iPhone Trouble in NY Doesn't Stop High Expectations

After sending mixed signals, AT&T is now back in the iPhone-selling business. The carrier stopped selling the mobile device to New York-area residents for a brief time. On Dec. 28, after the issue had been resolved, an analyst raised the target price for Apple's stock to $260. The analyst described iPhone use as still being in its infancy.

The Apple iPhone is now available again for online sale in the New York area.

According to several reports, potential purchasers in New York and northern New Jersey were told during the weekend of Dec. 26 that, "New York is not ready for the iPhone," essentially due to AT&T's inability to offer adequate coverage in the area.

"You don't have enough towers to handle the phone," an AT&T sales representative reportedly told a reporter for The Consumerist.

Then, on Dec. 28, AT&T released a short statement saying sales of the iPhone in the New York area were ready to resume. AT&T did not offer a specific explanation for what happened.

The carrier has been roundly criticized for its lack of coverage in major metropolitan areas, particularly New York and San Francisco. The iPhone, which AT&T is currently the exclusive provider of in the United States, has been an enormous success for AT&T, but so much so that its growing number of users are said to be bogging down its network.

According to AT&T, its smartphone traffic has increased by 5,000 percent in the past three years.

On Dec. 8, in an effort to use the iPhone to help it pinpoint faltering coverage areas, AT&T introduced a free AT&T Mark the Spot application, which enables customers to instantly-or in greater detail-alert it to any services issues they experience, such as dropped calls. The carrier said it plans to use the data it collects to inform decisions about where to invest money allocated for improving its wireless network.

Fletcher Cook, an AT&T spokesperson, in a note to several media outlets, explained the sudden unavailability of the iPhones in the New York area by saying, "We periodically modify our promotions and distribution channels."

Customers are being told to visit Apple or AT&T retail locations instead, which gives credence to reports such as that from The New York Times that the online unavailability of the iPhones is due to "fraudulent activity" in some areas.

Whether available to New Yorkers or not, Broadpoint AmTech analyst Brian Marshall said he sees current iPhone use as being just the tip of the iceberg, and on Dec. 28 raised the target price of Apple stock to $260.

"Despite the enormous success of the iPhone since inception in July '07, we strongly believe the device is still in its infancy with respect to penetrating the global post-paid subscriber market," Marshall wrote in a research note. "For example, our analysis indicates that while the iPhone currently enjoys 5.0 percent penetration of [AT&T's] post-paid subscriber base, the penetration of its current international carrier partners' post-paid subscriber base is only 0.8 percent."

Marshall continued, "In our view, Apple remains the best technology company on the planet, and we are comfortable with our Street-high Dec. 2009 estimates of $12,509 [million] and $2.27 ([versus] consensus of $11,856 [million] and $2.04)."