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Apple iPhone - a year in review

2008: The iPhone comes of age

If 2007 was Year Zero in the life of the Phone That Changed Everything, then 2008 skyrocketed forward to the year that the device truly came of age. A lot has changed in the world of Apple's handset since our first glimpse of it almost two years ago at Macworld Expo 2007, and while the iPhone has climbed to even greater heights of success in the past year, the road hasn't been without its fair share of pitfalls and potholes along the way.

The numbers
At Macworld Expo last January, Steve Jobs took the stage to dish iPhone sales figures. At that point, the original iPhone had sold about 4 million units, capturing around 20 percent of the US smartphone market.

That was impressive for a six-month-old phone, but throughout the year Apple executives repeatedly reaffirmed their goal - originally set by Jobs during his 2007 Macworld keynote - of selling 10 million iPhones in calendar year 2008.

Apple iPhone 3G

With the original iPhone, that goal might have been a bit lofty, but as the year progressed, it quickly became apparent that Apple had, as usual, given a number it expected to hit. Among the major factors in boosting the iPhone's sales were the introduction of the iPhone 3G and the App Store (which we'll get to below), but 2008 was also the year the iPhone became truly a global phenomenon.

Apple iPhone 3G review

As of the beginning of 2008, Apple sold the iPhone in only a handful of countries: the US, the UK, France, and Germany. Austria joined the club last February, followed by Ireland in March. That trickle turned into a deluge when, during the keynote at June's Worldwide Developer Conference, Jobs announced that Apple planned to add 70 countries to the iPhone's market by year's end.

And Apple delivered on that goal - the iPhone is now available in around 75 countries, with more still on their way. The most prominent omission remains China, where Apple remains in back-and-forth negotiations with the country's largest wireless operator, China Mobile.

All that expansion helped catapult the iPhone to its goal of 10 million, which Apple reached toward the end of October. That wasn't the only big number the company hit along the way: in a rare appearance on the company's quarterly conference call with stock market analysts in October, Jobs announced that Apple had shipped more units than BlackBerry-maker RIM in that quarter, and that its revenue put it in third place for mobile phone suppliers.

In early November, market research firm NPD Group said that the iPhone could stick another feather in its cap: namely, beating out the popular Motorola RAZR to become the top-selling handset in the US. It didn't hurt that in addition to selling the phone at Apple and AT&T stores in the US, the handset was also available from electronics chain Best Buy starting in September and retail giant Wal-Mart as of the end of December.

Apple also took another unusual step in its October conference call. In order to comply with Generally Accepted Accounting Principles (GAAP), Apple had long tracked iPhone revenue in a "subscription accounting" method, meaning that the company recognized revenue from the sales over the expected lifetime of the product, which in this case was 24 months.

While that helped keep Apple from running afoul of tricky regulations governing accounting, it had the side effect of concealing just how well the iPhone was actually doing. In that same October conference call that featured Jobs, the company announced that it would also begin providing a separate set of numbers that would more clearly represent the iPhone's impact on Apple's bottom line.

That impact was staggering: had the revenue not been deferred, the iPhone would have accounted for 39 percent of Apple's total revenue for the company's fiscal fourth quarter of 2008. Clearly, as Steve Jobs noted, Apple's iPhone business has become too big to ignore.


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