So-called ‘analyst’ finds his ‘missing’ iPhones

“Having stirred up a hornet’s nest with his first take in the so-called missing iPhones, Bernstein Research’s Apple specialist Toni Sacconaghi has taken a second look at the discrepancy between the number of iPhones Apple sold (3.75 million through Dec. 29) and the number AT&T actually activated (just under 2 million through Dec. 31),” Philip Elmer-DeWitt blogs for Fortune.

“His conclusion: most of the devices he describes as ‘missing in action’ are not sitting in warehouses, as he originally surmised, but were siphoned off into the gray market for unlocked iPhones,” Elmer-DeWitt writes. “His best guess is that in 2007 as many as 1 million iPhones may have been hacked by resellers and activated by carriers that are not paying Apple a kickback on every monthly charge.”

Elmer-DeWitt writes, “This is a big problem for Apple, says Sacconaghi.”

Full article here.

You’d think the one with the biggest problem would be a so-called “analyst” and “Apple specialist” who first told his clients and everyone else that the iPhones were “missing in action” or gathering dust in the channel and then figured out the real answer days late.

But, that would be a world in which people were held accountable for their actions. Instead, we seem to be in a world where just about anyone can get hired as an “analyst” and get their malformed, knee-jerk “analysis” widely quoted and published just about anywhere. If their idiocy and ineptitude affects the stock price one way or the other, so be it. Then, when they get around to “taking a second look” and find something closer to the reality of the situation, we’re still supposed to give a shit what they think? Sorry, not here.

Yes, iPhones that are sold and unlocked fail to generate additional carrier-derived revenue for Apple. This explains the iPhone’s across-the-board unsubsidized price. Apple still derives a profit from each unit sold. There are no “missing” iPhones: Apple got paid for each and every one. In Apple’s conference call last Tuesday, CFO Peter Oppenheimer addressed this issue and stated that Apple sees iPhone unlocking as a “good problem to have” and is a sign of iPhone’s popularity.

“Apple specialist” Sacconaghi will no doubt come up with new theories as to how Apple will not achieve their goal of selling 10 million iPhones in 2008. And when Apple blows that goal away and Sacconaghi proven is wrong yet again, will he finally be held accountable by his firm and/or clients?

Are you a Bernstein Research client currently holding AAPL? If so, why? Hopefully, you’re operating independently and ignoring “analysis” from “Apple specialist” Toni Sacconaghi.


  1. Toni Sacconaghi – Sanford Bernstein

    Okay, can you comment on the number of unlocked phones that you believe were sold in the quarter? You had mentioned that on your last call.

    Timothy D. Cook

    We believe that the number of phones bought with the intention of unlocking was SIGNIFICANT in the quarter but we are unsure how to reliably estimate the number. In the DECEMBER quarter particularly, we saw sales increase across the quarter similar to what you would expect with the holiday gift-buying pattern.

    But as we’re new in the business, we’re unsure when all the RECIPIENTS will ACTIVATE. Some people wait until their existing CONTRACTS EXPIRE, some may initially use the non-phone features only, others activate in the future, and so at this point we don’t have a precise estimate for you.

    We see this phenomenon as being an expression of very strong interest in iPhone globally and in that way, it’s a good problem to have.

    Toni Sacconaghi – Sanford Bernstein

    Can you comment qualitatively — you’ve given the number last quarter — qualitatively, do you believe the percentage would actually be higher or lower this quarter, or is it too early to tell based on your experience?

    Timothy D. Cook

    It’s too early to tell. I would just say I think it is significant.

    Toni Sacconaghi – Sanford Bernstein

    Okay, and then final question; I think you had mentioned initially at the end of the first quarter of iPhone sales that you didn’t want to talk about iPhone channel inventory, that it was still a relatively small and insignificant product. Given that it has over $1 billion in deferred revenue, why are you choosing not to disclose that number?

    Peter Oppenheimer

    Toni, that’s not the reason we gave. We said that since we only have one channel partner in each of our first four countries, we’re not going to report the inventory but we are going to employ our proven systems and processes to manage the iPhone differently, or effectively.

    Toni Sacconaghi – Sanford Bernstein

    Thank you.

  2. The answer here is simple. Apple should put its cash to work by purchasing some of the spectrum being auctioned off and build out its own wireless network for cellular and ISP services.

  3. “. . . but were siphoned off into the gray market for unlocked iPhones . . .”

    That’s what happens when people get old. They get bored and resort to smuggling electronics. And they know no TSA agent is going to suggest a cavity search. Those aren’t sagging boobs. It’s two hundred iPhones.

  4. Whoa. Is this MacDailyNews or MacDailyAxeGrinding?

    Whether there are over a million iphones sitting in warehouses or not being used as intended, either way it is a significant problem for Apple. The analyst is right to ask questions and try and get to the bottome of it.

  5. Alex,

    How about if Sacconaghi gets to the bottom of it without yapping about his incorrect theories to the press?

    When he has definitive proof, he can offer his analysis.

    In the meantime, he should keep his half-baked fantasies to himself.

  6. @ RonJeremy:

    Jobs said in his January 2007 Macworld keynote that Apple’s goal was to sell 10 million iPhones (1% global market share) by the end of 2008.

    I find it rather amusing that these analysts are getting their panties in a bunch over “missing” iPhones, etc. Have they not seen the sales results thus far? Can they not see how the iPhone is already taking a large percentage of all smart phones sold? And that’s within the first 9 months of its release! Find me one other phone that did what the iPhone has done – there isn’t one.

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