Does Apple Need Best Buy?

There've been plenty of critiques about Apple's (Nasdaq: AAPL  ) approach to building its iPhone empire, but the most common complaint I've received from investors, by far, is about how the device's exclusivity with AT&T (NYSE: T  ) has crippled sales and capabilities.

Apple wants to sell 10 million iPhones by the end of this year, but many observers have wondered how the Mac maven will do it. Only one carrier in the U.S. sells the gadget, and until this summer, international markets were not coming on line or ramping up as quickly.

Well, there must be a lot of happy Mac and iPhone fans out there now. Retailer Best Buy (NYSE: BBY  ) announced plans to put the iPhone 3G on store shelves across the U.S. With nearly 1,000 new distribution points for the iPhone, some analysts now expect Apple to sell more than 10 million units of the new 3G version alone before year's end.

While the added distribution will certainly boost iPhone sales, I doubt Apple needed a larger retail footprint to meet its goals. The 3G version was already seeing much better reception in Europe and other countries, and the lower entry price for the low-end version makes it a compelling gift for the upcoming holidays.

But I think Apple blowing past its milestone sales mark -- while it may be important validation for investors -- is already yesterday's news. The bigger story is that the iPhone will now sit right next to the Samsung Instinct, which exclusive service provider Sprint Nextel (NYSE: S  ) has deemed one of its best-selling products ever. In the first two weeks Best Buy offered the Instinct, the retailer also claimed that the Instinct was its best-selling phone in two years.

This is where direct competition takes hold. The iPhone's no longer an aloof toy for early adopters; it's on the shelf right next to competing devices from Research In Motion (Nasdaq: RIMM  ) , Nokia (NYSE: NOK  ) , and Motorola (NYSE: MOT  ) . I know it may be hard to believe, but there are still millions of Americans out there looking for a cool phone who remain almost completely unaware of all the recent Apple buzz.

Welcome to the open market, Apple. Let the games begin.

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Fool contributor Dave Mock is ignorant about a great many things. He owns shares of Motorola and is the author of The Qualcomm Equation.Sprint Nextel and Best Buy are Inside Value recommendations. The Fool owns shares of Best Buy. The Fool's disclosure policy blows sunshine up many a skirt.


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  • Report this Comment On August 14, 2008, at 5:47 PM, newyorkrebel wrote:

    Don't discount the buying power Best Buy affords its customers.

    Availability in Best Buy stores means for the first time the iPhone can be purchased on a store credit card, in some cases with no interest for a year or two.

    That alone should help the iPhone's sales.

  • Report this Comment On August 14, 2008, at 6:16 PM, aamire wrote:

    I was hoping somebody would tell that to Steve Jobs. He's got a killer product but is trying to distribute it the way he does Mac computers. That's pretty lethargic pace of distribution for a cell phone. I've personally seen anticipation in many affording parts of the world that only gets dimmer with each passing month. That gives Samsung, Nokia, and others plenty opportunity to capture non-penetrated markets with there me toos.

  • Report this Comment On November 10, 2008, at 8:52 PM, mracarpenter wrote:

    I've worked at Best Buy for about 6 months and it's because of their constant change and innovation that they keep moving forward and expanding their customer base and loyalty. Where else can you go to get a new cell phone from any carrier?

    Have complaints about Best Buy?

    ~ http://www.cistam.com -- "Can I Speak to a Manager?"

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