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Apple Gets Aggressive in Brazil

By Evan Niu, CFA - Apr 2, 2013 at 9:00PM

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The iPhone maker cuts prices in Brazil, the latest sign that Apple is focusing on tackling growth in BRIC countries.

Brazil is No. 2 on Apple's (AAPL 0.15%) BRIC priority list. CEO Tim Cook made that much clear late last year, saying the country is the next biggest opportunity behind China out of those emerging markets. While Cook didn't "envision" Apple opening retail stores in Brazil anytime soon, the company has already begun hiring for retail positions, which suggests that Brazilian Apple Stores may not be too far off.

In the meantime, another challenge that Apple has historically faced in Brazil is that carriers don't subsidize smartphones; the practice is considered an illegal tie-in sale. As investors know, unsubsidized iPhones are rather pricey, especially for consumers in emerging markets.

Well, the iPhone maker has now decided to get aggressive in Brazil by dropping the price of both the iPhone 4 and iPhone 4S. Apple has reduced retail iPhone pricing by 15% to 25%, depending on the model. The iPhone 4 saw its price fall from $741 to "just" $544, while the iPhone 4S now sits at the $840 price point, down from $989.

Installment payment plans are generally very popular in Brazil, and Apple also offers monthly plans to prospective buyers. Apple also offers a 10% discount to customers that willing to pay the full amount upfront.

When Cook spoke at the Goldman Sachs Technology and Internet Conference in February, he noted that Apple has been making numerous efforts recently to make its products more affordable. Apple supplier Foxconn has also been expanding in Brazil and is preparing to build its fifth facility. Producing iDevices locally can also help bring down costs since gadgets won't face hefty import taxes.

Apple has just begun taking India seriously with a major overhaul of operations, with expanded distribution, payment plans, and increased marketing. Brazil is a more promising BRIC country than India, so it's not surprising to see Apple put some more focus there now, too.

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