Apple (AAPL) iPhones Secreted Into China Could Cost Company $1 Billion
By 24/7 Wall St.
Last update: 4:47 a.m. EST Feb. 18, 2008
Apple (NYSE: AAPL) iPhones, perhaps hundreds of thousands of them, are
finding their way into China. There they are "unlocked" so that they can
work
on local cellular networks. According to The New York Times "For months,
tourists, small entrepreneurs and smugglers of electronic goods have been
buying iPhones in the United States and then ****pping them overseas."
There is every reason to think that the same thing in happening in
countries
like India and Russia.
While that people moving the phones overseas may buy them in the US, a
transaction which makes Apple money, the company does not get a part of
the
mobile contract for the cellular service which runs these phones. Apple
has
carefully set up a business model in the US, with AT&T (T), and Europe, so
that the company gets a piece of what customers pay to carriers for voice
and
data.
Some analysts believe that the "unlocked" iPhones could cost Apple as much
as
$1 billion over the next three years. For a company which has annual
operating income run rate of about $7 billion, the number is not
insignificant.
Apple may have a partial solution to the problem. It could bring out new
versions of the phone which are more difficult to tamper with or it could
increase the frequency of software upgrades in the hopes of making the
older
phones less attractive.
But, no matter what it does, Apple's program for taking a piece of its
carriers' revenues is already at least partially broken.
Douglas A. McIntyre
This blog is reprinted by permission from 24/7 Wall St, © 2007 24/7 Wall
St.,
LLC All rights reserved.
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A Mac a day, keeps the Trojan away.
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