Why iPhone Unlocking is Growing Every Day

While many of my readers are technology sorts, more of my readers are from the financial side of things. As a result, while they know the words "unlocking iPhone", and they know it is becoming an issue for Apple, it is something of an abstract notion.

Let's make it concrete. Point-and-click tools have made iPhone unlocking a straightforward and relatively trouble-free issue, turning something complex, time-consuming and fraught with opportunities to "brick" your iPhone into something only marginally more complex than running an anti-virus update.

Consider the following GUI overlay for one popular unlock tool:

Anyone still wondering why unlocked iPhone numbers are almost certainly bigger than Wall Street thinks?

Comments

[JIM:]

Funny, only now does Apple get any recognition of possible deferred revenue from the iPhones.

Does it only count AGAINST them, and not FOR them? What kind of sick game is this anyway?

2008 Feb 25 12:26 PM

[JIM:]

Snidley, is it Krudosky's point to warn us about unlocking or encourage it?

The sophistry of some of what passes for discourse on this site is astounding!

2008 Feb 25 12:34 PM

[PaulL:]

I don't think that Steve J. is that ignorant regarding the 'unlocking'.
This so-called loss of revenue is already pre-estimated in the
i-Phone sales. It's making money 'unlocked', just like the iPod.
Only the financial guys are making a big deal out of this.

2008 Feb 25 12:41 PM

[Robcal:]

FRS and Wall Street guy nailed it. Must the writer of this article be so obvious in his attempt to find anything wrong with a company that does so much right? I bet if it were up to Toni S., Eric Savitz, and this no name fool; there'd be no innovation in the world.

2008 Feb 25 12:45 PM

[Tom B:]

"And because AT&T runs the "do not call" list which as everyone knows is the democrat party phone tree,"

Really? I think of T as being more Republican, with all the illegal wiretapping of US citizens and all.

"And nobody mentions that in the US the only networks this phone can run on is AT&T and T-Mobile since it is GSM and not CDMA. So is still driving growth to AT&T."

That's why I added some ATT along with my AAPL. More AAPL, of course. Yea, Verizon, while touting their "great network" is still screwing around with CDMA. God, I hate Verizon-- I wish my wife would let me "switch".

2008 Feb 25 01:06 PM

[Oh Blah Dee...:]

RE: Thomas Barta "God, I hate Verizon-- I wish my wife would let me "switch"."

Get a backbone and just switch to AT&T. My wife is still on Verizon because she didn't want a smart phone. Now I only talk to her during "off-peak" minutes.

I just got the iPhone 2 weeks ago, and I must say I lost 6 months of use and learning about a great device because I thought Verizon had the best network. What I now found is that, in some areas, AT&T cell service is waaaaaaaay better that Verizon, and in only a few areas is Verizon cell service better than AT&T. Also, EDGE is not THAT slow. Only very complex, heavy graphic web sites take time to load. All other web sites are VERY reasonable. The EDGE network problem is another BS story that kept me from getting the iPhone until recently.

As far as 3G goes, when I'm ready to upgrade, I'll pass the original iPhone onto a family member or sell it on ebay.

EVERYTHING from my PowerBook synced over: Address Book, iCal, my notes etc. The iPhone is a beauty!

2008 Feb 25 01:37 PM

[bill davis:]

who is this flat belly knocking the old & new at&t???? Before the break up of att the mother of great service was the only company who knew how to service the public!! Trnsmission was clear and no drops The old tele were under the control of the regulaters and the bell system operated within their rules... granted things are more open to the tech boys but remember the transister was born in the bell labs!! the new att is getting back where some degree of standards will help the world for comm services.

2008 Feb 25 01:41 PM

[thinkbefore...:]

Since the author admits that the majority of readers here are not "technology sorts" it's more then irresponsible to advertise a hack and imply that it's easy and non-consequential. Apple can at any moment come with an update that will "brick" hacked iPhones and the hackers may not be able to fix it. Comparing it to a anti-virus update is deceiving - you forfeit the warranty and good luck finding a hacker on some continent that damaged your expansive device or stole your private information.

Will the author take financial and legal responsibility, or any responsibility for that matter, for misleading readers into complacency and false sense of security?

2008 Feb 25 06:11 PM

[I love my i...:]

Etrade you have lowered yourself for considering Seeking Alpha news. The iPhone is in it's infancy. 2nd generation will be out for next xmas. Did I hear a 16GB available?? Yes they will sell when VODIFDL (Video On Demand Download), you'll need the space. Oh as far as AAPL, patent application for a touch application using two hands?? Sounds like another innovative product on the way. The iMac touch?? look out MSFT. :) Buy Buy Buy !!!

2008 Feb 25 06:50 PM

[Constable Odo:]

Funny, only now does Apple get any recognition of possible deferred revenue from the iPhones.

Does it only count AGAINST them, and not FOR them? What kind of sick game is this anyway?

No, it's not funny at all. Recently, any news about Apple is turned into negative news. Deferred payments are a long term-almost invisible cash flow, but x00,000 unlocked iPhones becomes an instant loss to drive the stock down immediately. The people that are yelling "huge amounts of lost revenue" don't even take into consideration that eventually they may be used on a legal carrier when an iPhone rollout takes place. Either way, the iPhone is getting advance recognition and still making hardware profits in countries that don't yet have access to legal carrier iPhones.

Also this crap about weakness of iPod sales. An iPhone is in fact an iPod with cellphone capabilities. If you added iPhone and iPod sales together Apple would have sold more than enough iPods to satisfy the analysts. Okay, Apple calls it an iPhone, but it could have easily been called the iPodPhone. I'm willing to bet that eventually the product lines will merge into one as time goes by when 4G WIMAX or LTE start taking over. The iPod Touch line really should have VoIP capabilities when the SDK comes out. The only problem is that it doesn't have voice input yet. I guess a dongle could handle it, though.

2008 Feb 25 07:48 PM

[Ted Cranmor...:]

I still don't get the upset over unlocking. Apple gets unheard of margin for a techie device, and it's seen as a bad thing? Seems like complaining about being a starving man and only receiving a thick juicy steak instead of a think juicy steak plus dessert.

If the AT&T deal had never existed, wouldn't everyone be raving about being able to sell 10 million new devices at $399-499 with great margins even before the 2nd year is out? What am I missing?
(www.alleyinsider.com/2...

2008 Feb 26 01:35 AM

[Lisa:]

It's amazing to see the knee-jerk reaction of the apple fans in these comments. The article didn't attack apple, nor did it recommend unlocking the iPhone, nor did it attack AT&T. Rather, it simply illustrated how easy it has become to unlock the iPhone, and pointed out that this poses a threat to the consensus earnings estimates from Wall Street analysts.

It was a good and helpful article.

The knee-jerk reaction from the apple faithful is actually useful information for serious investors: It shows that many people who own AAPL are still emotionally wedded to the stock, suggesting to sentiment watchers that AAPL might have further to fall.

It would be interesting to construct some kind of sentiment measure based on the comments on Seeking Alpha articles.

2008 Feb 26 03:59 AM

[Lisa:]

One other thought. The unlocking issue is fascinating, because it shows that companies' attempts to limit users' choices through technology face huge opposition and challenges.

Why should I be limited to AT&T if I want to use an iPhone?

The message of this article is that a lot of people don't want to be limited in that way, and technology companies' attempts to restrict choice are unlikely to succeed.

2008 Feb 26 04:00 AM

[Ralph F:]

Look at the articles from early January when AAPL was at $200 per share. Some headlines from then:

Jim Cramer's 10 Predictions for 2008
seekingalpha.com/artic...
"Apple (AAPL), he predicts, will reach $300."

The Apple of Our Eye (Sramana Mitra)
seekingalpha.com/artic...
"Conceivably, the stock price will spend a lot more time in the above $200 zone this year, especially after the holiday quarter results are out."

Needham Starts Coverage of Apple with $235 Target (Eric Savitz)
seekingalpha.com/artic...

Apple's Target and Estimates Upped by Goldman (Eric Savitz)
seekingalpha.com/artic...

Some thoughts on this:

1. Why didn't the apple faithful complain about those articles -- they encouraged people to buy the stock when it was at it's 52 week high, just before it collapsed.

2. On the sentiment issue now, while the comments are still massively pro-apple, most articles are now bearish on the stock. That suggests to me that the stock might have bottomed.

2008 Feb 26 04:11 AM

[Apple's Fan:]

All of these comments above are really funny. Some people seems to know gadgets but not finance or stock market. Some knows about finance, but does not know about gadget. Some are just upset because they own Apple's stock and it went down a lot recently. Here is my opinion: Apple's stock went down because most US analysts are only concerned about short-term (1 year projection), not long term. They do not have the capabilities to forecast far into the future. And it just happened that US market is going towards recession. Of course hi-tech stock is punished, because they are risky and volatile, and in down market, it will go down a lot. If you believe that Apple has a solid fundamental, you should buy the stock when the down market is at its end. By that time, most forecasting by US analysts will be positive, especially for Apple since I believe it is a very innovative company, and innovative worth a lot. I love all of Apple's products even though I only have (1) iPod Shuffle and there are still a lot of consumer electronics that Apple still has not touch yet. There are still a lot of growth potentials for Apple. Unlocking or not, it should not make a big difference in Apple's stock price.

2008 Feb 26 04:11 AM

[Ichsala:]

Neither an Apple fan nor enemy, just a trader looking to make money off the stock market.

In that vein, I simply can't understand why Apple-lovers get so twisted in a knot when anyone posts even the most benignly negative article on their stock. In every transaction, there is a seller and a buyer. If you think the sellers are wrong, fade them. If you think they're right, sell along with them.

If you think Apple's the greatest thing since sliced bread, you should be thanking Kedrosky and anyone else who helps push prices lower -- so you can load up the boat.

2008 Feb 26 06:12 AM

[JIM:]

There's nothing innocuous, benign, or informative about this article. It's simply an attempt to encourage illegal/immoral activities and drive down the value of Apple shares...Typical of Seeking Alpha these days.

2008 Feb 26 06:30 AM

[CrossProfit_:]

Lisa,

If you want to understand how AAPL stock price and sentiment work, see:
seekingalpha.com/artic...
or the updated original article:
www.crossprofit.com/ar...

Yes, AAPL will go back up eventually, but based on consumer confidence and NOT necessarily EPS.

As the article states, we saw this coming back in September/October 2007. We also forecast that AAPL will rebound before the end of 2008. As we are not prophets, exactly when consumer confidence changes is unknown. Just follow the consumer confidence numbers and watch AAPL go up or down in tandem.

See www.crossprofit.com/vi...

We do not envision a decoupling of this phenomena any time soon and expect this to continue throughout 2008.

We trust that the above eases the temporary pain of long term AAPL shareholders. If you haven't sold until now, then we would hold (now @$120 PS).

CrossProfit (consensus)

2008 Feb 26 06:41 AM

[Tom B:]

"1. Why didn't the apple faithful complain about those articles -- they encouraged people to buy the stock when it was at it's 52 week high, just before it collapsed."

"In that vein, I simply can't understand why Apple-lovers get so twisted in a knot when anyone posts even the most benignly negative article on their stock."

Two explanations:

1)there is no "rational" price for a stock like Apple. One-trick pony companies that sell low margin products (I'm thinking Amazon) have in recent months commanded HUGE P/E's. If Apple commanded a 60 P/E for a while-- whoa-- wouldn't that be huge? I'd sell and "go home".

2) Apple fans are touchy because there is a pretty large stable of "journalist" who really do seem to like to single out Apple and pick on them. I suspect some have a financial motive and some spread FUD at Microsoft's behest to maintain the meme that Apple is a "niche player". They surely don't HAVE to be; anyone can benefit by upgrading to a Mac.

BTW: People should only listen to Cramer for entertainment purposes. I didn't buy any Apple at 200-- my last large-ish chunk was at $85 last March, and I've had some since 2001.

2008 Feb 26 09:45 AM

[Lucmee:]

I suspect Apple could give less than a flying fig about unlockers as long as they buy the phone legally... I'm sure Apple looks at the iPhone the same way they originally looked at the iPod... "If They Use It ...They Will Come"... Over to Macintosh that is. Use an iPhone... You're bound to be looking at a Mac the next time you're in the market for a computer. Even though they removed "Computer" from the company shingle... Computers is what they do and will remain the core of the business for the foreseeable future. Besides..What better stick to beat the other carriers over the head with when the AT&T contract runs it's course?... Can you hear Steve now?... "Look at all the folks using iPhones on your network now...Don't you want all the features to work?" Remember... Apple's mantra is customer experience... They'd rather build the market so that it becomes imperative that the carrier toe the line for features and ease of use... AT&T jumped on that bandwagon and got rewarded with exclusivity for a bit... Apple will be tickled pink to sell iPhones to anybody that wants one once the carriers get on board with the feature support.... I suspect they calculated 5 years as optimal to make this happen.

2008 Feb 26 06:47 PM