Did anyone actually look at the numbers and do the Math

Discussion in 'iPhone' started by flyingdoctor, Sep 29, 2007.

  1. flyingdoctor macrumors newbie

    Sep 14, 2007
    New around here so sorry if it has been covered before. I've nearly gone boogle eyed reading all the stuff on the hacking / bricking / legal / rights/ etc etc over the iPhone. Most is enjoyable and informative and the clientel seems to be fairly erudite and good natured. Of course there also seems to be the usual mix of Apple plants, fanboy ravers, bar-room lawyers and Steve Jobs is the Messiah / Satan of the electronics world and there seems to be an awful lot of the same old drivel repeated in every thread. But go to any forum, be it cars, watches, cigars, whatever and you will find the same mix and emotion when something "big" happens

    Sorry I digress. One of the arguments for Apple locking the system is loss of cash both for them and AT&T so I tried to come up with some numbers.

    First off. Apple. Lets assume 1 million iPhones have been sold at an average price of 400 bucks a pop. Apple pocket 400 million greenies. Man, that is a lot of cash in just about 3 months.

    They are supposed to be pulling in approx 10 dollars from AT&T every month for the contract exclusivity. That's another 240 million dollars over the 2 year life span.

    Call it around 650 million dollars over 2 years for selling 1 million iPhones in 3 months. Lets also assume that each iPhone costs about 200 dollars to make (most likely less but lets stick with 200). We are still looking at revenue before taxes and marketing, R&D investment etc on the iPhone at over 400 million smackaroonies. I'm ignoring salaries etc as many of the people involved in it won't be purely dedicated to the iPhone line.

    Lets say everyone just uses the standard AT&T $60 a month plan on activation. That means over the 2 year life AT&T will rake in $1,440 million for the 1 million iPhones sold. They give Apple 240 million so it leaves around 1,200 million in revenue. Of course there may be other income such as a one off activation cost etc. Don't know as I never activated mine so I'll ignore them.

    Now the squiffy bit. How many of those iPhones were unlocked and don't run on AT&T? In a sense Apple couldn't care because they still get paid for the hardware but will lose the recurring AT&T charges. I have no idea what a good figure would be but say 10 thousand. How do I come up with that figure? Well hanging out in the various forums I can see that many threads on the iphone actually generate thousands of views but since the 1.1.1 update how many post have we seen about bricked phones? Not that many. What phones will get bricked? Those that were unlocked. Who are the people who unlocked their phones and had the problems? Guys who hang out on the forums. Not Joe Man in the Street. His phone is fine because he doesn't give a toss about unlocking or apps or whatever. He wants to impress his friends or whatever with his sexy phone.

    So lets say I'm right and 10,000 iPhones escaped the AT&T net (actually some unlocked ones won't as people will still use AT&T as a carrier but just sim swap when abroad) but lets call it 10,000.

    AT&T will lose around 15 million bucks over the 2 years from those stragglers. Of that Apple should have gotten almost 2.5 million.

    Big money to you and me but a drop in the bucket when compared to 1,200 million and 650 Million. Obviously if the number of unlocked phones is more than 10,000 then those numbers will be more but subsequently if less then the "loss" will be less as well.

    For Apple to regenerate that 2.5 million all they had to do was sell another 6,000 iPhones.

    Anyway, I hope my math holds up.

  2. FJ218700 macrumors 68000


    Mar 8, 2007
    Blue Dot, Red State
    so how many phones do they need to sell before they can buy Google? :D
  3. boss1 macrumors 6502a


    Jan 8, 2007
    Unfortunately if even if your numbers do hold up there are other issues at large that may be reason for Apple to continue "Operation ACLA"* (Apple Consumer Lockdown Assault).

    * Operation ACLA is a term I came up with this morning after upgrading to 1.1.1 and subsequently feeling very abused and assaulted.

    Anyway, Apple in the business ecosystem has to market itself yet still, to unsigned international carriers and future US carriers (post 5 yr. AT&T agreement) as THE Mfg. that can do what others have failed to do. It makes Apple an appealing Cell Mfg from the Carrier perspective.

    Now I'm not going to detail out all those things Apple may feel it needs to do to image itself that way to carriers and I'm not going to spell out all the benefits those things may accomplish for Apple.

    Let's just leave it at "there are factors beyond financial involved"
  4. erandall38 macrumors 6502

    Jun 24, 2007
    Really interesting post.
    What I am getting from it is that you think there is no reason for Apple or ATT to brick unlocked phones, right?

    So what is the reasoning behind it?

    Your numbers make sense, I am just confused why Apple is making customers angry for such a small amount of cash.

  5. boss1 macrumors 6502a


    Jan 8, 2007

    I thought I brought up pretty good reasoning behind it, but we probably crossed posts and you might not have caught mine before responding to the OP.
  6. flyingdoctor thread starter macrumors newbie

    Sep 14, 2007
    Yea. I would have that that from a PR point of view if nothing else, they would warn people that it is a closed system tied to one carrier and that upgrades would wipe the phone and return it to a "must activate with AT&T" / factory fresh point. In the process of upgrading they would kill whatever backdoors that people had used to SIM unlock.

    No ill feeling from my viewpoint. People know the score. The phone isn't bricked just returned to initial state.

    Actually as the new restore to 1.0.2 KMAC technique seems to have sort of done that, I think Apple could have saved themselved a whole heap of bad Karma for not a lot of financial gain / loss.

  7. TXCraig macrumors 6502a


    Jul 2, 2007
    Houston, TX
    I understand the point of your post, but there were business sprouting up on the internet selling unlocked phones... so I think if Apple did nothing to stop the growing number of unlocked phones, it might slowly grow to a number that would impact the bottom line to both AT&T and Apple.

    I wish Apple was just less greedy and would have just rolled out a unlocked phone that could be taken to any providor, but they didn't... I guess they are in business to make money...
  8. LethalWolfe macrumors G3


    Jan 11, 2002
    Los Angeles
    Just like every other for profit business since the beginning of time.

  9. DeaconGraves macrumors 65816


    Apr 25, 2007
    Dallas, TX
    You're forgetting that just as much as we customers want to be kept happy, AT&T wants to be just as happy.

    We can go by the logic of the first post that AT&T missing out on $15 million isn't much compared to what they are gaining. Its one thing for AT&T and Apple to miss out on that money. It's an entirely different thing, however, for Apple "implying" that they don't care that AT&T is losing that money. Which is essentially what they would be doing if they just let the hacking continue completely unchecked.

    Both AT&T and Apple aren't dumb. They know that regardless of what they do people are going to continue to hack the iPhone for their specific purposes. I feel their goal is simply to discourage the average joe (i.e. people who probably wouldn't even come to forums like these) from trying to do so. The consequence is that they piss off the hackers temporarily, but most of the 3rd party devs are likely just quietly tinkering away on a fix for 1.1.1 as opposed to whining. Meanwhile, several hundred average joes stick with AT&T, and AT&T and Apple's profits keep going up. Sounds fairly win-win in the long term.

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