Free iPhone: iPhone Update Puts Kibosh on Unlock Market

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The market for unlocked iPhones is essentially dead, a financial analyst says.
Apple's move last week to stop hackers from modifying the iPhone has essentially killed the market for unlocked phones, a financial analyst said Thursday.
In a research note to clients, Piper Jaffray Co. analyst Gene Munster said that during in-store observations last month at Apple retail stores in New York, Chicago and San Francisco, he noticed many customers buying five iPhones -- the maximum number allowed in a single purchase. The purchases, he added, were especially noticeable in the New York City stores.
"We believe [they] were being purchased to be unlocked and operated on carriers other than AT&T," Munster said in the client note.
Apple salespeople told Munster that customers buying five iPhones per visit were doing so to sell them after unlocking. "Judging from our checks, as much as 10 percent of the iPhones sold in September were purchased with the intention to be resold unlocked."
But when Apple issued iPhone Update 1.1.1, which disabled unlocked phones and returned modified devices to their original factory condition, the company put a stop, if only temporarily, to the resale market.
Based on the same in-store sales tallies, Munster also estimated that Mac retail sales last month were down 39 percent from August. "[But] keep in mind [that] the decline is as expected," Munster said in an e-mail Thursday. Apple closed out this year's back-to-school promotion on Sept. 16 -- rebates of up to US$199 were given toward the purchase of an iPod when bought at the same time as an iMac or MacBook notebook -- so a drop-off was anticipated.
Even with that decline, however, Apple will still beat the consensus estimates of 1.95 million units sold in the quarter that ended Sept. 30. "We believe it is more prudent to expect Mac sales in the 2.0-2.1 million range," Munster said.
His numbers were in line with other analysts who have recently bumped up estimates on Apple hardware sales. Last week, for example, Citigroup analyst Richard Gardner raised his projection from 2 million to 2.17 million.
iPod sales, meanwhile, will finish at the 10.6 million mark that most analysts have predicted, Munster added. But Apple will report more revenue than expected because the mix is weighted with more iPod touch units than projected. His retail count put the blend at 39 percent iPod nano, 36 percent iPod touch, 16 percent iPod shuffle and only 9 percent for the iPod classic.
Munster now has the Cupertino, Calif. company's stock at a target price of $211. As of 2 p.m. Thursday, shares were down $1.75, or 1.1 percent, to $156.17.
Apple is slated to reveal its fiscal 2007 fourth-quarter numbers later this month