Unlocked iPhones May Be Costing Apple 300 Million

By: Administrator
Date Time: 2008-02-19 04:51:18

It is estimated that 1/3 of all iPhones are SIM unlocked, being used on carriers other than AT&T. This substantial portion of iPhones sold heading to the greymarket is costing Apple $300 to $500 million in future revenues and profits, says Bernstein Research's Apple specialist Toni Sacconaghi.

If Apple were to somehow stop the sale of unlocked iPhones (by forcing customers to activate them at the point of purchase, say) the company might miss its target of selling 10 million iPhones in 2008 — and forgo even more revenue and profit.

But if Apple does nothing, it gets hit with a double whammy. Not only are its healthy gross margins reduced (unlocked iPhones generate 50% less revenue for Apple and 70-75% less profit, according to Sacconaghi), but growing new markets overseas gets harder. If the company can't stop the flow of unlocked iPhones into a country like China, what's the incentive for a Chinese carrier to pay the stiff premium Apple demands for the right to be that country's exclusive carrier?

Sacconaghi believes that Apple will have difficulty in meeting its goal of 10 million iPhones sold by the end of 2008. Most other analysts would disagree with him on this point.