Apple Users Unlocked 1 Million iPhones

Institutional Investor magazine, the top-ranked computer analyst estimate represents 27 percent of about 3.75 million iPhones sold last year was unlocked phones.

Apple gets an undisclosed cut of monthly service fees for the iPhone, which is typically sold with two-year contracts from wireless providers in the U.S. and Europe. For every 1 million unlocked iPhones, Apple loses $300 million to $400 million in future revenue and profit, and may also find it more difficult to sign deals with new carriers.

AT&T Inc., which is Apple's exclusive wireless partner in the U.S., said last week that about 2 million iPhones had been activated. If 315,000 iPhones were sold in Europe and 480,000 remain in store inventory, that leaves a "stunning" and "astounding" 1 million unaccounted for.

To unlock a phone, users must modify the software within the device that ties it to wireless services authorized by Apple.

Unlocked iPhones generate 50 percent less revenue and as much as 75 percent less profit than those tethered to service contracts. If 30 percent of the 10 million iPhones Chief Executive Officer Steve Jobs plans to sell this year are unlocked, Apple's earnings may be lower by about 37 cents a share in each of the next two years.

In September 2007, Apple tried to halt the number of unlocked iPhones by releasing a software update that renders some of them inoperable. Hackers released software to bypass the update.