Overseas Black Market Hurts Apple

Consider the case of the "missing" iPhones.

It is widely estimated that as many as 25% of the iPhones purchased in the U.S. never show up on the AT&T network. And that's a sign Apple made a big strategic mistake by locking itself into an exclusive relationship with the phone carrier.

It has resulted in a huge black market for iPhones. A glance at eBay's daily auctions will show you that easily thousands of Apple's 3G phones are being resold regularly at $800 or more each, with the promise they can be "unlocked" -- used off the AT&T network.

Buying an unlocked iPhone in the booming BRIC countries -- Brazil, Russia, India and China -- is now a status symbol for up-and-comers. In places such as Moscow, unlocked 3G's are being sold by the thousands at $1,200 or more each. This means that by the time a "legal" iPhone makes it to these countries, demand for the phone likely will be largely satisfied. I've seen estimates that 600,000 iPhones are already in use in Russia and as many as a million in China.

Apple and AT&T may have permanently lost out on hundreds of millions (or billions?) in revenue to shrewd middlemen all over the world. As a result, the value of Apple's iPhone business unit is nowhere close where it could be.