Hackers Break Into New Apple's New iPhone Software

The new Apple (AAPL) iPhone operating system, known as OS 4.0, was only introduced two days ago. Hackers have already broken into the system so that they can run pirated software on the handset.

According to Apple Insider, “A hacker from the iPhone Dev Team who goes by the handle MuscleNerd uploaded on Friday a video of an iPhone 3GS running the iPhone OS 4 beta, as well as Veency, which is virtual network computing software available as an unauthorized application for the iPhone.”

Once the security software for OS 4.0 has been broken, iPhone  users with hacked versions of the operating system can download a number of applications which Apple has not approved. These “apps” take money and downloads away from those sold at the Apple App Store. 24/7 Wall St. estimated that Apple and its application partners have lost nearly $500 million to piracy since the Store opened in July 2008.

Software security may be the largest hurdle to the success of the iPhone and the App Store. Apple has indicated that it has sold 50 million units of the handset, has had 3 billion downloads of applications, and has a total of 150,000 approved apps available to its customers.

But, pirated versions of the App Store’s best products undermine the financial incentives of developers to spend time creating software for the handset. None of the other handset operating systems has anywhere near the number of applications that Apple does. The new Google (GOOG) Android OS has gained market share in the mobile market, but that growth is almost certain to be undermined by the very modest number of application downloads available to consumers on Android enabled phones. The figure is so low, Android is hardly worth hacking.

Douglas A. McIntyre