Math on iPhones Just Doesn't Add Up?

Tech Dirt is reporting that recently announced numbers by Apple and AT&T suggest that there is a large gap (1.7 million) between the number of iPhones being sold and those being activated. Taking into account factors like the iPhone launching outside the US and a 20% estimate of people buying the iPhone just for the purposes of unlocking, there are still 700,000 iPhones unaccounted for. "[...] suggesting that they're sitting on store shelves, piling up as unsold inventory. That number suggests at least some gap between perceived demand and actual demand -- while also raising questions about how much effort it will take to eat through that inventory."

i know!

[vanDrunen (1075573)]

They all got blended:
http://www.youtube.com/watch?v=qg1ckCkm8YI [youtube.com]

Re:i know!

[flyingsquid (813711)]

The Apple fanboys don't actually use them. They just stare, doe-eyed and utterly enraptured, at the sleek lucite and brushed aluminum, totally lost in the beauty of its industrial design. Occasionally they caress the device or whisper sweet nothings to it.

Re:i know!

[by Anonymous Coward]

my precious

Re:

[jellomizer (103300)]

That brings up an interesting point...
Perhaps some poeple who bought 2 Baught one to use and kept one in its origional package as a collectors item... Like some colectors do with Comics, or with some toys.

Re:

[by Anonymous Coward]

Like some colectors do with Comics, or with some toys.

She's an ACTION FIGURE, you bastard!

Re:

[camperslo (704715)]

There probably are some phones that people got as gifts over the holidays but haven't activated yet due to waiting for the contract with a prior carrier to run out.

Another possible factor is that the numbers used may be an AT&T report of new customers, excluding people who were already using AT&T cell service before getting an iPhone.

Re:i know!

[ContractualObligatio (850987)]

Actually, I didn't even take mine out of the box. I know it was perfect the day Steve Jobs announced it, why sully it with the imperfect air which I breathe? Let it's perfection remain untarnished for ever more!

Re:i know!

[Reality Master 101 (179095)]

You know, I have no love for Apple (I actually hate the company), but I did buy an iPhone, because it has the best browser and best map application (I wanted a browser with a phone, not a phone with a browser).

That said, I have to say one thing. The iPhone came in the nicest box and packaging I've ever seen. It's almost decadent, how thick the cardboard is and how nicely constructed it is. The iPhone comes cradled in this thick, thick, clear plastic holder. The manual came in an elegant black envelope. You have to see the thing to believe it.

I seriously can't bring myself to throw it away. It's utterly useless at this point, but it's so nice, it feels like I'm being wasteful by putting in the trash.

It actually gives me another reason to hate Apple. There is absolutely no reason that this box is necessary, and it really is a waste of resources. I think they used an entire tree to produce the box.

Re:i know!

[flappinbooger (574405)]

Yeah, well, it's kinda like the difference between a key for a Ferrari vs the key for a Ford.

Style, man. STYLE

You may hate Apple for doing the box that way, but to ME, it shows a company going all out to make something the best they can possibly make it the moment the end user comes into contact with the product.

Fine wine doesn't come in a plastic jug, does it? So, for Apple, a fine electronic device such as the iPhone should come in a nice box, too. Macs are expensive yet aren't the fastest computers out there, despite the hype. But you couldn't get a mac user to switch to a PC just because it was cheaper or faster. Why? I think it's the experience. Any Mac-o-philes care to chime in?

No, I don't have an iphone, I don't own a mac, and I'm not a mac fanboy, either.

Re:i know!

[flappinbooger (574405)]

Well, the guy I replied to with the Key analogy was discussing the box, I was sort of equating the key to a car to the box the iphone comes in. To compare the main component (the car, or the iphone) might break the analogy.

Regardless, I've worked with Italian equipment, and Italians. They are good engineers and take great pride in workmanship. They also are very much into aesthetics and style. Very much. But, the Italian culture is way way different than that of the USA. To make a hasty generality, American engineers always always always focus on function above form. The Italians are so relaxed and laid back, they put things off or get things just good enough and let it go. As long as it just works, and as long as it looks good, it's fine. That's why they only crack down on the mafia when they become embarrassing. Out of sight, out of mind.

Here's an example. The PLC on a piece of equipment in Europe probably is going to be Siemens. In the USA, the PLC will be Allen Bradley, more likely than not. Well, if we would sell a piece of Italian equipment in the US, we would sell it with AB. They didn't want to completely rewrite the fairly extensive PLC program, so they employed a translation program that converted it from Siemens to AB. Polish it up a bit, and it works. But anyone with a clue who looks at it finds it to be spaghettied up and a clumsy mess. Whether it was spaghettied up and clumsy before, I don't know for sure, but ... Hey, it works! Bon!

Now, don't get me wrong, the machines were very refined, worked very smoothly, had a lot of ingenious and elegant features, and look quite stylish. And had some not-insignificant shortcomings that you overlook because ... it's Italian and you feel really good about it.

Now I've figured it out - Steve Jobs is Italian!

Hey, get ahold of and watch the first episode of season 10 of Top Gear. When Clarkson is driving the Lambo and can't get the gas cap open - That sums it up.

Re:i know!

[mvdwege (243851)]

Believe this man! Mod him up! Buy him a beverage of choice when you meet him!

All joking aside, I ride Italian motorcycles, and by God isn't this post on the money. The engine, the frame and the suspension are a wonderful unit, the cycle rides like a dream, the styling is great. Yet, stupid little design flaws keep cropping up, like the headlight fittings not being designed to hold up under heavy use (my headlight is now fixed to the frame with tie-wrap).

That's Italian design for you: it does what it's supposed to do, so we it out of the factory. Never mind the details, they're not important to the main purpose of the product. So we get cars that look great, drive great, and have body panels that fit badly; the creaking of the body of some Alfa Romeos can really get on your nerves. Or motorcycles where someone thought it was a good idea to run the cables to the rear light right through the middle underside of the rear fender (my previous bike).

And yet...there is something in Italian engineering that captivates us fans, and makes us put up with their lackadaisical attitude to details. Damned if I know what it is, but it's there.

Mart

Or Bricked

[Skevin (16048)]

I work as a Construction Contractor for some rather extravagant celebrities*. One of my more indulgent clients asked what was the most expensive building materials I've ever seen. Well, I heard on Slashdot that unlocked iPhones make excellent bricks...

Tomorrow, I'm getting my sixth truckload. The North Wing is almost complete, and then I'll start working on the guest house.

* (just kidding, of course. I'm a working techie stiff just like everyone else here)

Solomon

Ummmm

[tgd (2822)]

So is it really more likely there are 700,000 mysteriously missing iPhones, or perhaps the number of people buying them to unlock is higher than they think?

Does the number of ATT activations also include the pre-paid plans, or just the contracts?

Re:

[Internet Ronin (919897)]

It almost certainly only include post-paid activations.

When carriers report their subscriber numbers they focus almost exclusively, in the US anyways, on post-paid subscribers.

You get a +1 insightful kudos sir, I hadn't considered this possibility until you mentioned it.

You are right

[That's Unpossible! (722232)]

The pundits math doesn't line up. What's the reason? They don't know what the fuck they are talking about.

For example: "20% estimate of people buying the iPhone just for the purposes of unlocking, there are still 700,000 iPhones unaccounted for."

OK, so then I guess maybe the 20% estimate is wrong? Horrors.

What I do know for certain is that this discussion won't solve something that only Apple can answer.

No worries

[DaffyDuck101 (247015)]

From the mouth of the great leader himself:

Apple faithful, trust me on this. The phones are not lost. Okay? I just saw them, like, I don't know, last week. Or was it just before Macworld? Tim Cook is trying to find the paperwork because he says he knows we shipped them and he can totally remember seeing the invoices but now he can't remember where he put them but he swears they're around here someplace. Ja'Red is on the job too.

http://fakesteve.blogspot.com/2008/01/so-were-missing-few-hundred-thousand.html [blogspot.com]

Enough anti-iPhone FUD to choke on...

[illumin8 (148082)]

This anti-iPhone FUD is pretty crazy. It makes me wonder how many MS shills and bloggers they have on the payroll:

"[...] suggesting that they're sitting on store shelves, piling up as unsold inventory. That number suggests at least some gap between perceived demand and actual demand -- while also raising questions about how much effort it will take to eat through that inventory."

If you knew anything about Wall Street, Apple can't announce sales when they're sitting on store shelves. They can only announce sales when they've been sold to an actual customer.

Surely some small percentage of phones are being unlocked, but did you ever stop to think that maybe the numbers are off because AT&T hasn't reported yet how many iPhone subscribers there are for December/January and there were probably tens of thousands of iPhones purchased as Christmas gifts that sat under a tree and just barely got activated in the last couple of weeks?

Re:

[Buelldozer (713671)]

What are you talking about?

Both Sony and Microsoft have a well established, and documented, history of announcing shipped instead of sold numbers!

Last I checked both are listed on the NYSE. Do MSFT and SNE ring any bells for you?

Re:Enough anti-iPhone FUD to choke on...

[Sparohok (318277)]

Both Sony and Microsoft have a well established, and documented, history of announcing shipped instead of sold numbers!

You can announce whatever you want, the question is what you recognize as revenue. For that you need to ask an accountant.

I'm not an accountant, but here's the basic principle. The important question is who is the customer and when a sale is made. If you sell a product to another company, such as a distributor or retail store, that's revenue, even if it hasn't been sold to their customer. If you ship a product to your own retail store, that's not revenue until it's sold to a customer.

Then you get complexities like, what happens if the distributor has an agreement where they can require you to buy back unsold product? Does that mean the distributor's inventory should also be treated as your own inventory?

That's why there's a genuinely interesting question about how many iPhones have really been sold to customers, and the truth may not be a simple matter of reading quarterly press releases from Apple and AT&T.

Last I checked both are listed on the NYSE. Do MSFT and SNE ring any bells for you?

Actually, MSFT is listed on Nasdaq, Sony is listed in Tokyo. SNE is a secondary listing (American Depository Receipt).

Martin

Re:

[vux984 (928602)]

Nintendo does too... but in their case shipped and sold happen to be the same number lately.

Re:Enough anti-iPhone FUD to choke on...

[Attila Dimedici (1036002)]

Actually, they can announce sales when they are sitting on store shelves, as long as those stores aren't part of the same corporate entity as is announcing sales. If the phones were sold to AT&T stores and are sitting on the shelves of the AT&T stores, Apple can count them as sold. If they are sitting on the shelves of Apple stores, then it depends on the corporate relationship between Apple stores and Apple itself (which I do not know, and don't care enough to look up).

Re:

[MBCook (132727)]

That's called channel stuffing, and Microsoft has done it quite a few times with the Zune, XBox, and XBox 360 in order to temporarily inflate the sales numbers. What happens is after you've done that, those stores don't need to order more for a while, so after your "great sales" period, you'll get a "low sales" period as the old units get cleared out.

Re:

[Attila Dimedici (1036002)]

Most manufacturers do it. Actually, it is one of those things that happens because it is hard to know how many units have been sold by the retailers who are not part of your company. Of course, many manufacturers further game this by giving incentives to retailers that encourage them to stock up on an item beyond what anyone expects them to sell at certain times to make the numbers look better for a particular report (figuring that no one will be paying attention to the next report). Additionally, the ma

Re:Enough anti-iPhone FUD to choke on...

[illumin8 (148082)]

That's called channel stuffing, and Microsoft has done it quite a few times with the Zune, XBox, and XBox 360 in order to temporarily inflate the sales numbers. What happens is after you've done that, those stores don't need to order more for a while, so after your "great sales" period, you'll get a "low sales" period as the old units get cleared out.

The only problem is that iPhones are only sold at two places: Apple stores and AT&T stores. Apple can't stuff their own channel because that wouldn't count as a sale. And do you think AT&T is stupid enough to take inventory of 700,000 phones at once? That would be bat-shit insane.

Re:Enough anti-iPhone FUD to choke on...

[LearnToSpell (694184)]

And do you think AT&T is stupid enough to take inventory of 700,000 phones at once?

Having been on the phone with AT&T for the last four hours, yes, yes I do.

Re:

[jandrese (485)]

Where did this $100/month contract meme come from? This is the second time it has been posted in this thread alone and I can't figure out where it came from. The only thing I know for sure is that it didn't come from reality. The basic iPhone plan (the one that almost everybody would get unless they're a salesguy or a teenage girl) is $60/month. Still kinda high, but with unlimited data (most cell data plans are pure rape) it's not completely unreasonable. The idea is if you plunking down the big bucks

Maybe...

[niceone (992278)]

They've been pinched?

(British joke only, I guess)

AT&T numbers are likely for iphone specific pl

[Que_Ball (44131)]

I think the likely reason for the large difference is that AT&T is simply giving you a total number of users who activated a phone on the Specific iphone plans and it does not include users who are blending the data only plan addition with a regular voice plan.

Many people will need more minutes than the regular iphone specific plans can deliver or wanted to keep their existing plan and simply add the iphone features to it.

Or AT&T simply doesn't like paying Apple and they are looking for ways to under report the activations of iphones until after the customers window to cancel without penalties expire or something like that.

Click through and find the answer....

[grocer (718489)]

Thumbs down on the blog link - the original CNet news story (link [news.com]) is much more detailed and has this tidbit - Based on the number of "missing" iPhones, each of the 4,400 worldwide iPhone retailers "had more than 150 units of channel inventory at the beginning of this year" which sure sounds like they're counting them F.O.B. from Apple's warehouse door, not when it's actually sold to a consumer.

2 million new customers or total?

[w3woody (44457)]

I went poking around AT&T's investor relations site, and it seems to me (though I didn't spend a whole lot of time there) that the 2 million number is the number of new AT&T customers who switched to AT&T wireless because of the iPhone. This does not count customers (such as myself) who kept my existing service but switched devices (in my case, from a Motorola RAZR to an iPhone).

If this is the case, it would explain a large amount of that gap.

I think part of the problem here is that the major media would like to report that the iPhone is a dismal failure somehow--and channel stuffing (a'la Microsoft's channel stuffing of the Zune) is one way to paint this picture. However, given the number of units I've seen on the shelves at the various stores I've gone to, I cannot imagine that 30% of Apple's iPhone stock was stuffed into the channel: that would mean that every Apple and AT&T store would have a mountain of iPhones sitting in the corner, and I'm not seeing it.

Only 20% being unlocked?

[Ehsan (606618)]

I'm currently working in Dubai, and I know about 20 people who use unlocked iPhones. I also see people with iPhones everywhere I go, as they are sold in all the phone shops here (unlocked, of course). I also know a lot of people in Saudi Arabia and Bahrain who are using them... and the Middle East accounts for one of the highest numbers of mobile users anywhere in the world. So why do they estimate only 20% of iPhones being unlocked? I always thought it was closer to 50%

Crazy People.

[jellomizer (103300)]

1. Colectors buy one keep the seconds in its origional package.
2. Horders buy as many as possible and sell them on ebay.
3. Short attention span. They bought one but never decided to use it.
4. Stupid People. They couldn't figure out how to use it.
5. Loose recepts. Broken or didn't like it but never returned it.
6. Like to break things. Will it blend what makes it tick.
7. Uninformed after spending $600 on a phone they realize their home has no Cell reception
8. Competitors buy the phone and study it for its secrets.
9. Compulsive cleaning spouce. New Toy left in the wrong spot got tossed.
10. Enemies a person is jelious that you just got an iPhone... Have it dissapar.
11. Kids... Shiny... Small... Toilet... Nuff said.
12. Gifts that were never open.
I bet more too.

Re:

[dtolman (688781)]

I wish I had a product that sold as "poorly" as the iPhone.

Course some of us can settle for having just one billion $$$ instead of dozens.

Re:Terrorists buying them to make a Beowulf Cluste

[flyingsquid (813711)]

The iPhone is the cool new thing.

Totally. Kim Jong Il got one, and now Mahmoud Ahmadinejad and Osama Bin Laden are really jealous, to the point that it's threatening to completely disrupt the Axis of Evil. It doesn't help that Osama got a brown Zune for Christmas and now Kim Jong Il and Ahmadinejad are teasing him mercilessly about it.

Re:Terrorists buying them to make a Beowulf Cluste

[Basehart (633304)]

There's no way Osama would use a Zune. He's an iPod Nano guy if ever I saw one.

Re:

[RealGrouchy (943109)]

Actually, Kim Jong Il got two, because he got a hole in one the first time he tried using it.

- RG>

Re:Terrorists buying them to make a Beowulf Cluste

[Dragonslicer (991472)]

Mahmoud Ahmadidntgetaniphonejad?

Re:Terrorists buying them to make a Beowulf Cluste

[by Anonymous Coward]

Actually Osama's not so pissed that he got a Zune as that he got it for Christmas .

Re:Terrorists buying them to make a Beowulf Cluste

[corychristison (951993)]

As a more serious one, perhaps a lot are being shipped overseas and unlocked for use there?

I would think a little more north [google.com] if I were you.

Re:

[porcupine8 (816071)]

a little more north

Of COURSE! Santa is stockpiling so that he doesn't run into the same situation next Christmas with the iPhone that he had this year with the Wii!

iPhone service starts at $60

[jevvim (826181)]

And requiring a 100 dollar a month contract minimum is an absolute deal killer.

Service plans for the iPhone start at $59.99/mo, which is $39.99 for the voice line and $20 for data. I added another iPhone for my wife for another $20 (data plan).

Don't forget the fees

[enzo_romeo (756095)]

Depending on what state you live in, and what ATT can get away with, there are usually some monthly fees on top of your bill. Like the taxes from the local government, and then the fee they charge you to pay the taxes, and whatever else they like to bilk from you. In Seattle my friend is on the $60/mo plan but has an additional $20 in fees from ATT to make it nearly $80/mo for his iPhone.

Still pretty dang expensive for me, even at the lowest rate. I'll sign on when I can get an iPhone for $200 and then pay $40/mo. I take after my dad who should have founded cheapbastard.com.

Re:

[filterban (916724)]

$100/month? What country do you live in? I'm paying $60/month and that includes unlimited data.

The recession and Apple

[MikeRT (947531)]

Not only that, but Apple is in for a swift kick in the ass if they're not careful. Even though a lot of people will still be able to afford an iPhone, the issues surrounding its battery will be a deterrent to purchasing it. Apple will have two choices if it wants to appeal to consumers who are starting to worry about their budgets: make the batter removable like a Razr or any other phone, or lose potential customers.

A removable battery takes away nothing from the aesthetics of the case. The only thing it does is keep it out of Apple's service shop every year, and thus makes it harder to justify buying a new one every year. Apple needs to prepare itself by making this a non-issue for the iPod Touch and iPhone if it doesn't want to face potential disruption.

Apple could take an active part in developing software for both devices, and sell them to offset the losses in their plans from people not spending a lot of money on repairs and new phones.

Re:The recession and Apple

[peragrin (659227)]

um Ihave never replaced the battery in any phone I have ever owned. they are on 24hours a day. I charge them while they are on. by the time the battery goes weak in my phones 2-3 years have passed and I am thinking about a new one anyways. If you talk so much during he day that your phone can't keep a charge for one day you should try doing less talking.

Re:

[timster (32400)]

No, silly-pants, this has nothing to do with some giant culture war. You made a joke and somebody thought it wasn't funny. As always throughout history, every time you use humor you are taking a risk. That's what makes humor interesting and why comedians have thick skins. If you get upset when people don't like your jokes, perhaps humor is not for you.

Re:A million here, a million there, and sooner or.

[glop (181086)]

Actually, it had been said that the hardware in the iPhone costs 200$ or so. If that's true then Apple is not losing money on those unlocked iPhones.
The share they get from ATT is just more profit.
Also, the iPhone is said to have cost 150 million $ in development. Not such a big deal when they sell millions of them with a decent margin.

There is a lot of speculation about this device, isn't there?

Re:

[Fieryphoenix (1161565)]

With all the junk passing for off topic first posts lately, it's kind of a pleasure just to see a plain old, old-school one for once.

Re:

[stewbacca (1033764)]

Well, "maths" is definitely one of the hardest things for an American living in the UK to get used to. I still can't bring myself to say "maths" or use plural conjucations for corporations. "Apple are selling.." just never sounds right.

Re:

[gnasher719 (869701)]

I wouldn't be surprised if this is typical late 90s shenanigans on the part of apple. I know a lot of software companies did this back in the 90s - they print up a jillion boxes of software and ship it to the stores, counting it as sales. This works in the short term, but when the stuff shows up on wooden palettes at the Qwiky Mart all marked down 50%, it travels back up the chain pretty quick, and affects share price. so, i would propose a tag to this article, stuffthechannel.

Apple just released their number of iPhones sold in the last quarter. There are accounting rules for this: An iPhone counts as sold at the time when it is either paid for, or when the person receiving it has an obligation to pay and can't get around it (without being bankrupt). And since Enron, the SEC checks these things quite carefully.

So now we have two choices: Either Apple has done things that will get them into deep trouble, and most likely someone into jail. Or, as unlikely as it may sound, there