Apple Inc. (NDAQ: AAPL) shares fell sharply today amid increasing concerns that it will not meet its sales goal of 10 million iPhones this year. Meanwhile, reports also surfaced that a growing number of unlocked phones are being used on other carriers and hurting its revenue share with AT&T Inc. (NYSE: T). The new product only accounts for a small portion of the firm’s revenues this year, but analysts are predicting that it could account for upwards of a quarter of its revenues during the next four years. So, are these problems that Apple can overcome or are they in some serious trouble?

Apple is facing two large problems with its iPhones. First, there are reports of illegal shipments of exported iPhones returning to the United States and being sold for far less. It is believed that Apple generates approximately $100 per sale in the United States, but this development drops that number far lower. Secondly, there are an increasing number of unlocked iPhones that are causing the company to lose out on revenue from carrier partnerships. It is believed that Apple generates more than $200 in gross profit over the life of the phone through such arrangements. Reports have shown that over a million such unlocked iPhones have hit the market since the product was released.

The question shareholders have to ask is just how much the iPhone is worth to Apple. Shares began at around $85 per share when Steve Jobs first announced the new phone before dropping more than 40% of their value from their peak. This drop has many analysts believing that the stock is undervalued, especially given its strong free cash flow generation. Other suggest that negative news surrounding the iPhone and iPod will only make things worse before they get any better. And finally, there are some that are concerned about the rising cost of the iPhone as it could hurt sales of the legitimate copies while encouraging more consumers to seek illegal imports.

In the end, Apple shares will likely be volatile over the coming months as investors try and sort out the true impact that these events have on sales. It will be interesting to see if Apple decides to eventually drop its costs in order to encourage more buyers and take advantage of its lucrative carrier partnerships. Meanwhile, there seems to be no slowdown in unlocked iPhones. However, as the iPhone goes more mainstream, it will be consumed by less tech-savvy people that will be less likely to purchase and use an unlocked iPhone. Combined, these factors make AAPL a stock that is definitely worth watching over the coming months!

Related Companies
Microsoft Corporation (MSFT)
Dell Inc. (DELL)
Sun Microsystems, Inc. (JAVA)
Motorola, Inc. (MOT)
Palm, Inc. (PALM)
Hewlett-Packard Company (HPQ)
Silicon Graphics, Inc. (SGIC)
Lenovo Group Limited (LNVGY)
Netflix, Inc. (NFLX)
Sony Corporation (SNE)