A 3G iPhone Loser: Snubbed Activation Firm Synchronoss (AAPL, SNCR)
"Synchronoss will not participate in the on-site, retail store activations associated with the 3G iPhone, which was already taken into consideration when we provided our revised financial outlook on our first quarter 2008 financial results conference call," the company confirmed in a filing with the SEC yesterday. Shares tumbled as much as 19%.
This explains the somewhat confusing outlook warning the company gave during its Q1 earnings report last month, which caused shares to drop 44% in after-hours trading. Synchronoss (SNCR) almost certainly knew in May that it wouldn't be part of the in-store 3G iPhone activation process, but couldn't say anything because of its NDA with Apple/AT&T. (Hat tip to Skydeck founder Jason Devitt for predicting this in our comments -- and on his blog -- more than a month ago.)
But Synchronoss still had to warn investors that its iPhone revenue would drop $30 million this year; in 2007, it only generated $124 million. So it spun a vague story. Now, we learn, the answer is much more simple: They got kicked to the curb. (They'll still keep some of their iPhone "activation and provisioning" business with AT&T, they say in their SEC filing. But we don't really know what that means, since they won't be doing the in-store activations -- which are the only activations for the 3G iPhone.) Synchronoss stock is down another 3% today, and down 78% from its 52-week high, reached last fall.
This isn't the first time a company has been burned from relying on Apple's gadgets for a big chunk of their businesses. Chipmaker PortalPlayer got almost all of its money making the guts for early iPods, and went public -- in 2004, when investors wouldn't get within miles of a tech IPO -- based on that story. A couple years later, after Apple had abandoned it for other suppliers, it had to settle for a fire sale to Nvidia.
See Also:
Synchronoss: Unlocked iPhones Are Killing Us
Steve Jobs' iPhone Gamble: Betting Billions To Beat RIM, Microsoft
Why The Unlocked iPhone Economy Won't Go Away
How about blaming the idiots that made this happen in the first place, the iPhone jailbreak hackers.
There's a lot of things wrong with the cell phone industry, but if you want to get a $400 phone for $200, there are going to be strings attached, including contracts with break-up fees. Paying more up front to get better value over time is a minority sport in America.
There has to be a contract-free price, if only for people who break or lose their iPhone before the end of the contract, and I'm sure anyone will be able to buy it at that price if they really want to.
Jason
But lets just shift the blame a bit shall we.
Have you ever canceled your land line because you now have a cell phone? There is one reason charging docks stopped being shipped with cell phones.
Have you or a family member ever popped 4 dollars or more to download a ringtone? You just whetted the appetites of the Bell Family.
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