Apple coming to terms with iPhone 'unlocking,' says analyst

Apple's attitude about unlocked iPhones hints that the company will abandon its business model of grabbing a piece of mobile carriers' revenues in order to make its goal of selling 10 million smart phones this year, an analyst said Thursday.

"They seemed absolutely blithe about making the 10-million number," said Ezra Gottheil, an analyst with Technology Business Research, referring to comments by Apple executives during Wednesday's earnings conference call. "And I get the funny sense that ultimately the whole idea of locked iPhones and the revenue almost doesn't interest them."

Several times during the call, Peter Oppenheimer, Apple's COO, and Tim Cook, the company's CFO, stood by the 10-million iPhone goal. "We are confident on hitting the 10 million for the year," Cook said.

According to the sales figures Apple released yesterday for the first three months of 2008 -- its second fiscal quarter -- the company sold 1.7 million iPhones worldwide, leaving 8.3 million more to go if it's to reach its iPhone sales goal.

"I think they think they'll go explosively into China" this year, said Gottheil, who stuck to earlier predictions that Apple will have to move into the massive Chinese market to sell 10 million handsets, and will probably have to forget about revenue sharing to do that.

"They'll go into China, they'll go into India, they'll go into all the large wireless markets," said Gottheil, "probably with a lower price." But likely without the business model they've used in the U.S. and Europe, where Apple has struck exclusive deals with one mobile carrier in each. In return, Apple receives part of each iPhone customer's monthly subscription.

China Mobile, that country's largest mobile service provider, has reportedly balked at any revenue sharing, a sticking point that's prevented negotiations between it and Apple from getting off the ground.

Financial analysts from several firms also pressed Oppenheimer and Cook to quantify the percentage of iPhones sold that have not been registered with one of the partner carriers, and thus presumably "unlocked," or hacked so that the devices can make calls with any mobile carrier.

In the one estimate given on unlocking, Cook said last October that about one in every six iPhones had been purchased with the intent to hack the hardware and use it with an unsanctioned carrier.

Yesterday, however, he refused to reveal what Apple thinks about unlocking trends, going only as far as calling the number "significant."

"We don't feel that we can quantify it with precision, and so we don't want to put out a number that we can't stand behind," Cook said. "But we've gone out of our way to classify the number as significant. I'm not sure how to be more clear than that."