Why Apple (AAPL) is Rationing iPhones: $831/unit

Apparently $399 of revenue per iPhone isn’t enough.  According to the AP, Apple has begun rationing the phones–2 per buyer–presumably in an attempt to inhibit a new cottage business of buying them, unlocking them, and reselling them.

As Dan Frommer recently noted, a prominent Wall Street analyst now estimates that Apple makes $432 per phone in subscription revenue kickbacks ($18 per month) from exclusive wireless partner AT&T–far more than most people had previously assumed. (Another analyst puts the figure at $288). This, combined with the iPhone’s $399 retail price, suggests that Apple generates a total of as much as $831 of revenue per unit…provided the buyers don’t unlock them.  Dan also estimates that 15% of the iPhones it sold last quarter were unlocked.

Unlike the sale of the iPhone gadget, which has significant cost of goods sold, the subscription revenue kickback is presumably almost 100% pure profit, so it’s not surprising Apple wants to hang onto it.  In simple terms, if Apple generates a 50% gross profit on the phone sale ($200) and 100% on the kickback ($432/$288, etc.), more than two-thirds of the overall iPhone gross profit could be coming from the kickback.

Will Apple’s combat tactics work?  SAI’s Apple analyst Dan Frommer touched on this last week and will explore it in greater depth soon.  From the perspective of this grizzled Saturday-morning analyst, the kickback bonanza is probably short-lived.  AT&T is getting a major competitive advantage through its current exclusivity, and it should be paying Apple a lot for that.  Once the phone is available through multiple providers, however (which it presumably will be?), this advantage will disappear, and carriers will probably have better negotiating leverage.

Of course, this raises the question about whether the iPhone will ever be available through multiple carriers.   Apple, perhaps, would like it never to be (that $432 is awfully sweet).  If it never is, however, Apple’s customers will be justifiably outraged, and public support for the wholesale unlocking will grow.  Apple has built its fanatical cult following by delighting its customers, not pissing them off, so this is probably not the smartest long-term strategy.  Fred Wilson also thinks Apple will lose the unlocking war.

See Also:
Apple’s AT&T Bounty: $432 Per Phone?  (Or $288?)
Dear Dell, HP, and IBM: Be Afraid of Apple, Very Afraid
iPhone Price Cut: To Break Even, Apple Must Sell 2x as Many
Apple Earnings Analysis: 15% of iPhones Unlocked

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