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October 21, 2008



Tomi, I know that you know quite a lot about the cellular industry, but I disagree that Apple cut profitability much with the iPhone 3G. Go do the numbers. Apple's deferred revenue line includes both iPhone and AppleTV. If we agree that AppleTV sales are negligible (at most 2% of the the deferred revenue; in today's analyst conference call- Jobs says "I don't think anyone has succeeded at it", and he presumably is including the AppleTV); then when I do the numbers, it works out that Apple generated about $4.3B selling 6.892M iPhones (or ASP of $624 upfront).

Regardless, on that conference call, Jobs openly says Apple recorded $4.6B in phone revenues selling those 6.892M iPhones this quarter, or ASP of $667. (It's possible the difference between my number and his is the AppStore sales.) In any case, how much additional carrier revenue (amortized over 24 months) did you think Apple was getting with the original $499 iPhone?

By the way, based on Netapplications iPhone daily browser share tracking numbers (see relative to what those numbers were on the week of July 5th, I forecasted 7M iPhone 3G sales. I know I need to make an adjustment for channel fill, but those browser share numbers seem like they can be a very useful tool.


One more point: On the conference call, Jobs reported that, measured by revenue, Apple has become the world's 3rd largest mobile phone supplier:
1. Nokia, $12.7b
2. Samsung, $5.9b
3. Apple, $4.6b
4. Sony/Ericsson , $4.2b
5. LG, $3.4b
6. Moto, $3.2b
7. RIM, $2.1b
(I don't know the source of Apple's numbers and have not checked if they are accurate.)

By the way, Apple's RIM comment boast was payback for how RIM, in its conference calls over this past year, has consistently refused to acknowledge (even when questioned directly by analysts) the impact of Apple's iPhone on its revenue. Even analysts have written that this refusal is comical.


Jobs also added that he doesn't know whether this strong quatertly position (eg. #3 in revenue share) is sustainable.
A fairer comparison at this point would be over last 12 months as Tomi did for unit sales.

While unit sales comparisons maybe best reflect the consumer view of the competition, revenue share and profitability comparison are more important business measures.

Also important that those $4.6b iPhone revenue are based on subscription accouning (over 24 months). Apple's non-GAAP revenues, which account sales as other phone vendors do, are $3.8b higher.
Neglecting AppleTV (the only other product where Apple uses subscription accounting), this yields about $8.4b iPhone revenue in Q3 - compared with Nokia's $12.7b.

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