Apple 2.0

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Estimate: As Many as 100,000 iPhones Sold for Unlock

October 4, 2007: 9:25 AM ET

iphonesimfreeAmid all the controversy about those unlocked iPhones -- and what Apple's (AAPL) most recent software update did to them -- it's never been clear how many devices were actually affected. Based on the number of times their iUnlock software was downloaded, the iPhone Dev team put the number of unlocked iPhones, perhaps unrealistically, at several hundred thousand. Shaw Wu of American Technology Research insists the real figure is so small as to be "immaterial."

Now we have the first estimate based on actual shoe-leather research and, not surprisingly, it falls between the two.

It comes from Gene Munster and his team at Piper Jaffray. They spent 12 hours counting sales in Apple stores in late September and compared the results with the 50 hours they spent doing the same thing in July and August. (See iPhone Sales Up 56% After Price Cut).

In an addendum to a report issued to clients today, Munster writes:

During our store checks we noticed many people buying iPhones in the maximum 5/customer allotments, which we believe were being purchased to be unlocked and operated on carriers other than AT&T. This trend was especially noticeable in the New York City store, where one Apple employee acknowledged that customers were buying five iPhones per store visit in order resell unlocked. At one point during out visit, the store sold out of iPhones. Judging from our checks, as much as 10% of the iPhones sold in Sept. were purchased with the intention to be resold unlocked.

Of course, those sales are likely to have stopped abruptly after Sept. 27, when Apple issued iPhone software update 1.1.1, which the company warned might render unlocked phones inoperable. And although the 10% figure can't be extended to cover sales in July and August, before the unlock solutions became available, enough iPhones were sold in September for Munster to estimate that as many as 100,000 of them were purchased to be unlocked and resold.

When pressed yesterday to make a similar estimate, Erica Sadun, a writer and programmer with contacts with the hacker community, came up with the same 10% figure. She estimates in addition that 100,000 iPhones were modified to accept third-party applications, with about a 50% overlap. In other words, her seat-of-the-pants guess is that 150,000 iPhones were modified -- and their warranties voided -- one way or another.

For further analysis see Apple Insider and Ars Technica's Infinite Loop.

See also: How Apple "Bricked" the iPhone

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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