Reports: $99 Wal-Mart iPhone would be atypical, risky move
"We believe a $99 iPhone would be atypical of Apple's premium brand strategy," UBS Investment Research analyst Maynard Um told clients in a research note. "More likely is a scenario in which select Wal-Mart (& possibly Samâs Clubs) are simply added as further iPhone distribution points (like Best Buy)."
The analyst recognized that a cheaper iPhone model could stimulate incremental demand, but said it would also cannibalize sales of both the 8GB and 16GB models and, to a lesser extent, the iPod touch.
More specifically, he estimates that sales of a $99 4GB iPhone would cut into Apple's fiscal year 2009 per-share earnings estimates by about 27 cents, requiring the Wal-Mart deal to generate sales of an incremental 1.5 million units to offset the impact.
Over at Barclays, analyst Ben Reitzes noted that a move intro Wal-Mart could help boost December quarter iPhone sales, as Apple would need to fill the discount chain's supply channel with handsets, which the iPhone maker in turn recognizes as sales. However, he too believes rumors of a $99 model will prove inaccurate.
"It is not like Apple to offer one special SKU for one non-Apple retailer, confusing views on pricing and driving traffic away from its own stores," the analyst told clients. "We believe it is more likely Apple will allow Wal-Mart to sell existing SKUâs at prices it desires (likely a small discount)."
Reitzes, who estimates Apple will sell 4.5 million iPhones during the December quarter, said the company is likely to expand its iPhone product line in 2009, potentially up-scaling with a 32GB iPhone version early in the year and offering a smaller, less expensive form factor down the road that plays better in "pre-paid" markets.
Pacific Crest analyst Andy Hargreaves also commented on the immediate benefits Apple would see by padding Wal-Mart with inventory. Should each of the discounter's stores received 150 iPhones before the end of the year, it would add approximately 540,000 units to the company's December quarter sales, he estimates.
Hargreaves pointed to a recent study that suggested iPhone 3G has seen its strongest growth from consumers that make between $25,000 and $75,00 per year. As such, he believes a high percentage of Wal-mart customers are potential iPhone purchasers.
With the weak economy driving traffic to Wal-mart stores over specialty stores, sales of iPhones at Wal-mart could help offset potentially weaker sales at AT&T and Best Buy stores, he said.
Hargreaves is currently modeling Apple to sell about 5 million iPhones during the December quarter.
17 Comments
I swear these guys hang out at AI. How else could they work this stuff out so quickly?
If you can't afford the phone, if a hundred bucks makes that much of a difference - then there's no way you can afford the plan.
I swear these guys hang out at AI. How else could they work this stuff out so quickly?
No, it doesn't take much brains to figure this one out. I went to Walmart during the weekend and also asked a buddy at the Apple store and came up with the same conclusions as these so called "Analysts".
http://applerumor.blogspot.com/2008/...d-walmart.html
It would make no sense for Apple to sell a $99 iPhone at Walmart. It would just hurt their stores.
Fascinating that "Analysts" are so plentiful, so vocal, and so prolific in their opinion. So are "bloggers", "experts", and "critics".
Interesting that none of the above has the cojones to start, own, or operate a business of their own but are constantly available to tell those who actually accomplish something in life precisely how they should do it.
Even more interesting: The critics, experts, and analysts are listened to and believed by the public.
Suggestion: Put all these people in the category of those who write for the National Enquirer and the Sun. Their opinion is worth precisely the price you pay for it.
Risky my arse.