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Zibri to Apple’s rescue
When Steve Jobs announced the iPhone, he said that Apple expected to sell 10 million units by the end of 2008. By January 2007 Apple had already sold 40% of its self imposed goal. So, why are analysts increasingly doubtful that Apple will be successful?
On the surface it seems that Apple has been very successful in the U.S. Market data shows that right now Apple is the number 2 smartphone maker, just behind RIM (the makers of the Blackberry phones). However, in Europe initial numbers aren’t as impressive. In France, for example, Orange sold 90,000 units in December, short of their 100,000 target. All in all, only between 300,000 and 400,000 were sold in Europe. Analysts also expected Apple to sign deals in more European counties. Europe is much more than just the UK, Germany and France. The EU has a population of nearly 500 million and those three countries represent just over 41% of the total. This number clearly shows that Apple still has much work to do in Europe if they really want to be successful on that continent.
However, we all know that these numbers are clearly wrong. Since AT&T claims to have activated only slightly over 2 millions iPhones, that leaves about 1.3 million devices unaccounted for which have been very likely activated on cellular networks not approved by Apple (some in the U.S. but most overseas). We already know for example that about 400,000 iPhones are in use in China. That means that the iPhone is not as successful in the U.S. as Apple would like us to believe. It also means that about 30% of all iPhones are sold to customers who would not buy the device if it couldn’t be unlocked.
Until now, Apple has been very active fighting the grey market. In November they released firmware 1.1.2. It broke all known exploits but the enhanced security could still be circumvented through the use of a Turbo SIM (which was relatively expensive and hard to obtain). On January 15, Apple released firmware 1.1.3 which plugged that hole. In my experience, Apple was very successful slowing down the gray market during the second half of Q4 and they must have felt the results on their balance sheet. Now that Zibri has released an easy to use tool to unlock the iPhone, gray market sales are soaring again (based on anecdotal evidence observed in Mexico and other LA countries).
If we consider that the iPhone has been available for six months, that means that Apple has achieved weekly sales of approximately 190,000 a week, with 57,000 units going to the gray market. By improving their device security, Apple has lost at least eight weeks of gray market sales which accounts to more than 225,000 units. If Apple were able to produce an unlock-able device by early March, they would lose the opportunity of selling 2,500,000 units during 2008. Can Apple reach their goal of selling 10 million units by December 2008 without the help of the gray market? Maybe, but not just by maintaining their current course. Apple would have to significantly increase legal sales to compensate for that loss. The easiest way to achieve that result is by lowering unit prices as some recent rumors have been pointing to, but that would seriously harm the company margins and investors wouldn’t be pleased. There must be some serious debate inside Apple going on as to what their attitude toward this market should be.
The real question though is wether Apple will be scared enough by the prospect of not achieving their stated goal to tolerate the gray market or if they will continue cracking down on hackers, presumably with the release of firmware 1.1.4 which is expected to support third-party applications and was expected before the end of February.
My opinion is that Apple has no choice and will have to continue plugging the iPhone security holes in order to try to make the iPhone impenetrable. The reason is simple and has nothing to do with AT&T. If the iPhone can easily be hacked, it won’t be long before the cripto key used to digitally sign applications is found and everyone can start creating iPhone homebrew applications, defeating the whole purpose of signing applications. That is something that Apple has to avoid by any means if they are serious about security (or if they plan on making money by selling apps through the iTunes store, which is much more likely). That means that a price cut will come along the release of firmware version 1.1.4.
Meanwhile, each week that goes by with no firmware update Zibri can be credited with the sale of an additional 57,000 iPhones. That probably means that there isn’t much pressure on Apple engineers to release the SDK as planned and that a delay of a couple of months (say until WWDC) could have some nice side effects like increased unit sales with healthy margins and renewed interest for their developer’s conference. But then, I am sure that Apple will claim that they needed the additional time to polish their code.
[updated on February 26th: Apple has just released firmware 1.1.4. This new release doesn’t seem to break unlock phones and ZiPhone seems to work fine, although some additional tweaking will be required in order to tune the tool for 1.1.4. Is this an indication that Apple is willing to compromise in order to achieve its sales target? Maybe, we will see.]
February 26th, 2008 at 1:28 am
Don’t give Zibri such a big head, he stole all the hard work of the dev team(s) and released it as his, not to mention he released the hard work of the devteam BEFORE v1.1.4, how will the general population feel when v1.1.4 can no longer be unlocked due to his ego?
The method of the combined dev team’s (JerrySIM) was a state of the art method, which now lies useless.
February 26th, 2008 at 10:04 am
I agree. I personally would have preferred Zibri to wait until the release of the SDK. However, the fact is that illicit sales of the iPhone had almost come to a standstill until this new hack became available. ZiPhone is helping Apple move hundred of thousands iPhones all over the world, and that was my point.