Apple’s iPhone Revenues

I’m not entirely sure why, but Apple seems to have transcended the stock market

to become some kind of pop-cultural phenomenon – not as a technology company,

but as a stock. I’m no stock-picker, but not everybody knows that, and often

when people find out I write about finance, they ask me for stock-market advice.

And as often as not, the advice they want concerns the question of whether they

should buy Apple stock.

The reason, of course, is that these people feel as though their love for Apple

products is finally being reflected in a soaring share price. But that’s not

the case: if Apple could really monetize its fan base, it would have been much

more successful many years ago – and its stock wouldn’t have been able

to rise so much of late. The big run-up in the Apple stock price is primarily

attributable to iPod and iTunes sales. Apple has managed to maneuver itself

into a position where it is dominating the main retail channel for online music

sales, and it’s Apple’s monopoly there which accounts for most of the frothiness

in its share price.

The rest of the frothiness is down to the iPhone, which is on track to sell

more than 10 million units by the end of next year. That’s a lot of revenue

for Apple – more than you might think if you simply multiplied those 10

million units by the price of the’s Scott Moritz



AT&T is paying Apple a bounty of between $150 and $200 per phone — plus

$9 a month per phone over the life of the typical two-year customer contract.

That’s another $400 or so on top of the sale price of as much as $600. And

it doesn’t even include any revenue that AT&T may or may not pay to Apple

in years 3-5, when iPhone owners will still be locked in to AT&T.

It’s not clear whether Apple will be able to get the same kind of deal from

carriers in Europe, but my guess is that given the strength of the iPhone’s

reception in the US, European carriers will be desperate – and willing

to pay a lot of money – to have iPhone exclusivity. (Even though that

will violate the European norm, where most phones are unlocked.)

What fascinates me is that Moritz also reports, at the end of his column, that

Apple first approached Verizon before finally going with AT&T. I’m surprised

at that, because Verizon’s US network doesn’t use the GSM technology which is

needed to be able to use

the iPhone worldwide. If Apple had gone with Verizon, it would have had

to fit both CDMA and GSM hardware into its device. Which would

have been ambitious indeed for a first-generation product.

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