Seeking Alpha's Todd Sullivan really doesn't like Apple's exclusive agreement with AT&T (tip o' the antlers to John Gruber). His dislike of it is so intense, as a matter of fact, that his "analysis" of the deal has burst free of the restraining coil of our so-called "Earth logic" and taken flight to a wondrous world of imagination. [Note for editor: is there a Doug Henning tag?]
The latest estimates have "unlocked" iPhones costing Apple over $1 billion in lost revenue the next 3 years.
Wow! $1 billion sounds like a lot. How did you come up with that number, Todd?
Apple's (AAPL) AT&T (T) tie-up in the US is for another 4 years, meaning the company will continue to not realize monthly revenue, estimated at $120 annually per subscriber from phones "unlocked" for use on other carriers.
OK, so Todd won't tell us where, exactly, he got that number -- you stupid Earth logicians would ask such a question! -- but doing the math he's apparently figuring that there are about 2.1 million unlocked iPhones "in the wild". That's a lot more than other estimates, but the number of iPhones and the grand total are pretty irrelevant once you see how inherently flawed the premise is.
Because this $1 billion is magical fairy money that you can only see when it's reflected in the shiny dew on the Blingo-tree leaves in the virgin wood of the elven kingdom of Willywindle, across the Chocolate River. And then only during the month of Februtuesrarey, which comes once in a 1,000 years, when the snow falls from clear skies and the IRS agents give fabulous deductions for non-asset transactions conducted in previous fiscal quarters. [Note for editor: this could probably use some tightening up.]
Well, anyway, the point is that opportunity cost is only relevant if there is, in fact, an actual opportunity, not some imaginary scenario you just pulled out of your butt. For Apple to be "foregoing" this huge chunk of change, you'd have to buy into the jacktastic assumption that it could negotiate the same $120/year revenue sharing with every other cellular provider in the world.
Not only that, Sullivan glosses over the fact that his "math" assumes a situation where AT&T exclusivity is in effect globally. However, here on Earth, 300 light years from planet Jackass, many if not most of the unlocked iPhones are being used in other countries, particularly countries where Apple doesn't currently have a deal with a cellular provider. Just the other day the lovely and talented Tom Krazit pointed to a report indicating there are 400,000 unlocked iPhones in China alone.
Why does Apple not have a deal in China? Because it's trying to do something craaaazy like negotiate one of them sweet revenue sharing schemes, that's why.
Todd, maybe you should be taking some notes or...
Well, whatever. That's fine.
Apple has stood by its "10 million phones sold by the end of 2008" goal, but recent news that they have dramatically cut back on component orders can only mean sales growth has slowed.
If you click through to the link, it's really not clear exactly what that component cut report was all about. First of all, Apple already said in its quarterly conference call that it expected the first quarter to be slower than normal. Go one link further and you'll see CNBC's Jim Goldman calling the report much ado about nothing.
At any rate, Apple's already sold more than 3.7 million iPhones. With the release of a 16GB version last week, more international rollouts coming and a 3G version sometime later in the year, does anyone really think they aren't going to make 10 million by the end of the year?
Anyone who doesn't cry out for the creation of a Doug Henning tag, that is?
I did a post in May of last year that said AT&T would be the big winner of the iPhone deal and to date they have been.
Yes. Surely, with iPhone sales perfectly aligned with expectations, Apple has taken it in the shorts.
Huh? And since when did this relationship become a zero sum game?
What's so interesting about that link is that it's to a post where Sullivan just references an unlinked-to previous post about the iPhone and then pulls a big long quote from another blog. Why would that be? Possibly because his opinions about the iPhone have been so fantastically wrong?
Like this one where he seems oblivious to the presence of the rest of the world:
This also means that the 10 million units Apple plans to have sold by the end of 2008 will be done to 47 million AT&T subscribers meaning 1 in 5 will have one? Doubt it.
Well, you were right to doubt it! Because you were wrong!
Todd, honey, after all this time maybe you should just drop this particular subject. Because you still don't seem to be getting it.
Back to the current piece:
When you also consider we have not seen what Research in Motion (RIMM), the Blackberry maker and clear "smart phone" leader has planned, Apple may face even more headwinds.
How, exactly, is one to consider what one has not seen? And doesn't this idiotic game work both ways? Shouldn't we also consider what we haven't seen from Apple? Or from Nokia? Or from space aliens?
None of this even takes into account the specter of Google's (GOOG) gPhone expected later this year.
Again, we have current Apple products forced to compete against future products from someone else. Why does Steve Jobs even get up in the morning?! And when did the linearity of time get revoked without the Macalope noticing it?
But let's look at some actual market share analysis for a minute.
"When you consider that it launched part way through the year, with limited operator and country coverage, and essentially just one product, Apple has shown very clearly that it can make a difference and has sent a wakeup call to the market leaders," said Pete Cunningham, Canalys senior analyst.
Phew. After reading Sullivan, that voice of sanity is like a soothing liniment applied to a festering rash, isn't it?
Not that the Macalope would know what that's like.
The horny one is a little confused at Sullivan's definition of the term "leader", though, as Nokia is #1 in market share, not RIM. And Apple, while at #3, clearly has the buzz, as manufacturers are scrambling to come up with an "iPhone killer".
But actual figures and logic be damned! Right, Todd? [Note to editor: can you write the Macalope a prescription for a pain killer?]
Instead of having a product that all carriers were glad to carry and sell, he created an atmosphere in which they embarked on a quest to compete directly with him and his product.
Todd, the Macalope just doesn't know how many other ways to say this but that is simply one busted-ass 2007 Nissan Premise you're driving there. Exclusivity is a condition for the revenue sharing agreement. That's how Apple gets the revenue sharing. You can't say Apple's somehow foregoing $1 billion in revenue sharing that it could never possibly get.
I think Apple devotees may find themselves in the future wondering "what could have been" if only Jobs had not started out this process so adversarially.
Yeah, well, the Macalope thinks you will find yourself in the future ignoring the uncomfortable fact that you ever wrote this piece in the first place.