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Thursday, July 21, 2005, 10:00 am PT (01:00 pm ET)

Apple lands iPod deal with RadioShack

Exclusive — Apple Computer and RadioShack have entered into a strategic partnership that will deliver Apple's full line of iPods to the shelves of thousands of RadioShack electronics stores in time for this year's holiday shopping season, AppleInsider has learned.

According to industry sources, RadioShack, the nation's No. 1 electronics specialty retailer, has agreed to carry Apple's full mix of iPod digital music players at several thousands locations beginning the fourth calendar quarter of the year.

The Fort Worth, Texas-based retailer operates nearly 7000 stores, which combine to fall within five minutes of where 94 percent of all Americans either live or work. Of the 7000 stores, approximately 5000 are company-owned stores with the remainder being dealer/franchise-operated locations.

Sources say RadioShack will stock all versions of the Apple iPod at company-owned stores that fit the iPod demographic. Stores outside major metropolitan areas, and those catering to a slightly older demographic, will stock a smaller selection of the players.

A vast majority of RadioShack’s franchise locations are also expected to begin selling Apple iPods in the coming months. However, sources said these locations would decide whether or not to carry the players, and what mix, on a per-store basis.

As one of the terms of the deal, RadioShack has agreed to purchase at least 450,000 iPods during the initial three-month period. Assuming iPods appear in only 70 percent of the company's stores, RadioShack would need to sell just shy of one iPod per store, per day to meet its contractual commitment. This leads sources to believe that RadioShack will likely sell a significantly larger number of the players by the end of the holiday shopping season.

Through both its online and brick-and-mortar retail stores, RadioShack currently carries a very small assortment of iPods from HP. The retailer sells a silver 6GB mini, 1GB shuffle, and 60GB iPod. However, in the case of 60GB HP iPod, RadioShack continues to list the player at its old retail price of $449 (about $50 above most advertised prices).

According to sources, RadioShack has been unable to reduce the cost of the player to fall inline with Apple's recent iPod price cuts because HP, due to its own iPod licensing agreement with Apple, cannot offer proper price protection on the players. As a result, sources say RadioShack jumped at the opportunity to work directly with Apple, knowing it would be offered an amicable price protection policy on the players moving forward.

Along with its current assortment of HP iPods, insiders say RadioShack has witnessed strong sales of iPod accessories and related gear. The retailer's partnership with Apple will further expand its accessory offerings to include the wide range of iPod accessories found in most Apple retail stores.

Apple recently ended its June fiscal quarter with a total of 25,000 worldwide distribution points for the iPod, an increase from the 21,000 points from the previous quarter. This was primarily due to the addition of 3,500 US-based Wal-Mart locations to its distribution network. The deal with RadioShack is expected to boost this figure to over 30,000 points by November.

If iPod sales at RadioShack boom — and they are expected to — sources say both companies will be open to a pilot program that will test sales of Apple's Macintosh computer line in the electronics stores. RadioShack currently markets computers from both HP and Compaq, but its arrangement with HP is said to expire at the end of the year.

For the quarter ended June 30th, RadioShack posted a profit of $52.3m or 33 cents per diluted share on sales of just over $1b.