Is the iPhone Slowly Killing Apple or Giving it a New Life?

by Sebastien Gomez Jan 29, 2008

With the new jailbreak for the iPhone, users haven’t waited that long to be able to break the latest update from Apple. This news comes along with last week’s claim that Apple had sold a little over 3.7 million iPhones while AT&T was showing numbers in the 2 million unit range. We all know what is causing this discrepancy, but is it hurting Apple as bad as it is hurting AT&T?

When Apple launched the iPhone, they felt as if they had no choice but to associate it with a carrier. They chose AT&T, for better or for worse. Apple signed a very lucrative contract with AT&T that would insure an additional recurring cash flow streaming every month from all the subscribers, a figure estimated at between $300 and $400 for each iPhone subscribed to a three-year plan. So the unlocking of the iPhone is already “costing” Apple half a billion dollars?

Some will argue that indeed the company is losing recurring income, but they are still positioning themselves in a bigger market where more money can be made in the very near future. Because of their AT&T agreement, Apple has to show the world that they do not support unlocking their units, but do they really care if iPhones get unlocked left and right? Some analysts have said that if Apple is to reach their goal of 10 million iPhones sold in 18 months, they cannot afford to fight against all the unlocked iPhones of this world.

In a time where the North American economy is looking grim and tech stocks are plummeting (Apple sunk from a high, during Christmas, of over $200 to $130 a month later), Apple will have no choice but to open up their market to try and lower the percentage of unlocked phones while keeping high steady numbers in sales. A hard task for both AT&T and Apple.

Till then, Apple’s stocks seem to have slowed down their fall while some say that they might even go below the $100 mark. That kind of drop could take as long as three years to recover from—or a sweet second generation iPhone to save the day…again.

What do you think? Is Apple secretly happy to gain whatever market share in the mobile phone business even if it’s to AT&T’s detriment? Is 10 million units achievable with or without unlocks?


  • I once watched an NCAA title game where the announcers spent the entire time explaining how NC State could never beat Houston. NC State led the whole way and won.

    Perhaps you didn’t take not of the extraordinary increase in AT&T;data traffic since the iphone release nor their amazing jump in subscribers.

    Perhaps you haven’ noticed Apple’s results?

    “Hurt” Apple and AT&T;? You’re kidding, right?

    Jim Stead had this to say on Jan 29, 2008 Posts: 10
  • Hi, perhaps you haven’t understood correctly what I was trying to convey. Apple obviously is not hurting, not now anyway. What about their future? What about the hopes of larger market share? Will they keep to their original business model with AT&T;?

    Not everyone agrees but YES Apple is in brand new territory and it could be dangerous. Again, not now but in the years to come.

    Yes AT&T;had a pretty significant jump in subscribers and I’m sure their board meetings are like this: “Yeah, we’re so thrilled to be getting 2 million new subscribers this year—of course Apple sold 3.7 million units but who cares we don’t want to be greedy, 2 million is good enough and Apple is going to figure out what to do with this unlocking situation so we’ll all be gravy this time next year”..

    Look at Apple’s results again..

    Sebastien Gomez had this to say on Jan 29, 2008 Posts: 11
  • 10 million iPhones should be very achievable. Look at the numbers. They sold almost 4 million iPhones worldwide using that archaic Edge technology. Apple is just sitting on a 3G version, and I think that was made pretty clear during the conference call on Apple’s earnings. Once they release a 3G version, more Europeans will buy (as 3G is the standard) and Americans will buy more, and I’ll buy one to replace my Edge one. 10 million will be low estimate come end of year.

    diablojota had this to say on Jan 29, 2008 Posts: 25
  • hmm low estimates??! I like you’re outlook and general positivity. I think you’re right about a 3G version of the iPhone. It just makes sense in 2008.

    Sebastien Gomez had this to say on Jan 29, 2008 Posts: 11
  • This is something of a European perspective; I’d be very glad from some feedback ...

    The value of the iPhone to Apple is the new computing platform.  The iPod Touch is a clearer example of of this platform as it emerges - think of the iPhone as an iPod Touch with better wireless connectivity.  Forget the phone.

    As a consumer - given the market I’m in - I’m happy to pay $2,000 for a portable computer.  But I won’t pay $1,000 for something called a “phone”, even if it does all the same things for me in a better package. 

    The iPhone and iPod touch are really radical and challenging to the market - and to Apple.  They’re trojan horses, dressed up as MP3 players and phones. Inside lurks a whole new category of device: not a substitute for the desktop, but a new way of doing personal computing.

    I think that few people outside Apple really understand the implications of this.  And it’s going to take a few years before this category is established. 

    In the mean time, carrier subsidy and locking of phones will remain a major inhibitor.  But the possibility that such a large proportion of iPhones have been unlocked (presumably, to a large part, in counties where iPhone contracts are not available) is good news for Apple in the long term. There is a demand.  Who cares about lost revenue at this stage?  Apple will make it to 10m units, but that’s not the point.

    Emerging technologies such as WiMax are complementary to the new platform. And Apple has a lot of product development to do.  The rest is marketing.  If Apple can explain to the world that this sort of pocket computing is the way forward for the masses then - by the time the rest of the industry understands the new game - Apple will already have won.

    Bruno Beloff had this to say on Jan 29, 2008 Posts: 1
  • Funny how I never once said that Apple’s stocks were falling because of their performance…

    I simply stated that because of the economic situation, Apple has to find a way to play this new game differently and try and finally gain that market share.

    Sebastien Gomez had this to say on Jan 29, 2008 Posts: 11
  • Its not really a problem for ATT. I think we will find that most of the unlocked phones are going overseas or to Canada.  The US market is doing fine - the deal with ATT works here. There is little reason to unlock for the US market since neither Sprint or Verizon can host an unlocked phone.

    The issue is that currently many markets are not served yet by Apple and that a locked phone in places like Europe is not a good solution.  People in Europe can easily change sim card when traveling. Or they take a phone from one country and use it in their own.  A locked phone is just not going to be flexible enough for them - so people there do not want to wait for it.  They’d rather buy the US discount version and hack it.  Its cheaper and in the end better for them.

    I think it would be better if Apple allowed customers to unlock their phone for a fee. Let people buy it where they like and pay a $200 bounty to unlock the phone.  Then Apple gets the revenue and the exclusive carriers get there exclusive right to offer the phone at the low price and customers can buy into the flexibility they want.

    junkie had this to say on Jan 29, 2008 Posts: 1
  • My iPhone contract is for two years, not three here in the US.

    Dave Marsh had this to say on Jan 29, 2008 Posts: 44
  • My guess.. Apple is happy to see as many iPhones sold as possible. Secondarily… they do get more money with AT&T;... but their money is in marketshare at the moment, the rest comes later.

    Unlocks make the 10million easier…. but 10 million or not they create more sales smile

    Greg Alexander had this to say on Jan 31, 2008 Posts: 228
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