Reports: $99 Wal-Mart iPhone would be atypical, risky move
Research firms and investment banks are welcoming a move that would see Wal-Mart carry the iPhone later this year, but warn that a special $99 model would stand in contrast to the company's proven strategy while also presenting unnecessary risk.
"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 Sam?s 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 SKU?s 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.
"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 Sam?s 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 SKU?s 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.
Comments
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.
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.
I'll start a new rumor: $99 is what Walmart will make off the sale of each 8 GB iPhone.
________________
...
drum roll, please....
They're coming out with a new and improved phone in a few months, so they want to hook people on the iPhone 3G before they release some new wonder-phone. The phone will be announced at MacWorld and then up for sale in June or July.
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 just have to agree here. For the longest time I have watched people ogle over the new lower price point for this phone. $99 is not that much different than $199 or even $299 for that matter where the subsidy is concerned. I've had both gen. phones and currently pay about $90+ a month for the BASIC plan on the 3g. It adds up, so I'm not sure that the Walmart approach will fly. We'll see.
there is only one way that Apple is sending the iPhone to Wal-Mart
drum roll, please....
They're coming out with a new and improved phone in a few months, so they want to hook people on the iPhone 3G before they release some new wonder-phone. The phone will be announced at MacWorld and then up for sale in June or July.
Seems unlikely to me. The current iPhone 3G is still on an upward curve as far as sales go. Wouldn't make sense to split the line until the sales curve flattens or drops.
I don't know about the US but wal mart in Canada has a 4GB iPod nano for $129. I don't see that one on the apple web site. So if Wal mart sells an iPod nano at a lower price point that apple doesn't sell then they might sell an iPhone made just for them at a lower price.
Exactly. Offically the 4GB Nano doesn't exist, but there it is, cheaper than the other Nanos.
If Apple technically phases out the 4GB iPhone, by officially adding a higher capacity version and moving the price points over to the existing models (the way they usually do with new models), they could easily reintroduce the low-end 4Gb as a low price Walmart exclusive.