iPhone 3G to bring Apple billions of dollars more revenue, fewer unlocked phones

“A change in the way Apple Inc. sells its upcoming iPhone could increase how much the consumer electronics giant makes on each phone sold, potentially boosting the company’s revenue by billions of dollars, as well as reduce the number of potential lost subscribers,” Ben Charny reports for Dow Jones.

“While the consumer will be paying about $200 less for each iPhone, Apple is seen as making more money, thanks to the subsidies that the phone’s carriers, including AT&T Inc., will pay. While the companies involved won’t comment on the plan, industry observers now suspect the subsidies may total more than $300 a phone, giving Apple an extra $100 or more on each phone sold,” Charny reports.

“Based on analysts’ forecast that between 35 million and 45 million iPhones will be sold before the end of 2010, that could add $4 billion or more to Apple’s top line,” Charny reports.

“Carriers likely are more willing to pay the high subsidy because of a simple change in the way iPhones are sold – Apple now is requiring a service contract at the time of sale. The move is seen cutting down on those iPhone buyers who ‘unlock’ their phones and use the devices on other cell phone networks,” Charny reports. “This action should help carriers benefit as much as possible from their iPhone relationship. It was estimated that about a quarter of the first-generation iPhones were unlocked, preventing those carriers from collecting the monthly subscription fee, which generally ranges between $70 and $130.”

“Analysts reckon Apple is pocketing as much as $352 per iPhone sold, based on estimates carriers pay about $525 per phone, which Apple is thought to spend about $173 to make, according to iSuppli, which tracks manufacturing costs,” Charny reports. “That means Apple could make between $12.3 billion to $15.8 billion in gross profit on the iPhone over the next two and a half years.”

Charny reports, “Apple might do even better in a few years. The cost of manufacturing the iPhone is expected to drop by at least 30% by 2010, according to iSuppli.”

Full article here.

32 Comments

  1. The cost of manufacturing the iPhone is expected to drop by at least 30% by 2010, according to iSuppli.

    This will give Apple two choices. Start reeping more profits while continuing to hose the competition.

    Lower the price thereby eliminating the only potential differentiator between iPhone and iPhakes thus royally hosing the competition. ” width=”19″ height=”19″ alt=”cool smile” style=”border:0;” />

  2. Steve Jobs went from being an agent of change to an agent of tolerance. He sold his soul for these subsidies and became the mobile carriers’ best friend.

    What happened to all that talk about how big bad Jobs kicked down AT&T;’s door, slapped an iPhone on the table and told the frightened execs “THIS is how it’s gonna be! We’re doing this MY way!” I thought he was a revolutionary?

    The Man waved a few bucks in his face and he got down on his knees. He’ll probably be wearing a three-piece suit at the next Stevenote.

  3. I been an AAPL shareholder for a long time. Purchased all my stock at under $20.00 and everyone called me crazy at the time.
    Sold a small % of my AAPL holdings in December 2007 at $156.00. Let’s just say, I’m on the Feds, Christmas Card list of favorite tax payers now. I owe no one anything (no mortgage payments, nothing).

    Now who looks crazy!

  4. @cynic:

    This estimated “profit” number is based on estimated hardware costs for iPhone manufacture, which don’t include R&D;, software development, customer service, etc. I’m sure Apple has a large part of that “profit” already spent in developing the iPhone SDK, MobileMe, OS X for iPhone/iPod Touch, etc.

    I’m sure Apple will make it’s customary 25% to 30% profit margin, perhaps more. And when the component costs decrease, we’ll see a decrease in iPhone prices.

  5. “Yes, I am a shareholder, but I’m also not one to be greedy. It doesn’t pay in the long term to piss off the masses.”

    People have a choice. They set the price. People can choose to pay for it or not. What’s to be pissed off about?

    If people feel like they are getting ripped off then they have themselves to blame. My feeling is that if people value the phone that much they aren’t going to feel that way. It’s not like they are being forced to buy it.

  6. The Man waved a few bucks in his face and he got down on his knees. He’ll probably be wearing a three-piece suit at the next Stevenote.

    I doubt it: in any case, if some of the forecasts are correct, Apple will be worth more than practically every phone company on the planet in around three to five years.

    On that basis, most people around here – myself included – wouldn’t care if he turned up wearing nothing but a tutu and a Richard Nixon mask.

  7. To all the piss heads who ‘think’ Apple are ripping anyone off.

    – Where else can you buy a phone like this one? At least not for the next 3 years.

    – As a shareholder, I want Apple to capitalise on their amazing products, not give them away thank you.

    – It is patently obvious that demand for the iPhone will likely outstrip supply. Would that be so if it were being sold at a rip-off price?

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