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Learning that in the fourth quarter of 2007, AT&T activated only 900,000 of the 4 million iPhones sold to date, one financial analyst has proclaimed that demand for the iPhone is in decline. Wrong.

In a report, Sanford C. Bernstein financial analyst Toni Sacconaghi writes:

We believe the data points to a significant amount of iPhone channel inventory... This is negative in two ways: (1) it indicates end-user demand for iPhone is lower than many investors may think based on Apple's sales figure; and (2) it points to slower iPhone sales in the current quarter, since much of this inventory is likely to be drawn down.

Poor analysis. AT&T may have only activated 900,000 iPhones during the fourth quarter, but during its investors conference call earlier this week, Apple reported it sold 2.3 million iPhones in the December quarter. That's about 57.5 percent of all iPhones sold since the Apple introduced the device last June, which would suggest demand for the iPhone increased in the last three months of 2007.

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So why only 900,000 activations? European sales, which started in the December quarter, account for about 400,000 units. "Unlocked" iPhones — phones hacked to run on networks besides AT&T — could account for still more, though it's harder to perform the hack these days.

But Sacconaghi's conclusion — that 660,000 iPhones are hanging around in the back-room warehouses of 4,400 retail stores — stretches credulity, when there's a much simpler explanation. Remember that holiday at the end of December? That's right, Christmas.

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While people buying iPhones for themselves wait until their cell-phone contracts are up, since the iPhone requires a two-year AT&T contract, gift-givers are unlikely to worry about such niceties. Isn't it possible that a large number of people who bought iPhones as gifts didn't rush out in the last week of the year to activate their phones and sign up with AT&T? We won't know for sure until Apple and AT&T report their March quarters, but it's puzzling that Sacconaghi didn't consider this obvious seasonal consideration in his rush to humbug Apple's iPhone sales.

A final thought: Apple said it sold 3.7 million iPhones in 2007, but 4 million by the time of Steve Jobs's mid-January Macworld keynote. That's 150,000 iPhones a week. Let's suppose Sacconaghi's figure of 660,000 is accurate. If it is, then that's just over four weeks of inventory. Hardly disturbing — unless you're trying to put out a sensational report.

(Photo by Stinging Eyes)