Apple says bulk of iPhones sales to occur at company storesFollowing a meeting with members of Apple's leadership, Prudential Equity Group said Monday that the company expects the majority of iPhone sales to occur at its own retail chain and that it will not tread on any new product categories for some time.
Present at the meeting, which took place in Cupertino last week, were Prudential analyst Jesse Tortora, Apple CFO, Peter Oppenheimer, Apple Sr. VP of Retail, Ron Johnson, and Apple Sr. Director of Mac Product Marketing, Tom Bogart.
"Apple said that the iPhone will be sold exclusively through its own stores, its website, and Cingular stores," Tortora wrote in a research note following the get-together. "Management expects the majority of the iPhone sales to occur in Apple stores, given that consumers will likely look to Apple to demonstrate the devices features."
Apple told the analyst that once iPhone is thrown into the product mix, it expects to achieve similar per store sales levels as leading U.S. electronics retailer, Best Buy, despite having only about one-tenth the floor space. Tortora approximates this figure at about $30 million per store, or over $5 billion in total for the company's retail segment over the fiscal year.
In the meantime, Apple said it "doesnt expect to broadly proliferate into any new categories for a while," and will instead focus on its four existing product categories in Macs, iPods, iPhone and Apple TV.
Regarding Macs, the company noted that its education segment has been growing faster than its consumer segment in recent quarters. "[Apple] believes that Adobes launch of Creative Suite 3 in Q2 will help its Consumer segment, spurring higher sales of both Mac Pro and MacBook Pro," Tortora wrote.
Apple also told the Prudential analyst that it is comfortable with current iPod channel inventory of 4 to 6 weeks, and that its existing NAND flash contracts are structured in such a way that the company will be able to participate in the full extent of ongoing price declines affecting the solid-state memory.
As Apple continues to polish and expand on its product portfolio, it has reportedly been looking at large companies for potential acquisition targets but has not discovered any one firm that passes its financial and strategic tests.
"Instead the company has traditionally focused on acquiring IP portfolios or small product start-ups with top talent," Tortora told clients. "Generally speaking, the company says that nothing has changed with its acquisitions strategy, as it still prefers organic growth."
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