So if you're Apple--and I realize that it's unfair of me to make you pretend you're a multinational corporation worth billions, but I'm cruel that way--what happens when you realize that many of the 5.4 million iPhones you've sold in the past 10 months haven't been activated on the networks of any of your worldwide cellular partners?
Here's what you do: You shrug. You made a lot of money on those 5.4 million phones. Yeah, you're probably getting a kickback from those cellular companies that you won't get from the unlocked phones. But presumably you've priced the iPhone hardware for a tidy profit all on its own. And that's money you don't have to share with the likes of AT&T, O2, or T-Mobile.
This strange story, the "disappearance" of iPhones from the markets in which they're being sold, has been the highlight of the last two Apple conference calls with analysts to discuss their financial results. In January's call, Apple COO Tim Cook said that "the number of phones bought with the intention of unlocking them was significant... We see this phenomenon as an expression of very strong interested in the iPhone globally, and in that way it's a good problem to have."
Wednesday, after Apple reported a 1.05 billion dollar profit, it was time for the lasted edition of my favorite reality show, Apple Analyst Phone Call. And sure enough, the unlocked-phone trend continues: "Unlocking is occurring and it's significant," said Apple CFO Peter Oppenheimer. "Our view is that it's a sign of clear interest and demand globally. We're hearing reports of iPhones being used in many countries, so it gives us confidence [in Apple's target of] shipping 10 million [iPhones in calendar-year 2008]." Cook went to far as to suggest that iPhone shortages in U.S. stores are largely due to iPhones being bought for overseas resale.
Reports of iPhone sightings have been coming in from all over the world. Though Apple's got a limited set of official iPhone partners in the U.S. and Europe, iPhones are readily available in China, India, South America, you name it. Anywhere with a network compatible with the iPhone's cellular radios, basically. And you-as-Apple don't really mind, since you've still got money in your pocket, and the presence of iPhones in those countries is building demand for the official version, whenever it goes on sale there. It also may put pressure on the local cellular providers to get with the program and offer the iPhone officially.
When this unlocking trend began, I think many Apple-watchers expected the company to take a pretty hard line in order to defend its phone-company agreements. But since the bulk of the unlocking appears to be happening in attempts to bring the iPhone to countries where it isn't currently available, Apple seems pretty cheery about the whole thing. (You can bet that if the company felt that unlocking was largely happening in order to let U.S. iPhones migrate from AT&T to T-Mobile, it would be making a bit more of a pouty face.)
"I get the funny sense that ultimately the whole idea of locked iPhones and the revenue almost doesn't interest [Apple]," analyst Ezra Gottheil told Computerworld's Gregg Keizer. In the end, while money from the cellular carriers is great, Gottheil says that Apple's biggest goal is simple: disseminate Apple products far and wide.
There's some amusing irony here, since this thriving market for iPhones only exists thanks to the intrepid hackers who figured out how to break into the iPhone's software and rewrite its radio firmware to unlock it from AT&T's clutches. But given how Apple's reacting, it makes you wonder: is this a lucky accident, or did the company expect it from the start?
My guess: Apple figured some people would hack the iPhone in order to unlock it--come on, it's a computer, of course people are going to figure out how to break into it--but didn't expect the demand for the product to be so huge that it would become the massive source of sales it has become.
If you were Apple--and I'm not saying that you are, so don't even try to imagine it this time--I imagine you'd be tempted to dance a little jig right now about how much demand there is for your phone around the world. But then you'd realize that if you danced that jig, mean ol' Mr. AT&T would give you the evil eye.
So you don't do the dance. You keep it cool. And maybe when your COO and CFO talk to analysts in that quarterly phone scrimmage, they'll let out just the faintest hint of glee about what a phenomenon the iPhone has become around the world.