Apple says bulk of iPhones sales to occur at company stores
Following 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 device’s 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 "doesn’t 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 Adobe’s 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."
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 device’s 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 "doesn’t 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 Adobe’s 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."
Comments
Adobe!?
In the meantime, Apple said it "doesn’t 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.
It's interesting that Apple regards AppleTV as a separate product category, on a par with the Mac, iPod & iPhone.
Whereas most of the comments on here seem to indicate that AppleTV is a bit of a 'so-what?' kind of product as far as the public is concerned.
It's interesting that Apple regards AppleTV as a separate product category, on a par with the Mac, iPod & iPhone.
Whereas most of the comments on here seem to indicate that AppleTV is a bit of a 'so-what?' kind of product as far as the public is concerned.
I bet that there is going to be more than meets the eye with the iTV. I really do. It's not just gut feel either, think about it.
It's interesting that Apple regards AppleTV as a separate product category, on a par with the Mac, iPod & iPhone.
Whereas most of the comments on here seem to indicate that AppleTV is a bit of a 'so-what?' kind of product as far as the public is concerned.
Apple TV is just the beginning. A very typical toe in the water for Apple.
Apple TV is just the beginning. A very typical toe in the water for Apple.
Yes, I hope so!
- so far, I'm in the camp that thinks that iTV is interesting, but not quite useful enough to be worth buying
- of course, we haven't got movies & TV shows yet in Europe - so that doesn't help!
quote:...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.
Adobe!?
Nah... Strategically not a good idea. Remember that Apple is not in the Windows support game so the Windows development side of any acquisition will always be phased out. In Adobe's case this would cause rioting in the streets and a probable call from the Feds and the EU Commission. Adobe is committed to Mac development so there's no point.
I've always thought a 3D graphics company to add value to the Motion/Shake compositing offering was always a possibility. Maya's been swallowed, Lightwave's a mess with a huge PC base. Softimage has no OSX codebase (but a port isn't out of the realms of possibility apparently). Luxology maybe? Modo is in mid-development with a good Mac base and loads of talent.
Who knows?
There should be a big market for AppleTV. Some people that rent and rip will get their money's worth in just a few months.
Nice attitude
Apple TV is separate though because it isn't a Mac or iPod or iPhone. The segments don't have to be of equal size or value.
I talked to an Apple Geniues yesterday (the concierge cue was 4+ hours) regarding how busy those stores were going to be in a few months with TV's and phones, he said yes, though few who worked in the store had hd TV's so he fielt that it will be big initially and then trail off until hd become more common. You walk into a Costco or Circuit City and you would think everyone is buying these things ... not quite. I forgot to ask him when they start training on the iPhone UI and support.
Nice attitude
Apple TV is separate though because it isn't a Mac or iPod or iPhone. The segments don't have to be of equal size or value.
I talked to an Apple Geniues yesterday (the concierge cue was 4+ hours) regarding how busy those stores were going to be in a few months with TV's and phones, he said yes, though few who worked in the store had hd TV's so he fielt that it will be big initially and then trail off until hd become more common. You walk into a Costco or Circuit City and you would think everyone is buying these things ... not quite. I forgot to ask him when they start training on the iPhone UI and support.
I believe the Apple Store employee is correct. There will be an initial surge and then demand will pretty much die down. By making it only function with widescreen TV's (which I don't see any technical reason for doing so), they cut out most of the market for the device. Then cut off the large portion of the remaining potential customers who have no desire to purchase iTunes movies or TV shows (yes, it can be used with other media but not easily) and you're left with a pretty slim customer base.
I'm a part of that vast majority lacking a widescreen TV. But I do occassionally download TV shows from iTunes (well, actually only Battlestar Galactica and Heroes). So for me, it's a two part process for Apple TV. And if I bought a HD widescreen TV, I'd be less interested in iTunes content since NONE of it is high-def so I'd be even less interested in Apple TV and more interested in something like a PS3 for the built in Blu-Ray player.
I haven't mentioned music because if that was it's killer feature for me, I'd just use the Airport Express (which I already do) for streaming iTunes audio (I just wish iTunes wouldn't include music videos in the Music section as it cuts out the audio streaming when it encounters them. This is one of those areas Apple seems to think it knows best. Personally, I want my videos in the video section.). Apple TV is too limited in its abilities for onscreen display with music to make it very compelling. Why not a visualizer like iTunes and bring up navigation features when the remote is used or the track changes, etc.? Or maybe a small display on the Apple TV. I don't feel very compelled to have my TV on just to listen to music.
the content has to catch up as does consumer RAID options that are quiet enough for the living room and AFFORDABLE.
There is soooo much data the average user is accumulating nowadays that they need to offer a solution for redundant storage solution to go along with the iTV.
the torrent idea is interesting, but i'd want a way to throttle the upload until upload has become plentiful
It's interesting that Apple regards AppleTV as a separate product category, on a par with the Mac, iPod & iPhone.
Whereas most of the comments on here seem to indicate that AppleTV is a bit of a 'so-what?' kind of product as far as the public is concerned.
It's hard to say. The positioning on the current site doesn't suggest that yet. AppleTV is still in the "iPod store" at store.apple.com, and AppleTV is currently under the iPod & iTunes tab on Apple.com. In both cases, iPhone now has its own tab.
QUOTE]
I was under the impression that Apple was coming out with a lot of new products this year that were not the traditional products (iPod, Mac,etc). The statement above would seem to state that for the most part they are just going to concentrate in producing new and improved Macs, iPods, iPhones and Apple TV.
Nothing wrong with that, but I was under the impression they were broadening further and into new consumer products.
I guess what I heard was wrong.
There's an interesting speculation on the real use for TV in an article by the science writer Robert Cringley. I a nutshell he believes the lack of an on/off switch on the device coupled with its 40G internal drive means it can be part of a vast torrent network for the iTunes movie downloads. Imagine, he says, when there are a million or more of these devices sitting in living rooms all over the country, and you order a movie and it streams to your computer from hundreds or thousands of torrents. He sees Apple positioning itself as a TV network rivaling cabel; a network where you choose what's broadcast into your home, and only pay for what you watch.
The problem with that thought is that torrents don't stream, and they don't download in order. They download pieces as they become available. So you lose the benefits of torrent technology if you have to get stuff 'in order' so you can watch it as its coming in.
Also, there's nothing about the AppleTV that requires a direct connection to the internet (in fact, its set up to work with your other computers - I don't think it can work by itself).
But the biggest problem is if they do see themselves as some type of TV network, and never add in the ability to record straight from cable/satellite. I just can't imagine there's that big of a market of people who don't have cable/satellite but have wide-screen TVs that would be buying an AppleTV just to get the TV content that's not even taking advantage of their TV's capabilities (I'm not even sure that iTMS content is even at digital cable crispness, let alone HD value).
There's an interesting speculation on the real use for TV in an article by the science writer Robert Cringley. I a nutshell he believes the lack of an on/off switch on the device coupled with its 40G internal drive means it can be part of a vast torrent network for the iTunes movie downloads. Imagine, he says, when there are a million or more of these devices sitting in living rooms all over the country, and you order a movie and it streams to your computer from hundreds or thousands of torrents. He sees Apple positioning itself as a TV network rivaling cabel; a network where you choose what's broadcast into your home, and only pay for what you watch.
Consumers would scream bloody murder if Apple "stole" their bandwidth to host video for which they had paid. It's an interesting idea, but I don't see Apple using torrents for distribution.
Consumers would scream bloody murder if Apple "stole" their bandwidth to host video for which they had paid. It's an interesting idea, but I don't see Apple using torrents for distribution.
Yes - I don't think Torrent is upto commercial delivery
- and I don't think Apple would want to risk their reputation by relying on it
Of course, this didn't factor in all the entertainment value available from the countless hours of excellent programming provided by cable TV...
It also assumed that you got good reception via old fashioned antennas for local/network programming.
Still a niche market, but an interesting twist.
Willrob= There's an interesting speculation on the real use for ?TV in an article by the science writer Robert Cringley. I a nutshell he believes the lack of an on/off switch on the device coupled with its 40G internal drive means it can be part of a vast torrent network for the iTunes movie downloads. Imagine, he says, when there are a million or more of these devices sitting in living rooms all over the country, and you order a movie and it streams to your computer from hundreds or thousands of torrents. He sees Apple positioning itself as a TV network rivaling cabel; a network where you choose what's broadcast into your home, and only pay for what you watch.
Interesting speculation is right. I just saw a demo of the Joost beta in person by Alex Lindsay last night. It looks a lot like AppleTV wants to be and it uses torrent techniques for fast streaming. It was pretty cool... and it doesn't require an AppleTV, or a Mac, for that matter.
I bet that there is going to be more than meets the eye with the iTV. I really do. It's not just gut feel either, think about it.
Apple started cruising toward becoming a cable-killer the day it started carrying TV shows in the iTunes Store. I suspect the satellite and cable carriers are very nervous right now about how much content Apple has under license and what could happen if Apple went to a subscription-based content plan.
Apple doesn't even even have to take much of the business to hurt the carriers; the customers Apple will take will be the high-end ones that buy all the value-add features like HD and pay channels.
If Apple announced today it was buying Charter Communications for $2B, Comcast's share price would instantly drop 15 percent.
I think there's about to be a major shakeup.