Unlocked iPhones: Over a Million of Them?

There's a lot of talk today (here and here for starters) about the iPhone's sales numbers from Apple's quarterly conference call and how they didn't match up with AT&T's numbers from their conference call. The gist is that Apple sold 3.7 million iPhones and AT&T had about 2 million iPhone subscribers. So where are the rest?

Of course, many were sold overseas, but most people very much doubt that Apple sold 1.7 million of them. Which has led to speculation that as many as a third of all iPhones have been purchased and unlocked. That's a lot, and it strikes me as an unrealistically high number. Naturally, we'd like Apple to help us understand this riddle. Naturally, we are sure they won't. Fake Steve Jobs agrees:

Why not just break out the numbers and share more information and tell Toni Sacconaghi and his pals on Wall Street exactly where all the iPhones are? Well, we're not going to do that. We're not going to break out any numbers or share any more information on this topic or try to explain how we arrived at the 4 million figure. We're just not going to do it, so stop asking.

It could be that Apple's number includes those shipped out to AT&T (and international carriers) for them to sell but haven't actually sold yet. It could be that hundreds of thousands of people bought iPhones just because they're really shiny. Whatever it is, it's clear that a significant number of these un-accounted for iPhones have been unlocked.

Dieter Bohn

Dieter Bohn is former editor-in-chief of Smartphone Experts, writing across iMore, Windows Phone Central, Android Central, and more. You can find him on Twitter (and everywhere else) @backlon.

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Unlocked iPhones: Over a Million of Them?

35 Comments

http://www.itwire.com/content/view/16278/1023/
Many analysts say unsold inventory build-up, which may be why Apple's share price tanked.
Ah, see I sort of thought that... but I do think that Apple's share price shouldn't have tanked for it. IIRC there was some early drama around Treo sales that amounted to a similar issue and Palm finally figured out the proper language (sell through vs. sold, etc) to keep investors happy. I wonder if Apple's just too new at this to understand how?

FWIW - I live in the suburbs in Quebec, Canada, and last weekend I went out to shop and saw 5+ iPhones in use at Best Buy, 2 or 3 at Future Shop, the local mall kiosk was selling iPhone accessories, and several people I know were googling to find out how to unlock the iPhones they picked up in the US over the holidays.
If even half the online reports are true, there are *tons* of the things floating out in the unlocked wild. (Dubai probably has a million in a warehouse ;) )
They're selling them pre-unlocked here for an outrageous $899. I wonder what a legit-from-Apple unlocked GSM @ $999 would do on the open market...

http://www.itwire.com/content/view/16278/1023/
Many analysts say unsold inventory build-up, which may be why Apple's share price tanked.
Some do, some don't. Truth of the matter is none of the analysts know how many are unsold, how many are unlocked, nor how many have been sold in Europe. Here's a relatively balanced summary:
http://blogs.barrons.com/techtraderdaily/2008/01/24/apple-so-where-are-all-the-iphones/
Both the 'lots unsold' and the 'lots unlocked' scenarios have downsides for Apple, not so the 'lots sold in Europe' scenario.

Some do, some don't. Truth of the matter is none of the analysts know how many are unsold, how many are unlocked, nor how many have been sold in Europe. Here's a relatively balanced summary:
http://blogs.barrons.com/techtraderdaily/2008/01/24/apple-so-where-are-all-the-iphones/
Both the 'lots unsold' and the 'lots unlocked' scenarios have downsides for Apple, not so the 'lots sold in Europe' scenario.
From your article, this paragraph is most telling:
In a note addressing the situation today, Bernstein Research analyst Toni Sacconaghi considers that question. He says that AT&T had previously said it had 1.1 million iPhone users as of October 23, indicating under 900,000 new activations in the last 69 days of the year. (He notes that Apple sold 3.7 million iPhones through December 29.) That is about 13,000 activations a day, or about half of Apple’s Q4 run rate of 25,400 a day.
Its rather amazing that iPhone activations would actually go down over the Christmas season. It indicated that initial sales were built-up demand to fanboys, and not an indication of demand from the general population, which is a lot lower. This further suggests that iPhone sales over the post-holiday season quarter will be even lower, maybe even half.
Surur

It's pretty equal and opposite to Thurrot, Ou, and the other blog-bait that, like Fox and CNN, has replaced reasoned discourse in media.

Problem with this story seems to be two-fold: analysts too keen to draw conclusions from too little data and journos, bloggers, and other denizens of the internet who are far too keen to jump on anything that supports whatever view they're peddling (or which just fills pages in a traffic-driving kinda way). Props for PD for circumspection and a healthy dose of scepticism.

Problem with this story seems to be two-fold: analysts too keen to draw conclusions from too little data and journos, bloggers, and other denizens of the internet who are far too keen to jump on anything that supports whatever view they're peddling (or which just fills pages in a traffic-driving kinda way). Props for PD for circumspection and a healthy dose of scepticism.
heh. we do what we can. The 3rd problem, I think, is that Apple finds it in their interest to not fully disclose on what's going on here, too.

The part I quoted above is pretty clearcut though - the rate of activations decreased over the holiday season in USA, at a time when it should have reached all-time highs, and when unlocking the phone had become more difficult.
That is interesting, and I have not heard any coherent argument against this yet.
Surur

Its rather amazing that iPhone activations would actually go down over the Christmas season. It indicated that initial sales were built-up demand to fanboys, and not an indication of demand from the general population, which is a lot lower.
The part I quoted above is pretty clearcut though - the rate of activations decreased over the holiday season in USA, at a time when it should have reached all-time highs, and when unlocking the phone had become more difficult.
That's rather at odds with what the AT&T CFO at the last conference call:
[INDENT]"We had very solid sales results in October and November and we had almost double sales in December," said Chief Financial Officer Rick Lindner, referring to iPhone sales on the company's quarterly earnings call.[/INDENT]
http://www.reuters.com/article/marketsNews/idUKWEN355220080124?rpc=44

That's rather at odds with what the AT&T CFO at the last conference call:
[INDENT]"We had very solid sales results in October and November and we had almost double sales in December," said Chief Financial Officer Rick Lindner, referring to iPhone sales on the company's quarterly earnings call.[/INDENT]
http://www.reuters.com/article/marketsNews/idUKWEN355220080124?rpc=44
Double sales are expected over the Christmas season, which means the period before Christmas must have been even worse. I'll make a nice graph when I get home of all the US sales data we know.
Surur

There we go. Using the available data:
After 2 days -146000 Activations.
After 117 days -1120000 Activations.
After 186 days - nearly 2000000 Activations.
Using elementary algebra-
From October 23 to December 31 = 69 days, 880 000 sales.
4 weeks of sales in December at double the rate of 5 weeks of sales in October and November =545600 sales in December and 545600 sales in October and November combined.
After 96 days - 917600 Activations
After 156 days -1454400 Activations
Plotting this data on the graph, we see sales have been quite smooth at 8800 sales per day, with of course increased sales at Christmas.
Anyone want to check the working ;)
Surur

Thanks for the graph. So, the first couple of days aside, slightly increasing US activation rate until the holiday season, where it picks up considerably... just like you said ;)
Care to add another line for the Apple sales numbers to emphasise the difference between those and US activations?

sweet graph surur - I'm totally going to post this at phone different.
If you still have the data open somewhere, maybe could you change the # of days axis to dates? If not, I can do it easy quick too.

Here's an updated version.
Pretty big gap between AT&T and Apple's reported sales. Makes me wonder if the inventory is not lying in Europe.
Data
Day 2 270000 sold
Day 69 price cut
Day 73 1000000 sold
Day 93 1119000 sold end Q4
Day 115 1400000 Q4 results reported
Day 186 3435000 sold end Q1
Day 221 4000000 Q1 rsults reported
Surur

Here's an updated version.
Thanks again. A couple of small criticisms if I may. Firstly the final point seems to be plotted mid Feb rather than mid Jan.
Secondly:
Data
Day 2 270000 sold
Day 69 price cut
Day 73 1000000 sold
Day 93 1119000 sold end Q4
Day 115 1400000 Q4 results reported
Day 186 3435000 sold end Q1
Day 221 4000000 Q1 rsults reported
I seem to have collected slightly different numbers:
[INDENT]Fiscal 2007 third quarter ended June 30, 2007
Quarterly sales: 270,000
http://www.apple.com/pr/library/2007/07/25results.htmlhttp://www.apple.com/pr/library/2007/10/22results.html
Fiscal 2007 fourth quarter ended September 29, 2007
Quarterly sales: 1,119,000
http://www.apple.com/pr/library/2007/10/22results.html
Fiscal 2008 first quarter ended December 29, 2007
Quarterly sales: 2,315,000
http://www.apple.com/pr/library/2008/01/22results.html
Cumulative sales:
End Q3 2007: 270,000
End Q4 2007: 1,389,000
End Q1 2008: 3,704,000[/INDENT]
Pretty big gap between AT&T and Apple's reported sales. Makes me wonder if the inventory is not lying in Europe.
I still think it's hard to say how the discrepancy is accounted for, or to be more specific how it splits between unsold, unlocked and sold and activated in Europe. Gene Munster of Piper Jaffray Co's view is that the unlocked proportion has increased after unlocking got easier:
http://www.pcworld.com/article/id,141951-c,iphone/article.html
Anyone have to hand the date when that was?

BTW, did anyone see that O2 increased the phone and text budle of the iPhone to make it more in line with the rest of their phones?
iPhone
The three current tariffs for iPhone will be brought in line with the minute and text bundles offered on the new and improved tariff structure. This means that customers on a £35 per month contract will get three times more minutes and more than double the number of texts than before. The new £45 iPhone tariff gives the same amount of minutes and texts as the former £55 tariff so customers who were on the £55 tariff can either save £10 per month or take the new £75 tariff with a massive 3000 minutes and 500 texts a month. All iPhone customers will continue to receive unlimited data browsing and access to The Cloud’s Wi-Fi hotspots as free bolt ons to their contract, worth £15 per month. Existing iPhone customers won’t miss out as they will be transferred to the new tariffs during February, with all customers benefiting by mid March.http://www.3g.co.uk/PR/Jan2008/5690.htm
Surur

BTW, did anyone see that O2 increased the phone and text budle of the iPhone to make it more in line with the rest of their phones?
I did see that. It's good of course but if they really want to drive sales I think they'll need a cheaper option (£20/£25 pcm, perhaps with a handset reduction too). Oh, and 3G, naturally.

What's also interesting is that, at least for the latter part of the quarter, those numbers should include the more restrictive selling terms Apple imposed (no cash, limit between 2-5 iPhones per buyer).
I wonder if removing those restrictions would have resulted in even more sales for unlocked phones?

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Or not. They frakked me again:
Update: Unfortunately, Rogers' new $20 Communication Value Pack is presently limited to just web browsing on cell phones with only those browsers authorized by Rogers for the plan. Browsing through other means, as well as use of email clients over the network, will continue to incur a 5 cents/kb charge.

How there has never been any Government investigation into the anti-competitive nature of Canadian data rates, how our politicians and regulatory agencies are not utterly humiliated by the worse-than-third-world communication standards puked over Canadians, and how each and every user doesn’t raise bloody murder online, in writing, and in statement to the CRTC (or whomever has regulatory authority) is beyond me.
(Not even mentioning how much money Rogers would make if they really did offer a $20 (or whatever competitively priced) unlimited internet access package — have they never heard of volume pricing or economy of scale? 100 desperate corp Crackberry accounts @$200 is far, far less than thousands upon thousands of regular consumers @$20. Is everybody chasing the prosumer market but Rogers??)
/vent