Revisiting the iPhone Index

While we're on the subject of recession indicators today, it's time to return to one of my favorites — my non-scientific, completely anecdotal, but nonetheless revealing iPhone Index.

According the The Street, Apple's goal is to sell 10 million of them this year.

Since the iPhone's launch in June, Apple has
sold about 4 million devices, including 2.3 million during the
important holiday season.

To reach the 10 million mark, it needs to average 2.5 million
phones in sales a quarter over the next four quarters — or 200,000
more than what it sold during the big holiday season.

The Street found an expert to say that Apple will likely reach the goal, to which I can say only: Good luck with that.  Even a rumored $50 price drop by mid-year will still mean plunking down $350 for a cellphone, and tying yourself to a two-year contract that costs a minimum $60 a month before taxes, fees, and all the other assorted garbage that jacks up almost any advertised cellphone plan by a good 20%.  Meanwhile, the only authorized iPhone carrier, AT&T, is blitzing TV screens with ads for $99 Blackberries.  Yeah, I know, they're not really comparable devices, but try telling that to the budget-conscious smartphone buyer.

In this economy, the iPhone is, and will remain, a niche device.  Evidence for this is buried within The Street's story — which to my eyes, screams out as what should have been the lead.

There's also the problem of some 1.7 million
"missing" phones — the difference between phones that were sold by
Apple and those that were activated by AT&T.

Activiation of the phones is crucial to Apple's bottom line
because it gets a 10 percent of the cut in monthly fees charged by

Some of that discrepancy can be attributed to excess inventory (which is itself a problem), but the article goes on to say that about 25% of iPhones sold in the U.S. are of the "unlocked" variety customers have hacked so they can work with carriers other than AT&T.  I'm no expert, but my impression is it takes a certain amount of effort to unlock an iPhone, even if the software can be readily downloaded from pirate websites.  So fully a quarter of the iPhones out there are owned by geeks who really want the device and really don't want to be tied down to AT&T.  That's about as niche a market as a consumer electronic device can get.  And again, it illustrates the struggle Apple will have making the iPhone a mass-market product in a struggling economy.

Bottom line: The iPhone Index continues trending downward.