Editor’s note: Ezra Gottheil is an analyst for Technology Business Research, a New Hampshire-based research firm. Gottheil’s analysis appears in Computer Business Quarterly and Software Business Quarterly.

HAMPTON, N.H. – In releasing its 4Q07 earnings last week, AT&T indicated a cumulative total of approximately 2 million iPhones had been registered for the AT&T service. Apple has sold a cumulative total of 3.7 iPhones. This has raised three questions.

Question #1: Where Are the 1.7 Million Unregistered iPhones?

Apple has three providers other than AT&T: Orange in France, O2 in the U.K., and T-Mobile in Germany. Sales in Europe just began in the fourth quarter, and certainly cannot account for the entire difference. Some unknown number of iPhones are being unlocked by purchasers and some, probably a larger number, are being unlocked for resale. Some are in inventory. Some will be returned. And some are being used for the non-phone features, as iPhone touches, until the owners can change their wireless contracts. We don’t know the proportions, but things will be much clearer at the end of next quarter.

Question #2: Will Apple Reach Its Goal of 10 million iPhones to be Sold in Calendar Year 2008?

With respect to the registration gap, only the prospective returns and inventoried phones affect Apple’s ability to reach its 10 million phone goal. Not only do those phones reduce the actual sales in 4Q07, but they will be sold but not counted during CY2008, while Apple is trying to reach the 10 million goal.

The number is a challenge. Irrespective of registration, Apple only sold 2.3 million phones in the seasonally important fourth calendar quarter.

Apple must average 2.5 million iPhones per quarter for the next four quarters to make its number. Which means that 4Q08 must be much better than 4Q07. Apple likes to make its numbers, and will work very hard to make this one. There are a lot of deals in the pipeline, and the available market will be much larger later in 2008. TBR believes Apple will reduce prices if necessary, and that there is room in the iPhone margin to do so. Apple will upgrade software in existing iPhones and probably release new iPhones with more capable hardware.

Unless the global economy slows down profoundly, TBR believes Apple will make the 10 million number, because the company will do everything they can to make it happen.

Question #3: What is the Impact on the Business?

Without the iPhone, Apple is doing extremely well with high profits and high growth in the core Mac business. iPods are also very profitable and the touch appears to have revived iPod growth. The business Steve Jobs called a hobby, Apple TV, seems to have new life.

The iPhone is already a success, contributing to revenue growth and profit. Because Apple is deferring most iPhone revenue, the company will continue to benefit from units already sold through CY2009. Sales will continue to grow. Even if Apple sells only 7 million units in 2008, the iPhone would contribute $1.7 billion in revenues and $340 million in operating income in CY2008, with greater downstream revenue and profits irrespective of later sales.

AT&T and the other providers pay Apple for each iPhone registered. TBR conservatively estimates this payment to be $10 per phone per month. This is a substantial revenue stream, generated at no cost to Apple, on top of the profit from the sale of the iPhone itself. If a substantial number of iPhones are never registered, iPhone profits will be less than currently estimated. Nevertheless, Every iPhone sale brings profit to Apple, and many of them also bring in new customers for other Apple products.

If iPhone sales fall short of Apple’s projections, it will embarrass Apple and disappoint stockholders, but the company will continue to be very successful.