Apple? While Apple does not receive revenue from AT&T on the unlocked units, many of them are finding their way into markets where Apple does not yet have agreements in place. This may help Apple to stimulate carrier distribution by raising brand awareness.

Also from Business Week:

Factoring out the unlocked phones leaves 700,000 to 900,000 iPhones unaccounted for. About 350,000 of those—and possibly more—were sold in France, Britain, and Germany over the holiday season, analysts estimate. Another hundred thousand or more customers may not have activated their phones yet with authorized carriers, either because they haven't gotten around to it or because they're waiting for their current contracts with other carriers to expire before jumping on board.

That leaves as many as 480,000 iPhones in inventory, according to various estimates. Chris Whitmore, an analyst at Deutsche Bank Equity Research (DB), which may own equity in Apple and may have advised the company in the past, figures that Jobs & Co. typically sell 20,000 iPhones a day. That means the company has 2_ to 3_ weeks of inventory. But if sales slow, that same inventory may take eight weeks to move, Sacconaghi says. That's not overly much by AT&T's standards, since it typically carries four to six weeks of cell-phone inventory, though it's sky high by Apple's lean standards.

Among Apple users, "jail-breaking" your iDevice is actually not difficult at all. The recent firmware upgrade 1.1.3 had a jailbreak published within a week, on Jan. 24. The hack includes step-by-step instructions and screenshots.

For many people, an iPhone was out of the question because they were either in a contract with a provider other than AT&T or didn't care to use AT&T. Considering how widespread the unlocked phones are and how easy it is to unlock them, would you give the iPhone a second look?

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