Best Buy’s deal with Apple to sell the iPhone 3G will help drive up holiday sales numbers for the combination iPod and smartphone, but not by much, according to UBS analyst Maynard Um. While the increase in iPhone sales will likely be incremental, the Best Buy deal could be an indicator that Apple is successfully ramping up handset production to meet consumer demand.
“Further retail expansion with Best Buy supports our belief that iPhone production is on track and should not be a material issue as Apple ramps up to be available in more than 70 countries by the end of the year,” Mr. Um said.
He added that “in order to move earnings by US$0.01 (assuming iPhone profits are all recognized in the quarter sold), each of the 970 Best Buy stores would have to take about 200 iPhones in the Dec quarter (about 194,000 units). From an initial volume standpoint, we believe this is unlikely.”
Apple launched the iPhone 3G in 22 countries on July 11, and is set to roll the handheld out in another 21 countries on August 22. The company plans to continue iPhone rollouts through the rest of the year for availability in about 70 countries before 2009.
Mr. Um has a “Buy” rating and $195 target price for Apple’s stock. Apple is currently trading in the pre-market at $177.70, up 0.97 (0.55%).